##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 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
 Yes o No o
  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. Unaudited Condensed Financial Statements
    
    
    3Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 4T. Controls and Procedures
    
    
    13PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    14Item 6. Exhibits
    
    
    16Signatures
    
    
    17Exhibit Index
    
    
    18EX-31.1 SECTION 302 CERTIFICATION OF THE CEO & CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO & CFO
   2




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ITEM 1. FINANCIAL STATEMENTS
 INHIBITEX, INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,557,326
    
    
    $
    11,290,332Short-term investments
    
    
    25,515,213
    
    
    
    26,625,496Prepaid expenses and other current assets
    
    
    852,235
    
    
    
    831,196Accounts receivable
    
    
    126,985
    
    
    
    61,062Total current assets
    
    
    35,051,759
    
    
    
    38,808,086Property and equipment, net
    
    
    1,502,332
    
    
    
    1,621,392Other assets
    
    
    37,606
    
    
    
    40,290Total assets
    
    $
    36,591,697
    
    
    $
    40,469,768LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,373,157
    
    
    $
    1,590,804Accrued expenses
    
    
    1,741,496
    
    
    
    1,537,637Current portion of notes payable
    
    
    60,764
    
    
    
    78,125Current portion of capital lease obligations
    
    
    212,902
    
    
    
    207,100Current portion of deferred revenue
    
    
    191,667
    
    
    
    191,667Other current liabilities
    
    
    227,386
    
    
    
    202,531Total current liabilities
    
    
    4,807,372
    
    
    
    3,807,864Long-term liabilities:Notes payable, net of current portion
    
    
    486,111
    
    
    
    546,875Capital lease obligations, net of current portion
    
    
    125,335
    
    
    
    180,792Deferred revenue, net of current portion
    
    
    50,000
    
    
    
    87,500Other liabilities, net of current portion
    
    
    1,043,347
    
    
    
    1,096,629Total long-term liabilities
    
    
    1,704,793
    
    
    
    1,911,796Total liabilities
    
    
    6,512,165
    
    
    
    5,719,660Stockholders equity:Preferred stock, $.001 par value; 5,000,000
shares authorized at March 31, 2010 and
December 31, 2009; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 150,000,000
shares authorized at March 31, 2010 and December
31, 2009, respectively; 61,562,606 and
61,559,782 shares issued and outstanding at
March 31, 2010 and December 31, 2009,
respectively
    
    
    61,563
    
    
    
    61,560Warrants
    
    
    12,133,216
    
    
    
    12,133,216Accumulated other comprehensive income (loss)
    
    
    (5,490
    )
    
    
    8,977Additional paid-in capital
    
    
    267,569,613
    
    
    
    267,432,572Accumulated deficit
    
    
    (249,679,370
    )
    
    
    (244,886,217
    )Total stockholders equity
    
    
    30,079,532
    
    
    
    34,750,108Total liabilities and stockholders equity
    
    $
    36,591,697
    
    
    $
    40,469,768
   3




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INHIBITEX, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Revenue:License fees and milestones
    
    $
    749,167
    
    
    $
    37,500Collaborative research and
development
    
    
    250,000
    
    
    
    250,000Total revenue
    
    
    999,167
    
    
    
    287,500Operating expense:Research and development
    
    
    4,789,615
    
    
    
    3,497,060General and administrative
    
    
    1,024,041
    
    
    
    1,071,490Total operating expense
    
    
    5,813,656
    
    
    
    4,568,550Loss from operations
    
    
    (4,814,489
    )
    
    
    (4,281,050
    )Other income (loss), net
    
    
    3,520
    
    
    
    (8,151
    )Interest income, net
    
    
    17,816
    
    
    
    93,518Net loss
    
    $
    (4,793,153
    )
    
    $
    (4,195,683
    )Basic and diluted net loss per share
    
    $
    (0.08
    )
    
    
    (0.10
    )Weighted average shares used to
compute basic and diluted net loss
per share
    
    
    61,561,030
    
    
    
    43,427,976
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INHIBITEX, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (4,793,153
    )
    
    $
    (4,195,683
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    161,908
    
