##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2006,
 or
 o
    
    Transition Period Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 For the Transition Period From  to.
 Commission file number 0-19591
 IDM PHARMA, INC.
  Delaware
    
    33-0245076(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 (949) 470-4751
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




---



##### 



IDM PHARMA, INC.
QUARTERLY REPORT
FORM 10-Q
 COVER PAGE
    
    
    1TABLE OF CONTENTS
    
    
    2PART I. FINANCIAL INFORMATIONITEM 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2006
(unaudited) and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations (unaudited) for the
Three and Six Months Ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    23ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33ITEM 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    35ITEM 1A. Risk Factors
    
    
    35ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    *ITEM 3. Defaults upon Senior Securities
    
    
    *ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    52ITEM 5. Other Information
    
    
    *ITEM 6. Exhibits
    
    
    53SIGNATURE
    
    
    55EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  
 *
    
    No information provided due to inapplicability of item. 2




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IDM PHARMA, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,941,000
    
    
    $
    26,702,000Related party accounts receivable
    
    
    3,444,000
    
    
    
    2,540,000Accounts receivable
    
    
    85,000
    
    
    
    904,000Research and development tax credit, current portion
    
    
    553,000
    
    
    
    526,000Prepaid expenses and other current assets
    
    
    1,948,000
    
    
    
    2,223,000Total current assets
    
    
    21,971,000
    
    
    
    32,895,000Property and equipment, net
    
    
    1,965,000
    
    
    
    2,109,000Patents, trademarks and other licenses, net
    
    
    3,701,000
    
    
    
    3,912,000Goodwill
    
    
    2,812,000
    
    
    
    2,812,000Research and development tax credit, less current portion
    
    
    1,342,000
    
    
    
    1,062,000Other long-term assets
    
    
    79,000
    
    
    
    97,000$
    31,870,000
    
    
    $
    42,887,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    5,095,000
    
    
    $
    4,887,000Accrued payroll and related expenses
    
    
    1,772,000
    
    
    
    2,689,000Related party deferred revenues, current portion
    
    
    747,000
    
    
    
    687,000Other current liabilities
    
    
    2,358,000
    
    
    
    2,251,000Total current liabilities
    
    
    9,972,000
    
    
    
    10,514,000Long-term debt, less current portion
    
    
    332,000
    
    
    
    317,000Related party deferred revenues, less current portion
    
    
    2,884,000
    
    
    
    2,875,000Other non-current liabilities
    
    
    495,000
    
    
    
    437,000Stockholders equity:Preferred stock, $.01 par value, 10,000,000 shares authorized and no shares issued
and outstanding at June 30, 2006 and December 31, 2005.
    
    
    
    
    
    
    Common stock, $.01 par value, 55,000,000 shares authorized at June 30, 2006 and
December 31, 2005 and 13,374,520 and 13,219,053 shares issued and outstanding
at June 30, 2006 and December 31, 2005, respectively.
    
    
    134,000
    
    
    
    132,000Additional paid-in capital
    
    
    171,007,000
    
    
    
    170,891,000Deferred compensation
    
    
    
    
    
    
    (368,000
    )Accumulated other comprehensive income
    
    
    15,777,000
    
    
    
    13,165,000Accumulated deficit
    
    
    (168,731,000
    )
    
    
    (155,076,000
    )Total stockholders equity
    
    
    18,187,000
    
    
    
    28,744,000$
    31,870,000
    
    
    $
    42,887,000
 See accompanying notes.
 3




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IDM PHARMA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Research grants and contract revenue
    
    $
    19,000
    
    
    $
    
    
    
    $
    68,000
    
    
    $
    Related party revenue
    
    
    3,008,000
    
    
    
    1,569,000
    
    
    
    5,216,000
    
    
    
    3,141,000License fees, milestones and other revenues
    
    
    9,000
    
    
    
    29,000
    
    
    
    16,000
    
    
    
    29,000Total revenues
    
    
    3,036,000
    
    
    
    1,598,000
    
    
    
    5,300,000
    
    
    
    3,170,000Costs and expenses:Research and development
    
    
    6,178,000
    
    
    
    4,833,000
    
    
    
    11,761,000
    
    
    
    9,678,000Impairment of patents and licenses
    
    
    353,000
    
    
    
    25,000
    
    
    
    353,000
    
    
    
    295,000Selling and marketing
    
    
    79,000
    
    
    
    392,000
    
    
    
    163,000
    
    
    
