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| DELAWARE                                                            |                                                        | 41-1505029                                   |
|---------------------------------------------------------------------|-------------------------------------------------------------|----------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |                                                        | (I.R.S.      Employer Identification Number) |
|                                                                |                                                        |                                         |
| 29      Emmons Drive Suite C-10Princeton,      NJ              |                                                        | 08540                                        |
| (Address      of principal executive offices)                       |                                                        | (Zip      Code)                              |
|                                                                | (609)      538-8200                                         |                                         |
|                                                                | (Issuer’s      telephone number, including area code) |                                         |

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| Large accelerated filer £ | Accelerated filer £ | Non-accelerated filer £ | Smaller reporting company R |
|--------------------------------|--------------------------|------------------------------|-----------------------------|

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Tableof Contents 

| Item                |          Description                                                                                                                                                                                                  | Page  |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| Part      I         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  1.            |  Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  3    |
|                |  Risk      Factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  16   |
|  2.            |  Properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  21   |
|  3.            |  Legal      Proceedings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  21   |
|  4.            |  Submission      of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  21   |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| Part      II   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| 5.             |  Market      for Registrant's Common Equity, Related Stockholder Matters      and Issuer Purchases of Equity Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  22   |
| 6.             |  Selected      Financial Data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 22         |
| 7.             |  Management's      Discussion and Analysis of Financial Condition and Results of      Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  23   |
|                |  Critical      Accounting Policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  23   |
|                |  Material      Changes in Results of Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  24   |
|                |  Financial      Condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  25   |
| 8.                  |  Financial      Statements and Supplementary Data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  28   |
| 9.                  |  Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  28   |
| 9A.                 |  Controls      and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  29   |
| 9B.                 |  Other      Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 29         |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  Part      III |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| 10.                 |  Directors,      Executive Officers, and Corporate      Governance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  30   |
| 11.                 |  Executive      Compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  33   |
| 12.                 |  Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  36   |
| 13.                 |  Certain      Relationships and Related Transactions and Director      Independence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  38   |
| 14.                 |  Principal      Accountant Fees and Services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  39   |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|  Part      IV  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
| 15.                 |  Exhibits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 40         |
|                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |
|                |  Consolidated      Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  42   |
|                |  Report      of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  F-1  |

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Item

| A.              | Overview |
|----------------------------------------------------------------------------------|----------|

|   | (a)       initiate and execute the pivotal Phase 3 confirmatory clinical trial      for orBec® in      the treatment of acute gastrointestinal Graft-versus-Host disease (“GI      GVHD”); |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b)      identify a development and marketing partner for orBec®      for territories outside of North America, as we have granted an exclusive      license to Sigma-Tau Pharmaceuticals, Inc. (“Sigma-Tau”) to      commercialize orBec® in      the U.S., Canada and Mexico, we will be paid a 35% royalty on net sales in      these territories by Sigma-Tau and they will be responsible for the      expense associated with all launch preparation and post-approval sales and      marketing activities; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (c)       conduct a Phase 2 clinical trial of orBec®      for the prevention of acute Graft-versus-Host disease    (“GVHD”);                                                                                                                                                                                                                                                                                                                                                                                 |

|   | (d)      evaluate and initiate additional clinical trials to explore the      effectiveness of oral beclomethasone dipropionate (oral “BDP”) in other      therapeutic indications involving inflammatory conditions of the      gastrointestinal (“GI”) tract such as radiation enteritis, radiation      injury and Crohn’s disease; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e)      make orBec® available      worldwide through named patient access programs (“NPAP”) for the treatment      of acute GI GVHD; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f)  reinitiate      development of our other biotherapeutics products, namely LPMTM      Leuprolide; |
|--------|-----------------------------------------------------------------------------------------------------------------|

|   | (g)      continue to secure additional government funding for each of our      biodefense programs, RiVaxTM and      BT-VACCTM,      through grants, contracts andprocurements; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h)      convert our biodefense vaccine programs from early stage development to      advanced development and manufacturing with the potential to      collaborate and/or partner with other companies in the  biodefense      area; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (i)       acquire or in-license new clinical-stage compounds for development;      and                                                                                                                                                     |

|   | (j)  explore      other business development and acquisition strategies under which we may      be considered       to be an attractive      acquisition candidate by anothercompany. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | BioTherapeutics      Overview |
|----------------|-------------------------------|

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|                                              | Phase      3 trial      | Phase      2 trial           |
|---------------------------------------------------|------------------------------|------------------------------|
|                                              | orBec®                  | Placebo                      | orBec® | Placebo |
|  Number      of patients randomized          |  62                     |  67                     |  31 |  29 |
|  Number      (%) who died                    |  5      (8%)            |  16      (24%)          |  3      (10%) |  6      (21%) |
|  Hazard      ratio (95% confidence interval) |  0.33      (0.12, 0.89) |  0.47      (0.12, 1.87) |
|  Death      with infection*                  |  3      (5%)            |  9      (13%)           |  2      (6%) |  5      (17%) |
|  Death      with relapse*                    |  3      (5%)            |  9      (13%)           |  1      (3%) |  4      (14%) |

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| 2.   | BioDefense      Overview |
|----------------|--------------------------|

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| 3.   | Additional      Programs |
|----------------|--------------------------|

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|             4.  | Summary of Our Products in      Development |
|----------------------------------------------------------------------------------|---------------------------------------------|

| Product                       | Therapeutic      Indication                     | Stage      of Development                                                         |
|-------------------------------|-------------------------------------------------|-----------------------------------------------------------------------------------|
|                          |                                            |                                                                              |
| orBec®                   | Treatment      of Acute GI GVHD                 |  PIvotal      Phase 3 confirmatory trial to be initiated in 2009   |
| orBec®                   | Prevention      of Acute GI GVHD                |  Phase      2 trial enrolling                                           |
| orBec®                   | Treatment      of Chronic GI GVHD               |  Phase      2 trial potentially to be initiated in 2009            |
| Oral      BDP                 | Radiation      Enteritis and Radiation Exposure |  Phase      1/2 trial potentially to be initiated in 2009          |
| LPMTM –      Leuprolide | Endometriosis      and Prostate Cancer          |  Phase      1 trial potentially to be initiated in 2009            |
| OraprineTM                    | Oral      lesions resulting from GVHD           |  Ready      for Phase 1/2 trial                                    |

| Select      Agent    | Currently      Available Countermeasure            | DOR      Biodefense Product                                                                                               |
|----------------------|----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                 |                                               |                                                                                                                      |
| Ricin      Toxin     | No      vaccine or antidote currently FDA approved |  Injectable      Ricin VaccinePhase      1 Clinical Trial Successfully CompletedSecond Phase 1 trial enrolling  |
| Botulinum      Toxin | No      vaccine or antidote currently FDA approved |  Oral/Nasal      Botulinum Vaccine                                                                              |

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|          5. |  The Drug Approval      Process |
|----------------------------------------------------------|--------------------------------------|

|   | General |
|--------|---------|

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| 1.   | Marketing      Strategies |
|----------------|---------------------------|

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| 2.   | Patents and Other Proprietary      Rights |
|----------------|-------------------------------------------|

| 3.   | Employees        |
|----------------|-----------------------|

| 4.   | Research and Development      Spending   |
|----------------|-----------------------------------------------|

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Cautio

| ·   | we      may not be able to maintain our current research and development      schedules; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | we      may be unsuccessful in our efforts to secure profitable procurement      contracts from the U.S. government or others for our biodefense      products; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we      may encounter problems in clinical trials or Named Patient Access      programs; or |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | the      technology or product may be found to be ineffective or      unsafe. |
|--------------------|-------------------------------------------------------------------------------|

| ·   | it      is uneconomical or the market for the product does not develop or      diminishes; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | we      are not able to enter into arrangements or collaborations to manufacture      and/or market the product; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | the      product is not eligible for third-party reimbursement from government or      private insurers; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | others      hold proprietary rights that preclude us from commercializing the      product; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | others      have brought to market similar or superior products;  or |
|--------------------|----------------------------------------------------------------------|

| ·   | the      product has undesirable or unintended side effects that prevent or limit      its commercial use. |
|--------------------|------------------------------------------------------------------------------------------------------------|

