UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 x
                  ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934.
 For the
Fiscal Year Ended December 31,
2009
 
 o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.
 
 For the
transition period from
____________  to  ____________
 
 Commission
File No. 000-16929
 
 SOLIGENIX,
INC.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                
                41-1505029(State
      or other jurisdiction of
                  incorporation
      or organization)
                
                (I.R.S.
      Employer
                  Identification
      Number)29
      Emmons Drive, Suite C-10
                  Princeton,
    NJ
                
                08540(Address
      of principal executive offices)
                
                (Zip
      Code)
  (609)
      538-8200(Registrant’s
      telephone number, including area
code)
 
 Securities
registered under Section 12 (b) of the Exchange Act:
  Title of Each
      Class
              Name of Each Exchange
      on Which RegisteredCommon Stock, par value $.001
      per share
              OTCBB
  Securities
registered under Section 12(g) of the Exchange Act: None
  Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.   Yes£NoR
 
 Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the
Act.   Yes£NoR
 
 Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934during the
preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes R     No
£
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
10-K or any amendments to this Form 10-K. R
 
 Indicate
by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definition of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large accelerated filer£
              Accelerated filer£
              Non-accelerated filer£
              Smaller reporting companyR
 
 Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R
 
 The
aggregate market value of the common stock held by non-affiliates of the
registrant was approximately $39,555,264 (assuming, for this purpose, that
executive officers, directors and holders of 10% or more of the common stock are
affiliates), based on the closing price of the registrant’s common stock as
reported on the Over-the-Counter Bulletin Board on March 25, 2010.
 
 As of
March 25, 2010, 186,888,036 shares of the registrant’s Common Stock, par value
$0.001 per share, were outstanding.
 
 DOCUMENTS INCORPORATED BY
REFERENCE:  None.
 SOLIGENIX, INC.
 
 ANNUAL REPORT ON FORM 10-K
 For the Year Ended December 31, 2009
 
 Table
of Contents
 
 
 Item
              Description
              PagePart
      I1.
              Business
              31A.
              Risk Factors
              161B.
              Unresolved Staff Comments
              252.
              Properties
              253.
              Legal Proceedings
              254.
              Submission of Matters to a Vote of Security
      Holders
              25Part
      II5.
              Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
              266.
              Selected Financial Data
              267.
              Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
              278.
              Financial Statements and Supplementary Data
              339.
              Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
              339A.
              Controls and Procedures
              339B.
              Other Information
              34Part
      III10.
              Directors, Executive Officers and Corporate
      Governance
              3511.
              Executive Compensation
              3912.
              Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
              4213.
              Certain Relationships and Related Transactions and Director
      Independence
              4414.
              Principal Accountant Fees and Services
              44Part
      IV15.
              Exhibits and Financial Statement Schedules
              45Signatures
              49Consolidated Financial Statements
              F-1
 
 2
   PART
I
 
 Item 1. Business
 
 This
Annual Report on Form 10-K contains statements of a forward-looking nature
relating to future events or our future financial performance. These statements
are only predictions and actual events or results may differ
materially.  In evaluating such statements, you should carefully
consider the various factors identified in this report that could cause actual
results to differ materially from those indicated in any forward-looking
statements, including those set forth in “Risk Factors” in this Annual Report on
Form 10-K.  See “Cautionary Note Regarding Forward Looking
Statements.”
 
 Our Business
Overview
 
 Soligenix,
Inc., formerly known as DOR BioPharma, Inc., was incorporated in Delaware in
1987. We are a late-stage research and development biopharmaceutical company
focused on developing products to treat the life-threatening side effects of
cancer treatment and serious gastrointestinal diseases where there remains an
unmet medical need, as well as developing biodefense vaccines and therapeutics.
We maintain two active business segments: BioTherapeutics and BioDefense. Our
BioTherapeutics business segment intends to develop orBec® (oral
beclomethasone dipropionate, or oral BDP) and other biotherapeutic products,
including LPMTM
Leuprolide. Our BioDefense business segment intends to convert its ricin toxin
vaccine and radiation injury program from early stage development to advanced
development and manufacturing.
 
 Our
business activities can be outlined as follows:
 
 ·
              complete
      the pivotal Phase 3 confirmatory clinical trial for orBec®in the treatment of acute gastrointestinal Graft-versus-Host
      disease (“GI GVHD”);
 ·
              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. to commercialize
      orBec®
      in the U.S., Canada and Mexico;
 ·
              conduct
      and complete a Phase 2 clinical trial of orBec®
      for the prevention of acute GVHD;
 ·
              evaluate
      and initiate additional clinical trials to explore the effectiveness of
      oral BDP in other therapeutic indications involving inflammatory
      conditions of the gastrointestinal tract such as radiation enteritis,
      radiation injury and Crohn’s
disease;
 ·
              reinitiate
      development of our other biotherapeutics products, including LPMTM
      Leuprolide;
 ·
              continue
      to secure additional government funding for each of our BioDefense
      programs through grants, contracts and
  procurements;
 ·
              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;
 ·
              make
      orBec®available
      worldwide through the Named Patient Access Program for the treatment of
      acute GI GVHD;
 ·
              acquire
      or in-license new clinical-stage compounds for development;
      and
 ·
              explore
      other business development and acquisition
  strategies.
 
 Our
principal executive offices are located at 29 Emmons Drive, Suite C-10,
Princeton, New Jersey 08540 and our telephone number is (609)
538-8200.
   3
   Our
Products in Development
 
 The
following tables summarize the products that we are currently
developing:
  BioTherapeutic
Products
 
 Soligenix Product
              Therapeutic Indication
              Stage of DevelopmentorBec®
              Treatment
      of Acute GI GVHD
              Pivotal
      Phase 3 confirmatory trial enrollingorBec®
              Prevention
      of Acute GI GVHD
              Phase
      2 trial enrollingorBec®
              Treatment
      of Chronic GI GVHD
              Phase
      2 trial potentially to be initiated in 2010SGX
      201
              Acute
      Radiation Enteritis
              Phase
      1/2 trial initiatedLPMTMLeuprolide
              Endometriosis
      and Prostate Cancer
              Phase
      1 trial potentially to be initiated in
2010
 
 BioDefense
Products
 
 Target
              Available Countermeasure
              Soligenix ProductRicin
      Toxin
              No
      vaccine or antidote
                currently
      FDA approved
              Injectable
      ricin vaccine
                Phase
      1 clinical trial successfully completed
                Second
      Phase 1 trial enrollingRadiation
      Injury
              No
      vaccine or antidote
                currently
      FDA approved
              SGX
      202 (pre-clinical)
  BioTherapeutics
Overview
  orBec®and oralBDP
 
 orBec®
represents a first-of-its-kind oral, locally acting
therapy tailored to treat the gastrointestinal manifestation of GI GVHD, the
organ system where GVHD is most frequently encountered and highly problematic.
orBec® is
intended to reduce the need for systemic immunosuppressive drugs to treat acute
GI GVHD. The active ingredient in orBec® is
beclomethasone dipropionate (“BDP”), a highly potent, topically active
corticosteroid that has a local effect on inflamed tissue. BDP has been marketed
in the U.S. and worldwide since the early 1970’s as the active pharmaceutical
ingredient in a nasal spray and in a metered-dose inhaler for the treatment of
patients with allergic rhinitis and asthma. orBec® is
specifically formulated for oral administration as a single product consisting
of two tablets. One tablet is intended to release BDP in the upper sections of
the GI tract and the other tablet is intended to release BDP in the lower
sections of the GI tract.
 
 Based on
data from the prior Phase 3 study of orBec®, the
current confirmatory Phase 3 study is a highly powered, double-blind,
randomized, placebo-controlled, multi-center trial and will seek to enroll an
estimated 166 patients. The primary endpoint is the treatment failure rate at
Study Day 80. This endpoint was successfully measured as a secondary endpoint
(p-value 0.005) in the previous Phase 3 study as a key measure of durability
following a 50-day course of treatment with orBec®
(i.e., 30 days following cessation of treatment).
 
 In
addition to issued patents and pending worldwide patent applications held by or
exclusively licensed to us, orBec® would
potentially benefit from orphan drug designations in the U.S. and in Europe for
the treatment of GI GVHD, as well as an orphan drug designation in the U.S for
the treatment of chronic GI GVHD. Orphan drug designations provide for 7 and 10
years of  market exclusivity upon approval in the U.S and Europe,
respectively.
   4
  Historical
Background
 
 Two prior
randomized, double-blind, placebo-controlled Phase 2 and 3 clinical trials
support orBec®’s ability to
provide clinically meaningful outcomes when compared with the current standard
of care, including a lowered exposure to systemic corticosteroids following
allogeneic transplantation. Currently, there are no approved products to treat
GI GVHD. The first trial was a 60-patient Phase 2 single-center clinical trial
conducted at the Fred Hutchinson Cancer Research Center ("FHCRC") in Seattle,
Washington. The second trial was a 129-patient pivotal Phase 3 multi-center
clinical trial of orBec® conducted at 16
leading bone marrow/stem cell transplantation centers in the U.S. and France.
Although orBec® did not achieve
statistical significance in the primary endpoint of its pivotal trial, namely
median time-to-treatment failure through Day 50 (p-value 0.1177), orBec® did achieve
statistical significance in other key secondary endpoints such as the proportion
of patients free of GVHD at Day 50 (p-value 0.05) and Day 80 (p-value 0.005) and
the median time-to-treatment failure through Day 80 (p-value 0.0226), as well as
a 66% reduction in mortality among patients randomized to orBec® at 200 days
post-transplant with only 5 patient (8%) deaths in the orBec® group compared
to 16 patient (24%) deaths in the placebo group (p-value 0.0139). Within one
year after randomization in the pivotal Phase 3 trial, 18 patients (29%) in the
orBec® group and 28
patients (42%) in the placebo group died (46% reduction in mortality, p-value
0.04).
 
 In the
Phase 2 study, the primary endpoint was the clinically relevant determination of
whether GI GVHD patients at Day 30 (the end of treatment) had a durable GVHD
treatment response as measured by whether or not they were able to consume at
least 70% of their estimated caloric requirement. The GVHD treatment response at
Day 30 was 22 of 31 (71%) vs. 12 of 29 (41%) in the orBec® and
placebo groups, respectively (p-value 0.02). Additionally, the GVHD treatment
response at Day 40 (10 days post cessation of therapy) was 16 of 31 (52%) vs. 5
of 29 (17%) in the orBec® and
placebo groups, respectively (p-value 0.007).
 
 Based on
the data from the above referenced Phase 2 and Phase 3 studies, on September 21,
2006, we filed a new drug application (“NDA”) for our lead product orBec® with
the U.S. Food and Drug Administration (“FDA”) for the treatment of acute GI
GVHD. On October 18, 2007, we received a not approvable letter from the FDA in
response to our NDA for orBec® for
the treatment of acute GI GVHD. In the letter, the FDA requested additional
clinical trial data to demonstrate the safety and efficacy of orBec®.  The
FDA also requested nonclinical and chemistry, manufacturing and controls
information as part of this letter.
  In
December 2008, we reached agreement with the FDA on the design of a
confirmatory, pivotal Phase 3 clinical trial evaluating orBec®for
the treatment of acute GI GVHD under the FDA’s Special Protocol Assessment
(“SPA”) procedure. An agreement via the SPA procedure is an agreement with the
FDA that a Phase 3 clinical trial design (e.g., endpoints, sample size, control
group and statistical analyses) is acceptable to support a regulatory submission
seeking new drug approval. After the study begins, the FDA can only change a SPA
for very limited reasons. Further, in June 2009, we
received Protocol Assistance feedback from the European Medicines Agency
(“EMEA”) on the design of the Phase 3 clinical trial for orBec®.  The
EMEA agreed that should the new confirmatory Phase 3 study produce positive
results, the data would be sufficient to support a marketing authorization in
all 27 European Union member states. The confirmatory Phase 3 trial has been
initiated and is expected to complete in the first half of 2011.
  If the
confirmatory Phase 3 trial is successful, we will file a complete response to
the FDA action letter.  This response is expected to be designated a
class II response with a corresponding FDA review time frame of 6
months.
  We have
entered into a collaboration agreementwith
Numoda Corporation (“Numoda”) for the execution of our confirmatory Phase 3
clinical trial of orBec®.  Collaborating
with Numoda will allow us to take advantage of a scope of services including
using their industry benchmarking capabilities to develop an operational and
financial plan including the use of a
proprietary management and oversight capabilities process. As part of the
collaboration, Numoda has agreed to accept
our common stock as payment in exchange for a portion of its
services in connection with the conduct of the confirmatory Phase 3 clinical
trial. To date, we have issued 3,250,447 shares of
common stock to Numoda in partial payment for its services.Working with
Numoda, we also will be able to take full advantage of early reporting of
results to potential licensing partners and others.
   5
   We are
currently enrolling patients in a randomized, double blind, placebo-controlled,
Phase 2 clinical trial of orBec® for
the prevention of acute GVHD after allogeneic hematopoietic cell
transplantation ("HCT") with myeloablative conditioning regimens. The trial
is being conducted by Paul Martin, M.D., at the FHCRC and is being
supported, in large part, by a grant from the National Institute of
Health . We will not receive any direct monetary benefit from this grant,
but if successful, this funded trial could serve to increase the value of our
orBec®/oral
from the BDP program.  The Phase 2 trial will seek to enroll up
to 138 (92 orBec® and
46 placebo) patients. The primary endpoint of the trial is the proportion of
subjects who develop acute GVHD with severity sufficient to require systemic
immunosuppressive treatment on or before day 90 after
transplantation.  Patients in this study will begin dosing at the
start of the conditioning regimen and continue through day 75 following HCT.
This trial is expected to complete enrollment in the first half of
2010.
 
 Mortality
Results
  Phase 3 Trial
              Phase 2 TrialorBec®
              Placebo
              orBec®
              PlaceboNumber
      of patients randomized
              62
              67
              31
              29Number
      (%) 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%)
 
 *Some
patients died with both infection and relapse of their underlying
malignancy.
 
 Among the
data from the Phase 3 clinical study of orBec® reported in the January 2007
issue of Blood, the peer-reviewed journal of
the American Society of Hematology, survival at the pre-specified
endpoint of 200 days post-transplantation showed a clinically meaningful and
statistically significant result. According to the manuscript, “the risk of
mortality during the 200-day post-transplantation period was 67% lower with
orBec®
treatment compared to placebo treatment (hazard ratio 0.33; 95% CI: 0.12, 0.89;
p-value 0.03, Wald chi-square test).” The most common proximate causes of death
by transplantation day-200 were relapse of the underlying malignancy and
infection. Relapse of the underlying hematologic malignancy had contributed to
the deaths of 9/67 patients (13.4%) in the placebo arm and 3/62 patients (4.8%)
in the BDP arm. Infection contributed to the deaths of 9/67 patients (13.4%) in
the placebo arm and 3/62 (4.8%) in the BDP arm. Acute or chronic GVHD was the
proximate cause of death in 3/67 patients (4.5%) in the placebo arm and in 1/62
(1.6%) in the BDP arm.
 
 In
addition, a subgroup analysis also revealed that patients dosed with orBec® who
had received stem cells from unrelated donors had a 94% reduction in the risk of
mortality 200 days post-transplantation.
 
 In this
Phase 3 study, orBec®showed continued survival benefit when compared to placebo one year after
randomization. Overall, 18 patients (29%) in the orBec® group
and 28 patients (42%) in the placebo group died within one year of randomization
(46% reduction in mortality, p-value 0.04).  Results from the Phase 2
trial also demonstrated enhanced long-term survival benefit with orBec®
versus placebo. In that study, at one year after randomization, 6 of 31 patients
(19%) in the orBec®group
had died while 9 of 29 patients (31%) in the placebo group had died (45%
reduction in mortality, p-value 0.26). Pooling the survival data from both
trials demonstrated that the survival benefit of orBec®
treatment was sustained long after orBec® was
discontinued and extended well beyond 3 years after the transplantation. As of
September 25, 2005, median follow-up of patients in the two trials was 3.5 years
(placebo patients) and 3.6 years (orBec®
patients), with a range of 10.6 months to 11.1 years. The risk of mortality was
37% lower for patients randomized to orBec®
compared with placebo (p-value 0.03).
   6
  A
retrospective analysis of survival at 200 days post-transplantation in the
supportive Phase 2 clinical trial showed consistent response rates with the
Phase 3 trial; three patients (10%) who had been randomized to orBec® had
died, compared with six deaths (21%) among patients who had been randomized to
placebo, leading to a reduced hazard of day-200 mortality, although not
statistically significantly different.  Detailed analysis of the
likely proximate cause of death showed that mortality with infection or with
relapse of underlying malignancy were both reduced in the same proportion after
treatment with orBec®
compared to placebo.  By transplantation day-200, relapse of
hematologic malignancy had contributed to the deaths of 1 of 31 patients (3%) in
the orBec® arm
and 4 of 29 patients (14%) in the placebo arm.  Infection contributed
to the deaths of 2 of 31 patients (6%) in the orBec® arm
and 5 of 29 patients (17%) in the placebo arm.
 
 Safety
and Adverse Events
 
 The
frequencies of severe adverse events, adverse events related to study drug, and
adverse events resulting in study drug discontinuation were all comparable to
that of the placebo group in both trials. Patients who remained on orBec® until
Day 50 in the Phase 3 study had a higher likelihood of having biochemical
evidence of abnormal hypothalamic-pituitary-adrenal axis function compared to
patients on placebo. This effect was far less pronounced than those seen in
patients on high dose prednisone.
 
 Commercialization
and Market
 
 We
anticipate the market potential for orBec®for
the treatment of acute GI GVHD to be approximately 50% of the more than 10,000
allogeneic bone marrow and stem cell transplantations that occur each year in
the U.S.
 
 On February 11, 2009, we entered into a collaboration
and supply agreement with Sigma-Tau Pharmaceuticals, Inc. ("Sigma-Tau") for
the commercialization of orBec®Sigma-Tau is a pharmaceutical company that
develops novel therapies for the unmet needs of patients with rare diseases.
Pursuant to this agreement, Sigma-Tau has an
exclusive license to commercialize orBec®in the U.S., Canada and Mexico (the “Territory”).
Sigma-Tau is obligated to make payments upon the attainment of significant
milestones, as set forth in the agreement.The first milestone payment of
$1 million was made in connection with the enrollment of the first patient
in our confirmatory Phase 3 clinical trial of orBec® for
the treatment of acute GI GVHD in September 2009. Total additional milestone payments due from Sigma-Tau
for orBec®under the agreement could reach up to $9 million.
Sigma-Tau will pay us a 35% royalty (inclusive of drug supply) on net sales in
the Territory as well as pay for commercialization expenses, including launch
activities. In connection with the execution of the collaboration and
supply agreement, we entered into a common stock purchase agreement with
Sigma-Tau pursuant to which we sold 25 million shares of our common stock to
Sigma-Tau for $0.18 per share, for an aggregate price of
$4,500,000.  The purchase price is equal to one hundred fifty percent
(150%) of the average trading price of our common stock over the five trading
days prior to February 11, 2009.  On November 26, 2008, prior to
entering the collaboration agreement, we sold Sigma-Tau 16,666,667 common shares
at $0.09 per share (the market price at the time) for proceeds of $1,500,000 in
exchange for the exclusive right to negotiate a collaboration deal with us until
March 1, 2009.
 
 Additionally, orBec® is currently
available in Named Patient Access Programs ("NPAPs") inSouth Korea, Latin America, Canada,
Singapore, Malaysia, Australia, South Africa, New Zealand and the ASEAN
countries.  The NPAPs are
compassionate use drug supply programs under which medical practitioners can
legally supply investigational drugs to their eligible
patients.  Under this program, drugs can be administered to patients
who are suffering from serious illnesses prior to the drug being approved by the
various regional regulatory authorities.
  ® to be approximately
$400 million for all GVHO applications, namely, treatment of acute and chronic
GI GVHD and prevention of acute GVHD.
   7
  
 About
GVHD
  GVHD
occurs in patients following allogeneic stem cell transplantation in which
tissues of the host, most frequently the gut, liver, and skin, are attacked by
lymphocytes from the donor (graft) marrow. Patients with mild to moderate GI
GVHD present to the clinic with early satiety, anorexia, nausea, vomiting and
diarrhea. If left untreated, symptoms of GI GVHD persist and can progress to
necrosis and exfoliation of most of the epithelial cells of the intestinal
mucosa, frequently a fatal condition. Approximately 50% of the more than 10,000
annual allogeneic transplantation patients in the U.S. will develop some form of
acute GI GVHD.
 
 GI GVHD
is one of the most common causes for the failure of stem cell transplantation.
These procedures are being increasingly utilized to treat leukemia and other
cancer patients with the prospect of eliminating residual disease and reducing
the likelihood of relapse. orBec®represents a first-of-its-kind oral, locally acting therapy tailored to
treat the gastrointestinal manifestation of GVHD, the organ system where GVHD is
most frequently encountered and highly problematic. orBec®is
intended to reduce the need for systemic immunosuppressives to treat acute GI
GVHD. Currently used systemic immunosuppressives utilized to control GI GVHD
substantially inhibit the highly desirable Graft-versus-Leukemia (“GVL”) effect
of stem cell transplantations, leading to high rates of aggressive forms of
relapse, as well as substantial rates of mortality due to opportunistic
infection.
 
 About
Allogeneic Hematopoietic Cell Transplantation
 
 Allogeneic
hematopoietic cell transplantation (“HCT”) is considered a potentially curative
option for many leukemias as well as other forms of blood cancer.  In
an allogeneic HCT procedure, hematopoietic stem cells are harvested from the
blood or bone marrow of a closely matched relative or unrelated person, and are
transplanted into the patient following either high-dose chemotherapy or intense
immunosuppressive conditioning therapy.  The curative potential of
allogeneic HCT is now partly attributed to the GVL or Graft-versus-Tumor effects
of the newly transplanted donor cells to recognize and destroy malignant cells
in the recipient patient.
 
