UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549


FORM
10-Q





(Mark
One)




[X]           Quarterly
Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of
1934


For the quarterly period
ended March 31, 2009




OR




[   ]           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: 0-23317







ORE
PHARMACEUTICALS INC.


(Exact
name of registrant as specified in its charter)







Delaware
              06-1411336(State or other
      jurisdiction of
              (I.R.S.
      Employerincorporation or
      organization)
              Identification
      No.)


610
Professional Drive, Suite 101


Gaithersburg,
Maryland 20879


(Address
of principal executive offices)


(240)
361-4400


(Registrant’s
phone number, including area code)







Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days:YESxNO 
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files) :YESoNO   o




Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.












Large accelerated
      filer  o
            Accelerated
      filer  o
            Non-accelerated
      filer  o
            Smaller reporting
      company  x(Do not check if
      smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YESoNO x




The number
of shares outstanding of the Registrant’s Common Stock, $.01 par value, was
5,483,519 as of April 30, 2009.















ORE PHARMACEUTICALS
INC.




TABLE OF
CONTENTS




PART I
                                                                                                  FINANCIAL INFORMATIONItem 1.
                                                                                                  Financial Statements
                                                                                                  3Consolidated Condensed Balance Sheets at March
      31, 2009 and December 31, 2008
                                                                                                  3Consolidated Condensed Statements of
      Operations for the Three Months Ended March 31, 2009 and
      2008
                                                                                                  4Consolidated Condensed Statements of Cash
      Flows for the Three Months Ended March 31, 2009 and
    2008
                                                                                                  5Notes to Consolidated Condensed Financial
      Statements
                                                                                                  6Item 2.
                                                                                                  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                                                                                                  10Item 4.
                                                                                                  Controls and Procedures
                                                                                                  12PART II
                                                                                                  OTHER INFORMATIONItem 1.
                                                                                                  Legal Proceedings
                                                                                                  12Item 2.
                                                                                                  Unregistered Sales of Equity Securities and Use of
      Proceeds
                                                                                                  12Item 3.
                                                                                                  Defaults Upon Senior Securities
                                                                                                  13Item 4.
                                                                                                  Submission of Matters to a Vote of Security
      Holders
                                                                                                  13Item 5.
                                                                                                  Other Information
                                                                                                  13Item 6.
                                                                                                  Exhibits
                                                                                                  13Signatures
                                                                                                  
                                                                                                  14
  2.




PART
I                         FINANCIAL
INFORMATION




Item 1.    Financial Statements




ORE PHARMACEUTICALS INC.
  CONSOLIDATED
CONDENSED BALANCE SHEETS
 (in
thousands, except share data)


March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          7,077
                          
                          
                          $
                          10,784Prepaid
      expenses
                          
                          
                          333
                          
                          
                          
                          200Notes
      receivable, net
                          
                          
                          3,315
                          
                          
                          
                          3,252Other
      current assets
                          
                          
                          67
                          
                          
                          
                          70Total
      current assets
                          
                          
                          10,792
                          
                          
                          
                          14,306Property
      and equipment, net
                          
                          
                          427
                          
                          
                          
                          483Other
      intangibles, net
                          
                          
                          575
                          
                          
                          
                          573Note
      receivable, net
                          
                          
                          348
                          
                          
                          
                          338Total
      assets
                          
                          $
                          12,142
                          
                          
                          $
                          15,700LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilities:Accounts
      payable
                          
                          $
                          401
                          
                          
                          $
                          623Accrued
      compensation and employee benefits
                          
                          
                          1,201
                          
                          
                          
                          1,185Other
      accrued expenses
                          
                          
                          1,045
                          
                          
                          
                          1,267Current
      portion of long-term debt
                          
                          
                          463
                          
                          
                          
                          477Total
      liabilities
                          
                          
                          3,110
                          
                          
                          
                          3,552Commitments
      and contingencies
                          
                          
                          -
                          
                          
                          
                          -Stockholders'
      equity:Preferred
      stock, $.01 par value; 10,000,000 shares authorized; and no shares issued
      andoutstanding
      as of March 31, 2009 and December 31, 2008
                          
                          
                          -
                          
                          
                          
                          -Common
      stock, $.01 par value; 60,000,000 shares authorized;  5,483,519
      sharesissued
      and outstanding as of March 31, 2009 and December 31, 2008
                          
                          
                          55
                          
                          
                          
                          55Additional
      paid-in-capital
                          
                          
                          384,950
                          
                          
                          
                          384,922Accumulated
      other comprehensive loss
                          
                          
                          -
                          
                          
                          
                          -Accumulated
      deficit
                          
                          
                          (375,973
                          )
                          
                          
                          (372,829
                          )Total
      stockholders' equity
                          
                          
                          9,032
                          
                          
                          
                          12,148Total
      liabilities and stockholders' equity
                          
                          $
                          12,142
                          
                          
                          $
                          15,700




See
accompanying notes.





