##### 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 September 30, 2005
 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
    
    30004(Address of principal executive
    
    (Zip Code)offices)
 (678) 746-1100
 Not Applicable
 þ o
 o þ
 o þ




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TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004 and for the Period from Inception (May 13, 1994) through September 30, 2005
    
    
    4Condensed Statements of Cash Flows for the Three and Nine Months Ended September 30, 2005 and 2004 and from the Period from Inception (May 13, 1994) through September 30, 2005
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II  OTHER INFORMATIONItem 6. Exhibits
    
    
    24Signatures
    
    
    25Exhibit IndexEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO & CFO
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PART I
FINANCIAL INFORMATION
 INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED BALANCE SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    59,190,233
    
    
    $
    71,580,823Short-term investments
    
    
    37,843,745
    
    
    
    15,623,887Prepaid expenses and other current assets
    
    
    1,806,589
    
    
    
    1,082,359Accounts receivable
    
    
    192,102
    
    
    
    322,019Total current assets
    
    
    99,032,669
    
    
    
    88,609,088Property and equipment, net
    
    
    8,616,838
    
    
    
    2,629,987Total assets
    
    $
    107,649,507
    
    
    $
    91,239,075LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,359,206
    
    
    $
    3,077,636Accrued expenses
    
    
    5,089,212
    
    
    
    3,587,093Current portion of notes payable
    
    
    1,539,043
    
    
    
    877,239Current portion of capital lease obligations
    
    
    870,963
    
    
    
    315,043Current portion of deferred revenue
    
    
    191,667
    
    
    
    191,667Other current liabilities
    
    
    1,152,806
    
    
    
    1,000,000Total current liabilities
    
    
    11,202,897
    
    
    
    9,048,678Long-term liabilities:Notes payable, net of current portion
    
    
    1,666,667
    
    
    
    486,112Capital lease obligations, net of current portion
    
    
    1,839,970
    
    
    
    321,190Deferred revenue, net of current portion
    
    
    725,000
    
    
    
    837,498Other liabilities, net of current portion
    
    
    1,333,996
    
    
    
    Total long-term liabilities
    
    
    5,565,633
    
    
    
    1,644,800Total liabilities
    
    
    16,768,530
    
    
    
    10,693,478Stockholders equity:Preferred stock, $.001 par value; 5,000,000
shares authorized at September 30, 2005 and
December 31, 2004; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 75,000,000 shares
authorized at September 30, 2005 and December
31, 2004; 30,213,356 and 25,133,327 shares
issued and outstanding at September 30, 2005 and
December 31, 2004, respectively
    
    
    30,213
    
    
    
    25,133Common stock warrants
    
    
    11,555,968
    
    
    
    11,555,968Additional paid-in capital
    
    
    212,205,541
    
    
    
    173,188,745Deferred stock compensation
    
    
    (896,535
    )
    
    
    (1,269,099
    )Deficit accumulated during the development stage
    
    
    (132,014,210
    )
    
    
    (102,955,150
    )Total stockholders equity
    
    
    90,880,977
    
    
    
    80,545,597Total liabilities and stockholders equity
    
    $
    107,649,507
    
    
    $
    91,239,075
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INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED STATEMENTS OF OPERATIONS
 (unaudited)
 Period fromInceptionThree Months Ended
    
    
    Nine Months Ended
    
    
    (May 13, 1994)September 30,
    
    
    September 30,
    
    
    ThroughSeptember 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005Revenue:License fees and milestones
    
    $
    37,500
    
    
    $
    37,500
    
    
    $
    112,500
    
    
    $
    112,500
    
    
    $
    1,125,000Collaborative research and
development
    
    
    125,000
    
    
    
    125,000
    
    
    
    375,000
    
    
    
    375,000
    
    
    
    2,874,455Grants and other revenue
    
    
    165,823
    
    
    
    
    
    
    
    286,474
    
    
    
    
    