 The use
of allogeneic HCT has grown substantially over the last decade due to advances
in human immunogenetics, the establishment of unrelated donor programs, the use
of cord blood as a source of hematopoietic stem cells and the advent of
non-myeloablative conditioning regimens, or mini-transplants, that avoid the
side effects of high-dose chemotherapy.  Based on the latest
statistics available, it is estimated that there are more than 10,000 allogeneic
HCT procedures annually in the U.S. and a comparable number in
Europe.  Estimates as to the current annual rate of increase in these
procedures are as high as 20%. High rates of morbidity and mortality occur in
this patient population. Clinical trials are also underway testing allogeneic
HCT for treatment of some metastatic solid tumors such as breast cancer, renal
cell carcinoma, melanoma and ovarian cancer. Allogeneic transplantation has also
been studied as a curative therapy for several genetic disorders,
including immunodeficiency syndromes, inborn errors of metabolism, and sickle
cell disease. The primary toxicity of allogeneic HCT, however, is GVHD in which
the newly transplanted donor cells damage cells in the recipient’s
gastrointestinal tract, liver and skin.
 
 Future
Potential Indications of orBec® and
oral BDP
 
 Based on
its pharmacological characteristics, orBec®may
have utility in treating other conditions of the gastrointestinal tract having
an inflammatory component. We have an issued U.S. patent 6,096,731 claiming the
use of oral BDP as a method for preventing and treating the tissue damage that
is associated with both GI GVHD following HCT, as well as GVHD which also occurs
following organ allograft transplantation. We initiated a Phase 2 trial of
orBec® in
the prevention of acute GVHD and are expecting to complete enrollment in the
first half of 2010. We expect to begin a Phase 2 clinical trial in chronic GI
GVHD in the second half of 2010.  In addition, we are exploring the
possibility of testing oral BDP (the active ingredient in orBec®) for
local inflammation associated with Crohn’s Disease, Lymphocytic Colitis,
Irritable Bowel Syndrome, Ulcerative Colitis, among other
indications.
 
  8
   SGX201-
Time Release Formulation of oral BDP
  We have
recently initiated a Phase 1/2 clinical trial in acute radiation enteritis for
which we have received “Fast Track” designation from the FDA. Fast Track is a
designation that the FDA reserves for a drug intended to treat a serious or
life-threatening condition and one that demonstrates the potential to address an
unmet medical need for the condition. Fast track designation is designed to
facilitate the development and expedite the review of new drugs. For instance,
should events warrant, we will be eligible to submit an NDA for SGX201 on a
rolling basis, permitting the FDA to review sections of the NDA prior to
receiving the complete submission. Additionally, NDAs for Fast Track development
programs ordinarily will be eligible for priority review, which implies an
abbreviated review time of six months.
  SGX201
contains BDP, a highly potent, topically active corticosteroid that has a local
effect on inflamed tissue. BDP has been marketed in the U.S. and worldwide since
the early 1970s as the active pharmaceutical ingredient in inhalation products
for the treatment of patients with allergic rhinitis and asthma.  BDP is
also the active ingredient in orBec®,
currently in Phase 3 and Phase 2 development by Soligenix for the treatment and
prevention of GI GVHD, respectively.  SGX201 is a time-release
formulation of BDP specifically designed for oral use.
 
 Patients
with rectal cancer who are scheduled to undergo concurrent radiation and
chemotherapy prior to surgery will be enrolled in four dose
groups.   The objectives of the study are to evaluate the safety
and maximal tolerated dose of escalating doses of SGX201, as well as the
preliminary efficacy of SGX201 for prevention of signs and symptoms of acute
radiation enteritis. This program is supported in part by a $500,000 two-year
Small Business Innovation Research (“SBIR”) grant awarded by the
NIH.
 
 The study
is expected to be completed in the first half of 2011.
  About
Acute Radiation Enteritis
  External
radiation therapy is used to treat most types of cancer, including cancer of the
bladder, uterine, cervix, rectum, prostate, and vagina.  During
delivery of treatment, some level of radiation will also be delivered to healthy
tissue, including the bowel, leading to acute and chronic
toxicities.  The large and small bowels are very sensitive to
radiation and the larger the dose of radiation the greater the damage to normal
bowel tissue. Radiation enteritis is a condition in which the lining of the
bowel becomes swollen and inflamed during or after radiation therapy to the
abdomen, pelvis, or rectum.  Most tumors in the abdomen and pelvis
need large doses, and almost all patients receiving radiation to the abdomen,
pelvis, or rectum will show signs of acute enteritis.
  Patients
with acute enteritis may have nausea, vomiting, abdominal pain and bleeding,
among other symptoms.  Some patients may develop dehydration and
require hospitalization. With diarrhea, the gastrointestinal tract does not
function normally, and nutrients such as fat, lactose, bile salts, and vitamin
B12
are not well absorbed.
 
 Symptoms
will usually resolve within 2-6 weeks after therapy has
ceased.  Radiation enteritis is often not a self-limited illness, as
over 80% of patients who receive abdominal radiation therapy complain of a
persistent change in bowel habits.  Moreover, acute radiation injury
increases the risk of development of chronic radiation enteropathy, and overall
5% to 15% of the patients who receive abdominal or pelvic irradiation will
develop chronic radiation enteritis.
 
 There are
over 100,000 patients annually in the U.S. who receive abdominal or pelvic
external beam radiation treatment for cancer, and these patients are at risk of
developing acute and chronic radiation enteritis.
  9
    LPMTM –
Leuprolide
 
 Our Lipid
Polymer Micelle (“LPMTM”) oral drug delivery system is a proprietary platform
technology designed to allow for the oral administration of peptide drugs that
are water-soluble but poorly permeable through the gastrointestinal tract. We
have previously demonstrated in pre-clinical animal models that the LPMTM
technology is adaptable to oral delivery of peptide drugs and that high systemic
levels after intestinal absorption can be achieved with the peptide hormone drug
leuprolide. The LPMTM system utilizes a lipid based delivery system that can
incorporate the peptide of interest in a thermodynamically stable configuration
called a “reverse micelle” that, through oral administration, can promote
intestinal absorption. Reverse micelles are structures that form when certain
classes of lipids come in contact with small amounts of water.  This
results in a drug delivery system in which a stable clear dispersion of the
water soluble drug can be evenly dispersed within the lipid phase. LPMTM is
thought to promote intestinal absorption due to the ability of the micelles to
open up small channels through the epithelial layer of the intestines that allow
only molecules of a certain dimension to pass through while excluding extremely
large molecules such as bacteria and viruses.  The reverse micelles
also structurally prevent the rapid inactivation of peptides by enzymes in the
upper gastrointestinal tract via a non-specific enzyme inhibition by
surfactant(s) in the formulation.
 
 In
pre-clinical studies, the LPMTM delivery technology significantly enhanced the
ability of leuprolide to pass through the intestinal epithelium in comparison to
leuprolide alone. Leuprolide is a synthetic peptide agonist of gonadotropin
releasing hormone, which is used in the treatment of prostate cancer in men and
endometriosis in women. Leuprolide exhibits poor intestinal absorption from an
aqueous solution with the oral bioavailability being less than 5%. Utilizing
LPMTM in rats and dogs, the bioavailability of leuprolide averaged 30% compared
to 2.2% for the control oral solution. Based on these promising pre-clinical
data, we anticipate preparing for a Phase 1 study in humans to confirm these
findings.
 
 An oral
version of leuprolide may provide a significant advantage over the currently
marketed “depot” formulations. Leuprolide is one of the most widely used
anti-cancer agents for advanced prostate cancer in men.  Injectable
forms of leuprolide marketed under trade names such as Lupron® and
Eligard® had
worldwide annual sales of more than $1 billion in recent years. Injectable
leuprolide is also widely used in non-cancer indications, such as endometriosis
in women (a common condition in which cells normally found in the uterus become
implanted in other areas of the body), uterine fibroids in women (noncancerous
growths in the uterus) and central precocious puberty in children (a condition
causing children to enter puberty too soon). Leuprolide is currently available
only in injectable, injectable depot and subcutaneous implant routes of delivery
which limits its use and utility.
 
 BioDefense
Overview
 
 RiVaxTM
     10
   The
initial Phase 1 clinical trial of RiVax TM was conducted by Dr. Ellen Vitetta at
the University of Texas Southwestern Medical Center (“UTSW”) at Dallas,
Soligenix's academic partner. The trial demonstrated that RiVaxTM is well
tolerated and induces antibodies in humans that neutralize the ricin toxin. The
functional activity of the antibodies was confirmed by animal challenge studies
in mice which survived exposure to ricin toxin after being injected with serum
samples from the volunteers. The outcome of the study was published in the
Proceedings of the National Academy of Sciences. A second Phase 1 trial
supported by a grant to UTSW is currently underway utilizing an adjuvanted
formulation of RiVaxTM and is expected to complete in the second half of
2010.
  The
National Institutes of Health (“NIH”) has previously awarded us two grants: one
for $6.4 million and one for $5.2 million for a total of $11.6 million for the
development of RiVaxTM covering process development, scale-up and current Good
Manufacturing Practive ("cGMP") manufacturing, and pre-clinical toxicology
testing pursuant to the FDA’s “animal rule,” which has supported our research
from 2004 to present.
  On
September 21, 2009, we announced that we were awarded a $9.4 Million grant from
the National Institue of Allergy and Infectious Diseases ("NIAID"), a division
of the NIH. The grant will fund, over a five-year period, the development of
formulation and manufacturing processes for vaccines, including RiVaxTM,
that are stable at elevated temperatures. The grant will also fund the
development of improved thermostable adjuvants expected to result in rapidly
acting vaccines that can be given with fewer injections over shorter intervals.
The development of heat-stable vaccines will take advantage of combining several
novel formulation processes with well characterized adjuvants that have been
evaluated in numerous vaccine field trials. The formulation and process
technology funded by the grant will be applied to the further development of
RiVaxTM, a
subunit vaccine for prevention of ricin toxin lethality and morbidity. The grant
will also address the development of manufacturing processes and animal model
systems necessary for the pre-clinical characterization of vaccine formulations.
Further, the grant will fund the concurrent development of at least one other
protein subunit vaccine, which is currently expected to be an anthrax vaccine.
This could lead to new subunit vaccines that would bypass current cold chain
requirements for storage and distribution. Vaccines to be stored in the
Strategic National Stockpile ("SNS") and used under emergency situations for
biodefense are expected to have long-term shelf life.
  On April
29, 2008, we announced the initiation of a comprehensive program to evaluate the
efficacy of RiVaxTM in non-human primates. This study is taking place at the
Tulane University Health Sciences Center and will provide data that will further
aid in the interpretation of immunogenicity data obtained in the human
vaccination trials.
  SGX202
– Oral BDP for GI Radiation Injury
 
 On
September 12, 2007, we announced that our academic partner, the Fred Hutchinson
Cancer Research Center (“FHCRC”), received a $1 million grant from the NIH to
conduct pre-clinical studies of oral beclomethasone dipropionate (oral BDP, also
the active ingredient in orBec®) for
the treatment of GI radiation injury. While we will not receive any monetary
benefit from this grant, we will benefit if this work is successful and it will
enhance the value of our oral BDP programs. The purpose of the studies funded by
the grant, entitled “Improving Gastrointestinal Recovery after Radiation,” is to
evaluate the ability of three promising clinical-grade drugs, including oral
BDP, given alone or in combination, that are likely to significantly mitigate
the damage to the gastrointestinal epithelium caused by exposure to high doses
of radiation using a well-established dog model. The GI tract is highly
sensitive to ionizing radiation and the destruction of epithelial tissue is one
of the first effects of radiation exposure. The rapid loss of epithelial cells
leads to inflammation and infection that are often the primary cause of death in
acute radiation injury. This type of therapy, if successful, would benefit
cancer patients undergoing radiation, chemotherapy, or victims of
nuclear-terrorism. In most radiation scenarios, injury to the hematopoietic
(blood) system and gastrointestinal tract are the main determinants of survival.
The studies will compare overall survival and markers of intestinal cell
regeneration when the drug regimens are added to supportive care intended to
boost proliferation of blood cells. The principal investigator of the study is
George E. Georges, M.D., Associate Member of the FHCRC. Our rights to the use of
SGX202 are through our license with George McDonald.
 
  11
   The Drug Approval
Process
 
 Before
marketing, each of our products must undergo an extensive regulatory approval
process conducted by the FDA and applicable agencies in other countries.
Testing, manufacturing, commercialization, advertising, promotion, export and
marketing, among other things, of the proposed products are subject to extensive
regulation by government authorities in the U.S. and other countries. All
products must go through a series of tests, including advanced human clinical
trials, which the FDA is allowed to suspend as it deems necessary to protect the
safety of subjects.
  Our
products will require regulatory clearance by the FDA and by comparable agencies
in other countries, prior to commercialization. The nature and extent of
regulation differs with respect to different products. In order to test, produce
and market certain therapeutic products in the U.S., mandatory procedures and
safety standards, approval processes, manufacturing and marketing practices
established by the FDA must be satisfied.
 
 An
Investigational New Drug ("IND") application is required before human
clinical testing in the U.S. of a new drug compound or biological product can
commence. The IND application includes results of pre-clinical animal
studies evaluating the safety and efficacy of the drug and a detailed
description of the clinical investigations to be undertaken.
 
 Clinical
trials are normally done in three phases, although the phases may overlap. Phase
1 trials are smaller trials concerned primarily with metabolism and
pharmacologic actions of the drug and with the safety of the product. Phase 2
trials are designed primarily to demonstrate effectiveness and safety in
treating the disease or condition for which the product is indicated. These
trials typically explore various doses and regimens. Phase 3 trials are expanded
clinical trials intended to gather additional information on safety and
effectiveness needed to clarify the product’s benefit-risk relationship and
generate information for proper labeling of the drug, among other things. The
FDA receives reports on the progress of each phase of clinical testing and may
require the modification, suspension or termination of clinical trials if an
unwarranted risk is presented to patients. When data is required from long-term
use of a drug following its approval and initial marketing, the FDA can require
Phase 4, or post-marketing, studies to be conducted.
 
 With
certain exceptions, once successful clinical testing is completed, the sponsor
can submit an NDA for approval of a drug. The process of completing clinical
trials for a new drug is likely to take a number of years and require the
expenditure of substantial resources. Furthermore, the FDA or any foreign health
authority may not grant an approval on a timely basis, if at all. The FDA may
deny the approval of an NDA, in its sole discretion, if it determines that its
regulatory criteria have not been satisfied or may require additional testing or
information. Among the conditions for marketing approval is the requirement that
the prospective manufacturer’s quality control and manufacturing procedures
conform to good manufacturing practice regulations. In complying with standards
contained in these regulations, manufacturers must continue to expend time,
money and effort in the area of production, quality control and quality
assurance to ensure full technical compliance. Manufacturing facilities, both
foreign and domestic, also are subject to inspections by, or under the authority
of, the FDA and by other federal, state, local or foreign agencies.
  Even
after initial FDA or foreign health authority approval has been obtained,
further studies, including Phase 4 post-marketing studies, may be required to
provide additional data on safety and will be required to gain approval for the
marketing of a product as a treatment for clinical indications other than those
for which the product was initially tested. Also, the FDA or foreign regulatory
authority will require post-marketing reporting to monitor the side effects of
the drug. Results of post-marketing programs may limit or expand the further
marketing of the products. Further, if there are any modifications to the drug,
including any change in indication, manufacturing process, labeling or
manufacturing facility, an application seeking approval of such changes will
likely be required to be submitted to the FDA or foreign regulatory
authority.
  In the
U.S., the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act,
the Federal Trade Commission Act, and other federal and state statutes and
regulations govern or influence the research, testing, manufacture, safety,
labeling, storage, record keeping, approval, advertising and promotion of drug,
biological, medical device and food products. Noncompliance with applicable
requirements can result in, among other things, fines, recall or seizure of
products, refusal to permit products to be imported into the U.S., refusal of
the government to approve product approval applications or to allow the Company
to enter into government supply contracts, withdrawal of previously approved
applications and criminal prosecution. The FDA may also assess civil penalties
for violations of the Federal Food, Drug, and Cosmetic Act involving medical
devices.
   12
   For the
development of biodefense vaccines, such as RiVaxTM, the
FDA has instituted policies that are expected to result in shorter pathways to
market. This potentially includes approval for commercial use using the results
of animal efficacy trials, rather than efficacy trials in humans. However, the
Company will still have to establish that the vaccine and countermeasures it is
developing are safe in humans at doses that are correlated with the beneficial
effect in animals. Such clinical trials will also have to be completed in
distinct populations that are subject to the countermeasures; for instance, the
very young and the very old, and in pregnant women, if the countermeasure is to
be licensed for civilian use. Other agencies will have an influence over the
benefit-risk scenarios for deploying the countermeasures and in establishing the
number of doses utilized in the Strategic National Stockpile. We may not be able
to sufficiently demonstrate the animal correlation to the satisfaction of the
FDA, as these correlates are difficult to establish and are often
unclear.  Invocation of the animal rule may raise issues of confidence
in the model systems even if the models have been validated. For many of the
biological threats, the animal models are not available and the Company may have
to develop the animal models, a time-consuming research effort. There are few
historical precedents, or recent precedents, for the development of new
countermeasure for bioterrorism agents. Despite the Animal Rule, the FDA may
require large clinical trials to establish safety and immunogenicity before
licensure and it may require safety and immunogenicity trials in additional
populations. Approval of biodefense products may be subject to post-marketing
studies, and could be restricted in use in only certain
populations.
  Marketing
Strategies
  Pursuant to the collaboration and supply agreement with
Sigma-Tau, we granted an exclusive license to Sigma-Tau to commercialize orBec®
in the U.S., Canada and Mexico.
 
 We are
actively seeking a commercialization partner for orBec® and
oral BDP outside of North America as well as for our LPMTM –
Leuprolide program.
 
 We have
had and are having strategic discussions with a number of pharmaceutical
companies regarding the partnering or sale of our biodefense vaccine products.
We may market our biodefense vaccine products directly to government agencies.
We believe that both military and civilian health authorities of the U.S. and
other countries will increase their stockpiling of therapeutics and vaccines to
treat and prevent diseases and conditions that could ensue following a
bioterrorism attack.
  Competition
  Our
competitors are pharmaceutical and biotechnology companies, most of whom have
considerably greater financial, technical, and marketing resources than we
currently have. Another source of competing technologies is universities and
other research institutions, including the U.S. Army Medical Research Institute
of Infectious Diseases, and we face competition from other companies to acquire
rights to those technologies.
 
 orBec®
Competition
 
 Competition
is intense in the gastroenterology and transplant areas. Companies are
attempting to develop technologies to treat GVHD by suppressing the immune
system through various mechanisms. Some companies, including Sangstat, Abgenix,
and PDL BioPharma, Inc., are developing monoclonal antibodies to treat GVHD.
Novartis, Medimmune, and Ariad are developing both gene therapy products and
small molecules to treat GVHD. All of these products are in various stages of
development. For example, Novartis currently markets Cyclosporin, and Sangstat
currently markets Thymoglobulin for transplant-related therapeutics. We face
potential competition from Osiris Therapeutics if its product Prochymal for
the treatment of GVHD is successful in reaching the market. Kiadis Pharma is
also developing products for the treatment of GVHD.  In addition,
there are investigator-sponsored clinical trials exploring the use of approved
drugs such as Enbrel®,
which has been approved by the FDA for the treatment of rheumatoid arthritis, in
the treatment of GVHD.  We believe that orBec®’s
unique release characteristics, intended to deliver topically active therapy to
both the upper and lower gastrointestinal systems, should make orBec®an
attractive alternative to existing therapies for inflammatory diseases of the
gastrointestinal tract.
   13
   Competition
is also intense in the therapeutic area of inflammatory bowel disease. Several
companies, including Centocor, Immunex, and Celgene, have products that are
currently FDA approved. For example, Centocor, a subsidiary of Johnson &
Johnson, markets the drug product RemicadeTM for
Crohn’s disease. Other drugs used to treat inflammatory bowel disease include
another oral locally active corticosteroid called budesonide, which is being
marketed by AstraZeneca in Europe and Canada and by Prometheus Pharmaceuticals
in the U.S. under the tradename of Entocort®. Entocort®
is structurally similar to beclomethasone dipropionate, and the FDA-approved
Entocort for Crohn’s disease late in 2001. In addition, Salix Pharmaceuticals,
Inc. markets an FDA-approved therapy for ulcerative colitis called Colazal®.
Chiesi Pharmaceuticals (“Chiesi”) markets a delayed-release oral formulation of
beclomethasone dipropionate, the active ingredient of orBec®,
called CLIPPERTM for
ulcerative colitis and may seek marketing approval in Italy and other European
countries. In the U.S., Eurand N.V. (“Eurand”) has licenses from Chiesi to the
same formulation as CLIPPERTMand
is developing it for ulcerative colitis. Eurand has also received Orphan Drug
Designation for the compound in pediatric ulcerative colitis
patients.
 
 Several
companies have also established various colonic drug delivery systems to deliver
therapeutic drugs to the colon for treatment of Crohn’s disease. These companies
include Ivax Corporation, Inkine Pharmaceutical Corporation, and Elan
Pharmaceuticals, Inc. Other approaches to treat gastrointestinal disorders
include antisense and gene therapy. Isis Pharmaceuticals, Inc. is in the process
of developing antisense therapy to treat Crohn’s disease.
  BioDefense
Vaccine Competition
  We face
competition in the area of biodefense vaccines from various public and private
companies, universities and governmental agencies, such as the U.S. Army, some
of whom may have their own proprietary technologies which may directly compete
with the our technologies. Acambis, Inc., Dynavax, Emergent Biosolutions
(formerly Bioport Corporation), VaxGen, Inc., Chimerix, Inc., Human Genome
Sciences, Inc., Coley Pharmaceuticals, Inc., Avanir Pharmaceuticals, Inc.,
Dynport Vaccine Company, LLC., Pharmathene, SIGA Pharmaceuticals and others have
announced vaccine or countermeasure development programs for biodefense. Some of
these companies have substantially greater human and financial resources than we
do, and many of them have already received grants or government contracts to
develop anti-toxins and vaccines against bioterrorism. For example, Avecia
Biotechnology, Inc. has received NIH contracts to develop a next generation
injectable anthrax vaccine. VaxGen received an approximately $900 million
procurement order from the U.S. government to produce and deliver 75 million
doses of Anthrax vaccine. This contract was rescinded in January 2007 by the US
Department of Health and Human Services ("HHS") because of the inability of
Vaxgen to enter into Phase 2 clinical trials according to contract timelines.
Several companies have received development grants from the NIH for biodefense
products. For example, Coley Pharmaceuticals, Inc. has received a $6 million
Department of Defense (“DOD”) grant to develop vaccine enhancement technology.
Dynport Vaccine Company, LLC, a prime contractor with the DOD, currently has a
$200 million contract to develop vaccines for the U.S. military, including a
multivalent botulinum toxin vaccine. Although we have received significant grant
funding to date for product development, we have not yet been obtained contract
awards for government procurement of products.
   14
   Patents and Other Proprietary
Rights
 
 Our goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, preserve
our trade secrets, and operate without infringing on the proprietary rights of
other parties, both in the U.S. and in other countries. Our policy is to
actively seek to obtain, where appropriate, the broadest intellectual property
protection possible for our product candidates, proprietary information and
proprietary technology through a combination of contractual arrangements and
patents, both in the U.S. and elsewhere in the world.
 