3.




ORE PHARMACEUTICALS INC.




CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS


(in
thousands, except per share data)


(unaudited)


Three
      Months EndedMarch
      31,2009
                    
                    
                    2008Services
      revenue
                    
                    $
                    -
                    
                    
                    $
                    750Expenses:Research
      and development
                    
                    
                    941
                    
                    
                    
                    2,842Selling,
      general and administrative
                    
                    
                    2,289
                    
                    
                    
                    5,164Total
      expenses
                    
                    
                    3,230
                    
                    
                    
                    8,006Loss
      from operations
                    
                    
                    (3,230
                    )
                    
                    
                    (7,256
                    )Interest
      (income), net
                    
                    
                    (86
                    )
                    
                    
                    (316
                    )Net
      loss
                    
                    $
                    (3,144
                    )
                    
                    $
                    (6,940
                    )Basic
      and diluted net loss per share
                    
                    $
                    (0.57
                    )
                    
                    $
                    (1.12
                    )Shares
      used in computing basic and dilutednet
      loss per share
                    
                    
                    5,474
                    
                    
                    
                    6,206




See accompanying
notes.





4.




ORE PHARMACEUTICALS INC.




CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)




Three
      Months EndedMarch
      31,2009
                        
                        
                        2008Cash
      flows from operating activities:Loss
      from operations
                        
                        $
                        (3,144
                        )
                        
                        $
                        (6,940
                        )Adjustments
      to reconcile loss from operations to net cash flowsfrom operating activities:Depreciation
      and amortization
                        
                        
                        56
                        
                        
                        
                        296Non-cash
      stock-based compensation expense
                        
                        
                        28
                        
                        
                        
                        159Other
      non-cash items
                        
                        
                        (30
                        )
                        
                        
                        71Changes
      in operating assets and liabilities:Prepaids
      and other assets
                        
                        
                        (130
                        )
                        
                        
                        1,795Accounts
      payable
                        
                        
                        (222
                        )
                        
                        
                        399Accrued
      expenses
                        
                        
                        (206
                        )
                        
                        
                        (1,666
                        )Deferred
      revenue
                        
                        
                        -
                        
                        
                        
                        (750
                        )Net
      cash flows from operating activities
                        
                        
                        (3,648
                        )
                        
                        
                        (6,636
                        )Cash
      flows from investing activities:Purchases
      of property and equipment
                        
                        
                        -
                        
                        
                        
                        (97
                        )Purchases
      of licenses and patent costs
                        
                        
                        (45
                        )
                        
                        
                        (152
                        )Proceeds
      from sale of marketable securities available-for-sale
                        
                        
                        -
                        
                        
                        
                        6,522Purchase
      of marketable securities available-for-sale
                        
                        
                        -
                        
                        
                        
                        (2,975
                        )Net
      proceeds received from sale of Genomics Assets
                        
                        
                        -
                        
                        
                        
                        501Net
      proceeds received from sale of Preclinical Division
                        
                        
                        -
                        
                        
                        
                        272Net
      cash flows from investing activities
                        
                        
                        (45
                        )
                        
                        
                        4,071Cash
      flows from financing activities:Purchase
      of common stock
                        
                        
                        -
                        
                        
                        
                        (2,991
                        )Repayments
      of an equipment loan
                        
                        
                        (14
                        )
                        
                        
                        -Net
      cash flows from financing activities
                        
                        
                        (14
                        )
                        
                        
                        (2,991
                        )Net
      decrease in cash and cash equivalents
                        
                        
                        (3,707
                        )
                        
                        
                        (5,556
                        )Cash
      and cash equivalents, beginning of period
                        
                        
                        10,784
                        
                        
                        
                        26,323Cash
      and cash equivalents, end of period
                        
                        $
                        7,077
                        
                        
                        $
                        20,767Supplemental
      disclosure:Interest
      paid
                        
                        $
                        -
                        
                        
                        $
                        1


See
accompanying notes.





5.




ORE PHARMACEUTICALS INC.