    650,000General and administrative
    
    
    2,462,000
    
    
    
    1,413,000
    
    
    
    5,254,000
    
    
    
    2,896,000Total costs and expenses
    
    
    9,072,000
    
    
    
    6,663,000
    
    
    
    17,531,000
    
    
    
    13,519,000Loss from operations
    
    
    (6,036,000
    )
    
    
    (5,065,000
    )
    
    
    (12,231,000
    )
    
    
    (10,349,000
    )Interest income, net
    
    
    153,000
    
    
    
    156,000
    
    
    
    309,000
    
    
    
    342,000Other expenses, net
    
    
    (16,000
    )
    
    
    
    
    
    
    (49,000
    )
    
    
    Foreign exchange (loss) gain
    
    
    (1,192,000
    )
    
    
    103,000
    
    
    
    (1,863,000
    )
    
    
    107,000Loss before income tax benefit
    
    
    (7,091,000
    )
    
    
    (4,806,000
    )
    
    
    (13,834,000
    )
    
    
    (9,900,000
    )Income tax benefit
    
    
    71,000
    
    
    
    137,000
    
    
    
    179,000
    
    
    
    578,000Net loss
    
    $
    (7,020,000
    )
    
    $
    (4,669,000
    )
    
    $
    (13,655,000
    )
    
    $
    (9,322,000
    )Weighted average number of shares outstanding
    
    
    13,373,304
    
    
    
    8,378,130
    
    
    
    13,331,672
    
    
    
    8,378,130Basic and diluted loss per share
    
    $
    (0.52
    )
    
    $
    (0.56
    )
    
    $
    (1.02
    )
    
    $
    (1.11
    )Comprehensive loss:Net loss
    
    $
    (7,020,000
    )
    
    $
    (4,669,000
    )
    
    $
    (13,655,000
    )
    
    $
    (9,322,000
    )Other comprehensive (loss) gain
    
    
    1,659,000
    
    
    
    39,000
    
    
    
    2,612,000
    
    
    
    (3,881,000
    )$
    (5,361,000
    )
    
    $
    (4,630,000
    )
    
    $
    (11,043,000
    )
    
    $
    (13,203,000
    )
 See accompanying notes.
 4




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IDM PHARMA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Six months ended June 30,2006
    
    
    2005Operating activitiesNet loss
    
    $
    (13,655,000
    )
    
    $
    (9,322,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Stock-based compensation expense
    
    
    429,000
    
    
    
    14,000Depreciation and amortization
    
    
    665,000
    
    
    
    926,000Impairment of patents and licenses
    
    
    346,000
    
    
    
    290,000Foreign exchange loss
    
    
    1,267,000
    
    
    
    Change in operating assets and liabilities:Related party accounts receivable (Sanofi-Aventis)
    
    
    (677,000
    )
    
    
    (483,000
    )Accounts receivable
    
    
    826,000
    
    
    
    Prepaid expenses and other current assets
    
    
    513,000
    
    
    
    (394,000
    )Research and development tax credit receivable
    
    
    (175,000
    )
    
    
    (621,000
    )Other long-term assets
    
    
    25,000
    
    
    
    (27,000
    )Accounts payable and accrued liabilities
    
    
    (118,000
    )
    
    
    645,000Accrued payroll and related expenses
    
    
    (1,048,000
    )
    
    
    (410,000
    )Related party deferred revenues (Sanofi-Aventis)
    
    
    (204,000
    )
    
    
    (355,000
    )Other liabilities
    
    
    71,000
    
    
    
    653,000Net cash used in operating activities
    
    
    (11,735,000
    )
    
    
    (9,084,000
    )Investing activitiesPurchase of property and equipment
    
    
    (114,000
    )
    
    
    (496,000
    )Patents,
trademarks and other licenses
    
    
    (172,000
    )
    
    
    (99,000
    )Net cash paid for acquisition
    
    
    
    
    
    
    (1,460,000
    )Net cash used in investing activities
    
    
    (286,000
    )
    
    
    (2,055,000
    )Financing activitiesNet proceeds from issuance of common stock
    
    
    49,000
    
    
    
    Net cash provided by (used in) financing activities
    
    
    49,000
    
    
    
    Effect of exchange rate on cash and cash equivalents
    
    
    1,211,000
    
    
    
    (3,695,000
    )Decrease in cash and cash equivalents
    
    
    (10,761,000
    )
    
    
    (14,834,000
    )Cash and
cash equivalents at beginning of period
    
    
    26,702,000
    
    
    
