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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission File Number: 001-33054
 TRUBION PHARMACEUTICALS, INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
(State or other jurisdiction of incorporation or organization)
    
    52-2385898
(IRS Employer Identification No.)
 2401 FOURTH AVENUE, SUITE 1050
SEATTLE, WASHINGTON
    
    98121(Address of registrants principal executive offices)
    
    (Zip Code)
 (206) 838-0500
(Telephone number, including area code)
 N/A
 
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
 þ o
  o o þ
 o þ




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##### 



TRUBION PHARMACEUTICALS, INC.
 INDEX
 PAGE NO.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Balance Sheets as of March 31, 2007 and December 31, 2006
    
    
    3Statements of Operations for the Three Months Ended March 31, 2007 and 2006
    
    
    4Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATION
    
    
    21Item 1 Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 6. Exhibits
    
    
    35SIGNATURES
    
    
    36EXHIBIT INDEX
    
    
    37EXHIBIT 3.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TRUBION PHARMACEUTICALS, INC.
 
 BALANCE SHEETS
 (In thousands, except share and par value)
 March 31, 2007
    
    
    December 31, 2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    55,003
    
    
    $
    56,414Investments
    
    
    43,399
    
    
    
    49,387Receivable from collaboration
    
    
    3,443
    
    
    
    4,354Prepaid expenses and other current assets
    
    
    781
    
    
    
    792Total current assets
    
    
    102,626
    
    
    
    110,947Property and equipment, net
    
    
    11,926
    
    
    
    10,334Other assets
    
    
    87
    
    
    
    113Total assets
    
    $
    114,639
    
    
    $
    121,394LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    898
    
    
    $
    1,537Accrued liabilities
    
    
    5,048
    
    
    
    5,666Accrued compensation
    
    
    810
    
    
    
    1,351Current portion of notes payable
    
    
    1,338
    
    
    
    1,025Current portion of deferred rent
    
    
    180
    
    
    
    180Current portion of deferred revenue
    
    
    8,000
    
    
    
    8,000Total current liabilities
    
    
    16,274
    
    
    
    17,759Non-current portion of notes payable
    
    
    7,681
    
    
    
    6,708Non-current portion of deferred rent
    
    
    450
    
    
    
    495Non-current portion of deferred revenue
    
    
    21,778
    
    
    
    23,778Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value per
share; shares authorized  5,000,000 at
March 31, 2007 and December 31, 2006;
issued and outstanding  none at March 31,
2007 and December 31, 2006
    
    
    
    
    
    
    Common stock, $0.001 par value per share;
shares authorized  150,000,000 at March
31, 2007 and December 31, 2006;
outstanding  17,585,477 at March 31, 2007
and 17,554,318 at December 31, 2006
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    117,764
    
    
    
    117,061Deferred stock-based compensation
    
    
    (724
    )
    
    
    (850
    )Accumulated other comprehensive income
    
    
    13
    
    
    
    21Accumulated deficit
    
    
    (48,615
    )
    
    
    (43,596
    )Total stockholders equity
    
    
    68,456
    
    
    
    72,654Total liabilities and stockholders equity
    
    $
    114,639
    
    
    $
    121,394
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TRUBION PHARMACEUTICALS, INC.
 
 STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Collaboration revenue
    
    $
    4,835
    
    
    $
    5,818Operating expenses:Research and development*
    
    
    8,591
    
    
    
    5,757General and administrative*
    
    
    2,355
    
    
    
    2,831Total operating expenses
    
    
    10,946
    
    
    
    8,588Loss from operations
    
    
    (6,111
    )
    
    
    (2,770
    )Interest income
    
    
    1,257
    
    
    
    502Interest expense
    
    
    (165
    )
    
    
    (60
    )Other expense
    
    
    
    
    
    
    (59
    )Net loss
    
    $
    (5,019
    )
    
    $
    (2,387
    )Basic and diluted net loss per share
    
    $
    (0.29
    )
    
    $
    (1.80
    )Shares used in computation of basic and diluted net loss per share
    
    
    17,566
    
    
    
    1,327* Includes non-cash stock-based compensation as follows:Research and development
    
    $
    338
    
    
    $
    894General and administrative
    
    
    465
    
    
    
    1,153Total non-cash stock-based compensation
    
    $
    803
    
    
    $
    2,047
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TRUBION PHARMACEUTICALS, INC.
 
 STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Operating Activities:Net loss
    
    $
    (5,019
    )
    
    $
    (2,387
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Non-cash stock-based compensation expense
    
    
    771
    
    
    
    1,829Non-cash stock-based consulting expense
    
    
    32
    
    
    
    218Depreciation and amortization expense
    
    
    671
    
    
    
    281Amortization of debt discount
    
    
    6
    
    
    
    6Revaluation of warrants to fair value
    
    
    
    
    
    
    59Changes in operating assets and liabilities:Receivable from collaboration
    
    
    911
    
    
    
    36,182Prepaid expenses and other assets
    
    
    37
    
    
    
    (1,097
    )Accounts payable
    
    
    (639
    )
    
    
    655Accrued liabilities and compensation
    
    
    (1,159
    )
    
    
    375Deferred revenue
    
    
    (2,000
    )
    
    
    (2,000
    )Deferred rent
    
    
    (45
    )
    
    
    (43
    )Net cash provided by (used in) operating activities
    
    
    (6,435
    )
    
    
    34,078Investing Activities:Purchase of property and equipment
    
    
    (2,263
    )
    
    
    (317
    )Purchase of investments
    
    
    (46,453
    )
    
    
    (36,990
    )Maturities of investments
    
    
    52,433
    
    
    
    8,481Net cash provided by (used in) investing activities
    
    
    3,717
    
    
    
    (28,826
    )Financing Activities:Proceeds from issuance of notes payable
    
    
    1,516
    
    
    
    Payments on notes payable
    
    
    (236
    )
    
    
    (300
    )Proceeds from exercise of stock options
    
    
    26
    
    
    
    16Net cash provided by (used in) financing activities
    
    
    1,306
    
    
    
    (284
    )Net increase (decrease) in cash and cash equivalents
    
    
    (1,411
    )
    
    
    4,968Cash and cash equivalents at beginning of period
    
    
    56,414
    
    
    
    4,681Cash and cash equivalents at end of period
    
    $
    55,003
    
    
    $
    9,649Supplemental disclosure information:Cash paid for interest
    
    $
    158
    
    
    $
    54
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TRUBION PHARMACEUTICALS, INC.
 
 NOTES TO FINANCIAL STATEMENTS
 1. The Company and Basis of Presentation
 Business
  tm
 Basis of Presentation
   2. Summary of Significant Accounting Policies
 Revenue Recognition
   Up-Front Fees and License Fees:
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Collaborative Research Funding:
 Milestones:
 Royalties:
 Research and Development
  Accounting for Stock-Based Compensation
 Share-Based Payment Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB 25 Accounting for Stock-Based Compensation, Accounting for Stock-Based Compensation  Transition and Disclosure.
 Recent Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes, Accounting for Income Taxes
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Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement
No. 115
 Use of Estimates
  3. Net Loss per Share
  As of March 31,2007
    
    2006Stock options
    
    
    1,588
    
    
    
    1,515Warrants to purchase convertible preferred stock
    
    
    
    
    
    
    20Common shares subject to repurchase
    
    
    1
    
    
    
    70Convertible preferred stock
    
    
    
    
    
    
    10,6521,589
    
    
    
    12,257
 Non-GAAP Pro Forma Net Loss per Share Applicable to Common Stockholders
  Three months endedMarch 31,2007
    
    
    2006Net loss
    
    $
    (5,019
    )
    
    $
    (2,387
    )Preferred stock warrant liability expense
    
    
    
    
    
    
    59Pro forma net loss
    
    $
    (5,019
    )
    
    $
    (2,328
    )
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Three months endedMarch 31,2007
    
    
    2006Shares used to compute basic net loss per share
    
    
    17,566
    
    
    
    1,327Pro forma adjustments to reflect weighted-average
effect of conversion of preferred stock on
January 1,
2006
    
    
    
    
    
    
    10,652Non-GAAP pro forma shares used in pro forma basic
net loss per share
    
    
    17,566
    
    
    