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| ·   | announcements      by us or others of results of pre-clinical testing and clinical      trials; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | announcements      of technological innovations, more important bio-threats or new commercial      therapeutic products by us, our collaborative partners or our present or      potential competitors; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our      quarterly operating results andperformance; |
|--------------------|------------------------------------------------------|

| ·   | developments      or disputes concerning patents or other proprietary  rights; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | acquisitions; |
|--------------------|---------------|

| ·   | litigation      and government proceedings; |
|--------------------|---------------------------------------------|

| ·   | adverse      legislation; |
|--------------------|---------------------------|

| ·   | changes      in government regulations; |
|--------------------|-----------------------------------------|

| ·   | economic      and other external factors; and |
|--------------------|-----------------------------------------------|

| ·   | general      market conditions. |
|--------------------|---------------------------------|

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| ·   | warrants      to purchase a total of approximately 43,500,000 shares of our common stock      at a current weighted average exercise price of approximately $0.20;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | options      to purchase approximately 16,370,039 shares of our common stock at a      current weighted average exercise price of approximately      $0.27. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 5.

| Period                                    | Price Range |
|-------------------------------------------|------------------|
| High                                      | Low              |
| Fiscal      Year Ended December 31, 2007: |             |   |
| First      Quarter                        | $0.71            | $0.23 |
| Second      Quarter                       | $0.95            | $0.20 |
| Third      Quarter                        | $0.40            | $0.26 |
| Fourth      Quarter                       | $0.61            | $0.15 |
|                                      |             |   |
| Fiscal      Year Ended December 31, 2008: |             |   |
| First      Quarter                        | $0.25            | $0.16 |
| Second      Quarter                       | $0.19            | $0.11 |
| Third      Quarter                        | $0.15            | $0.09 |
| Fourth      Quarter                       | $0.12            | $0.04 |

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Item 7.

|   | (a)       initiate and execute the pivotal Phase 3 confirmatory clinical trial      for orBec® in      the treatment of acute gastrointestinal Graft-versus-Host disease (“GI      GVHD”); |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b)      identify a development and marketing partner for orBec®      for territories outside of North America, as we have granted an exclusive      license to Sigma-Tau Pharmaceuticals, Inc. (“Sigma-Tau”) to      commercialize orBec® in      the U.S., Canada and Mexico, Sigma-Tau will pay us a 35% royalty on      net sales in these territories and they will be responsible for the      expense associated with all launch preparation and post-approval sales and      marketing activities; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c)      conduct a Phase 2 clinical trial of orBec®      for the prevention of acute Graft-versus-Host      disease    (“GVHD”); |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d)      evaluate and initiate additional clinical trials to explore the      effectiveness of oral beclomethasone dipropionate (oral “BDP”) in other      therapeutic indications involving inflammatory conditions of the      gastrointestinal (“GI”) tract such as radiation enteritis, radiation      injury and Crohn’s disease; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e)      make orBec® available      worldwide through named patient access programs (“NPAP”) for the treatment      of acute GI GVHD; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f)  reinitiate      development of our other biotherapeutics products, namely LPMTM      Leuprolide; |
|--------|-----------------------------------------------------------------------------------------------------------------|

|   | (g)      continue to secure additional government funding for each of our      biodefense programs, RiVaxTM and      BT-VACCTM,      through grants, contracts andprocurements; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h)      convert our biodefense vaccine programs from early stage development to      advanced development and manufacturing with the potential to      collaborate and/or partner with other companies in the biodefense      area; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (i)       acquire or in-license new clinical-stage compounds for development;      and                                                                                                                                               |

|   | (j)  explore      other business development and acquisition strategies under which we may      be considered to be an attractive acquisition candidate by another      company. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Material

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Financial

|    | We      are exploring out-licensing opportunities for orBec®      and oral BDP in territories outside North America, and for LPMTM      -Leuprolide and BioDefense programs in the U.S. and inEurope. We      have and will utilize NPAPs wherever possible in countries outside the      U.S. to generate revenues from orBec®.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | We      intend to utilize our existing $8 million equity line of credit with      Fusion Capital (approximately $7.8 million of which is still available to      us through June 2010) when we deem market conditions to be      appropriate. We      expect to receive new government grants intended to support existing and      new research and development over the next twelve months. In addition to      research and development funding, these grants would provide additional      support for our overhead expenditures as well as defray certain costs      intended to cover portions of our upcoming confirmatory Phase 3 trial of      our lead product orBec®.  Therefore      these grants would have the effect of extending our cash resources. We      routinely file for government grants which support our biotherapeutic and      biodefense programs. We      may obtain additional funds through the issuance of equity or      equity-linked securities through private placements or rights offerings.      We are currently evaluating additional equity financing opportunities and      will continue to execute them when appropriate.   |

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|                                                           | 2008                                                           | 2007                                                                                                                       |
|----------------------------------------------------------------|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
| Program      - Research & Development Expenses             |                                                           |                                                                                                                       |
| orBec®                                                    | $              921,562 | $     2,288,614                                                                                   |
| RiVax™                                                   | 312,486                                                        | 452,894                                                                                                                    |
| BT-VACC™                                                 | 201,529                                                        | 315,082                                                                                                                    |
| Oraprine™                                                | 4,500                                                          | 5,100                                                                                                                      |
| LPMTM-Leuprolide                                               | 112,246                                                        | 38,254                                                                                                                     |
|   Research      & Development Expense            | $     1,552,323                       | $     3,099,944                                                                                   |
|                                                           |                                                           |                                                                                                                       |
| Program      - Cost of Goods Sold and Reimbursed under Grants  |                                                           |                                                                                                                       |
| orBec®                                                    | $         122,551 | $                    - |
| RiVax™                                                   | 1,681,274                                                      | 897,470                                                                                                                    |
| BT-VACC™                                                 | 82,606                                                         | 45,915                                                                                                                     |
|   Cost      of Goods Sold and Reimbursed under Grant | $     1,886,431                       | $             943,385                                                                   |
|                                                           |                                                           |                                                                                                                       |
| TOTAL                                                          | $     3,438,754                       | $          4,043,329                                                                                   |

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Item 8
.

Item 9

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Item 9
A

|   | • | pertain to the maintenance of records that in      reasonable detail accurately and      fairly reflect the transactions and dispositions of the assets of the      Company; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | provide reasonable assurance that transactions are      recorded as necessary to permit preparation of financial statements in      accordance with generally accepted      accounting principles, and that receipts and expenditures of the Company      are being made only in accordance with authorizations of management and      directors of the Company;and |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | provide reasonable assurance regarding prevention      or timely detection of unauthorized      acquisition, use or disposition of the Company’s assets      that could have a material effect on the financial      statements. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 10.

| Name                                               | Age                                                                                                                                                                                                                  | Position                                                                     |
|----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|
|  James      S. Kuo, M.D., M.B.A.         | 45                                                                                                                                                                                                                   | Chairman      of the Board                                                   |
|  Cyrille      F. Buhrman                 | 36                                                                                                                                                                                                                   | Director                                                                     |
|  Gregg      A. Lapointe, C.P.A., M.B.A.  |                                         50 |  Director                                                               |
|  Christopher J. Schaber,      Ph.D.      | 42                                                                                                                                                                                                                   | Chief      Executive Officer, President, and Director                        |
|  Evan      Myrianthopoulos               | 44                                                                                                                                                                                                                   | Chief      Financial Officer, Senior Vice President, and Director            |
| Brian      L. Hamilton, M.D., Ph.D.           | 61                                                                                                                                                                                                                   |  Chief      Medical Officer, and Senior Vice President   |
| Robert      N. Brey, Ph.D.                    | 58                                                                                                                                                                                                                   |  Chief      Scientific Officer, and Senior Vice President          |
|  James      Clavijo, C.P.A., M.A.        | 43                                                                                                                                                                                                                   | Controller,      Treasurer, and Corporate Secretary                          |

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Audit 
Committee
Financial 
Expert

as defined under the rules of the Securities and ExchangeCommission. The board of directors has also determined that the members of theAudit Committee are qualified to serve on the committee and have the experienceand knowledge to perform the duties required of the committee.

