**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

| **(Mark One)**                                   |
|--------------------------------------------------|
|                                             |   |
| **ý**                                       | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES  EXCHANGE ACT OF 1934** |
|                                             |   |
| **For the Quarter Ended December 31, 2003** |
|                                             |   |
| **or**                                           |
|                                             |   |
| **o**                                            | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES  EXCHANGE ACT OF 1934** |
|                                             |   |
| **Commission file number 1-14430**               |

 

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**MAXIMPHARMACEUTICALS, INC.**

(Exact name ofregistrant as specified in its charter)

 
| **Delaware**                                               |   | **87-0279983**                    |
|------------------------------------------------------------|--------|-----------------------------------|
| (State of incorporation)                                   |   | (IRS Employer Identification No.) |
|                                                       |   |                              |
| **8899 University Center Lane, Suite 400, San Diego, CA**  |   | **92122**                         |
| (Address of principal executive offices)                   |   | (zip code)                        |
|                                                       |   |                              |
| **(858) 453-4040**                                    |
| (Registrant’s telephone number, including  area code) |

 

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Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past90 days. Yes ý No o

 

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

 

The number of outstanding shares of the registrant’s Common Stock,$.001 par value, as of February 3, 2004 was 28,029,262.

 

 

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**MAXIM PHARMACEUTICALS, INC. ANDSUBSIDIARIES**

*(A Development Stage Company)*

 

**INDEX**

 
|                                   | **Page**                                                                                                                                                                            |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                   |                                                                                                                                                                                |
| **Part I–Financial  Information** |                                                                                                                                                                                |
| Item 1.                                | Financial Statements (unaudited)                                                                                                                                                    |   |
|                                   | Condensed  Consolidated Balance Sheets–December 31, 2003 and September 30,  2003                                                                                     | 1 |
|                                   | Condensed Consolidated Statements of  Operations–Three Months Ended December 31, 2003 and 2002 and from  Inception (October 23, 1989) through December 31, 2003 | 2 |
|                                   | Condensed Consolidated Statements of Cash  Flows–Three Months Ended December 31, 2003 and 2002 and from Inception  (October 23, 1989) through December 31, 2003 | 3 |
|                                   | Notes to Condensed Consolidated Financial  Statements                                                                                                                               | 4 |
| Item 2.                                | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                         | 8 |
| Item 3.                                | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                         | 26 |
| Item 4.                                | Controls  and Procedures                                                                                                                                                            | 26 |
| **Part II–Other Information**     |                                                                                                                                                                                |
| Item 1.                                | Legal  Proceedings                                                                                                                                                                  | 27 |
| Item 6.                                | Exhibits  and Reports on Form 8-K                                                                                                                                                   | 28 |
| **SIGNATURES**                         |                                                                                                                                                                                |

 

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**CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(in thousands, except share data)**

 

*Maxim Pharmaceuticals, Inc. and Subsidiaries (A DevelopmentStage Company)*

 
|                                                                                                                                                                                        |   | **As of December 31  2003** |       | **As of September 30  2003** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|-----------------------------------|--------|
| **ASSETS**                                                                                                                                                                                  |   |                             | ** ** |                              |   |
| **Current Assets:**                                                                                                                                                                         |   |                             | ** ** |                              |   |
| Cash  and cash equivalents                                                                                                                                                                  |   | **$**                            | **9,255**  | ** **                        | $      | 32,861 |   |
| Investments  in marketable securities, available for sale                                                                                                                                   |   | **70,895**                       | ** ** | 58,468                            |   |
| Accrued  interest and other current assets                                                                                                                                                  |   | **2,289**                        | ** ** | 2,210                             |   |
| Total  current assets                                                                                                                                                                       |   | **82,439**                       | ** ** | 93,539                            |   |
|                                                                                                                                                                                        |   |                             | ** ** |                              |   |
| Restricted  cash and cash equivalents                                                                                                                                                       |   | **3,500**                        | ** ** | 3,500                             |   |
| Property  and equipment, net                                                                                                                                                                |   | **4,077**                        | ** ** | 4,358                             |   |
| Patents  and licenses, net                                                                                                                                                                  |   | **3,836**                        | ** ** | 3,521                             |   |
| Note  receivable from officer, net of allowance of $700,000                                                                                                                                 |   | **2,165**                        | ** ** | 2,287                             |   |
| Deposits  and other assets                                                                                                                                                                  |   | **290**                          | ** ** | 142                               |   |
| Total  assets                                                                                                                                                                               |   | **$**                            | **96,307** | ** **                        | $      | 107,347 |   |
|                                                                                                                                                                                        |   |                             | ** ** |                              |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                               |   |                             | ** ** |                              |   |
| **Current Liabilities:**                                                                                                                                                                    |   |                             | ** ** |                              |   |
| Accounts  payable                                                                                                                                                                           |   | **$**                            | **2,377**  | ** **                        | $      | 5,141 |   |
| Accrued  expenses                                                                                                                                                                           |   | **4,647**                        | ** ** | 3,805                             |   |
| Notes  payable and current portion of long-term debt and obligations under capital  leases                                                                                                  |   | **1,106**                        | ** ** | 1,246                             |   |
| Provision  for loan guarantee for officer                                                                                                                                                   |   | **900**                          | ** ** | 900                               |   |
| Deferred  revenue                                                                                                                                                                           |   | **1,023**                        | ** ** | 190                               |   |
| Total  current liabilities                                                                                                                                                                  |   | **10,053**                       | ** ** | 11,282                            |   |
|                                                                                                                                                                                        |   |                             | ** ** |                              |   |
| Long-term  debt and obligations under capital leases, excluding current portion                                                                                                             |   | **618**                          | ** ** | 828                               |   |
|                                                                                                                                                                                        |   |                             | ** ** |                              |   |
| Commitments  and contingencies                                                                                                                                                              |   |                             | ** ** |                              |   |
|                                                                                                                                                                                        |   |                             | ** ** |                              |   |
| **Stockholders’ Equity:**                                                                                                                                                              |   |                             | ** ** |                              |   |
| Convertible  preferred stock, $.001 par value, 5,000,000 shares authorized; no shares  issued and outstanding at December 31, 2003 and September 30, 2003                         |   | **—**                       | ** ** | —                            |   |
| Common  stock, $.001 par value, 40,000,000 shares authorized; 28,027,237 and  27,951,059 shares issued and outstanding at December 31, 2003 and  September 30, 2003, respectively |   | **28**                           | ** ** | 28                                |   |
| Additional  paid-in capital                                                                                                                                                                 |   | **401,779**                      | ** ** | 401,251                           |   |
| Deficit  accumulated during the development stage                                                                                                                                           |   | **(316,375**                     | **)**      | (306,504                          | )      |
| Accumulated  other comprehensive income                                                                                                                                                     |   | **204**                          | ** ** | 462                               |   |
| Total  stockholders’ equity                                                                                                                                                            |   | **85,636**                       | ** ** | 95,237                            |   |
| Total  liabilities and stockholders’ equity                                                                                                                                            |   | **$**                            | **96,307** | ** **                        | $      | 107,347 |   |

 

*See Accompanying Notes to Condensed Consolidated FinancialStatements.*

 

1

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**CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS (Unaudited)(in thousands, except per share amounts)**

 