 We also
depend upon the skills, knowledge and experience of our scientific and technical
personnel, as well as that of our advisors, consultants and other contractors,
none of which is patentable. To help protect our proprietary knowledge and
experience that is not patentable, and for inventions for which patents may be
difficult to enforce, we rely on trade secret protection and confidentiality
agreements to protect our interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into confidentiality
agreements, which prohibit the disclosure of confidential information and, where
applicable, require disclosure and assignment to us of the ideas, developments,
discoveries and inventions important to our business.
 
 We are
the exclusive licensee of an issued U.S. patent that covers the use of
orBec® for
the prevention and treatment of GI GVHD. We also have “Orphan Drug” designations
for orBec® in
the U.S. and in Europe. Our Orphan Drug designations provide for seven years of
post approval marketing exclusivity in the U.S. and ten years exclusivity in
Europe for the use of orBec® in
the treatment of GI GVHD. We have pending patent applications for this
indication that, if granted, may extend our anticipated marketing exclusivity
beyond the seven year post-approval exclusivity provided by the Orphan Drug Act
of 1983.
 
 orBec®License
Agreement
 
 In
November 1998, we entered into an exclusive, worldwide, royalty bearing license
agreement with George B. McDonald, M.D., including the right to grant
sublicenses, for the rights to the intellectual property and know-how relating
to orBec®. In
addition, Dr. McDonald receives $80,000 per annum as a consultant.
  We also
executed an exclusive license to patent applications for “Use of
Anti-Inflammatories to Treat Irritable Bowel Syndrome” from the University of
Texas Medical Branch-Galveston. Under the license agreements, we will be
obligated to make performance-based milestone payments, as well as royalty
payments on any net sales of oral BDP.
 
 RiVaxTM Intellectual
Property
 
 In
January 2003, we executed a worldwide exclusive option to license patent
applications with University of Texas Southwestern Medical Center ("UTSW")
for the nasal, pulmonary and oral uses of a non-toxic ricin vaccine. In June
2004, we entered into a license agreement with UTSW for the injectable rights to
the ricin vaccine and, in October 2004, we negotiated the remaining oral rights
to the ricin vaccine.  Our license obligates us to pay $50,000 in
annual license fees. Through this license, we have rights to the issued patent
number 7,175,848 entitled “Ricin A chain mutants lacking enzymatic activity as
vaccines to protect against aerosolized ricin.” This patent includes methods of
use and composition claims for RiVaxTM.
 
 Research
and Development Expenditure
 
 We spent
approximately $4,500,000 and $1,600,000 in the years ended December 31, 2009 and
2008, respectively, on research and development.  The amounts we spent
on research and development per product during the years ended December 31, 2009
and 2008 are set forth in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in this Annual Report on Form
10-K.
   15
  
 Employees
 
 As of
December 31, 2009, we had 12 full-time employees, 6 of whom are
Ph.D.s.
 
 Available
Investor Information
 
 We file
electronically with the Securities and Exchange Commission (“SEC”) our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) of 15(d) of the Securities Exchange Act of 1934, as amended.  We
make available through our website, free of charge, copies of these reports as
soon as reasonably practicable after we electronically file or furnish them to
the SEC.  Our website is located at http://www.soligenix.com.
You can also request copies of such documents by contacting the company at (609)
538-8200 or sending an email to info@soligenix.com.
 
 Item 1A. Risk factors
 
 You should carefully consider the
risks, uncertainties and other factors described below before you decide whether
to buy shares of our common stock. Any of the factors could materially and
adversely affect our business, financial condition, operating results and
prospects and could negatively impact the market price of our common stock.
Below are the significant risks and uncertainties of which we are aware.
Additional risks and uncertainties that we do not yet know of, or that we
currently think are immaterial, may also impair our business operations. You
should also refer to the other information contained in and incorporated by
reference into this Annual Report, including our financial statements and the
related notes.
 
 Risks Related to our
Industry
 
 We
have had significant losses and anticipate future losses; if additional funding
cannot be obtained, we may reduce or discontinue our product development and
commercialization efforts.
  We have
experienced significant losses since inception and have a significant
accumulated deficit. We expect to incur additional operating losses in the
future and expect our cumulative losses to increase. As of December 31, 2009, we
had $7.7 million in cash available. Based on our projected budgetary needs and
funding from existing grants over the next 18 months, we expect to be able to
maintain the current level of our operations beyond the first quarter of 2011
and conduct the pivotal Phase 3 confirmatory clinical trial of orBec®for
the treatment of acute GI GVHD.
 
 We have
sufficient funds through our existing biodefense grant facilities from the
National Institute of Allergy and Infectious Diseases (“NIAID”), a division of
the National Institutes of Health (“NIH”), to finance our biodefense projects.
On September 21, 2009, we announced that we had received an NIAID grant for
approximately $9.4 million for the development of our biodefense programs. Our
biodefense grants have an overhead component that allows us an agency-approved
percentage over our incurred costs. We estimate that the overhead component,
which is approximately 22%above our subcontracted expenses, will finance some fixed costs for
direct employees working on the grants and other administrative costs. We expect
that our existing NIH biodefense grants will cover approximately $600,000 of
such fixed overhead costs over the next several years.
 
 Our
products are positioned for or are currently in clinical trials, and we have not
yet generated any significant revenues from sales or licensing of them. From
inception through December 31, 2009, we had expended approximately $30.2 million
developing our current product candidates for pre-clinical research and
development and clinical trials, and we currently expect to spend at least $10
millionover the next
two years in connection with the development of our therapeutic and vaccine
products, licenses, employment agreements, and consulting agreements. Unless and
until we are able to generate sales or licensing revenue from orBec®, our lead
product candidate, or another one of our product candidates, we will require
additional funding to meet these commitments, sustain our research and
development efforts, provide for future clinical trials, and continue our
operations. There can be no assurance we can raise such funds. If additional
funds are raised through the issuance of equity securities, stockholders may
experience dilution of their ownership interests, and the newly issued
securities may have rights superior to those of the common stock. If additional
funds are raised by the issuance of debt, we may be subject to limitations on
our operations. If we cannot raise such additional funds, we may have to delay
or stop some or all of our drug development programs.
   16
  If we are unsuccessful in developing
our products, our ability to generate revenues will be significantly
impaired.
 
 To be
profitable, our organization must, along with corporate partners and
collaborators, successfully research, develop and commercialize our technologies
or product candidates. Our current product candidates are in various stages of
clinical and pre-clinical development and will require significant further
funding, research, development, pre-clinical and/or clinical testing, regulatory
approval and commercialization, and are subject to the risks of failure inherent
in the development of products based on innovative or novel technologies.
Specifically, each of the following is possible with respect to any of our
product candidates:
 
 ·
              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
      (“NPAP”); or
 ·
              the
      technology or product may be found to be ineffective or
      unsafe.
  If any of
the risks set forth above occur, or if we are unable to obtain the necessary
regulatory approvals as discussed below, we may not be able to successfully
develop our technologies and product candidates and our business will be
seriously harmed. Furthermore, for reasons including those set forth below, we
may be unable to commercialize or receive royalties from the sale of any other
technology we develop, even if it is shown to be effective, if:
 
 ·
              it
      is not economical 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;
 ·
              we
      are not able to manufacture the product
  reliably;
 ·
              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.
 
 We received a
“not approvable letter” from the FDA for our lead product candidate
orBec®.
 
 Our
business is subject to very stringent U.S., federal, foreign, state and local
government laws and regulations, including the Federal Food, Drug and Cosmetic
Act, the Environmental Protection Act, the Occupational Safety and Health Act,
and state and local counterparts to these acts. These laws and regulations may
be amended, additional laws and regulations may be enacted, and the policies of
the FDA and other regulatory agencies may change.
 
 On
October 18, 2007, we received a “not approvable letter” from the FDA for our
lead product candidate, orBec®, for
the treatment of acute GI GVHD.  The letter stated that the FDA
requested data from additional clinical trials to demonstrate the safety and
efficacy of orBec®. The
FDA also requested nonclinical and chemistry, manufacturing and controls
information as part of the not approvable letter. On October 19, 2007, we
requested an “End of Review Conference” with the FDA to further understand the
letter and gain clarity regarding the next steps. On December 7, 2007, we
announced the following guidance from that meeting: (1) a single, confirmatory,
Phase 3 clinical trial could provide sufficient evidence of efficacy provided
that it is well designed, well executed and provides clinically and
statistically meaningful findings; (2) we anticipated working quickly with the
FDA to finalize the design of the confirmatory trial under the Agency’s “Special
Protocol Assessment” process; and (3) the FDA would be agreeable to reviewing a
plan for a Treatment  Investigational New Drug (“Treatment IND”) as
long as it does not interfere with patient accrual in a confirmatory trial, such
as potentially enrolling patients that would not be eligible for the Phase 3
study.
  17
    On
January 5, 2009, we reached an agreement with the FDA on the design of a
confirmatory, pivotal Phase 3 clinical trial evaluating our lead product
orBec®for the treatment of acute GI GVHD. The agreement was made under the
FDA’s Special Protocol Assessment procedure. The confirmatory Phase 3 clinical
trial for the treatment of acute GI GVHD has been initiated and is expected to
complete in the first half of 2011.
 
 Although
we intend to obtain FDA approval for orBec®,
there can be no assurances that the FDA will ever approve orBec®for
market launch. Furthermore, the FDA may mandate additional testing or data,
which may take additional time and expense to provide.
 
 Our business is subject to extensive
governmental regulation, which can be costly, time consuming and subjects us to
unanticipated delays.
 
 The
regulatory process applicable to our products requires pre-clinical and clinical
testing of any product to establish its safety and efficacy. This testing can
take many years and require the expenditure of substantial capital and other
resources. We may not be able to obtain, or we may experience difficulties and
delays in obtaining, necessary domestic and foreign governmental clearances and
approvals to market a product. Also, even if regulatory approval of a product is
granted, that approval may entail limitations on the indicated uses for which
the product may be marketed.
 
 Following
any regulatory approval, a marketed product and its manufacturer are subject to
continual regulatory review. Later discovery of problems with a product or
manufacturer may result in restrictions on such product or manufacturer. These
restrictions may include withdrawal of the marketing approval for the product.
Furthermore, the advertising, promotion and export, among other things, of a
product are subject to extensive regulation by governmental authorities in the
U.S. and other countries. If we fail to comply with applicable regulatory
requirements, we may be subject to fines, suspension or withdrawal of regulatory
approvals, product recalls, seizure of products, operating restrictions and/or
criminal prosecution.
 
 There
may be unforeseen challenges in developing our biodefense products.
 
 For
development of biodefense vaccines and therapeutics, the FDA has instituted
policies that are expected to result in accelerated approval. This includes
approval for commercial use using the results of animal efficacy trials, rather
than efficacy trials in humans.  However, we will still have to
establish that the vaccines we are developing are safe in humans at doses that
are correlated with the beneficial effect in animals. Such clinical trials will
also have to be completed in distinct populations that are subject to the
countermeasures; for instance, the very young and the very old, and in pregnant
women, if the countermeasure is to be licensed for civilian
use.  Other agencies will have an influence over the risk benefit
scenarios for deploying the countermeasures and in establishing the number of
doses utilized in the Strategic National Stockpile. We may not be able to
sufficiently demonstrate the animal correlation to the satisfaction of the FDA,
as these correlates are difficult to establish and are often
unclear.  Invocation of the animal rule may raise issues of confidence
in the model systems even if the models have been validated. For many of the
biological threats, the animal models are not available and we may have to
develop the animal models, a time-consuming research effort. There are few
historical precedents, or recent precedents, for the development of new
countermeasure for bioterrorism agents. Despite the Animal Rule, the FDA may
require large clinical trials to establish safety and immunogenicity before
licensure and it may require safety and immunogenicity trials in additional
populations.  Approval of biodefense products may be subject to
post-marketing studies, and could be restricted in use in only certain
populations.
   18
  We will be dependent on government
funding, which is inherently uncertain, for the success of our biodefense
operations.
 
 We are
subject to risks specifically associated with operating in the biodefense
industry, which is a new and unproven business area. We do not anticipate that a
significant commercial market will develop for our biodefense products. Because
we anticipate that the principal potential purchasers of these products, as well
as potential sources of research and development funds, will be the U.S.
government and governmental agencies, the success of our biodefense division
will be dependent in large part upon government spending decisions. The funding
of government programs is dependent on budgetary limitations, congressional
appropriations and administrative allotment of funds, all of which are
inherently uncertain and may be affected by changes in U.S. government policies
resulting from various political and military developments. Our successful
receipt of government funding is also dependant on our ability to adhere to the
terms and provisions of the original grant documents and other
regulations.
 
 If
the parties we depend on for supplying our drug substance raw materials and
certain manufacturing-related services do not timely supply these products and
services, it may delay or impair our ability to develop, manufacture and market
our products. We do not have or are anticipating having internal manufacturing
capabilities.
 
 We rely
on suppliers for our drug substance raw materials and third parties for certain
manufacturing-related services to produce material that meets appropriate
content, quality and stability standards, which material will be used in
clinical trials of our products and, after approval, for commercial
distribution. To succeed, clinical trials require adequate supplies of drug
substance and drug product, which may be difficult or uneconomical to procure or
manufacture. We and our suppliers and vendors may not be able to (i) produce our
drug substance or drug product to appropriate standards for use in clinical
studies, (ii) perform under any definitive manufacturing, supply or service
agreements with us or (iii) remain in business for a sufficient time to
successfully produce and market our product candidates. If we do not maintain
important manufacturing and service relationships, we may fail to find a
replacement supplier or required vendor or develop our own manufacturing
capabilities which could delay or impair our ability to obtain regulatory
approval for our products and substantially increase our costs or deplete profit
margins, if any. If we do find replacement manufacturers and vendors, we may not
be able to enter into agreements with them on terms and conditions favorable to
us and, there could be a substantial delay before a new facility could be
qualified and registered with the FDA and foreign regulatory
authorities.
 
 The
manufacture of our products is a highly exacting process, and if we or one of
our materials suppliers encounter problems manufacturing our products, our
business could suffer.
 
 The FDA
and foreign regulators require manufacturers to register manufacturing
facilities. The FDA and foreign regulators also inspect these facilities to
confirm compliance with current Good Manufacturing Practice ("cGMP") or similar
requirements that the FDA or foreign regulators establish. We, or our materials
suppliers, may face manufacturing or quality control problems causing product
production and shipment delays or a situation where we or the supplier may not
be able to maintain compliance with the FDA’s cGMP requirements, or those of
foreign regulators, necessary to continue manufacturing our drug substance. Any
failure to comply with cGMP requirements or other FDA or foreign regulatory
requirements could adversely affect our clinical research activities and our
ability to market and develop our products.
  We
do not have sales and marketing experience and our lack of experience may
restrict our success in commercializing some of our product
candidates.
 
 We do not
have experience in marketing or selling pharmaceutical products whether in the
U.S. or internationally. Although we have a collaboration agreement with
Sigma-Tau for the sales and marketing of orBec®in
North America, we may be unable to establish additional satisfactory
arrangements for marketing, sales and distribution capabilities necessary to
commercialize and gain market acceptance for orBec® or
our other product candidates. In addition, Sigma-Tau may not be able to
effectively commercialize orBec® if it
is approved. To obtain the expertise necessary to successfully market and sell
orBec®, or
any other product, potentially will require the development of our own
commercial infrastructure and/or collaborative commercial arrangements and
partnerships. Our ability to make that investment and also execute our current
operating plan is dependent on numerous factors, including, the performance of
third party collaborators with whom we may contract.
  19
    Our
products, if approved, may not be commercially viable due to change in health
care practice and third party reimbursement limitations.
 
 Recent
initiatives to reduce the federal deficit and to change health care delivery are
increasing cost-containment efforts. We anticipate that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, price controls on pharmaceuticals, and other fundamental changes to
the health care delivery system. Any changes of this type could negatively
impact the commercial viability of our products, if approved. Our ability to
successfully commercialize our product candidates, if they are approved, will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of these products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations. In the absence of
national Medicare coverage determination, local contractors that administer the
Medicare program may make their own coverage decisions. Any of our product
candidates, if approved and when commercially available, may not be included
within the then current Medicare coverage determination or the coverage
determination of state Medicaid programs, private insurance companies or other
health care providers. In addition, third-party payers are increasingly
challenging the necessity and prices charged for medical products, treatments
and services.
 
 We may not be able to retain rights
licensed to us by third parties to commercialize key products or to develop the
third party relationships we need to develop, manufacture and market our
products.
 
 We
currently rely on license agreements from the University of Texas Southwestern
Medical Center, the University of Texas Medical Branch at Galveston, and George
B. McDonald, MD for the rights to commercialize key product candidates. We may
not be able to retain the rights granted under these agreements or negotiate
additional agreements on reasonable terms, or at all.
 
 Furthermore,
we currently have very limited product development capabilities and no
manufacturing, marketing or sales capabilities. For us to research, develop and
test our product candidates, we need to contract or partner with outside
researchers, in most cases with or through those parties that did the original
research and from whom we have licensed the technologies. If products are
successfully developed and approved for commercialization, then we will need to
enter into additional collaboration and other agreements with third parties to
manufacture and market our products. We may not be able to induce the third
parties to enter into these agreements, and, even if we are able to do so, the
terms of these agreements may not be favorable to us. Our inability to enter
into these agreements could delay or preclude the development, manufacture
and/or marketing of some of our product candidates or could significantly
increase the costs of doing so. In the future, we may grant to our development
partners rights to license and commercialize pharmaceutical and related products
developed under the agreements with them, and these rights may limit our
flexibility in considering alternatives for the commercialization of these
products. Furthermore, third-party manufacturers or suppliers may not be able to
meet our needs with respect to timing, quantity and quality for the
products.
 
 Additionally,
if we do not enter into relationships with additional third parties for the
marketing of our products, if and when they are approved and ready for
commercialization, we would have to build our own sales force. If our
collaboration agreement with Sigma-Tau were to be terminated, we would need to
establish and build our own sales force in North America or enter into an
agreement for the commercialization of orBec® with
another company. Development of an effective sales force in any part of the
world would require significant financial resources, time and expertise. We may
not be able to obtain the financing necessary to establish a sales force in a
timely or cost effective manner, if at all, and any sales force we are able to
establish may not be capable of generating demand for our product candidates, if
they are approved.
  20
   We may suffer product and other
liability claims; we maintain only limited product liability insurance, which
may not be sufficient.
 
 The
clinical testing, manufacture and sale of our products involves an inherent risk
that human subjects in clinical testing or consumers of our products may suffer
serious bodily injury or death due to side effects, allergic reactions or other
unintended negative reactions to our products. As a result, product and other
liability claims may be brought against us. We currently have clinical trial and
product liability insurance with limits of liability of $5 million, which may
not be sufficient to cover our potential liabilities. Because liability
insurance is expensive and difficult to obtain, we may not be able to maintain
existing insurance or obtain additional liability insurance on acceptable terms
or with adequate coverage against potential liabilities. Furthermore, if any
claims are brought against us, even if we are fully covered by insurance, we may
suffer harm such as adverse publicity.
 
 We may not be able to compete
successfully with our competitors in the biotechnology
industry.
 
 The
biotechnology industry is intensely competitive, subject to rapid change and
sensitive to new product introductions or enhancements. Most of our existing
competitors have greater financial resources, larger technical staffs, and
larger research budgets than we have, as well as greater experience in
developing products and conducting clinical trials. Our competition is
particularly intense in the gastroenterology and transplant areas and is also
intense in the therapeutic area of inflammatory bowel diseases. We face intense
competition in the biodefense area from various public and private companies and
universities as well as governmental agencies, such as the U.S. Army, which may
have their own proprietary technologies that may directly compete with our
technologies. In addition, there may be other companies that are currently
developing competitive technologies and products or that may in the future
develop technologies and products that are comparable or superior to our
technologies and products. We may not be able to compete successfully with our
existing and future competitors.
 
 We may be unable to commercialize
our products if we are unable to protect our proprietary rights, and we may be
liable for significant costs and damages if we face a claim of intellectual
property infringement by a third party.
 
 Our
success depends in part on our ability to obtain and maintain patents, protect
trade secrets and operate without infringing upon the proprietary rights of
others. In the absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and marketing
substantially equivalent or superior products and technology, possibly at lower
prices. We could also incur substantial costs in litigation and suffer diversion
of attention of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by third parties,
with or without merit, or if we are required to initiate litigation against
others to protect or assert our intellectual property rights. Moreover, any such
litigation may not be resolved in our favor.
 
 Although
we and our licensors have filed various patent applications covering the uses of
our product candidates, patents may not be issued from the patent applications
already filed or from applications that we might file in the future. Moreover,
the patent position of companies in the pharmaceutical industry generally
involves complex legal and factual questions, and recently has been the subject
of much litigation. Any patents we have obtained, or may obtain in the future,
may be challenged, invalidated or circumvented. To date, no consistent policy
has been developed in the U.S. Patent and Trademark Office regarding the breadth
of claims allowed in biotechnology patents.
 
