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UNITED
    STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    no. 0-19591
  IDM PHARMA INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

33-0245076(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)9 Parker, Suite 100,
    Irvine, CA 92618(Address of Principal
    executive offices)Registrants telephone
    number, including area code:(949) 470-4751   Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, $.01 par value
 (Title of class)
   (Name of Each Exchange on
    Which Registered)
  Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
 o þ
 þ o
 Regulation S-K Form 10-K Form 10-K. o
 Rule 12b-2
  o o þ
  Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.
    *
    
    Excludes 5,036,719 shares of
    Common Stock held by directors and officers and stockholders
    whose ownership exceeds 10% of the Common Stock outstanding on
    June 30, 2006. Exclusion of shares held by any person
    should not be construed to indicate that such person possesses
    the power, direct or indirect, to direct or cause the direction
    of the management or policies of the registrant, or that such
    person is controlled by or under common control with the
    registrant.




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PART I
  Item 1.
    Business  Forward
    Looking Statements
    ® ® ® ® ® ® ®
    Overview
    in
    vivo
     1




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
    for our products that are designed to destroy residual cancer
    cells, we have rights to both non-cellular immunotherapies that
    stimulate the immune system non-specifically such as Junovan,
    and cellular immunotherapies that use activated macrophages,
    such as Bexidem,
    for our Dendritophage products that are designed to prevent
    tumor recurrence, we have rights to specific immunotherapies
    using dendritic cell vaccines, a type of therapeutic cancer
    vaccine, and
    for our synthetic vaccines, we have rights to specific
    combinations of peptides and analogs of peptides called epitopes.   2




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Industry
    and Scientific Background
  Overview
          Osteosarcoma
  60-65%
  Melanoma
   3




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Lung
    cancer
    The
    Immune System and Our Therapeutic Approaches
            
    one or several antigens against which an immune reaction will be
    triggered,
    a delivery vehicle which will deliver the antigen to the
    appropriate immune system cells at the correct time, and 4




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
    an immune system stimulant which will enhance the elicited
    immune reaction.      ®
  ex vivo
  Advantages
    of Our Approaches
    
    Multiple and Complementary Product
    Categories.  We use different innovative
    approaches to fight cancer. We use both ex vivoand in
    vivo activation of immune cells to stimulate and enhance the
    bodys natural defenses. We are developing products to
    destroy residual cancer cells, such as our macrophage activators
    and our MAK-based products, and products to prevent tumor
    recurrence, such as our synthetic-peptides-based or
    Dendritophage-based cancer treatments.
    Unique Macrophage-Based Approach.  To our
    knowledge, we are the only company that is developing products
    based on activation of macrophages. These include our MAK cell
    products and Junovan.
    Benefits of Ex-Vivo Engineering of
    Dendritophages.  Our Dendritophages are produced
    outside the body and therefore in isolation from the potential
    negative effects of cancer on dendritic cell function. As a
    result, we believe that they should continue to function after
    injection into a cancer patient to trigger a broad immune
    response. 5




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
    Potential Product Synergies.  Our immune system
    stimulants, such as Junovan, have independent therapeutic
    activity as well as the potential to enhance the activity of
    some of our Cell Drugs. If successful, these products could be
    used alone and in combination, increasing their potential value.
    Low Toxicity and Well-Tolerated.  Unlike
    chemotherapy and other conventional cancer treatments, our
    multiple approaches to immunotherapy have been shown in clinical
    trials to have low toxicity and to be well-tolerated.
    Designed to Treat a Wide Variety of
    Cancers.  Because our MAK cells are not tumor
    specific and because our Dendritophages can be loaded with a
    variety of antigens or synthetic peptides, we are able to
    develop new product opportunities for the treatment of a variety
    of cancers.
    Use of Epitopes in Vaccine Development.  By
    selectively modifying epitopes included in our synthetic
    vaccines, we believe we can enhance the desired immune response,
    and by using multiple epitopes from multiple tumor-associated
    antigens, increase the likelihood that the vaccine will continue
    to elicit an effective immune response.  Product
    Development Programs
    6




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Product Candidate

Description

Primary Indication(s)

Status*

Marketing RightsProduct Candidates to Destroy
    Residual Cancer CellsJunovan

Liposomal muramyl-tripeptide
    phosphatidylethanol- amine

Osteosarcoma

NDA filed in U.S.; MAA filed in EU

IDM + Cambridge Labs (United
    Kingdom and Ireland), Medison Pharma (Israel) and Genesis Pharma
    (South East Europe)Bexidem

MAK

Bladder cancer

Phase II

IDMProduct Candidates to Stimulate
    an Immune Response and Prevent Tumor RecurrenceUvidem

Dendritophage + melanoma tumor
    cell lysates

Melanoma

Phase II

sanofi-aventisEP-2101

Multiple tumor-associated CTL
    epitopes

Non-Small Cell Lung cancer

Phase II

IDMCollidem

Dendritophages + tumor associated
    antigen peptides

Colorectal cancer

Phase I/II

IDM     *
    
    Human clinical trials are usually conducted in three sequential
    phases that may overlap. In Phase I, the drug is typically
    introduced into healthy human subjects to determine the initial
    safety profile, identify side effects and evaluate dosage
    tolerance, distribution and metabolism. In Phase II, the
    drug is studied in a limited patient population with the target
    disease to determine preliminary efficacy and optimal dosages
    and to expand the safety profile. In certain cases, regulatory
    authorities may permit Phase I and Phase II to be
    combined into a single Phase I/II trial by accepting a
    Phase II protocol in which the first few patients are more
    specifically tested for safety and tolerance. This is
    particularly true in instances where it may be inappropriate to
    conduct Phase I studies in normal volunteers, such as is
    the case with our cellular products. In Phase III,
    large-scale comparative trials are conducted in patients with
    the target disease to provide sufficient data for the proof of
    efficacy and safety required for product approval by regulatory
    agencies. Regulatory authorities may permit Phase II and
    Phase III trials to be combined into a single
    Phase II/III trial by accepting a protocol that typically
    includes a planned interim analysis after an initial group of
    patients (Phase II) is treated to help guide a
    decision about continuation or modification for the
    Phase III portion. Preclinical studies involve laboratory
    evaluation of product characteristics and laboratory
    and/or
    animal studies to assess the potential efficacy and safety of
    the product, as well as development of manufacturing processes
    for clinical production.  Our
    Clinical Stage Products
  Our
    Product Candidates to Destroy Residual Cancer
    Cells
  Junovan for Treatment of Osteosarcoma.
 7




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5-year
          2
 8




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shortness-of-breath,
        Bexidem for Treatment of Superficial Bladder
    Cancer.
     9




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Products
    to Prevent Tumor Recurrence
  Uvidem for Treatment of Melanoma.
  15-25%
        EP-2101 for Non-Small Cell Lung Cancer.
     10




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Collidem for Treatment of Colorectal
    Cancer.
  ex vivo,
    Product
    Manufacturing
        and/or
 11




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ex vivo
         12




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Marketing
    and Sales
    Collaboration
    Agreements and Licenses
    Collaboration
    with sanofi-aventis
  10-year
    in vitro in
    vivo.
       13




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sub-license,
    sub-license
  and/or
  Collaboration
    with Medarex
   14




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country-by-country product-by-product
          License
    Agreement with Novartis
  country-by-country product-by-product
 15




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Collaboration
    with Biotecnol
  E-coli, E-coli
          and/or
  License
    Agreement with Eli Lilly
  and/or
  Other
    Agreements and Licenses
   16




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back-up
      Government
    Research Funding
            Acquisition
    of Certain Assets from Jenner Biotherapies
   17




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Intellectual
    Property
  Patents
    and/or
  10-year
       18




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Trademarks
    
    I.D.M., The Immunogenics Company:  France, the
    European Union, Canada, Switzerland, Australia, Israel and
    Hungary;
    Junovan:  United States, the European Union,
    Switzerland, Australia and Hungary;
    Mepact:  United States, the European Union,
    Switzerland and Hungary;
    MAK:  United States, Japan, European Union,
    Canada and Australia;
    Dendritophage:  United States, Canada, France,
    and the European Union.    Government
    Regulation
        Regulation
    of Clinical Trials
   19




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30-day
  Regulation
    of Marketing Approval
      
    whether the drug is safe and effective in its proposed use(s),
    and whether the benefits of the drug outweigh the risks
    whether the drugs proposed labeling (package insert) is
    appropriate, and what it should contain; and
    whether the methods used in manufacturing the drug and the
    controls used to maintain the drugs quality are adequate
    to preserve the drugs identity, strength, quality, and
    purity.    Orphan
    Drugs
   20




