##### 



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, 2006
 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
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non Accelerated Filer o
 o þ




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TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial StatementsBalance Sheets as of March 31, 2006 and December 31, 2005
    
    
    3Statements
of Operations for the Three Months Ended March 31, 2006 and 2005 and for the Period
from Inception (May 13, 1994) through March 31, 2006
    
    
    4Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005 and for the
Period from Inception (May 13, 1994) through March 31, 2006
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    25Signatures
    
    
    26Exhibit 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
 2




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##### 



PART I
FINANCIAL INFORMATION
 INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
 March 31,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,722,314
    
    
    $
    33,842,937Short-term investments
    
    
    43,446,875
    
    
    
    53,288,016Prepaid expenses and other current assets
    
    
    1,486,252
    
    
    
    1,917,436Accounts receivable
    
    
    283,428
    
    
    
    44,923Total current assets
    
    
    78,938,869
    
    
    
    89,093,312Property and equipment, net
    
    
    7,912,088
    
    
    
    8,175,074Total assets
    
    $
    86,850,957
    
    
    $
    97,268,386LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,524,706
    
    
    $
    1,879,191Accrued expenses
    
    
    3,632,476
    
    
    
    5,316,906Current portion of notes payable
    
    
    1,111,111
    
    
    
    1,319,445Current portion of capital lease obligations
    
    
    857,154
    
    
    
    869,043Current portion of deferred revenue
    
    
    191,667
    
    
    
    191,667Other current liabilities
    
    
    1,152,751
    
    
    
    1,152,702Total current liabilities
    
    
    9,469,865
    
    
    
    10,728,954Long-term liabilities:Notes payable, net of current portion
    
    
    1,250,000
    
    
    
    1,458,333Capital lease obligations, net of current portion
    
    
    1,434,492
    
    
    
    1,646,323Deferred revenue, net of current portion
    
    
    650,000
    
    
    
    687,500Other liabilities, net of current portion
    
    
    1,255,890
    
    
    
    1,294,210Total long-term liabilities
    
    
    4,590,382
    
    
    
    5,086,366Total liabilities
    
    
    14,060,247
    
    
    
    15,815,320Stockholders equity:Preferred stock, $.001 par value; 5,000,000
shares authorized at March 31, 2006 and
December 31, 2005; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 75,000,000 shares
authorized at March 31, 2006 and December 31,
2005; 30,243,262 and 30,219,715 shares issued
and outstanding at March 31, 2006 and December
31, 2005, respectively
    
    
    30,243
    
    
    
    30,220Warrants
    
    
    11,514,793
    
    
    
    11,514,793Additional paid-in capital
    
    
    211,757,980
    
    
    
    212,210,931Deferred stock compensation
    
    
    
    
    
    
    (772,347
    )Deficit accumulated during the development stage
    
    
    (150,512,306
    )
    
    
    (141,530,531
    )Total stockholders equity
    
    
    72,790,710
    
    
    
    81,453,066Total liabilities and stockholders equity
    
    $
    86,850,957
    
    
    $
    97,268,386
  3




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##### 



INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)
 Period fromInception(May 13, 1994)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006Revenue:License fees and milestones
    
    $
    37,500
    
    
    $
    37,500
    
    
    $
    1,200,000Collaborative research and development
    
    
    125,000
    
    
    
    125,000
    
    
    
    3,124,455Grants and other revenue
    
    
    165,387
    
    
    
    114,631
    
    
    
    751,861Total revenue
    
    
    327,887
    
    
    
    277,131
    
    
    
    5,076,316Operating expense:Research and development
    
    
    7,426,552
    
    
    
    9,187,792
    
    
    
    117,222,136General and administrative
    
    
    2,766,453
    
    
    
    1,474,424
    
    
    
    26,832,108Total operating expense
    
    
    10,193,005
    
    
    
    10,662,216
    
    
    