Notes
to Consolidated Condensed Financial Statements


March
31, 2009


(in
thousands, except share and per share data)


(unaudited)




Note
1 — Organization and summary of significant accounting policies




Description
of Business




Ore
Pharmaceuticals Inc. (the “Company”) is a drug asset development company with a
focus on acquiring and developing clinical-stage drug candidates that have
already undergone substantial safety testing in humans.  The Company
currently has three compounds in its development pipeline: ORE1001 (formerly
known as GL1001), our lead compound, ORE5002 (tiapamil) and ORE5007
(romazarit).  New therapeutic uses for each of these compounds were
identified through the Company’s now discontinued drug repositioning
program.  In the fourth quarter of 2008, the Company completed a
multiple ascending dose human tolerability Phase I clinical trial of ORE1001
under an Investigative New Drug Application (“IND”) filed with the FDA and
expects to advance the compound into additional clinical trials as a potential
treatment for inflammatory bowel disease.




Basis
of Presentation




The
accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with United States Generally Accepted Accounting
Principles (“GAAP”) for interim financial information and the instructions to
Form 10-Q and Article 8-03 of Regulation S-X.  The consolidated
condensed balance sheet as of March 31, 2009, consolidated condensed statements
of operations for the three months ended March 31, 2009 and 2008 and the
consolidated condensed statements of cash flows for the three months ended March
31, 2009 and 2008 are unaudited, but include all adjustments (consisting of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows,
respectively, for the periods presented.  Although the Company
believes that the disclosures in these financial statements are adequate to make
the information presented not misleading, certain information and footnote
information normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted pursuant to the rules and regulations
of the United States Securities and Exchange Commission (“SEC”).  All
material intercompany accounts and transactions have been eliminated in
consolidation.




In 2008,
the Company sold its wholly owned subsidiary, DioGenix Inc., its molecular
diagnostics business.  The results of operations for the Company’s
molecular diagnostic business are not considered material and, therefore, have
not been classified as a discontinued operation.  There was no revenue
from the Company’s molecular diagnostics business.




Results
for any interim period are not necessarily indicative of results for any future
interim period or for the entire year.  The accompanying unaudited
consolidated condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  Actual results could differ from those
estimates.




Fair
Value Measurements




The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157
“Fair Value Measurements” (“SFAS 157”) for financial assets and liabilities on
January 1, 2008.  The Company adopted SFAS 157 for non-financial
assets and liabilities on January 1, 2009.




SFAS
No. 157 discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income
or cash flow) and the cost approach (cost to replace the service capacity of an
asset or replacement cost).  The statement utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels.  The following is a brief
description of those three levels:




●
            Level
      1:  Observable inputs such as quoted prices (unadjusted) in
      active markets for identical assets or
  liabilities.




6.




●
            Level
      2:  Inputs other than quoted prices that are observable for the
      asset or liability, either directly or indirectly.  These
      include quoted prices for similar assets or liabilities in active markets
      and quoted prices for identical or similar assets or liabilities in
      markets that are not active.




●
            Level
      3:  Unobservable inputs that reflect the reporting entity’s own
      assumptions.




The
Company’s recurring financial assets and liabilities subject to fair value
measurements and the necessary disclosures are as follows:




Fair
      Valueas
      of
                    
                    
                    Fair
      Value Measurements at March 31, 2009March
      31,
                    
                    
                    Using
      Fair Value Hierarchy2009
                    
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3Cash
      and cash equivalents
                    
                    $
                    7,077
                    
                    
                    $
                    7,077
                    
                    
                    $
                    -
                    
                    
                    $
                    -Total
                    
                    $
                    7,077
                    
                    
                    $
                    7,077
                    
                    
                    $
                    -
                    
                    
                    $
                    -


There were
no required fair value measurements for non-financial assets and liabilities in
the first quarter of 2009.




Comprehensive
Loss




The
Company accounts for comprehensive loss as prescribed by SFAS No. 130,
“Reporting Comprehensive Income.”  Comprehensive income (loss) is the
total net income (loss) plus all changes in equity during the period except
those changes resulting from investment by and distribution to
owners.  Total comprehensive loss was $3,144 and $6,894 for the three
months ended March 31, 2009 and 2008, respectively.




New
Accounting Pronouncements




In
February 2008, the Financial Accounting Standards Board (“FASB”) issued a
one-year deferral for non-financial assets and liabilities to comply with
SFAS No. 157.  The Company adopted SFAS No. 157
for financial assets and liabilities effective January 1, 2008 (see
Note 1, Fair
Value Measurements).  The Company adopted
SFAS No. 157 as it pertains to non-financial assets and liabilities
effective January 1, 2009 and the adoption had no impact on the Company’s
financial position or results of operations.