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Item11
. 

| Name                                        | Position                          | Year             | Salary         | Bonus                     | Option      Awards        | All      Other Compensation | Total                |
|---------------------------------------------|-----------------------------------|------------------|----------------|---------------------------|---------------------------|-----------------------------|----------------------|
|  Christopher      J. Schaber (1)  |  C.E.O.      & President |  2007       |  $300,000 |  $100,000            |  $155,409            |  $47,798               |  $603,207       |
|                                   |                              |  2008       |  $300,000 |  $100,000            |  $185,721            |  $24,844               |  $610,565       |
|  Evan      Myrianthopoulos (2)    |  C.F.O.      & Sr. V.P.  |  2007       |  $200,000 |  $ 50,000       |  $146,938            |  $44,786               |  $441,724       |
|                                   |                              |  2008       |  $200,000 |  $  50,000 |  $       66,033 |  $23,474               |  $339,507       |
|  Robert      N. Brey (3)               |  C.S.O.      & Sr. V.P.  |  2007  |  $190,000 |  $  15,000 |  $  48,252 |  $18,325               |  $271,577       |
|                              |                              |  2008       |  $190,000 |  $  20,000 |  $  55,133 |   $18,405         |  $283,538  |

Employment and SeveranceAgreements

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| Name                                    | Number      of SecuritiesUnderlying      UnexercisedOptions      (#)                              | Equity      Incentive Plan Awards: Number of Securities Underlying Unexercised      Unearned Options  (#)                         | Option      Exercise Price ($)                                                                                                                    | Option      Expiration Date |
|-----------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
| Exercisable                             | Unexercisable                                                                                     |
|  Christopher      J. Schaber  | 2,083,343                                                                                         | 416,657                                                                                                                                     | 416,657                                                                                                                                           | $0.27                       | 8/28/2016 |
|                                    |  506,250                                                                                | 393,750                                                                                                                                | 393,750                                                                                                                                           | $0.47                       | 8/29/2017 |
|                               | 700,000                                                                                           | 2,100,000                                                                                                                                   | 2,100,000                                                                                                                                         | $0.06                       | 12/17/2018 |
| Evan      Myrianthopoulos          |                150,000 |                        - |                         - |  $0.35                 | 11/14/2012 |
|                               |            50,000                          |                        - |                         - |  $0.90                 | 9/15/2013 |
|                               |            50,000                          |                       -       |                         - |  $0.58                 | 6/11/2014 |
|                               |          150,000                                     |                       -       |                         - |  $0.47                 | 11/10/2014 |
|                               |          500,000                                     |            -                                                                         |                -                                                       |  $0.49                 | 12/13/2014 |
|                               |          375,000                                     |            25,000                                                                    |                25,000                                                  |  $0.35                 | 5/10/2016 |
|                                    |  309,375                                                                                | 240,625                                                                                                                                     | 240,625                                                                                                                                           | $0.47                       | 8/29/2017 |
|                               |          300,000                                     |            900,000                                                                   |                900,000                                                 |  $0.06                 | 12/17/2018 |
| Robert      N. Brey                |          10,000                                      |              -                                                             |                  -                                           |  $2.00                 | 2/23/2009 |
|                               |          9,000                                       |              -                                                             |                  -                                           |  $3.94                 | 2/08/2010 |
|                               |          562,500                                     |            37,500                                                                    |                37,500                                                  |  $0.33                 | 5/10/2016 |
|                                    |  125,000                                                                                | 75,000                                                                                                                                      | 75,000                                                                                                                                            | $0.47                       | 8/29/2017 |
|                               |          200,000                                     |            600,000                                                                   |                600,000                                                 |  $0.06                 | 12/17/2018 |

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| Name                                | Fees      Earned of Paid in Cash ($) (1) | Option      Awards ($) (2) | Total      ($) |
|-------------------------------------|------------------------------------------|----------------------------|----------------|
|  James      S. Kuo        | $16,000                                  | $-                         | $16,000        |
|  Cyrille      F. Buhrman  | $9,000                                   | $-                         | $9,000         |

| (1)   | Directors      who are compensated as full-time employees receive no additional      compensation for service on our Board of Directors. Each independent      director who is not a full-time employee is paid $2,000 for each board or      committee meeting attended ($1,000 if such meeting was attended      telephonically). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | We      maintain a stock option grant program pursuant to the nonqualified stock      option plan, whereby members of our Board of Directors or its committees      who are not full-time employees receive an initial grant of fully vested      options to purchase 300,000 shares of common stock, and subsequent      prorated annual grants of fully vested options to purchase 150,000 shares      of common stock after re-election to our Board of Directors. During 2008,      we did not hold an annual meeting. As a result there were no stock options      granted to the Board of Directors in 2008. Option Awards include the value      of stock option awards of vested shares of Common Stock as required by      FASB No. 123R. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 12.

| Name      of Beneficial Owner                                                | Shares      of Common Stock Beneficially Owned                                                                  | Percent      of Class |
|------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-----------------------|
|  Sigma-Tau      Pharmaceuticals, Inc. (1)                          | 41,666,667                                                                                                      | 25.0%                 |
|  Biotex      Pharmaceuticals, LLC (2)                              | 40,000,000                           | 21.4%                 |
|  Cyrille      F. Buhrman (3)                                       | 5,125,020                  | 3.1%                  |
|  Christopher      J. Schaber (4)                                   | 4,108,749                                                                                                       | 2.4%                  |
|  Evan      Myrianthopoulos (5)                                     | 2,368,125                                                                                                       | 1.4%                  |
|  Robert      N. Brey (6)                                           |  1,019,000                      | *                     |
|  James      Clavijo (7)                                            | 950,691                                                                                                         | *                     |
|  James      S. Kuo (8)                                             | 630,000                                                                                                         | *                     |
|  Gregg      A. Lapointe (9)                                   | 300,000                         | *                     |
|  Brian      L. Hamilton (10)                                  | 250,000                         | *                     |
|  All      directors and executive officers as a group (8 persons)  | 14,751,585                                                                                                 | 8.8%                  |

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| Plan      Category                                                    | Number      of Securities to be issued upon exercise of outstanding options, warrants      and rights                     | Weighted-Average      Exercise Price Outstanding options, warrants and rights                           | Number      of Securities Remaining Available for Future Issuance Under Equity      Compensation Plans (excluding securities reflected in the first      column) |
|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity      compensation plans approved by security holders (1)       | 16,370,039                                                                                                                | $      0.27                                                                                             | 3,547,331                                                                                                                                                        |
|  Equity      compensation plans not approved by security holders |                          - |                       - |                           -    |
|                                                                  |                                                                                                                      |                                                                                                    |                                                                                                                                                             |
| TOTAL                                                                 | 16,370,039                                                                                                                | $0.27                                                                                                   | 3,547,331                                                                                                                                                        |

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Item 13

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Item 14

|                    |                                                                                                    2008                    |   |                                                                                                              2007         |
|-------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Audit fees              |                                                                                                $107,302                                        |   |                                                                                                       $82,311                       |
| Audit related      fees |                                                                                                  6,254 |   |                                                                                                                4,000 |
| Tax fees                |                                                                                                       9,229 |   |                                                                                                              10,202            |
| Total                   |                                                                                                $122,785                                        |   |                                                                                                            $96,513                       |