 In
addition, because patent applications in the U.S. are maintained in secrecy
until patents issue, and because publication of discoveries in the scientific or
patent literature often lags behind actual discoveries, we cannot be certain
that we and our licensors are the first creators of inventions covered by any
licensed patent applications or patents or that we or they are the first to
file. The Patent and Trademark Office may commence interference proceedings
involving patents or patent applications, in which the question of first
inventorship is contested. Accordingly, the patents owned or licensed to us may
not be valid or may not afford us protection against competitors with similar
technology, and the patent applications licensed to us may not result in the
issuance of patents.
  21
   It is
also possible that our patented technologies may infringe on patents or other
rights owned by others, licenses to which may not be available to us. We may not
be successful in our efforts to obtain a license under such patent on terms
favorable to us, if at all. We may have to alter our products or processes, pay
licensing fees or cease activities altogether because of patent rights of third
parties.
 
 In
addition to the products for which we have patents or have filed patent
applications, we rely upon unpatented proprietary technology and may not be able
to meaningfully protect our rights with regard to that unpatented proprietary
technology. Furthermore, to the extent that consultants, key employees or other
third parties apply technological information developed by them or by others to
any of our proposed projects, disputes may arise as to the proprietary rights to
this information, which may not be resolved in our favor.
 
 Our business could be harmed if we
fail to retain our current personnel or if they are unable to effectively run
our business.
 
 We
currently have only 14 employees and we depend upon these employees to manage
the day-to-day activities of our business. Because we have such limited
personnel, the loss of any of them or our inability to attract and retain other
qualified employees in a timely manner would likely have a negative impact on
our operations. We will not be successful if our management team cannot
effectively manage and operate our business. Several members of our board of
directors are associated with other companies in the biopharmaceutical industry.
Stockholders should not expect an obligation on the part of these board members
to present product opportunities to us of which they become aware outside of
their capacity as members of our board of directors.
 
 Instability
and volatility in the financial markets could have a negative impact on our
business, financial condition, results of operations, and cash
flows.
 
 During
recent months, there has been substantial volatility and a decline in financial
markets due at least in part to the deteriorating global economic environment.
In addition, there has been substantial uncertainty in the capital markets and
access to additional financing is uncertain. Moreover, customer spending habits
may be adversely affected by the current economic crisis. These conditions could
have an adverse effect on our industry and business, including our financial
condition, results of operations, and cash flows.
 
 To the
extent that we do not generate sufficient cash from operations, we may need to
issue stock or incur indebtedness to finance our plans for growth.
Recent turmoil in the credit markets and the potential impact on the liquidity
of major financial institutions may have an adverse effect on our ability to
fund our business strategy through borrowings, under either existing or newly
created instruments in the public or private markets on terms we believe to be
reasonable, if at all.
   22
   Risks
Related to our Common Stock
 
 Our common stock price is highly
volatile.
 
 The
market price of our common stock, like that of many other research and
development public pharmaceutical and biotechnology companies, has been highly
volatile and may continue to be so in the future due to a wide variety of
factors, including:
 
 ·
              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 and
performance;
 ·
              developments
      or disputes concerning patents or other proprietary
  rights;
 ·
              acquisitions;
 ·
              litigation
      and government proceedings;
 ·
              adverse
      legislation;
 ·
              changes
      in government regulations;
 ·
              our
      available working capital;
 ·
              economic
      and other external factors; and
 ·
              general
      market conditions.
 
 Our stock
price has fluctuated over the last year between a high of $0.38 per share to a
low of $0.06 per share. As of December 31, 2009, our common stock traded at
$0.25. The fluctuation in the price of our common stock has sometimes been
unrelated or disproportionate to our operating performance. In addition,
potential dilutive effects of future sales of shares of common stock by the
Company, and subsequent sale of common stock by the holders of warrants and
options, could have an adverse effect on the market price of our
shares.
 
 Our common stock trades on the
Over-the-Counter Bulletin Board.
 
 Our
common stock trades on the Over-The-Counter Bulletin Board (“OTCBB”) securities
market under the symbol “SNGX.”  The OTCBB is a decentralized market
regulated by the Financial Industry Regulatory Authority in which securities are
traded via an electronic quotation system that serves more than 3,000 companies.
On the OTCBB, securities are traded by a network of brokers or dealers who carry
inventories of securities to facilitate the buy and sell orders of investors,
rather than providing the order matchmaking service seen in specialist
exchanges. OTCBB securities include national, regional, and foreign equity
issues. Companies traded on the OTCBB must be current in their reports filed
with the Securities and Exchange Commission (“SEC”) and other regulatory
authorities.
 
 If our
common stock is not listed on a national exchange or market, the trading market
for our common stock may become illiquid. Our common stock is subject to the
penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share, other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The penny
stock rules require a broker-dealer, before a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with bid and ask quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. In addition, the penny stock rules require that, before
a transaction in a penny stock that is not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. As a result of these requirements, our common
stock could be priced at a lower price and our stockholders could find it more
difficult to sell their shares.
  23
   Shareholders may suffer substantial
dilution related to issued stock warrants and options.
 
 We have a
number of agreements or obligations that may result in dilution to investors.
These include:
 
 ·
              warrants
      to purchase a total of approximately 42,472,874 shares of our common stock
      at a current weighted average exercise price of approximately $0.24;
      and
 ·
              options
      to purchase approximately 19,311,539 shares of our common stock at a
      current weighted average exercise price of approximately
      $0.24.
 
 To the
extent that warrants or options are exercised, our stockholders will experience
dilution and our stock price may decrease.
 
 The
sale of our common stock to Fusion Capital may cause dilution and the sale of
the shares of common stock acquired by Fusion Capital could cause the price of
our common stock to decline.
 
 On
February 14, 2008, we entered into an $8,500,000 common stock purchase agreement
with Fusion Capital.  The Fusion Capital facility allows us to require
Fusion Capital to purchase between $80,000 and $1.0 million, depending on
certain conditions, of our common stock up to an aggregate of $8.5 million over
approximately a 25-month period. As part of that agreement, we issued Fusion
Capital 1,275,000 shares of common stock as a commitment fee. In connection with
the execution of the common stock purchase agreement, Fusion Capital purchased
2,777,778 common shares and a four year warrant to purchase 1,388,889 shares of
common stock at $0.22 per share, for an aggregate price of
$500,000.  Through March 2010, we have issued an additional 1,891,246
shares of common stock and received an additional $289,315 from the Fusion
Capital facility.
 
 In
connection with entering into the agreement, we authorized the sale to Fusion
Capital of up to 25,327,778 shares of our common stock.  The number of
shares ultimately offered for sale by Fusion Capital is dependent upon the
number of shares purchased by Fusion Capital under the agreement. The purchase
price for the common stock to be sold to Fusion Capital pursuant to the common
stock purchase agreement will fluctuate based on the price of our common stock.
All 25,327,778 shares registered for sale by Fusion Capital are freely
tradable.  It is anticipated that those shares will be sold over a
period of up to 25 months from the date of the prospectus pertaining to those
shares.  Depending upon market liquidity at the time, a sale of shares
under the registration statement at any given time could cause the trading price
of our common stock to decline. Fusion Capital may ultimately purchase all, some
or none of the approximately 18.8 million shares of common stock not yet
issued.  After it has acquired such shares, it may sell all, some or
none of such shares. Therefore, sales to Fusion Capital by us under the
agreement may result in substantial dilution to the interests of other holders
of our common stock. The sale of a substantial number of shares of our common
stock, or anticipation of such sales, could make it more difficult for us to
sell equity or equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales. However, we have the right to
control the timing and amount of any sales of our shares to Fusion Capital and
the agreement may be terminated by us at any time at our discretion without any
cost to us.
 
 The common stock purchase agreement with Fusion Capital
also may be terminated in the event of a default under the
agreement.  In addition, we cannot require Fusion Capital to purchase
any shares of our common stock if the purchase price is less than $0.10 per
share.  Thus, we may be unable to sell shares of our common stock to
Fusion Capital when we need the funds, and that could severely harm our business
and financial condition and our ability to continue to develop and commercialize
our products.  The closing price of our common stock on December 31,
2009 was$0.25.
   24
  Our
shares of common stock are thinly traded, so stockholders may be unable to sell
at or near ask prices or at all if they need to sell shares to raise money or
otherwise desire to liquidate their shares.
 
 Our
common stock has from time to time been “thinly-traded,” meaning that the number
of persons interested in purchasing our common stock at or near ask prices at
any given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give stockholders any
assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained.
 
 Item 1B. Unresolved
Staff Comments
 
 None.
 
 Item 2.
Properties
 
 We
currently lease approximately 5,250 square feet of office space at 29 Emmons
Drive, Suite C-10, Princeton, New Jersey 08540. This office space currently
serves as our corporate headquarters. We pay rent of approximately $7,500 per
month, or approximately $17.00 per square foot on an annualized basis, pursuant
to the lease that we entered into on April 1, 2009 and that expires on March 31,
2012. Our office space is sufficient to satisfy our current needs.
 
 Item 3. Legal
Proceedings
 
 From time
to time, we are a party to claims and legal proceedings arising in the ordinary
course of business. Our management evaluates our exposure to these claims and
proceedings individually and in the aggregate and allocates additional monies
for potential losses on such litigation if it is possible to estimate the amount
of loss and if the amount of the loss is probable.
 
 Item 4.Submission of
Matters to a Vote of Security Holders
 
 None.
   25
   PART
II
 
 Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
 
 Our
common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under
the symbol "SNGX." Prior to September 30, 2009, around the time of our corporate
name change, our stock was quoted under the symbol “DORB.” The following table
sets forth, for the periods indicated, the high and low sales prices per share
of our common stock as reported by the OTCBB.
 
 Price RangePeriod
              
              High
              
              
              LowYear
      Ended December 31, 2008:First Quarter
              
              $
              0.25
              
              
              $
              0.16Second Quarter
              
              $
              0.19
              
              
              $
              0.11Third Quarter
              
              $
              0.15
              
              
              $
              0.09Fourth Quarter
              
              $
              0.12
              
              
              $
              0.04Year
      Ended December 31, 2009:First Quarter
              
              $
              0.18
              
              
              $
              0.06Second Quarter
              
              $
              0.24
              
              
              $
              0.09Third Quarter
              
              $
              0.38
              
              
              $
              0.17Fourth Quarter
              
              $
              0.36
              
              
              $
              0.18
 
 As of
March 25, 2010, the last reported price of our common stock quoted on the OTCBB
was $0.28 per share. The OTCBB prices set forth above represent inter-dealer
quotations, without adjustment for retail mark-up, mark-down or commission, and
may not represent the prices of actual transactions. As of March 25, 2010, we
have approximately 993stockholders of record
of our common stock.
 
 Dividends
 
 We have
never declared nor paid any cash dividends, and currently intend to retain all
our cash and any earnings for use in our business and, therefore, do not
anticipate paying any cash dividends in the foreseeable future.  Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent upon our consolidated financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deems relevant.
 
 Item 6. Selected Financial Data
 
 Not
applicable.
   26
   Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
 
 Cautionary Note Regarding
Forward-Looking Statements
 
 This Annual Report on Form 10-K
contains forward-looking statements that reflect our current expectations about
our future results, performance, prospects and opportunities. These
forward-looking statements are subject to significant risks, uncertainties, and
other factors, including those identified in "Risk Factors" above, which may
cause actual results to differ materially from those expressed in, or implied
by, any forward-looking statements. The forward-looking statements within this
Form 10-K may be identified by words such as "believes," "anticipates,"
"expects," "intends," "may," "would," "will" and other similar expressions.
However, these words are not the exclusive means of identifying these
statements. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. Except as expressly required by the federal securities laws, we
undertake no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances occurring subsequent to the filing
of this Form 10-K with the SEC or for any other reason. You should carefully
review and consider the various disclosures we make in this report and our other
reports filed with the SEC that attempt to advise interested parties of the
risks, uncertainties and other factors that may affect our
business.
 
 Our Business
Overview
 
 Soligenix,
Inc., formerly known as DOR BioPharma, Inc., was incorporated in Delaware in
1987. We are a late-stage research and development biopharmaceutical company
focused on developing products to treat the life-threatening side effects of
cancer treatment and serious gastrointestinal diseases where there remains an
unmet medical need, as well as developing biodefense vaccines and therapeutics.
We maintain two active business segments: BioTherapeutics and BioDefense. Our
BioTherapeutics business segment intends to develop orBec® (oral
beclomethasone dipropionate, or oral BDP) and other biotherapeutic products,
including LPMTM
Leuprolide. Our BioDefense business segment intends to convert its ricin toxin
vaccine program and radiation injury program from early stage development to
advanced development and manufacturing.
 
 Our
business activities can be outlined as follows:
 
 ·
              complete
      the pivotal Phase 3 confirmatory clinical trial for orBec®in the treatment of acute gastrointestinal Graft-versus-Host
      disease ("GI GVHD") ;
 ·
              identify
      a development and marketing partner for orBec®
      for territories outside of North America, as we have granted an exclusive
      license to Sigma-TauPharmaceuticals,
      Inc. ("Sigma-Tau")to commercialize orBec®
      in the U.S., Canada and Mexico;
 ·
              conduct
      and complete a Phase 2 clinical trial of orBec®
      for the prevention of acute GVHD;
 ·
              evaluate
      and initiate additional clinical trials to explore the effectiveness of
      oral BDP in other therapeutic indications involving inflammatory
      conditions of the gastrointestinal tract such as radiation enteritis,
      radiation injury and Crohn’s
disease;
 ·
              reinitiate
      development of our other biotherapeutics products, including LPMTM
      Leuprolide;
 ·
              continue
      to secure additional government funding for each of our BioDefense
      programs through grants, contracts and
  procurements;
 ·
              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;
 ·
              make
      orBec®available
      worldwide through the Named Patient Access Program for the treatment of
      acute GI GVHD;
 ·
              acquire
      or in-license new clinical-stage compounds for development;
      and
 ·
              explore
      other business development and acquisition
  strategies.
   27
   Critical Accounting
Policies
 
 Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses,
and related disclosure of contingent assets and liabilities. We evaluate these
estimates and judgments on an on-going basis.
 
 Intangible
Assets
 
 One of
the most significant estimates or judgments that we make is whether to
capitalize or expense patent and license costs. We make this judgment based on
whether the technology has alternative future uses, as defined in Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
730, Research and
Development. Based on this consideration, we capitalized all applicable
outside legal and filing costs incurred in the procurement and defense of
patents.
 
 We
capitalize and amortize intangibles over their expected useful life – generally
a period of 11 to 16 years. We capitalize legal costs associated with the
protection and maintenance of our patents and rights for our current products in
both the domestic and international markets. As a late stage research and
development company with drug and vaccine products in an often lengthy clinical
research process, we believe that patent rights are one of our most valuable
assets. Patents and patent applications are a key currency of intellectual
property, especially in the early stage of product development, as their
purchase and maintenance gives us access to key product development rights from
our academic and industrial partners. These rights can also be sold or
sub-licensed as part of our strategy to partner our products at each stage of
development. The legal costs incurred for these patents consist of work designed
to protect, preserve, maintain and perhaps extend the lives of the patents.
Therefore, our policy is to capitalize these costs and amortize them over the
remaining useful life of the patents. We capitalize intangible assets’
alternative future use as referred to in FASB ASC 350, Intangibles – Goodwill and OtherandFASB
ASC 730, Research and
Development.
 
 These
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or if the
underlying program is no longer being pursued. If the sum of the expected
undiscounted cash flows is less than the carrying value of the related asset or
group of assets, a loss is recognized for the difference between the fair value
and the carrying value of the related asset or group of assets.
 
 Research and Development
Costs
 
 Research
and development costs are charged to expense when incurred. Research and
development includes costs such as clinical trial expenses, contracted research
and license agreement fees with no alternative future use, supplies and
materials, salaries and employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development
expense represents the value assigned or paid for acquired research and
development for which there is no alternative future use as of the date of
acquisition.
 
 Revenue
Recognition
 
 Our
revenues are generated from NIH grants, the achievement of licensing milestones,
and NPAP sales of orBec®. The
revenue from NIH grants are based upon subcontractor costs and internal costs
incurred that are specifically covered by the grant, plus a facilities and
administrative rate that provides funding for overhead expenses. These revenues
are recognized when expenses have been incurred by subcontractors or when we
incur internal expenses that are related to the grant. Licensing milestone
revenues are recorded when earned. Revenue from NPAP sales of orBec® are
recorded when the product is shipped.
   28
   Stock-Based
Compensation
 
 From time
to time, we issue common stock to vendors, consultants, and employees as
compensation for services performed. These shares are typically issued as
restricted stock, unless issued to non-affiliates under the 2005 Equity
Incentive Plan, where the stock may be issued as unrestricted. The restricted
stock can only have the restrictive legend removed if the shares underlying the
certificate are sold pursuant to an effective registration statement, which we
must file and have approved by the SEC, if the shares underlying the certificate
are sold pursuant to Rule 144, provided certain conditions are satisfied, or if
the shares are sold pursuant to another exemption from the registration
requirements of the Securities Act of 1933, as amended.
 
 We
determine stock-based compensation expense for options, warrants and shares of
common stock granted to non-employees in accordance with FASB ASC 718, Stock Compensation, and FASB
ASC 505-50, Equity-Based
Payments to Non-Employees, and represents the fair value of the
consideration received, or the fair value of the equity instruments issued,
whichever may be more reliably measured. For options that vest over future
periods, the fair value of options granted to non-employees is amortized as the
options vest. The option’s price is remeasured using the Black-Scholes model at
the end of each quarterly reporting period. Stock-based compensation expense
recognized during the period is based on the value of the portion of share-based
payment awards that is ultimately expected to vest during the
period.
 
 New Accounting
Pronouncements
 
 See Note
2, New Accounting Pronouncements, for a discussion of new accounting
pronouncements.
 
 Material Changes in Results
of Operations
 
 Year
Ended December 31, 2009 Compared to 2008
 
 For the
year ended December 31, 2009, we had a net loss of $6,034,453 as compared to a
net loss of $3,422,027 for the prior year, representing an increase of
$2,612,426 or 76%. This increase is primarily attributed to increased spending
of $2,971,052 in research and development for the year ended December 31, 2009
over 2008 related to the preparation for and conduct of the confirmatory Phase 3
clinical trial of orBec® for
the treatment of acute GI GVHD. For the year ended December 31, 2009, there was
also an increase in general and administrative expenses of $339,532, which
reflects the $270,000 expense recorded in first quarter 2008 related to the
Fusion Capital commitment shares, offset by staffing and other corporate cost
increases this year.
 
 For the
year ended December 31, 2009, revenues and associated costs relate to NIH grants
awarded in support of our ricin, botulinum and thermostable vaccines development
and from the NPAP sales of orBec®. For
the year ended December 31, 2009, we had revenues of $2,816,037 as compared to
$2,310,265 for the prior year, representing an increase of $505,772, or 22%.
During 2009, we received a $1 million clinical milestone payment from Sigma Tau,
our collaborative partner on the orBec® Phase
3 study. The increase in revenues generated by this one-time milestone payment
was offset by decreases in NIH grant revenues as we reached the end of our
earlier NIH grants before the work under our newer grants had commenced.
Included in those revenue figures for the year ended December 31, 2009, we also
recorded revenues of $56,000 from NPAP sales of orBec®,
compared to $40,618 recorded in the prior year.
 
 We
incurred costs related to that revenue in the year ended December 31, 2009 and
2008 of $1,483,641 and $1,886,431, respectively, representing a decrease of
$402,790, or 21%.  This decrease follows from the decrease in NIH
grant revenues discussed above.
 
 Our gross
profit for the year ended December 31, 2009 was $1,332,396 as compared to
$423,834 for the prior year, representing an increase of $908,562, or 214%. This
increase is almost entirely explained by the $1 million clinical milestone
revenue recorded in 2009 for which there were no corresponding
costs.
  29
   Research
and development spending increased by $2,971,052, or 191%, to $4,523,375, for
the year ended December 31, 2009 as compared to $1,552,323 for the prior
year.  This increase is primarily related to the preparation for and
conduct of the confirmatory Phase 3 clinical trial of orBec® for
the treatment of acute GI GVHD.
 
 General
and administrative expenses increased $339,532, or 17%, to $2,281,251 for the
year ended December 31, 2009, as compared to $1,941,719 for the prior year
reflecting staffing and other corporate cost increases this year.
 
 Stock-based
compensation expenses related to research and development increased $28,666, or
16%, to $210,834 for the year ended December 31, 2009, as compared to $182,168
for the prior year. Stock-based compensation expenses related to general and
administrative increased $164,784, or 81%, to $368,232 for the year ended
December 31, 2009, as compared to $203,448 for the prior year. These increases
were related to stock options that were issued to new employees hired in 2009
and for options issued in the last quarter of 2008 that began vesting in
2009.
 
 Net
interest income for the year ended December 31, 2009 was $19,242 as compared to
$33,797 for the prior year, representing a decrease of $14,555, or 43%. This
decrease was due to substantially lower interest rates earned on cash balances
in 2009 versus the prior year.
 
 Business
Segments
 
 We had
two active business segments for the year ended December 31, 2009 and December
31, 2008:  BioDefense and BioTherapeutics.
 
 Revenues
for the BioDefense business segment for the year ended December 31, 2009 were
$1,670,536 as compared to $2,269,647 for the year ended December 31, 2008,
representing a decrease of $599,111, or 26%. This decrease is primarily
attributed to a reduction in NIH grant revenues as we reached the end of our
earlier NIH grants focusing on RiVax and botulinum vaccines before the work
under our new thermostable vaccine technology grant had
commenced.  Revenues for the BioTherapeutics business segment for the
year ended December 31, 2009 were $1,145,501 as compared to $40,618 for the year
ended December 31, 2008, representing an increase of $1,104,883.  This
substantial increase is a result of the receipt of a $1 million clinical
milestone payment from Sigma Tau in 3009 upon the initiation of enrollment in
the confirmatory Phase 3 clinical trial of orBec®.
 
 Loss from
operations for the BioDefense business segment for the year ended December 31,
2009 was $389,157 as compared to $132,272 for the year ended December 31, 2008,
representing an increase of $256,885, or 194%. This increase is primarily
attributed to a reduction in NIH grant revenues as we reached the end of our
earlier NIH grants focusing on RiVax and botulinum vaccines before the work
under our new thermostable vaccine technology grant had
commenced.  Loss from operations for the BioTherapeutics business
segment for the year ended December 31, 2009 was $3,444,838 as compared to
$1,556,429 for the year ended December 31, 2008, representing an increase of
$1,888,409, or 121%. This increase is primarily attributed the preparation for
and conduct of the confirmatory Phase 3 clinical trial of orBec®,
offset to some degree by the receipt of a $1 million clinical milestone payment
from Sigma Tau in 2009.
 