In
December 2007, the FASB issued SFAS No. 141 Revised, “Business Combinations”
(“SFAS 141R”).  SFAS 141R requires an acquirer to determine the fair
value of the consideration exchanged as of the acquisition date (i.e. the date
the acquirer obtains control).  Previously, an acquisition was valued
as of the date the parties agreed upon the terms of the
transaction.  SFAS 141R also modifies, among other things, the
accounting for direct costs associated with an acquisition, contingencies
acquired and contingent consideration.  The Company adopted SFAS 141R
effective January 1, 2009 for business combinations occurring after the
effective date.




In
December 2007, the FASB ratified Emerging Issues Task Force No. 07-1,
“Accounting for Collaborative Agreements” (“EITF 07-1”).  EITF 07-1
provides guidance regarding financial statement presentation and disclosure of
collaborative arrangements, as defined therein.  The Company adopted
EITF 07-1 effective January 1, 2009 and the adoption had no impact on the
Company’s financial position or results of operations.




Note
2 – Liquidity and management’s plans




Since inception, the
Company has incurred, and continues to incur, significant losses from
operations.  At March 31, 2009, the Company had $7,077 in cash and
cash equivalents.  The Company has realigned its corporate resources
and as a result significantly reduced its workforce from 71 employees on
December 31, 2007 to 11 employees as of March 31, 2009.  In addition,
the Company assigned its Cambridge, Massachusetts lease and subleased back a
smaller portion through June 2009 and expects to lease new space thereafter at a
lower cost.  The Company believes that its cash and cash equivalents
on hand, continuing cash savings resulting from its ongoing realignment and cash
conservation efforts and proceeds from the collection of its outstanding notes
receivable, will be sufficient to allow the Company to complete the Phase Ib/IIa
clinical trial for ORE1001, which is expected to be completed in mid to late
2010.  However, there can be no assurance that the Company will be
successful in its continuing realignment and cash conservation efforts, the
collection of its outstanding notes receivable or, if necessary, attracting
additional financing to allow the Company to complete the clinical
trial.  Furthermore, there is no assurance if the Company completes
its Phase Ib/IIa clinical trial, that the results will be satisfactory or will
enable the Company to successfully outlicense its compound.  If the
Company is not successful in achieving its objectives, it might be necessary to
liquidate the Company in late 2010.  The balance sheet at March 31,
2009 does not include any adjustments relating to recoverability and
classification of recorded asset amounts or the amounts and classifications of
liabilities that might be necessary in the event of such
liquidation.




7.





Note
3 — Stock-based compensation




At March
31, 2009, the Company has the following stock-based compensation plans: the 1997
Equity Incentive Plan (the “Stock Plan”) and the 1997 Non-Employee Directors’
Stock Option Plan (the “Directors’ Plan”).




The
Company recorded stock-based compensation expense of $28 and $159 for the three
months ended March 31, 2009 and 2008, respectively.




Stock
Option Awards




The
Company determined the fair value of each option grant on the date of grant
using the Black-Scholes option pricing model for the indicated periods, with the
following assumptions:




Three
      Months EndedMarch
      31,2009
                            
                            
                            2008Weighted
      average fair value of grants
                            
                            
                            $0.21
                            
                            
                            
                            $1.90Expected
      volatility
                            
                            
                            79%
                            
                            
                            
                            61%Risk-free
      interest rate
                            
                            
                            1.31%
                            
                            
                            
                            3.04%Expected
      lives
                            
                            3
      years
                            
                            
                            3
      yearsDividend
      rate
                            
                            
                            0%
                            
                            
                            
                            0%




The
following is a summary of option activity for the three months ended March 31,
2009:




Per
      ShareWeighted-
                          
                          
                          AggregateNumber
      of
                          
                          
                          Average
                          
                          
                          IntrinsicShares
                          
                          
                          Exercise
      Price
                          
                          
                          ValueOutstanding
      at January 1, 2009
                          
                          
                          683,847
                          
                          
                          $
                          24.10Options
      granted
                          
                          
                          550,000
                          
                          
                          $
                          0.40Options
      exercised
                          
                          
                          -
                          
                          
                          $
                          -Options
      cancelled
                          
                          
                          (142,108
                          )
                          
                          $
                          13.93Outstanding
      at March 31, 2009
                          
                          
                          1,091,739
                          
                          
                          $
                          13.48
                          
                          
                          $
                          2Exercisable
      at March 31, 2009
                          
                          
                          489,929
                          
                          
                          $
                          29.06
                          
                          
                          $
                          -




Of the
stock options outstanding at March 31, 2009, 271,519 are stock options held by
the employees that have been or are expected to be terminated as part of the
Company’s workforce reductions and therefore will be subject to cancellation
within three months after the date of their termination in accordance with the
Stock Plan.