    
    
    586,474Total revenue
    
    
    328,323
    
    
    
    162,500
    
    
    
    773,974
    
    
    
    487,500
    
    
    
    4,585,929Operating expense:Research and development
    
    
    8,027,230
    
    
    
    5,202,291
    
    
    
    25,938,478
    
    
    
    15,302,048
    
    
    
    100,977,642General and administrative
    
    
    1,780,370
    
    
    
    1,063,897
    
    
    
    5,007,697
    
    
    
    2,725,346
    
    
    
    21,310,275Amortization of deferred
stock compensation
    
    
    124,188
    
    
    
    124,188
    
    
    
    372,564
    
    
    
    349,101
    
    
    
    1,022,088Total operating expense
    
    
    9,931,788
    
    
    
    6,390,376
    
    
    
    31,318,739
    
    
    
    18,376,495
    
    
    
    123,310,005Loss from operations
    
    
    (9,603,465
    )
    
    
    (6,227,876
    )
    
    
    (30,544,765
    )
    
    
    (17,888,995
    )
    
    
    (118,724,076
    )Other (loss) income, net
    
    
    (51,857
    )
    
    
    24,118
    
    
    
    (51,857
    )
    
    
    38,169
    
    
    
    651,185Interest income, net
    
    
    608,943
    
    
    
    133,878
    
    
    
    1,537,562
    
    
    
    147,282
    
    
    
    2,440,744Net loss
    
    
    (9,046,379
    )
    
    
    (6,069,880
    )
    
    
    (29,059,060
    )
    
    
    (17,703,544
    )
    
    
    (115,632,147
    )Dividends and accretion to
redemption value of redeemable
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,823,160
    )
    
    
    (16,382,063
    )Net loss attributable to
common stockholders
    
    $
    (9,046,379
    )
    
    $
    (6,069,880
    )
    
    $
    (29,059,060
    )
    
    $
    (20,526,704
    )
    
    $
    (132,014,210
    )Basic and diluted net loss
attributable to common
stockholders per
share
    
    $
    (0.33
    )
    
    $
    (0.33
    )
    
    $
    (1.12
    )
    
    $
    (2.60
    )Weighted average shares used
to compute basic and diluted
net loss attributable to
common stockholders per share
    
    
    27,326,530
    
    
    
    18,268,314
    
    
    
    25,898,716
    
    
    
    7,883,424
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INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED STATEMENTS
OF CASH FLOWS(unaudited)
 Period fromInception(May 13, 1994)Nine Months Ended
    
    
    ThroughSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (29,059,060
    )
    
    $
    (17,703,544
    )
    
    $
    (115,632,147
    )Adjustments to reconcile net loss to
net cash used in operating activities:Depreciation and amortization
    
    
    935,764
    
    
    
    604,016
    
    
    
    4,400,818Amortization of deferred stock compensation
    
    
    372,564
    
    
    
    349,101
    
    
    
    1,022,088Loss on sale of equipment
    
    
    51,857
    
    
    
    
    
    
    
    99,991Amortization of investment premium or discount
    
    
    216,551
    
    
    
    105,345
    
    
    
    417,212Forgiveness of receivables from stockholders
    
    
    
    
    
    
    
    
    
    
    28,695Amortization of warrants and discount on debt
    
    
    
    
    
    
    53,685
    
    
    
    176,477Stock issued for interest
    
    
    
    
    
    
    2,310
    
    
    
    126,886Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    99,500Changes in operating assets and liabilities:Prepaid expenses and other assets
    
    
    (724,230
    )
    
    
    (206,540
    )
    
    
    (1,806,589
    )Accounts receivable
    
    
    129,917
    
    
    
    288,471
    
    
    
    (192,102
    )Accounts payable and other liabilities
    
    
    768,372
    
    
    
    (419,622
    )
    
    
    4,846,008Accrued expenses
    
    
    1,502,119
    
    
    
