##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission File No. 0-50772
 INHIBITEX, INC.
  Delaware
    
    74-2708737(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)9005 Westside ParkwayAlpharetta, Georgia
    
    30009(Address of principal executive offices)
    
    (Zip Code)
 (678) 746-1100   Not Applicable
 þ o
 Rule 12b-2
 Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ
 o þ




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TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 4T. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 6. Exhibits
    
    
    25Signatures
    
    
    26Exhibit Index
    
    
    27Exhibit 31.1Exhibit 32.1
   2




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##### Table of Contents



PART I
FINANCIAL INFORMATION
 INHIBITEX, INC.
 
 CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,766,307
    
    
    $
    14,178,143Short-term investments
    
    
    25,011,452
    
    
    
    36,088,309Prepaid expenses and other current assets
    
    
    713,739
    
    
    
    1,058,426Accounts receivable
    
    
    192,659
    
    
    
    44,988Total current assets
    
    
    37,684,157
    
    
    
    51,369,866Property and equipment, net
    
    
    2,285,344
    
    
    
    2,564,345Other assets
    
    
    7,969
    
    
    
    Total assets
    
    $
    39,977,470
    
    
    $
    53,934,211LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    915,362
    
    
    $
    1,160,351Accrued expenses
    
    
    1,717,407
    
    
    
    6,605,253Current portion of notes payable
    
    
    312,500
    
    
    
    312,500Current portion of capital lease obligations
    
    
    314,946
    
    
    
    698,151Current portion of deferred revenue
    
    
    566,667
    
    
    
    441,667Other current liabilities
    
    
    210,932
    
    
    
    154,824Total current liabilities
    
    
    4,037,814
    
    
    
    9,372,746Long-term liabilities:Notes payable, net of current portion
    
    
    468,750
    
    
    
    703,125Capital lease obligations, net of current portion
    
    
    259,023
    
    
    
    68,710Deferred revenue, net of current portion
    
    
    275,000
    
    
    
    387,500Other liabilities, net of current portion
    
    
    1,347,429
    
    
    
    1,202,328Total long-term liabilities
    
    
    2,350,202
    
    
    
    2,361,663Total liabilities
    
    
    6,388,016
    
    
    
    11,734,409Stockholders equity:Preferred stock, $.001 par value; 5,000,000
shares authorized at September 30, 2008 and
December 31, 2007; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 75,000,000 shares
authorized at September 30, 2008 and December
31, 2007; 43,336,803 and 42,785,318 shares
issued and outstanding at September 30, 2008 and
December 31, 2007, respectively
    
    
    43,337
    
    
    
    42,785Warrants
    
    
    15,548,773
    
    
    
    15,551,492Accumulated other comprehensive (loss) income
    
    
    (33,777
    )
    
    
    106,480Additional paid-in capital
    
    
    241,778,300
    
    
    
    240,634,018Accumulated deficit
    
    
    (223,747,179
    )
    
    
    (214,134,973
    )Total stockholders equity
    
    
    33,589,454
    
    
    
    42,199,802Total liabilities and stockholders equity
    
    $
    39,977,470
    
    
    $
    53,934,211
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INHIBITEX, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:License fees and milestones
    
    $
    412,500
    
    
    $
    412,500
    
    
    $
    1,237,500
    
    
    $
    1,237,500Collaborative research and
development
    
    
    375,000
    
    
    
    250,000
    
    
    
    1,125,000
    
    
    
    750,000Grants and other revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,500Total revenue
    
    
    787,500
    
    
    
    662,500
    
    
    
    2,362,500
    
    
    
    2,016,000Operating expense:Research and development
    
    
    3,468,184
    
    
    
    35,798,427
    
    
    
    8,982,333
    
    
    
    39,043,464General and administrative
    
    
    1,519,205
    
    
    
    1,581,888
    
    
    
    4,083,112
    
    
    
    4,849,952Total operating expense
    
    
    4,987,389
    
    
    
    37,380,315
    
    
    
    13,065,445
    
    
    
    43,893,416Loss from operations
    
    
    (4,199,889
    )
    
    
    (36,717,815
    )
    
    
    (10,702,945
    )
    
    
    (41,877,416
    )Other income (loss), net
    
    
    5,077
    
    
    
    (31
    )
    
    
    19,557
    
    
    
    1,944,548Interest income, net
    
    
    239,280
    
    
    