    144,054,244Loss from operations
    
    
    (9,865,118
    )
    
    
    (10,385,085
    )
    
    
    (138,977,928
    )Other income, net
    
    
    58,460
    
    
    
    
    
    
    
    716,125Interest income, net
    
    
    824,883
    
    
    
    442,397
    
    
    
    4,131,560Net loss
    
    
    (8,981,775
    )
    
    
    (9,942,688
    )
    
    
    (134,130,243
    )Dividends and accretion to redemption value of
redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    (16,382,063
    )Net loss attributable to common stockholders
    
    $
    (8,981,775
    )
    
    $
    (9,942,688
    )
    
    $
    (150,512,306
    )Basic and diluted net loss per share
    
    $
    (0.30
    )
    
    $
    (0.40
    )Weighted average shares used to compute basic
and diluted net loss per share
    
    
    30,233,142
    
    
    
    25,147,579
  4




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##### 



INHIBITEX, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(unaudited)
 Period fromInception(May 13, 1994)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (8,981,775
    )
    
    $
    (9,942,688
    )
    
    $
    (134,130,243
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    488,235
    
    
    
    225,514
    
    
    
    5,391,294Stock compensation
    
    
    333,477
    
    
    
    124,188
    
    
    
    1,479,753Loss on sale of equipment
    
    
    
    
    
    
    
    
    
    
    99,991Amortization of investment premium or discount
    
    
    74,147
    
    
    
    (1,717
    )
    
    
    638,892Forgiveness of receivables from stockholders
    
    
    
    
    
    
    
    
    
    
    28,695Amortization of warrants and discount on debt
    
    
    
    
    
    
    
    
    
    
    176,477Stock issued for interest
    
    
    
    
    
    
    
    
    
    
    126,886Cumulative effect of change in accounting principle
    
    
    (58,460
    )
    
    
    
    
    
    
    41,040Changes in operating assets and liabilities:Prepaid expenses and other assets
    
    
    431,184
    
    
    
    69,908
    
    
    
    (1,486,252
    )Accounts receivable
    
    
    (238,505
    )
    
    
    (219,577
    )
    
    
    (283,428
    )Accounts payable and other liabilities
    
    
    607,244
    
    
    
    1,346,834
    
    
    
    4,933,347Accrued expenses
    
    
    (1,684,430
    )
    
    
    917,813
    
    
    
    3,632,476Deferred revenue
    
    
    (37,500
    )
    
    
    (37,500
    )
    
    
    841,667Net cash used in operating activities
    
    
    (9,066,383
    )
    
    
    (7,517,225
    )
    
    
    (118,509,405
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (225,249
    )
    
    
    (2,145,624
    )
    
    
    (8,955,427
    )Purchases of short-term investments
    
    
    (5,696,984
    )
    
    
    (56,001,384
    )
    
    
    (157,405,314
    )Proceeds from maturities of short-term investments
    
    
    15,460,000
    
    
    
    31,664,319
    
    
    
    113,235,598Net cash provided by (used) in investing activities
    
    
    9,537,767
    
    
    
    (26,482,689
    )
    
    
    (53,125,143
    )Cash flows from financing activities:Proceeds from promissory notes, notes payable and related warrants
    
    
    
    
    
    
    1,024,680
    
    
    
    5,513,492Payments on promissory notes and capital leases
    
    
    (640,387
    )
    
    
    (344,562
    )
    
    
    (5,308,681
    )Proceeds from bridge loan and related warrants
    
    
    
    
    
    
    
    
    
    
    2,220,000Net proceeds from the issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    81,788,868Proceeds from the issuance of common stock, net of issuance costs
    
    
    48,380
    
    
    
    168,359
    
    
    
    121,143,183Net cash (used) provided by in financing activities
    
    
    (592,007
    )
    
    
    848,477
    
    
    
    205,356,862(Decrease) increase in cash and cash equivalents
    
    
    (120,623
    )
    