*Maxim Pharmaceuticals, Inc. and Subsidiaries (A DevelopmentStage Company)*

 
|                                                                              |   |           |       | **From Inception  (October 23, 1989)  Through  December 31, 2003** |   |
|-----------------------------------------------------------------------------------|--------|----------------|------------|------------------------------------------------------------------------------|--------|
|                                                                              |
| **Three Months Ended December 31**                                           |
| **2003**                                                                          |   | **2002**       |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Collaboration  and research revenue                                               |   | **$**          | **1,419**  | ** **                                                                   | $      | 390 |   | $ | 16,237 |   |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Operating  expenses:                                                              |   |           | ** ** |                                                                         |   |   |   |
| Research  and development                                                         |   | **9,331**      | ** ** | 8,255                                                                        |   | 225,111 |   |
| Business  development and marketing                                               |   | **643**        | ** ** | 372                                                                          |   | 22,314 |   |
| General  and administrative                                                       |   | **1,766**      | ** ** | 1,907                                                                        |   | 42,113 |   |
| Amortization  of goodwill and other acquisition-related intangible assets         |   | **—**     | ** ** | —                                                                       |   | 2,955 |   |
| Purchased  in-process technology                                                  |   | **—**     | ** ** | —                                                                       |   | 42,300 |   |
| Provisions  for note receivable and loan guarantee to/for officers                |   | **—**     | ** ** | —                                                                       |   | 1,600 |   |
| Total  operating expenses                                                         |   | **11,740**     | ** ** | 10,534                                                                       |   | 336,393 |   |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Loss  from operations                                                             |   | **(10,321**    | **)**      | (10,144                                                                      | )      | (320,156 | ) |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Other  income (expense):                                                          |   |           | ** ** |                                                                         |   |   |   |
| Investment  income                                                                |   | **470**        | ** ** | 825                                                                          |   | 30,325 |   |
| Gain  on sale of assets                                                           |   | **—**     | ** ** | —                                                                       |   | 4,435 |   |
| Interest  expense                                                                 |   | **(23**        | **)**      | (33                                                                          | )      | (2,817 | ) |
| Other  income                                                                     |   | **3**          | ** ** | 22                                                                           |   | 17 |   |
| Total  other income                                                               |   | **450**        | ** ** | 814                                                                          |   | 31,960 |   |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Loss  before cumulative effect of accounting change and preferred stock dividends |   | **(9,871**     | **)**      | (9,330                                                                       | )      | (288,196 | ) |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Cumulative  effect of accounting change                                           |   | **—**     | ** ** | —                                                                       |   | (28,179 | ) |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Net  loss before preferred stock dividends                                        |   | **(9,871**     | **)**      | (9,330                                                                       | )      | (316,375 | ) |
| Dividends  on preferred stock                                                     |   | **—**     | ** ** | —                                                                       |   | 5,496 |   |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Net  loss applicable to common stock                                              |   | **$**          | **(9,871** | **)**                                                                        | $      | (9,330 | ) | $ | (321,871 | ) |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Basic  and diluted net loss per share of common stock                             |   | **$**          | **(0.35**  | **)**                                                                        | $      | (0.40 | ) |   |   |
|                                                                              |   |           | ** ** |                                                                         |   |   |   |
| Weighted  average shares outstanding                                              |   | **27,986,732** | ** ** | 23,313,609                                                                   |   |   |   |

 

*See Accompanying Notes to Condensed Consolidated FinancialStatements.*

 

2

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**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In thousands)**

 

*Maxim Pharmaceuticals, Inc. and Subsidiaries (A DevelopmentStage Company)*

 
|                                                                                    |   |        |       | **From Inception  (October 23, 1989)  Through  December 31, 2003** |   |
|-----------------------------------------------------------------------------------------|--------|-------------|------------|------------------------------------------------------------------------------|--------|
|                                                                                    |
| **Three Months Ended December 31**                                                 |
| **2003**                                                                                |   | **2002**    |
| **OPERATING ACTIVITIES:**                                                               |   |        | ** ** |                                                                         |   |   |   |
| Net  loss                                                                               |   | **$**       | **(9,871** | **)**                                                                        | $      | (9,330 | ) | $ | (316,375 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities:            |   |        | ** ** |                                                                         |   |   |   |
| Depreciation  and amortization                                                          |   | **440**     | ** ** | 592                                                                          |   | 12,989 |   |
| Stock  contributions to 401(k) plan                                                     |   | **—**  | ** ** | 46                                                                           |   | 643 |   |
| Cumulative  effect of accounting change                                                 |   | **—**  | ** ** | —                                                                       |   | 28,179 |   |
| Stock-based  compensation                                                               |   | **143**     | ** ** | —                                                                       |   | 1,531 |   |
| Loss  on disposal of property and equipment                                             |   | **8**       | ** ** | —                                                                       |   | 297 |   |
| Provisions  for note receivable and loan guarantees to/for officers                     |   | **—**  | ** ** | —                                                                       |   | 1,600 |   |
| Purchased  in-process technology                                                        |   | **—**  | ** ** | —                                                                       |   | 44,946 |   |
| Gain  on sale of assets                                                                 |   | **—**  | ** ** | —                                                                       |   | (2,146 | ) |
| Amortization  of premium on investments                                                 |   | **—**  | ** ** | —                                                                       |   | 535 |   |
| Cumulative  effect of reorganization                                                    |   | **—**  | ** ** | —                                                                       |   | 1,153 |   |
| Gain  on sale of subsidiary                                                             |   | **—**  | ** ** | —                                                                       |   | (2,288 | ) |
| Other                                                                                   |   | **—**  | ** ** | —                                                                       |   | 160 |   |
| Changes  in operating assets and liabilities:                                           |   |        | ** ** |                                                                         |   |   |   |
| Accrued  interest and other current assets                                              |   | **(79**     | **)**      | (50                                                                          | )      | (269 | ) |
| Deposits  and other assets                                                              |   | **(148**    | **)**      | 3                                                                            |   | (786 | ) |
| Accounts  payable                                                                       |   | **(2,764**  | **)**      | (805                                                                         | )      | 1,285 |   |
| Accrued  expenses                                                                       |   | **842**     | ** ** | (54                                                                          | )      | 3,350 |   |
| Deferred  revenue                                                                       |   | **833**     | ** ** | —                                                                       |   | 1,023 |   |
| Net  cash used in operating activities                                                  |   | **(10,596** | **)**      | (9,598                                                                       | )      | (224,173 | ) |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| **INVESTING ACTIVITIES:**                                                               |   |        | ** ** |                                                                         |   |   |   |
| Purchases  of marketable securities                                                     |   | **(27,835** | **)**      | (8,972                                                                       | )      | (466,296 | ) |
| Sales  and maturities of marketable securities                                          |   | **15,150**  | ** ** | 15,416                                                                       |   | 396,108 |   |
| Purchases  of property and equipment                                                    |   | **(111**    | **)**      | (411                                                                         | )      | (11,003 | ) |
| Additions  to patents and licenses                                                      |   | **(371**    | **)**      | (136                                                                         | )      | (6,736 | ) |
| Net  proceeds from sale of assets                                                       |   | **—**  | ** ** | —                                                                       |   | 3,452 |   |
| Cash  acquired in acquisition of business                                               |   | **—**  | ** ** | —                                                                       |   | 1,121 |   |
| Net  cash provided by (used in) investing activities                                    |   | **(13,167** | **)**      | 5,897                                                                        |   | (83,354 | ) |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| **FINANCING ACTIVITIES:**                                                               |   |        | ** ** |                                                                         |   |   |   |
| Net  proceeds from issuance of common stock and exercise of stock options and  warrants |   | **386**     | ** ** | —                                                                       |   | 278,101 |   |
| Net  proceeds from issuance of preferred stock                                          |   | **—**  | ** ** | —                                                                       |   | 41,298 |   |
| Payment  of preferred stock dividends                                                   |   | **—**  | ** ** | —                                                                       |   | (302 | ) |
| Proceeds  from issuance of notes payable, capital lease and long-term debt              |   | **—**  | ** ** | —                                                                       |   | 9,318 |   |
| Restricted  cash                                                                        |   | **—**  | ** ** | —                                                                       |   | (3,500 | ) |
| Payments  on notes payable, long-term debt, and capital lease obligations               |   | **(351**    | **)**      | (484                                                                         | )      | (8,920 | ) |
| Proceeds  from issuance of notes payable to related parties                             |   | **—**  | ** ** | —                                                                       |   | 4,982 |   |
| Payments  on notes payable to related parties                                           |   | **—**  | ** ** | —                                                                       |   | (1,330 | ) |
| Loan  to officer                                                                        |   | **122**     | ** ** | 122                                                                          |   | (2,865 | ) |
| Net  cash provided by (used in) financing activities                                    |   | **157**     | ** ** | (362                                                                         | )      | 316,782 |   |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| Net  increase (decrease) in cash and cash equivalents                                   |   | **(23,606** | **)**      | (4,063                                                                       | )      | 9,255 |   |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| Cash  and cash equivalents at beginning of period                                       |   | **32,861**  | ** ** | 24,775                                                                       |   | — |   |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| Cash  and cash equivalents at end of period                                             |   | **$**       | **9,255**  | ** **                                                                   | $      | 20,712 |   | $ | 9,255 |   |
|                                                                                    |   |        | ** ** |                                                                         |   |   |   |
| Noncash  investing activities:                                                          |   |        | ** ** |                                                                         |   |   |   |
| Acquisition  of property and equipment under capital lease                              |   | **$**       | **—** | ** **                                                                   | $      | 50 |   | $ | 270 |   |
| Increase  (decrease) in fair value of securities available for sale                     |   | **$**       | **(258**   | **)**                                                                        | $      | (153 | ) | $ | 208 |   |

 

*See Accompanying Notes to Condensed Consolidated FinancialStatements.*

 

3

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**NOTES TO CONDENSED****CONSOLIDATEDFINANCIAL STATEMENTS (Unaudited)**

*Maxim Pharmaceuticals, Inc. and Subsidiaries (A Development StageCompany)*

 

**1.****                                      PRINCIPLESOF INTERIM PERIOD REPORTING**

 

Maxim Pharmaceuticals, Inc. (the“Company”) has not earned significant revenues from planned principaloperations. Accordingly, the Company’s activities have been accounted for asthose of a “Development Stage Enterprise” as set forth in Financial AccountingStandards Board Statement No. 7.