    
    
    191,633Share-based compensation
    
    
    134,835
    
    
    
    178,374Amortization of investment premium or discount
    
    
    158,154
    
    
    
    (25,442
    )Changes in operating assets and liabilities:Prepaid expenses and other assets
    
    
    (18,355
    )
    
    
    63,409Accounts receivable
    
    
    (65,923
    )
    
    
    (48,966
    )Accounts payable and other liabilities
    
    
    753,926
    
    
    
    366,914Accrued expenses
    
    
    203,859
    
    
    
    29,594Deferred revenue
    
    
    (37,500
    )
    
    
    (287,500
    )Net cash used in operating activities
    
    
    (3,502,249
    )
    
    
    (3,727,667
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (42,848
    )
    
    
    Purchases of investments
    
    
    (2,312,338
    )
    
    
    (7,648,611
    )Proceeds from maturities
    
    
    3,250,000
    
    
    
    8,550,000Net cash provided by investing activities
    
    
    894,814
    
    
    
    901,389Cash flows from financing activities:Payments on promissory notes and capital leases
    
    
    (127,780
    )
    
    
    (191,353
    )Repurchase of common stock
    
    
    
    
    
    
    (3,213
    )Proceeds from the issuance of common stock
    
    
    2,209
    
    
    
    Net cash used in financing activities
    
    
    (125,571
    )
    
    
    (194,566
    )Decrease in cash and cash equivalents
    
    
    (2,733,006
    )
    
    
    (3,020,844
    )Cash and cash equivalents at beginning of period
    
    
    11,290,332
    
    
    
    11,507,137Cash and cash equivalents at end of period
    
    $
    8,557,326
    
    
    $
    8,486,293Supplemental cash flow information:Interest paid
    
    $
    10,960
    
    
    $
    19,655
   5




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INHIBITEX, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Operations
     2. Summary of Significant Accounting Policies
 Form 10-Q
  Recent Accounting Pronouncements.
   6




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3. Net Loss Per Share
   Three Months EndedMarch 31,2010
    
    
    2009Net loss
    
    $
    (4,793,153
    )
    
    $
    (4,195,683
    )Weighted average common shares outstanding used to  compute basic and diluted earnings per
share
    
    
    61,561,030
    
    
    
    43,427,976Dilutive effect of:Stock options
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    Shares used to compute diluted earnings per share
    
    
    61,561,030
    
    
    
    43,427,976Basic net loss per share
    
    $
    (0.08
    )
    
    $
    (0.10
    )Diluted net loss per share
    
    $
    (0.08
    )
    
    $
    (0.10
    )Number of antidilutive stock options excluded
from computation
    
    
    5,720,937
    
    
    
    4,776,564Number of antidilutive warrants excluded from
computation
    
    
    14,047,015
    
    
    
    8,022,410
 4. Comprehensive Loss
  Three Months EndedMarch 31,2010
    
    
    2009Net loss
    
    $
    (4,793,153
    )
    
    $
    (4,195,683
    )Change in net
unrealized losses on
investments
    
    
    (14,467
    )
    
    
    (56,761
    )Comprehensive
loss
    
    $
    (4,807,620
    )
    
    $
    (4,252,444
    )
 5. Fair Value Measurements
    Quoted prices inactive markets for
    
    
    Significant other
    
    
    Significantidentical assets
    
    
    observable inputs
    
    
    unobservable inputsMarch 31, 2010
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash equivalents
    
    $
    6,988,742
    
    
    $
    6,988,742
    
    
    $
    
    
    
    $
    Short-term investments available-for-sale
    
    
    25,515,213
    
    
    
    252,217
    
    
    
    25,262,996
    
    
    
    Total
    
    $
    32,503,955
    
    
    $
    7,240,959
    
    
    $
    25,262,996
    
    
    $
    
  7




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Unrealized
    
    
    UnrealizedMarch 31, 2010
    
    At Cost
    
    
    Gains
    
    
    (Losses)
    
    
    At Fair ValueMoney market funds
    
    $
    6,988,742
    
    
    $
    
    
    
    $
    
    
    