    645,085
    
    
    
    1,071,182
    
    
    
    1,997,990Net loss
    
    $
    (3,955,532
    )
    
    $
    (36,072,761
    )
    
    $
    (9,612,206
    )
    
    $
    (37,934,878
    )Basic and diluted net loss per share
    
    $
    (0.09
    )
    
    $
    (1.12
    )
    
    $
    (0.22
    )
    
    $
    (1.22
    )Weighted average shares used to
compute basic and diluted net loss
per share
    
    
    43,273,487
    
    
    
    32,170,657
    
    
    
    42,992,372
    
    
    
    31,168,994
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INHIBITEX, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months EndedSeptember 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (9,612,206
    )
    
    $
    (37,934,878
    )Adjustments to reconcile net loss to net cash
used in operating activities:In-process research and development
    
    
    (129,251
    )
    
    
    32,575,273Depreciation and amortization
    
    
    737,491
    
    
    
    790,711Share-based compensation
    
    
    1,252,338
    
    
    
    1,487,828(Gain) loss on sale of equipment
    
    
    (24,439
    )
    
    
    1,538Amortization of investment premium or discount
    
    
    (555,607
    )
    
    
    (1,096,357
    )Changes in operating assets and liabilities:Prepaid expenses and other assets
    
    
    343,777
    
    
    
    27,328Accounts receivable
    
    
    (147,671
    )
    
    
    (105,859
    )Accounts payable and other liabilities
    
    
    27,690
    
    
    
    (459,435
    )Accrued expenses
    
    
    (4,678,317
    )
    
    
    (866,550
    )Deferred revenue
    
    
    12,500
    
    
    
    887,500Net cash used in operating activities
    
    
    (12,773,695
    )
    
    
    (4,692,901
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (464,281
    )
    
    
    (23,834
    )Proceeds from sale of property and equipment
    
    
    30,230
    
    
    
    Purchases of investments
    
    
    (33,757,870
    )
    
    
    (60,690,948
    )Proceeds from maturities and sales of investments
    
    
    45,250,077
    
    
    
    65,998,000Cash paid in connection with previous acquisition
    
    
    (151,748
    )
    
    
    (2,273,202
    )Net cash provided by investing activities
    
    
    10,906,408
    
    
    
    3,010,016Cash flows from financing activities:Proceeds from capital lease financing
    
    
    368,121
    
    
    
    Payments on promissory notes and capital leases
    
    
    (795,388
    )
    
    
    (1,049,583
    )Proceeds from the issuance of common stock
    
    
    13,301
    
    
    
    74,754Repurchase of common stock
    
    
    (130,583
    )
    
    
    Net cash used in financing activities
    
    
    (544,549
    )
    
    
    (974,829
    )Decrease in cash and cash equivalents
    
    
    (2,411,836
    )
    
    
    (2,657,714
    )Cash and cash equivalents at beginning of period
    
    
    14,178,143
    
    
    
    19,681,861Cash and cash equivalents at end of period
    
    $
    11,766,307
    
    
    $
    17,024,147Supplemental cash flow information:Interest paid
    
    $
    44,514
    
    
    $
    116,254Supplemental non-cash investing activities:Assets and liabilities assumed by acquisition:Prepaid expenses and other current assets
    
    $
    
    
    
    $
    23,009Property and equipment, net
    
    
    
    
    
    
    3,600Other assets
    
    
    
    
    
    
    43,890Accounts payable
    
    
    
    
    
    
    870,754Accrued expenses
    
    
    
    
    
    
    277,307
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INHIBITEX, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Operations
  ® taphylococcus aureus
 
 2. Summary of Significant Accounting Policies
  Recent Accounting Pronouncements. Fair Value Measurements The
Fair Value Option for Financial Assets and Financial Liabilities"
 Business Combinations
 The Hierarchy of Generally Accepted Accounting Principles, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
  6




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3. Net Loss Per Share
 Earnings Per Share Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (3,955,532
    )
    
    $
    (36,072,761
    )
    
    $
    (9,612,206
    )
    
    $
    (37,934,878
    )Weighted average common shares outstanding used
to
compute basic earnings per share
    
    
    43,273,487
    
    
    
    32,170,657
    
    
    
    42,992,372
    
    
    
    31,168,994Dilutive effect of:Stock options and restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used to compute diluted earnings per share
    
    
    43,273,487
    
    
    