 

The information at December 31, 2003 and for the three monthsended December 31, 2003 and 2002 and from inception (October 23,1989) through December 31, 2003 is unaudited. In the opinion of theCompany, these condensed consolidated financial statements contain all of theadjustments, consisting only of normal recurring adjustments and accruals,necessary to present fairly the condensed consolidated financial position of theCompany as of December 31, 2003 and September 30, 2003, and thecondensed consolidated results of operations for the three months endedDecember 31, 2003 and 2002 and from inception (October 23, 1989)through December 31, 2003. The condensed consolidated results ofoperations for the three months ended December 31, 2003 are notnecessarily indicative of the results to be expected in subsequent periods orfor the year as a whole. For further information, refer to the consolidatedfinancial statements and footnotes thereto in our Annual Report onForm 10-K for the year ended September 30, 2003.

 

**2.****                                      SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

*Stock Option Plans*-TheCompany accounts for its stock option plans under the recognition andmeasurement principles of APB Opinion No. 25, “Accounting for Stock Issued toEmployees”,**and relatedInterpretations.  Compensation expenseassociated with stock options to employees was $46,000 in the currentquarter.  Compensation expense tonon-employees was $97,000 in the current quarter.  No other stock-based employee compensation cost is reflected innet loss, as all options granted under those plans had an exercise price equalto the market value of the underlying common stock on the date of grant.  The following table illustrates the effecton net income and

 

4

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earnings per share if the Company had appliedthe fair value recognition provisions of Statement of Financial AccountingStandards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”,**to stock-based employee compensation.

 
|                                                                                                            |   | **Three Months Ended**                    |    |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                                                            |   | **December 31,  2003**               |    | **December 31,  2002** |   |
|                                                                                                            |   | **(in thousands, except per share data)** |    |
| Net loss,  as reported                                                                                          |   | $                                         | (9,871  | ) | $ | (9,330 | ) |
| Less:  Compensation expense associated with stock options                                                       |   | 46                                        |    | — |   |
| Add: Total  stock-based employee compensation expense determined under fair value based  methods for all awards |   | (605                                      | )       | (982 | ) |
| Pro forma  net loss                                                                                             |   | $                                         | (10,430 | ) | $ | (10,312 | ) |
|                                                                                                            |   |                                      |    |   |   |
| Net loss  per share:                                                                                            |   |                                      |    |   |   |
| Basic and  diluted-as reported                                                                                  |   | $                                         | (0.35   | ) | $ | (0.40 | ) |
| Basic and  diluted- pro forma                                                                                   |   | $                                         | (0.37   | ) | $ | (0.44 | ) |

 

The fair value of the stock options were estimated at the date of grantusing the “Black-Scholes” method for option pricing and the followingweighted-average assumptions were used for grants made during the three monthsended, December 31, 2003 and 2002, respectively:

 
|                          |   | **Three Months Ended**      |   |
|-------------------------------|--------|-----------------------------|--------|
|                          |   | **December 31,  2003** |   | **December 31,  2002** |   |
| Risk free  interest rate      |   | 2.56                        | %      | 2.59 | % |
| Dividend  Yield               |   | 0                           |   | 0 |   |
| Volatility  Factor            |   | 75                          | %      | 75 | % |
| Expected  Life (in years)     |   | 4.5                         |   | 4.5 |   |
| Resulting  average fair value |   | $                           | 4.12   |   | $ | 1.40 |   |
|                               |        |                             |        |  |  |  |  |

 

**3.****                                      TOTALOTHER COMPREHENSIVE LOSS**

 

Total other comprehensive loss for the three months endedDecember 31, 2003 and 2002 was $10,129,000 and $9,483,000, respectively.  The difference between total othercomprehensive loss and net loss attributable to common stock was composed ofunrealized gains and losses on available-for-sale securities.

 

**4.****                                      NETLOSS PER SHARE**

 

Net loss per share is calculated in accordance with SFAS No. 128“Earnings per Share”. Basic net loss per share of common stock is computed bydividing the net loss after deduction of dividends on preferred stock by theweighted average number of shares of common stock outstanding during theperiod. Diluted loss per share is calculated by including the additional commonshares issuable upon exercise of outstanding options and warrants in the basicweighted average share calculation unless the effect of their inclusion isantidilutive. For the quarters ended

 

5

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December 31, 2003 and 2002, outstanding options and warrantstotaled 5,602,000 and 3,921,000, respectively. As these securities wereantidilutive, diluted loss per share equaled basic loss per share in eachrespective period.

 

**5.****                                      RECLASSIFICATIONS**

 

Certain amounts in the prior period financial statements have beenreclassified to conform with current period classifications.

 

**6.****                                      RELATEDPARTY TRANSACTIONS**

 

In December 2000, the Company entered into a secured revolvingpromissory note with an officer of the Company. The purpose of the agreementwas to allow the repayment of margin loans associated with the exercise ofstock options, the payment of income taxes associated with such exercises andthe purchase of a residence.  The Boarddetermined that it was in the Company’s best interest to provide the loan tothe officer to avoid the necessity of selling personal holdings of theCompany’s securities during a period of depressed market prices.  The note, as amended, bears interest at anannual rate of 4.0% and is secured by the officer’s outstanding options andshares of common stock. During the quarter ended September 30, 2002, theCompany determined that the note to the officer had become impaired because theCompany determined that the officer did not have the ability to repay the loanin full when due.  Accordingly, theCompany has not recorded interest income of $188,000 on the note subsequent toJune 30, 2002 and has recorded an allowance on the note in the amount of$700,000.  In December 2003 and inDecember 2002, the officer paid the Company $122,000, which was a portionof the interest due on the note.  Theentire outstanding balance of principal and interest was due onDecember 8, 2002.  As of the date thenote came due, the officer did not have the liquid assets necessary to repaythe loan.  The Company is reviewing itsoptions and alternatives and intends to collect the outstanding principal andinterest on the loan.  As ofDecember 31, 2003, the recorded outstanding principal and interest balanceon the note was $2,165,000, net of the $700,000 allowance.

 

At December 31, 2003, the Company was a guarantor on $1,800,000 inloans made by a bank to two officers and one former officer of the Company.Under the guarantor agreement executed in July 2001, the Company grantedthe bank a security interest in a $1,800,000 certificate of deposit ascollateral for the loans the bank made to the officers. The purpose of the thebank loans was to allow the payment of income taxes associated with theexercise of stock options.  The Boarddetermined that it was in the Company’s best interest to provide the guaranteesto avoid the necessity of the officers selling personal holdings of theCompany’s securities during a period of depressed market prices.  These loans are due in July 2004.  The Company does not hold any assets ascollateral for the guarantees; however, in a case of default the Company wouldpursue collection from the individuals. During the fourth quarter of fiscal year 2002, the Company determinedthat it was probable that one of the officers would not have the ability torepay his loan. Therefore, the Company recorded a provision for the guaranteeand a liability in the amount of $900,000. The Company intends to collect from the officer any amounts that mayultimately be paid by the Company to the bank as a result of the guarantee onbehalf of the officer.

 

6

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**7.****                                      CONTINGENCIES**

 

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 the Company and two officers of theCompany, alleging violations of federal securities laws related to declines inthe Company’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 theCompany’s motion to dismiss the lawsuit with prejudice and without leave toamend.  On December 30, 2003,plaintiff Blake Martin exercised his right to appeal the decision of the UnitedStates District Court for the Sourthern District of California to the NinthCircuit.  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 wasconfirmed by the Superior Court, which entered a judgment to this effect.  In January 2004, the plaintiffs filed anotice of appeal.  No amounts have beenrecorded in the Company’s financial statements related to the recovery of theseexpenses.