    11,979Non-GAAP pro forma basic net loss per share
    
    $
    (0.29
    )
    
    $
    (0.19
    )
 4. Collaboration Agreement
 tm tm
   5. Stock-Based Compensation
 Employee Stock Options Granted Prior to January 1, 2006
  Remainder of 2007
    
    $
    3762008
    
    
    3122009
    
    
    36$
    724
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Employee Stock Options Granted On or Subsequent to January 1, 2006
   Three months ended
    
    Three months endedMarch 31, 2007
    
    March 31, 2006Risk-free interest rate
    
    
    4.62
    %
    
    
    4.63
    %Weighted-average expected life (in years)
    
    
    6.25
    
    
    
    5.5-6.25Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility rate
    
    
    75
    %
    
    
    75
    %Weighted-average estimated fair value of employee
options
    
    $
    14.34
    
    
    $
    15.11
  Non-Employee Stock Options
 Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure, Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services
 Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans.
  Equity Incentive Plans
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Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingShares
    
    
    
    
    
    
    Exercise
    
    
    Contractual
    
    
    AggregateAvailable for
    
    
    Options
    
    
    Price Per
    
    
    Life
    
    
    IntrinsicGrant
    
    
    Granted
    
    
    Share
    
    
    (in years)
    
    
    ValueBalance at January 1, 2007
    
    
    490,522
    
    
    
    1,587,626
    
    
    $
    3.90Authorized increase in Plan
    
    
    877,715
    
    
    
    
    
    
    
    Granted
    
    
    (32,900
    )
    
    
    32,900
    
    
    
    20.51Forfeited
    
    
    1,206
    
    
    
    (1,206
    )
    
    
    4.20Exercised
    
    
    
    
    
    
    (31,159
    )
    
    
    0.83Balance at March 31, 2007
    
    
    1,336,543
    
    
    
    1,588,161
    
    
    
    4.30
    
    
    
    8.16
    
    
    $
    24,638Vested and expected to vest at
March 31, 2007
    
    
    
    
    
    
    1,567,343
    
    
    
    4.21
    
    
    
    8.16
    
    
    
    24,269Exercisable at March 31, 2007
    
    
    
    
    
    
    817,082
    
    
    
    2.33
    
    
    
    7.66
    
    
    
    14,197
  6.
    
    Property and EquipmentProperty and equipment consisted of the following (in thousands):
 March 31,
    
    
    December 31,2007
    
    
    2006Lab equipment
    
    $
    7,829
    
    
    $
    6,053Leasehold improvements
    
    
    6,413
    
    
    
    6,385Furniture and fixtures
    
    
    377
    
    
    
    359Computer equipment and software
    
    
    856
    
    
    
    711Construction in progress
    
    
    501
    
    
    
    20415,976
    
    
    
    13,712Accumulated depreciation and
amoritization
    
    
    (4,050
    )
    
    
    (3,378
    )$
    11,926
    
    
    $
    10,334
 7.
    
    Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands):
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March 31,
    
    
    December 31,2007
    
    
    2006Accrued professional fees
    
    $
    132
    
    
    $
    576Accrued manufacturing
    
    
    865
    
    
    
    1,583Accrued clinical trials
    
    
    2,072
    
    
    
    1,994Accrued property, plant & equipment
    
    
    787
    
    
    
    442Other
    
    
    1,192
    
    
    