    (119,846
    )
    
    
    5,089,212Deferred revenue
    
    
    (112,498
    )
    
    
    (112,500
    )
    
    
    916,667Net cash used in operating activities
    
    
    (25,918,644
    )
    
    
    (17,159,124
    )
    
    
    (100,407,284
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,484,365
    )
    
    
    (427,418
    )
    
    
    (8,669,700
    )Purchases of short-term investments
    
    
    (100,509,117
    )
    
    
    (27,920,374
    )
    
    
    (147,953,349
    )Proceeds from maturities of short-term investments
    
    
    78,029,073
    
    
    
    8,600,000
    
    
    
    109,634,671Net cash used in investing activities
    
    
    (26,964,409
    )
    
    
    (19,747,792
    )
    
    
    (46,988,379
    )Cash flows from financing activities:Proceeds from promissory notes and related warrants
    
    
    2,500,000
    
    
    
    
    
    
    
    5,513,492Payments on promissory notes and capital leases
    
    
    (1,073,048
    )
    
    
    (936,905
    )
    
    
    (4,044,795
    )Proceeds from bridge loan and related warrants
    
    
    
    
    
    
    
    
    
    
    2,220,000Net proceeds from the issuance of preferred stock and warrants
    
    
    
    
    
    
    1,517,997
    
    
    
    81,788,868Proceeds from the issuance of common stock, net of issuance costs
    
    
    39,065,511
    
    
    
    34,214,660
    
    
    
    121,108,331Net cash provided by financing activities
    
    
    40,492,463
    
    
    
    34,795,752
    
    
    
    206,585,896(Decrease) increase in cash and cash equivalents
    
    
    (12,390,590
    )
    
    
    (2,111,164
    )
    
    
    59,190,233Cash and cash equivalents at beginning of period
    
    
    71,580,823
    
    
    
    26,649,150
    
    
    
    Cash and cash equivalents at end of period
    
    $
    59,190,233
    
    
    $
    24,537,986
    
    
    $
    59,190,233Supplemental cash flow information:Interest paid
    
    $
    134,796
    
    
    $
    157,265
    
    
    $
    916,137Supplemental non-cash investing and financing activities:Fixed assets capitalized using promissory notes and capital leases
    
    
    2,490,107
    
    
    
    240,764
    
    
    
    4,447,946Conversion of bridge loans and interest payable into Series C
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    2,124,576Preferred stock dividends and accretion of preferred stock to
redemption value
    
    
    
    
    
    
    2,823,160
    
    
    
    16,382,063Unrealized loss on short-term investments
    
    
    (43,635
    )
    
    
    (11,889
    )
    
    
    (57,721
    )
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INHIBITEX, INC.
(A Development Stage Company)
 
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 1. Operations
  Staphylococcus aureus (S. aureus)
 2. Summary of Significant Accounting Policies
 Basis
of Presentation
 Use of Estimates.
 Cash, Cash Equivalents and Short-Term Investments. Accounting
for Certain Investments in Debt and Equity Securities
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Property and Equipment, Net.
 Asset
    
    Estimated LifeComputer software and equipment
    
    3 yearsFurniture and fixtures
    
    7 yearsLaboratory equipment
    
    5 yearsLeasehold improvements
    
    Lesser of estimated useful life or life of lease
 Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use.
 Revenue Recognition. Revenue Recognition in Financial Statements Revenue Recognition Revenue Arrangements with Multiple Deliverables
 Accrued Expenses.
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Prepaid Expenses and Other Current Assets.
 Stock-based Compensation. Accounting for Stock Issued to Employees Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB No. 25, and Related Interpretations Accounting for Stock-Based Compensation Accounting for Equity Instruments that are
Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Accounting for
Stock-Based Compensation  Transition and Disclosure
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss attributable to common
stockholders  as reported
    
    $
    (9,046,379
    )
    
    $
    (6,069,880
    )
    
    $
    (29,059,060
    )
    