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direct-to-consumer
  Environmental
    and Health and Safety Laws and Regulations
    Competition
  indication-by-indication
 21




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and/or
        Financial
    Information About Geographic Areas
  Long-lived
    Assets
    Risks
    Associated with Foreign Operations
    Employees
    Convention Collective de lIndustrie
    Pharmaceutique
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
 22




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Item 1A.
    Risk
    Factors  We wish to caution readers that the following important
    factors, among others, in some cases have affected our results
    and in the future could cause our actual results and needs to
    vary materially from forward-looking statements made from time
    to time by us on the basis of managements then-current
    expectations. The business in which we are engaged is in a
    rapidly changing and competitive market and involves a high
    degree of risk, and accuracy with respect to forward-looking
    projections is difficult.
  Our lead
    product candidate, Junovan, may never obtain regulatory
    approval.
        Even if
    we receive regulatory approval for Junovan, we may not be able
    to commercialize it immediately or market it
    successfully.
   23




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10-year
  Our
    substantial additional capital requirements and potentially
    limited access to financing may harm our ability to develop
    products and fund our operations, and if we do not obtain
    additional funding we may be required to sell our assets or our
    company, or dissolve and liquidate all of our assets.
    
    whether we are able to secure additional financing on favorable
    terms, or at all;
    The costs associated with, and the success of, obtaining
    marketing approval and, as applicable, pricing approval, for
    Junovan for the treatment of osteosarcoma in the United States,
    Europe and other jurisdictions and the timing of any such
    approval;
    the success or failure of the product launch and
    commercialization of Junovan;
    the costs associated with the launch and the commercialization
    of Junovan in the United States, Europe and other jurisdictions
    upon obtaining marketing approval;
    the costs associated with our clinical trials for our product
    candidates, including our Dendritophages and lung cancer vaccine
    candidates;
    progress with other preclinical testing and clinical trials in
    the future;
    our ability to establish and maintain collaboration and license
    agreements and any government contracts and grants; 24




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
    the actual revenue we receive under our collaboration and
    license agreements;
    the actual costs we incur under our collaboration agreements;
    the time and costs involved in obtaining regulatory approvals
    for our products;
    the costs involved in filing, prosecuting, enforcing and
    defending patent claims and any other proprietary rights;
    competing technological and market developments; and
    the magnitude of our immunotherapeutic product discovery and
    development programs.  and/or
  ®
    The
    process of developing immunotherapeutic products requires
    significant research and development, preclinical testing and
    clinical trials, all of which are extremely expensive and
    time-consuming and may not result in a commercial
    product.
    
    the results of preclinical studies may be inconclusive, or they
    may not be indicative of results that will be obtained in human
    clinical trials;
    after reviewing test results, we may abandon projects that we
    might previously have believed to be promising; 25




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
    after reviewing test results, our collaborators may abandon
    projects that we might believe are still promising and we would
    either have to bear the operating expenses and capital
    requirements of continued development of our therapeutic cancer
    vaccines or abandon the projects outright;
    we, our collaborators or government regulators may suspend or
    terminate clinical trials if the participating subjects or
    patients are being exposed to unacceptable health risks;
    clinical trials may be delayed as a result of difficulties in
    identifying and enrolling patients who meet trial eligibility
    criteria;
    safety and efficacy results attained in early human clinical
    trials may not be indicative of results that are obtained in
    later clinical trials; and
    the effects of our product candidates may not be the desired
    effects or may include undesirable side effects that preclude
    regulatory approval or limit their commercial use, if approved.    Our
    principal source of revenues and cash receipts is a
    collaboration agreement under which our partner has limited
    obligations.
    Our
    revenues and operating results are likely to
    fluctuate.
    
    any payments from sanofi-aventis and any other current or future
    collaborative partners;
    any government and European Union grants and contracts; and
    investment income.   26




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Our
    history of operating losses and our expectation of continuing
    losses may hurt our ability to reach profitability or continue
    operations.
    If we
    lose our key scientific and management personnel or are unable
    to attract and retain qualified
 personnel, it could delay or hurt our research and product
    development efforts.
    Unexpected
    or undesirable side effects or other characteristics of our
    products and technology may delay or otherwise hurt the
    development of our drug candidates, or may expose us to
    significant liability that could cause us to incur significant
    costs.
   27




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Adverse
    publicity regarding the safety or side effects of the technology
    approach or products of others could negatively impact us and
    cause the price of our common stock to decline.
    Our
    treatment approach may not prove effective.
    
    the targeted antigens are not sufficiently different from those
    normal cells to cause an immune reaction;
    the tumor cells do not express the targeted antigen or other
    target structures at all or in sufficient quantities to be
    recognized by immune system cells, such as T cells or
    macrophages;
    the immune response stimulated by the immunotherapeutic agent is
    not strong enough to destroy all of the cancer cells; or
    cancer cells may, through various biochemical mechanisms, escape
    an immune response.    If we
    cannot enter into and maintain strategic collaborations on
    acceptable terms in the future, we may not be able to develop
    products in markets where it would be too costly or complex to
    do so on our own.
   28




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If our
    collaboration or license arrangements are unsuccessful, our
    revenues and product development may be limited.
    
    collaborations and licensee arrangements may be terminated, in
    which case we will experience increased operating expenses and
    capital requirements if we elect to pursue further development
    of the product candidate;
    collaborators and licensees may delay clinical trials and
    prolong clinical development, under fund a clinical trial
    program, stop a clinical trial or abandon a product candidate;
    expected revenue might not be generated because milestones may
    not be achieved and product candidates may not be developed;
    collaborators and licensees could independently develop, or
    develop with third parties, products that could compete with our
    future products;
    the terms of our contracts with current or future collaborators
    and licensees may not be favorable to us in the future;
    a collaborator or licensee with marketing and distribution
    rights to one or more of our products may not commit enough
    resources to the marketing and distribution of our products,
    limiting our potential revenues from the commercialization of a
    product; and
    disputes may arise delaying or terminating the research,
    development or commercialization of our product candidates, or
    result in significant and costly litigation or arbitration.  We may
    not be able to license technology necessary to develop
    products.
    Our
    supplies of certain materials necessary to our business may be
    limited and key raw materials of desired quantity and quality
    may be difficult to obtain.
    and/or
   29




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and/or
      If we
    and/or our
    collaborators cannot cost-effectively manufacture our
    immunotherapeutic product candidates in commercial quantities or
    for clinical trials in compliance with regulatory requirements,
    we and/or
    our collaborators may not be able to successfully commercialize
    the products.
     30




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
    non-compliance by these third parties with regulatory and
    quality control standards;
    breach by these third parties of their agreements with
    us; and
    Termination or non-renewal of these agreements for reasons
    beyond our control.        We are
    subject to extensive and uncertain government regulation and we
    may not be able to obtain
 necessary regulatory approvals.
    
    fines and penalties;
    injunctions;
    seizure of products;
    total or partial suspension of product marketing;
    failure of a regulatory agency to grant marketing authorization;
    withdrawal of marketing approvals; and
    criminal prosecution. 31




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Even if
    we obtain regulatory approval for our products, we may be
    required to perform additional
 clinical trials or change the labeling of our products if we
    or others identify side effects after our
 products are on the market, which could harm sales of the
    affected products.
    
    regulatory approval may be withdrawn;
    reformulation of our products, additional clinical trials,
    changes in labeling of our products or changes to or
    re-certifications of our manufacturing facilities may be
    required;
    sales of the affected products may drop significantly;
    our reputation in the marketplace may suffer; and
    lawsuits, including costly and lengthy class action suits, may
    be brought against us.    We may
    not be able to commercialize products under development by us if
    those products infringe claims in existing patents or patents
    that have not yet issued, and this would materially harm our
    ability to operate.
  and/or
  Our
    failure to obtain issued patents and, consequently, to protect
    our proprietary technology, could hurt our competitive
    position.
   32




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
    the pending patent applications we have filed or to which we
    have exclusive rights may not result in issued patents or may
    take longer than we expect to result in issued patents;
    the allowed claims of any patents that issue may not provide
    meaningful protection;
    we may be unable to develop additional proprietary technologies
    that are patentable;
    the patents licensed or issued to us may not provide a
    competitive advantage;
    other companies may challenge patents licensed or issued to us;
    disputes may arise regarding inventions and corresponding
    ownership rights in inventions and know-how resulting from the
    joint creation or use of our intellectual property and our
    respective licensors or collaborators; and
    other companies may design around the technologies patented by
    us.  If we are
    unable to compete effectively in the highly competitive
    biotechnology industry, our business will fail.
         33




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Litigation
    regarding intellectual property rights owned or used by us may
    be costly and time-consuming.
        