    1,071$
    5,048
    
    
    $
    5,666
 8. Notes Payable  Equipment Financing Arrangements
  
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 This quarterly report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Act) and Section 21E of the Securities
Exchange Act of 1934, as amended, which are subject to the safe harbor created by those sections.
Forward-looking statements are based on our managements beliefs and assumptions and on information
currently available to them. In some cases you can identify forward-looking statements by terms
such as may, will, should, could, would, expect, plans, anticipates, believes,
estimates, projects, predicts, potential, and similar expressions intended to identify
forward-looking statements. Examples of these statements include, but are not limited to,
statements regarding: the implications of interim or final results of our clinical trials, the
progress of our research programs, including clinical testing, the extent to which our issued and
pending patents may protect our products and technology, our ability to identify new product
candidates, the potential of such product candidates to lead to the development of commercial
products, our anticipated timing for initiation or completion of our clinical trials for any of our
product candidates, our future operating expenses, our future losses, our future expenditures for
research and development, and the sufficiency of our cash resources. Our actual results could
differ materially from those anticipated in these forward-looking statements for many reasons,
including the risks faced by us and described in Part II, Item 1A of this quarterly report on Form
10-Q and our other filings with the SEC. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this quarterly report on Form 10-Q .
You should read this quarterly report on Form 10-Q completely and with the understanding that our
actual future results may be materially different from what we expect. Except as required by law,
we assume no obligation to update these forward-looking statements, whether as a result of new
information, future events, or otherwise.
 The following discussion and analysis should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I, Item 1 of this quarterly report on Form
10-Q.
 Overview
 tm
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tm tm
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Critical Accounting Policies and Significant Judgments and Estimates
   Revenue Recognition
   Up-Front Fees and License Fees:
 Collaborative Research Funding:
 Milestones:
 Royalties:
 15




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Preclinical Study and Clinical Trial Accruals
  
    
    fees paid to contract research organizations in connection with preclinical studies;
    
    fees paid to contract research organizations and other clinical sites in connection with clinical trials; and
    
    fees paid to contract manufacturers in connection with the production of
components and drug materials for preclinical studies and clinical trials.
  Stock-Based Compensation
 Share-Based Payment Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB 25 Accounting for Stock-Based
Compensation, Accounting for Stock-Based Compensation  Transition and
Disclosure.
  Accounting for Stock-Based Compensation  Transition and Disclosure,
and Emerging Issues Task Force No. 96-18 Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
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Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans
 Results of Operations for the Three Months and Ended March 31, 2007 and 2006
 Revenue
  Research and Development Expenses
   17




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(in thousands)
 Three months endedMarch 31,2007
    
    
    2006Research and preclinical programs
    
    $
    4,869
    
    
    $
    2,636Clinical development programs
    
    
    3,722
    
    
    
    3,121Total research and development
    
    $
    8,591
    
    
    $
    5,757
    General and Administrative Expenses
  Net Interest Income
  18




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Liquidity and Capital Resources
   Operating Activities:
 Investing Activities:
 Financing Activities:
    
    
    expenditures related to continued preclinical and clinical development of our product candidates
during this period will be within budgeted levels;
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
    
    unexpected costs related to the development of our manufacturing capability will not be material; and
    
    the hiring of a number of new employees at salary levels consistent with our estimates to support
our continued growth during this period.
  
    
    milestone payments projected to be received under the Wyeth collaboration agreement;
    
    the hiring of a number of new employees at salary levels consistent with our
estimates to support our continued growth during this period;
    
    the scope, rate of progress, results and costs of our preclinical testing, clinical trials, and
other research and development activities;
    
    the terms and timing of any additional collaborative or licensing agreements that we may establish;
    
    the cost, timing, and outcomes of regulatory approvals;
    
    the number and characteristics of product candidates that we pursue;
    
    the cost of establishing clinical and commercial supplies of our product candidates;
    
    the cost of preparing, filing, prosecuting, defending, and enforcing any patent claims and other
intellectual property rights; and
    
    the extent to which we acquire or invest in businesses, products, or technologies, although we
currently have no commitments or agreements relating to any of these types of transactions.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  20




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ITEM 4. CONTROLS AND PROCEDURES
   
    
    strengthened our internal staffing and technical expertise in financial and SEC accounting and reporting;
    
    improved the segregation of duties within our accounting and finance department;
    
    upgraded our accounting software systems; and
    
    engaged an outside compliance consulting firm to advise us on improving our
internal controls to take advantage of best practices.
    