 

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 insurance carrier. Even if the Company’s defense against such claimsis successful, the litigation could result in substantial costs and divertmanagement’s attention and resources, which could adversely affect theCompany’s business.

 

As discussed in Footnote 6, Related PartyTransactions, the Company is a guarantor on $1,800,000 in loans made by a bankto two officers and one former officer of the Company and has a $2,165,000 notereceivable from an officer, net of a $700,000 allowance against the note.

 

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**ITEM 2****.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

*Maxim Pharmaceuticals, Inc. and Subsidiaries (A DevelopmentStage Company)*

 

*This Management’s Discussion and Analysis of FinancialCondition and Results of Operations contains certain forward-looking statementsthat involve risks and uncertainties. Such forward-looking statements includebut are not limited to statements regarding plans for the development andcommercialization of the Company’s drug candidates and future cashrequirements. Such statements are only predictions and the Company’s actualresults could differ materially from those anticipated or projected in suchforward-looking statements. Moreover, the Company assumes no responsibility forthe accuracy and completeness of the forward-looking statements.  The Company is under no duty to update anyof the forward-looking statements after the date hereof to conform suchstatements to actual results or to changes in its expectations.  Factors that could cause or contribute tosuch differences include, but are not limited to, those discussed in thesection entitled “Risk Factors” contained in this Quarterly Report. As aresult, you are cautioned not to rely on these forward-looking statements.*

 

*This Management’s Discussion and Analysis of FinancialCondition and Results of Operations should be read in conjunction with thecondensed consolidated financial statements, including the related notes,appearing in Item 1 of this Quarterly Report on Form 10-Q as well as theCompany’s Annual Report on Form 10-K for the year ended September 30,2003.*

 

**OVERVIEW**

 

Weare a global bio-pharmaceutical company with a diverse pipeline of drugcandidates for life-threatening cancers and chronic liver diseases.

 

Ourlead drug candidate CepleneTM (histamine dihydrochloride) is designed to preventor reverse damage associated with oxidative stress, thereby protecting criticalcells and tissues. Because Ceplene modulates basic immune functions, it has thepotential to be used in the treatment of a broad range of diseases in whichoxidative stress plays an important role. More than 2,000 patients haveparticipated in our 17 completed and ongoing clinical trials of Ceplene,conducted in 20 countries.  The clinicaltrials involve the 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.

 

Clinicaltrials completed to date have suggested that Ceplene can be safelyself-administered by most patients in their own homes.

 

Ceplene for the treatment of advanced malignant melanoma represents ourmost advanced program.  InNovember 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

 

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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).

 

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.

 

Our development activities are supported by clinical collaborationswith Schering Plough, Myriad Genetics, and Chiron Corporation.

 

**CRITICAL ACCOUNTING POLICIES**

 

Thepreparation of condensed consolidated financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires the Company to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses as well as relateddisclosure of contingent assets and liabilities. These estimates include usefullives for fixed assets, useful lives for intellectual property, estimated livesfor license agreements, revenue recognition, allowance for notes receivable,reserves related to loan guarantees, valuation of intellectual property, andestimates for clinical trial expenses incurred but not yet billed.  On an on-going basis, the Company evaluatesits estimates. The Company bases its estimates on historical experience andvarious other assumptions that are believed to be reasonable under thecircumstances. Under different assumptions or conditions these estimates mayvary significantly. In addition, actual results may differ materially fromthese estimates.

 

TheCompany believes the following critical accounting policies affect its moresignificant judgments and estimates used in the preparation of its condensedconsolidated financial statements.

 

*Revenue Recognition.* Revenue is generally recognized when all of the following criteria aremet: persuasive evidence of an arrangement exists; services have been renderedand are non-refundable, the price is fixed and determinable and collection isreasonably assured.  All multipledeliverable arrangements are reviewed by the Company for separability inaccordance with EITF 00-21. If the separability criteria are met, non-refundable upfront technologyaccess fees are recognized over the license period.  Upfront technology access fees which are not considered separablefrom the related research fees are recognized as revenue over the applicableresearch period as research activities are performed. Milestone payments arerecognized when earned and collectibility is assured provided that themilestone events are substantive and their achievability is not reasonablyassured at the inception of the agreement. Amounts received but unearned arerecorded as deferred revenue.  Certaincollaborative agreements provide the Company donated materials and serviceswhich are recorded when used at the fair market value of the material receivedor the service provided.  Grant fundingis recognized as revenue when earned.

 

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*Clinical trial expenses.*  TheCompany accounts for certain study drug, clinical trial site and other clinicaltrial costs by estimating the services incurred but not reported for eachpatient enrolled in each trial. These costs and estimates vary based on thetype of clinical trial, the site of the clinical trial, the length of treatmentperiod for each patient and the length of time required to receive formaldocumentation of the actual expenses incurred. As actual costs become known,the Company may need to revise its estimated accrual, which could alsomaterially affect its results of operations.

 

*Valuation of Intellectual Property.*  TheCompany evaluates its patents and licenses for impairment on an annual basisand whenever indicators of impairment exist. During this process, the Companyreviews its portfolio of pending domestic and international patentapplications, domestic and international issued patents, and licenses theCompany has acquired from other parties. To determine if any impairment ispresent, the Company considers challenges or potential challenges to itsexisting patents, the likelihood of applications being issued, the scope of itsissued patents, the assessment of future cash flows to be generated from thepatents and its experience. In the event that it is determined that animpairment exists where the Company had previously determined that one did notexist, it may result in a material adjustment to the Company’s financialstatements.

 

**RESULTS OF OPERATIONS FOR THE THREE MONTHSENDED DECEMBER 31, 2003 AND 2002**

 

*Collaboration and Research Revenue–*For thequarter ended December 31, 2003, collaboration and research revenue was$1,419,000, an increase of $1,029,000 compared to the same period in the prioryear.  This increase was primarilyattributable to an increase in donated drugs and services from ScheringCorporation, which provided $1,047,000 in revenue in the current quarter.  The increase in donated drugs and servicesfrom Schering was a result of the full enrollment in our Phase 2 study(MP-8899-0406), which is also known as the Phase 2 triple-drug trial innonresponder HCV patients.  Otherrevenue recognized during the quarter amounted to $281,000 from license andresearch agreements with Myriad Genetics Corporation and Celera GenomicsCorporation, along with a grant from the National Institute of Health.

 

*Research and Development Expenses–*Research anddevelopment expenses for the quarter ended December 31, 2003 totaled$9,331,000, an increase of $1,076,000 or 13% over the same period in the prioryear.  This increase was primarily theresult of increased activity resulting from increased enrollment in our Phase 2study (MP-8899-0406) and Phase 3 study (MP-8899-0104),

which is also known as the Phase 3 advanced malignant melanoma trial inpatients with liver involvement, as well as costs incurred related to ourapplication for approval to market Ceplene in the European Union which we filedin November 2003.  In the future weexpect to continue incurring substantial additional research and developmentexpenses due to:

 

•                  preclinical andclinical testing of our product candidates;

•                  expansion of oradditional research and development programs; and

•                  regulatory-relatedexpenses

 

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*Business Development and Marketing Expenses–*Businessdevelopment and marketing expenses for the quarter ended December 31, 2003were $643,000, an increase of $271,000 or 73% over the same period of the prioryear.  This increase is due to anincrease in premarketing activities associated with the potential market launchof Ceplene.  Business development andmarketing expenses are expected to increase in the future to support marketingand administrative activities related to the potential commercialization of ourproduct candidates.

 

*General and Administrative Expenses–*For thequarter ended December 31, 2003, general and administrative expenses were$1,766,000, a decrease of $141,000 or 7% from the same period in the prioryear, which is relatively consistent with expense in the quarter endedDecember 31, 2002.

 

*Other Income–*Investment income was $470,000for the quarter ended December 31, 2003, a decrease of $355,000 or 43%from the same period in the prior year. This decrease was a result of a decrease in the rate of interest earnedon our cash and short-term investments.

 

*Net Loss Applicable to Common Stock–*Net lossapplicable to common stock for the quarter ended December 31, 2003 totaled$9,871,000, an increase of $541,000 or 6% from the same period in the prioryear. This increase was primarily a result of increases in research anddevelopment expenses and business development and marketing expenses as well asthe decrease in investment income, partially offset by the increase incollaboration and research revenue, as described above.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company has financed its operations primarily through the sale ofits equity securities, including an initial public offering in 1996, aninternational follow-on public offering in 1997, private offerings of preferredstock in July and November 1999, a follow-on public offering inFebruary 2000, and a private placement of common stock inSeptember 2003, that provided total net proceeds of approximately $319million.