 Amortization
and depreciation expense for the BioDefense business segment for the year ended
December 31, 2009 was $91,420 as compared to $85,354 for the year ended December
31, 2008, representing an increase of $6,066, or 7%, primarily related to newly
capitalized patent support costs in 2009. Amortization and depreciation expense
for the BioTherapeutics business segment for the year ended December 31, 2009
was $77,496 as compared to $58,829 for the year ended December 31, 2008,
representing an increase of $18,667, or 32%, primarily related to newly
capitalized patent support costs in 2009.
  30
   Financial Condition and
Liquidity
 
 Cash
and Working Capital
 
 As of
December 31, 2009, we had cash and cash equivalents of approximately $7,692,000
as compared to $1,475,000 as of December 31, 2008, representing an increase of
$6,217,000, or 421%, over the prior year. As of December 31, 2009, we had
working capital of approximately $6,690,000 as compared to working capital of
$537,000 as of December 31, 2008, representing an increase of
$6,153,000. The increase was the result of the $10.9 million in proceeds
from the sale of our common stock and warrants to accredited investors and a
collaborative partner, less the cash used in operating and investing activities
over the period. We have used equity instruments in the past to provide a
portion of the compensation due to our employees, vendors and collaborative
partners, and expect to continue to do so in the foreseeable future. For the
year ended December 31, 2009, our cash used in operating activities was
approximately $4,603,000, compared to $2,788,000 for the prior year,
representing an increase of $1,815,000, or 65%. This increase primarily relates
to the preparation for and conduct of our confirmatory Phase 3 clinical trial of
orBec® for
the treatment of acute GI GVHD.
  Based on
our current rate of cash outflows, cash on hand, the timely collection of
milestone payments under collaboration agreements, proceeds from our
grant-funded programs, revenues collected under the NPAP’s, and potential
proceeds from the Fusion Capital transaction, we believe that our current cash
will be sufficient to meet the anticipated cash needs for working capital and
capital expenditures beyond the first quarter of 2011.
 
 Our plans
with respect to our liquidity management include the following:
 
 ·
              We
      have $10 million in active grant funding still available to support our
      research programs in 2010 and beyond.  Additionally, we have
      submitted additional grant applications for further support of these
      programs and others with various funding agencies, and have received
      encouraging feedback to date on the likelihood of
  funding.
 ·
              We
      have continued to use equity instruments to provide a portion of the
      compensation due to vendors and collaboration partners and expect to
      continue to do so for the foreseeable
future.
 ·
              We
      have approximately $7.7 million in available capacity under our Fusion
      Capital equity facility.  Although we have historically drawn
      amounts in modest amounts under this agreement, we could draw more within
      certain contractual parameters.
 ·
              We
      may seek additional capital in the private and/or public equity markets to
      continue our operations, respond to competitive pressures, develop
      new products and services, and to support new strategic
      partnerships. We are currently evaluating additional equity financing
      opportunities and may execute them when appropriate.  However,
      there can be no assurances that we can consummate such a transaction, or
      consummate a transaction at favorable
pricing.
 
 Expenditures
 
 Under our
budget and based upon our existing product development agreements and license
agreements pursuant to letters of intent and option agreements, we expect our
research and development expenditures for the next 12 months to be approximately
$7,500,000. We anticipate grant revenues in the next year to offset
research and development expenses for the development of our thermostable
vaccine technology and the development of SGX201 in radiation enteritis in the
amount of approximately $1,600,000, with $700,000 of that total amount
contributing towards our overhead expenses.
   31
   The table
below details our costs by program for each of the two years ended December 31,
2009:
 
 2009
              
              
              2008Research
      & Development ExpensesorBec®
              
              $
              3,211,682
              
              
              $
              921,562RiVaxTM & Thermostable
      Vaccines
              
              
              1,264,218
              
              
              
              312,486BT-VACCTM
              
              
              31,167
              
              
              
              201,529OraprineTM
              
              
              6,000
              
              
              
              4,500LPMTM
      Leuprolide
              
              
              10,308
              
              
              
              112,246Total
              
              $
              4,523,375
              
              
              $
              1,552,323Reimbursed
      under NIH GrantsorBec®
              
              $
              162,106
              
              
              $
              122,551RiVaxTM & Thermostable
      Vaccines
              
              
              1,321,535
              
              
              
              1,681,274BT-VACCTM
              
              
              -
              
              
              
              82,606Total
              
              $
              1,483,641
              
              
              $
              1,886,431Grand
      Total
              
              $
              6,007,016
              
              
              $
              3,438,754
 
 Effects of Inflation and
Foreign Currency Fluctuations
 
 We do not
believe that inflation or foreign currency fluctuations significantly affected
our financial position and results of operations as of and for the years ended
December 31, 2009 or 2008.
 
 Contractual
Obligations
 
 We have a
contractual obligation of approximately $3.3 million as of December 31, 2009 in
connection with a collaboration with
Numoda for the execution of our confirmatory Phase 3 clinical trial of
orBec®
that began in September 2009 and is expected to complete in first half of
2011.
 
 We have
several licensing agreements with consultants and universities, which upon
clinical or commercialization success may require the payment of milestones
and/or royalties if and when achieved; however, there can be no assurance that
clinical or commercialization success will occur.
 
 On April
1, 2009, we entered into a sublease agreement through March 31, 2012 for office
space in Princeton, New Jersey. We were required to provide 4 months of rent as
a security deposit. The rent for the first 18 months will be approximately
$7,500 per month, or approximately $17.00 per square foot on an annualized
basis. This rent increases to approximately $7,650 per month, or approximately
$17.50 per square foot on an annualized basis, for the remaining 18
months.
 
 On April
24, 2008, we signed a three-year lease for a copier.
 
 Employees
with employment contracts have severance agreements that will provide separation
benefits from the Company if they are involuntarily separated from
employment.
 
 As a
result of the above agreements, we have future contractual obligations over the
next five years as follows:
 
 Year
              
              Research and Development
              
              
              Property and
                Other Leases
              
              
              Total2010
              
              $
              3,013,640
              
              
              $
              95,398
              
              
              $
              3,109,0382011
              
              
              631,440
              
              
              
              92,699
              
              
              
              724,1392012
              
              
              155,000
              
              
              
              22,950
              
              
              
              177,9502013
              
              
              75,000
              
              
              
              -
              
              
              
              75,0002014
              
              
              75,000
              
              
              
              -
              
              
              
              75,000Total
              
              $
              3,950,080
              
              
              $
              211,047
              
              
              $
              4,161,127
   32
   Item 8. Financial Statements and Supplementary Data
 
 The
information required by this Item 8 is contained on pages F-1 through F-22 of
this Annual Report on Form 10-K and is incorporated herein by
reference.
 
 Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure
 
 None.
 
 Item 9A. Controls and
Procedures
 
 Evaluation of Disclosure
Controls and Procedures
 
 Disclosure controls and procedures are the Company’s
controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit
underthe Securities
Exchange Act of 1934,as amended (the
“Exchange Act”) is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosurecontrols and proceduresinclude, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange
Act is accumulated and communicated to ourmanagement, including our principal
executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. Our management recognizes that any controls and
procedures, no matter how well designed and operated, can only provide
reasonable assurance of achieving their objectives and management necessarily
applies its judgment in evaluating the possible controls and
procedures.
  Our management has evaluated, with the participation of
our principal executive officer and principal financial officer, the
effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)as of the end of the period covered
by this report. Based upon that evaluation,
our management, including our principal executive officer and principal
financial officer, has concluded that, as of the end of the period covered by
this report, the Company’s disclosure controls and procedures were
effective.
  Management’s Annual Reporton Internal ControloverFinancial
Reporting
 
 Company management is responsible for
establishing and maintaining adequate internal control over financial
reporting. Internal control over financial
reporting is a process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by the Company’s Board
of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
  •
              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.
   33
   Because of inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
  Management assessed the
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2009.  In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework.
  Based on our assessment,
management has concluded that, as of December 31, 2009, the Company’s internal
control over financial reporting is effective.
  This report does not
include an attestation report of our registered public accounting firm regarding
internal control over financial reporting. Management's report was not subject
to attestation by our registered public accounting firm pursuant to temporary
rules of the SEC that permit us to provide only management's report in this
report.
  Changes
in Internal Control over Financial Reporting
  There were no changes in
the Company’s internal control over financial reporting identified in connection
with the evaluation of such internal control that occurred during the Company’s
last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
 
 Item 9B. Other
Information
 
 None.
  34
    PART
III
 
 Item 10. Directors, Executive Officers and Corporate
Governance
 
 The
following table contains information regarding the current members of the Board
of Directors and executive officers:  The ages of individuals are
provided as of February 28, 2010:
 
 Name
              Age
              PositionChristopher
      J. Schaber, Ph.D.
              43
              Chairman
      of the Board, Chief Executive Officer and PresidentCyrille
      F. Buhrman
              37
              DirectorGregg
      A. Lapointe, C.P.A., M.B.A.
              51
              DirectorRobert
      J. Rubin, M.D.
              64
              DirectorEvan
      Myrianthopoulos
              45
              Chief
      Financial Officer, Senior Vice President and DirectorBrian
      L. Hamilton, M.D., Ph.D.
              62
              Chief
      Medical Officer and Senior Vice PresidentRobert
      N. Brey, Ph.D.
              59
              Chief
      Scientific Officer and Senior Vice PresidentChristopher
      P. Schnittker, C.P.A.
              41
              Vice
      President of Administration, Controller and Corporate
      Secretary
 
 Christopher J. Schaber, Ph.D.has been our President and Chief Executive Officer and a director since
August 2006. He was appointed interim Chairman of the Board on October 8,
2009.  Dr. Schaber has served on the boards of directors of both the
Alliance for BioSecurity and BioNJ since May 2008 and January 2009,
respectively, and represents Soligenix on the corporate councils of both the
National Organization for Rare Diseases (“NORD”) and the American Society for
Blood and Marrow Transplantation (“ASBMT”) since October 2009 and July
2009, respectively.  Prior to joining Soligenix, Dr. Schaber served from
1998 to 2006 as Executive Vice President and Chief Operating Officer of
Discovery Laboratories, Inc., where he was responsible for overall pipeline
development and key areas of commercial operations, including regulatory
affairs, quality control and assurance, manufacturing and distribution,
pre-clinical and clinical research, and medical affairs, as well as coordination
of commercial launch preparation activities. During his tenure at Discovery
Laboratories, Inc., Dr. Schaber played a significant role in raising in excess
of $150 million through both public offerings and private placements. From 1996
to 1998, Dr. Schaber was a co-founder of Acute Therapeutics, Inc., and served as
its Vice President of Regulatory Compliance and Drug Development. From 1994 to
1996, Dr. Schaber was employed by Ohmeda PPD, Inc., as Worldwide Director of
Regulatory Affairs and Operations. From 1989 to 1994, Dr. Schaber held a variety
of regulatory, development and operations positions with The Liposome Company,
Inc., and Elkins-Sinn Inc., a division of Wyeth-Ayerst Laboratories. Dr. Schaber
received his B.A. degree from Western Maryland College, his M.S. degree in
Pharmaceutics from Temple University School of Pharmacy and his Ph.D. degree in
Pharmaceutical Sciences from the Union Graduate School. Dr. Schaber was
selected to serve as a member of our Board of Directors because of his extensive
experience in drug development and pharmaceutical operations, including his
experience as executive senior officer with our Company and Discovery
Laboratories, Inc., and as a member of the boards of directors of the Alliance
for BioSecurity and BioNJ; because of his proven ability to raise funds and
provide access to capital; and because of his advanced degrees in science and
business.
  Cyrille F. Buhrmanhas been a director since June 2007.Mr. Buhrman is Chairman of the Pacific Healthcare Group of
Companies, a full-service regulatory affairs, commercialization and distribution
company, focusing on specialty pharmaceuticals, medical supplies, medical
technology, OTC and consumer health products across the Asian
region.  In addition to serving on the Board of Soligenix, Mr. Buhrman
has served on the boards of directors of Canyon Pharmaceuticals, a
privately-held company specialty pharmaceutical company based in Basel,
Switzerland and serves on the boards of directors of several other
privately-held pharmaceutical and medical technology companies in the Asia
Pacific region.  Mr. Buhrman also heads up his own private investment
fund that specializes in the biotechnology and pharmaceutical industries. Mr.
Buhrman is also one of our largest shareholders. Mr. Buhrman was selected to
serve as a member of our Board of Directors because of his experience as a CEO
of a pharmaceutical company, as a member of the boards of several
pharmaceutical, and medical device companies and as an investor in the
biotechnology and pharmaceutical industries.
   35
   Gregg Lapointe, C.P.A., M.B.A.
has been a director since March 10, 2009. Mr. Lapointe has served on the Board
of Directors of the Pharmaceuticals Research and Manufacturers of America
(“PhRMA”) and has been a member of the Corporate Council of NORD for several
years. He has served in varying roles for Sigma-Tau, a private biopharmaceutical
company, since September 2001, including Chief Operating Officer from November
2003 to April 2008 and Chief Executive Officer since April 2008. From May, 1996
to August, 2001, he served as Vice President of Operations and Vice President,
Controller of AstenJohnson, Inc. (formerly JWI Inc.).  Prior to that, Mr.
Lapointe spent several years in the Canadian medical products industry in
both distribution and manufacturing.  Mr. Lapointe began his career at
Price Waterhouse in. Mr. Lapointe received his B.A. degree in Commerce from
Concordia University in Montreal, Canada, a graduate diploma in Accountancy from
McGill University and his M.B.A. degree from Duke University. He is a C.P.A. in
the state of Illinois and a Chartered Accountant in Ontario, Canada. Mr.
Lapointe was selected to serve as a member of our Board of Directors because of
his significant experience in the areas of global strategic planning and
implementation, business development, corporate finance, and acquisitions, and
his experience as an executive officer and board member in the pharmaceutical
medical products industries.
  Robert J. Rubin, M.D. has been
a director since October 8, 2009.  Dr. Rubin has also been a clinical
professor of medicine at Georgetown University since 1995. From 1987 to 2001, he
was president of the Lewin Group (purchased by Quintiles Transnational Corp. in
1996), an international health policy and management consulting firm. From 1994
to 1996, Dr. Rubin served as Medical Director of ValueRx, a pharmaceutical
benefits company. From 1992 to 1996, Dr. Rubin served as President of Lewin-VHI,
a health care consulting company. From 1987 to 1992, he served as President of
Lewin-ICF, a health care consulting company. From 1984 to 1987, Dr. Rubin served
as a principal for ICF, Inc., a health care consulting company. From 1981 to
1984, Dr. Rubin served as the Assistant Secretary for Planning and Evaluation at
the Department of Health and Human Services and as the Assistant Surgeon General
in the United States Public Health Service. Dr. Rubin is a board certified
nephrologist and internist. Dr. Rubin received an undergraduate degree in
Political Science from Williams College and his medical degree from Cornell
University Medical College. Dr. Rubin was selected to serve as a member of our
Board of Directors because of his vast experience in the health care industry,
including his experience as a nephrologist, internist, clinical professor of
medicine and Assistant Surgeon General, and his business experience in the
pharmaceutical industry.
 
 Evan Myrianthopoulos has been
a director since 2002 and is currently our Chief Financial Officer and Senior
Vice President, after joining us in November of 2004 as President and Acting
Chief Executive Officer. From November 2001
to November 2004, he was President and founder of CVL Advisors Group Inc., a
financial consulting firm specializing in the biotechnology sector. Prior to
founding CVL Advisors Group, Inc., Mr. Myrianthopoulos was a co-founder of
Discovery Laboratories, Inc. During his tenure at Discovery Laboratories, Inc.
from June 1996 to November 2001, Mr. Myrianthopoulos held the positions of Chief
Financial Officer and Vice President of Finance, where he was responsible for
raising approximately $55 million in four private placements. He also helped
negotiate and manage Discovery Laboratories, Inc.’s mergers with Ansan
Pharmaceuticals and Acute Therapeutics, Inc. Prior to co-founding Discovery
Laboratories, Inc., Mr. Myrianthopoulos was a Technology Associate at Paramount
Capital Investments, L.L.C., a New York City based biotechnology venture capital
and investment banking firm from October 1995 to December 1997. Prior to joining
Paramount Capital Investments, LLC, Mr. Myrianthopoulos was a managing partner
at a hedge fund and also held senior positions in the treasury department at the
National Australia Bank where he was employed as a spot and derivatives currency
trader. Mr. Myrianthopoulos holds a B.S. degree in Economics and Psychology from
Emory University. Mr. Myrianthopoulos was selected to serve as a member of our
Board of Directors because of his experience as principal financial officer and
principal executive officer of our Company and Discovery
Laboratories  and his experience in raising capital.
   36
   Brian L. Hamilton, M.D., Ph.D.
has been Chief Medical Officer and Senior Vice President since March 11,
2009.  His academic career at the University of Washington and the
University of Miami focused on the use of bone marrow transplantation to treat
children with congenital immune deficiency, with research in the immunobiology
of GVHD. In the pharmaceutical industry, he has worked with both large
pharmaceutical companies (Astra, USA and Wyeth) and several biotechnology
companies. From December 2001 to June 2004, he was Senior Director of Clinical
Research with Wyeth Research.  From June 2004 to March 2006, he was
Vice President for Clinical and Regulatory Affairs at Merrimack
Pharmaceutical.  He was Chief Medical Officer with BioVex from
September 2006 to March 2007.  He was a consultant in clinical
development as Medical Director with Biopharm Solutions, Inc. from March 2007 to
October 2008.  From October 2008 to March 2009, he was Acting Vice
President of Medical Affairs with Ziopharm Oncology.  He has expertise
in clinical development and regulatory affairs with small molecules, biologics,
vaccines, and genetically modified oncolytic viruses in oncology, hematology,
rheumatology, and immunology.  At Astra, USA, he had a significant
role in the clinical development and registration of both Pulmicort Turbuhaler
for the treatment of patients with asthma and Rhinocort Aqua for the treatment
of patients with allergic rhinitis.  Dr. Hamilton received his M.D.
and Ph.D. degrees from the University of Washington, with post-graduate training
in Pediatrics, Allergy, Immunology, and Oncology.
  Robert N. Brey, Ph.D. has been
with the Company since January 1996, and is currently our Chief Scientific
Officer and Senior Vice President. He has also held the positions of Vice
President Vaccine Development and Vice President of Research and
Development.  He also has held Scientific, Management and Project
Management positions in the Lederle-Praxis division of American Cyanamid, now a
division of Wyeth, in which he participated in the successful development of a
vaccine for Haemophilius
influenzae meningitis, and a vaccine for pneumonia. While at
Lederle-Praxis, Dr. Brey was Manager of Molecular Biology Research for vaccines
and Project Manager for development of oral vaccines from 1985 through 1993.
From 1993 through 1994, Dr. Brey served as Director of Research and Development
of Vaxcel, in which he was responsible for developing adjuvant technology and
formulations for improved vaccines. From 1994 through 1996, Dr. Brey established
an independent consulting group, Vaccine Design Group, to identify and develop
novel vaccine technologies and platforms. Before entering into drug and vaccine
delivery, he held senior scientific positions at Genex Corporation from 1982
through 1986. Dr. Brey received a B.S. degree in Biology from Trinity College in
Hartford, Connecticut, his Ph.D. degree in Microbiology from the University of
Virginia and performed postdoctoral studies at MIT with Nobel Laureate Salvador
Luria.
  Christopher P. Schnittker, C.P.A.has been our Vice President of Administration, Controller and Corporate
Secretary since July 2009.  He has more than 19 years of financial
management experience primarily in publicly-held life science
companies.  From June 2000 until joining Soligenix, Mr. Schnittker was
a Vice President and Chief Financial Officer of several publicly-held
biotechnology and specialty pharmaceutical companies, including: VioQuest
Pharmaceuticals Inc. (from July 2008 until joining Soligenix); Micromet, Inc.
(from October 2006 through December 2007); Cytogen Corporation (from September
2003 through May 2006); and Genaera Corporation (from June 2000 through August
2003).  From December 1997 through June 2000, he was Director of
Finance and Controller of GSI Commerce, an e-commerce technology company. From
June 1995 through December 1997, he served in various financial reporting and
internal control manager roles with Rhône-Poulenc Rorer Pharmaceuticals Inc.
(now part of the Sanofi Aventis Group).  From September 1990 through
June 1995, he was a member of the Audit and Assurance Services division at Price
Waterhouse LLP (now PricewaterhouseCoopers LLP), working largely with the firm’s
pharmaceutical and technology clients.  Mr. Schnittker received his
Bachelor’s degree in Economics and Business, with a concentration in Accounting,
from Lafayette College in 1990 and is a currently-licensed Certified Public
Accountant in the State of New Jersey.
  Board
Leadership Structure
 
 Our Board
of Directors believes that Dr. Schaber’s service as both our Interim Chairman of
our Board of Directors and our Chief Executive Officer is in the best interest
of our Company and our stockholders. Dr. Schaber possesses detailed and in-depth
knowledge of the issues, opportunities and challenges facing our Company and our
business and, therefore, is best positioned to develop agendas that ensure that
the Board of Directors’ time and attention are focused on the most important
matters.  His combined role enables decisive leadership, ensures clear
accountability, and enhances our ability to communicate our message and strategy
clearly and consistently to our stockholders, employees, and collaborative
partners.
   37
 
 Mr.
Buhrman and Dr. Rubin are independent and the Board of Directors believes that
the independent directors provide effective oversight of management. Moreover,
in addition to feedback provided during the course of meeting of the Board of
Directors, the independent directors hold executive sessions. Following an
executive session of independent directors, the independent directors report
back to the full Board of Directors regarding any specific feedback or issues,
provides the Chairman with input regarding agenda items for Board of Directors
and Committee meetings, and coordinates with the Chairman regarding information
to be provided to the independent directors in performing their duties. The
Board of Directors believes that this approach appropriately and effectively
complements the combined Chairman/Chief Executive Officer
structure.
 