    $
    (20,526,704
    )Add: Amortization of deferred stock
compensation included in
net loss  as reported
    
    
    124,188
    
    
    
    124,188
    
    
    
    372,564
    
    
    
    349,101Deduct: Stock compensation expense
determined under fair value method
    
    
    (541,592
    )
    
    
    (283,747
    )
    
    
    (1,560,520
    )
    
    
    (767,648
    )Net loss attributable to common
stockholders  pro forma
    
    $
    (9,463,783
    )
    
    $
    (6,229,439
    )
    
    $
    (30,247,016
    )
    
    $
    (20,945,251
    )Net loss attributable to common
stockholders per share (basic and
diluted):As reported
    
    $
    (0.33
    )
    
    $
    (0.33
    )
    
    $
    (1.12
    )
    
    $
    (2.60
    )Pro forma
    
    $
    (0.35
    )
    
    $
    (0.34
    )
    
    $
    (1.17
    )
    
    $
    (2.66
    )
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Risk-free interest rate
    
    
    4.12
    %
    
    
    3.51
    %
    
    
    3.76
    %
    
    
    3.23
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Volatility factors
    
    
    .60
    
    
    
    .43
    
    
    
    .53
    
    
    
    .43Expected life of options (years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Weighted average fair value of
options granted
    
    $
    4.30
    
    
    $
    2.23
    
    
    $
    3.83
    
    
    $
    2.06
  Fair Value of Financial Instruments.
 Concentrations of Credit Risk and Limited Suppliers.
  Research and Development Expense.
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Income Taxes. Accounting for Income Taxes
 Comprehensive Loss. Comprehensive Income
 Lease Accounting.
 Recent Accounting Pronouncements. Share-Based Payment Statement of Cash Flows
  Accounting Changes and Error Corrections Accounting
Changes Reporting Accounting Changes in
Interim Financial Statements
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3. Net Loss Per Share
 Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004HistoricalNumerator:Net loss attributable to common
stockholders
    
    $
    (9,046,379
    )
    
    $
    (6,069,880
    )
    
    $
    (29,059,060
    )
    
    $
    (20,526,704
    )Denominator:Weighted average common shares
outstanding
    
    
    27,326,530
    
    
    
    18,268,314
    
    
    
    25,898,716
    
    
    
    7,883,424Basic and diluted net loss per
share attributable to common
stockholders
    
    $
    (0.33
    )
    
    $
    (0.33
    )
    
    $
    (1.12
    )
    
    $
    (2.60
    )
  September 30,2005
    
    2004Common stock options
    
    
    2,315,107
    
    
    
    1,260,476Warrants
    
    
    3,800,143
    
    
    
    1,850,127Total
    
    
    6,115,250
    
    
    
    3,110,603
 4. Debt
 Notes Payable.
 Capital Lease Obligations.
 5.
Stockholders Equity
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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:
 
    
    potential future revenue from collaborative research or materials transfer agreements;
    
    our ability to successfully commercialize our product candidates and generate product-related revenue in the future;
    
    the potential volatility of our quarterly and annual operating results;
    
    the anticipated length of time to generate data from our Phase III Veronate trial;
    
    the anticipated timing of the Data Safety Monitoring Board (DSMB) for reviewing the Phase III Veronate trial;
    
    our intention and timing of filing a Biological License Application (BLA) for Veronate;
    
    our intention and timing to proceed to a larger well-powered follow-on clinical trial of Aurexis in patients with S. aureus
bloodstream infections, the timing, design and size of such clinical trial and the concurrence by the FDA therewith;
    
    our plans to establish a specialized hospital-based sales force and commercialize our product candidates, particularly
Veronate, in the United States;
    
    expected increases in our research and development expenses, general and administrative expenses and operating losses in
the future;
    
    our expected future amortization of deferred stock compensation;
    