    assert against others or defend ourselves against claims of
    infringement;
    enforce patents owned by, or licensed to us from another party;
    protect our trade secrets or know-how; or
    determine the enforceability, scope and validity of our
    proprietary rights or those of others.  If we are
    unable to protect our trade secrets, we may be unable to protect
    from competitors our interests in proprietary know-how that is
    not patentable or for which we have elected not to seek patent
    protection.
    The
    U.S. government will fund some of our programs and,
    therefore, the U.S. government may have rights to certain
    of our technology and could require us to grant licenses of our
    inventions to third parties.
  .
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Successful
    commercialization of our future products will depend on our
    ability to gain acceptance by the medical community.
    
    the extent to which our therapeutic product candidates are
    demonstrated to be safe and effective in clinical trials;
    convenience and ease of administration;
    the success of sales, marketing and public relations efforts;
    the availability of alternative treatments;
    competitive pricing;
    the reimbursement policies of governments and other third
    parties; and
    garnering support from well respected external advocates.    We may
    experience difficulties managing our growth, which could
    adversely affect our results of operations.
    
    train, manage, motivate and retain a growing employee base,
    particularly given our operations in both California and France;
    accurately forecast demand for, and revenues from, our product
    candidates, particularly Junovan; and
    expand existing operational, financial and management
    information systems to support our development and planned
    commercialization activities and the multiple locations of our
    offices.    Our use
    of hazardous materials could expose us to significant
    costs.
    clean-up
 35




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Our
    financial results may be adversely affected by fluctuations in
    foreign currency exchange rates.
    Risks
    Related to our Common Stock
  The
    volatility of the price of our common stock may adversely affect
    stockholders.
    
    the development and regulatory status of our product candidates,
    particularly Junovan;
    whether we are able to secure additional financing on favorable
    terms, or at all;
    announcements of technological innovations or new commercial
    immunotherapeutic products by us or others;
    governmental regulation that affects the biotechnology and
    pharmaceutical industries in general or us in particular;
    developments in patent or other proprietary rights by us;
    receipt of funding by us under collaboration and license
    agreements and government grants;
    developments in, or termination of, our relationships with our
    collaborators and licensees;
    public concern as to the clinical results
    and/or the
    safety of drugs developed by us or others; and
    announcements related to the sale of our common stock or other
    securities.    Our
    principal stockholders, executive officers and directors own a
    significant percentage of shares of our common stock and, as a
    result, the trading price for shares of our common stock may be
    depressed. These stockholders may make decisions that may be
    adverse to your interests.
   36




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Future
    sales of shares of our common stock may cause the market price
    of your shares to decline.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    3-year
  5-year
  and/or
  Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   37




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High


Low2007First Quarter (through March 26)

$
3.24


$
2.382006Fourth Quarter

$
3.80


$
2.60Third Quarter

$
3.51


$
2.25Second Quarter

$
6.40


$
2.98First Quarter

$
6.25


$
2.772005Fourth Quarter

$
5.87


$
2.50Third Quarter

$
6.99


$
3.85Second Quarter

$
8.26


$
0.98First Quarter

$
12.11


$
7.28     Form 10-K.
  Stock
    Price Performance Graph(1)
   38




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COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN
  
    (1)
    
    The material in this section is not soliciting
    material, is not deemed filed with the SEC,
    and is not to be incorporated by reference into any filing of
    the Company under the Securities Act of 1933, as amended, or the
    Exchange Act.  Item 6.
    Selected
    Financial Data  Form 10-K.
  Years Ended December 31,2006


2005


2004


2003


2002(In millions, except for net loss per share)Statement of Operations
    Data:Operating revenues

$
11.3


$
8.5


$
5.8


$
6.1


$
3.4Net loss


(23.5
)


(39.2
)


(31.7
)


(18.4
)


(12.2
)Net loss per share 
    basic and diluted


(1.75
)


(3.84
)


(4.35
)


(2.56
)


(1.91
)   As of December 31,2006


2005


2004


2003


2002(In millions)Balance Sheet Data:Working capital

$
4.5


$
22.4


$
37.2


$
40.9


$
48.2Total assets


24.4



42.9



55.3



65.8



67.9Long-term obligations


1.0



0.8



0.4



0.3



0.2Stockholders equity


10.2



28.7



42.5



55.1



59.6  39




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Except for the historical information contained herein, the
    following discussion contains forward-looking statements that
    involve risks and uncertainties. When used herein, the words
    believe, anticipate, expect,
    estimate and similar expressions are intended to
    identify such forward-looking statements. There can be no
    assurance that these statements will prove to be correct. Our
    actual results could differ materially from those discussed
    here. Factors that could cause or contribute to such differences
    include, but are not limited to, those discussed in this annual
    report. We undertake no obligation to update any of the
    forward-looking statements contained herein to reflect any
    future events or developments.
  Overview
    in vivo
       40




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and/or
   41




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Basis of
    Financial Statements Presentation
  one-for-seven Series S-1
       42




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Critical
    Accounting Policies and Estimates
    Revenue
    recognition
  Revenue Recognition, 00-21 Revenue Arrangements with Multiple
    Deliverables.
          Research
    and development expenses and related tax credit.
     43




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Patents,
    trademarks and licenses
      Impairment
    of long-lived assets
  Accounting for the Impairment or Disposal of Long-Lived
    Assets,
  Goodwill
  Goodwill and Other
    Intangible Assets,
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Cost
    Associated with Exit or Disposal
  Accounting for Costs
    Associated with Exit or Disposal Activities
  Stock based compensation. Share-Based
    Payments. Accounting for Stock
    Issued to Employees Share-Based
    Payment.
  Business
    Combination and Name Change
     45




---



##### Table of Contents



Epimmune common stock

$
21,301Epimmune preferred stock,
    as-converted to common


2,589Estimated fair value of options
    assumed


2,586Estimated IDM S.A. direct
    transaction costs


3,298Total purchase price

$
29,774       Estimated UsefulAmount


Life (Years)Purchase price allocation:Net tangible assets (net of
    liabilities)

$
1,607



Licensing and milestone agreements


1,600



5 yearsIn-process research and
    development (IPR&D)


13,300



Goodwill


13,267



Total purchase price

$
29,774   Accounting for Research and
    Development Costs, Applicability of FASB Statement No. 2 to Business
    Combinations Accounted for by the Purchase Method, an
    Interpretation of SFAS No. 2
   46




---



##### Table of Contents



Goodwill and Other
    Intangible Assets,
  Sale of
    Infectious Disease Related Assets
    ® ®
    Results
    of Operations for the Years Ended December 31, 2006 and
    2005
  Revenues.
         47




---



##### Table of Contents



Research and Development Expenses and Impairment of
    Patents and Licenses.
        Selling and Marketing Expenses.
  General and Administrative
    Expenses.
  Acquired in Process Research and
    Development.
  Interest Income, Net.
  Foreign Exchange Gain or Loss.
 48




---



##### Table of Contents



Income Tax Benefit.
      Net Loss.
  Results
    of Operations for the Years Ended December 31, 2005 and
    2004
  Revenues.
          Research and Development Expenses and Impairment of
    Patents and Licenses.
   49




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##### Table of Contents



Selling and Marketing Expenses.
  General and Administrative
    Expenses.
  Acquired in Process Research and
    Development.
  Interest Income, Net.
  Income Tax Benefit.
      Net Loss.
  Liquidity
    and Capital Resources
   50




---



##### Table of Contents



51




---



##### Table of Contents



and/or
         52




---



##### Table of Contents



Payments Due by PeriodLess Than


Years


Years


More ThanTotal


1 Year


2-3


4-5


5 Years(In thousands of $)Contractual
    ObligationsLong-Term Debt


479







160



319



Operating Lease Obligations


3,525



910



1,969



325



321Fixed Mandatory Payments under
    Collaboration, Licensing and Consulting Agreements


222



188



27



8



Total


4,226



1,098



2,156



652



321       Off-Balance
    Sheet Arrangements
    
    any obligations under a guarantee contract;
    a retained or contingent interest in assets transferred to an
    unconsolidated entity or similar arrangement that serves as
    credit, liquidity or market risk support for such assets;
    any obligation under a derivative instrument that is both
    indexed to our stock and classified in shareholders
    equity, or not reflected, in our statement of financial
    position; or
    any obligation, including a contingent obligation, arising out
    of a variable interest, in an unconsolidated entity that is held
    by, and material to, us, where such entity provides financing,
    liquidity, market risk or credit risk support to us, or engages
    in leasing, hedging or research and development services with us. 53