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Item 15

| (i)   | Reports      of Independent Registered Public Accounting Firm.                                                 |
|-----------------|---------------------------------------------------------------------------------------------------------------------|
| (ii)       | Consolidated      Balance Sheets as of December 31, 2008 and 2007.                                             |
| (iii)      | Consolidated      Statements of Operations for the years ended December 31, 2008 and      2007.                |
| (iv)       | Consolidated      Statements of Stockholders’ Deficiency for the years December 31, 2008 and      2007.  |
| (v)        | Consolidated      Statements of Cash Flows for the years ended December 31, 2008 and      2007.                |
| (vi)       | Notes      to Consolidated FinancialStatements.                                                                     |

| 2.1   | Agreement      and Plan of Merger, dated May 10, 2006 by and among the Company, Corporate      Technology Development, Inc., Enteron Pharmaceuticals, Inc. and CTD      Acquisition, Inc. (incorporated by reference to Exhibit 2.1 included in      our Registration Statement on Form SB-2 (File No. 333-133975) filed on May      10, 2006).                      |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1   | Amended      and Restated Certificate of Incorporation (incorporated by reference to      Exhibit 3.1 included in our Quarterly Report on Form 10-QSB, as amended,      for the fiscal quarter ended September 30, 2003).                                                                                                                                            |
| 3.2   | Certificate      of Amendment to Amended and Restated Certificate of Incorporation      (incorporated by reference to Exhibit 4.2 included in our Registration      Statement on Form S-8 (File No. 333-130801) filed on December 30,      2005).                                                                                                                    |
| 3.3   | Certificate      of Amendment to Amended and Restated Certificate of Incorporation      (incorporated by reference to Annex A to our Proxy Statement filed      December 12, 2006).                                                                                                                                                                                  |
| 3.4   | By-laws      (incorporated by reference to Exhibit 3.1 included in our Quarterly      Report on Form 10-QSB, as amended, for the fiscal quarter ended June 30,      2003).                                                                                                                                                                                      |
| 3.5   | Certificate      of Designations of Series A Junior Participating Preferred Stock      (incorporated by reference to Exhibit 3.1 included in our current      report on Form 8-K filed on June 22, 2007).                                                                                                                                                       |
| 4.1   | Form      of Warrant issued to each investor in the February 2005 private placement      (incorporated by reference to Exhibit 10.2 included in our current      report on Form 8-K filed on February 3, 2005).                                                                                                                                                 |
| 4.2   | Form      of Warrant issued to each investor in the April 2006 private placement      (incorporated by reference to Exhibit 10.2 included in our current      report on Form 8-K filed on April 7, 2006).                                                                                                                                                       |
| 4.3   | Form      of Warrant issued to finders in connection with the February 2007 private      placement. (incorporated by reference to Exhibit 4.14 included in our      registration statement on Form SB-2 filed on April 16, 2007).                                                                                                                                    |
| 4.4   | Rights      Agreement dated June 22, 2007, between the Company and American Stock      Transfer & Trust Company, as Rights Agent (incorporated by reference      to Exhibit 4.1 included in our current report on Form 8-K filed on      June 22, 2007).                                                                                               |
| 4.5   | Form      of Right Certificate (incorporated by reference to Exhibit 4.2 included      in our current report on Form 8-K filed on June 22,      2007).                                                                                                                                                                                                          |
| 4.6   | Warrant      dated February 14, 2008, issued to Fusion Capital Fund II, LLC      (incorporated by reference to Exhibit 4.17 included in our Registration      Statement on Form S-1 (File No. 333-149239) filed on February 14,      2008).                                                                                                                          |
| 4.7   | Form      of Warrant issued to each investor in the February 2008 private placement      (incorporated by reference to Exhibit 10.2 in our current report on Form      8-K filed on January 21, 2009).                                                                                                                                                               |
| 4.8   | Form      of Warrant issued to each investor in the January 2009 private placement      (incorporated by reference to Exhibit 4.18 included in our Registration      Statement on Form S-1 (File No. 333-149239) filed on February 14,      2008).                                                                                                                   |
| 10.1  | Amended      and Restated 1995 Omnibus Incentive Plan (incorporated by reference to      Exhibit 10.1 included in our Quarterly Report on Form 10-QSB, as amended,      for the fiscal quarter ended September 30, 2003).**                                                                                                                                          |
| 10.2  | Noncompetition      and Nonsolicitation Agreement entered into by and among the Company, CTD      and Steve H. Kanzer dated as of November 29, 2001 (incorporated by      reference to Exhibit 10.30 included in our Annual Report on Form 10-KSB as      amended for the fiscal year ended December 31, 2002).                                                      |
| 10.3  | Termination      of the Endorex Newco joint venture between the Company, Élan Corporation,      Élan International Services, and Elan Pharmaceutical Investments dated      December 12, 2002 (incorporated by reference to Exhibit 10.37 included in      our Annual Report on Form 10-KSB as amended for the fiscal year ended      December 31, 2002).  |
| 10.4  | Option      Agreement with General Alexander M. Haig Jr. (incorporated by reference to      Exhibit 10.39 included in our Annual Report on Form 10-KSB as amended for      the fiscal year ended December 31, 2002).**                                                                                                                                               |
| 10.5  | Separation      agreement and General Release between the Company and Ralph Ellison dated      July 9, 2004 (incorporated by reference to Exhibit 10.7 included in our      Annual Report on Form 10-KSB, as amended, for the fiscal year ended      December 31, 2004).**                                                                                           |
| 10.6  | License      Agreement between the Company and the University of Texas Southwestern      Medical Center (incorporated by reference to Exhibit 10.8 included in our      Annual Report on Form 10-KSB, as amended, for the fiscal year ended      December 31, 2004).                                                                                                 |
| 10.7  | License      Agreement between the Company and Thomas Jefferson University      (incorporated by reference to Exhibit 10.9 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                                         |
| 10.8  | License      Agreement between the Company and the University of Texas Medical Branch      (incorporated by reference to Exhibit 10.10 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).                                                                                                             |
| 10.9  | Consulting      Agreement between the Company and Lance Simpson of Thomas Jefferson      University. (incorporated by reference to Exhibit 10.43 included in our      Annual Report on Form 10-KSB as amended for the fiscal year ended December      31, 2002).                                                                                                     |
| 10.10 | Form      of Securities Purchase Agreement between the Company and each investor      dated March 4, 2004 (incorporated by reference to Exhibit 99.3 included in      our current report on Form 8-K filed on March 4, 2004).                                                                                                                                        |
| 10.11 | Employment      agreement between the Company and Mike Sember dated December 7, 2004      (incorporated by reference to Exhibit 10.16 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).**                                                                                                            |
| 10.12 | Employment      agreement between the Company and Evan Myrianthopoulos dated December 7,      2004 (incorporated by reference to Exhibit 10.17 included in our Annual      Report on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).**                                                                                                   |
| 10.13 | Employment      agreement between the Company and James Clavijo dated February 18, 2005      (incorporated by reference to Exhibit 10.18 included in our Annual Report      on Form 10-KSB, as amended, for the fiscal year ended December 31,      2004).**                                                                                                         |
| 10.14 | Form      of Securities Purchase Agreement between the Company and each investor      dated February 1, 2005 (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on February 3,      2005).                                                                                                                        |
| 10.15 | Amendment      No. 1 dated February 17, 2005 to the Securities Purchase Agreement between      the Company and each investor dated February 1, 2005 (incorporated by      reference to Exhibit 10.20 included in our Annual Report on Form 10-KSB,      as amended, for the fiscal year ended December 31, 2004).                                                    |
| 10.16 | Form      Registration Rights agreement between the Company and each investor dated      February 1, 2005 (incorporated by reference to Exhibit 10.3 included      in our current report on Form 8-K filed on February 3,      2005).                                                                                                                           |
| 10.17 | 2005      Equity Incentive Plan (incorporated by reference to Appendix D to our      Proxy Statement filed December 12, 2005).**                                                                                                                                                                                                                                     |
| 10.18 | Form      S-8 Registration of Stock Options Plan dated December 30, 2005      (incorporated by reference to our registration statement on Form S-8 filed      on December 30, 2005).                                                                                                                                                                                 |
| 10.19 | Form      of Securities Purchase Agreement between the Company and each investor      dated January 17, 2006 (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on January 20, 2006)                                                                                                                                   |
| 10.20 | Form      of Registration Rights agreement between the Company and each investor      dated January 17, 2006 (incorporated by reference to Exhibit 4.1 included      in our current report on Form 8-K filed on January 20,      2006).                                                                                                                         |
| 10.21 | Securities      Purchase Agreement dated as of April 6, 2006 among the Company and the      investors named therein (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on April 7,      2006).                                                                                                                    |
| 10.22 | Registration      Rights Agreement dated as of April 6, 2006 among the Company and the      investors named therein (incorporated by reference to Exhibit 10.3      included in our current report on Form 8-K filed on April 7,      2006).                                                                                                                    |
| 10.23 | Employment      Agreement, dated as of August 29, 2006, between Christopher J. Schaber,      Ph.D., and the Company (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on August 30,      2006).**                                                                                                                |
| 10.24 | Letter      of Intent dated January 3, 2007 by and between DOR BioPharma, Inc. and      Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on January 4,      2007).                                                                                                              |
| 10.25 | January      17, 2007 letter from Cell Therapeutics, Inc. to DOR BioPharma, Inc.      (incorporated by reference to Exhibit 10.1 included in our current      report on Form 8-K filed on January 19, 2007).                                                                                                                                                    |
| 10.26 | Securities      Purchase Agreement dated February 7, 2007 by and among the Company and the      investors named therein (incorporated by reference to Exhibit 10.1      included in our current report on Form 8-K filed on February 12,      2007).                                                                                                            |
| 10.27 | Registration      Rights Agreement dated February 7, 2007 by among the Company and the      investors named therein (incorporated by reference to Exhibit 10.2      included in our current report on Form 8-K filed on February 12,      2007).                                                                                                                |
| 10.28 | Letter      from Sigma-Tau Pharmaceuticals, Inc. dated February 21, 2007 (incorporated      by reference to Exhibit 10.1 included in our current report on Form 8-K      filed on February 23, 2007).                                                                                                                                                                |
| 10.29 | Letter      dated May 3, 2007 between the Company and Sigma-Tau Pharmaceuticals, Inc.      (incorporated by reference to Exhibit 10.1 included in our current      report on Form 8-K filed on May 4, 2007).                                                                                                                                                    |