    32,170,657
    
    
    
    42,992,372
    
    
    
    31,168,994Basic and diluted net loss per share
    
    $
    (0.09
    )
    
    $
    (1.12
    )
    
    $
    (0.22
    )
    
    $
    (1.22
    )Number of anti-dilutive stock options and
restricted stock excluded from computation
    
    
    4,966,762
    
    
    
    5,923,697
    
    
    
    4,966,762
    
    
    
    5,923,697Number of anti-dilutive warrants excluded from
computation
    
    
    8,557,288
    
    
    
    8,535,097
    
    
    
    8,557,288
    
    
    
    8,535,097
 4. Acquisition
    7




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Fair value of Inhibitex common stock issued
    
    $
    18,924,279Fair value of FermaVir stock options and stock warrants assumed
    
    
    9,212,033Transaction and exit costs
    
    
    1,816,728Cash advance consideration as note receivable
    
    
    1,500,000Total purchase price
    
    $
    31,453,040
 Goodwill and Other Intangible Assets
  Cash and cash equivalents
    
    $
    68,953Prepaid expenses and other current assets
    
    
    23,009Property and equipment, net
    
    
    3,600Other assets
    
    
    43,890Accounts payable
    
    
    (870,754
    )Accrued expenses
    
    
    (256,116
    )Net fair value of acquired assets and liabilities
    
    
    (987,418
    )In-process research and development
    
    
    32,440,458Total purchase price
    
    $
    31,453,040
 Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business,
  Pro
Forma Results of Operations
  (Unaudited)
    
    
    (Unaudited)Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    787,500
    
    
    $
    662,500
    
    
    $
    2,362,500
    
    
    $
    2,016,000Operating expenses
    
    $
    4,987,389
    
    
    $
    38,118,465
    
    
    $
    13,065,445
    
    
    $
    48,115,936Net loss
    
    $
    (3,955,532
    )
    
    $
    (36,833,113
    )
    
    $
    (9,612,206
    )
    
    $
    (49,614,136
    )Basic and diluted net loss per common share
    
    $
    (0.09
    )
    
    $
    (0.87
    )
    
    $
    (0.22
    )
    
    $
    (1.18
    )
  8




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5. Stockholders Equity
 Common Stock Warrants.
  6. Share-Based Award Plans
  Stock Options
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average risk-free interest rate
    
    
    3.12
    %
    
    
    4.19
    %
    
    
    2.72
    %
    
    
    4.22
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected weighted average volatility
    
    
    .67
    
    
    
    .71
    
    
    
    .68
    
    
    
    .71Expected weighted average life of options (years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Weighted average fair value of options granted
    
    $
    0.33
    
    
    $
    0.81
    
    
    $
    0.43
    
    
    $
    0.81
  Weighted Average
    
    
    Weighted-Average
    
    
    Aggregate IntrinsicNumber of
    
    
    Exercise Price
    
    
    Remaining Contractual
    
    
    ValueStock Options
    
    
    Per Option
    
    
    Term
    
    
    ($000)Balance at December
31, 2007
    
    
    4,958,131
    
    
    $
    2.35Granted
    
    
    121,500
    
    
    $
    0.81Exercised
    
    
    (6,303
    )
    
    $
    0.68Forfeited or expired
    
    
    (246,566
    )
    
    $
    2.01Balance at September
30, 2008
    
    
    4,826,762
    
    
    $
    2.33
    
    
    
    6.27
    
    
    $
    3
  9




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Restricted Stock
  Weighted-AverageGrant Date FairShares
    
    
    ValueBalance at December 31, 2007
    
    
    902,959
    
    
    $
    1.83Granted
    
    
    
    
    
    
    Released
    
    
    (762,959
    )
    
    $
    1.84Forfeited
    
    
    
    
    
    
    Balance at September 30, 2008
    
    
    140,000
    
    
    $
    1.76
  7. Contingency
     10




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8. Capital Leases
  9. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (3,955,532
    )
    
    $
    (36,072,761
    )
    
    $
    (9,612,206
    )
    
    $
    (37,934,878
    )Change in net
unrealized (losses)
gains on
investments
    
    
    (40,129
    )
    
    
    54,417
    
    
    
    (140,257
    )
    
    
    61,951Comprehensive loss
    
    $
    (3,995,661
    )
    
    $
    (36,018,344
    )
    