---



##### Table of Contents



Trends
          Recently
    Issued Accounting Standards
  Accounting for
    Uncertainty in Income Taxes, an interpretation of
    SFAS No. 109, Accounting for Income Taxes
    (FIN 48),
  No. 00-19-2, Accounting for Registration Payment Arrangements, Accounting for
    Contingencies.
 54




---



##### Table of Contents



Accounting for Certain Hybrid Financial FASB Statements No. 133 and 140.
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities.
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risks    Item 8.
    Consolidated
    Financial Statements and Supplementary Data  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures    Rules 13a-15(e) 15d-15(e)
 55




---



##### Table of Contents




    Consolidate operating and financial reporting locations and
    structure;
    Implement additional review and approval procedures over
    accruals;
    Formalize process and documentation related to financial
    statement close and consolidation review, including
    face-to-face
    meeting of all members of our financial staff involved in
    preparation of financial statements and a review of those
    financial statements by the entire staff as a group;
    Formalize and enhance documentation, oversight and review
    procedures related to accounting records of our foreign
    subsidiary to ensure compliance with U.S. generally
    accepted accounting principles;
    Supplement internal staff expertise by consulting with
    independent, third party experts regarding accounting treatment
    of unusual or non-routine transactions, and the impact of the
    adoption of new accounting pronouncements, when and if necessary;
    Review and make appropriate staffing adjustments at all company
    locations to enhance accounting expertise; 56




---



##### Table of Contents




    Revise and enhance the review process for unusual and
    acquisition related transactions; and
    Improve training for, and integration and communication among,
    accounting and financial staff.    Rules 13a-15(f) 15d-15(f)
  PART III
  Item 10.
    Directors,
    Executive Officers of the Registrant and Corporate
    Governance    Item 11.
    Executive
    Compensation    Compensation
    Committee Interlocks and Insider Participation
    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   57




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##### Table of Contents



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  (a) Financial
    Statements
  (1) Index to Consolidated Financial Statements
  page F-1 Form 10-K.
  PageReport of Ernst & Young
    LLP, Independent Registered Public Accounting Firm

F-2Report of Ernst & Young
    Audit, Independent Registered Public Accounting Firm

F-3Consolidated Balance Sheets as of
    December 31, 2006 and 2005

F-4Consolidated Statements of
    Operations for each of the three years in the period ended
    December 31, 2006

F-5Consolidated Statements of Cash
    Flows for each of the three years in the period ended
    December 31, 2006

F-6Consolidated Statements of
    Stockholders Equity for each of the three years in the
    period ended December 31, 2006

F-7Notes to Consolidated Financial
    Statements

F-8   (2) Consolidated Financial Statement Schedules
    (3) Listing of Exhibits
  ExhibitNumber

Document Description3
.1

Amended and Restated Certificate
    of Incorporation filed with the Secretary of State of Delaware
    on December 2, 1991.(1)3
.2

Certificate of Designation of
    Series A Junior Participating Preferred Stock filed with
    the Secretary of State of Delaware on April 2, 1993.(2)3
.3

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on July 5, 1995.(3)3
.4

Certificate of Increase of
    Series A Junior Participating Preferred Stock filed with
    the Secretary of State of Delaware on July 5, 1995.3
.5

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on July 2, 1998.(4)3
.6

Certificate of Increase of
    Series A Junior Participating Preferred Stock filed with
    the Secretary of State of Delaware on July 2, 1998.(4)3
.7

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on November 12, 1998.(5)3
.8

Certificate of Designations of the
    Series S and
    Series S-1
    Preferred Stock filed with the Secretary of State of Delaware on
    June 29, 1999.(6)3
.9

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on July 1, 1999.(7)3
.10

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on September 23, 1999.(8)3
.11

Certificate of Decrease of
    Series A Junior Participating Preferred Stock filed with
    the Secretary of State of Delaware on September 23, 1999.(8)3
.12

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on June 17, 2004.(9) 58




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##### Table of Contents



ExhibitNumber

Document Description3
.13

Certificate of Amendment of
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on August 15, 2005.(10)3
.14

Certificate of Ownership and
    Merger, filed with the Secretary of State of Delaware on
    August 15, 2005.(10)3
.15

Amended and Restated Bylaws of the
    Company. (28)4
.1

Reference is made to
    Exhibits 3.1 through 3.15.4
.2

Specimen certificate of the Common
    Stock.(23)10
.1

Form of Indemnification Agreement
    entered into between the Company and its directors and
    officers.(*)10
.2

1989 Stock Plan, as amended (the
    1989 Plan).(4)(*)10
.3

Forms of Incentive Stock Option
    Agreement under the 1989 Plan.(1)(*)10
.4

Form of Nonstatutory Stock Option
    Agreement under the 1989 Plan.(1)(*)10
.5

1994 Non-Employee Directors
    Stock Option Plan, as amended.(4)(*)10
.6

Letter Agreement between the
    Company and Robert De Vaere dated May 4, 2000.(11)(*)10
.7

Letter Agreement between the
    Company and Dr. Emile Loria regarding employment terms
    dated January 16, 2001.(12)(*)10
.8

Form of Restricted Stock Purchase
    Agreement between the Company and Dr. Emile Loria dated
    January 16, 2001.(12)(*)10
.9

Amendment to Severance Benefits
    Agreement between the Company and Dr. Mark Newman dated
    March 8, 2001.(12)(*)10
.10

Amendment to Severance Benefits
    Agreement between the Company and Robert De Vaere dated
    March 8, 2001.(12)(*)10
.11

2001 Employee Stock Purchase
    Plan.(13)(*)10
.12

Non-exclusive License Agreement
    dated October 28, 2002 between the Company and Valentis
    Inc.(14)(A)10
.13

Amendment to Letter Agreement
    between the Company and Dr. Emile Loria dated June 20,
    2003.(15)(*)10
.14

Non-Exclusive License Agreement
    between the Company and IDM S.A. dated July 7, 2003.(15)(B)10
.15

Termination of Amendment to Letter
    Agreement between the Company and Dr. Emile Loria dated
    September 8, 2003.(16)(*)10
.16

Accelerated Benefits Agreement
    between the Company and Dr. Emile Loria dated
    February 27, 2004.(17)(*)10
.17

Share Exchange Agreement dated
    March 15, 2005 among the Company and certain shareholders
    of IDM S.A.(18)10
.18

Amendment No. 1 (to the Share
    Exchange Agreement) dated March 15, 2005 among the Company
    and certain shareholders of IDM S.A.(18)10
.19

Voting Agreement dated
    March 15, 2005 among the Company, Hélène Ploix,
    as the Shareholder Representative, and certain stockholders of
    the Company.(18)10
.20

Employment Agreement with Emile
    Loria, M.D. dated March 17, 2005.(18)(*)10
.21

Employment Agreement with Robert
    De Vaere dated March 17, 2005.(18)(*)10
.22

Amended and Restated Preferred
    Exchange Agreement dated April 12, 2005.(19)10
.23

Amendment No. 2 (to the Share
    Exchange Agreement) dated April 21, 2005 among the Company
    and certain shareholders of IDM S.A.(20)10
.24

Amendment No. 3 (to the Share
    Exchange Agreement) dated May 31, 2005 among the Company
    and certain shareholders of IDM S.A.(21)10
.25

Amendment No. 4 (to the Share
    Exchange Agreement) dated June 30, 2005 among the Company
    and certain shareholders of IDM S.A.(22) 59




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##### Table of Contents



ExhibitNumber

Document Description10
.26

Amendment No. 5 (to the Share
    Exchange Agreement) dated August 16, 2005 among the Company
    and certain shareholders of IDM S.A.(10)10
.27

Employment Agreement with
    Jean-Loup Romet-Lemonne, M.D. dated April 21,
    2005.(10)(*)10
.28

Indemnity Escrow Agreement dated
    August 16, 2005, among the Company, Helene Ploix, as
    designated representative of certain shareholders of IDM S.A.
    and U.S. Bank National Association.(10)10
.29

Form of Option Liquidity Agreement
    between the Company and certain shareholders of IDM S.A.(23)10
.30

Form of Put/Call Agreement between
    the Company and certain shareholders of IDM S.A.(23)10
.31

2000 Stock Plan, as amended, and
    French Annex to the 2000 Stock Plan.(23)(*)10
.32

Form of Stock Option Agreement
    under the 2000 Plan.(24)(*)10
.33

Form of Deferred Issuance
    Restricted Stock Bonus Agreement under the 2000 Plan.(24)(*)10
.34

Form of French Participants
    Deferred Issuance Restricted Stock Bonus Agreement under the
    2000 Plan.(25)(*)10
.35

Form of French Annex Stock Option
    Agreement under the 2000 Plan.(25)(*)10
.36