    our planned adoption of Statement of Financial Accounting Standard No. 123(R), Accounting for Stock-Based Compensation
(SFAS No. 123(R)), and the potential impact that the adoption of SFAS No. 123(R) may have on our future results of
operations and reported cash flows;
    
    our future financing requirements and how we plan to fund them;
    
    the number of months that our current cash, cash equivalents, short-term investments and our borrowing capacity under
existing arrangements will allow us to operate; and
    
    anticipated financial results, including revenues, operating expenses and ending cash, cash equivalents and short-term
investments for our fiscal year ending on December 31, 2005.
 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 the
preceding preclinical and clinical results related to our antibody-based products, including
Veronate and Aurexis, are not reflective of future
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results; Wyeth terminating our license and
collaborative research agreement; the cost and rate at which investigators can recruit patients
into our clinical trials; our ongoing or future clinical trials not demonstrating the appropriate
safety and efficacy of our product candidates; our ability to successfully develop current and
future product candidates either independently or in collaboration with business partners; our
ability to secure and our use of third-party contract clinical research and data management
organizations, raw material suppliers and manufacturers, who may not fulfill their contractual
obligations or otherwise perform satisfactorily in the future; manufacturing and maintaining
sufficient quantities of clinical trial material on hand to complete our clinical trials on a
timely basis; our failure to obtain DSMB or regulatory approval to commence or continue our
clinical trials or to market our product candidates; our ability to protect and maintain our
proprietary intellectual property rights from unauthorized use by others; our collaborators do not
fulfill their obligations under our agreements with them in the future; 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 related governmental laws and
regulations; 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 our annual report on Form 10-K filed with
the Securities and Exchange Commission on March 28, 2005 and in risk factors described in or
referred to in greater detail in the Risk Factors section of the Companys prospectus, which
forms part of its Registration Statement on Form S-3, which, as amended, was declared effective by
the Securities and Exchange Commission on September 21, 2005.
 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 that 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 and 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 ® , Veronate ® , 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 condensed financial statements and
the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.
 Overview
 Staphylococcus aureus, S. aureus, S. aureus
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Recent Developments
  th
  
    
    We expect to complete the enrollment phase of a
2,000-patient Phase III trial of Veronate, for the prevention of
hospital-associated infections in very low birth weight infants,
within the next two weeks. We indicated that we had
qualified and initiated a total of 98 sites in the United States and
Canada, 93 of which have enrolled at least one patient.
    
    As a result of a recent pre-BLA
meeting, we also reported that we have reached an
understanding with the FDA on a regulatory pathway for Veronate,
whereby the FDA acknowledged, among other items, that:
  ̈
    
    we can and should proceed to file a request for a
priority review of Veronate. ̈
    
    subject to final clinical data being acceptable, the ongoing
2,000 patient Phase III clinical trial, as designed, can support the
registration of Veronate. ̈
    
    we can initiate the BLA process for Veronate by
filing the Chemistry, Manufacturing and Control (CMC) section prior
to the final Phase III clinical data being available. Accordingly,
we plan to initiate a rolling BLA process for Veronate by
submitting the CMC section in the first half of 2006. ̈
    
    we will not be required to perform any additional
clinical trials to evaluate a minor modification in Veronates
formulation that we have recently made to improve the
products stability. The FDA indicated that due to this change,
it will require us to manufacture three new consistency lots
of Veronate prior to BLA approval.
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S aureus





    
    We also reported that a paper related to our
Phase I Veronate trial entitled Multi-center Study to
Determine Antibody Concentrations and Assess the Safety of
Administration of INH-A21, a Donor-Selected Human Staphylococcal
Immune Globulin, in Low-Birth-Weight Infants was published in
Antimicrobial Agents and Chemotherapy, Volume 49,
Number 10, October 2005, and another paper related to our
Phase II Veronate trial entitled Multi-center Study to
Access Safety and Efficacy of INH-A21, a Donor-Selected Human
Staphylococcal Immune Globulin, for Prevention of Nosocomial Infections
in Very-Low-Birth-Weigh Infants was published in The
Pediatric Infectious Disease Journal, Volume 24, Number 10,
October 2005. In addition, the preclinical characterization of
Aurexis was published in Infection and Immunity,
Volume 73, Number 8, August 2005.