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  21




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Risks Related to our Business
 Our success is dependent on the success of our lead product candidate, TRU-015, and we cannot be
certain that it will receive regulatory approval or be successfully commercialized.
  We are a biopharmaceutical company with a limited operating history, have not generated revenue
from product sales and face many risks inherent in our business. If we do not overcome these
risks, our business will not succeed.
 tm
 
    
    obtain sufficient capital to support our efforts to develop our technology and create a
pipeline of product candidates; and
    
    complete and continue to enhance the characteristics and development of our product
candidates.
 We have incurred operating losses in each year since our inception and expect to continue to incur
substantial and increasing losses for the foreseeable future.
  22




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There is no assurance that we will be granted regulatory approval for any of our product
candidates.
  We are dependent upon our collaborative relationship with Wyeth to develop, manufacture, and
commercialize our lead product candidate, TRU-015, and other selected product candidates.
 tm tm
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Our relationship with Wyeth may have a negative effect on our ability to enter into relationships
with third parties.
 tm
 Any failure or delay in commencing or completing clinical trials for product candidates could
severely harm our business.
  
    
    our or our collaborators ability to obtain regulatory approval to commence a clinical
trial;
    
    our or our collaborators ability to manufacture or obtain from third parties materials
sufficient for use in preclinical studies and clinical trials;
    
    delays in patient enrollment and variability in the number and types of patients available for clinical trials;
    
    poor effectiveness of product candidates during clinical trials;
    
    unforeseen safety issues or side effects;
    
    governmental or regulatory delays and changes in regulatory requirements, policy, and guidelines; and
    
    varying interpretation of data by the FDA and similar foreign regulatory agencies.
  We rely on third parties to conduct our clinical trials. If these third parties do not perform as
contractually required or otherwise expected, we may not be able to obtain regulatory approval for
or commercialize our product candidates.
  24




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Even if our product candidates receive regulatory approval, they could be subject to restrictions
or withdrawal from the market and we may be subject to penalties if we fail to comply with
regulatory requirements or if we experience unanticipated problems with our products.
  
    
    restrictions on the products or manufacturing processes;
    
    withdrawal of the products from the market;
    
    voluntary or mandatory recalls;
    
    fines;
    
    suspension of regulatory approvals;
    
    product seizures; or
    
    injunctions or the imposition of civil or criminal penalties.
  Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our
products internationally.
  Our product candidates may never achieve market acceptance even if we obtain regulatory approvals.
  
    
    our ability to provide acceptable evidence of safety and efficacy;
    
    the prevalence and severity of adverse side effects;
    
    availability, relative cost, and relative efficacy of alternative and competing treatments;
 25




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
    
    the effectiveness of our marketing and distribution strategy;
 
    
    publicity concerning our products or competing products and treatments; and
    
    our ability to obtain sufficient third-party insurance coverage or reimbursement.
  If we are unable to obtain, maintain, and enforce our proprietary rights, we may not be able to
compete effectively or operate profitably.
  
    
    obtain patent and other proprietary protection for our technology, processes, and product candidates;
    
    defend patents once issued;
    
    preserve trade secrets; and
    
    operate without infringing the patents and proprietary rights of third parties.
  
    
    we might not have been the first to make the inventions covered by any of our patents, if
issued, or our pending patent applications;
    
    we might not have been the first to file patent applications for these inventions;
    
    others may independently develop similar or alternative technologies or duplicate any of our technologies;
    
    it is possible that none of our pending patent applications will result in issued patents
or, if issued, these patents may not be sufficient to protect our technology or provide us
with a basis for commercially-viable products and may not provide us with any competitive
advantages;
    
    if our pending applications issue as patents, they may be challenged by third parties as
not infringed, invalid, or unenforceable under U.S. or foreign laws;
    
    if issued, the patents under which we hold rights may not be valid or enforceable; or
    
    we may develop additional proprietary technologies that are not patentable and which may
not be adequately protected through trade secrets, if for example a competitor were to
independently develop duplicative, similar, or alternative technologies.
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If our SMIP tm technology or our product candidates, including TRU-015,
conflict with the rights of others, we may not be able to manufacture or market our product
candidates, which could have a material and adverse effect on us and on our collaboration
agreement with Wyeth.
    27




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tm
   We may incur substantial costs as a result of litigation or other proceedings relating to patent
and other intellectual property rights.
  If any products we develop become subject to unfavorable pricing regulations, third-party
reimbursement practices, or healthcare reform initiatives, our business could be harmed.
  28




