##### Table of Contents









Form 10-Q/A


(Amendment No. 1)


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended March 31, 2005                                               
|          
|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


EPIMMUNE INC.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 33-0245076                              
|                                                                   |  |                                         
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

5820 Nancy Ridge Drive


San Diego, California 92121


(Address of principal executive offices and zip code)


(858) 860-2500


(Registrants telephone number, including area code)


þ o


o þ














---










EPIMMUNE INC.


QUARTERLY REPORT


FORM 10-Q





|                              |                                                                                                           |   |   
|----------------------------- | --------------------------------------------------------------------------------------------------------- | - | --
|COVER PAGE                    |                                                                                                           | 1
|TABLE OF CONTENTS             |                                                                                                           | 2
|PART I. FINANCIAL INFORMATION |                                                                                                           |  
|                              | ITEM 1. Financial Statements                                                                              |   |   
|                              | Condensed
    Balance Sheets as of March 31, 2005 (unaudited) and
    December 31, 2004                   |   | 3 
|                              | Condensed
    Statements of Operations (unaudited) for the Three Months
    Ended March 31, 2005 and 2004 |   | 4 
|                              | Condensed
    Statements of Cash Flows (unaudited) for Three Months Ended
    March 31, 2005 and 2004     |   | 5 
|                              | Notes
    to Condensed Financial Statements (unaudited)                                                   |   | 6 
|                              | ITEM 2. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations     |   | 10
|                              | ITEM 3. Quantitative and
    Qualitative Disclosures about Market Risk                                    |   | 14
|                              | Risk
    Factors                                                                                          |   | 15
|                              | ITEM 4. Controls and
    Procedures                                                                       |   | 26
|PART II. OTHER INFORMATION    |                                                                                                           |  
|                              | ITEM 1. Legal Proceedings                                                                                 |   | 27
|                              | ITEM 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                                           |   | * 
|                              | ITEM 5. Other Information                                                                                 |   | * 
|                              | ITEM 6. Exhibits                                                                                          |   | 27
|                              | SIGNATURE                                                                                                 |   | 29
|EXHIBIT 31.1                  |                                                                                                           |  
|EXHIBIT 31.2                  |                                                                                                           |  
|EXHIBIT 32.1                  |                                                                                                           |  
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 











|  |                                                        
|- | -------------------------------------------------------
|* | No information provided due to inapplicability of item.

2



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION





ITEM I.     FINANCIAL
STATEMENTS


EPIMMUNE INC.