    41,777,000Cash and
cash equivalents at end of period
    
    $
    15,941,000
    
    
    $
    26,943,000
 See accompanying notes.
 5




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##### Table of Contents



IDM PHARMA, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 June 30, 2006
 1. Nature of Business
  
    
    to destroy cancer cells remaining after conventional therapies, and
    
    to prevent tumor recurrence.
   2. Basis of Presentation
  6




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3. Recent Operating Results and Liquidity
   7




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4. Summary of Significant Accounting Policies
  Foreign Currency Translation
     8




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Revenue Recognition
 Revenue Recognition, Revenue Arrangements with Multiple Deliverables.
     Research and development expenses and related tax credit
   9




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Patents
and licenses
   Impairment of long lived assets
 Accounting for
the Impairment or Disposal of Long-Lived Assets
 Goodwill
 Goodwill and Other Intangible Assets
 10




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Earnings per share
 Earnings per
Share
 Antidilutive Shares Outstanding
 June 30,2006
    
    
    2005Options outstanding
    
    
    1,073,930
    
    
    
    608,403Restricted stock awards
    
    
    42,141
    
    
    
    Warrants outstanding
    
    
    325,056
    
    
    
    2,237,862Reserved pursuant to option liquidity agreements
    
    
    389,839
    
    
    
    Reserved pursuant to put/call agreements
    
    
    78,600
    
    
    
    78,600Total Antidilutive Outstanding Shares
    
    
    1,909,566
    
    
    
    2,924,865
 Share-Based Compensation Plans
 Overview
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
  Share Based Payment
 11




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Description of Share-Based Compensation Plans
 1998 IDM Stock Option Plan
 2000 IDM Stock Option Plan
  1989 Stock Plan
 1997 Stock Plan
 12




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2000 Stock Plan
   Employee Stock Purchase Plan
  13




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Impact of the Adoption of SFAS 123(R)
  Three months ended
    
    
    Six months endedJune 30, 2006
    
    
    June 30, 2006Research and development
    
    $
    26,307
    
    
    $
    52,575General and administrative
    
    
    134,964
    
    
    
    374,422Sales and marketing
    
    
    501
    
    
    
    2,003Reduction in operating income
    
    $
    161,772
    
    
    $
    429,000
  Determining Fair Value
 Expected Term
 Expected Volatility
 Risk-Free Interest Rate
 Dividends
 14




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Forfeitures
  Three Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2006Average expected term (years)
    
    
    5.50
    
    
    
    5.50 - 7.00Expected volatility (range)
    
    
    86
    %
    
    
    86% - 95%Risk-free interest rate
    
    
    5.03
    %
    
    
    4.73% - 5.03%Expected dividend yield
    
    
    0
    %
    
    
    0%
 Stock Option Activity and Share-Based Compensation Expense
  Weighted
    
    
    Weighted AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (years)
    
    
    ValueOptions outstanding, December 31, 2005
    
    
    1,547,790
    
    
    $
    14.53Granted
    
    
    56,000
    
    
    $
    4.66Exercised
    
    
    (16,011
    )
    
    $
    3.06Cancelled, forfeited or expired
    
    
    (124,010
    )
    
    $
    12.15Options outstanding, June 30, 2006
    
    
    1,463,769
    
    
    $
    13.43
    
    
    
    6.57
    
    
    $
    39,000Options exercisable, June 30, 2006
    
    
    817,910
    
    
    $
    17.93
    
    
    
    4.57
    
    
    $
    5,000
 15




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Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    AverageRemaining
    
    
    Average
    
    
    
    
    
    
    Exercise PriceOptions
    
    
    Life in
    
    
    Exercise
    
    
    Options
    
    
    of OptionsRange of Exercise Prices
    
    Outstanding
    
    
    Years
    
    
    Price
    
    
    Exercisable
    
    
    Exercisable3.36 to $4.99
    
    
    336,284
    
    
    
    9.52
    
    
    $
    3.42
    
    
    
    38,355
    
    
    $
    3.36$5.00 to $9.99
    
    
    289,844
    
    
    
    9.07
    
    
    
    5.92
    
    
    
    35,306
    
    
    
    5.74$10.00 to $19.99
    
    
    396,787
    
    
    
    2.76
    
    
    
    12.32
    
    
    
    384,263
    
    
    
    12.26$20.00 to $29.99
    
    
    429,732
    
    
    
    6.22
    
    
    
    26.55
    
    
    