The
aggregate intrinsic value in the table above represents the total intrinsic
value (the excess of the Company’s closing stock price on the last trading day
of March 2009 over the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option
holders exercised their options on March 31, 2009.  This amount is
subject to change based on changes to the fair market value of the Company’s
Common Stock.




Restricted
Stock Awards




The
Committee approved grants for shares of restricted stock under the Stock Plan
subject to certain performance- or time-based vesting conditions which, if not
met, would result in forfeiture of the shares and the reversal of any previously
recognized related stock-based compensation expense.




The
following is a summary of restricted stock awards activity for the three months
ended March 31, 2009:




Per
      ShareWeighted-AverageNumber
      of
                        
                        
                        Grant-DateShares
                        
                        
                        Fair
      ValueOutstanding
      at January 1, 2009
                        
                        
                        10,000
                        
                        
                        $
                        6.15Restricted
      stock granted
                        
                        
                        -
                        
                        
                        $
                        -Restricted
      stock vested
                        
                        
                        -
                        
                        
                        $
                        -Restricted
      stock forfeited
                        
                        
                        -
                        
                        
                        $
                        -Outstanding
      at March 31, 2009
                        
                        
                        10,000
                        
                        
                        $
                        6.15




8.




Performance-based
non-vested restricted stock awards are recognized as compensation expense over
the expected vesting period based on the fair value at the date of grant and the
number of shares ultimately expected to vest.  At March 31, 2009, the
Company continues to believe that the achievement of the performance milestones
for the remaining outstanding award is not probable.  In a prior
period, the Company had reversed the previously recognized related stock-based
compensation expense for this restricted stock award.




As of
March 31, 2009, $196 of total unrecognized compensation cost related to stock
options is expected to be recognized over a weighted-average period of 1.9
years.  This estimate does not include the impact of other possible
stock-based awards that may be made during future periods.




Note
4 — Subsequent events




The
Company recently received a notice requiring repayment of all amounts
potentially due under a loan and a grant agreement with the State of Maryland
that total $705 at March 31, 2009.  The Company has recorded the
amounts due under the loan and grant agreement within current portion of
long-term debt and other accrued expenses.  The Company is in
discussions with the State of Maryland concerning the terms of potential
repayment of this amount.




In the
second quarter of 2009, the Company will close its Gaithersburg, Maryland
facility and expects to record a non-cash accelerated lease expense and
write-down of leasehold improvements and other related assets of approximately
$900.





9.





Item 2.       Management’s
Discussion and Analysis of Financial Condition and Results of
Operations




This
Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements
regarding future events and the future results of Ore Pharmaceuticals Inc. (“Ore
Pharmaceuticals”) that are based on current expectations, estimates, forecasts
and projections about the industries in which Ore Pharmaceuticals operates and
the beliefs and assumptions of the management of Ore Pharmaceuticals. Words such
as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” variations of such words, and similar
expressions are intended to identify such forward-looking statements. These
forward-looking statements are only predictions and are subject to risks,
uncertainties and assumptions. Therefore, actual results may differ materially
and adversely from those expressed in any forward-looking statements. Factors
that might cause or contribute to such differences include those discussed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
under the section entitled “Risk Factors” and in our subsequent filings with the
United States Securities and Exchange Commission (“SEC”). Ore Pharmaceuticals
undertakes no obligation to revise or update publicly any forward-looking
statements to reflect any change in management’s expectations with regard
thereto or any change in events, conditions, or circumstances on which any such
statements are based.




Unless the
context otherwise requires, references in this Form 10-Q to “Ore
Pharmaceuticals,” “DioGenix,” the “Company,” “we,” “us,” and “our” refer to Ore
Pharmaceuticals Inc. and its formerly wholly owned subsidiary, DioGenix
Inc.




Overview




We are a
drug asset development company with a focus on acquiring and developing
clinical-stage drug candidates that have already undergone substantial safety
testing in humans.  By restricting our development focus to compounds
with prior evidence of a favorable safety profile in human testing, we believe
we may have a higher probability of development success, since safety issues are
the most common technical reasons for failure in clinical trials.