Amendment No. 1 to the French
    Annex to the 2000 stock plan(26)(*)10
.37

Asset Purchase Agreement between
    the Company and Pharmexa Inc. dated November 23,
    2005.(26)(C)10
.38

Amendment No. 1 to the Asset
    Purchase Agreement between the Company and Pharmexa Inc. dated
    December 30, 2005.(26)(C)10
.39

License Agreement for EIS(R)
    between the Company and Pharmexa Inc. dated December 30,
    2005.(26)(C)10
.40

License Agreement for PADRE(R)
    between the Company and Pharmexa Inc. dated December 30,
    2005.(26)(C)10
.41

Services Agreement between the
    Company and Pharmexa Inc. dated December 30, 2005.(26)(C)10
.42

License Agreement between
    CIBA-GEIGY Ltd (now Novartis) and TherAtid Inc. dated
    April 4, 1996 (assigned to IDM S.A. January 30,
    2003).(26)(C)10
.43

Memorandum of Agreement between
    IDM S.A. and sanofi dated July 20, 2001.(26)(C)10
.44

IL-13 Agreement between IDM S.A.
    and sanofi dated November 30, 2001.(26)(C)10
.45

Development, Collaboration and
    Supply Agreement between IDM S.A. and Medarex Inc. dated
    May 24, 2002. (26)(C)10
.46

IL-13 Development and
    Manufacturing Agreement between IDM S.A. and Biotecnol S.A.
    dated November 4, 2003.(26)(C)10
.47

Amendment No. 1 to IL-13
    Development and Manufacturing Agreement between IDM S.A. and
    Biotecnol S.A. dated May 18, 2004. (26)(C)10
.48

License and Distribution Agreement
    between IDM S.A. and Cambridge Laboratories dated May 10,
    2005. (26)(C)10
.49

Amended and Restated IL-13 License
    Agreement between IDM S.A. and sanofi dated August 12,
    2005.(26)(C)10
.50

Restricted Stock Bonus Agreement
    and Grant Notice between the Company and Emile Loria, dated
    January 4, 2006.(26)(*)10
.51

Amended and Restated
    Directors Deferred Compensation Plan, effective as of
    January 1, 2005.(26)(*)10
.52

First Amendment to Employment
    Agreement with Robert De Vaere dated January 26, 2006.(27)10
.53

Consulting Agreement with Sylvie
    Grégoire, Pharm.D. dated August 10, 2006.(27)14
.1

Code of Business Conduct and
    Ethics dated December 9, 2003, as amended21
.1

Subsidiaries of IDM Pharma,
    Inc.(26)23
.1

Consent of Independent Registered
    Public Accounting Firm.23
.2

Consent of Independent Registered
    Public Accounting Firm. 60




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##### Table of Contents



ExhibitNumber

Document Description25
.1

Power of Attorney. Reference is
    made to the signature page of this report.31
.1

Certification of Principal
    Executive Officer pursuant to Section 302 of the Public
    Company Accounting Reform and Investor Protection Act of 2002
    (18 U.S.C. § 1350, as adopted).31
.2

Certification of Principal
    Financial Officer pursuant to Section 302 of the Public
    Company Accounting Reform and Investor Protection Act of 2002
    (18 U.S.C. § 1350, as adopted).32
.1

Certification pursuant to
    Section 906 of the Public Company Accounting Reform and
    Investor Protection Act of 2002 (18 U.S.C.
    § 1350, as adopted).     *
    
    Executive Compensation Plans and Arrangements(1)
    
    Incorporated by reference to the Companys
    Form S-1
    Registration Statement and Amendments thereto filed with
    Securities and Exchange Commission (the SEC) (File
    No. 33-43356).(2)
    
    Incorporated by reference to the Companys
    Form 8-K,
    filed with the SEC on March 22, 1993.(3)
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1994, filed with the
    SEC on March 31, 1995.(4)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended June 30, 1998, filed with
    the SEC on August 14, 1998.(5)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended September 30, 1998, filed
    with the SEC on November 16, 1998.(6)
    
    Incorporated by reference to the Companys
    Form 8-K,
    filed with the SEC on July 16, 1999.(7)
    
    Incorporated by reference to the Companys Definitive Proxy
    Statement, filed with the SEC on Form DEF 14A on
    July 28, 1999.(8)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended September 30, 1999, filed
    with the SEC on November 15, 1999.(9)
    
    Incorporated by reference to the Companys Registration
    Statement on
    Form S-8,
    filed with the SEC on July 2, 2004.  (10)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed with the SEC on August 17, 2005.(11)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q,
    for the quarterly period ended June 30, 2000, filed on
    August 14, 2000.(12)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q,
    for the quarterly period ended March 31, 2001, filed on
    May 11, 2001.(13)
    
    Incorporated by reference to the Companys Registration
    Statement on
    Form S-8,
    filed with the SEC on June 27, 2001 (File
    No. 333-63950).(14)
    
    Incorporated by reference to Amendment No. 1 to the
    Companys Registration Statement on
    Form S-1/A,
    filed on November 6, 2002.(15)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q,
    for the quarterly period ended June 30, 2003, filed on
    August 14, 2003.(16)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q,
    for the quarterly period ended September 30, 2003, filed on
    November 10, 2003.(17)
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K,
    for the fiscal year ended December 31, 2003, filed on
    March 30, 2004.(18)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on March 18, 2005.(19)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on April 18, 2005.(20)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on April 22, 2005.(21)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on June 2, 2005. 61




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##### Table of Contents



(22)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on July 7, 2005.(23)
    
    Incorporated by reference to the Companys Definitive Proxy
    Statement on Form DEFM14A, filed with the SEC on
    June 30, 2005.(24)
    
    Incorporated by reference to the Companys Registration
    Statement on
    Form S-8,
    filed with the SEC on September 8, 2005 (File
    No. 333-128178).(25)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q,
    for the quarterly period ended September 30, 2005, filed on
    November 14, 2005.(26)
    
    Incorporated by reference to the Companys Annual Report on
    Form 10-K,
    for the fiscal year ended December 31, 2005, filed on
    March 31, 2006.(27)
    
    Incorporated by reference to the Companys Quarterly Report
    on
    Form 10-Q
    for the quarterly period ended September 30, 2006, filed
    with the SEC on November 14, 2006.(28)
    
    Incorporated by reference to the Companys Current Report
    on
    Form 8-K,
    filed on March 27, 2007.  (A)
    
    Portions of this exhibit have been granted confidential
    treatment pursuant to an order granted by the Securities and
    Exchange Commission on November 5, 2002.(B)
    
    Portions of this exhibit have been granted confidential
    treatment pursuant to an order granted by the Securities and
    Exchange Commission on October 22, 2003.(C)
    
    Portions of this exhibit have been granted confidential
    treatment pursuant to an order granted by the Securities and
    Exchange Commission on September 12, 2006. 62




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##### Table of Contents



SIGNATURES
    Pharma, Inc.
  By
    /s/Jean-Loup
    Romet-Lemonne   Chief Executive Officer
  attorney-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/Jean-Loup
    Romet-LemonneJean-Loup
    Romet-Lemonne, M.D.

Chief Executive Officer and
    Director (Principal Executive Officer)

April 2, 2007/s/Hervé
    Duchesne De
    LamotteHervé
    Duchesne De Lamotte

Acting Principal Financial and
    Accounting Officer (Principal
    Financial and Accounting Officer)

April 2, 2007/s/Robert
    BeckRobert
    Beck, M.D.

Director

April 2, 2007/s/Jean
    DeleageJean
    Deleage, Ph.D.

Director

April 2, 2007/s/Donald
    DrakemanDonald
    Drakeman, Ph.D.

Director

April 2, 2007/s/Sylvie
    GrégoireSylvie
    Grégoire, Pharm.D.

Director

April 2, 2007/s/Michael
    G. GreyMichael
    G. Grey

Director

April 2, 2007/s/John
    P. MckearnJohn
    P. McKearn, Ph.D.

Director

April 2, 2007  63




---



##### 



IDM
    PHARMA INC.
    PageReport of
    Ernst & Young LLP, Independent Registered Public
    Accounting Firm

F-2Report of
    Ernst & Young Audit, Independent Registered Public
    Accounting Firm

F-3Consolidated
    Balance Sheets as of December 31, 2006 and 2005

F-4Consolidated
    Statements of Operations for the Years Ended December 31,
    2006, 2005 and 2004

F-5Consolidated
    Statements of Cash Flows for the Years Ended December 31,
    2006, 2005 and 2004

F-6Consolidated
    Statements of Stockholders Equity for the Years Ended
    December 31, 2006,
    2005 and 2004

F-7Notes to
    Consolidated Financial Statements

F-8EXHIBIT 10.1EXHIBIT 14.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   F-1




---



##### Table of Contents



REPORT OF
    ERNST & YOUNG LLP, INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM                 F-2




---



##### Table of Contents



REPORT OF
    ERNST & YOUNG AUDIT, INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM           Jean-Yves
    Jégourel
      F-3




---



##### Table of Contents



IDM
    PHARMA, INC.