    348,864
    
    
    
    26.16$30.00 and above
    
    
    11,122
    
    
    
    1.48
    
    
    
    44.90
    
    
    
    11,122
    
    
    
    44.90Total
    
    
    1,463,769
    
    
    
    6.57
    
    
    $
    13.43
    
    
    
    817,910
    
    
    $
    17.93
      Comparable Disclosures
   16




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5. Business Combination and Name Change








Epimmune common stock
    
    $
    21,301,000Epimmune preferred stock, as-converted to common
    
    
    2,589,000Estimated fair value of options and warrants assumed
    
    
    2,586,000Estimated IDM S.A. direct transaction costs
    
    
    3,298,000Total purchase price
    
    $
    29,774,000








Estimated UsefulAmount
    
    
    LifePurchase price allocation:Net tangible assets (net of liabilities)
    
    $
    1,607,000
    
    

    Licensing and milestone agreements
    
    
    1,600,000
    
    
    5 yearsIn-process research and development (IPR&D)
    
    
    13,300,000
    
    
    Goodwill
    
    
    13,267,000
    
    
    Total purchase price
    
    $
    29,774,000


Accounting for
Research and Development Costs, Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method,




17



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Goodwill and Other Intangible Assets,
 6. Sale of Infectious Disease Related Assets
  (R) (R)
  AmountPrepaids and other current assets
    
    $
    214,000Fixed assets
    
    
    778,000Intangible assets
    
    
    1,627,000Goodwill
    
    
    10,455,000Accrued liabilities
    
    
    (146,000
    )Total carrying value
    
    $
    12,928,000
  18




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Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2005
    
    June 30, 2005Revenues
    
    $
    1,778,000
    
    
    $
    3,593,000Net loss
    
    $
    (6,605,000
    )
    
    $
    (13,841,000
    )Net loss per common share  basic and diluted
    
    $
    (.50
    )
    
    $
    (1.05
    )
 7. Research and Development and Other Agreements
 Jenner Biotherapies, Inc.
  Accounting For Equity Instruments That Are Issued to Other Than
Employees For Acquiring, or in conjunction with Selling, Goods or Services
   19




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Sanofi-Aventis S.A. (Related Party)
     Medarex, Inc. (Related Party)
  Cambridge Laboratories Ltd
   20




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8. Commitments
 Biotecnol S.A.
  Accovion GmbH
  PEA Shares
 Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity
 21




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9. Recent Accounting Pronouncements
  10.
Subsequent Event
  22




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Operating results for the three and six months ended June 30, 2006 are not necessarily indicative
of results that may occur in future periods.
 Except for the historical information contained herein, the following discussion contains
forward-looking statements that involve risks and uncertainties. When used herein, the words
believe, anticipate, expect, estimate and similar expressions are intended to identify such
forward-looking statements. There can be no assurance that these statements will prove to be
correct. Our actual results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed in this
report. We undertake no obligation to update any of the forward-looking statements contained herein
to reflect any future events or developments.
 Overview
  
    
    to destroy cancer cells remaining after conventional therapies,
    
    to prevent tumor recurrence.
   
    
    two products based on Dendritophages, which are dendritic cells, or specialized
immune cells, derived from the patients own white blood cells: Uvidem®, in Phase II for
the treatment of melanoma, jointly developed with Sanofi-Aventis; and Collidem®, in Phase
I/II for the treatment of colorectal cancer; and
    
    EP-2101, a synthetic peptide-based vaccine that is being evaluated in a Phase II
clinical trial for the treatment of non-small cell lung cancer.
   23




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24




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Results of Operations for the Three Months Ended June 30, 2006 and 2005
 Revenues
    25




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Research and Development Expenses and Impairment of Patents and Licenses
    Selling and Marketing Expenses
 General and Administrative Expenses
 Interest Income
 Foreign
Exchange Gain or Loss.
 26




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Income Tax Benefit
  Net Loss
 Results of Operations for the Six Months Ended June 30, 2006 and 2005
 Revenues
     Research and Development Expenses and Impairment of Patents and Licenses
  27




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Selling and Marketing Expenses
 General and Administrative Expenses
 Interest Income
 Foreign
Exchange Gain or Loss.
 Income Tax Benefit
  Net Loss
 Liquidity and Capital Resources
  28