CONDENSED BALANCE SHEETS


|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |   |        |          |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------ | -------- | ------------ | - | ------ | -------- | -
|                                           |                                                                                                                                                                                                                                                                                                   | March 31,                   |        |          | December 31, |  
|                                           |                                                                                                                                                                                                                                                                                                   | 2005                        |        |          | 2004         |  
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|                                           |                                                                                                                                                                                                                                                                                                   | (Unaudited)                 |        |          |             
|                                           |                                                                                                                                                                                                                                                                                                   | (In thousands, except share |       
|                                           |                                                                                                                                                                                                                                                                                                   | and per share data)         |       
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |   |        |         
|                                           | Cash and cash equivalents                                                                                                                                                                                                                                                                         |                             | $      | 5,673    |              |   | $      | 7,006    |  
|                                           | Accounts receivable                                                                                                                                                                                                                                                                               |                             |        | 1,110    |              |   |        | 2,667    |  
|                                           | Prepaids and other current assets                                                                                                                                                                                                                                                                 |                             |        | 334      |              |   |        | 221      |  
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|Total current assets                       |                                                                                                                                                                                                                                                                                                   |                             | 7,117  |          |              |   | 9,894  |         
|Restricted long-term cash                  |                                                                                                                                                                                                                                                                                                   |                             | 354    |          |              |   | 354    |         
|Property and equipment, net                |                                                                                                                                                                                                                                                                                                   |                             | 962    |          |              |   | 1,032  |         
|Patents and other assets                   |                                                                                                                                                                                                                                                                                                   |                             | 3,447  |          |              |   | 3,527  |         
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|TOTAL ASSETS                               |                                                                                                                                                                                                                                                                                                   | $                           | 11,880 |          |              | $ | 14,807 |         
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |   |        |         
|                                           | Accounts payable, trade                                                                                                                                                                                                                                                                           |                             | $      | 1,213    |              |   | $      | 1,013    |  
|                                           | Accrued liabilities                                                                                                                                                                                                                                                                               |                             |        | 1,008    |              |   |        | 1,700    |  
|                                           | Deferred contract revenues                                                                                                                                                                                                                                                                        |                             |        | 493      |              |   |        | 607      |  
|                                           | Accrued payroll and related expenses                                                                                                                                                                                                                                                              |                             |        | 192      |              |   |        | 161      |  
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|Total current liabilities                  |                                                                                                                                                                                                                                                                                                   |                             | 2,906  |          |              |   | 3,481  |         
|Deferred rent                              |                                                                                                                                                                                                                                                                                                   |                             | 208    |          |              |   | 210    |         
|Stockholders equity:                      |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |   |        |         
|                                           | Preferred stock, $.01 par value, 10,000,000 shares
    authorized, 1,409,288 shares issued and outstanding of
    Series S and S-1 convertible preferred stock at
    March 31, 2005 and December 31, 2004. Liquidation
    preference of $10,000,000 at March 31, 2005 and
    December 31, 2004 |                             |        | 14       |              |   |        | 14       |  
|                                           | Common stock, $.01 par value, 40,000,000 shares
    authorized, 16,023,786 shares and 16,011,655 shares
    issued and outstanding at March 31, 2005 and
    December 31, 2004, respectively                                                                                                      |                             |        | 160      |              |   |        | 160      |  
|                                           | Additional paid-in capital                                                                                                                                                                                                                                                                        |                             |        | 172,942  |              |   |        | 172,933  |  
|                                           | Deferred compensation                                                                                                                                                                                                                                                                             |                             |        | (165     | )            |   |        | (184     | )
|                                           | Accumulated deficit                                                                                                                                                                                                                                                                               |                             |        | (164,185 | )            |   |        | (161,807 | )
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|Total stockholders equity                 |                                                                                                                                                                                                                                                                                                   |                             | 8,766  |          |              |   | 11,116 |         
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                                                                                                                                   | $                           | 11,880 |          |              | $ | 14,807 |         
|                                           |                                                                                                                                                                                                                                                                                                   |                             |        |          |              |  



3



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EPIMMUNE INC.





CONDENSED STATEMENTS OF OPERATIONS


|                                            |                                        |                       |        |       |      |   |        |       | 
|------------------------------------------- | -------------------------------------- | --------------------- | ------ | ----- | ---- | - | ------ | ----- | 
|                                            |                                        | Three Months Ended    |       
|                                            |                                        | March 31,             |       
|                                            |                                        |                       |       
|                                            |                                        | 2005                  |        |       | 2004 |  
|                                            |                                        |                       |        |       |      |  
|                                            |                                        | (Unaudited)           |       
|                                            |                                        | (In thousands, except |       
|                                            |                                        | per share data)       |       
|Revenues                                    |                                        |                       |        |       |      |   |        |      
|                                            | License fees and milestones            |                       | $      | 114   |      |   | $      | 97    | 
|                                            | Research grants and contract revenue   |                       |        | 1,719 |      |   |        | 1,454 | 
|                                            | Related party revenue                  |                       |        |      |      |   |        | 1,026 | 
|                                            |                                        |                       |        |       |      |  
|Total revenues                              |                                        |                       | 1,833  |       |      |   | 2,577  |      
|Costs and expenses:                         |                                        |                       |        |       |      |   |        |      
|                                            | Research and development               |                       |        | 2,686 |      |   |        | 2,407 | 
|                                            | General and administrative             |                       |        | 467   |      |   |        | 658   | 
|                                            | Business combination transaction costs |                       |        | 1,089 |      |   |        |      | 
|                                            |                                        |                       |        |       |      |  
|Total costs and expenses                    |                                        |                       | 4,242  |       |      |   | 3,065  |      
|Loss from operations                        |                                        |                       | (2,409 | )     |      |   | (488   | )    
|Interest income, net                        |                                        |                       | 36     |       |      |   | 4      |      
|Other expense, net                          |                                        |                       | (5     | )     |      |   | (1     | )    
|                                            |                                        |                       |        |       |      |  
|Net loss                                    |                                        | $                     | (2,378 | )     |      | $ | (485   | )    
|                                            |                                        |                       |        |       |      |  
|Net loss per share  basic and diluted      |                                        | $                     | (0.15  | )     |      | $ | (0.04  | )    
|                                            |                                        |                       |        |       |      |  
|Shares used in computing net loss per share |                                        |                       | 16,015 |       |      |   | 13,456 |      
|                                            |                                        |                       |        |       |      |  