 Although
the Company believes that the combination of the Chairman and Chief Executive
Officer roles is appropriate under the current circumstances, our corporate
governance guidelines do not establish this approach as a policy, and the Board
of Directors may determine that it is more appropriate to separate the roles in
the future.
 
 Section 16(a) Beneficial Ownership
Reporting Compliance
 
 We are
required to identify each person who was an officer, director or beneficial
owner of more than 10% of our registered equity securities during our most
recent fiscal year and who failed to file on a timely basis reports required by
Section 16(a) of the Securities Exchange Act of 1934.
 
 To our
knowledge, based solely on review of these filings and written representations
from the certain reporting persons, we believe that during the year ended
December 31, 2009, our officers, directors and significant stockholders have
timely filed the appropriate form under Section 16(a) of the Exchange
Act.
 
 Code
of Ethics
 
 We have
adopted a code of ethics that applies to all of our executive officers and
senior financial officers (including our chief executive officer, chief
financial officer, chief accounting officer, controller, and any person
performing similar functions). A copy of our code of ethics is publicly
available on our website at http://www.soligenix.com
under the "Investors" section. If we make any substantive amendments to our code
of ethics or grant any waiver, including any implicit waiver, from a provision
of the code to our chief executive officer, chief financial officer or chief
accounting officer, we will disclose the nature of such amendment or waiver in a
Current Report on Form 8-K.
 
 Diversity
Considerations in Identifying Director Nominees
 
 We do not
have a formal diversity policy or set of guidelines in selecting and appointing
directors that comprise our Board of Directors. However, when making
recommendations to our Board of Directors regarding the size and composition of
our Board of Directors, our Nominating Committee does consider each individual
director’s qualifications, skills, business experience and capacity to serve as
a director and the diversity of these attributes for the Board of Directors as a
whole.
 
 Audit
Committee
Financial
Expert
  We have
an audit committee comprised of independent directors Mr. Lapointe (Chair), Mr.
Buhrman and Dr. Rubin. Mr. Lapointe was appointed to the Board and the Committee
on March 27, 2009. The board of directors has determined that Mr. Lapointe
qualifies as an “audit committee financial expert,” 



as
defined under the rules of the Securities and Exchange Commission. The board of
directors has also determined that the members of the Audit Committee are
qualified to serve on the committee and have the experience and knowledge to
perform the duties required of the committee.
   38
   Item 11. Executive Compensation
 
 Summary
Compensation
 
 The
following table contains information concerning the compensation paid during
each of the two years ended December 31, 2009 to our Chief Executive Officer and
each of the two other most highly compensated executive officers during 2009
(collectively, the “Named Executive Officers”).
 
 Summary
Compensation
  Name
                Position
                Year
                Salary
                Bonus
                Option
      Awards
                All
      Other Compensation
                TotalChristopher
      J. Schaber1
                CEO
      & President
                2009
                $337,709
                $120,000
                -
                $24,737
                $482,4462008
                $300,000
                $100,000
                $127,120
                $24,844
                $551,964Evan
      Myrianthopoulos2
                CFO
      &Senior VP
                2009
                $202,605
                $70,000
                -
                $24,811
                $297,4162008
                $200,000
                $50,000
                $54,480
                $23,474
                $327,954Brian L. Hamilton3
                CMO
      & Senior VP
                2009
                $206,400
                $60,000
                $87,400
                $26,843
                $380,643
 ____________
  1
                Dr.
      Schaber deferred payment of his 2008 annual bonus of $100,000 until
      February 28, 2009 and his 2009 annual bonus of $120,000 until January 15,
      2010. Option award figures include the value of common stock option awards
      at grant date as calculated under FASB ASC 718. Other compensation for
      2008 and 2009 represent insurance costs.2
                Mr.
      Myrianthopoulos deferred payment of his 2008 annual bonus of $50,000 until
      February 28, 2009 and his 2009 annual bonus of $70,000 until January 15,
      2010. Option award figures include the value of common stock option awards
      at grant date as calculated under FASB ASC 718. Other compensation for
      2008 and 2009 represent insurance costs.3
                Dr.
      Hamilton joined the Company in April 2009. He deferred his 2009 annual
      bonus of $60,000 until January 15, 2010. Option award figures include the
      value of common stock option awards at grant date as calculated under FASB
      ASC 718. Other compensation for 2009 represents insurance
      costs.
 Employment and Severance
Agreements
  In August
2006, we entered into a three-year employment agreement with Christopher J.
Schaber, Ph.D. Pursuant to this employment agreement we agreed to pay Dr.
Schaber a base salary of $300,000 per year and a minimum annual bonus of
$100,000. This employment agreement was renewed in December 27, 2007 for a term
of three years. We agreed to issue him options to purchase 2,500,000 shares of
our common stock, with one third immediately vesting and the remainder vesting
over three years. Upon termination without “Just Cause” as defined by this
agreement, we would pay Dr. Schaber nine months of severance, as well as any
accrued bonuses, accrued vacation, and we would provide health insurance and
life insurance benefits for Dr. Schaber and his dependants. No unvested options
shall vest beyond the termination date. Dr. Schaber’s monetary compensation
(base salary of $300,000 and bonus of $100,000) remained unchanged from 2006
with the 2007 renewal.  He will be paid nine months of severance upon
termination of employment.  Upon a change in control of the Company
due to merger or acquisition, all of Dr. Schaber’s options shall become fully
vested, and be exercisable for a period of five years after such change in
control (unless they would have expired sooner pursuant to their
terms).  In the event of his death during term of the agreement, all
of his unvested options shall immediately vest and remain exercisable for the
remainder of their term and become the property of Dr. Schaber’s immediate
family.
 
 In
December 2004, we entered into a three-year employment agreement with Evan
Myrianthopoulos. Pursuant to this employment agreement we agreed to pay Mr.
Myrianthopoulos a base salary of $185,000 per year. After one year of service
Mr. Myrianthopoulos would be entitled to a minimum annual bonus of $50,000. This
employment agreement was renewed in December 27, 2007 for a term of three years.
We agreed to issue him options to purchase 500,000 shares of our common stock,
with the options vesting over three years.
 
 39
 
 
 Upon
termination without “Just Cause” as defined by this agreement, we would pay Mr.
Myrianthopoulos six months of severance subject to set off, as well as any
unpaid bonuses and accrued vacation would become payable. No unvested options
shall vest beyond the termination date. Mr. Myrianthopoulos also received
150,000 options, vested immediately when he was hired in November 2004, as
President and Acting Chief Executive Officer. Mr. Myrianthopoulos’ monetary
compensation (base salary of $200,000 and bonus of $50,000) remained unchanged
from 2006 with the 2007 renewal.  He will be paid six months of
severance upon termination of employment. Upon a change in control of the
Company due to merger or acquisition, all of Mr. Myrianthopoulos’ options shall
become fully vested, and be exercisable for a period of three years after such
change in control (unless they would have expired sooner pursuant to their
terms).  In the event of his death during term of contract, all of his
unvested options shall immediately vest and remain exercisable for the remainder
of their term and become property of Mr. Myrianthopoulos’ immediate
family.
 
 In
February 2007, our Board of Directors authorized the issuance of the following
number of shares to each of Dr. Schaber, Mr. Myrianthopoulos and Dr. Brey
immediately prior to the completion of a transaction, or series or a combination
of related transactions negotiated by our Board of Directors whereby, directly
or indirectly, a majority of our capital stock or a majority of our assets are
transferred from the Company and/or our stockholders to a third
party: 1,000,000 common shares to Dr. Schaber and 750,000 common shares to
Mr. Myrianthopoulos.  The amended agreements include our obligation to
issue such shares to the executives if such event occurs.
 
 In March
2009, we entered into a two-year employment agreement with Brian L. Hamilton,
M.D., Ph.D. Pursuant to this employment agreement we agreed to pay Dr. Hamilton
a base salary of $270,000 per year and a minimum annual bonus of $70,000. We
agreed to issue him options to purchase 1,000,000 shares of our common stock,
with one quarter immediately vesting and the remainder vesting over three years.
Upon termination without “Just Cause” as defined by this agreement, we would pay
Dr. Hamilton six months of severance, as well as any accrued bonuses, accrued
vacation, and we would provide health insurance and life insurance benefits for
Dr. Hamilton and his dependants. No unvested options shall vest beyond the
termination date. Upon a change in control of the Company due to merger or
acquisition, all of Dr. Hamilton’s options shall become fully vested, and be
exercisable for a period of three years after such change in control (unless
they would have expired sooner pursuant to their terms).  In the event
of his death during term of the agreement, all of his unvested options shall
immediately vest and remain exercisable for the remainder of their term and
become the property of Dr. Hamilton’s immediate family.
 
 On March
27, 2009, the Compensation Committee approved the increase in salaries for Dr.
Schaber to $350,000 and Mr. Myrianthopoulos to $230,000. On December 1, 2009,
the Compensation Committee approved the increase in salaries for Dr. Hamilton to
$280,000, effective January 1, 2010. Dr. Schaber’s and Mr. Myrianthopoulos’
salaries were not changed at this time.
   40
   Outstanding Equity Awards at
Fiscal Year-End
 
 The
following table contains information concerning unexercised options, stock that
has not vested, and equity incentive plan awards for the Named Executive
Officers outstanding at December 31, 2009. We have never issued Stock
Appreciation Rights.
  Outstanding
Equity Awards at Fiscal Year-End
  Number
      of Securities
                Underlying
      Unexercised
                Options
                (#)
              
              
              Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned
              
              
              Option
      Exercise Price
              
              
              Option
      ExpirationName
              
              Exercisable
              
              
              Unexercisable
              
              
              Options (#)
              
              
              ($)
              
              
              DateChristopher
      J. Schaber
              
              
              2,500,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.27
              
              
              8/28/2016731,250
              
              
              
              168,750
              
              
              
              168,750
              
              
              $
              0.47
              
              
              8/29/20171,400,000
              
              
              
              1,400,000
              
              
              
              1,400,000
              
              
              $
              0.06
              
              
              12/17/2018Evan
      Myrianthopoulos
              
              
              150,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.35
              
              
              11/14/201250,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.90
              
              
              9/15/201350,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.58
              
              
              6/11/2014150,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.47
              
              
              11/10/2014500,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.49
              
              
              12/13/2014400,000
              
              
              
              -
              
              
              
              -
              
              
              $
              0.35
              
              
              5/10/2016446,875
              
              
              
              103,125
              
              
              
              103,125
              
              
              $
              0.47
              
              
              8/29/2017600,000
              
              
              
              600,000
              
              
              
              600,000
              
              
              $
              0.06
              
              
              12/17/2018Brian
      L. Hamilton
              
              
              437,500
              
              
              
              562,500
              
              
              
              562,500
              
              
              $
              0.11
              
              
              3/10/2019
 
 Compensation of
Directors
 
 The
following table contains information concerning the compensation of the
non-employee directors during the fiscal year ended December 31,
2009.
 
 Compensation
of Directors
 
 Name
              Fees
      Earned  Paid in Cash1
              Option Awards2
              TotalGregg
      A. Lapointe
              $16,000
              $30,413
              $46,413James
      S. Kuo
              $12,000
              $27,950
              $39,950Cyrille
      F. Buhrman
              $13,000
              $27,950
              $40,950Robert
      J. Rubin
              $3,000
              $75,720
              $78,720
 ___________
 
 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. Option award figures include the
      value of common stock option awards at grant date as calculated under FASB
      ASC 718.
  For 2010,
non-employee directors will be paid $20,000 annually, on a prorated basis, for
their service on our Board of Directors, the chairman of our Audit
Committee will be paid $7,500 annually, on a prorated basis, and the
chairman of our Compensation and Nominating Committees will be paid $5,000
annually, on a prorated basis.  This compensation will be paid quarterly,
in arrears.
  41
  Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
 
 The table
below provides information regarding the beneficial ownership of the common
stock as of March 25, 2010 of (1) each person or entity who owns beneficially 5%
or more of the shares of our outstanding common stock, (2) each of our
directors, (3) each of the Named Executive Officers, and (4) our directors and
officers as a group. Except as otherwise indicated, and subject to applicable
community property laws, we believe the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.
 
 Beneficial
Ownership
 
 Name of Beneficial Owner
              Shares of Common Stock Beneficially
      Owned**
              Percent of ClassSigma-Tau Pharmaceuticals,
      Inc.1
              47,595,521
              25.23%Biotex Pharma Investments,
      LLC2
              37,395,000
              18.09%BAM
      Opportunity Fund, L.P.3
              14,509,828
              7.60%Cyrille F.
      Buhrman4
              5,375,020
              2.87%Christopher J.
      Schaber5
              5,009,343
              2.62%Evan
      Myrianthopoulos6
              2,706,030
              1.43%Robert
      N. Brey7
              1,262,500
              *Christopher
      P. Schnittker8
              328,125
              *Robert
      J. Rubin9
              300,000
              *Gregg
      A. Lapointe10
              337,500
              *Brian
      L. Hamilton11
              500,000
              *All
      directors and executive officers as a group (8 persons)
              15,818,518
              8.03%
 _______________
   1
              Includes
      45,619,237 shares of common stock and warrants to purchase 1,976,284
      shares of common stock exercisable within 60 days of March 25, 2010. The
      amount does not include 1,546,870 shares of common stock held by Paolo
      Cavazza, one of the principal owners of Sigma-Tau. The address of
      Sigma-Tau Pharmaceuticals, Inc. is c/o Sigma-Tau Pharmaceuticals, Inc.,
      9841 Washingtonian Boulevard,Suite 500, Gaithersburg,
      Maryland 20878.2
              Includes
      17,395,000 shares of common stock and warrants to purchase 20,000,000
      shares of common stock exercisable within 60 days of March 25, 2010. The
      address of Biotex
      Pharma Investments, LLC is c/o Biotex Pharma Investments,
      LLC,220 West
      42ndStreet 6thFloor New York, New York
      10036.3
              Includes 10,557,259
      shares of common stock and warrants to purchase 3,952,569 shares of common
      stock exercisable within 60 days of March 25, 2010. The address of BAM
      Opportunity Fund L.P. is 44 Wall Street, Suite 1603, New York, New
      York 10005.4
              Includes
      4,900,020 shares of common stock and options to purchase 475,000 shares of
      common stock exercisable within 60 days of March 25, 2010. The address of
      Mr. Buhrman is c/o Soligenix, 29 Emmons Drive, Suite C-10,
      Princeton, New Jersey 08540.5
              Includes
      471,817 shares of common stock owned by Dr. Schaber, options to purchase
      4,498,000 shares of common stock exercisable within 60 days of March 25,
      2010, and warrants to purchase 39,526 shares of common stock exercisable
      within 60 days of March 25, 2010. The address of Dr. Schaber is c/o
      Soligenix, 29 Emmons
      Drive, Suite C-10, Princeton, New Jersey 08540.6
              Includes
      224,780 shares of common stock owned by Mr. Myrianthopoulos and his wife
      and options to purchase 2,456,250 shares of common stock exercisable
      within 60 days of March 25, 2010. The address of Mr. Myrianthopoulos is
      c/o Soligenix, 29
      Emmons Drive, Suite C-10, Princeton, New Jersey
      08540.7
              Includes
      options to purchase 1,225,000 shares of common stock exercisable within 60
      days of March 25, 2010. The address of Dr. Brey is c/o Soligenix, 29 Emmons Drive, Suite C-10,
      Princeton, New Jersey 08540.8
              Includes
      options to purchase 328,125 shares of common stock owned by Mr. Schnittker
      exercisable within 60 days of March 25, 2010. The address of Mr.
      Schnittker is c/o Soligenix, 29 Emmons Drive, Suite C-10,
      Princeton, New Jersey 08540.9
              Includes
      options to purchase 300,000 shares of common stock exercisable within 60
      days of March 25, 2010. The address of Dr. Rubin is c/o Soligenix, 29 Emmons Drive, Suite C-10,
      Princeton, New Jersey 08540.10
              Includes
      options to purchase 337,500 shares of common stock exercisable within 60
      days of March 25, 2010. The address of Mr. Lapointe is c/o Soligenix,
      29 Emmons Drive, Suite
      C-10, Princeton, New Jersey 08540.11
              Includes
      options to purchase 500,000 shares of common stock exercisable within 60
      days of March 25, 2010. The address of Dr. Hamilton is c/o Soligenix, 29
      Emmons Drive, Suite C-10, Princeton, New Jersey 08540.*
              Indicates
      less than 1%.**
              Beneficial
      ownership is determined in accordance with the rules of the SEC. Shares of
      common stock subject to options or warrants currently exercisable or
      exercisable within 60 days of March 25, 2010 are deemed outstanding for
      computing the percentage ownership of the stockholder holding the options
      or warrants, but are not deemed outstanding for computing the percentage
      ownership of any other stockholder. Percentage of ownership is based on
      186,888,036 shares of common stock outstanding as of March 25,
      2010.
           42
 
 Equity Compensation Plan
Information
 
 In
December 2005, our Board of Directors approved the 2005 Equity Incentive Plan,
which was approved by stockholders on December 29, 2005. In September 2007, our
stockholders approved an amendment to the 2005 Equity Incentive Plan to increase
the maximum number of shares of our common stock available for issuance under
the plan by 10,000,000 shares, bringing the total shares reserved for issuance
under the plan to 20,000,000 shares. The following table provides information,
as of December 31, 2009, with respect to options outstanding under our 1995
Amended and Restated Omnibus Incentive Plan and our 2005 Equity Incentive
Plan.
  Plan Category
              
              Number of Securities
                to be Issued
                upon Exercise of Outstanding Options, Warrants and
      Rights
              
              
              Weighted-Average Exercise Price of 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 holders1
              
              
              19,311,539
              
              
              $
              0.24
              
              
              
              454,831Equity
      compensation plans not approved by security holders
              
              
              -
              
              
              
              -
              
              
              
              -TOTAL
              
              
              19,311,539
              
              
              $
              0.24
              
              
              
              454,831
 _________
 
 1
              Includes
      our 1995 Amended and Restated Omnibus Incentive Plan and our 2005 Equity
      Incentive Plan.  Our 1995 Plan expired in 2005 and thus no
      securities remain available for future issuance under that plan. Under the
      amended 2005 equity incentive plan, we have issued 1,482,669 shares to
      individuals as payment for services in the amount of $380,342 as allowed
      in the plan.
   43
 
 Item 13. Certain Relationships and Related Transactions and Director
Independence
 
 Related Party
Transactions
 
 Other than the employment agreements and compensation
paid to our directors, we did not engage in any transactions with related
parties since January 1, 2009.  For a discussion of our employment
agreements and compensation paid to our directors, see “Item 11. Executive
Compensation.”
 
 Director
Independence
 
 The Board of Directors has determined that Cyrille F.
Buhrman and Robert Rubin are "independent" as such term is defined by the
applicable listing standards of the American Stock Exchange. Our Board of
Directors based this determination primarily on a review of the responses of the
Directors to questionnaires regarding their employment, affiliations and family
and other relationships.
 
 Item 14.Principal Accountant Fees and Services
 
 The
following table highlights the aggregate fees billed during each of the two
years ended December 31, 2009 by Amper, Politziner & Mattia, LLP (our
principal accountants in 2009), Sweeney, Matz & Co., LLC (our principal
accountants in 2008), and Gentile, Pismeny & Brengel, LLP (our tax advisors
in 2009).
 
 2009
              
              
              2008Audit
      fees1
              
              $
              96,900
              
              
              $
              107,302Audit
      related fees
              
              
              19,900
              
              
              
              6,254Tax
      fees2
              
              
              9,710
              
              
              
              9,229Total
              
              $
              126,510
              
              
              $
              122,785
 ______________
 
 1
              Relates to services performed during the audit of
      each of those years and reviews of our financial statements included in
      our Quarterly Reports on Form 10-Q during those years. Although Amper was
      engaged for the December 31, 2008 audit, our fees related to them were
      incurred in 2009.
 
 2
              Sweeney, Matz & Co., LLC billed us $9,229 for
      tax compliance for the year ended December 31, 2008. We engaged Gentile,
      Pismeny & Brengel, LLP as our tax advisors in 2009. Our fees
      associated with our 2008 tax returns were incurred in
      2009.
 
 Other
Fees
 
 Our
principal accountants did not bill us for any services or products other than as
reported above in this Item 14 during each of the two years ended December 31,
2009.
 
 Pre-Approval Policies and
Procedures
 
 The audit
committee has adopted a policy that requires advance approval of all audit
services and permitted non-audit services to be provided by the independent
auditor as required by the Exchange Act. The audit committee must approve the
permitted service before the independent auditor is engaged to perform
it.
 
 The audit
committee approved all of the services described above in accordance with its
pre-approval policies and procedures.
   44
  Part
IV
 
 Item 15. Exhibits and Financial Statements Schedules
 
 a.  (1)
Consolidated Financial Statements:
 
 The
financial statements required to be filed by Item 8 of this Annual Report on
Form 10-K and filed in this Item 15, are as follows:
  Consolidated Balance
      Sheets as of December 31, 2009 and 2008
              F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2009 and
      2008
              F-3Consolidated
      Statements of Stockholders’ Deficiency for the Years Ended December 31,
      2009 and 2008
              F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
              F-5Notes to
      Consolidated Financial Statements
              F-6Report of
      Independent Registered Public Accounting Firm
              F-20
  (2) Financial
Statement Schedules
 
 Schedules
are omitted because they are not applicable, or are not required, or because the
information is included in the consolidated financial statements and notes
thereto.
 