    
    (33,151,437
    )
    
    
    33,722,314Cash and cash equivalents at beginning of period
    
    
    33,842,937
    
    
    
    71,580,823
    
    
    
    Cash and cash equivalents at end of period
    
    $
    33,722,314
    
    
    $
    38,429,386
    
    
    $
    33,722,314Supplemental cash flow information:Interest paid
    
    $
    65,844
    
    
    $
    232,318
    
    
    $
    1,050,771Supplemental non-cash investing and financing activities:Fixed assets capitalized using promissory notes and capital leases
    
    
    
    
    
    
    379,351
    
    
    
    4,447,946Conversion of bridge loans and interest payable into preferred stock
    
    
    
    
    
    
    
    
    
    
    2,124,576Preferred stock dividends and accretion of preferred stock to
redemption value
    
    
    
    
    
    
    
    
    
    
    16,382,063Unrealized loss on short-term investments
    
    
    (3,978
    )
    
    
    (44,089
    )
    
    
    (83,949
    )
  5




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##### 



INHIBITEX, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 1. Operations
  Staphylococcus aureus (S.
aureus)
 2. Summary of Significant Accounting Policies
 Use of Estimates.
 Cash, Cash Equivalents and Short-Term Investments. Accounting for Certain Investments in Debt and Equity Securities
   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
 6




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##### 



Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use.
 Revenue Recognition. Revenue Recognition in Financial
Statements Revenue Recognition.
 Accrued Expenses.
 Prepaid Expenses and Other Current Assets.
 Stock-based
Compensation. Share-Based Payment, or . Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation
   7




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##### 



Three Months EndedMarch 31,2006
    
    
    2005Net loss attributable to common
stockholders  as reported
    
    $
    (8,981,775
    )
    
    $
    (9,942,688
    )Add: Amortization of deferred stock
compensation included in
net loss  as reported
    
    
    333,477
    
    
    
    124,188Deduct: Stock compensation expense
determined under fair value method
    
    
    (333,477
    )
    
    
    (480,111
    )Net loss
attributable to common stockholders  pro forma
    
    $
    (8,981,775
    )
    

    $
    (10,298,611
    )Net loss attributable to common
stockholders per share (basic and
diluted):As reported
    
    $
    (0.30
    )
    
    $
    (0.40
    )Pro forma
    
    $
    (0.30
    )
    
    $
    (0.41
    )
   Three Months EndedMarch 31,2006
    
    2005Risk-free interest rate
    
    
    4.51
    %
    
    
    3.71
    %Dividend yield
    
    
    
    
    
    
    Expected weighted average volatility
    
    
    .70
    
    
    
    .50Expected life of options (years)
    
    
    4.0
    
    
    
    4.0Weighted average fair value of options granted
    
    $
    5.79
    
    
    $
    3.89
  Fair Value of Financial Instruments.
 Concentrations of Credit Risk and Limited Suppliers.
  8




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##### 



Research and Development Expense.
 General and Administrative Expense .
 Income Taxes. Accounting for Income Taxes
 Comprehensive Loss. Comprehensive Income
 Lease Accounting.
 Reclassifications.
 Recent
Accounting Pronouncements. Accounting Changes and
Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 3. Net Loss Per Share
 Earnings Per Share Earnings Per Share,
  9




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##### 



Three Months EndedMarch 31,2006
    
    
    2005HistoricalNumerator:Net loss attributable to common stockholders
    
    $
    (8,981,775
    )
    
    $
    (9,942,688
    )Denominator:Weighted average common shares outstanding
    
    
    30,233,142
    
    
    
    25,147,579Basic and diluted net loss per share
    
    $
    (0.30
    )
    
    $
    (0.40
    )
  March 31,2006
    
    2005Common stock options
    
    
    2,347,528
    
    
    
    2,057,999Warrants
    
    
    3,800,143
    
    
    