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EPIMMUNE INC.





CONDENSED STATEMENTS OF CASH FLOWS


|                                                                                |                                             |                                      |        |      |       |   |        |      |      |  
|------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------ | ------ | ---- | ----- | - | ------ | ---- | ---- | -
|                                                                                |                                             | Three Months Ended                   |       
|                                                                                |                                             | March 31,                            |       
|                                                                                |                                             |                                      |       
|                                                                                |                                             | 2005                                 |        |      | 2004  |  
|                                                                                |                                             |                                      |        |      |       |  
|                                                                                |                                             | (Unaudited)                          |       
|                                                                                |                                             | (In thousands)                       |       
|OPERATING ACTIVITIES                                                            |                                             |                                      |        |      |       |   |        |     
|Net loss                                                                        |                                             | $                                    | (2,378 | )    |       | $ | (485   | )   
|Adjustments to reconcile net loss to net cash used in operating
    activities: |                                             |                                      |        |      |       |   |        |     
|                                                                                | Depreciation and amortization               |                                      |        | 215  |       |   |        | 220  |     
|                                                                                | Stock-based compensation                    |                                      |        | 17   |       |   |        | 12   |     
|                                                                                | Deferred rent                               |                                      |        | (2   | )     |   |        | 3    |     
|                                                                                | Deferred revenue                            |                                      |        | (114 | )     |   |        | (229 | )   
|                                                                                | Write-off of abandoned patents              |                                      |        | 102  |       |   |        |     |     
|                                                                                | Change in operating assets and liabilities: |                                      |        |      |       |   |        |      |     
|                                                                                |                                             | Accounts receivable                  |        |      | 1,557 |   |        |      | (559 | )
|                                                                                |                                             | Prepaids and other current assets    |        |      | (113  | ) |        |      | (179 | )
|                                                                                |                                             | Accounts payable, trade              |        |      | 200   |   |        |      | 290  |  
|                                                                                |                                             | Accrued liabilities                  |        |      | (685  | ) |        |      | (184 | )
|                                                                                |                                             | Accrued payroll and related expenses |        |      | 31    |   |        |      | 152  |  
|                                                                                |                                             |                                      |        |      |       |  
|Net cash used in operating activities                                           |                                             |                                      | (1,170 | )    |       |   | (959   | )   
|INVESTING ACTIVITIES                                                            |                                             |                                      |        |      |       |   |        |     
|Purchase of property and equipment                                              |                                             |                                      | (3     | )    |       |   | (17    | )   
|Patents and other assets                                                        |                                             |                                      | (163   | )    |       |   | (244   | )   
|                                                                                |                                             |                                      |        |      |       |  
|Net cash used in investing activities                                           |                                             |                                      | (166   | )    |       |   | (261   | )   
|FINANCING ACTIVITIES                                                            |                                             |                                      |        |      |       |   |        |     
|Net proceeds from issuance of common stock                                      |                                             |                                      | 3      |      |       |   | 5      |     
|                                                                                |                                             |                                      |        |      |       |  
|Net cash provided by financing activities                                       |                                             |                                      | 3      |      |       |   | 5      |     
|Decrease in cash and cash equivalents                                           |                                             |                                      | (1,333 | )    |       |   | (1,215 | )   
|Cash and cash equivalents at beginning of year                                  |                                             |                                      | 7,006  |      |       |   | 6,416  |     
|                                                                                |                                             |                                      |        |      |       |  
|Cash and cash equivalents at end of period                                      |                                             | $                                    | 5,673  |      |       | $ | 5,201  |     
|                                                                                |                                             |                                      |        |      |       |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                |                                             |                                      |        |      |       |   |        |     
|Interest paid                                                                   |                                             | $                                    | 1      |      |       | $ | 2      |     
|                                                                                |                                             |                                      |        |      |       |  
|Reclassification of unvested common shares from liabilities to
    equity       |                                             | $                                    | 7      |      |       | $ | 44     |     
|                                                                                |                                             |                                      |        |      |       |  