 (3) Exhibits:
 
 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
              Certificate
      of Amendment to Amended and Restated Certificate of Incorporation
      (incorporated by reference to Exhibit 3.4 included in our Registration
      Statement on Form S-1 (File No.
      333-162375) filed on October 7,
      2009).3.5
              Certificate
      of Amendment to Amended and Restated Certificate of Incorporation
      (incorporated by reference to Exhibit 3.1 included in our current report
      on Form 8-K filed on September 30, 2009).3.6
              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).3.7
              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).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).   45
   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).4.9
              Form
      of Warrant issued to each investor in the September 2009 private placement
      (incorporated by reference to Exhibit 10.2 included in our current report
      on Form 8-K filed on September 29, 2009).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
              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).10.3
              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).10.4
              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).10.5
              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).10.6
              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). **10.7
              2005
      Equity Incentive Plan (incorporated by reference to Appendix D to our
      Proxy Statement filed December 12, 2005). **10.8
              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).10.9
              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).
      **10.10
              Letter
      of Intent dated January 3, 2007 by and 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 January 4,
      2007).   46
   10.11
              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).10.12
              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).10.13
              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).10.14
              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).10.15
              Employment
      Agreement dated December 27, 2007, between Christopher
      J.  Schaber, PhD and the Company (incorporated by reference to
      Exhibit 10.30 included in our Annual Report on Form 10-K for the
      fiscal year ended December 31, 2008). **10.16
              Employment
      Agreement dated December 27, 2007, between Evan Myrianthopoulos and the
      Company (incorporated by reference to Exhibit 10.31 included in our
      Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
      **10.17
              Employment
      Agreement dated December 27, 2007, between James Clavijo, CPA and the
      Company (incorporated by reference to Exhibit 10.32 included in our
      Annual Report on Form 10-K for the fiscal year ended December 31, 2008).
      **10.18
              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 in our Registration Statement on Form S-1 filed on February 14,
      2008).10.19
              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)filed on February 14, 2008).10.20
              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).10.21
              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).10.22
              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).10.23
              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).10.24
              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).10.25
              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 in our Registration Statement on Form S-1 (File No. 333-157322) filed on February 13,
      2009).   47
   10.26
              Collaboration and Supply Agreement dated February
      11, 2009, between the Company and Sigma-Tau Pharmaceuticals, Inc.(incorporated by reference to Exhibit 10.43 included in our
      Registration Statement on Form S-1 (File No.
      333-157322) filed on February 13, 2009). †10.27
              Common
      Stock Purchase Agreement dated February 11, 2009, between the Company and
      Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit
      10.44 included in our Registration Statement on Form S-1 (File No. 333-157322)  filed on February 13,
      2009).10.28
              Sublease
      Agreement dated April 1, 2009, between the Company and BioWa, Inc.
      (incorporated by reference to Exhibit 10.43 included in our Registration
      Statement on Form S-1/A (File No.
      333-157322) filed on April 14,
      2009).10.29
              Employment
      Agreement, dated as of July 1, 2009, between Christopher P. Schnittker,
      CPA and the Company. (incorporated by reference to Exhibit 10.1 included
      in our current report on Form 8-K filed on July 7, 2009).10.30
              Securities
      Purchase Agreement dated September 23, 2009 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 September 29,
      2009).10.31
              Registration
      Rights Agreement dated September 23, 2009 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 September 29,
      2009).10.32
              Letter
      Agreement dated September 25, 2009 between the Company and BAM Opportunity
      Fund, L.P. (incorporated by reference to Exhibit 10.32 included in our
      Registration Statement on Form S-1 (File No.
      333-162375) filed on October 7,
      2009).10.33
              Letter
      Agreement dated September 23, 2009 between the Company and Iroquois Master
      Fund, Ltd. (incorporated by reference to Exhibit 10.32 included in our
      Registration Statement on Form S-1 (File No.
      333-162375) filed on October 7,
      2009).21.1
              Subsidiaries
      of the Company.*31.1
              Certification
      of the Chief Executive Officer pursuant to Exchange Act rule 13(a)-14(a)
      (under Section 302 of the Sarbanes-Oxley Act of 2002).*31.2
              Certification
      of the Chief Financial Officer pursuant to Exchange Act rule 13(a)-14(a)
      (under Section 302 of the Sarbanes-Oxley Act of 2002).*32.1
              Certification
      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.
                Portions of this exhibit have been omitted
      pursuant to a request for confidential
  treatment.
   48
 
  SIGNATURES
  In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  SOLIGENIX,
      INC.By:
                /s/ Christopher J.
      SchaberChristopher
      J. Schaber, Ph.D.Chief
      Executive Officer and President
 Date:
March 31, 2010
 
 In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated
and on the dates indicated.
 
 Name
              
              Capacity
              
              Date/s/ Christopher J. Schaber
              
              Chairman
      of the Board, Chief Executive Officer and President
              
              March
      31, 2010Christopher
      J. Schaber, Ph.D.
              
              (principal
      executive officer)/s/ Cyrille F. Buhrman
              
              Director
              
              March
      31, 2010Cyrille
      F. Buhrman/s/ Gregg A. Lapointe
              
              Director
              
              March
      31, 2010Gregg
      A. Lapointe, C.P.A., M.B.A./s/ Robert J. Rubin
              
              Director
              
              March
      31, 2010Robert
      J. Rubin, M.D./s/ Evan Myrianthopoulos
              
              Chief
      Financial Officer, Senior Vice President and Director
              
              March
      31, 2010Evan
      Myrianthopoulos
              
              (principal
      financial officer)/s/ Christopher P.
    Schnittker
              
              Vice
      President of Administration, Controller and Corporate
      Secretary
              
              March
      31, 2010Christopher
      P. Schnittker, C.P.A.
              
              (principal
      accounting officer)
   49
 
 SOLIGENIX,
INC. ANDSUBSIDIARIES
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 
 Table
of Contents
 
 
 
 PageConsolidated
      Balance Sheets as of December 31, 2009 and 2008
              F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2009 and
      2008
              F-3Consolidated
      Statements of Changes in Shareholders’ Equity for the Years Ended December
      31, 2009 and  2008
              F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
              F-5Notes
      to Financial Statements
              F-6Report
      of Independent Registered Public Accounting Firms
              F-20
 
  F-1
 
 Soligenix,
Inc. and Subsidiaries
 Consolidated
Balance Sheets
 As
of December 31,
  
 2009
              
              
              2008Assets
                Current
      assets:Cash
      and cash equivalents
              
              $
              7,692,011
              
              
              $
              1,475,466Grants
      receivable
              
              
              23,632
              
              
              
              278,316Inventory,
      net
              
              
              42,865
              
              
              
              82,182Prepaid
      expenses
              
              
              141,313
              
              
              
              86,837Total
      current assets
              
              
              7,899,821
              
              
              
              1,922,801Office
      furniture and equipment, net
              
              
              21,172
              
              
              
              21,217Intangible
      assets, net
              
              
              1,463,289
              
              
              
              1,418,717Total
      assets
              
              $
              9,384,282
              
              
              $
              3,362,735Liabilities
      and shareholders’ equityCurrent
      liabilities:Accounts
      payable
              
              $
              844,857
              
              
              $
              1,015,005Accrued
      compensation
              
              
              365,199
              
              
              
              370,614Total
      current liabilities
              
              
              1,210,056
              
              
              
              1,385,619Commitments
      and contingenciesShareholders’
      equity:Preferred
      stock; 5,000,000 shares authorized; none issued or
    outstanding
              
              
              -
              
              
              
              -Common
      stock, $.001 par value; 400,000,000 shares authorized; 185,655,720 shares
      and 118,610,704 sharesissued
      and outstanding in 2009 and 2008, respectively
              
              
              185,656
              
              
              
              118,610Additional
      paid-in capital
              
              
              116,340,770
              
              
              
              104,176,253Accumulated
      deficit
              
              
              (108,352,200
              )
              
              
              (102,317,747
              )Total
      shareholders’ equity
              
              
              8,174,226
              
              
              
              1,977,116Total
      liabilities and shareholders’ equity
              
              $
              9,384,282
              
              
              $
              3,362,735
 
 The
accompanying notes are an integral part of these financial
statements.
  F-2
  Soligenix,
Inc. and Subsidiaries
 Consolidated
Statements of Operations
 For
the Years Ended December 31,
 
 2009
              
              
              2008Revenues,
      principally from grants
              
              $
              2,816,037
              
              
              $
              2,310,265Cost
      of revenues
              
              
              (1,483,641
              )
              
              
              (1,886,431
              )Gross
      profit
              
              
              1,332,396
              
              
              
              423,834Operating
      expenses:Research
      and development
              
              
              4,523,375
              
              
              
              1,552,323General
      and administrative
              
              
              2,281,251
              
              
              
              1,941,719Stock-based
      compensation - research and development
              
              
              210,834
              
              
              
              182,168Stock-based
      compensation - general and administrative
              
              
              368,232
              
              
              
              203,448Total
      operating expenses
              
              
              7,383,692
              
              
              
              3,879,658Loss
      from operations
              
              
              (6,051,296
              )
              
              
              (3,455,824
              )Other
      income (expense):Interest
      income
              
              
              21,920
              
              
              
              37,073Interest
      expense
              
              
              (2,678
              )
              
              
              (3,276
              )Other
      expense
              
              
              (2,399
              )
              
              
              -Total
      other income (expense)
              
              
              16,843
              
              
              
              33,797Net
      loss
              
              $
              (6,034,453
              )
              
              $
              (3,422,027
              )Basic
      and diluted net loss per share
              
              $
              (0.04
              )
              
              $
              (0.03
              )Basic
      and diluted weighted average common shares outstanding
              
              
              167,515,043
              
              
              
              101,881,991
  The
accompanying notes are an integral part of these financial
statements.
 
 F-3
 
 Soligenix,
Inc. and Subsidiaries
 Consolidated
Statements of Changes in Shareholders’ Equity (Deficit)
 For
the Years Ended December 31, 2009 and 2008
 
  Common Stock
              
              
              Additional
                Paid–In
              
              
              AccumulatedShares
              
              
              Par Value
              
              
              Capital
              
              
              Deficit
              
              
              TotalBalance,
      January 1, 2008
              
              
              94,996,547
              
              
              $
              94,996
              
              
              $
              101,391,090
              
              
              $
              (98,895,720
              )
              
              $
              (2,590,366
              )Issuance
      of common stock from private placement
              
              
              3,658,890
              
              
              
              3,659
              
              
              
              654,940
              
              
              
              -
              
              
              
              658,599Issuance
      of common stock for commitment shares - Fusion
              
              
              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
              
              
              
              -
              
              
              
              1,500,000Issuance
      of common stock pursuant to equity line agreement - Fusion
              
              
              993,084
              
              
              
              993
              
              
              
              126,507
              
              
              
              -
              
              
              
              127,500Issuance
      of common stock to vendors
              
              
              758,082
              
              
              
              758
              
              
              
              110,440
              
              
              
              -
              
              
              
              111,198Issuance
      of common stock as payment to employees
              
              
              168,309
              
              
              
              168
              
              
              
              25,696
              
              
              
              -
              
              
              
              25,864Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              385,616
              
              
              
              -
              
              
              
              385,616Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,422,027
              )
              
              
              (3,422,027
              )Balance,
      December 31, 2008
              
              
              118,610,704
              
              
              $
              118,610
              
              
              $
              104,176,253
              
              
              $
              (102,317,747
              )
              
              $
              1,977,116Issuance
      of common stock from private placements, net of expenses of
      $347,000
              
              
              38,266,602
              
              
              
              38,267
              
              
              
              6,488,995
              
              
              
              -
              
              
              
              6,527,262Issuance
      of common stock for collaboration and supply agreement with Sigma
      Tau
              
              
              25,000,000
              
              
              
              25,000
              
              
              
              4,375,000
              
              
              
              -
              
              
              
              4,400,000Issuance
      of common stock pursuant to equity line agreement - Fusion
              
              
              708,989
              
              
              
              709
              
              
              
              114,292
              
              
              
              -
              
              
              
              115,001Issuance
      of common stock to vendors
              
              
              2,500,000
              
              
              
              2,500
              
              
              
              297,500
              
              
              
              -
              
              
              
              300,000Issuance
      of common stock warrants to vendors
              
              
              -
              
              
              
              -
              
              
              
              190,655
              
              
              
              -
              
              
              
              190,655Issuance
      of common stock to former employee
              
              
              569,425
              
              
              
              570
              
              
              
              119,009
              
              
              
              -
              
              
              
              119,579Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              579,066
              
              
              
              -
              
              
              
              579,066Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,034,453
              )
              
              
              (6,034,453
              )Balance,
      December 31, 2009
              
              
              185,655,720
              
              
              $
              185,656
              
              
              $
              116,340,770
              
              
              $
              (108,352,200
              )
              
              $
              8,174,226
  The
accompanying notes are an integral part of these financial
statements.
   F-4
  Soligenix,
Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 For
the Years Ended December 31,
 
 2009
              
              
              2008Operating
      activities:Net
      loss
              
              $
              (6,034,453
              )
              
              $
              (3,422,027
              )Adjustments
      to reconcile net loss to net cash usedin
      operating activities:Amortization
      and depreciation
              
              
              175,604
              
              
              
              149,183Inventory reserve
              
              
              50,000
              
              
              
              100,000Stock or warrants issued in
      exchange for services
              
              
              490,654
              
              
              
              137,062Stock-based
      compensation
              
              
              579,066
              
              
              
              385,616Stock issued to former
      employee
              
              
              119,579
              
              
              
              -Loss on disposal of fixed
      assets
              
              
              2,399
              
              
              
              -Change
      in operating assets and liabilities:Grants receivable
              
              
              254,684
              
              
              
              (180,471
              )Inventory
              
              
              (10,683
              )
              
              
              (182,182
              )Prepaid expenses
              
              
              (54,476
              )
              
              
              32,341Accounts payable
              
              
              (170,148
              )
              
              
              167,396Accrued
    compensation
              
              
              (5,415
              )
              
              
              24,710Total adjustments
              
              
              1,431,264
              
              
              
              633,655Net cash used in operating
      activities
              
              
              (4,603,189
              )
              
              
              (2,788,372
              )Investing
      activities:Acquisition
      of intangible assets
              
              
              (206,799
              )
              
              
              (237,113
              )Purchase
      of office equipment
              
              
              (15,730
              )
              
              
              (5,277
              )Net cash used in investing
      activities
              
              
              (222,529
              )
              
              
              (242,390
              )Financing
      activities:Net
      proceeds from sale of common stock
              
              
              10,927,262
              
              
              
              2,158,600Proceeds
      from sale of common stock pursuant to equity line
              
              
              115,001
              
              
              
              127,500Net cash provided by financing
      activities
              
              
              11,042,263
              
              
              
              2,286,100Net
      increase (decrease) in cash and cash equivalents
              
              
              6,216,545
              
              
              
              (744,662
              )Cash and cash equivalents at beginning of period
              
              
              1,475,466
              
              
              
              2,220,128Cash and cash equivalents at end
      of period
              
              $
              7,692,011
              
              
              $
              1,475,466Supplemental
      disclosure of cash flow:Cash
      paid for interest
              
              $
              2,678
              
              
              $
              3,276Non-cash
      transactions:Issuance of commitment
      shares
              
              $
              -
              
              
              $
              272,484
  The
accompanying notes are an integral part of these financial
statements
  F-5
 
 Soligenix,
Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 
 
 Note 1. Nature of
Business
 
 Basis of
Presentation
 
 Soligenix,
Inc. (the “Company”), formerly known as DOR BioPharma, Inc., is a late-stage
biopharmaceutical company that was incorporated in 1987 and is focused on
developing products to treat the life-threatening side effects of cancer
treatments and serious gastrointestinal diseases where there remains an unmet
medical need, as well as developing biodefense vaccines and therapeutics. The
Company maintains two active business segments: BioTherapeutics and BioDefense.
Soligenix’s BioTherapeutics business segment intends to develop orBec® (oral
beclomethasone dipropionate, or oral BDP) and other biotherapeutic products,
including LPMTM-Leuprolide.
Soligenix’s BioDefense business segment intends to convert its ricin and
botulinum toxin vaccine programs and radiation injury program from early stage
development to advanced development and manufacturing.
 
 The
Company generates revenues from the National Institutes of Health under three
active BioDefense grants, the successful achievement of development milestones
under collaborative agreements, and its Named Patient Access Program
(“NPAP”) partners for orBec®.
 
 The
Company is subject to risks common to companies in the biotechnology industry
including, but not limited to, development of new technological innovations,
dependence on key personnel, protections of proprietary technology, compliance
with FDA regulations, litigation, and product liability.
 
 Liquidity
 
 As of
December 31, 2009, the Company had cash and cash equivalents of $7,692,011 as
compared to $1,475,466 as of December 31, 2008, representing an increase of
$6,216,545. As of December 31, 2009, the Company had working capital of
$6,689,765 as compared to working capital of $537,182 as of December 31, 2008,
representing an increase of $6,152,583.  The increase was the result
of the execution of our collaboration agreement and ensuing sale of our common
stock to our commercialization partner Sigma-Tau of $4.5 million, plus the $6.5
million in proceeds from the sale of our common stock and warrants to accredited
investors, less the cash used in operating and investing activities over the
period.
 
 For the
year ended December 31, 2009, the Company’s cash used in operating activities
was $4,603,189, as compared to $2,788,372 for the same period in 2008. The
increase in spending was attributable to the preparation for and conduct of the
confirmatory Phase 3 clinical trial of orBec® in
the treatment of GI GVHD.
   F-6
 
 Management’s
business activities can be outlined as follows:
 
 ·
              complete
      the pivotal Phase 3 confirmatory clinical trial for orBec®in the treatment of acute gastrointestinal Graft-versus-Host
      disease (“GI GVHD”);
 ·
              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;
 ·
              conduct
      and complete a Phase 2 clinical trial of orBec®
      for the prevention of acute GVHD;
 ·
              evaluate
      and initiate additional clinical trials to explore the effectiveness of
      oral BDP in other therapeutic indications involving inflammatory
      conditions of the gastrointestinal tract such as radiation enteritis,
      radiation injury and Crohn’s
disease;
 ·
              reinitiate
      development of our other biotherapeutics products, including LPMTM
      Leuprolide;
 ·
              continue
      to secure additional government funding for each of our BioDefense
      programs through grants, contracts and
  procurements;
 ·
              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;
 ·
              make
      orBec®available
      worldwide through the Named Patient Access Program for the treatment of
      acute GI GVHD;
 ·
              acquire
      or in-license new clinical-stage compounds for development;
      and
 ·
              explore
      other business development and acquisition
  strategies.
  Based on
the Company’s current rate of cash outflows, cash on hand, the timely collection
of milestone payments under collaboration agreements, proceeds from our grant
programs, and potential minimal proceeds from the Fusion Capital
transaction, management believes that its current cash will be sufficient to
meet the anticipated cash needs for working capital and capital expenditures
beyond the first quarter of 2011.
 
 The
Company’s plans with respect to its liquidity management include the
following:
 
 ·
              We
      have $10 million in active grant funding still available to support our
      research programs in 2010 and beyond.  Additionally, we have
      submitted additional grant applications for further support of these
      programs and others with various funding agencies, and received
      encouraging feedback to date on the likelihood of
  funding.
 ·
              We
      have continued to use equity instruments to provide a portion of the
      compensation due to vendors and collaboration partners and expect to
      continue to do so for the foreseeable
future.
 ·
              We
      have approximately $7.7 million in available capacity under our Fusion
      Capital equity facility.  Although we have historically drawn
      amounts in modest amounts under this agreement, we could draw more within
      certain contractual parameters.
 ·
              We
      may seek additional capital in the private and/or public equity markets to
      continue our operations, respond to competitive pressures, develop
      new products and services, and to support new strategic
      partnerships. We are currently evaluating additional equity financing
      opportunities and may execute them when appropriate.  However,
      there can be no assurances that we can consummate such a transaction, or
      consummate a transaction at favorable
pricing.
 
 Note 2. Summary of Significant Accounting
Policies
 
 Principles of
Consolidation
 
 The
consolidated financial statements include Soligenix, Inc., and its wholly and
majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated as a result of consolidation.
   F-7
  Operating
Segments
 
 Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated on a regular basis by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources to an individual segment and in assessing the performance of
the segment. The Company divides its operations into two operating segments:
BioTherapeutics and BioDefense.
 
 Grants
Receivable
 
 Receivables
consist of unbilled amounts due from grants from the National Institute of
Health of the U.S. Federal Government for costs incurred prior to the period end
under reimbursement contracts.  The amounts were billed in the month
subsequent to period end and collected shortly thereafter. The Company considers
the grants receivable to be fully collectible; accordingly, no allowance for
doubtful amounts has been established. If amounts become uncollectible, they are
charged to operations.
 
 Intangible
Assets
 
 One of
the most significant estimates or judgments that the Company makes is whether to
capitalize or expense patent and license costs. The Company makes this judgment
based on whether the technology has alternative future uses, as defined in
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 730, Research and
Development. Based on this consideration, the Company capitalizes
payments made to legal firms that are engaged in filing and protecting rights to
intellectual property and rights for our current products in both the domestic
and international markets. The Company believes that patent rights are one of
its most valuable assets. Patents and patent applications are a key component of
intellectual property, especially in the early stage of product development, as
their purchase and maintenance gives the Company access to key product
development rights from Soligenix’s academic and industrial partners. These
rights can also be sold or sub-licensed as part of its strategy to partner its
products at each stage of development as the intangible assets have alternative
future use. The legal costs incurred for these patents consist of work designed
to protect, preserve, maintain and perhaps extend the lives of the patents. The
Company capitalizes such costs and amortizes intangibles over their expected
useful life – generally a period of 11 to 16 years.
 
 The
Company capitalized $206,799and $237,113in patent related costs during the years ended December 31, 2009 and 2008, respectively.
 
 Impairment of Long-Lived
Assets
 
 Office
furniture and equipment and intangible assets are evaluated and reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The Company recognizes impairment of
long-lived assets in the event the net book value of such assets exceeds the
estimated future undiscounted cash flows attributable to such assets. If the sum
of the expected undiscounted cash flows is less than the carrying value of the
related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets. Such analyses necessarily involve significant judgment.
 
 The
Company did not record any impairment of intangible assets for the years ended
December 31, 2009 or 2008.
 
 Inventory
 
 Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method and includes the cost of materials and
overhead. Inventory consists of finished goods related to the orBec®NPAP.
The Company records an allowance as needed for excess
inventory.  During 2008 and 2009 allowances of $100,000 and $150,000,
respectively, were provided. This allowance will be evaluated on a periodic
basis and adjustments will be made as required.
   F-8
   Fair Value of Financial
Instruments
 
 Accounting
principles generally accepted in the U.S. require that fair values be disclosed
for the Company’s financial instruments. The carrying amounts of the Company’s
financial instruments, which include grants receivable and current liabilities,
are considered to be representative of their respective fair
values.
 