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29




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30




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Off-Balance Sheet Arrangements
  
    
    any obligation under a guarantee contract;
    
    a retained or contingent interest in assets transferred to an unconsolidated entity or
similar arrangement that serves as credit, liquidity or market risk support for such
assets;
    
    any obligation under a derivative instrument that is both indexed to our stock and
classified in shareholders equity, or not reflected, in our statement of financial
position; or
    
    any obligation, including a contingent obligation, arising out of a variable interest,
in an unconsolidated entity that is held by, and material to, us, where such entity
provides financing, liquidity, market risk or credit risk support to us, or engages in
leasing, hedging or research and development services with us.
 Trends
   31




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32




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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.  CONTROLS AND PROCEDURES
   
  33




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
    
    Consolidate operating and financial reporting locations and structure;
    
    Implement additional review and approval procedures over accruals;
    
    Formalize process and documentation related to financial statement close and
consolidation review, including face-to-face meeting of all members of our financial staff
involved in preparation of financial statements and a review of those financial statements
by the entire staff as a group;
    
    Formalize and enhance documentation, oversight and review procedures related to
accounting records of our foreign subsidiary to ensure compliance with U.S. generally
accepted accounting principles;
    
    Review and make appropriate staffing adjustments at all company locations to enhance
accounting expertise;
    
    Revise and enhance the review process for unusual and acquisition related transactions;
    
    Supplement internal staff expertise by consulting with independent, third-party experts
regarding accounting treatment of unusual or non-routine transactions, and the impact of
the adoption of new accounting pronouncements, when and if necessary;
    
    Supplement our accounting and financial staff to improve the breadth and depth of
experience; and
    
    Improve training for, and integration and communication among, accounting and financial
staff.
   34




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PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
 We wish to caution readers that the following important factors, among others, in some cases have
affected our results and in the future could cause our actual results and needs to vary materially
from forward-looking statements made from time to time by us on the basis of managements
then-current expectations. The business in which we are engaged is in rapidly changing and
competitive markets and involves a high degree of risk, and accuracy with respect to
forward-looking projections is difficult.
 The Company has marked with an asterisk those risk factors that reflect changes from the risk
factors included in the Companys Annual Report on Form 10-K filed with the SEC.
 *Our lead product candidate, Junovan, may never obtain regulatory approval.
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*Even if we receive regulatory approval for Junovan, we may not be able to market it successfully.
   *The process of developing immunotherapeutic products requires significant research and
development, preclinical testing and clinical trials, all of which are extremely expensive and
time-consuming and may not result in a commercial product.
  
    
    the results of preclinical studies may be inconclusive, or they may not be indicative
of results that will be obtained in human clinical trials;
    
    after reviewing test results, we may abandon projects that we might previously have
believed to be promising;
    
    after reviewing test results, our collaborators may abandon projects that we might
believe are still promising and we would either have to bear the operating expenses and
capital requirements of continued development of our therapeutic cancer vaccines or abandon
the projects outright;
    
    we, our collaborators or government regulators may suspend or terminate clinical trials
if the participating subjects or patients are being exposed to unacceptable health risks;
    
    clinical trials may be delayed as a result of difficulties in identifying and
enrolling patients who meet trial eligibility criteria;
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
    
    safety and efficacy results attained in early human clinical trials may not be
indicative of results that are obtained in later clinical trials;
    
    the effects of our immunotherapeutic product candidates may not be the desired effects
or may include undesirable side effects or other characteristics that preclude regulatory
approval or limit their commercial use, if ever approved;
    
    the effects of our product candidates on patients may not have the desired effects or
may include undesirable side effects or other characteristics that may delay or preclude
regulatory approval or limit their commercial use, if approved.
  *Our principal source of revenues and cash receipts is a collaboration agreement under which our
partner has limited obligations.
  Our revenues and operating results are likely to fluctuate.
  
    
    any payments from Sanofi-Aventis and any other current or future collaborative partners;
    
    any government and European Union grants and contracts; and
    
    investment income.
  37




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*Our history of operating losses and our expectation of continuing losses may hurt our ability to
reach profitability or continue operations.
  *Our substantial additional capital requirements and potentially limited access to financing may
harm our ability to develop products and fund our operations.
  
    
    whether we are able to secure additional financing on favorable terms, or at all;
    
    the costs associated with, and the success of, obtaining marketing approval and, as
applicable, pricing approval, for Junovan for the treatment of osteosarcoma in the United
States, Europe and other jurisdictions and the timing of any such approval;
    
    the success or failure of the product launch and commercialization of Junovan;
    
    the costs associated with the launch and the commercialization of Junovan in the United
States, Europe and other jurisdictions upon obtaining marketing approval;
 38