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EPIMMUNE INC.





NOTES TO CONDENSED FINANCIAL STATEMENTS


(Unaudited)


March 31, 2005




|   |                      
|-- | ---------------------
|1. | Basis of Presentation









Earnings per Share


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EPIMMUNE INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS  (Continued)




|                               |  |      |            |  |      |  |            | 
|------------------------------ |  | ---- | ---------- |  | ---- |  | ---------- | 
|                               |  | 2005 |            |  | 2004 | 
|                               |  |      |            |  |      | 
|Common stock outstanding       |  |      | 16,023,786 |  |      |  | 13,525,622 | 
|Preferred shares, as converted |  |      | 1,787,572  |  |      |  | 1,703,298  | 
|Options outstanding            |  |      | 2,396,316  |  |      |  | 1,777,943  | 
|Warrants outstanding           |  |      | 2,275,426  |  |      |  | 797,198    | 
|                               |  |      |            |  |      | 
|Fully diluted shares           |  |      | 22,483,100 |  |      |  | 17,804,061 | 
|                               |  |      |            |  |      | 

Accounting for
Stock-based Compensation Accounting for Stock Issued to Employees


Accounting for Stock-Based
Compensation  Transition and Disclosure




|                     |                                                                                                                     |                    |            |          |      |   |          |          |  
|-------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------ | ---------- | -------- | ---- | - | -------- | -------- | -
|                     |                                                                                                                     | Three Months Ended |           
|                     |                                                                                                                     | March 31,          |           
|                     |                                                                                                                     |                    |           
|                     |                                                                                                                     | 2004               |            |          | 2003 |  
|                     |                                                                                                                     |                    |            |          |      |  
|Net loss as reported |                                                                                                                     | $                  | (2,378,000 | )        |      | $ | (485,000 | )       
|                     | Add: stock-based employee compensation expense included in
    reported net loss                                    |                    |            | 15,000   |      |   |          |         |  
|                     | Deduct: total stock-based employee compensation expense
    determined under fair value based method for all awards |                    |            | (288,000 | )    |   |          | (216,000 | )
|                     |                                                                                                                     |                    |            |          |      |  
|Pro forma net loss   |                                                                                                                     | $                  | (2,651,000 | )        |      | $ | (701,000 | )       
|                     |                                                                                                                     |                    |            |          |      |  
|Net loss per share:  |                                                                                                                     |                    |            |          |      |   |          |         
|                     | Basic and diluted  as reported                                                                                     |                    | $          | (0.15    | )    |   | $        | (0.04    | )
|                     |                                                                                                                     |                    |            |          |      |  
|                     | Basic and diluted  pro forma                                                                                       |                    | $          | (0.17    | )    |   | $        | (0.05    | )
|                     |                                                                                                                     |                    |            |          |      |  

Share-Based Payments


7



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EPIMMUNE INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS  (Continued)






|   |                                            
|-- | -------------------------------------------
|2. | Proposed Business Combination with IDM S.A.