    $
    (9,752,463
    )
    
    $
    (37,872,927
    )
 10. Fair Value Measurements
 Fair Value Measurements"
 Level 1
    
    Quoted prices in active markets for identical assets or
liabilities. Our Level 1 assets and liabilities include
investments in marketable securities and cash equivalents.Level 2
    
    Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities.Level 3
    
    Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
  11




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Quoted prices inactive markets for
    
    
    Significant other
    
    
    Significantidentical assets
    
    
    observable inputs
    
    
    unobservable inputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents (1)
    
    $
    10,746,761
    
    
    $
    10,746,761
    
    
    $
    
    
    
    $
    Short-term investments available-for-sale (2)
    
    
    25,011,452
    
    
    
    25,011,452
    
    
    
    
    
    
    
    Total
    
    $
    35,758,213
    
    
    $
    $35,758,213
    
    
    $
    
    
    
    $
    
 (1)
    
    Cash equivalents consist primarily of money market funds,
corporate notes and commercial paper securities with
original maturity dates of three months or less, for which
we determine fair value through quoted market prices.(2)
    
    Investments available-for-sale consists of corporate notes
and government agency notes, for which we determine fair
value through quoted market prices.  12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. In some cases,
you can identify forward-looking statements by terms such as may, will, should, could,
would, expect, plan, intend, anticipate, believe, estimate, project, predict,
forecast, potential, likely or possible, as well as the negative of such expressions, and
similar expressions intended to identify forward-looking statements. These forward-looking
statements include, without limitation, statements relating to:
 
    
    The timing and the anticipated completion of a Phase I trial evaluating multiple ascending doses of FV-100 and
initiating a FV-100 Phase II trial in shingles patients in the first quarter of 2009;
    
    our plans and the length of time it may take to identify lead a candidate for our HCV polymerase inhibitor program;
    
    our intent to pursue licenses, co-development, collaborations or other transactions to support the further
development of Aurexis;
    
    our plans to support our existing collaborations;
    
    the number of months that our current cash, cash equivalents, short-term and long-term investments will allow us
to operate;
    
    our future financing requirements, the factors that may influence the timing and amount of these requirements, and
how we expect to fund them;
    
    potential future revenue from collaborative research agreements, partnerships, license agreements or materials
transfer agreements;
    
    and anticipated future and increased losses from operations.
 These statements reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties including, without limitation: our ongoing or
future preclinical studies or clinical trials demonstrating the appropriate safety and efficacy
of our product candidates; our ability to obtain timely regulatory approval to advance our
product candidates; or failure to obtain regulatory approval to commence or continue our
clinical trials for safety or other reasons; achieving satisfactory results of ongoing lead
optimization activities and future preclinical studies supporting the selection of lead
candidates for our HCV program; our ability to secure and our use of third-party contract
clinical and preclinical research and data management organizations; our manufacturers
fulfilling their contractual obligations or otherwise performing satisfactorily in the future;
manufacturing and maintaining sufficient on hand quantities of preclinical and clinical trial
material on hand to complete our preclinical studies or clinical trials on a timely basis; our
ability enroll patients in clinical trials in a timely manner;3M Company or Wyeth not
terminating our license and collaborative research agreements; our maintaining sufficient
resources, including executive management and key employees; our ability to successfully develop
current and future product candidates either in collaboration with a partner or independently;
our ability to obtain, protect and
  13




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maintain
our intellectual property rights for our product
candidates from unauthorized use by other or not infringe on the intellectual property rights of
other third parties; our collaborators fulfilling their obligations under our agreements with
them in the future; our ability to attract suitable organizations to collaborate on the
development and commercialization of our product candidates; the condition of the financial
equity and debt markets and our ability to raise sufficient funding in such markets; our ability
to manage our expenses, revenues and cash reserves as planned; changes in general economic
business or competitive conditions; and other statements contained elsewhere in this Quarterly
Report on Form 10-Q and risk factors described in or referred to in greater detail in the Risk
Factors section of Form 10-K for the year ended December 31, 2007 and in the Risk Factors
section of Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008. There may be
events in the future that we are unable to predict accurately, or over which we have no control.
You should read this Form 10-Q and the documents that we reference herein and have been filed or
incorporated by reference as exhibits completely and with the understanding that our actual
future results may be materially different from what we expect. Our business, financial
condition, results of operations, and prospects may change. We may not update these
forward-looking statements, even though our situation may change in the future, unless we have
obligations under the federal securities laws to update and disclose material developments
related to previously disclosed information. We qualify all of the information presented in this Form 10-Q , and particularly our
forward-looking statements, by these cautionary statements.
 Inhibitex ® , MSCRAMM ® and Aurexis ® are registered trademarks of
Inhibitex, Inc. MSCRAMM is an acronym for Microbial Surface Components Recognizing Adhesive Matrix
Molecules
 The following discussion should be read in conjunction with the financial statements and the notes
thereto included in Item 1 of this Quarterly Report on Form 10-Q .
 Overview
  ® taphylococcus aureus
     14