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
    
    the costs associated with our clinical trials for our product candidates, including our
Cell Drugs and lung cancer vaccine candidates;
    
    progress with other preclinical testing and clinical trials in the future;
    
    our ability to establish and maintain collaboration and license agreements and any
government contracts and grants;
    
    the actual revenue we receive under our collaboration and license agreements;
    
    the actual costs we incur under our collaboration agreements;
    
    the time and costs involved in obtaining regulatory approvals for our products;
    
    the costs involved in filing, prosecuting, enforcing and defending patent claims and
any other proprietary rights;
    
    competing technological and market developments; and
    
    the magnitude of our immunotherapeutic product discovery and development programs.
   *If we lose our key scientific and management personnel or are unable to attract and retain
qualified personnel, it could delay or hurt our research and product development efforts.
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*Unexpected or undesirable side effects or other characteristics of our products and technology may
delay or otherwise hurt the development of our drug candidates, or may expose us to significant
liability that could cause us to incur significant costs.
   Adverse publicity regarding the safety or side effects of the technology approach or products of
others could negatively impact us and cause the price of our common stock to decline.
  *Our treatment approach may not prove effective.
  
    
    the targeted antigens are not sufficiently different from those normal cells to cause
an immune reaction;
    
    the tumor cells do not express the targeted antigen or other target structures at all
or in sufficient quantities to be recognized by immune system cells, such as T cells or
macrophages;
    
    the immune response provoked by the immunotherapeutic agent is not strong enough to
destroy the cancer; or
    
    cancer cells may, through various biochemical mechanisms, escape an immune response.
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*If we cannot enter into and maintain strategic collaborations on acceptable terms in the future,
we may not be able to develop products in markets where it would be too costly or complex to do so
on our own.
  *If our collaboration or license arrangements are unsuccessful, our revenues and product
development may be limited.
  
    
    collaborations and licensee arrangements may be terminated, in which case we will
experience increased operating expenses and capital requirements if we elect to pursue
further development of the product candidate;
    
    collaborators and licensees may delay clinical trials and prolong clinical development,
underfund a clinical trial program, stop a clinical trial or abandon a product candidate;
    
    expected revenue might not be generated because milestones may not be achieved and
product candidates may not be developed;
    
    collaborators and licensees could independently develop, or develop with third parties,
products that could compete with our future products;
    
    the terms of our contracts with current or future collaborators and licensees may not
be favorable to us in the future;
    
    a collaborator or licensee with marketing and distribution rights to one or more of our
products may not commit enough resources to the marketing and distribution of our products,
limiting our potential revenues from the commercialization of a product; and
    
    disputes may arise delaying or terminating the research, development or
commercialization of our product candidates, or result in significant and costly litigation
or arbitration.
 41




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We may not be able to license technology necessary to develop products.
  *Our supplies of certain materials necessary to our business may be limited and key raw materials
of desired quantity and quality may be difficult to obtain.
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*If we and/or our collaborators cannot cost-effectively manufacture our immunotherapeutic product
candidates in commercial quantities or for clinical trials in compliance with regulatory
requirements, we and/or our collaborators may not be able to successfully commercialize the
products.
   
    
    non-compliance by these third parties with regulatory and quality control standards;
    
    breach by these third parties of their agreements with us; and
    
    termination or nonrenewal of these agreements for reasons beyond our control.
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*We are subject to extensive and uncertain government regulation and we may not be able to obtain
necessary regulatory approvals.
  
    
    fines and penalties;
    
    injunctions;
    
    seizure of products;
    
    total or partial suspension of product marketing;
    
    failure of a regulatory agency to grant marketing authorization;
    
    withdrawal of marketing approvals; and
    
    criminal prosecution.
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*Even if we obtain regulatory approval for our products, we may be required to perform additional
clinical trials or change the labeling of our products if we or others identify side effects after
our products are on the market, which could harm sales of the affected products.
  
    
    regulatory approval may be withdrawn;
    
    reformulation of our products, additional clinical trials, changes in labeling of our
products or changes to or re-certifications of our manufacturing facilities may be
required;
    
    sales of the affected products may drop significantly;
    
    our reputation in the marketplace may suffer; and
    
    lawsuits, including costly and lengthy class action suits, may be brought against us.
  *We may not be able to commercialize products under development by us if those products infringe
claims in existing patents or patents that have not yet issued, and this would materially harm our
ability to operate.
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*Our failure to obtain issued patents and, consequently, to protect our proprietary technology,
could hurt our competitive position.
  