CONSOLIDATED
    BALANCE SHEETS  December 31,


December 31,2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
10,181,000


$
26,702,000Related party accounts receivable


3,353,000



2,540,000Accounts receivable


39,000



904,000Research and development tax
    credit, current portion


201,000



526,000Prepaid expenses and other current
    assets


1,380,000



2,223,000Total current assets


15,154,000



32,895,000Property and equipment, net


1,711,000



2,109,000Patents, trademarks and other
    licenses, net


3,323,000



3,912,000Goodwill


2,812,000



2,812,000Research and development tax
    credit, less current portion


1,300,000



1,062,000Other long-term assets


82,000



97,000$
24,382,000


$
42,887,000LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued
    liabilities

$
4,935,000


$
4,887,000Accrued payroll and related
    expenses


1,251,000



2,689,000Related party deferred revenues,
    current portion


769,000



687,000Other current liabilities


3,681,000



2,251,000Total current liabilities


10,636,000



10,514,000Long-term debt, less current
    portion


505,000



317,000Related party deferred revenues,
    less current portion


2,593,000



2,875,000Other non-current liabilities


452,000



437,000Total liabilities


14,186,000



14,143,000Stockholders equity:Preferred stock, $.01 par
    value, 10,000,000 shares authorized and no shares issued
    and outstanding at December 31, 2006 and December 31,
    2005






Common stock, $.01 par value,
    55,000,000 shares authorized at December 31, 2006 and
    December 31, 2005 and 13,401,071 and 13,219,053 shares
    issued and outstanding at December 31, 2006 and
    December 31, 2005, respectively


134,000



132,000Additional paid-in capital


171,892,000



170,891,000Deferred compensation






(368,000
)Accumulated other comprehensive
    income


16,701,000



13,165,000Accumulated deficit


(178,531,000
)


(155,076,000
)Total stockholders equity


10,196,000



28,744,000$
24,382,000


$
42,887,000    F-4




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##### Table of Contents



IDM
    PHARMA, INC.



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Years Ended December 31,2006


2005


2004Revenues:Related party revenue

$
11,147,000


$
6,794,000


$
5,805,000Research grants and contract
    revenue


96,000



1,621,000



License fees, milestones and other
    revenues


43,000



124,000



Total revenues


11,286,000



8,539,000



5,805,000Costs and expenses:Research and development


22,329,000



24,021,000



20,063,000Impairment of patents and licenses


592,000



2,555,000



7,716,000Selling and marketing


605,000



1,270,000



1,176,000General and administrative


9,402,000



7,437,000



9,541,000Acquired in process research and
    development






13,300,000



Total costs and expenses


32,928,000



48,583,000



38,496,000Loss from operations


(21,642,000
)


(40,044,000
)


(32,691,000
)Interest income, net


503,000



580,000



696,000Other income (expenses), net






(4,000
)


Foreign exchange loss


(2,559,000
)


(162,000
)


(23,000
)Loss before income tax benefit


(23,698,000
)


(39,630,000
)


(32,018,000
)Income tax benefit


243,000



421,000



361,000Net loss

$
(23,455,000
)

$
(39,209,000
)

$
(31,657,000
)Weighted average number of shares
    outstanding


13,366,002



10,208,937



7,279,246Basic and diluted loss per share

$
(1.75
)

$
(3.84
)

$
(4.35
)Comprehensive loss:Net loss

$
(23,455,000
)

$
(39,209,000
)

$
(31,657,000
)Other comprehensive gain (loss)


3,545,000



(3,920,000
)


1,182,000$
(19,910,000
)

$
(43,129,000
)

$
(30,475,000
)    F-5




---



##### Table of Contents



IDM
    PHARMA, INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Years Ended December 31,2006


2005


2004Operating activitiesNet loss

$
(23,455,000
)

$
(39,209,000
)

$
(31,657,000
)Adjustments to reconcile net loss
    to net cash used in operating activities:Stock-based compensation expense


1,313,000



859,000



75,000Depreciation and amortization


1,329,000



1,812,000



2,735,000Acquired in process research and
    development






13,300,000



Impairment of patents and licenses


587,000



2,557,000



7,716,000Foreign exchange loss


2,525,000







21,000Change in operating assets and
    liabilities:Related party accounts receivable
    (sanofi-aventis)


(497,000
)


(826,000
)


667,000Accounts receivable


869,000







Prepaid expenses and other current
    assets


1,193,000



(340,000
)


816,000Research and development tax credit
    receivable


256,000



85,000



220,000Other long-term assets


25,000



330,000



1,000Accounts payable and accrued
    liabilities


(405,000
)


(1,489,000
)


2,011,000Accrued payroll and related expenses


(1,622,000
)


67,000



287,000Related party deferred revenues
    (sanofi-aventis)


(578,000
)


(403,000
)


(687,000
)Other liabilities


969,000



1,624,000



248,000Net cash used in operating
    activities


(17,491,000
)


(21,633,000
)


(17,547,000
)Investing activitiesProceeds from asset sale






12,090,000



Purchase of property and equipment


(216,000
)


(514,000
)


(505,000
)Patents, trademarks and other
    licenses


(210,000
)


(499,000
)


(604,000
)Net cash paid for acquisition






(1,015,000
)


Net cash used in investing
    activities


(426,000
)


10,062,000



(1,109,000
)Financing activitiesProceeds from loans






225,000



155,000Net proceeds from issuance of
    common stock


49,000



2,000



15,536,000Net cash provided by financing
    activities


49,000



227,000



15,691,000Effect of exchange rate on cash and
    cash equivalents


1,347,000



(3,731,000
)


2,761,000Decrease in cash and cash
    equivalents


(16,521,000
)


(15,075,000
)


(204,000
)Cash and cash equivalents at
    beginning of year


26,702,000



41,777,000



41,981,000Cash and cash equivalents at end of
    period

$
10,181,000


$
26,702,000


$
41,777,000Supplemental disclosure of cash
    flow informationInterest paid

$



$
3,000


$
Supplemental disclosure of
    non-cash investing and financing activitiesIssuance of shares in exchange for
    professional services

$



$



$
944,000Issuance of shares in exchange for
    patents and licenses

$



$
2,030,000


$
Issuance of shares in connection
    with Epimmune acquisition

$



$
26,476,000


$
    F-6




---



##### Table of Contents



IDM
    PHARMA INC.



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY

For the
    three years ended December 31, 2006  Additional





Accumulated Other





TotalCommon Stock


Paid-In


Deferred


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Compensation


Income


Deficit


EquityBalance at December 31, 2003


7,251,543


$
73,000


$
123,481,000


$
(142,000
)

$
15,903,000


$
(84,210,000
)

$
55,105,000Issuance of common stock in
    connection with private placement (net)


1,126,587



11,000



17,785,000















17,796,000Deferred compensation related to
    employee stock options










(24,000
)


24,000











Amortization of deferred
    compensation related to employee stock options














75,000











75,000Net loss






















(31,657,000
)


(31,657,000
)Translation adjustment


















1,182,000







1,182,000Balance at December 31, 2004


8,378,130



84,000



141,242,000



(43,000
)


17,085,000



(115,867,000
)


42,501,000Issuance of common stock in
    connection with exercise of warrants


2,237,862



22,000



2,008,000















2,030,000Issuance of common stock in
    connection with Epimmune acquisition


2,569,817



26,000



26,450,000















26,476,000Issuance of common stock in
    connection with employee stock purchase plan


2,344







5,000















5,000Issuance of common stock in
    connection with stock bonus grants


30,900







104,000















104,000Issuance of deferred issuance
    restricted stock awards










1,059,000



(1,059,000
)Issuance of consultant stock option










22,000















22,000Deferred compensation related to
    employee stock options










(2,000
)


2,000Amortization of deferred
    compensation














732,000











732,000Decrease in estimated issuance costs










3,000















3,000Net loss






















(39,209,000
)


(39,209,000
)Translation adjustment


















(3,920,000
)






(3,920,000
)Balance at December 31, 2005


13,219,053



132,000



170,891,000



(368,000
)


13,165,000



(155,076,000
)


28,744,000Common stock awards and related
    compensation expense


139,456



2,000



222,000















224,000Issuance of common stock for options


16,011







49,000















49,000Elimination of deferred
    compensation upon adoption of SFAS No. 123R










(359,000
)