    3,800,143Total
    
    
    6,147,671
    
    
    
    5,858,142
 4. Stock Option Plans
 1998 Equity Ownership Plan
 2004 Stock Incentive Plan and 2002 Non-Employee Directors Stock Option Plan
   AggregateWeighted Average
    
    
    Weighted Average
    
    
    IntrinsicNumber of
    
    
    Exercise Price
    
    
    Remaining Contractual
    
    
    ValueShare
    
    
    per Share
    
    
    term
    
    
    ($000)Balance at December 31, 2005
    
    
    2,304,242Granted
    
    
    72,500Exercised
    
    
    27,381Forfeited or expired
    
    
    1,833Balance at March 31, 2006
    
    
    2,347,528
    
    
    $
    5.96
    
    
    
    4.05
    
    
    $
    4,085Vested or expect to vest at March 31, 2006
    
    
    2,011,960
    
    
    $
    5.55
    
    
    
    0.57
    
    
    $
    4,012Exercisable at March 31, 2006
    
    
    1,089,166
    
    
    $
    3.99
    
    
    
    3.35
    
    
    $
    3,242
  5. Subsequent Events
    
 S. aureus
 10




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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:
 
    
    our ability to discover and develop novel therapies to prevent or treat serious, life threatening infections
based on our expertise in MSCRAMM® proteins;
    
    the potential advantages of using antibody-based products over existing therapies;
    
    the ability of antibodies that target MSCRAMM proteins to reduce the incidence and severity of bacterial and
fungal infections;
    
    estimated cash burn rates or operating expenses for the remainder of 2006;
    
    the annualized savings related to workforce reductions and one-time charges related to termination benefits;
    
    the consideration of other strategic pathways to create shareholder value;
    
    our intent to complete analyses on the Veronate Phase III trial, convene a panel in May 2006 and complete its
review near the end of June 2006;
    
    our plan to not conduct any further clinical trials in very low birth weight infants with the
current donor-selected immune globulin form of Veronate;
    
    our plans to commence a clinical trial to assess the safety and efficacy of two doses of Aurexis;
    
    the expected timing of additional preclinical toxicological studies of two doses of Aurexis;
    
    the potential to discover, develop or commercialize any product candidates resulting from existing or future
collaborations, including those with Dyax and Wyeth;
    
    potential future revenue from collaborative research agreements, partnerships, or materials transfer agreements;
    
    the number of months that our current cash, cash equivalents, short-term investments under existing
arrangements will allow us to operate;
    
    our future financing requirements and how we expect to fund them;
    
    our ability to successfully commercialize our products and generate product-related revenue in the future;
    
    our plan to establish partnerships or collaborations with other entities to develop and commercialize our
product candidates in other countries outside of the United States;
    
    the potential volatility of our quarterly and annual operating results;
    
    the expectation of continued substantial net losses;
    
    the potential benefits related to Fast Track, Orphan Drug and Orphan Medicinal Product status;
    
    and our intention to apply for Fast Track and Orphan Drug status for our other product candidates.
 11




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##### 



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
Aurexis and other product candidates, are not reflective of future results; Wyeth terminating our
license and collaborative research agreement; our ability to contract with a sufficient number of
clinical trial sites to perform our clinical trials; the cost and rate at which investigators at
such sites 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 Data Safety Monitoring Board or 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; our ability to attract suitable organizations to collaborate on the development and
commercialization of our product candidates, particularly outside of the United States; that no
viable product candidates result from the collaborations with Wyeth or Dyax or that product
candidates from these collaborations do not demonstrate any therapeutic benefit or an acceptable
safety profile in clinical trials; our collaborators do not fulfill their obligations under the 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 this Form 10-Q and the Companys Form 10-K for the year ended December
31, 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 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 ® , 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 1A of this Quarterly Report on Form 10-Q .
 Overview
 S. aureus,
  12




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##### 



Recent Developments
 Staphylococcus
aureus (S. aureus)
  
    
    We have assembled an independent panel of experts in the fields of neonatology,
immunology and infectious diseases to review the Veronate program in its entirety. The
panel is scheduled to convene in May.
    