 

Until required for operations, the Company’s policy under establishedguidelines is to keep its cash reserves in bank deposits, corporate debtsecurities, United States government instruments and other readily marketabledebt instruments, all of which are investment-grade quality.  As of December 31, 2003, the Companyhad cash, cash equivalents and investments (including restricted cash of $3.5million) totaling approximately $83.7 million compared with $94.8 million atSeptember 30, 2003.  As ofDecember 31, 2003, the Company had working capital of approximately $72.4million compared with $82.3 million at September 30, 2003.  The decrease in the Company’s cash, cashequivalents and short-term investments, and working capital was primarily dueto day-to-day operating expenses relating to research and developmentactivities.

 

In December 2000, the Company entered into a secured revolvingpromissory note with an officer of the Company.  The note, as amended, bears interest at an annual rate of 4.0%and is secured by the officer’s outstanding options and shares of common stock.During the quarter ended September 30, 2002, the Company determined thatthe note to the officer had become impaired because the Company determined thatthe officer did not have the ability to repay the

 

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loan in full when due. Accordingly, the Company has not recorded interest income of $188,000 onthe note subsequent to June 30, 2002, and has recorded an allowance on thenote in the amount of $700,000.  InDecember 2003 and in December 2002, the officer paid the Company$122,000 which was a portion of the interest due on the note.  The entire outstanding balance of principaland interest was due on December 8, 2002. As of the date the note came due, the officer did not have the liquidassets necessary to repay the loan.  TheCompany is reviewing its options and alternatives and intends to collect theoutstanding principal and interest on the loan.

 

The Company is a guarantor on $1,800,000 in loans made by a bank to twoofficers and one former officer of the Company. Under the guarantor agreementexecuted in July 2001, the Company granted the bank a security interest ina $1,800,000 certificate of deposit as collateral for the loans the bank madeto the officers.  These loans are due inJuly 2004.  The Company does nothold any assets as collateral for the guarantees; however, in a case of defaultthe Company would pursue collection from the individuals.  During the fourth quarter of fiscal year2002, the Company determined that it was probable that one of the officerswould not have the ability to repay his loan. Therefore, the Company recorded aprovision for the guarantee and a liability in the amount of $900,000.  The Company intends to collect from theofficer any amounts that may ultimately be paid by the Company to the bank as aresult of the guarantee on behalf of the officer.

 

The Company has term loans with a bank totaling $1,427,000 atDecember 31, 2003, the proceeds of which were used to finance capitalexpenditures.  The term loan agreementscontain customary affirmative and negative covenants, including financialcovenants requiring the maintenance of specified liquidity terms and tomaintenance of the Company’s principal depository and operating accounts withthe bank.  In addition, the Company hasthe choice to either maintain a minimum aggregate balance of $3,500,000 at theinstitution, which includes the $1,800,000 certificate of deposit held underthe loan guarantees, as noted above, or to pay the bank a quarterly fee of $2,500.  During the quarter ended December 31,2003, the Company maintained the minimum aggregate balance noted above at thebank and was in compliance with all covenants.

 

The following table summarizes our contractual obligations as ofDecember 31, 2003:

 
|                        |   | **Payments  due by Period (in thousands)** |   |
|-----------------------------|--------|--------------------------------------------|--------|
|                        |   | **Total**                                  |   | **Less than  1  Year** |   | **1-3 Years** |   | **3-5 Years** |   | **More  than 5  Years** |   |
|                        |   |                                       |   |   |   |   |   |   |   |   |   |
| CONTRACTUAL OBLIGATIONS     |   |                                       |   |   |   |   |   |   |   |   |   |
| Debt                        |   | $                                          | 1,618  |   | $ | 1,015 |   | $ | 549 |   | $ | 54 |   | $ | — |   |
| Guarantee on Officer Loans  |   | 1,800                                      |   | 1,800 |   | — |   | — |   | — |   |
| Capital Lease Obligations   |   | 106                                        |   | 91 |   | 15 |   | — |   | — |   |
| Operating Lease Obligations |   | 11,702                                     |   | 1,891 |   | 3,799 |   | 3,753 |   | 2,259 |   |
|                             |        |                                            |        |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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The Company, as a development stage enterprise, anticipates incurringsubstantial additional losses at least in the near future as it continues toexpend substantial amounts on its ongoing and planned clinical trials and itsexpanded efforts related to its other research and development efforts,including the apoptosis modulator program. In addition, the Company’s cash requirements may fluctuate in futureperiods as it conducts additional research and development activities includingclinical trials, other research and development activities, and effortsassociated with the commercial launch of any product candidates that areapproved for sale by government regulatory bodies.  Among the activities that may result in an increase in cashrequirements are the scope and timing of the Phase 3 and Phase 2 Ceplene cancerand hepatitis C clinical trials currently underway, and earlier-stage clinicaltrials and other research related to liver disease and the apoptosis modulatorand topical histamine technologies. Other factors that may impact the Company’scash requirements include the results of clinical trials, the scope of otherresearch and development activities, the time required to obtain regulatoryapprovals, costs associated with defending certain lawsuits currently pendingagainst the Company, the costs of filing, prosecuting, defending and enforcingpatent claims and other intellectual property rights, and the ability toestablish marketing alliances and collaborative arrangements. As a result ofthese factors, it is difficult to accurately predict the timing and amount offuture cash requirements.

 

We believe that our available cash, cash equivalents and investments atDecember 31, 2003 will be sufficient to satisfy our funding needs for atleast the next 18 months.  To meet itscash requirements, the Company may pursue the issuance of additional equitysecurities and corporate collaborative agreements. In December 2003, theCompany filed a shelf registration, which will allow the Company to raise up to$75 million through the sale of various securities in one or more offerings inthe future.  Specific prices and termswill be determined at the time of any offering.  The issuance of additional equity securities, if any, couldresult in substantial dilution to the Company’s stockholders. There can be noassurance that additional funding will be available on terms acceptable to theCompany, if at all. The failure to fund the Company’s capital requirementswould have a material adverse effect on its business, financial condition andresults of operations.

 

The Company is currently pursuing a pharmaceutical collaborationregarding the European marketing rights for Ceplene and is pursuing theout-licensing of certain of its apoptosis modulator technology.  For instance, in November 2003, theCompany entered into an agreement with Myriad Genetics, Inc. (“Myriad”) underwhich the Company licensed its MX90745 series of caspase-inducer anti-cancercompounds to Myriad.  The agreementrequires that Myriad make licensing, research and milestone payments to theCompany totaling up to $27 million, assuming the successful commercializationof the compound for the treatment of cancer, as well as pay a royalty onproduct sales.  There can be noassurance that the Company will be able to enter into any additional agreementson acceptable terms, if at all.

 

The Company has never paid a cash dividend on its common stock and suchpayments are prohibited by the terms of the Company’s bank loan. The Companydoes not contemplate the payment of cash dividends on its common stock in theforeseeable future.

 

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**IMPACT OF INFLATION**

 

Theimpact of inflation on the operations of the Company for the three months endedDecember 31, 2003 and 2002 was not material.

 

**RECENT ACCOUNTING PRONOUNCEMENTS**

 

There have been no recent accounting pronouncements which have affectedthe Company.

 

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**RISK FACTORS**

 

You should carefully consider the followingrisk factors and the other information included herein as well as theinformation included in our Annual Report on Form 10-K for the fiscal yearended September 30, 2003, and other reports and filings made with theSecurities and Exchange Commission before investing in our common stock. If anyof the following risks actually occur, our business, financial condition orresults of operations could be harmed. The trading price of our common stockcould decline 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 Ceplene, apoptosis modulator and topicalhistamine gel technologies will require, dependent upon the specific drugcandidate, extensive research and development, preclinical testing, clinicaltesting, regulatory approval and substantial additional investment before wecan market them. We cannot assure you that any of our drug candidates will:

 

•                                          besuccessfully developed;

 

•                                          proveto be safe and effective in clinical trials;

 

•                                          meetapplicable United States or international regulatory standards;

 

•                                          becapable of being produced in commercial quantities at acceptable costs;

 

•                                          becommercially viable;

 

•                                          beeligible for third party reimbursement from governmental or private insurers;or

 

•                                          achievemarket acceptance.