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Recent Developments
 FV-100 
  
    
    All doses of FV-100 were generally well tolerated;
    
    All doses of FV-100 produced CF-1743 plasma levels that exceeded the EC50 (as measured
in cell culture) for > 24 hours;
    
    A high fat meal prior to dosing significantly reduced the plasma concentration of
CF-1743; however, administration of FV-100 with a low fat meal did not affect the PK of
CF-1743; and
    
    Additional clinical studies were warranted to evaluate the PK safety of FV-100 following
multiple doses.
 NASDAQ Listing 
  Settlement of Litigation with Nabi Biopharmaceuticals
 Critical Accounting Policies
   
    
    Revenue Recognition
    
    Accrued Expenses
    
    Share-based Compensation
  15




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Fair Value
Measurements The Fair Value Option for Financial Assets and Financial
Liabilities" Business Combinations" Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB
No. 51" Disclosures about Derivative Instruments and Hedging Activities" The Hierarchy of Generally Accepted Accounting Principles.
 Results of Operations
 Three Months Ended September 30, 2008 and 2007
 Summary.
 Revenue.
 Research and Development Expense.
 September 30,2008
    
    
    2007(In millions)In-process research and development expenses
    
    $
    (0.1
    )
    
    $
    32.6Preclinical, clinical and manufacturing-related expenses
    
    
    1.5
    
    
    
    0.1Salaries, benefits and share-based compensation expenses
    
    
    0.9
    
    
    
    0.9License fees, patent-related legal fees and other expenses
    
    
    0.6
    
    
    
    1.6Depreciation and facility related expenses
    
    
    0.6
    
    
    
    0.6Total research and development expense
    
    $
    3.5
    
    
    $
    35.8
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General and Administrative Expense.
 September 30,2008
    
    
    2007(In millions)Professional and legal fees
    
    $
    0.2
    
    
    $
    0.3Salaries, benefits and share-based compensation expense
    
    
    0.6
    
    
    
    0.9Other expenses
    
    
    0.3
    
    
    
    0.3Depreciation and facility-related expenses
    
    
    0.4
    
    
    
    0.1Total general and administrative expense
    
    $
    1.5
    
    
    $
    1.6
  Nine Months Ended September 30, 2008 and 2007
 Summary.
 Revenue.
 Research and Development Expense.
 September 30,2008
    
    
    2007(In millions)In-process research and development expenses
    
    $
    (0.1
    )
    
    $
    32.6Clinical, preclinical and manufacturing-related expenses
    
    
    2.4
    
    
    
    0.1Salaries, benefits and share-based compensation expenses
    
    
    3.1
    
    
    
    2.5License fees, patent-related legal fees and other expenses
    
    
    1.9
    
    
    
    2.2Depreciation and facility related expenses
    
    
    1.7
    
    
    
    1.6Total research and development expense
    
    $
    9.0
    
    
    $
    39.0
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General and Administrative Expense.
 September 30,2008
    
    
    2007(In millions)Professional and legal fees
    
    $
    0.9
    
    
    $
    0.8Salaries, benefits and share-based compensation expense
    
    
    1.8
    
    
    
    2.7Other expenses
    
    
    0.9
    
    
    
    1.0Depreciation and facility-related expenses
    
    
    0.5
    
    
    