368,000



(9,000
)






Stock-based compensation expense










1,089,000















1,089,000Exchange of common stock for PEA
    shares


26,551























Net loss






















(23,455,000
)


(23,455,000
)Translation adjustment


















3,545,000







3,545,000Balance at December 31, 2006


13,401,071


$
134,000


$
171,892,000


$



$
16,701,000


$
(178,531,000
)

$
10,196,000     F-7




---



##### Table of Contents



IDM
    PHARMA INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    Nature of
    Business    
    to destroy cancer cells remaining after conventional
    therapies, and
    to prevent tumor recurrence.  tm tm tm
    2.
    Basis of
    Presentation   F-8




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Basis of
    Presentation  (Continued)  one-for-seven Series S-1
      and/or
    3.
    Recent
    Operating Results and Liquidity   F-9




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Recent
    Operating Results and
    Liquidity  (Continued)   Accounting for Costs
    Associated with Exit or Disposal Activities tm
    4.
    Summary
    of Significant Accounting Policies    Foreign
    Currency Translation
     F-10




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)        Cash
    and Cash Equivalents
    Major
    customer and concentration of credit risk
      Revenue
    recognition
  Revenue Recognition, 00-21 Revenue Arrangements with Multiple
    Deliverables.
     F-11




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)        Research
    and development expenses and related tax credit.
        Patents,
    trademarks and licenses
  Accounting for the Impairment or Disposal of Long-Lived
    Assets
   F-12




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)    Impairment
    of long lived assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
    Fair
    value of financial instruments
    Property
    and equipment  net
    Laboratory Equipment:






5 yearsComputer Equipment:






3 yearsFurniture:






5 yearsOffice Equipment:






8 yearsLeasehold improvements:






Shorter of useful life or lease term  F-13




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)  Income
    taxes
  Accounting for Contingencies.
  Segment
    information
    Goodwill
  Goodwill and Other
    Intangible Assets
  Earnings
    per share
  Earnings per
    Share.
  2006


2005


2004Options Outstanding


1,891,840



1,143,806



623,434Restricted Stock Awards


42,141



188,739



Warrants Outstanding


211,882



325,056



2,237,862Reserved Pursuant to Option
    Liquidity Agreement


380,815



403,984



Reserved Pursuant to Put/Call
    Agreements


52,049



78,600



Total


2,578,727



2,140,185



2,861,296  F-14




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)  Share-Based
    Compensation Plans
  Overview
  Accounting for Stock Issued to
    Employees Accounting for
    Stock-Based Compensation.
    Share-Based Payment
    Description
    of Share-Based Compensation
  1998 IDM Stock Option Plan
 F-15




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)    2000 IDM Stock Option Plan
    1989 Stock Plan
  1997 Stock Plan
  2000 Stock Plan
   F-16




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)          WeightedAverageShares


PriceBalance at December 31, 2003


622,787


$
23.81Granted


38,258


$
23.83Cancelled


(37,611
)

$
28.37Balance at December 31, 2004


623,434


$
25.30Granted


981,384


$
8.14Cancelled


(57,028
)

$
22.46Balance at December 31, 2005


1,547,790


$
14.53Granted


905,500


$
2.95Exercised


(16,011
)

$
3.06Cancelled


(164,624
)

$
11.66Balance at December 31, 2006


2,272,655


$
9.84   Employee Stock Purchase Plan
   F-17




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)    Impact of
    the Adoption of SFAS 123(R)
    Research and development

$
163,000General and administrative


332,000Sales and marketing


3,000Incremental expense under SFAS 123R


498,000Expense related to restricted
    stock (general and administrative)


224,000Expense related to consultant
    options (general and administrative)


591,000Total stock-based compensation
    expense

$
1,313,000     Determining Fair Value
  Expected Term at-the-money,
  Expected Volatility
 F-18




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)   Risk-Free Interest Rate
  Dividends
  Forfeitures
    2006

2005(Post-CombinationPeriod)Average expected term (years)

5.50  7.00

6.00Expected volatility (range)

84%  95%

115%Risk-free interest rate

4.57%  5.03%

5.00Expected dividend yield

0%

0%   Stock
    Option Activity and Share-Based Compensation Expense
    Weighted


Weighted AverageAverage


Remaining


AggregateExercise


Contractual Term


IntrinsicShares


Price


(years)


ValueOptions outstanding,
    December 31, 2005


1,547,790


$
14.53Granted


905,500


$
2.95Exercised


(16,011
)

$
3.06Cancelled, forfeited or expired


(164,624
)

$
11.66Options outstanding,
    December 31, 2006


2,272,655


$
9.84



5.01


$
Options exercisable,
    December 31, 2006


1,218,772


$
14.28



3.90


$
    F-19




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)     Weighted








WeightedAverage








AverageRemaining


Weighted





Exercise PriceOptions


Life in


Average


Options


of OptionsRange of Exercise Prices

Outstanding


Years


Exercise Price


Exercisable


Exercisable$2.75 to $4.99


1,157,398



4.86


$
3.00



345,567


$
2.95$5.00 to $9.99


286,844



8.56



5.92



97,437



5.97$10.00 to $19.99


396,787



2.26



12.71



384,667



12.64$20.00 to $29.99


346,143



5.50



26.97



324,258



26.88$30.00 and above


85,483



5.91



32.93



66,843



33.32Total


2,272,655



5.01


$
9.84



1,218,772


$
14.28         Performance-Based
    Stock Options and Awards
    EITF 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
 F-20




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Summary
    of Significant Accounting
    Policies  (Continued)      Comparable
    Disclosures
      Comprehensive
    Income
  Reporting Comprehensive Income available-for-sale
  5.
    Business
    Combination and Name Change     F-21




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Business
    Combination and Name Change  (Continued)     Epimmune common stock





$
21,301,000Epimmune preferred stock,
    as-converted to common






2,589,000Estimated fair value of options
    and warrants assumed






2,586,000Estimated IDM S.A. direct
    transaction costs






3,298,000Total purchase price





$
29,774,000         Estimated UsefulAmount


Life (Years)Purchase price allocation:Net tangible assets (net of
    liabilities)

$
1,607,000



Licensing and milestone agreements


1,600,000



5 yearsIn-process research and
    development (IPR&D)


13,300,000



Goodwill


13,267,000



Total purchase price

$
29,774,000   Accounting
    for Research and Development Costs, Applicability of FASB Statement
    No. 2 to Business Combinations Accounted for by the
    Purchase Method,
   F-22




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Business
    Combination and Name Change  (Continued)    Goodwill and Other
    Intangible Assets,
  6.
    Sale of
    Infectious Disease Related Assets    ®
    AmountPrepaids and other current assets

$
214,000Fixed assets


778,000Intangible assets


1,627,000Goodwill


10,455,000Accrued liabilities


(146,000
)Total carrying value

$
12,928,000      F-23




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Sale of
    Infectious Disease Related Assets 
    (Continued)    Year Ended


Year EndedDecember 31,


December 31,2005


2004Revenues

$
7,134


$
6,650Net loss

$
(39,483
)

$
(38,016
)Net loss per common
    share  basic and diluted

$
(3.87
)

$
(2.89
)    7.
    Research
    and Development and Other Agreements  Jenner
    country-by-country product-by-product
      Agreement
    with sanofi-aventis (Related Party)
  sanofi-aventis sanofi-aventis sanofi-aventis sanofi-aventis sanofi-aventis
 F-24




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Research
    and Development and Other Agreements 
    (Continued)  sanofi-aventis sanofi-aventis sanofi-aventis
      2006


2005


2004Amortization of upfront fee

$
221,000


$
220,000


$
219,000Amortization of phase I
    milestone payment


262,000



259,000



259,000Amortization of initial R&D
    expenses from 1999 to 2001


210,000



208,000



208,000Reimbursement of current R&D
    expenses


10,454,000



6,107,000



5,119,000Total revenues

$
11,147,000


$
6,794,000


$
5,805,000     Sanofi-aventis sanofi-aventis sanofi-aventis sanofi-aventis
  sub-license
 F-25




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Research
    and Development and Other Agreements 
    (Continued)     Medarex
    (Related Party)
      EITF 96-18, Accounting For Equity Instruments That Are Issued to Other
    Than Employees For Acquiring, or in conjunction with Selling,
    Goods or Services,
      Cambridge
    Labs
     F-26




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Research
    and Development and Other Agreements 
    (Continued)         8.
    Balance
    Sheet Information  Cash
    and Cash equivalents
    As of December 31,2006