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##### Table of Contents



We face potential product liability exposure, and if successful claims are brought against us, we
may incur substantial liability for a product candidate and may have to limit its
commercialization.
  
    
    decreased demand for our product candidates;
    
    impairment of our business reputation;
    
    withdrawal of clinical trial participants;
    
    costs of related litigation;
    
    substantial monetary awards to patients or other claimants;
    
    loss of revenues; and
    
    the inability to commercialize our product candidates.
  We currently rely on third-party manufacturers to supply our product candidates, which could delay
or prevent the clinical development and commercialization of our product candidates.
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We face substantial competition, which may result in others discovering, developing or
commercializing products before, or more successfully, than we do.
  TRU-015 Product Candidate. ® ® ® ® ® tm ® tm
 TRU-016 Product Candidate. ® ® ® ® ® tm
  
    
    design and develop products that are superior to other products in the market;
    
    attract qualified scientific, medical, sales and marketing, and commercial personnel;
    
    obtain patent and/or other proprietary protection for our processes and product candidates;
    
    obtain required regulatory approvals; and
    
    successfully collaborate with others in the design, development, and commercialization of new products.
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If we are unable to establish a sales and marketing infrastructure or enter into collaborations
with partners to perform these functions, we will not be able to commercialize our product
candidates.
  
    
    our inability to recruit and retain adequate numbers of effective sales and marketing
personnel;
    
    the inability of sales personnel to obtain access to or persuade adequate numbers of
physicians to prescribe our products;
    
    the lack of complementary products to be offered by sales personnel, which may put us at
a competitive disadvantage relative to companies with more extensive product lines; and
    
    unforeseen costs and expenses associated with creating a sales and marketing
organization.
  The loss of members of our management team could substantially disrupt our business operations.
  We rely on highly skilled personnel, and if we are unable to retain or motivate key personnel or
hire qualified personnel, we may not be able to maintain our operations or grow effectively.
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If we use biological and hazardous materials in a manner that causes contamination or injury or
violates laws, we may be liable for damages.
  Our management and auditors have identified a material weakness in our internal controls that, if
not properly remediated, could result in material misstatements in our financial statements and the
inability of our management to provide its report on the effectiveness of our internal controls as
required by the Sarbanes-Oxley Act of 2002 for the year ending December 31, 2007, either of which
could cause investors to lose confidence in our reported financial information and have a negative
effect on the trading price of our stock.
    
    
    strengthened our internal staffing and technical expertise in financial and SEC accounting and reporting;
    
    improved the segregation of duties within our accounting and finance department;
    
    upgraded our accounting software systems; and
    
    engaged an outside compliance consulting firm to advise us on improving our internal
controls to take advantage of best practices.
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If we fail to obtain the capital necessary to fund our operations, we may be unable to develop our
product candidates and we could be forced to share our rights to these product candidates with
third parties on terms that may not be favorable to us.
   Risks Related to Our Common Stock
 The trading price of our common stock may be volatile subject to significant fluctuations and
volatility, and our stockholders may be unable to resell their shares at a profit.
  
    
    quarterly variations in our results of operations or those of our collaborators or competitors;
    
    our ability to develop and market new and enhanced product candidates on a timely basis;
    
    announcements by us or our collaborators or competitors of new commercial products,
clinical progress or the lack thereof, significant contracts, commercial relationships, or
capital commitments;
    
    commencement of, or our involvement in, litigation;
    
    changes in governmental regulations or in the status of our regulatory approvals;
    
    changes in earnings estimates or recommendations by securities analysts;
    
    any major change in our board or management;
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
    
    general economic conditions and slow or negative growth of our markets; and
    
    political instability, natural disasters, war, and/or events of terrorism.
  If securities analysts do not publish research or reports about our business, or if they downgrade
our stock, the price of our stock could decline.
  The concentration of our capital stock ownership with insiders will likely limit your ability to
influence corporate matters.
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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition
of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
  
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Bylaws of the registrant31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C § 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
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SIGNATURES
   TRUBION PHARMACEUTICALS, INC.By:
    /s/ Michelle G. BurrisMichelle G. BurrisSenior Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer) 36




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EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Bylaws of the registrant31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C § 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 37