We
currently have three compounds in our development pipeline:  ORE1001
(formerly known as GL1001), our lead candidate, ORE5002 (tiapamil) and ORE5007
(romazarit).  Each of these candidates has been successfully tested
for safety in humans in at least one Phase I clinical study.  We are
currently in negotiations to secure rights to develop additional compounds to
expand and diversify our pipeline; however, there can be no assurances that we
will be able to conclude these transactions.




In
December 2008, we completed a multiple ascending dose human tolerability Phase I
clinical trial for ORE1001.  Results of that trial showed that the
drug candidate was well tolerated, with no serious adverse effects
observed.  We plan to begin a Phase Ib/IIa clinical trial for ORE1001,
which is expected to begin mid 2009 and to be completed in mid to late
2010.  Successful completion of this clinical trial should enable us
to either outlicense the compound on terms more favorable to us or attract
additional financing.  However, there can be no assurance that we will
be able to do so.  We also plan to continue to exploit our portfolio
of other drug candidates.




We continue
to actively explore a variety of commercial and financial arrangements
to further fund the long-term development of these compounds and of
our business.




Our Common
Stock is currently below the NASDAQ listing requirement of $1.00 price, but
NASDAQ has temporarily suspended the listing requirement through at least July
19, 2009.




We have
incurred net losses in each year since our inception, including losses of $22.5
million in 2008 and $34.7 million in 2007.  At March 31, 2009, we had
an accumulated deficit of $376.0 million.  Our losses have resulted
principally from costs incurred from the businesses we sold and the development
of our drug development business.  We expect to incur additional
losses in the future.




Results
of Operations




Three
Months Ended March 31, 2009 and 2008




Revenue.  We
had no revenue for the three months ended March 31, 2009 compared to $0.8
million for the three months ended March 31, 2008.  During the three
months ended March 31, 2008, our revenue resulted from a licensing agreement for
certain technology unrelated to our core drug asset development
business.




Research
and Development Expense. Research and development expenses, which now
consist almost entirely of costs associated with the further development of
ORE1001, decreased to $0.9 million for the three months ended March 31, 2009
from $2.8 million for the same period in 2008.  The decrease is
primarily a result of lower employee and facility-related costs due to our
significant workforce reductions.  For 2009, we expect a significant
decrease in research and development expenses over 2008, primarily as a result
of workforce reductions.




Selling,
General and Administrative Expense. Selling, general and administrative
expenses, which now consist primarily of  accounting, legal, human
resources and other general corporate expenses, decreased to $2.3 million for
the three months ended March 31, 2009 from $5.2 million for the same period in
2008 primarily as a result of lower employee and facility-related costs due to
our significant workforce reductions, reduced professional fees relating to
strategic planning and the absence of $0.5 million in accelerated lease costs
and $0.4 million of expense related to the purchase of shares from a former
director that occurred in 2008.  For 2009, we expect a significant
decrease in selling, general and administrative expenses over 2008, primarily as
a result of workforce reductions.




10.




Net
Interest Income. Net interest income decreased to $0.1 million for the
three months ended March 31, 2009 from $0.3 million for the same period in 2008,
due to the decline in the balance of our cash and cash equivalents and
marketable securities available-for-sale and a decrease in our rates of return
on investments.




Liquidity
and Capital Resources




Historically,
we have financed our operations through the issuance and sale of equity
securities, payments from customers and sales of parts of our business and
assets from time to time.  As of March 31, 2009, we had approximately
$7.1 million in cash and cash equivalents, compared to $10.8 million as of
December 31, 2008.




Net cash
from operating activities increased to a negative $3.6 million for the three
months ended March 31, 2009 from a negative $6.6 million for the same period in
2008, primarily due to our reduced net loss for the three months ended March 31,
2009.  Based on current expectations of cash usage and collection of
outstanding notes, we presently anticipate that we will have sufficient cash to
initiate and complete the Phase Ib/IIa clinical trial for ORE1001, which is
expected to begin mid 2009 and to be completed in mid to late
2010.  We currently expect our cash usage for the second quarter of
2009 to be similar to that of the first quarter (not taking into account the
collection of the Ocimum $3.0 million promissory note that is due June
2009).  We also expect our cash usage for the second half of 2009 to
be significantly lower than the first half.




For the
three months ended March 31, 2009, our investing activities were not
significant.