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EPIMMUNE INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS  (Continued)






9



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS











Critical Accounting Policies




10



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| |                    
| | -------------------
| | Revenue Recognition

Revenue Recognition.












| |        
| | -------
| | Patents





| |                  
| | -----------------
| | Investment Policy



Results of Operations




| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Three months ended March 31, 2005, as compared with
    three months ended March 31, 2004.



11



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|                |  |                    |           |  |      |   |           | 
|--------------- |  | ------------------ | --------- |  | ---- | - | --------- | 
|                |  | Three Months Ended |          
|                |  | March 31,          |          
|                |  |                    |          
|                |  | 2005               |           |  | 2004 |  
|                |  |                    |           |  |      |  
|Cancer Programs |  | $                  | 942,000   |  |      | $ | 450,000   | 
|HIV Programs    |  |                    | 929,000   |  |      |   | 1,200,000 | 
|Collaborations  |  |                    | 408,000   |  |      |   | 349,000   | 
|Other Programs  |  |                    | 406,000   |  |      |   | 408,000   | 
|                |  |                    |           |  |      |  
|                |  | $                  | 2,685,000 |  |      | $ | 2,407,000 | 
|                |  |                    |           |  |      |  



|                |  |                    |           |  |      |   |           | 
|--------------- |  | ------------------ | --------- |  | ---- | - | --------- | 
|                |  | Three Months Ended |          
|                |  | March 31,          |          
|                |  |                    |          
|                |  | 2005               |           |  | 2004 |  
|                |  |                    |           |  |      |  
|Cancer Programs |  | $                  | 183,000   |  |      | $ | 114,000   | 
|HIV Programs    |  |                    | 935,000   |  |      |   | 1,154,000 | 
|Collaborations  |  |                    | 408,000   |  |      |   | 349,000   | 
|Other Programs  |  |                    | 108,000   |  |      |   | 194,000   | 
|                |  |                    |           |  |      |  
|                |  | $                  | 1,634,000 |  |      | $ | 1,811,000 | 
|                |  |                    |           |  |      |  



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Liquidity and Capital Resources












13



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##### Table of Contents







| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether our proposed transaction with IDM is successfully
    completed;                                                                                                                 
|
| |  | whether we are able to secure additional financing on favorable
    terms, or at all;                                                                                                    
|
| |  | the costs associated with our ongoing Phase I/ II clinical
    trial for our vaccine targeting HIV, which began in September
    2002, including the status of our contract with the NIH;
|
| |  | the costs associated with our Phase II clinical trial for
    our vaccine targeting lung cancer, which began in December 2004;                                                           
|
| |  | 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 research collaboration with
    Bavarian Nordic;                                                                                                     
|
| |  | the time and costs involved in obtaining regulatory approvals;                                                                                                                           
|
| |  | the costs involved in filing, prosecuting, enforcing and
    defending patent claims and any other proprietary rights;                                                                   
|
| |  | competing technological and market developments;                                                                                                                                         
|
| |  | changes in our existing research relationships;                                                                                                                                          
|
| |  | continued scientific progress in our drug discovery
    programs; and                                                                                                                    
|
| |  | the magnitude of our drug discovery and development programs.                                                                                                                            








|        |                                                              
|------- | -------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
    RISK



14



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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 rapidly
changing and competitive and involves a high degree of risk.




| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our substantial additional financing requirements and
    limited access to financing, which will likely be even more
    limited in the absence of the proposed combination with IDM, may
    adversely affect our ability to develop products and fund our
    operations.





| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether our proposed transaction with IDM is successfully
    completed;                                                                                                                 
|
| |  | whether we are able to secure additional financing on favorable
    terms, or at all;                                                                                                    
|
| |  | the costs associated with our ongoing Phase I/ II clinical
    trial for our vaccine targeting HIV, which began in September
    2002, including the status of our contract with the NIH;
|
| |  | the costs associated with our Phase II clinical trial for
    our vaccine targeting NSCLC, which began in December 2004;                                                                 
|
| |  | 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 research collaboration with
    Bavarian Nordic;                                                                                                     
|
| |  | the time and costs involved in obtaining regulatory approvals;                                                                                                                           
|
| |  | the costs involved in filing, prosecuting, enforcing and
    defending patent claims and any other proprietary rights;                                                                   
|
| |  | competing technological and market developments;                                                                                                                                         
|
| |  | changes in our existing research relationships;                                                                                                                                          
|
| |  | continued scientific progress in our drug discovery
    programs; and                                                                                                                    
|
| |  | the magnitude of our drug discovery and development programs.                                                                                                                            

15



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| |                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We presently do not meet all of The Nasdaq National
    Markets continued listing requirements and we may be
    delisted, which could reduce the liquidity of our common stock
    and adversely affect our ability to raise additional necessary
    capital.





| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The process of developing therapeutic 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 or our collaborators may
    abandon projects that we might previously have believed to be
    promising;              

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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we, our collaborators or regulators may suspend or terminate
    clinical trials if the participating subjects or patients are
    being exposed to unacceptable health risks;                                                          
|
| |  | we may have to delay clinical trials as a result of scheduling
    conflicts with participating clinicians and clinical
    institutions, or difficulties in identifying and enrolling
    patients who meet trial eligibility criteria;
|
| |  | safety and efficacy results attained in early human clinical
    trials may not be indicative of results that are obtained in
    later clinical trials; and                                                                            
|
| |  | the effects our vaccine candidates have 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.   





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our programs are funded by the
    U.S. government and the government may not allocate funds
    for these programs in future fiscal years.



Our history of operating losses and our expectations of
continuing losses may hurt our ability to reach profitability or
continue operations.






| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | We are at an early stage of development, and we may
    experience delays and other problems in entering clinical
    trials.



17



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| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Unexpected side effects or other characteristics of our
    technology may delay or otherwise hurt the development of our
    vaccine candidates.





| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There are no therapeutic vaccines that have been approved
    for use by the FDA and our vaccines may not work, which would
    prevent us from ever becoming profitable.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Adverse publicity regarding the safety or side effects of
    the technology approach or products of others could reduce our
    revenues and cause our stock price to fall.





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | Our research and development programs may not yield
    effective product candidates, which could prevent us from
    developing our products.





| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We may not identify the correct epitopes and, therefore,
    not develop a safe or effective vaccine.





| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Our business is based on a novel technology, which has not
    been used in any commercial drugs, and may not work.



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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 intellectual property by us, our
    licensors, or collaborators; and
|
| |  | other companies may design around our patented technologies.                                                                                                                                                                   



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Our competitors may develop products that are more
    effective and that render our potential products
    obsolete.





| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | If we are unable to compete effectively in the highly
    competitive biotechnology industry, our business will
    fail.





| |   |                                     
| | - | ------------------------------------
| |  | pharmaceutical companies;           
|
| |  | chemical companies;                 
|
| |  | specialized biotechnology companies;
|
| |  | academic institutions; and          
|
| |  | research organizations.             



19



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PhRMA PhRMA




| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | 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 in our portfolio owned by us or licensed from
    another party;                 
|
| |  | protect our trade secrets or know-how; or                                                        
|
| |  | determine the enforceability, scope and validity of the
    proprietary rights of ours or others.



| |                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we cannot obtain 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.