----

| 10.30                                        | Employment      Agreement dated December 27, 2007, between Christopher      J.  Schaber, PhD and the Company.*  **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.31                                        | Employment      Agreement dated December 27, 2007, between Evan Myrianthopoulos and the      Company.*  **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.32                                        | Employment      Agreement dated December 27, 2007, between James Clavijo, CPA and the      Company.*  **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.33                                        | Common      Stock Purchase Agreement dated February 14, 2008, between the Company and      Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 10.35      included on Form S-1 filed on February 14, 2008).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.34                                        | Registration      Rights Agreement dated February 14, 2008, between the Company and Fusion      Capital Fund II, LLC (incorporated by reference to Exhibit 10.35 included      in our Registration Statement on Form S-1      (File No. 333-149239) on Form S-1 filed on February 14,      2008).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.35                                        | Letter      dated December 1, 2008, between the Company and Sigma-Tau Pharmaceuticals,      Inc. (incorporated by reference to Exhibit 10.1 included in our current      report on Form 8-K filed on December 1, 2008).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.36                                        | Form of Securities Purchase Agreement between the      Company and each investor dated February 14, 2008 (incorporated by      reference to Exhibit 10.37 included      in our Registration Statement on Form      S-1 (File No. 333-149239) filed on      February 14, 2008).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.37                                        | Common      Stock Purchase Agreement dated January 12, 2009, between the Company and      accredited investors (incorporated by reference to Exhibit 10.1 included      in our current report on Form 8-K filed on January 21, 2009).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.38                                        | Registration      Rights Agreement dated January 12, 2009, between the Company and      accredited investors (incorporated by reference to Exhibit 10.3 included      in our current report on Form 8-K filed on January 21, 2009).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.39 10.40 10.41 10.42  | Registration      Rights Agreement dated January 12, 2009, between the Company and accredited investors (incorporated by      reference to Exhibit 10.3 included in our current report on Form 8-K filed      on January 21, 2009). Exclusive License Agreement dated November 24,      1998, between Enteron Pharmaceuticals, Inc. and George B. McDonald,      M.D. and amendments (incorporated by reference to Exhibit      10.42 included on Form S-1 filed on February 13, 2009). Collaboration and Supply Agreement dated February      11, 2009, between the Company and Sigma-Tau Pharmaceuticals,      Inc. (incorporated by      reference to Exhibit 10.43 included on Form S-1 filed on February 13,      2009). Common      Stock Purchase Agreement dated February 11, 2009, between the Company and      Sigma Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit      10.44 included on Form S-1 filed on February 13, 2009).  |
| 21.1                                         | Subsidiaries      of the Company.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.1                                    | Certification      of the Chief Executive Officer pursuant to Section 302 of the Sarbanes      Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.2                                    | Certification      of the Chief Financial Officer pursuant to Section 302 of the Sarbanes      Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.1                                         | Certiifcation      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes      Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.2                                         | Certification      of the Chief Financial Officer pursuant to Section 906 of the Sarbanes      Oxley Act of 2002. *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

| * ** | Filed herewith Indicates management contract or compensatory      plan. |
|-----------|------------------------------------------------------------------------------|
|      |                                                                         |
|      |                                                                         |

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OR 

| Consolidated Financial Statements-December 31,      2008 and 2007:                                                              |   |      |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------|
|                                                                                                                            |   |      |
| Reports      of Independent Registered Public Accounting Firm                                                              |   | F-1       |
| Consolidated      Balance Sheets as of December 31, 2008 and 2007                                                          |   | F-3       |
| Consolidated      Statements of Operations for the years ended December 31, 2008 and      2007                             |   | F-4       |
| Consolidated      Statements of Changes in Shareholders’ Equity for the years ended December      31, 2008 and 2007  |   | F-5       |
| Consolidated      Statements of Cash Flows for the years ended December 31, 2008 and      2007                             |   | F-6       |
| Notes      to Financial Statements                                                                                              |   | F-7  |

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REPORT

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REPORT

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DOR

|                                                                                                                                                            |   |   | 2008               |    |   |   |   |   | 2007              |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------|---------|--------|--------|--------|--------|-------------------|---------|
| AssetsCurrent      assets:                                                                                                                                      |   |   |               |    |   |   |   |   |              |    |
|         Cash      and cash equivalents                                                                                  |   | $      | 1,475,466          |    |   |   |   | $      | 2,220,128         |    |
|         Grants      receivable                                                                                          |   |   | 278,316            |    |   |   |   |   | 97,845            |    |
|              Inventory, net                                                                                                  |   |   |  82,182       |    |   |   |   |   | -            |    |
|         Prepaid      expenses                                                                                           |   |   | 86,837             |    |   |   |   |   | 119,178           |    |
| Total      current assets                                                                                                                                       |   |   | 1,922,801          |    |   |   |   |   | 2,437,151         |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |
| Office      and laboratory equipment, net                                                                                                                       |   |   | 21,217             |    |   |   |   |   | 25,941            |    |
| Intangible      assets, net                                                                                                                                     |   |   | 1,418,717          |    |   |   |   |   | 1,320,787         |    |
| Total      assets                                                                                                                                               |   | $      | 3,362,735          |    |   |   |   | $      | 3,783,879         |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |
| Liabilities and shareholders’      equity                                                                                                                 |   |   |               |    |   |   |   |   |              |    |
| Current      liabilities:                                                                                                                                       |   |   |               |    |   |   |   |   |              |    |
|         Accounts      payable                                                                                           |   | $      | 1,015,005          |    |   |   |   | $      | 847,610           |    |
|         Accrued      compensation                                                                                       |   |   | 370,614            |    |   |   |   |   | 345,903           |    |
| Total      current liabilities                                                                                                                                  |   |   | 1,385,619          |    |   |   |   |   | 1,193,513         |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |
| Commitments      and contingencies                                                                                                                              |   |   |               |    |   |   |   |   |              |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |
| Shareholders’      equity:                                                                                                                                |   |   |               |    |   |   |   |   |              |    |
|         Common      stock, $.001 par value. Authorized 250,000,000                                                      |   |   |               |    |   |   |   |   |              |    |
|              shares;      118,610,704 and 94,996,547, respectively issued and      outstanding |   |   | 118,610            |    |   |   |   |   |  94,996      |    |
|         Additional      paid-in capital                                                                                 |   |   | 104,176,253        |    |   |   |   |   |  101,391,090 |    |
|         Accumulated      deficit                                                                                        |   |   | (      102,317,747 |  ) |   |   |   |   | (      98,895,720 | )  |
| Total      shareholders’ equity                                                                                                                           |   |   | 1,977,116          |    |   |   |   |   | 2,590,366         |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |
| Total      liabilities and shareholders’ equity                                                                                                           |   | $      | 3,362,735          |    |   |   |   | $      |  3,783,879   |    |
|                                                                                                                                                            |   |   |               |    |   |   |   |   |              |    |