 

We have not completed final testing for efficacy or safety in humansfor the diseases we propose to treat with Ceplene and our other drugcandidates. Failure to ultimately obtain approval for Ceplene and our otherdrug candidates, any delay in our expected testing and development schedules,or any elimination of a product development program in its entirety, willnegatively impact our ability to generate revenues in the future from the saleof our product candidates.

 

**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 to extensivegovernment regulations related to development, clinical trials, manufacturingand commercialization. The process of obtaining Federal Drug Administration(FDA), European Agency for the Evaluation of Medicinal Products (EMEA), andother governmental and similar international regulatory approvals is costly,

 

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time consuming, uncertain and subject to unanticipated delays. Even ifwe 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, EMEA or similar internationalregulators may refuse to approve an application for approval of a drugcandidate if they believe that applicable regulatory criteria are notsatisfied. The FDA, EMEA or similar international regulators may also requireadditional testing for safety and efficacy. For example, in 2000, we submitteda New Drug Application (NDA) to the FDA seeking approval to market Ceplenebased on the data from our first Phase 3 clinical study in advanced malignantmelanoma. In January 2001, the FDA determined that a second study wasrequired to support approval. In response to the FDA request, inJanuary 2002 we commenced another Phase 3 trial. Although we believe thatthis additional Phase 3 trial, in combination with the results of the first Phase3 trial, will support approval in the United States and other countries, wehave no assurance that (i) the results from this additional Phase 3 trialwill confirm the results from the first Phase 3 trial, (ii) the FDA, EMEAor similar regulatory agencies will not require additional Phase 3 trials or(iii) the FDA, EMEA or similar regulatory agencies will approve ourregulatory filings for drug approval.

 

In addition, manufacturing facilities operated by the third partymanufacturers with whom we contract to manufacture Ceplene and our other drugcandidates may not pass a FDA, EMEA or similar international regulatorypreapproval inspection. Moreover, if the FDA, EMEA or similar internationalregulatory agency grants regulatory approval of a product candidate, 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 approvals could prohibit ordelay us from marketing Ceplene and our other drug candidates. If Ceplene andour other drug candidates do not meet applicable regulatory requirements forapproval, we may not have the financial resources to continue research anddevelopment of these candidates, and we may not generate revenues from thecommercial sale of any of our 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 plannedclinical studies. For example, we may encounter delays in commencing studies orenrolling volunteers, lower than anticipated retention rate of volunteers in atrial or serious side effects experienced by study participants relating to thedrug candidate. Factors that could affect patient enrollment include the sizeof the patient enrollment population for the targeted disease, eligibilitycriteria, proximity of eligible patients to clinical sites, clinical trialprotocols and the existence of competing protocols, including competitivefinancial incentives for patients and clinicians, and existing approved drugs.If we encounter any delay in the commencement, conduct or completion of ourclinical studies for Ceplene or our other drug candidates, we may experiencethe following consequences:

 

•                                          theanalysis of data from our clinical studies and the reporting of results may bedelayed;

 

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•                                          thesubmission of our applications for regulatory approval of Ceplene and otherdrug candidates with regulatory authorities in North America, Europe andelsewhere 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 product candidates;

 

•                                          wemay not have the financial resources to continue and complete research anddevelopment of any of our product candidates; and

 

•                                          wemay not be able to enter into collaborative arrangements relating to anypotential product as a result of the delay in clinical development orregulatory filings.

 

**Because we are dependent on clinical researchcenters and other contractors for clinical testing and for certain research anddevelopment activities, the results of our clinical trials and such researchactivities are, to a certain extent, beyond our control.**

 

The nature of clinical trials and our business strategy requires us torely on clinical research centers and our other contractors to assist us withclinical testing and certain research and development activities. As a result,our success is dependent upon the success of these outside parties inperforming their responsibilities. Although we believe our contractors areeconomically motivated to perform on their contractual obligations, we cannotdirectly control the adequacy and timeliness of the resources and expertiseapplied to these activities by our contractors. If our contractors do notperform their activities in an adequate or timely manner, the development andcommercialization of our drug candidates could be delayed.

 

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

 

We expect to rely on collaborative arrangements for research anddevelopment and commercialization of certain drug candidates discovered anddeveloped by us, such as our agreement with Schering Corporation related to ourMP-8899-0406 Phase 2 Ceplene clinical trial in nonresponder hepatitis Cpatients and our agreement with Myriad Genomics Corporation related to theMX90745 series of caspase-inducer anti-cancer compounds. We cannot be certainthat we will be able to maintain these collaborations or enter into any futurecollaborative arrangements, that any of our collaborations will be successfulor that we will receive revenues from any of these collaborations. The successof these and any future collaborations will depend, in significant part, on ourpartners’ development and strategic considerations, including the relativeadvantages of alternative products being developed or marketed by competitors.If our partners fail to conduct their activities in a timely manner, or at all,preclinical or clinical development of drug candidates under thosecollaborations could be delayed or terminated. The suspension or termination ofour collaborations, the failure of our collaborations to be successful or thedelay in the development or commercialization of drug candidates pursuant toour collaborations could harm our business.

 

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**Our planned business may expose us toproduct, clinical trial and other liability claims.**

 

Our design, testing and development of potential products involves aninherent risk of exposure to clinical trial and product liability claims andrelated adverse publicity. Insurance coverage is expensive and difficult toobtain, and we may be unable to obtain coverage in the future on acceptableterms, if at all. Although we currently maintain clinical trial insurance forour drug candidates in the amounts we believe to be commercially reasonable, wecannot be certain that the coverage limits of our insurance policies or thoseof our strategic partners will be adequate. If we are unable to obtainsufficient insurance at an acceptable cost or if a claim is brought against us,whether fully covered by insurance or not, our business, results of operationsand 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 in development, may notachieve market acceptance even if they are approved by the FDA, EMEA andsimilar international regulatory agencies. We cannot guarantee that physicians,patients, payors or the medical community in general will accept and utilizeany products that we develop. The degree of market acceptance of our potentialproducts will depend on a number of factors, including:

 

•                                          thescope of regulatory approvals;

 

•                                          theestablishment and demonstration of the clinical efficacy, safety and advantagesof our product candidates by clinical trial results, and the acceptance of suchresults by the medical community;

 

•                                          thepotential advantages of our products over existing treatment methods; and

 

•                                          reimbursementpolicies of government and other third-party payors.

 

**We have yet to market or sell any of ourproduct candidates.**

 

Although we currently intend to market Ceplene in the United States ifit is approved by the FDA through the recruitment of experienced marketing andsales personnel, we have never before marketed or sold any pharmaceuticalproduct. In order to market or co-market Ceplene or certain other drug candidates,we will need to hire a significant number of people with relevantpharmaceutical experience to staff our sales force and marketing group, andpossibly also to make appropriate arrangements with collaborative partners. Ifwe cannot develop the required marketing and sales expertise both internallyand through our partnering arrangements, our ability to generate revenue fromproduct sales will likely suffer.

 

We intend to rely on collaborative partners to market and sell Ceplenein international markets, and such arrangements may be sought to market certainother drug candidates in all markets. We have not yet entered into anycollaborative arrangement with respect to marketing or selling Ceplene with theexception of agreements relating to Australia, New Zealand and Israel. We

 

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cannot guarantee that we will be able to enter into any sucharrangements on terms favorable to us, or at all. If we are able to enter intomarketing and selling arrangements with collaborative partners, we cannotassure you that such marketing collaborators will apply adequate resources andskills to their responsibilities, or that their marketing efforts will besuccessful. If we are unable to enter into favorable collaborative arrangementswith respect to marketing or selling Ceplene or our marketing collaboratorsefforts are not successful, our ability to generate revenue from product saleswill suffer.

 

**We will be dependent on third partymanufacturers of our product candidates. Our ability to sell our productcandidates may be harmed if adequate quantities of our product candidates arenot manufactured on a timely basis.**

 

We do not intend to acquire or establish our own dedicatedmanufacturing facilities for Ceplene and our other drug candidates in theforeseeable future. We have contracted and expect to continue to contract withestablished pharmaceutical manufacturers for the production of Ceplene. If weare 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 product candidates will be adversely affected.If we cannot adequately manufacture our product candidates, it could result indelays in submissions for regulatory approval and in commercial productlaunches, which in turn could materially impair our competitive position andthe possibility of achieving profitability. We cannot guarantee that we will beable to maintain our existing contract manufacturing relationships, or acquireor establish new, satisfactory third-party relationships to provide adequatemanufacturing capabilities 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 have experienced net lossesevery year since our inception. Our net losses applicable to common stock were$9.9 million and $9.3 million for the quarters ended December 31,2003 and 2002. As of December 31, 2003, we had an accumulated deficit ofapproximately $316.4 million. We anticipate incurring substantial additionallosses over at least the next several years related to developing and testingour drug candidates and preparing for commercialization and planned marketlaunches of our products. If we do not become profitable, our stock price willbe negatively affected, and we may ultimately be forced to discontinue ouroperations. We may never generate product revenues or become profitable. Weexpect to have quarter-to-quarter fluctuations in revenues, expenses andlosses, some of which could be significant.