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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | If our collaboration or license arrangements are
    unsuccessful, our revenues and product development may be
    limited.





| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | collaborators and licensees may not pursue further development
    and commercialization of potential products resulting from our
    collaborations or may elect not to renew research and
    development programs;                                                          
|
| |  | collaborators and licensees may delay clinical trials,
    under-fund a clinical trial program, stop a clinical trial or
    abandon a product candidate, repeat or conduct new clinical
    trials or require new formulation of a product candidate for
    clinical testing;
|
| |  | 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 our 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;   
|
| |  | disputes may arise delaying or terminating the research,
    development or commercialization of our product candidates, or
    result in significant and costly litigation or
    arbitration; and                                                                            
|
| |  | collaborations and licensee arrangements may be terminated and
    we will experience increased operating expenses and capital
    requirements if we elect to pursue further development of the
    product candidate.                                                        



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We may not be able to obtain licenses to technology that
    is necessary for us to develop products.





| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to commercialize our products under
    development if they 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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| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we, or our collaborators cannot cost-effectively
    manufacture vaccines in commercial quantities and for clinical
    trials in compliance with regulatory requirements, we, or our
    collaborators may not be able to successfully commercialize the
    products.







| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not successfully develop and commercialize our
    products, we may never generate significant revenues or become
    profitable.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The lengthy approval process and uncertainty of government
    regulatory requirements may impair our ability to develop,
    manufacture and sell any vaccines.





| |   |                                                           
| | - | ----------------------------------------------------------
| |  | fines and penalties;                                      
|
| |  | injunctions;                                              
|
| |  | seizure of products;                                      
|
| |  | total or partial suspension of product marketing;         
|
| |  | failure of the government to grant a new drug application;
|
| |  | withdrawal of marketing approvals; and                    
|
| |  | criminal prosecution.                                     



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| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The approval process outside the United States is also
    uncertain and may limit our ability to develop, manufacture and
    sell our products internationally.





| |                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Even if we obtain regulatory approval, 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-approvals 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.                                                                                            





| |                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



23



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| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we lose our key scientific and management personnel or
    are unable to attract and retain qualified personnel, it could
    delay or hurt our epitope identification and vaccine development
    efforts.





| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We out-license technology outside of our core area of
    focus, and these licensees may not develop any products using
    our technology, which may limit our revenue.





| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our programs are funded by the
    U.S. government and, therefore, the government may have
    rights to certain of our technology and could require us to
    grant licenses of our technology to third parties.





| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Adverse determinations concerning product pricing,
    reimbursement and related matters could prevent us from
    successfully commercializing products and impair our ability to
    generate revenues.





| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | Product liability risks may expose us to significant
    liability that could cause us to incur significant costs or
    cease developing our products.



24



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| |                                                                         
| | ------------------------------------------------------------------------
| | Our use of hazardous materials could expose us to
    significant costs.





| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The subordination of our common stock to our preferred
    stock could hurt common stockholders and, upon conversion, our
    preferred stock will further dilute our holders of common
    stock.





| |                                                                               
| | ------------------------------------------------------------------------------
| | The volatility of the price of our common stock may hurt
    our stockholders.





| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | whether we are able to secure additional financing on favorable
    terms, or at all;                                   
|
| |  | announcements of technological innovations or new commercial
    vaccines or other therapeutic products by us or others;
|
| |  | governmental regulation that affects the biotechnology and
    pharmaceutical industries;                               
|
| |  | developments in patent or other proprietary rights;                                                                     
|
| |  | receipt of funding 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 stock.                                                                         





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Concentration of ownership among our existing officers,
    directors and principal stockholders may prevent other
    stockholders from influencing significant corporate decisions
    and depress our stock price.