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DOR 

|                                                                               |   |    | 2008         |    |          | 2007             |          |
|------------------------------------------------------------------------------------|--------|---------|------------------------------------------------------|---------|---------------|------------------|--------------------|
|                                                                               |   |    |                                                 |    |          |             |               |
| Revenues                                                                           |   | $       | 2,310,265                                            |    | $        | 1,258,017        |               |
| Cost      of revenues                                                              |   |    | (      1,886,431                                     | )       |          | (      943,385   | )                  |
|            Gross profit                                   |   |    | 423,834                                              |    |          | 314,632          |               |
|                                                                               |   |    |                                                 |    |          |             |               |
| Operating      expenses:                                                           |   |    |                                                 |    |          |             |               |
|        Research and development                                               |   |    | 1,552,323                                            |    |          | 3,099,944        |               |
|        General and administrative                                             |   |    |  1,941,719                                      |    |          |  2,864,370  |               |
|        Stock based compensation research and development                 |   |    |  182,168                                        |    |          |  230,668    |               |
|        Stock based compensation general and administrative               |   |    |  203,448                                        |    |          |  446,733    |               |
|            Total operating expenses                       |   |    | 3,879,658                                            |    |          | 6,641,715        |               |
|                                                                               |   |    |                                                 |    |          |             |               |
| Loss      from operations                                                          |   |    | (      3,455,824                                     | )       |          | (      6,327,083 | )                  |
|                                                                               |   |    |                                                 |    |          |             |               |
| Other      income (expense):                                                       |   |    |                                                 |    |          |             |               |
|        Interest income                                                        |   |    | 37,073                                               |    |          | 164,847          |               |
|        Interest (expense)                                                     |   |    |  (      3,276                                   | )  |          | (      1,020     | )             |
|        Other (expense)                                                   |   |    |  -                                              |    |          | (      1,387     | )             |
|            Total other income (expense)                   |   |    | 33,797                                               |    |          | 162,440          |               |
|                                                                               |   |    |                                                 |    |          |             |               |
| Net      loss                                                                      |   |  $ | (      3,422,027                                     | )       |        $ | (      6,164,643 | )                  |
|                                                                               |   |    |                                                 |    |          |             |               |
| BasicnBasic      and diluted net loss per share                               |   | $       | (      0.03                                          | )       |  $       | (      0.07      | )                  |
|                                                                               |   |    |                                                 |    |          |             |               |
| Basic  Basic      and diluted weighted average common shares outstanding |   |    | 101,881,991                                          |    |          | 90,687,677       |               |

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DOR 

|                                                                          |   | Common      Stock | Additional      Paid-In capital | Accumulated      Deficit |
|-------------------------------------------------------------------------------|--------|-------------------|---------------------------------|--------------------------|
|                                                                          |   |              | Shares                          |                     |   | Par      Value |   |   |   |   |   |   |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Balance,January      1, 2007                                                  |   |              | 68,855,794                      |                     |   | $68,855 |   |   | $91,553,766 |   |   | (      $92,731,077 | ) |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock                                                 |   |              | 15,745,891                      |                     |   | 15,746 |   |   | 6,219,658 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock upon exercise of options and warrants           |   |              | 8,195,487                       |                     |   | 8,195 |   |   | 2,128,088 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to vendors                                      |   |              | 829,821                         |                     |   | 830 |   |   | 329,670 |   |   | -  |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to investors by contract as dilution protection |   |              | 995,947                         |                     |   | 996 |   |   | 307,747 |   |   | -  |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock as payment to employees                    |   |              | 373,607                         |                     |   | 374 |   |   | 84,759 |   |   | -  |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Stock      option expense                                                     |   |              | -                               |                     |   | - |   |   | 677,401 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                 |   |              | -                               |                     |   | - |   |   | - |   |   | (      6,164,643 | ) |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Balance,December      31, 2007                                                |   |              | 94,996,547                      |                     |   | $94,996 |   |   | $101,391,090 |   |   | (      $98,895,720 | ) |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock from private placement                          |   |              | 3,658,890                       |                     |   | 3,659 |   |   | 654,940 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for commitment shares                           |   |              | 1,369,125                       |                     |   | 1,369 |   |   | (1,369 | )  |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for execution of letter of intent               |   |              | 16,666,667                      |                     |   |  16,667 |   |   | 1,483,333 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock for equity line                                 |   |              | 993,084                         |                     |   | 993 |   |   | 126,507 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock to vendors                                      |   |              | 758,082                         |                     |   | 758 |   |   | 110,440 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock as payment to employees                         |   |              | 168,309                         |                     |   | 168 |   |   | 25,696 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Stock      option expense                                                     |   |              | -                               |                     |   | - |   |   | 385,616 |   |   | - |   |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                 |   |              | -                               |                     |   | - |   |   | - |   |   | (      3,422,027 | ) |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |
| Balance,December      31, 2008                                                |   |              | 118,610,704                     |                     |   | $118,610 |   |   | $104,176,253 |   |   | (      $102,317,747 | ) |
|                                                                          |   |              |                            |                     |   |   |   |   |   |   |   |   |   |