    0.4Total general and administrative expense
    
    $
    4.1
    
    
    $
    4.9
  Other Income (Loss), net .
 Liquidity and Capital Resources
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
    
    any changes in our strategy in the future;
    
    our development plans of our product candidates;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may enter into;
    
    the timing and costs and the variability thereof, associated with conducting preclinical studies;
    
    the cost of manufacturing clinical and preclinical trial materials for our product candidates;
    
    the timing and costs and the variability thereof, associated with conducting clinical trials and
preclinical studies, the rate of enrollment in such trials or studies and the results of these
trials or studies;
    
    the cost and the time it takes to obtain the regulatory approvals required to advance the
development of our programs or product candidates;
    
    the number of product candidates we may advance into clinical development or preclinical studies;
    
    future payments we may receive or make under existing or future license or collaboration
agreements if any and assuming existing agreements continue;
    
    whether we obtain additional preclinical or clinical-stage product candidates or programs through
future in-licensing or acquisition;
    
    the cost to maintain a corporate infrastructure to support being a publicly-traded company; and
    
    the cost of filing, prosecuting, and enforcing patent and other intellectual property claims.
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ITEM 4T. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
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PART II
OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
 You should carefully consider the following discussion of risks, together with the other
information contained in this Form 10-Q . The occurrence of any of the following risks could
materially harm our business, our ability to continue to operate our business, our financial
condition, or our ability to raise additional capital in the future or ever become profitable. In
that event, the market price of our common stock could decline and you could lose part or all of
your investment. The Risk Factors included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2007 and the Companys Quarterly Reports on Form 10-Q for the periods ended
March 31, 2008 and June 30, 2008 have not materially changed, except as set forth below.
 Risks Relating to our Development of our Product Candidates
 All of our product candidates are still in the early stages of development and remain subject to
numerous preclinical studies, clinical testing and regulatory approval. If we are unable to
successfully develop our product candidates, our business will be materially harmed.
   
    
    offer therapeutic or other benefits over existing, comparable drugs;
    
    be proven safe and effective in clinical trials or preclinical studies;
    
    have the desired effects or may include undesirable effects or the
drug candidates may have other unexpected characteristics;
    
    meet applicable regulatory standards;
    
    be capable of being produced in commercial quantities at acceptable costs; or
    
    be successfully commercialized by us or by our collaborators.
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In order to develop our product candidates, we expect that we will need to raise additional capital
in the future, which may not be available to us on acceptable terms, if at all.
  
    
    any changes in our strategy in the future;
    
    our development plans of our product candidates;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may enter into;
    
    the timing and costs and the variability thereof, associated with conducting preclinical studies;
    
    the cost of manufacturing clinical and preclinical trial materials for our product candidates;
    
    the timing and costs and the variability thereof, associated with conducting clinical trials and
preclinical studies, the rate of enrollment in such trials or studies and the results of these
trials or studies;
    
    the cost and the time it takes to obtain the regulatory approvals required to advance the
development of our programs or product candidates;
    
    the number of product candidates we may advance into clinical development or preclinical studies;
    
    future payments we may receive or make under existing or future license or collaboration
agreements if any and assuming existing agreements continue;
    
    whether we obtain additional preclinical or clinical-stage product candidates or programs through
future in-licensing or acquisition;
    
    the cost to maintain a corporate infrastructure to support being a publicly-traded company; and
    
    the cost of filing, prosecuting, and enforcing patent and other intellectual property claims.
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Risks Related to Owning Our Common Stock
 We currently do not meet the standards for continued listing on The NASDAQ Capital Market, and we
cannot provide any assurance that we will meet these standards in the future. If we are delisted
from this exchange, the value of your investment may substantially decrease.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
  Maximum NumberTotal Number
    
    
    (or ApproximateOf Shares
    
    
    Dollar Value) ofTotal
    
    
    
    
    
    
    Purchased as
    
    
    Shares That MayNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    under the PlansPurchased
    
    
    per Share
    
    
    or Programs
    
    
    Or ProgramsJuly 1 through July 31
    
    
    79,859
    
    
    $
    0.66
    
    
    
    N/A
    
    
    
    N/AAugust 1 through August 31
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ASeptember 1 through September 30
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    79,859
    
    
    $
    0.66
    
    
    
    N/A
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ITEM 6. EXHIBITS
  Exhibit No.
    
    Description31.1
    
    
    Section 302 Certification of the Chief Executive Officer and Chief Financial Officer
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer
  25




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SIGNATURES
  Date: November 10, 2008
    INHIBITEX, INC/s/ Russell H. PlumbRussell H. PlumbPresident, Chief Executive Officer,
Chief Financial Officer and Chief Accounting
Officer  26




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    Section 302 Certification of the Chief Executive Officer and Chief Financial Officer as
Required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer
  27