In
connection with the 2008 sale of DioGenix Inc. to Nerveda, Inc., the balance of
the purchase price is due pursuant to a $0.8 million interest bearing promissory
note, with receipt of two principal payments of $0.4 million plus interest due
December 2009 and June 2010, subject to acceleration in certain
events.




In 2008,
we assigned our lease in Cambridge, Massachusetts, but remain liable under the
lease in the event of the assignee’s default.  The lease expires in
August 2013 and at March 31, 2009, the total remaining amounts due under the
lease for the balance of the term is $5.0 million.




In
connection with the 2007 sale of the assets of our Genomics Division to Ocimum
Biosolutions, Inc. (“Ocimum”), the balance of the sales price is due pursuant to
a $3.0 million non-interest bearing promissory note due June
2009.  Ocimum also assumed the lease obligations of our former
Genomics laboratory and office facility, but we remain liable under the lease in
the event of Ocimum’s default.  Our liability expires for obligations
under the lease in February 2011, and at March 31, 2009, we could be liable for
amounts due under the lease that total $2.0 million.  Ocimum has
deposited $0.8 million in escrow to partially secure both Ocimum’s performance
under the lease and payment of the note.




In
connection with the 2006 sale of our Preclinical Division to Bridge
Pharmaceuticals, Inc. (“Bridge”), less than $0.1 million of the sales price
remains in escrow pending resolution between the parties.  We continue
to guarantee two leases now held by Bridge.  The leases expire in
February 2011 and December 2013 and at March 31, 2009, the total remaining
amounts due under the leases for the balance of the terms is $1.1 million and
$3.4 million, respectively.




Our
financing activities for the three months ended March 31, 2008 consisted of the
purchase of shares from a former director for $3.0 million.




We
recently received a notice requiring repayment of all amounts potentially due
under a loan and a grant agreement with the State of Maryland that total $0.7
million.  We have recorded the amounts due under the loan and grant
agreement within current portion of long-term debt and other accrued
expenses.  We are in discussions with the State of Maryland concerning
the terms of potential repayment of this amount.




We believe
that existing cash and cash equivalents, the anticipated receipt of $3.0 million
and $0.8 million relating to the promissory notes from Ocimum and Nerveda,
respectively, and our ongoing realignment and cash conservations efforts, will
enable us to support our operations through mid to late 2010, including
completion of the Phase Ib/IIa clinical trial for ORE1001, which is expected to
be completed in mid to late 2010.  However, there can be no assurance
that we will be successful in our continuing realignment and cash conservation
efforts, the full collection of our outstanding notes receivable or, if
necessary, attracting additional financing to allow us to complete the clinical
trial.  Furthermore, there is no assurance if we complete our clinical
trial, that the results will be satisfactory or will enable us to successfully
outlicense our compound.  If we are not successful in achieving our
objectives, it might be necessary to liquidate the Company in late
2010.  We currently expect long-term support of our operations to come
from possible future financings and payments from commercial arrangements from
our pipeline of drug candidates.  These estimates are forward-looking
statements that involve risks and uncertainties.  Our actual future
capital requirements and the adequacy of our available funds will depend on
those factors discussed above and in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008 under the section entitled “Risk Factors”
and in our subsequent filings with the SEC.




11.




Recently
Issued Accounting Pronouncements




In
February 2008, the Financial Accounting Standards Board (“FASB”) issued a
one-year deferral for non-financial assets and liabilities to comply with
SFAS No. 157, “Fair Value Measurements”
(“SFAS No. 157”).  We adopted SFAS No. 157 for
financial assets and liabilities effective January 1, 2008.  We
adopted SFAS No. 157 as it pertains to non-financial assets and
liabilities effective January 1, 2009 and the adoption had no impact on our
financial position or results of operations.





In
December 2007, the FASB issued SFAS No. 141 Revised, “Business Combinations”
(“SFAS 141R”).  SFAS 141R requires an acquirer to determine the fair
value of the consideration exchanged as of the acquisition date (i.e. the date
the acquirer obtains control).  Previously, an acquisition was valued
as of the date the parties agreed upon the terms of the
transaction.  SFAS 141R also modifies, among other things, the
accounting for direct costs associated with an acquisition, contingencies
acquired and contingent consideration.  We adopted SFAS 141R effective
January 1, 2009 for business combinations occurring after the effective
date.