Critical Accounting Policies and Estimates




Use of Estimates.


-15-



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Revenue Recognition. Revenue Recognition in
Financial Statements, Revenue Recognition, Revenue Arrangements with Multiple Deliverables.
 Accrued Expenses.
 Stock-Based Compensation. Accounting for Stock Issued to Employees, Accounting for
Stock-Based Compensation.
  Financial Operations Overview
 Revenue.
 -16-




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Research and Development Expense.
  
    
    the scope, rate of progress and cost of our clinical trials and other research and development programs;
    
    future clinical trial results;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may establish;
    
    the cost and timing of regulatory approvals;
    
    the cost of establishing and maintaining clinical and commercial supplies of our product candidates;
    
    the effect of competing technological and market developments;
    
    the cost of establishing, maintaining, and protecting our patents and intellectual property portfolio;
    
    the availability of funding to continue clinical trials.
  -17-




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General and Administrative Expense.
 Deferred Stock Compensation
 Interest and Other Income (Expense), net.
 Results of Operations
 Three Months Ended September 30, 2005 and 2004
 Revenue.
 Research and Development Expense. , S. aureu
 -18-




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Three Months EndedSeptember 30,2005
    
    
    2004(in thousands)Clinical and manufacturing-related expense
    
    $
    4,737
    
    
    $
    2,645Salaries and personnel-related expenses
    
    
    1,674
    
    
    
    1,324License fees, legal, and other expense
    
    
    949
    
    
    
    866Depreciation and facility-related expense
    
    
    667
    
    
    
    367Total research and development expense
    
    $
    8,027
    
    
    $
    5,202
 General and Administrative Expense.
 Amortization of Deferred Stock Compensation.
 Interest and Other Income, net .
 Nine Months Ended September 30, 2005 and 2004
 Revenue.
 -19-




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Research and Development Expense. , S. aureu
  Nine Months EndedSeptember 30,2005
    
    
    2004(in thousands)Clinical and manufacturing-related expense
    
    $
    16,645
    
    
    $
    7,303Salaries and personnel-related expenses
    
    
    4,940
    
    
    
    3,939License fees, legal, and other expense
    
    
    2,556
    
    
    
    2,945Depreciation and facility-related expense
    
    
    1,797
    
    
    
    1,115Total research and development expense
    
    $
    25,938
    
    
    $
    15,302
 General and Administrative Expense.
 -20-




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Amortization of Deferred Stock Compensation.
 Interest
and Other Income, net .
 Dividends and Accretion to Redemption Value of Redeemable Preferred Stock.
 Liquidity and Capital Resources
 Sources of Liquidity
      -21-




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Cash Flows
     Funding Requirements
   -22-




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2005 Financial Guidance
   ̈
    
    total revenue from existing agreements of approximately $800,000 to $1.0 million; ̈
    
    total operating expenses of approximately $43 to $44 million; and ̈
    
    cash, cash equivalents and short-term investments in the amount of approximately $83 to
$85 million at December 31, 2005.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
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Changes in Internal Control over Financial Reporting
  
 PART II
 OTHER INFORMATION
 
 ITEM 6. EXHIBITS
  Exhibit No.
    
    Description31.1
    
    Section 302 Certification of the Chief Executive 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 200231.2
    
    Section 302 Certification of the 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
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SIGNATURES
  Date: November 8, 2005
    INHIBITEX, INC/s/ Russell H. PlumbRussell H. PlumbVice President, Finance and
Administration,
Chief Financial Officer -25-




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Section 302 Certification of the Chief Executive 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 200231.2
    
    Section 302 Certification of the 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
 -26-