    
    the pending patent applications we have filed or to which we have exclusive rights may
not result in issued patents or may take longer than we expect to result in issued patents;
    
    the allowed claims of any patents that issue may not provide meaningful protection;
    
    we may be unable to develop additional proprietary technologies that are patentable;
    
    the patents licensed or issued to us may not provide a competitive advantage;
    
    other companies may challenge patents licensed or issued to us;
    
    disputes may arise regarding inventions and corresponding ownership rights in
inventions and know-how resulting from the joint creation or use of our intellectual
property and our respective licensors or collaborators; and
    
    other companies may design around the technologies patented by us.
 *If we are unable to compete effectively in the highly competitive biotechnology industry, our
business will fail.
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Litigation regarding intellectual property rights owned or used by us may be costly and
time-consuming.
    
    
    assert against others or defend ourselves against claims of infringement;
    
    enforce patents owned by, or licensed to us from another party;
    
    protect our trade secrets or know-how; or
    
    determine the enforceability, scope and validity of our proprietary rights or those of others.
 If we are unable to protect our trade secrets, we may be unable to protect from competitors our
interests in proprietary know-how that is not patentable or for which we have elected not to seek
patent protection.
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Some of our programs will be funded by the U.S. government and, therefore, the U.S. government may
have rights to certain of our technology and could require us to grant licenses of our inventions
to third parties.
  Successful commercialization of our future products will depend on our ability to gain acceptance
by the medical community.
  
    
    the extent to which our therapeutic product candidates are demonstrated to be safe and
effective in clinical trials;
    
    the existence of adverse side effects;
    
    convenience and ease of administration;
    
    the success of sales, marketing and public relations efforts;
    
    the availability of alternative treatments;
    
    competitive pricing;
    
    the reimbursement policies of governments and other third parties;
    
    effective implementation of a publications strategy; and
    
    garnering support from well-respected external advocates.
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We may experience difficulties managing our growth, which could adversely affect our results of
operations.
  
    
    train, manage, motivate and retain a growing employee base, particularly given our
operations in both California and France;
    
    accurately forecast demand for, and revenues from, our product candidates, particularly
Junovan; and
    
    expand existing operational, financial and management information systems to support
our development and planned commercialization activities and the multiple locations of our
offices.
  Our use of hazardous materials could expose us to significant costs.
   Our financial results may be adversely affected by fluctuations in foreign currency exchange rates.
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*The volatility of the price of our common stock may adversely affect stockholders.
  
    
    the status of development of our product candidates;
    
    whether we are able to secure additional financing on favorable terms, or at all;
    
    announcements of technological innovations or new commercial immunotherapeutic products
by us or others;
    
    governmental regulation that affects the biotechnology and pharmaceutical industries in
general or us in particular;
    
    developments in patent or other proprietary rights by us;
    
    receipt of funding by us under collaboration and license agreements and government grants;
    
    developments in, or termination of, our relationships with our collaborators and licensees;
    
    public concern as to the clinical results and/or the safety of drugs developed by us or others; and
    
    announcements related to the sale of our common stock or other securities.
  *Our principal stockholders, executive officers and directors own a significant percentage of
shares of our common stock and, as a result, the trading price for shares of our common stock may
be depressed. These stockholders may make decisions that may be adverse to your interests.
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*Future sales of shares of our common stock may cause the market price of your shares to decline.
  51




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ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  
    
    The election of eight directors to hold office until the 2007 Annual Meeting of
Stockholders. Elected to serve as directors were Dr. Jean-Loup Romet-Lemonne, Dr. Robert
Beck, Dr. Jean Deleage, Dr. Donald L. Drakeman,
Dr. Sylvie Grégoire, Mr. Michael G. Grey, Dr.
David Haselkorn and Dr. John P. McKearn.
  Nominees
    
    For
    
    WithheldJean-Loup Romet-Lemonne, M.D.
    
    
    9,923,748
    
    
    
    8,624Robert Beck, M.D.
    
    
    9,857,516
    
    
    
    74,856Jean Deleage, Ph.D.
    
    
    9,923,199
    
    
    
    9,173Donald L. Drakeman, Ph.D.
    
    
    9,923,798
    
    
    
    8,574Sylvie Grégoire, Pharma. D.
    
    
    9,923,401
    
    
    
    8,971Michael G. Grey
    
    
    9,923,442
    
    
    
    8,930David Haselkorn, Ph.D.
    