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DOR 

|                                                                                  |   | 2008          |                 | 2007    |          |
|---------------------------------------------------------------------------------------|--------|---------------|----------------------|---------|---------------|
| Operating      activities                                                             |   |          |                 |    |          |   |   |
|         Net loss                                                            |   |        $ | (      3,422,027     | )       |        $ | (      6,164,643 | ) |
|                                                                                  |   |          |                 |    |          |   |   |
| Adjustments      to reconcile net loss to net cash used by operating      activities: |   |          |                 |    |          |   |   |
|          Amortization and depreciation                                 |   |          | 149,183              |    |          | 119,565 |   |
|          Inventory reserve                                             |   |          | 100,000              |    |          | - |   |
|          Non-cash stock compensation                                   |   |          | 522,678              |    |          | 1,401,777 |   |
|                                                                                  |   |          |                 |    |          |   |   |
| Change      in operating assets and liabilities:                                      |   |          |                 |    |          |   |   |
|          Grants receivable                                             |   |          | (      180,471       | )  |          | (7,912 | )  |
|          Inventory                                                     |   |          |  (      182,182 | )  |          | - |   |
|          Prepaid expenses                                              |   |          |  32,341         |    |          | (24,708 | ) |
|          Accounts payable                                              |   |          | 167,396              |    |          | (1,264,868 | ) |
|          Accrued compensation                                          |   |          | 24,710               |    |          | (57,044 | )  |
| Total      adjustments                                                                |   |          | 633,655              |    |          | 166,810 |   |
|                                                                                  |   |          |                 |    |          |   |   |
|          Net cash used by operating activities                         |   |          | (      2,788,372     | )       |          | (      5,997,833 | ) |
|                                                                                  |   |          |                 |    |          |   |   |
| Investing      activities:                                                            |   |          |                 |    |          |   |   |
|  Purchases      of office and laboratory equipment                               |   |          | (      5,277         | )       |          | (      7,170 | ) |
|  Acquisition      of intangible assets                                           |   |          | (      237,113       | )       |          | (      356,192 | ) |
|          Net cash used by investing activities                         |   |          | (      242,390       | )       |          | (      363,362 | ) |
|                                                                                  |   |          |                 |    |          |   |   |
| Financing      activities:                                                            |   |          |                 |    |          |   |   |
|  Net      proceeds from issuance of common stock                                 |   |          | 2,158,600            |    |          | 6,235,404 |   |
|  Proceeds      from equity line                                                  |   |          |  127,500        |    |          | - |   |
|  Proceeds      from exercise of warrants                                         |   |          | -                    |    |          | 1,592,263 |   |
|  Proceeds      from exercise of stock options                                    |   |          | -                    |    |          | 634,020 |   |
|          Net cash provided by financing activities                     |   |          | 2,286,100            |    |          | 8,461,687 |   |
|                                                                                  |   |          |                 |    |          |   |   |
| Net      increase (decrease) in cash and cash equivalents                             |   |          | (744,662             | )       |          | 2,100,492 |   |
|          Cash and cash equivalents at beginning of period              |   |          | 2,220,128            |    |          | 119,636 |   |
|          Cash and cash equivalents at end of period                    |   |        $ | 1,475,466            |    |        $ | 2,220,128 |   |
|                                                                                  |   |          |                 |    |          |   |   |
| Supplemental      disclosure of cash flow:                                            |   |          |                 |    |          |   |   |
|          Cash paid for interest                                        |   |        $ | 3,276                |    |        $ | 1,020 |   |
| Non-cash      transactions:                                                           |   |          |                 |    |          |   |   |
|          Issuance of commitment shares                                 |   |        $ |  272,484        |    |        $ |  - |   |
|          Issuance of shares for anti-dilution                          |   |        $ | -                    |    |   $ | 308,743 |   |

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DOR 

|    | The      Company is exploring out-licensing opportunities for orBec®      and oral BDP in territories outside North America, and for LPMTM-Leuprolide      and BioDefense programs in the United States and in Europe. The      Company has and will utilize NPAPs wherever possible in countries outside      the United States to generate revenues from orBec®. The      Company intends to utilize its existing $8 million equity line of credit      with Fusion Capital (approximately $7.8 million of which is still      available to the Company through June 2010) when it deems market      conditions to be appropriate. The      Company expects to receive new government grants intended to support      existing and new research and development over the next twelve months. In      addition to research and development funding, these grants would provide      additional support for its overhead expenditures as well as defray certain      costs intended to cover portions of its upcoming confirmatory Phase 3      trial of its lead product orBec®.  Therefore      these grants would have the effect of extending its cash resources. The      Company routinely files for government grants which support its      biotherapeutic and biodefense programs. The Company may obtain additional funds through      the issuance of equity or equity-linked securities through private      placements or rights offferings. The Company is currently evaluating      additional equity financings opportunities and will continue to execute      them when appropriate.  |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                      | Year      Ended        |   | Year      Ended        |
|---------------------------|------------------------|--------|------------------------|
|                      | December      31, 2008 |   | December      31, 2007 |
|                      | Loss                   | Shares | EPS                    |   | Loss | Shares | EPS |
|                      |                   |   |                   |   |   |   |   |
| Basic      EPS Dilutives: | ($3.42)                | 101.88 | ($0.03)                |   | ($6.16) | 90.69 | ($0.07) |
| Options      and Warrants | -                      | -      | -                      |   | - | - | - |
| Diluted      EPS          | ($3.42)                | 101.88 | ($0.03)                |   | ($6.16) | 90.69 | ($0.07) |

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|           |          2008      |   |   |                                              | 2007    |   |
|--------------------------------------------------------|------------------------------------------------------------|--------|--------|---------------------------------------------------|------------------------|--------|
|                                                   |                                                       |   |   |                                              |                   |
| Office      equipment                                  | $     130,605                     |   |   | $     125,328            |                   |
| Laboratory      equipment                              |    23,212                                   |   |   |    23,212                          |                   |
| Total                                                  |    153,817                                  |   |   |    148,540                         |                   |
| Accumulated      depreciation                          | ( 132,600                                             | )      |   | ( 122,599                                    | )                      |
|                                                   | $            21,217          |   |   | $            25,941 |                   |

|                         | Weighted      Average Amortization period      (years) |   Cost                        |   |  AccumulatedAmortization          |   |   Net Book Value                         |
|------------------------------|--------------------------------------------------------|-----------------------------------------|--------|----------------------------------------|--------|----------------------------------------------------|
| December      31, 2008       |                                                   |                                    |   |                                   |   |                                               |
| Licenses                     | 11.7                                                   | $         462,234        |   | $   142,994             |   | $          319,240             |
| Patents                      | 9.0                                                    |    1,870,603             |   |    771,126              |   |    1,099,477                        |
| Total                        | 9.5                                                    | $      2,332,837                        |   | $        914,120             |   | $      1,418,717                                   |
|  December      31, 2007 |                                                   |                                    |   |                                   |   |                                               |
| Licenses                     | 12.7                                                   | $           462,234 |   | $     115,681 |   | $            346,553 |
| Patents                      | 9.7                                                    |    1,633,490             |   |    659,256              |   |    974,234                          |
| Total                        | 10.4                                                   | $        2,095,724            |   | $     774,937 |   | $         1,320,787                 |

| Year | Amortization Amount                   |
|------|---------------------------------------|
| 2009 | $   150,000            |
| 2010 |      151,000 |
| 2011 |      152,000 |
| 2012 |      153,000 |
| 2013 |      154,000 |

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|                                                                |                                            2008 |    |                                                                                                                                               |    |                    2007 |   |
|---------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------------|--------|
| Deferred tax assets:                                                |                                                                                                                                                                                                                                     |    |                                                                                                                                               |    |                                                                                     |   |
| Net      operating loss carry forwards                              | $      26,300,000                                                                                                                                                                                                                        |    | $25,000,000                                                                                                                                   |    |
| Orphan      drug and research and development credit carry forwards | 2,000,000                                                                                                                                                                                                                                |    | 2,000,000                                                                                                                                          |    |
| Other                                                               | 3,300,000                                                                                                                                                                                                                                |    | 3,000,000                                                                                                                                          |    |
| Total                                                               |   31,600,000                                                                                                                                                                                                                   |    |   30,000,000                                                                                                                             |    |
| Valuation      allowance                                            | ( 31,600,000                                                                                                                                                                                                                        |  ) | ( 30,000,000                                                                                                                                  |  ) |
| Net      deferred tax assets                                        |              $                       -                                             |    |        $                 - |    |

|                                                 |            2008                                   |   |              2007                       |
|------------------------------------------------------|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|
|                                                 |                                                                                                     |   |                                                                                                     |
| Income      tax loss at federal statutory rate  |                 (34.00)% |   |                      (34.00)% |
| State      taxes, net of federal benefit        |               (6.50)               |   |               (4.29)               |
|  Valuation      allowance                  |                    40.50                |   |               38.29                |
| Provision      for income taxes (benefit)       |               -      %             |   |                -      %       |