 

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**We will need to raise additional funds in thefuture. 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 our potentialproducts and business. We expect to continue to have negative cash flow fromour operations for at least the next several years. We will have to raiseadditional funds to complete the development of our drug candidates and tobring them to market. Our future capital requirements will depend on numerousfactors, including:

 

•                                          theresults of our clinical trials;

 

•                                          thetiming and scope of any additional clinical trials undertaken;

 

•                                          thescope and results of our research and development programs;

 

•                                          thetime required to obtain regulatory approvals;

 

•                                          ourability to establish marketing alliances and collaborative agreements;

 

•                                          thecost of our internal marketing activities; and

 

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

 

Additional financing may not be available on acceptable terms, if atall. If adequate funds are not available, we will be required to delay, scaleback or eliminate one or more of our drug development programs or obtain fundsthrough arrangements with collaborative partners or others that may require usto relinquish rights to certain of our technologies or product candidates thatwe would not otherwise relinquish.

 

**We compete against many companies andresearch institutions that are developing products to treat the same diseasesas our drug candidates. To the extent these competitors are successful indeveloping and marketing such products, our future potential market share andrevenues could be reduced.**

 

There are many companies, both publicly and privately held, includingwell-known pharmaceutical companies and academic and other researchinstitutions, engaged in developing pharmaceutical products for the treatmentof life-threatening cancers and liver diseases. Products developed by any ofthese companies or institutions may demonstrate greater safety or efficacy thanour drug candidates or be more widely accepted by doctors, patients orthird-party payors. Many of our competitors and potential competitors havesubstantially greater capital resources, research and development capabilitiesand human resources than we do. Many of these competitors also havesignificantly greater experience than we do in undertaking preclinical testingand clinical trials of new pharmaceutical product candidates and obtaining FDA,EMEA and other regulatory approvals. If any of our drug candidates are approvedfor commercial sale, we will also be competing with

 

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companies that have greater resources and experience in manufacturing,marketing and selling pharmaceutical products. To the extent that any of ourcompetitors succeed in developing products that are more effective, less costlyor have better side effect profiles than our products, then our futurepotential market share could decrease, which may have a negative impact on ourbusiness.

 

**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 product candidates and technologiesfrom competitors.**

 

Our success depends in large part on our ability to obtain, maintainand protect patents, trademarks and trade secrets and to operate withoutinfringing upon the proprietary rights of others. If we are unable to do so,our product candidates and technologies may not provide us with any competitiveadvantage.

 

The patent positions of biotechnology and pharmaceutical companies arehighly uncertain and involve complex legal and factual questions, and thebreadth of claims allowed in biotechnology and pharmaceutical patents cannot bepredicted. As a result, patents may not issue from any of our patentapplications. Patents currently held by us or issued to us in the future, or tolicensors from whom we have licensed technology rights, may be challenged,invalidated or circumvented so that our intellectual property rights may notprotect our technologies or provide commercial advantage to us. In addition, wealso rely on unpatented trade secrets and proprietary know-how, and we cannotbe sure that others will not obtain access to or independently develop suchtrade secrets and know-how. Enforcement of our intellectual property rightsagainst any infringers of our patents relating to Ceplene and our othertechnologies will be costly and time-consuming. Because of the nature of thosepatents, we could be required to bring lawsuits against many different entitiessuch as hospitals or clinics. This would have the effect of increasing thecosts of enforcing our rights.

 

The pharmaceutical industry has experienced extensive litigationregarding patent and other intellectual property rights. Although to date weare not aware of any intellectual property claims against us, in the future wecould be forced to incur substantial costs in defending ourselves in lawsuitsthat are brought against us claiming that we have infringed on the patentrights of others or in asserting our patent rights in lawsuits against otherparties. We may also be required to participate in interference proceedingsdeclared by the United States Patent and Trademark Office or internationalpatent authorities for the purpose of determining the priority of inventions inconnection with our patent applications or other parties’ patent applications.Adverse determinations in litigation or interference proceedings could requireus to seek licenses that may not be available on commercially reasonable termsor subject us to significant liabilities to third parties.

 

**The technology in our sector is developingrapidly, and our future success depends on our ability to keep abreast oftechnological change.**

 

We are engaged in the pharmaceutical field, which is characterized byextensive research efforts and rapid technological progress. New developmentsin oncology, cancer therapy, medicinal pharmacology, biochemistry and otherfields are expected to continue at a rapid pace. Research and discoveries byothers may render some or all of our proposed programs or product candidates

 

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noncompetitive or obsolete. Our business strategy is subject to therisks inherent in the development of new product candidates 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.

 

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

 

Our success will depend, to a great extent, upon the experience,abilities and continued services of our executive officers, and key personnelfor research, development and commercialization. If we lose the services of anyof these officers or key research and development personnel, our business couldbe harmed. Our success also will depend upon our ability to attract and retainother highly qualified research and development, managerial, manufacturing andsales personnel and our ability to develop and maintain relationships withqualified clinical researchers. Competition for these personnel andrelationships is intense and we compete with numerous pharmaceutical andbiotechnology companies as well as with universities and non-profit researchorganizations. We may not be able to continue to attract and retain qualifiedpersonnel or develop and maintain relationships with clinical researchers.

 

**The marketability of our product candidatesmay depend on reimbursement and reform measures in the health care industry.**

 

Our success may depend, in part, on the extent to which reimbursementfor the costs of therapeutic product candidates and related treatments will beavailable from third-party payors such as United States and similarinternational government health administration authorities, private healthinsurers, managed care programs and other organizations. Over the past decade,the cost of health care has risen significantly, and there have been numerousproposals by legislators, regulators and third-party health care payors to curbthese costs. Some of these proposals have involved limitations on the amount ofreimbursement for certain products and product candidates. We cannot guaranteethat similar United States federal or state or similar international healthcare legislation will not be adopted in the future or that any productcandidates sought to be commercialized by us will be considered cost-effectiveor that adequate third-party insurance coverage will be available for us toestablish and maintain price levels sufficient for realization of anappropriate return on our investment in product development. Moreover, theexistence or threat of cost control measures could have an adverse effect onthe willingness of potential collaborators to pursue research and developmentprograms related to our product candidates.

 

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

 

From time to time we consider strategic transactions and alternativeswith the goal of maximizing stockholder value. These potential transactions mayinclude a variety of different business arrangements, including spin-offs,acquisitions, strategic partnerships, joint ventures, restructurings, divestitures,business combinations and investments. We cannot assure you that any suchtransactions will be consummated on favorable terms or at all, will in factenhance stockholder

 

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value, or will not adversely affect our business or the trading priceof our stock. Any such transactions may require us to incur non-recurring orother charges and may pose significant integration challenges and/or managementand business disruptions, any of which could materially and adversely affectour business and financial results.

 

**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, on behalf of himselfand purportedly on behalf of a class of others similarly situated, filed acomplaint in the United States District Court for the Southern District ofCalifornia against us and two officers of our Company, alleging violations offederal securities laws related to declines in the Company’s stock price inconnection with various statements and alleged omissions to the public and tothe securities markets, and seeking damages therefore. In December 2003,the United States Federal Court granted our motion to dismiss the lawsuit withprejudice and without leave to amend. On December 30, 2003, plaintiffBlake Martin exercised his right to appeal the decision of the United StatesDistrict Court for the Southern District of California to the Ninth Circuit.The complaint has been tendered to our insurance carrier.

 

In October 2001 and May 2002, certain former shareholders ofCytovia, Inc. filed complaints in California Superior Court in San Diego,against us and two of our officers based on similar facts and circumstances,alleging fraud and negligent misrepresentation in connection with ouracquisition of Cytovia. The Superior Court subsequently issued an ordercompelling the first lawsuit to a binding arbitration forum, and the secondlawsuit has been stayed pending the resolution of the arbitration proceeding. Abinding arbitration proceeding with the American Arbitration Association washeld in May 2003. The three-member arbitration panel rejected all of theclaims asserted by certain former shareholders of Cytovia, determined that wehave no liability for such claims and awarded recovery of our reasonableattorneys’ fees and costs of approximately $922,000 as prevailing party in theproceedings. In December 2003, the decision was confirmed by the SuperiorCourt, which entered a judgment to this effect.  In January 2004, the plaintiffs filed a notice of appeal.