2005Money market funds

$
609,000


$
14,574,000Cash, including certificates of
    deposit


9,572,000



12,128,000Total cash and cash equivalents

$
10,181,000


$
26,702,000   Prepaids
    and Other Current Assets
    As of December 31,2006


2005Prepaid expenses

$
1,117,000


$
758,000Value added tax receivable


121,000



514,000Prepaid services agreement


97,000



900,000Other current assets


45,000



51,000$
1,380,000


$
2,223,000   Fixed
    Assets  Net
    As of December 31,2006


2005Laboratory equipment

$
2,713,000


$
2,488,000Computer equipment


1,787,000



1,591,000Furniture and other equipment


706,000



683,000Leasehold improvements


2,195,000



1,857,000Total fixed assets


7,401,000



6,619,000Less accumulated depreciation and
    amortization


(5,690,000
)


(4,510,000
)Fixed assets  net

$
1,711,000


$
2,109,000  F-27




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Balance
    Sheet Information  (Continued)    Intangible
    Assets  Net
  assets-net
  As of December 31, 2006


As of December 31, 2005Accumulated








AccumulatedAmortization








Amortizationand








andOriginal Cost


Impairment


Net


Original Cost


Impairment


NetPatents

$
1,215,000


$
(593,000
)

$
622,000


$
3,055,000


$
(2,105,000
)

$
950,000Trade marks


170,000



(100,000
)


70,000



592,000



(513,000
)


79,000Jenner and other licenses


4,174,000



(1,543,000
)


2,631,000



4,374,000



(1,491,000
)


2,883,000Sanofi-aventis licenses(1)


2,030,000



(2,030,000
)






2,030,000



(2,030,000
)


Medarex licenses(2)


18,943,000



(18,943,000
)






16,998,000



(16,998,000
)


Total

$
26,532,000


$
(23,209,000
)

$
3,323,000


$
27,049,000


$
(23,137,000
)

$
3,912,000     (1)
    On August 12, 2005, sanofi-aventis exercised warrants that were
    granted in connection with the 1999 Agreement in exchange for a
    new license agreement for the Companys use of IL-13 in
    Phase III clinical trials and for the commercialization of the
    Companys products using IL-13. The fair value of the
    shares issued to sanofi-aventis was estimated at approximately
    $2,030,000. The fair value allocated to the license was
    reflected in intangible assets and immediately impaired in full
    since the acquired license has no alternative future use.(2)
    In 2000, the Company acquired licenses from Medarex, which were
    capitalized for an amount of $12,379,000. In 2004, the Company
    recorded an impairment charge of $6,776,000 relating to the
    remaining carrying value of the Medarex licenses. This
    impairment charge was related to IDMs decision not to
    further pursue any of the development programs in connection
    with the MDX-210 antibody, an antibody used in the
    Companys Osidem-2 product candidate.       F-28




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Balance
    Sheet Information  (Continued)     2006


2005


2004AmortizationPatents

$
186,000


$
166,000


$
382,000Licenses


383,000



509,000



1,345,000Trademarks


14,000



47,000



42,000$
583,000


$
722,000


$
1,769,000ImpairmentPatents

$
414,000


$
264,000


$
357,000Licenses


144,000



2,071,000



7,359,000Trademarks


34,000



220,000



$
592,000


$
2,555,000


$
7,716,000   Other
    Currents Liabilities
    2006


2005Value added tax payable

$
875,000


$
399,000Accrued tax liabilities


1,680,000



1,638,000Severance costs


864,000



Contract termination costs


90,000



European grant


172,000



214,000$
3,681,000


$
2,251,000   Long-term
    Debt
    As of December 31,2006


2005Interest-free loan from
    governmental agencies

$
479,000


$
277,000Long-term equipment lease


26,000



40,000Long term portion

$
505,000


$
317,000      F-29




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Shareholders
    Equity  seven-for-one
  Preferred
    Stock
    Common
    Stock
    Accounting for Certain Financial Instruments with
    Characteristics of Both Liabilities and Equity,
         F-30




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Shareholders
    Equity  (Continued)     Stock
    Warrants
        Employee
    Stock Purchase Plan
      Directors
    Deferred Compensation Plan
   F-31




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Shareholders
    Equity  (Continued)     Shares Reserved
    for Future Issuance
    Options granted and outstanding


2,272,655Options authorized for future
    grants


134,173Employee stock purchase plan for
    future purchases


72,357Common stock warrants


211,882Restricted stock awards


42,1412,733,208   10.
    Income
    Tax Provision (Benefit)    As of December 31,2004


2005


2006Foreign

$
(25,203,000
)

$
(16,692,000
)

$
(13,580,000
)United States


(6,815,000
)


(22,938,000
)


(10,118,000
)Total

$
(32,018,000
)

$
(39,630,000
)

$
(23,698,000
)     Years ended December 31,2004


2005


2006Current:Federal

$



$
120,000


$
State






5,000



Foreign


(361,000
)


(546,000
)


(243,000
)Income tax benefit

$
(361,000
)

$
(421,000
)

$
(243,000
)    F-32




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Income
    Tax Provision (Benefit)  (Continued)    Years ended December 31,2004


2005


2006Amounts computed at statutory
    federal rate

$
(10,886,000
)

$
(13,474,000
)

$
(8,057,000
)State taxes net of federal benefit


(397,000
)


(1,337,000
)


(530,000
)Nondeductible expenses and other






372,000



493,000Foreign refundable credits


(361,000
)


(546,000
)


(303,000
)Foreign tax rate differential


(1,764,000
)


(1,169,000
)


91,000Change in valuation allowance


13,047,000



5,946,000



(1,973,000
)Asset basis differences






9,663,000



Alternative minimum tax






124,000



Expiration of US net operating
    losses










3,456,000Adjustment to foreign tax rate for
    deferred taxes










6,580,000$
(361,000
)

$
(421,000
)

$
(243,000
)     As of December 312005


2006Deferred tax liabilities:Patents expensed for tax

$
(58,000
)

$
(68,000
)Fixed assets


(110,000
)


(84,000
)Total deferred tax liabilities


(168,000
)


(152,000
)Deferred tax assets:Capitalized research expenses


1,400,000



1,203,000Reserves and accruals


449,000



1,944,000FAS 123R expense






37,000US net operating loss carryforwards


59,337,000



60,006,000Foreign net operating loss
    carryforwards


60,978,000



57,186,000Research and development credits


9,545,000



9,264,000Other, net


143,000



223,000Total deferred tax assets


131,852,000



129,863,000Valuation allowance for deferred
    tax assets


(131,684,000
)


(129,711,000
)Net deferred tax assets

$



$
    F-33




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Income
    Tax Provision (Benefit)  (Continued)               11.
    Benefit
    Plans and 401(k) Plan       F-34




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Commitments  Operating
    lease commitments
        OperatingYear

Leases2007


910,0002008


929,0002009


845,0002010


194,0002011


163,000Thereafter


483,000Total


3,524,000     Obligations
    under collaboration, licensing and contract research
    organization agreements
    Commitment
    with Biotecnol
    Commitment
    with Accovion
   F-35




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Commitments 
    (Continued)      13.
    Restructuring
    Charges  Accounting for
    Costs Associated with Exit or Disposal Activities tm
      14.
    Related
    Party Transactions     F-36




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Related
    Party Transactions  (Continued)    15.
    Recent
    Accounting Pronouncements  Accounting for
    Uncertainty in Income Taxes, an interpretation of
    SFAS No. 109, Accounting for Income Taxes
    (FIN 48)
  No. 00-19-2, Accounting for Registration Payment Arrangements, Accounting for
    Contingencies.
  Accounting for Certain Hybrid Financial FASB Statements No. 133 and 140.
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities.
   F-37




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Subsequent
    Event           F-38




---



##### Table of Contents



IDM PHARMA INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    Unaudited
    quarterly financial information    1st Quarter


2nd Quarter


3rd Quarter


4th QuarterYear Ended December 31,
    2006Revenues

$
2.3


$
3.0


$
3.0


$
3.0Loss from operations


(6.2
)


(6.0
)


(4.2
)


(5.2
)Net loss


(6.6
)


(7.0
)


(3.9
)


(5.9
)Basic and diluted net loss per
    share(a)


(0.50
)


(0.52
)


(0.29
)


(0.44
)   1st Quarter


2nd Quarter


3rd Quarter


4th QuarterYear Ended December 31,
    2005Revenues

$
1.6


$
1.6


$
2.1


$
3.3Loss from operations


(5.3
)


(5.1
)


(20.4
)


(9.3
)Net loss


(4.7
)


(4.7
)


(20.2
)


(9.7
)Basic and diluted net loss per
    share


(0.55
)


(0.55
)


(1.87
)


(0.74
)     (a)
    
    The sum of the four quarters will not agree to year total due to
    rounding within the quarter. F-39