    We are currently conducting various analyses of our preclinical and clinical data, as
well as analyzing the various lots of clinical trial material used in the Phase II and
Phase III trials in an effort to determine whether the results of the Phase III Veronate
trial were a consequence of one or more factors, including the potency and consistency
of the clinical trial material, the immune status of very low birth weight infants, the
change in the dosing schedule, and the utility of donor-selected polyclonal
anti-MSCRAMM® antibodies against staphylococcal organisms.
    
    We have halted the manufacture of clinical trial material used in the
clinical development of Veronate as a donor-selected immune globulin. We do not intend
to conduct future clinical trials in VLBW infants with the current donor-selected immune
globulin form of Veronate.
    
    We terminated our contract manufacturing agreement with Nabi Biopharmaceuticals and
suspended collections of all plasma used to manufacture the current donor-selected
immune globulin form of Veronate. Nabi BioPharmaceuticals invoiced
us for approximately $3.3 million for cancellation penalties
associated with forecasted future production that Nabi BioPharmaceutical contends are due as a result of the termination. We do
not believe that termination will result in any material cancellation penalties.
    
    We reduced our workforce by eliminating 35 positions. This reduction, which represents
approximately 40% of our workforce, was largely focused in areas dedicated to the planned
commercialization of Veronate. As a result, we anticipate recording a charge of
approximately $1.2 million in the second quarter of 2006 related to the cost of one-time
termination benefits.
    
    We established an incentive program designed to retain our key executives and employees.
This plan includes incentives consisting of a combination of cash, restricted stock and
stock options.
    
    We have initiated a review of other strategic pathways that
we may consider in the future to
optimize shareholder value pending the results of the ongoing review of the Veronate Phase
III trial results.
  ® S.
aureus
  13




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##### 



Critical Accounting Policies
   
    
    Revenue Recognition
    
    Accrued Expenses
    
    Stock-based Compensation
  Stock-Based Compensation
 Share-Based Payment, . Accounting for Stock-Based Compensation
   14




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##### 



Results of Operations
 Three Months Ended March 31, 2006 and 2005
 Revenue.
 Research and Development Expense. ,
  Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Clinical and manufacturing-related expense
    
    $
    3,645
    
    
    $
    6,359Salaries, benefits and stock compensation expense
    
    
    1,786
    
    
    
    1,520License fees, legal, and other expense
    
    
    1,348
    
    
    
    781Depreciation and facility-related expense
    
    
    648
    
    
    
    528Total research and development expense
    
    $
    7,427
    
    
    $
    9,188
 General and Administrative Expense.
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Interest Income, net .
 Liquidity and Capital Resources
 Sources of Liquidity
    Cash Flows
     Funding Requirements
  16




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  17




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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 financial condition, and 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, 2005 have not materially
changed except as set forth below.
 Risks Relating to Our Business
 Our
prospects to date have been largely dependent on the success of Veronate, which was the subject
of a pivotal Phase III clinical trial that failed to meet its primary endpoint. Although we have
implemented a reduction in our workforce and decreased our operating expenses, we may be unable to
successfully manage our remaining resources, including available cash, cash equivalents and
short-term investments, while we seek to determine the implications, if any, of the Phase III
Veronate results on our other MSCRAMM-based product candidates and consider other potential
strategic pathways.
 S. aureus
 ®
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The use of MSCRAMM proteins to develop antibody-based products is an unproven approach, and no
antibody-based products that target MSCRAMM proteins have been successfully developed or approved.
 S. aureus
  If the clinical trials involving our product candidates are unsuccessful or delayed, we could be
delayed or precluded from further developing or ultimately selling our product candidates.
   We may be forced to delay, curtail, or terminate the development or commercialization of our
clinical or preclinical product candidates if we are unable to obtain additional funding.
  