    $
    6,988,742Commercial paper
    
    
    9,642,829
    
    
    
    3,744
    
    
    
    
    
    
    
    9,646,573Corporate debt
    
    
    11,362,975
    
    
    
    
    
    
    
    (10,305
    )
    
    
    11,352,670Debt securities of U. S. government
agencies
    
    
    4,262,779
    
    
    
    1,525
    
    
    
    (551
    )
    
    
    4,263,753U. S. Treasury securities
    
    
    252,120
    
    
    
    97
    
    
    
    
    
    
    
    252,217Total
    
    $
    32,509,445
    
    
    $
    5,366
    
    
    $
    (10,856
    )
    
    $
    32,503,955
 Unrealized
    
    
    UnrealizedDecember 31, 2009
    
    At Cost
    
    
    Gains
    
    
    (Losses)
    
    
    At Fair ValueCertificates of deposit and money
market funds
    
    $
    10,380,463
    
    
    $
    
    
    
    $
    
    
    
    $
    10,380,463Commercial paper
    
    
    9,635,631
    
    
    
    9,145
    
    
    
    
    
    
    
    9,644,776Corporate debt
    
    
    9,183,702
    
    
    
    956
    
    
    
    (5,006
    )
    
    
    9,179,652Debt securities of U.S. government
agencies
    
    
    7,293,200
    
    
    
    5,273
    
    
    
    (1,428
    )
    
    
    7,297,045U.S. Treasury securities
    
    
    503,986
    
    
    
    103
    
    
    
    (66
    )
    
    
    504,023Total
    
    $
    36,996,982
    
    
    $
    15,477
    
    
    $
    (6,500
    )
    
    $
    37,005,959
  6. Research and License Agreements
 Out-licensing Agreements
 Pfizer (Wyeth).
  Staphylococcus
aureus (S. aureus) ®
  8




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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 anticipated availability of top-line data from the ongoing FV-100 Phase II trial in
shingles patients;
 
    
    the number of escalating doses of INX-189 that may be evaluated in the Phase I single
ascending dose study;
 
    
    the number of months that our current cash, cash equivalents and short-term investments will
allow us to operate;
 
    
    our future financing requirements, the factors that may influence the timing and amount of
these requirements, and our ability to fund them;
 
    
    our potential future revenue from collaborative research agreements, partnerships, license
agreements, product related revenue or materials transfer agreements;
 
    
    the potential of our product candidates to address a number of current therapeutic
limitations, such as inadequate potency, diminishing efficacy due to the emergence of
drug-resistant viruses, toxic or adverse side effects, complex dosing schedules, and
inconvenient routes of administration and other unmet needs in their intended indications; and
 
    
    anticipated future and increased net 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: that we, the FDA,
or an investigational review board suspending or terminating the clinical development of FV-100 or
INX-189 for lack of safety, manufacturing issues or other clinical reasons; FV-100 not
demonstrating sufficient efficacy in reducing the incidence and severity of shingles-related
symptoms, including acute pain and PHN, to be clinically relevant or commercially viable; the
results of ongoing or future preclinical studies and clinical trials of INX-189 not supporting its
further development; Pfizer not terminating our license and collaborative research agreements; our
ability to maintain 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 and through the regulatory process; our ongoing or future preclinical
studies or clinical trials not demonstrating an appropriate safety and/or efficacy profile of our
product candidates; our ability to secure and use third-party clinical and preclinical research
and data management organizations and third party manufacturers not fulfilling their contractual
obligations or otherwise performing satisfactorily in the future; our ability to manufacture and
maintain sufficient quantities of preclinical and clinical trial material on hand to complete our
preclinical studies or clinical trials on a timely basis; our failure to obtain regulatory approval
to market our product candidates; our ability to protect and maintain our proprietary intellectual
property rights from unauthorized use by others or not infringing on the intellectual property
rights of others; our collaborators failing to fulfill 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
current 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 (including the Risk
Factors section herein) and risk factors described in or referred to in greater detail in the
Risk Factors section of our Form 10-K for the year ended December 31, 2009. 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 which 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.
  9