    
    9,923,556
    
    
    
    8,816John P. McKearn, Ph.D.
    
    
    9,923,402
    
    
    
    8,970
 
    
    For approval of an amendment to the Companys 2000 Stock Plan to increase the aggregate
number of shares of Common Stock authorized for issuance under the Plan from 1,628,571 to
2,228,571 shares and to increase the limitation on the total number of shares subject to
stock awards under the Plan that an employee is eligible to be granted during any calendar
year from 71,428 to 500,000 shares.
  For:
    
    
    6,786,585Against:
    
    
    931,168Abstained:
    
    
    802,980Non-Votes:
    
    
    1,411,639
 
    
    To ratify the selection by the Board of Directors of Ernst & Young LLP, Independent
Registered Public Accounting Firm, as the independent registered public accounting firm of
the Company for its fiscal year ending December 31, 2006.
  For:
    
    
    9,908,384Against:
    
    
    14,093Abstained:
    
    
    9,895Non-Votes:
    
    
    
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ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    Document Description3.1
    
    
    Amended and Restated Certificate of Incorporation filed with the
Secretary of State of Delaware on December 2, 1991.(1)3.2
    
    
    Certificate of Designation of Series A Junior Participating
Preferred Stock filed with the Secretary of State of Delaware on
April 2, 1993.(2)3.3
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
July 5, 1995.(3)3.4
    
    
    Certificate of Increase of Series A Junior Participating
Preferred Stock filed with the Secretary of State of Delaware on
July 5, 1995.3.5
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
July 2, 1998.(4)3.6
    
    
    Certificate of Increase of Series A Junior Participating
Preferred Stock filed with the Secretary of State of Delaware on
July 2, 1998.(4)3.7
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
November 12, 1998.(5)3.8
    
    
    Certificate of Designations of the Series S and Series S-1
Preferred Stock filed with the Secretary of State of Delaware on
June 29, 1999.(6)3.9
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
July 1, 1999.(7)3.10
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
September 23, 1999.(8)3.11
    
    
    Certificate of Decrease of Series A Junior Participating
Preferred Stock filed with the Secretary of State of Delaware on
September 23, 1999.(8)3.12
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
June 17, 2004.(9)3.13
    
    
    Certificate of Amendment of Amended and Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
August 15, 2005.(10)3.14
    
    
    Certificate of Ownership and Merger, filed with the Secretary of
State of Delaware on August 15, 2005.(10)3.15
    
    
    Amended and Restated Bylaws of the Company.(11)4.1
    
    
    Reference is made to Exhibits 3.1 through 3.15.4.2
    
    
    Specimen certificate of the Common Stock.(12)31.1
    
    
    Certification of Principal Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended.31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended.32.1
    
    
    Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of
the Securities Exchange Act of 1934, as amended, and Section
1350 of Chapter 63 of Title 18 of the United States Code (18
U.S.C. § 1350).
 
 (1)
    
    Incorporated by reference to the Companys Form S-1 Registration Statement and Amendments thereto filed with Securities and Exchange Commission (the SEC) (File No. 33-43356).(2)
    
    Incorporated by reference to the Companys Form 8-K, filed with the SEC on March 22, 1993.(3)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the SEC on March 31, 1995. 53




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(4)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, filed with the SEC on August 14, 1998.(5)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, filed with the SEC on November 16, 1998.(6)
    
    Incorporated by reference to the Companys Form 8-K, filed with the SEC on July 16, 1999.(7)
    
    Incorporated by reference to the Companys Definitive Proxy Statement, filed with the SEC on Form DEF 14A on July 28, 1999.(8)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed with the SEC on November 15, 1999.(9)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8, filed with the SEC on July 2, 2004.(10)
    
    Incorporated by reference to the Companys Current Report on Form 8-K, filed with the SEC on August 17, 2005.(11)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the SEC on March 29, 2002.(12)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8, filed with the SEC on September 8, 2005. 54




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IDM PHARMA, INC.
 
 SIGNATURES
  IDM PHARMA, INC.Dated: August 14, 2006
    
    By:
    
    /s/ Jean-Loup Romet-Lemonne

Jean-Loup Romet-Lemonne, M.D.Chief Executive Officer(Principal Executive Officer)Dated: August 14, 2006
    
    By:
    
    /s/ Hervé Duchesne de Lamotte

Hervé Duchesne de LamotteActing Principal Financial and Accounting Officer
 55