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| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Compliance with the Sarbanes-Oxley Act of 2002 and other
    changing regulations of corporate governance and public
    disclosure may result in additional expenses.








|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES









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PART II.     OTHER
INFORMATION







|        |                  
|------- | -----------------
|ITEM 1. | LEGAL PROCEEDINGS








|        |         
|------- | --------
|ITEM 6. | EXHIBITS

|              |  |  |  |                                                                                                                                                                  
|------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1   |  |  |  | Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of Delaware on December 2, 1991.(1)                                      
|Exhibit 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)           
|Exhibit 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)          
|Exhibit 3.4   |  |  |  | Certificate of Increase of Series A Junior Participating
    Preferred Stock filed with the Secretary of State of Delaware on
    July 5, 1995.                  
|Exhibit 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)          
|Exhibit 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)               
|Exhibit 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)     
|Exhibit 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)            
|Exhibit 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)          
|Exhibit 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)    
|Exhibit 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)         
|Exhibit 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)         
|Exhibit 3.13  |  |  |  | Amended and Restated Bylaws of the Registrant.(10)                                                                                                               
|Exhibit 4.1   |  |  |  | Reference is made to Exhibits 3.1 through 3.13.                                                                                                                  
|Exhibit 4.2   |  |  |  | Specimen certificate of the common stock.(1)                                                                                                                     
|Exhibit 10.1  |  |  |  | Share Exchange Agreement dated March 15, 2005 among
    Epimmune Inc. and certain shareholders of IDM S.A.(11)                                                   
|Exhibit 10.3  |  |  |  | Amendment No. 1 (to the Share Exchange Agreement) dated
    March 15, 2005 among Epimmune Inc. and certain shareholders
    of IDM S.A.(11)                      
|Exhibit 10.4  |  |  |  | Voting Agreement dated March 15, 2005 among Epimmune Inc.,
    Hélène Ploix, as the Shareholder Representative, and
    certain stockholders of Epimmune Inc.(11)
|Exhibit 10.5  |  |  |  | Preferred Exchange Agreement dated March 15, 2005.(11)                                                                                                           
|Exhibit 10.6  |  |  |  | Employment Agreement with Emile Loria, M.D. dated
    March 17, 2005.(11)                                                                                        
|Exhibit 10.7  |  |  |  | Employment Agreement with Mark Newman, Ph.D. dated
    March 17, 2005.(11)                                                                                       
|Exhibit 10.8  |  |  |  | Employment Agreement with Robert De Vaere dated March 17,
    2005.(11)                                                                                          
|Exhibit 10.9  |  |  |  | Amended and Restated Preferred Exchange Agreement dated
    April 12, 2005.(12)                                                                                  
|Exhibit 10.10 |  |  |  | Amendment No. 2 (to the Share Exchange Agreement) dated
    April 21, 2005 among Epimmune Inc. and certain shareholders
    of IDM S.A.(13)                      
|Exhibit 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.            

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##### Table of Contents



|             |  |  |  |                                                                                                                                                                                                                        
|------------ |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 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.                                                                  
|Exhibit 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.                            
|   
|(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 Annual Report on
    Form 10-K for the fiscal year ended December 31, 2001,
    filed with the SEC on March 29, 2002.
|    
|(11) | Incorporated by reference to our Current Report on
    Form 8-K, filed with the SEC on March 18, 2005.                                                          
|    
|(12) | Incorporated by reference to our Current Report on
    Form 8-K, filed with the SEC on April 18, 2005.                                                          
|    
|(13) | Incorporated by reference to our Current Report on
    Form 8-K, filed with the SEC on April 22, 2005.                                                          

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EPIMMUNE INC.





SIGNATURES






| |              
| | -------------
| | EPIMMUNE INC.



| |     |                
| | --- | ---------------
| | By: | /s/ Emile Loria

| |                                                
| | -----------------------------------------------
| |                                                
| | Emile Loria, M.D.                              
| | President, Chief Executive Officer and Director
| | (Principal Executive Officer)                  











| |     |                    
| | --- | -------------------
| | By: | /s/ Robert De Vaere

| |                                             
| | --------------------------------------------
| |                                             
| | Robert De Vaere                             
| | Vice President, Finance and Administration, 
| | Chief Financial Officer and Secretary       
| | (Principal Financial and Accounting Officer)









29