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Inhibitex ® and MSCRAMM ® are registered trademarks of
Inhibitex, Inc.
 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
   Recent Developments
 FV-100 
 INX-189 
 Staphylococcal Vaccine S.
aureus ®
 Critical Accounting Policies
   10




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
    
    Use of Estimates
    
    Revenue Recognition
    
    Accrued Expenses
   Results of Operations
 Three Months Ended March 31, 2010 and 2009
 Summary.
 Revenue.
 Research and Development Expense.
 March 31,2010
    
    
    2009(In millions)Direct clinical,
preclinical and
manufacturing-related
expenses
    
    $
    2.6
    
    
    $
    1.5Salaries, benefits and
share-based
compensation
expense
    
    
    1.0
    
    
    
    0.9License fees,
patent-related legal
fees and other
expense
    
    
    0.7
    
    
    
    0.6Depreciation and
facility related
expenses
    
    
    0.5
    
    
    
    0.5Total research and
development
expense
    
    $
    4.8
    
    
    $
    3.5
   11




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General and Administrative Expense.
 March 31,2010
    
    
    2009(In millions)Salaries, benefits and
share-based compensation
expense
    
    $
    0.4
    
    
    $
    0.5Professional and legal
fees
    
    
    0.3
    
    
    
    0.3Other
expenses
    
    
    0.3
    
    
    
    0.3Total general and
administrative
expense
    
    $
    1.0
    
    
    $
    1.1
  Liquidity and Capital Resources
       
    
    our development timelines and plans for our product candidates, including any changes in our strategy;
    
    the variability, timing and costs associated with conducting clinical trials, the rate of enrollment in
such clinical trials and the results of these clinical trials:
    
    the variability, timing and costs associated with conducting preclinical studies;
    
    the cost of formulating and manufacturing preclinical and clinical trial materials to evaluate our product
candidates;
    
    whether we receive regulatory approval to advance the clinical development of our product candidates in a
timely manner, if at all;
    
    the cost to obtain regulatory approvals required to advance the development of our product candidates;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may establish in the
future;
    
    future payments we may receive or make under existing or future license or collaboration agreements, if any;
    
    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.
  12




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ITEM 4T.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   13




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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, 2009, have not materially changed, except as set forth below.
 Risks Relating to our Development of our Product Candidates
 All of our product candidates are in the early stages of development and their commercial
viability remains subject to future preclinical studies, clinical trials, regulatory approvals and
the risks generally inherent in these activities. If we are unable to successfully advance or
develop our product candidates, our business will be materially harmed.
   
    
    offer therapeutic or other benefits over existing comparable drugs or other product candidates in development;
    
    be proven to be safe and effective in current and future preclinical studies or clinical trials;
    
    have the desired effects (or may include undesirable or unexpected effects);
    
    meet applicable regulatory standards;
    
    be capable of being formulated and manufactured in commercially suitable quantities and at an acceptable cost; or
    
    be successfully commercialized by us or by collaborators.
    14




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In order to develop our product candidates and support our operations beyond 24 months, we expect
that we will need to raise additional capital. Such capital may not be available to us on
acceptable terms, if at all, which could materially harm our business and business prospects.
   
    
    our development timelines and plans for our product candidates, including any changes in our strategy;
    
    the variability, timing and costs associated with conducting clinical trials, the rate of enrollment in
such clinical trials and the results of these clinical trials:
    
    the variability, timing and costs associated with conducting preclinical studies;
    
    the cost of formulating and manufacturing preclinical and clinical trial materials to evaluate our product
candidates;
    
    whether we receive regulatory approval to advance the clinical development of our product candidates in a
timely manner, if at all;
    
    the cost to obtain regulatory approvals required to advance the development of our product candidates;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may establish in the
future;
    
    future payments we may receive or make under existing or future license or collaboration agreements, if any;
    
    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.
  15




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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
  16




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SIGNATURES
  Date: May 13, 2010
    INHIBITEX, INC./s/ Russell H. PlumbRussell H. PlumbPresident, Chief Executive Officer,
Chief Financial Officer and Chief Accounting Officer  17




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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
  18