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|                                                 |                                                        2008 |                                                                                     2007 |   |
|------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                 |                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |
| Shares      available for grant at beginning of year | 10,612,961                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 3,236,032 |   |
| Increase      in shares available                    | -                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 10,000,000 |   |
| Options      granted                                 | ( 6,800,000                                                                                                                                                                                                                                                                                                 | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | ( 3,375,000 | ) |
| Options      forfeited or expired                    | 100,000                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 1,140,000 |   |
| Common      stock payment for services               | ( 365,630                                                                                                                                                                                                                                                                                                   | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | ( 388,071 | ) |
| Shares      available for grant at end of year       |       3,547,331                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |       10,612,961 |   |

|                              | Options          | Weighted      AverageOptions Exercise Price |   |
|-----------------------------------|------------------|---------------------------------------------|--------|
| Balance      at January 1, 2007   | 11,639,339       |                                        |   |          $   0.59 |   |
|   Granted               | 3,375,000        |                                        |   | 0.46 |   |
|   Forfeited             | ( 2,927,300 | )                                           |   | 0.73 |   |
|   Exercised             | ( 1,737,200 | )                                           |   | 0.36 |   |
| Balance      at December 31, 2007 | 10,349,839       |                                        |   | 0.44 |   |
|   Granted               | 6,800,000        |                                        |   | 0.06 |   |
|   Forfeited             | ( 779,800   | )                                           |   | 0.81 |   |
| Balance      at December 31, 2008 | 16,370,039       |                                        |   | $   0.27 |   |

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| PriceRange  |   | Weighted      Average RemainingContractual Life in Years |   | Outstanding Options |   | Exercisable      Options |   |
|-------------|--------|----------------------------------------------------------|--------|--------------------------|--------|--------------------------|--------|
| $0.06-$0.20 |   | 9.8                                                      |   | 6,950,000                |   | 1,887,500                |   |
| $0.22-$0.49 |   | 7.3                                                      |   | 8,770,000                |   | 7,155,935                |   |
| $0.50-$4.00 |   | 2.9                                                      |   | 650,039                  |   | 650,039                  |   |
| Total       |   | 8.2                                                      |   | 16,370,039               |   | 9,693,474                |   |

|  Intrinsic      Value |                                                                                                    - |   |                                                                                                - |
|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              | Warrants          | Weighted      AverageWarrant Exercise Price |   |
|-----------------------------------|-------------------|---------------------------------------------|--------|
| Balance      at January 1, 2007   | 37,128,790        |                                        |   |          $   0.65 |   |
|   Granted               | 560,106           |                                        |   | 0.59 |   |
|        Expired               |  (2,021,268  | )                                      |   |  1.93 |   |
|        Exercised             |  (6,458,287  | )                                      |   |  0.25 |   |
| Balance      at December 31, 2007 | 29,209,341        |                                        |   | 0.69 |   |
|   Granted               | 2,079,444         |                                        |   | 0.20 |   |
|   Expired               | (      10,938,637 |  )                                     |   | 1.13 |   |
| Balance      at December 31, 2008 | 20,350,148        |                                        |   | $   0.41 |   |

| PriceRange  |   | Weighted      Average RemainingContractual Life in Years |   | Outstanding Warrants |   | Exercisable      Warrants |   |
|-------------|--------|----------------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|
| $0.06-$0.25 |   | 0.8                                                      |   | 10,120,330                |   | 10,120,330                |   |
| $0.26-$0.51 |   | 1.6                                                      |   | 6,359,575                 |   | 6,359,575                 |   |
| $0.52-$0.88 |   | 1.2                                                      |   | 3,870,243                 |   | 3,870,243                 |   |
| Total       |   | 1.1                                                      |   | 20,350,148                |   | 20,350,148                |   |

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| Year  | Research      and Development | Property      and Other Leases | Public      and Investor Relations | Total      |
|-------|-------------------------------|--------------------------------|------------------------------------|------------|
| 2009  | $3,300,000                    | $92,000                        | $53,000                            | 3,445,000  |
| 2010  | 2,900,000                     | 95,000                         | -                                  | 2,995,000  |
| 2011  | 200,000                       | 96,000                         | -                                  | 296,000    |
| 2012  | 200,000                       | 105,000                        | -                                  | 305,000    |
| 2013  | 200,000                       | 115,000                        | -                                  | 315,000    |
| Total | $6,800,000                    | $503,000                       | $53,000                            | $7,356,000 |

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|                                       |   | December      31, |             |
|--------------------------------------------|--------|-------------------|------------------|
|                                       |   | 2008              |             | 2007 |   |
| Net      Revenues                          |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 2,269,647        |   | $ | 1,258,017 |   |
| BioTherapeutics                            |   |              | 40,618           |   |   | - |   |
|        Total                          |   | $                 | 2,310,265        |   | $ | 1,258,017 |   |
|                                       |   |              |             |   |   |   |   |
| Loss      from Operations                  |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | (      132,272   | ) | $ | (      109,698 | ) |
| BioTherapeutics                            |   |              | (      1,556,429 | ) |   | (      2,748,764 | ) |
| Corporate                                  |   |              | (      1,767,123 | ) |   | (      3,468,621 | ) |
|        Total                          |   | $                 | (      3,455,824 | ) | $ | (      6,327,083 | ) |
|                                       |   |              |             |   |   |   |   |
| Identifiable      Assets                   |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 1,076,854        |   | $ | 896,383 |   |
| BioTherapeutics                            |   |              | 650,179          |   |   | 552,248 |   |
| Corporate                                  |   |              | 1,635,702        |   |   | 2,335,248 |   |
|        Total                          |   | $                 | 3,362,735        |   | $ | 3,783,879 |   |
|                                       |   |              |             |   |   |   |   |
| Amortization      and Depreciation Expense |   |              |             |   |   |   |   |
| BioDefense                                 |   | $                 | 85,354           |   | $ | 90,185 |   |
| BioTherapeutics                            |   |              | 58,829           |   |   | 24,312 |   |
| Corporate                                  |   |              | 5,000            |   |   | 5,068 |   |
|        Total                          |   | $                 | 149,183          |   | $ | 119,565 |   |
|                                       |   |              |             |   |   |   |   |
| Interest      Income                  |   |              |             |   |   |   |   |
| Corporate                             |   |  $           | 37,073           |   |  $ | 164,847 |   |
|         Total                    |   |  $           | 37,073           |   |  $ | 164,847 |   |
|                                       |   |              |             |   |   |   |   |
| Stock      Option Compensation             |   |              |             |   |   |   |   |
| BioDefense                                 |   |  $           | 92,822           |   |  $ | 69,591 |   |
| BioTherapeutic                        |   |              | 89,346           |   |   |  161,077 |   |
| Corporate                             |   |              | 203,448          |   |   |  446,733 |   |
|         Total               |   |  $           | 385,616          |   |  $ | 677,401 |   |
|                                       |   |              |             |   |   |   |   |

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| Signature                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | Title                                                                                                                                   |   | Date                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|
|  /s/ Christopher J.      Schaber                                Christopher      J. Schaber, Ph.D.                                                                                                                                                                                                                                                                                                                                                                        |   |  Director,      President and Chief Executive Officer (Principal Executive      Officer)                                           |   |  March      27, 2009 |
|  /s/ Evan      Myrianthopoulos                                  Evan      Myrianthopoulos                                                                                                                                                                                                                                                                                                                                                                       |   |  Director,      Senior Vice President, Chief Financial Officer (Principal Financial      Officer and Principal Accounting Officer) |   |  March      27, 2009 |
|  /s/ James      S. Kuo                                                                                                   James      S. Kuo, M.D., M.B.A. |   |  Chairman      of the Board                                                                                                        |   |  March      27, 2009 |
|  __________________________________                                                    Cyrille      F. Buhrman                                                                                                                                                                                                                                                        |   |  Director                                                                                                                          |   |                 |
|  /s/ Gregg A.      Lapointe                                        Gregg      A. Lapointe, C.P.A., M.B.A.                                                                                                                                                                                                                                                                                                                         |   |  Director                                                                                                                          |   |  March      27, 2009 |
|  /s/ James      Clavijo                                                     James      Clavijo, C.P.A., M.A.                                                                                                                                                                                                                                                                                   |   |  Controller,      Treasurer, and Corporate Secretary                                                                               |   |  March      27,2009  |

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