 

No assurances can be made that we will be successful in our defense ofthe pending claims. If we are not successful in our defense of such claims, wecould be forced to make significant payments to our stockholders, theplaintiffs and defense lawyers, and such payments could have a material adverseeffect on our business, financial condition and results of operations if notcovered by our insurance carrier. Even if our defense against such claims issuccessful, the litigation could result in substantial costs and divertmanagement’s attention and resources, which could adversely affect ourbusiness.

 

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**Our stock price may be highlyvolatile due to external factors.**

 

Our common stockcurrently trades on the Nasdaq National Market and on the OM StockholmExchange. Historically, our common stock has generally experienced relativelylow daily trading volumes in relation to the aggregate number of sharesoutstanding. The Company currently has a $75 million shelf registration on filewith the Securities and Exchange Commission. Sales of substantial amounts of our common stock in the public marketcould adversely affect the prevailing market prices of our common stock and ourability to raise equity capital in the future.

 

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 to ourcollaborative relationships;

 

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

 

•                                          developments or disputes concerningpatents 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 pharmaceutical andbiotechnology stocks, whether or not related to results or news regarding us orour competitors; and

 

•                                          publicity regarding actual or potentialmedical results relating to products or drug candidates under development by usor our competitors.

 

External factors may alsoadversely affect the market price for our common stock. The price and liquidityof our common stock may be significantly affected by the overall tradingactivity and market factors on the Nasdaq National Market and the OM StockholmExchange, and these factors may differ between the two markets. In addition,the securities markets have from time to time experienced significant price andvolume fluctuations that may be unrelated to the operating performance ofparticular companies. The market prices of the common stock of many publiclytraded pharmaceutical or biotechnology companies have in the past been, and canin the future be expected to be, especially volatile.

 

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**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 make it moredifficult for a third party to acquire control of us, even though suchacquisition may be beneficial to our stockholders. These provisions include:

 

•                                          astaggered or classified board;

 

•                                          theinability of stockholders to act by written consent; and

 

•                                          noright to remove directors other than for cause.

 

We have also adopted a shareholder rights plan or “poison pill.” Ourshareholder rights plan is designed to protect our shareholders in the event ofan unsolicited bid to acquire the company. In general terms, the rights planimposes a significant penalty upon any person or group that acquires 15% ormore of our outstanding common stock without the approval of our board ofdirectors. Our shareholder rights plan could discourage a third party fromattempting to acquire us through an acquisition of our outstanding votingstock, even though such acquisition may be beneficial to our stockholders.

 

Our board of directors also has the authority to issue, at any time,without further stockholder approval, up to 5,000,000 shares of preferredstock, and to determine the price, rights, privileges and preferences of thoseshares. These preferred shares are available to be used in connection with ourshareholder rights plan. Any issuance of preferred stock could discourage athird party from acquiring a majority of our outstanding voting stock.

 

Furthermore, we are subject to the provisions ofSection 203 of the Delaware General Corporations Law, an anti-takeoverlaw, which may also dissuade a potential acquiror, even though such acquisitionmay be beneficial to our stockholders.

 

**Issuing preferred stock with rights senior tothose of our common stock could adversely affect holders of common stock.**

 

Our charter documents give our board of directors the authority toissue series of preferred stock without a vote or action by our stockholders.The board also has the authority to determine the terms of preferred stock,including price, preferences and voting rights. The rights granted to holdersof preferred stock may adversely affect the rights of holders of our commonstock. For example, a series of preferred stock may be granted the right toreceive a liquidation preference—a pre-set distribution in the event of aliquidation—that would reduce the amount available for distribution to holdersof common stock. In addition, the issuance of preferred stock could make itmore difficult for a third party to acquire a majority of our outstandingvoting stock. As a result, common stockholders could be prevented fromparticipating in transactions that would offer an optimal price for theirshares.

 

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**ITEM 3****. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

 

The Company’s exposure to market risk is principally confined to itscash equivalents and investments that have maturities of less than three years.The Company maintains a non-trading investment portfolio of investment grade,liquid debt securities that limits the amount of credit exposure to any oneissue, issuer or type of instrument. The securities in its investment portfolioare not leveraged, are classified as available-for-sale and are subject tointerest rate risk. The Company currently does not hedge interest rateexposure. A hypothetical ten percent change in interest rates during thequarter ended December 31, 2003 would have resulted in approximately a$41,000 change in net loss.  The Companyhas not used derivative financial instruments in its investment portfolio.There have been no significant changes in the types or maturities ofinvestments held from September 30, 2003.

 

**ITEM 4****. CONTROLS AND PROCEDURES**

 

The Company carried out an evaluation, under the supervision and withthe participation of the Company’s management, including the Company’sPresident and Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of theperiod covered by this report.  Basedupon that evaluation, the Company’s President and Chief Executive Officer andChief Financial Officer concluded that the Company’s disclosure controls andprocedures are effective in enabling the Company to record, process, summarizeand report information required to be included in the Company’s periodicfilings with the Securities Exchange Commission within the required timeperiod.  There have been no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date the Companycarried out its evaluation.

 

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**PART II****–OTHERINFORMATION**

 

*Item 1**.  LegalProceedings*

 

On December 14, 2000 plaintiff Blake Martin, on behalf of himselfand purportedly on behalf of a class of others similarly situated, filed acomplaint in the United States District Court for the Southern District ofCalifornia against the Company and two officers of the Company, allegingviolations of federal securities laws related to declines in the Company’sstock price in connection with various statements and alleged omissions to thepublic and to the securities markets, and seeking damages therefore. InDecember 2003, the United States Federal Court granted the Company’smotion to dismiss the lawsuit with prejudice and without leave to amend.  On December 30, 2003, plaintiff BlakeMartin exercised his right to appeal the decision of the United States DistrictCourt for the Southern District of California to the Ninth Circuit.  The complaint has been tendered to theCompany’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 wasconfirmed by the Superior Court, which entered a judgment to this effect. InJanuary 2004, the plaintiffs filed a notice of appeal.

 

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 insurance carrier. Even if the Company’s defense against such claimsis successful, the litigation could result in substantial costs and divertmanagement’s attention and resources, which could adversely affect theCompany’s business.

 

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*Item 6**. Exhibitsand Reports on Form 8-K*

 

*a)**            Exhibits*

 
| 10.1 |   | Employment  Agreement dated October 1, 2003 between the Registrant and Kurt R.  Gehlsen.*                                                                                      |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2 |   | Employment  Agreement dated October 1, 2003 between the Registrant and Dale A.  Sander.*                                                                                       |
| 10.3 |   | Employment  Agreement dated October 1, 2003 between the Registrant and Anthony E.  Altig.*                                                                                     |
| 10.4 |   | Employment  Agreement dated October 1, 2003 between the Registrant and Pam G.  Gleason.*                                                                                       |
| 10.5 |   | Employment  Agreement dated November 17, 2003 between the Registrant and Larry G.  Stambaugh.*                                                                                 |
| 10.6 |   | Employment  Agreement dated December 1, 2003 between the Registrant and Sharon A.  Tonetta.*                                                                                   |
| 10.7 |   | License  and Collaboration Agreement dated November 19, 2003 between the  Registrant and Myriad Genetics, Inc.‡                                                           |
| 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   |   | Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 906 of the Sarbanes-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.

 

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

 

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*b)  Reports on Form 8-K*

 
| **Date of Report**     |   | **Description  of Exhibit**                                                             |   | **Financial  Statements Filed** |
|------------------------|--------|-----------------------------------------------------------------------------------------|--------|---------------------------------|
| December 16, 2003 |   | Press Release: “Maxim Pharmaceuticals Reports Fiscal 2003 Financial  Results” |   | No                              |

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                          | MAXIM  PHARMACEUTICALS, INC. |
|-------------------------------|------------------------------|
|                          | By:                          | /s/ ANTHONY E. ALTIG |
|                          |                         | Anthony E. Altig,*Vice President, Finance and Chief  Financial Officer  (Principal Financial and Accounting Officer duly authorized to  sign on behalf of the registrant)* |
| Date:  February 10, 2004 |                         |   |

 

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