In
December 2007, the FASB ratified Emerging Issues Task Force No. 07-1,
“Accounting for Collaborative Agreements” (“EITF 07-1”).  EITF 07-1
provides guidance regarding financial statement presentation and disclosure of
collaborative arrangements, as defined therein.  We adopted EITF 07-1
effective January 1, 2009 and the adoption had no impact on our financial
position or results of operations.




Item 4.         Controls and
Procedures




Evaluation
of Disclosure Controls and Procedures




As of March 31, 2009, under
the supervision and with the participation of our management, including the
Chief Executive Officer (“CEO”) and former Chief Financial Officer (“CFO”), an
evaluation was performed of the effectiveness of the design and operation of our
“disclosure controls and procedures” (“Disclosure Controls”).  These
are controls and procedures designed to reasonably assure that information
required to be disclosed in our reports filed under the Exchange Act, such as
this Form 10-Q, is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC.  Disclosure
Controls are also designed to reasonably assure that such information is
accumulated and communicated to our management, including the CEO and CFO as
appropriate, to allow timely decisions regarding required
disclosure.  Based on that evaluation, our CEO and CFO have concluded
that, as of March 31, 2009, our disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified by the SEC, and that material
information relating to us is made known to management, including the CEO and
CFO, particularly during the period when our periodic reports are being
prepared.




Our
management, including the CEO and CFO, does not expect that our Disclosure
Controls or our internal control over financial reporting will prevent or detect
all errors and all instances of fraud.  A control system, no matter
how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met.  The
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs.  Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within the Company have been
detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because
of simple error or mistake.  Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls.  The design of any system of
controls is based, in part, on certain assumptions about the likelihood of
future events and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future
conditions.  Projections of any evaluation of the effectiveness of
controls to future periods are subject to risks.  Over time, controls
may become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures.




Changes
in Internal Control Over Financial Reporting




There were
no changes in our internal controls over financial reporting during the first
quarter of 2009 that materially affected or are reasonably likely to materially
affect our internal controls over financial reporting.






PART
II              
OTHER INFORMATION




Item 1.       Legal
Proceedings




We are not
currently a party to any material legal proceedings.




Item 2.       Unregistered Sales
of Equity Securities and Use of Proceeds




None.




12.




Item 3.       Defaults Upon Senior
Securities




None.




Item 4.       Submission of
Matters to a Vote of Security Holders




None.




Item 5.       Other
Information




None.




Item
6.       Exhibits




*10.58c
                                                    Executive
      Employment Agreement, dated as of December 31, 2008, between Registrant
      and Philip L. Rohrer, Jr. (1)*10.95a
                                                    Form
      of Amendment to Employment Agreement for Employment Agreements between
      Registrant and Charles L. Dimmler, III, Stephen Donahue, Philip L. Rohrer,
      Jr. and F. Dudley Staples. (2)*10.105
                                                    Letter
      Agreement, dated February 26, 2009, between Registrant and Mark J.
      Gabrielson. (3)*10.108
                                                    Professional
      Services Agreement, dated February 26, 2009, between Registrant and F.
      Dudley Staples.*10.109
                                                    Employment
      Agreement, as amended, dated July 23, 2007, between Registrant and Stephen
      Donahue.*10.110
                                                    Professional
      Services Agreement, dated March 25, 2009, between Registrant and Philip L.
      Rohrer, Jr.31
                                                    Certifications
      pursuant to Rule 13a-14(a)/15d-14(a).32
                                                    Certifications
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.__________________________*
                                                    Indicates
      management compensatory plan, contract or
  arrangement.




(1)
                                                                        Filed
      as an exhibit to Registrant’s Current Report on Form 8-K with respect to
      the Company’s employment of Phillip L. Rohrer, Jr., filed on January 15,
      2009, and incorporated herein by reference.(2)
                                                                        Filed
      as an exhibit to Registrant’s Current Report on Form 8-K with respect to
      amendments to certain agreements to comply with Section 409A of the
      Internal Revenue Code of 1986, as amended, filed on October 2, 2008, and
      incorporated herein by reference.(3)
                                                                        Filed
      as an exhibit to Registrant’s Current Report on Form 8-K with respect to
      the Company’s employment of Mark J. Gabrielson, filed on March 3, 2009,
      and incorporated herein by
reference.


13.




SIGNATURES






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





ORE
      PHARMACEUTICALS INC.Date:
                                                                      May
      15, 2009
                                                                      
                                                                      By:
                                                                      /s/
      Mark J. GabrielsonMark
      J. GabrielsonPresident
      and Chief Executive Officer(Principal
      Executive and Financial Officer)




14.