    
    the successful development of our product candidates in preclinical and clinical testing;
    
    the time it takes to receive the regulatory approvals needed to market or advance our product candidates
through clinical development;
    
    future payments, if any, received or made under existing or
possible future collaborative arrangements or licences;
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
    
    the costs associated with protecting and expanding our patent and other intellectual property rights; and
    
    the need to acquire rights or licenses to new products or compounds.
   If third-party suppliers upon whom we rely or may rely to provide us with the critical raw material
for Veronate do not perform or fail to comply with strict regulations, our clinical trials for, and
the commercialization of, Veronate could be terminated, delayed, or adversely affected.
   In the event that we need to change our third-party contract manufacturers, our clinical trials and
the commercialization of our products could be delayed, adversely affected or terminated, result in
higher costs, or deprive us of potential product revenues.
   If we fail to establish marketing and sales capabilities or fail to enter into effective sales,
marketing and distribution arrangements with third parties, we may not be able to successfully
commercialize our products.
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Veronate, in its current form, is a blood product derived from human plasma. The administration of
blood products could result in the transmission of infectious diseases or impurities that could
prevent us from selling Veronate or expose us to liability.
   If a third party claims we are infringing on its intellectual property rights, we could incur
significant litigation or licensing expenses, or be prevented from further developing or
commercializing our products.
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If we are unable to retain or attract key employees, advisors or consultants, we may be unable to
successfully develop and commercialize our product candidates or otherwise manage our business
effectively.
  We have experienced losses since our inception. We expect to continue to incur such losses for the
foreseeable future and we may never become profitable.
  
    
    costs related to our research programs and the clinical development of our product candidates; and
    
    general and administrative costs relating to our operations.
  We may be unable to successfully develop or commercialize product candidates that are the subject
of collaborations if our collaborators do not perform.
  Our revenues, expenses and results of operations will be subject to significant fluctuations, which
will make it difficult to compare our operating results from period to period.
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Risks Related to the Ownership of Our Common Stock
 Our common stock price has been highly volatile, and your investment in us could suffer a decline
in value.
  
    
    disclosure of our or our competitors clinical trial status or data;
    
    the approval or commercialization of new products by us or our competitors, and the disclosure thereof;
    
    announcements of scientific innovations by us or our competitors;
    
    rumors relating to us or our competitors;
    
    public concern about the safety of our product candidates, products or similar classes of products;
    
    litigation to which we may become subject;
    
    disclosures of any favorable or unfavorable clinical or regulatory developments concerning our
clinical trials, manufacturing, or product candidates;
    
    actual or anticipated variations in our annual and quarterly operating results;
    
    changes in general conditions or trends in the biotechnology and pharmaceutical industries;
    
    changes in drug reimbursement rates or government policies related to reimbursement;
    
    announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
    
    new regulatory legislation adopted in the United States or abroad;
    
    our failure to achieve or meet equity research analysts expectations or their estimates of our
business, or a change in their recommendations concerning our company, the value of our common stock
or our industry in general;
    
    termination or delay in any of our existing or future collaborative arrangements;
    
    future sales of equity or debt securities, including large block trades or the sale of shares held by
our directors or management;
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
    
    the loss of our eligibility to use Form S-3 due to the amount of our market capitalization
falling below specified levels;
    
    the loss of our eligibility to trade our shares of common stock on the Nasdaq National Exchange due to
our market capitalization and/or price per share falling below specified levels;
    
    changes in accounting principles;
    
    failure to comply with the periodic reporting requirements of publicly-owned companies, under the
Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002; and
    
    general economic conditions.
  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: May 10, 2006
    
    INHIBITEX, INC/s/ Russell H. PlumbRussell H. PlumbVice President, Finance and Administration,Chief Financial Officer
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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
 27