 Revenue
Recognition
 
 The
Company’s revenues are generated from NIH grants, the achievement of licensing
milestones and NPAP sales of orBec®. The
revenue from NIH grants are based upon subcontractor costs and internal costs
incurred that are specifically covered by the grants, plus a facilities and
administrative rate that provides funding for overhead expenses. These revenues
are recognized when expenses have been incurred by subcontractors or when the
Company incurs internal expenses that are related to the grant. Licensing
milestone revenues are recorded when earned. Revenue from NPAP sales of
orBec® are
recognized when the product is shipped.
 
 Research and Development
Costs
 
 Research
and development costs are charged to expense when incurred. Research and
development includes costs such as clinical trial expenses, contracted research
and license agreement fees with no alternative future use, supplies and
materials, salaries and employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development
expense represents the value assigned or paid for acquired research and
development for which there is no alternative future use as of the date of
acquisition.
 
 Stock-Based
Compensation
 
 Stock
options are issued with an exercise price equal to the market price on the date
of issuance. Stock options issued to directors are fully vested upon issuance.
Stock options issued to employees generally vest 25% upfront, then 25% each year
for a period of three years. Stock options vest over each three month period
from the date of issuance to the end of the three year period. These options
have a ten year life for as long as the individuals remain employees or
directors. In general when an employee or director terminates their position the
options will expire within six months, unless otherwise extended by the
Board.
 
 The fair
value of options in accordance with FASB ASC 718, Stock Compensation, was
estimated using the Black-Scholes option-pricing model and the following
weighted-average assumptions:
 
 ·
              no
      dividend yield;
 ·
              an
      expected life of 4 years;
 ·
              volatilities
      ranging from 126% to 130% for 2009 and 115% for 2008;
  and
 ·
              average
      risk-free interest rates of 1.8% and 1.1% in 2009 and 2008,
      respectively.
 
 The
Company estimates these values based on the assumptions that have been
historically available. The fair value of each option grant made during 2009 and
2008 was estimated on the date of each grant using the Black-Scholes option
pricing model and amortized ratably over the option’s vesting periods, which
approximates the service period. The Company awarded 3,712,500 and 6,800,000
stock options in 2009 and 2008, respectively.
 
 Stock
compensation expense for options, warrants and shares of common stock granted to
non-employees has been determined in accordance with FASB ASC 718, Stock Compensation, and FASB
ASC 505-50, Equity-Based
Payments to Non-Employees, and represents the fair value of the
consideration received, or the fair value of the equity instruments issued,
whichever may be more reliably measured. For options that vest over future
periods, the fair value of options granted to non-employees is amortized as the
options vest. The option’s price is re-measured using the Black-Scholes model at
the end of each three month reporting period.
   F-9
  
 Upon
exercise, shares are issued from the amended 2005 equity incentive plan and
increase the number of shares the Company has outstanding. There were no stock
option exercises during 2009 or 2008. There were forfeitures or expirations of
620,000  and 100,000 stock options during 2009 and 2008, respectively.
The intrinsic value of the stock options outstanding at December 31, 2009 was
zero.
 
 The
intrinsic value was calculated as the difference between the Company’s common
stock closing price on the Over-the-Counter Bulletin Board at December 31, 2009
and the exercise price of the stock option issued multiplied by the number of
shares underlying the stock options. The Company’s common stock price at
December 31, 2009 was $0.25.
 
 From time
to time, the Company issues common stock to vendors, consultants, and employees
as compensation for services performed. These shares are typically issued as
restricted stock, unless issued to non-affiliates under the 2005 Equity
Incentive Plan, where the stock may be issued as unrestricted. The restricted
stock can only have the restrictive legend removed if the shares underlying the
certificate are sold pursuant to an effective registration statement, which the
Company must file and have approved by the SEC, if the shares underlying the
certificate are sold pursuant to Rule 144, provided certain conditions are
satisfied, or if the shares are sold pursuant to another exemption from the
registration requirements of the Securities Act of 1933, as
amended.  Stock-based compensation expense recognized during the
period is based on the value of the common stock at the date of grant and the
portion of share-based payment awards that is ultimately expected to vest during
the period.
 
 Income
Taxes
 
 Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. A valuation
allowance is established when it is more likely than not that all or a portion
of a deferred tax asset will not be realized. A review of all available positive
and negative evidence is considered, including the Company’s current and past
performance, the market environment in which the Company operates, the
utilization of past tax credits, and the length of carryback and carryforward
periods.  Deferred tax assets and liabilities are measured utilizing
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. No current or
deferred income taxes have been provided through December 31, 2009 due to the
net operating losses incurred by the Company since its inception. Additionally,
the Company has not recorded a liability for unrecognized tax benefits for
December 31, 2009 and 2008.
 
 Earnings Per
Share
 
 Basic
earnings per share (“EPS”) excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that shared in the earnings of the entity. Since there is a large number
of options and warrants outstanding, fluctuations in the actual market price can
have a variety of results for each period presented.
 
 For
      the Year Ended
              
              
              For
      the Year EndedDecember 31, 2009
              
              
              December 31, 2008Net Loss
              
              
              Shares
              
              
              EPS
              
              
              Net Loss
              
              
              Shares
              
              
              EPSBasic
      & Diluted EPS
              
              $
              (6,034,453
              )
              
              
              167,515,043
              
              
              $
              (0.04
              )
              
              $
              (3,422,027
              )
              
              
              101,881,991
              
              
              $
              (0.03
              )
 
 Options
and warrants outstanding at December 31, 2009 and 2008 were 19,311,539 and
16,370,039 options, and 42,472,874 and 20,350,148 warrants, respectively. No
options and warrants were included in the 2009 and 2008 computations of diluted
earnings per share because their effect would be anti-dilutive as a result of
losses in each of those years.
   F-10
 
 Use of Estimates and
Assumptions
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
 
 New Accounting
Pronouncements
 
 In June
2009, the FASB issued ASC 105,Generally Accepted Accounting Principles, which establishes the FASB
Accounting Standards Codification as the sole source of authoritative generally
accepted accounting principles. The Codification supersedes existing GAAP for
nongovernmental entities. Pursuant to the provisions of FASB ASC 105, the
Company has updated references to GAAP in its financial statements issued for
the period ended September 30, 2009 and thereafter. The implementation of these
standards did not have any effect on the Company’s consolidated financial
statements.
  In
October 2009, the FASB issued ASC 605-25, Revenue Recognition – Multiple
Element Arrangements, which defines a milestone and clarifies whether a
vendor may recognize arrangement consideration earned from the achievement of a
milestone in its entirety in the period in which the milestone is achieved.
 A milestone is defined as an event for which there is “substantial”
uncertainty at the date the arrangement is entered into that the event will be
achieved. The consideration earned from the achievement of a milestone is
commensurate with either the vendor’s performance to achieve the milestone or
the enhancement of the value of the delivered item and relates solely to past
performance and is reasonable relative to the deliverables and payment terms
within the arrangement. The guidance in this accounting policy does not require
use of the milestone method, and instead provides guidance on one method of
accounting that could be used to account for the arrangements that fall within
its scope.  The effective date of this consensus is for fiscal years
beginning after December 15, 2009, with early adoption permitted. The Company is
evaluating if the adoption of this standard will have a material impact on its
financial statements.
 In
December 2009, the FASB updated ASC 810, Consolidations, which changes how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entity’s purpose and design
and the reporting entity’s ability to direct the activities of the other entity
that most significantly impact the other entity’s economic performance. ASC
810 will require a reporting entity to provide additional disclosures about
its involvement with variable interest entities and any significant changes in
risk exposure due to that involvement. A reporting entity will be required to
disclose how its involvement with a variable interest entity affects the
reporting entity’s financial statements. ASC 810 will be effective at the start
of a reporting entity’s first fiscal year beginning after November 15, 2009, or
January 1, 2010, for a calendar year-end entity. Early application is not
permitted. The Company is evaluating if the adoption of this standard will have
a material impact on its financial statements.
 
 Note 3. Office Furniture and
Equipment
 
 Office
furniture and equipment are stated at cost. Depreciation is computed on a
straight-line basis over five years. Office and laboratory equipment consisted
of the following as of December 31:
  2009
              
              
              2008Office
      equipment
              
              $
              31,567
              
              
              $
              124,849Office
      furniture
              
              
              2,889
              
              
              
              5,756Laboratory
      equipment
              
              
              -
              
              
              
              23,21234,456
              
              
              
              153,817Less:
      Accumulated depreciation
              
              
              (13,284
              )
              
              
              (132,600
              )Office furniture and equipment,
      net
              
              $
              21,172
              
              
              $
              21,217
 
 During
2009 laboratory equipment and office equipment of with an original cost and
accumulated depreciation of $135,092 and $132,693, respectively, was written
off, resulting in a loss on disposal of $2,399 for 2009.  Depreciation
expense was $13,377 and $10,001 for the years ended December 31, 2009 and 2008,
respectively.
   F-11
   Note 4. Intangible
Assets
 
 The
following is a summary of intangible assets which consists of licenses and
patents:
 
 Weighted
      Average Amortization period(years)
              
              
              Cost
              
              
              Accumulated
                Amortization
              
              
              Net Book ValueDecember
      31, 2009Licenses
              
              
              10.7
              
              
              $
              462,234
              
              
              $
              170,231
              
              
              $
              292,003Patents
              
              
              6.2
              
              
              
              2,077,401
              
              
              
              906,115
              
              
              
              1,171,286Total
              
              
              7.0
              
              
              $
              2,539,635
              
              
              $
              1,076,346
              
              
              $
              1,463,289December
      31, 2008Licenses
              
              
              11.7
              
              
              $
              462,234
              
              
              $
              142,994
              
              
              $
              319,240Patents
              
              
              9.0
              
              
              
              1,870,603
              
              
              
              771,126
              
              
              
              1,099,477Total
              
              
              9.5
              
              
              $
              2,332,837
              
              
              $
              914,120
              
              
              $
              1,418,717
 
 Amortization
expense was $162,227 and $139,183 in 2009 and 2008, respectively.
 
 Based on
the balance of licenses and patents at December 31, 2009, the annual
amortization expense for each of the succeeding five years is estimated to be as
follows:
 
 Year
              
              Amortization Expense2010
              
              $
              178,0002011
              
              
              178,0002012
              
              
              178,0002013
              
              
              178,0002014
              
              
              178,000
 
 License
fees and royalty payments are expensed annually as incurred as the Company does
not attribute any future benefits other than within that period.
 
 Note
5. Inventory
 
 In the
third quarter of 2008, the Company purchased and recorded inventory for the
first time, because of the development of the NPAP programs which provided the
Company the ability to sell orBec® for
the first time.  Inventory consists of finished goods. For the years
ended December 31, 2009 and 2008 the Company also recorded an allowance for
excess inventory of $150,000 and $100,000, respectively.
 
 Note 6. Income
Taxes
 
 Deferred
tax assets consisted of the following as of December 31:
 
 2009
              
              
              2008Net
      operating loss carry forwards
              
              $
              24,249,000
              
              
              $
              26,300,000Orphan
      drug and research and development credit carry forwards
              
              
              3,339,000
              
              
              
              2,000,000Other
              
              
              2,312,000
              
              
              
              3,300,000Total
              
              
              29,900,000
              
              
              
              31,600,000Valuation
      allowance
              
              
              (29,900,000
              )
              
              
              (31,600,000
              )Net
      deferred tax assets
              
              $
              -
              
              
              $
              -
   F-12
 
 At
December 31, 2009, the Company had net operating loss carry forwards of
approximately $82,000,000 for federal and state tax purposes, portions of which
are currently expiring each year until 2029. In addition, the Company had
$3,600,000 of various tax credits that start expiring from December 2009 to
December 2029. The Company may be able to utilize their NOLs to reduce future
federal and state income tax liabilities.  However, these NOLs are
subject to various limitations under Internal Revenue Code (“IRC”) Section
382.  IRC Section 382 limits the use of NOLs to the extent there has
been an ownership change of more than 50 percentage points. In addition, the NOL
carryforwards are subject to examination by the taxing authority and could be
adjusted or disallowed due to such exams.  Although the Company has
not undergone an IRC Section 382 analysis, it is possible that the utilization
of the NOLs may be limited.
 
 The
Company and one or more of its subsidiaries files income tax returns in the U.S.
Federal jurisdiction, and various state and local jurisdictions. The Company is
no longer subject to income tax assessment for years before 2004. However, since
the Company has incurred net operating losses in every tax year since inception,
all its income tax returns are subject to examination by the Internal Revenue
Service and state authorities for purposes of determining the amount of net
operating loss carryforward that can be used to reduce taxable
income.
 
 The net
change in the valuation allowance for the year ended December 31, 2009 and
December 31, 2008 was a decrease of approximately $1,700,000 and increase of
$1,600,000, respectively, resulting primarily from net operating losses expiring
and generated. As a result of the Company’s continuing tax losses, the Company
has recorded a full valuation allowance against a net deferred tax
asset.
 
 Reconciliations
of the difference between income tax benefit computed at the federal and state
statutory tax rates and the provision for income tax benefit for the years ended
December 31, 2009 and 2008 was as follows:
 
 2009
              
              
              2008Income
      tax loss at federal statutory rate
              
              
              (34.00
              )%
              
              
              (34.00
              )%State
      taxes, net of federal benefit
              
              
              (6.50
              )
              
              
              (6.50
              )Valuation
      allowance
              
              
              40.50
              
              
              
              40.50Provision
      for income taxes (benefit)
              
              
              -
              %
              
              
              -
              %
 
 The
Company adopted FASB ASC 740-10, Uncertainty in Income Taxes.
This standard prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. The adoption did not have an effect on
the consolidated financial statements.
 
 Note 7. Shareholders’
Equity
 
 Preferred
Stock
 
 The
Company has 5 million authorized shares of preferred stock, none are issued or
outstanding.
 
 Common
Stock
 
 The
following items represent transactions in the Company’s common stock for the
year ended December 31, 2009:
 
 ·
              In
      11 separate transactions during 2009, the Company issued an aggregate of
      708,989 shares of common stock under its existing Fusion Capital equity
      facility. The Company received an aggregate of $115,001 in proceeds which
      approximated the shares’ fair market value on the date of
      issuance.
   F-13
  
 ·
              In
      September 2009, the Company received $4,390,200 from the completed private
      placement of common stock and warrants to accredited investors. Under the
      terms of the agreements, the Company sold 17,352,567 common shares
      together with five year warrants to purchase up to 8,676,284 shares of the
      Company’s common stock at $0.278 per share, for an aggregate price of
      $4,390,200, or $0.253 per share, representing the market price as
      determined by the five-day average closing price of the Company’s common
      stock prior to the date of the agreements. The expiration date of the
      warrants can be accelerated at the option of the Company if the Company's
      common stock meets certain price thresholds. The Company would receive
      additional gross proceeds of approximately $2,412,000 if they are all
      exercised. The Company’s North American collaboration partner, Sigma-Tau
      Pharmaceuticals, Inc., led this offering with an investment of $1
      million.
 
 ·
              In
      August 2009, 569,425 shares of the Company’s common stock were issued to
      the former controller, treasurer and secretary of the Company in partial
      settlement of certain compensation and severance liabilities pursuant to
      the employee’s employment agreement. The aggregate number of shares is
      subject to future adjustment for a six month period following the
      separation date should the market price fall below the original issuance
      price. The former employee was granted standard piggyback registration
      rights with respect to those shares. Compensation expense of $119,579 was
      recorded in General & Administrative Expense for 2009 related to this
      issuance, representing the fair market value of the shares at the date of
      issuance.
 
 ·
              In
      March 2009, the Company issued 2,500,000 shares of common stock pursuant
      to the $400,000 ($300,000 of which was issued on this date) common stock
      equity investment agreement with its clinical trials management partner,
      Numoda Corporation (“Numoda”). These shares were priced at the then
      current market price of $0.12 per share. The remaining $100,000 investment
      was completed in January 2010 and was paid in cash.  The
      investment follows the collaboration between the Company and Numoda
      announced in June 2008 and represents partial payment by the Company under
      its collaboration agreement. The Company recognized $400,000 of research
      and development costs during March 2009 as a result of this
      transaction.
 
 ·
              In February 2009, the Company entered into a
      collaboration and supply agreement with Sigma-Tau for the
      commercialization of orBec®.In
      connection with the execution of the collaboration agreement, the Company
      entered into a common stock purchase agreement with Sigma-Tau pursuant to
      which the Company sold 25,000,000 shares of common stock to Sigma-Tau for
      $0.18 per share, representing an aggregate price of $4,500,000. The
      purchase price was equal to one hundred fifty percent (150%) of the
      average trading price of the Company’s common stock over the five trading
      days prior to closing. As part of the transaction, the Company granted
      Sigma-Tau certain demand and piggy-back registration
      rights.
 
 ·
              In
      January 2009, the Company received $2,384,200 from the completed private
      placement of common stock and warrants to accredited investors. Under the
      terms of the agreement, the Company sold 20,914,035 common shares together
      with five year warrants to purchase up to 20,914,035 shares of the
      Company’s common stock at $0.14 per share, for an aggregate price of
      $2,384,200, or $0.114 per share, representing a premium to the Company’s
      common stock market price on the date of the agreements. The expiration
      date of the warrants can be accelerated if the Company's common stock
      meets certain price thresholds and the Company would receive additional
      gross proceeds of approximately $2,900,000 if they are all
      exercised.
 
 Equity
Line
 
 In
February 2008, the Company entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC (“Fusion Capital”). The Fusion Capital equity
facility allows the Company to require Fusion Capital to purchase between
$80,000 and $1.0 million of the Company’s common stock every two business days,
up to an aggregate of $8.0 million over approximately a 25-month period
depending on certain conditions, including the quoted market price of the
Company’s common stock on such date. As part of the agreement, the Company
issued Fusion Capital 1,275,000 shares of common stock as a commitment fee. In
connection with the execution of the common stock purchase agreement, Fusion
Capital made an initial purchase of 2,777,778 common shares and received a four
year warrant to purchase 1,388,889 shares of common stock for $0.22 per share,
representing an aggregate price of $500,000. The Company issued an additional
75,000 shares of common stock as a commitment fee in connection with this
$500,000 purchase.
   F-14
 
 If the
Company’s stock price exceeds $0.15, then the amount required to be purchased
may be increased under certain conditions as the price of the Company’s common
stock increases. The Company cannot require Fusion Capital to purchase any
shares of the Company’s common stock on any trading days that the market price
of the Company’s common stock is less than $0.10 per share. Furthermore, for
each additional purchase by Fusion, additional commitment shares in commensurate
amounts up to a total of 1,275,000 shares will be issued based upon the relative
proportion of purchases compared to the total commitment maximum of 18.5 million
shares. The total issuance of common stock related to commitment shares for 2008
was 1,369,125 shares, which were issued to Fusion Capital and consisted of
1,275,000 shares as a commitment fee, 75,000 shares as a commitment fee for the
$500,000 invested, and 19,125 shares for the commitment fee shares on the equity
line draws totaling $127,500.
 
 During
the year ended December 31, 2008, the Company issued 993,084 shares of common
stock under the Fusion Capital equity facility. In connection with these
issuances the Company received $127,500 in proceeds which approximated the
shares’ fair market value on the dates of issuance.
 
 Note
8. Stock Option Plans and Warrants to Purchase Common Stock
 
 Stock Option
Plans
 
 The
Amended and Restated 1995 Omnibus Plan is divided into four separate equity
programs:
 
 1)
              the
      Discretionary Option Grant Program, under which eligible persons may, at
      the discretion of the Plan Administrator, be granted options to purchase
      shares of common stock,
 2)
              the
      Salary Investment Option Grant Program, under which eligible employees may
      elect to have a portion of their base salary invested each year in options
      to purchase shares of common stock,
 3)
              the
      Automatic Option Grant Program, under which eligible nonemployee Board
      members will automatically receive options at periodic intervals to
      purchase shares of common stock,
and
 4)
              the
      Director Fee Option Grant Program, under which non-employee Board members
      may elect to have all, or any portion, of their annual retainer fee
      otherwise payable in cash applied to a special option
    grant.
  The 2005
Equity Incentive Plan (“2005 Plan”) is divided into four separate equity
programs:
 
 1)
              the
      Discretionary Option Grant Program, under which eligible persons may, at
      the discretion of the Plan Administrator, be issued common stock or
      granted options to purchase shares of common
  stock,
 2)
              the
      Salary Investment Option Grant Program, under which eligible employees may
      elect to have a portion of their base salary invested each year in options
      to purchase shares of common stock,
 3)
              the
      Automatic Option Grant Program, under which eligible nonemployee Board
      members will automatically receive options at periodic intervals to
      purchase shares of common stock,
and
 4)
              the
      Director Fee Option Grant Program, under which non-employee Board members
      may elect to have all, or any portion, of their annual retainer fee
      otherwise payable in cash applied to a special option
    grant.
 
 In
addition, under the 2005 Plan, the Board may elect to pay certain consultants,
directors, and employees in common stock. The 2005 Plan was amended in September
2007 to increase the number of options available under the plan to
20,000,000.
   F-15
  The table
below only accounts for transactions occurring as part of the amended 2005
Equity Incentive Plan.
 
 December
      31,2009
              
              
              2008Shares
      available for grant at beginning of year
              
              
              3,547,331
              
              
              
              10,612,961Options
      granted
              
              
              (3,712,500
              )
              
              
              ( 6,800,000
              )Options
      forfeited or expired
              
              
              620,000
              
              
              
              100,000Common
      stock payment for services
              
              
              -
              
              
              
              ( 365,630
              )Shares
      available for grant at end of year
              
              
              454,831
              
              
              
              3,547,331
 
 The total
option activity for the 1995 plan and the amended 2005 plan for the years ended
December 31, 2009 and 2008 was as follows:
 
 Options
              
              
              Weighted
      Average
                Options
      ExercisePriceBalance
      at January 1, 2008
              
              
              10,349,839
              
              
              $
              0.44Granted
              
              
              6,800,000
              
              
              
              0.06Forfeited
              
              
              ( 779,800
              )
              
              
              0.81Balance
      at December 31, 2008
              
              
              16,370,039
              
              
              $
              0.27Granted
              
              
              3,712,500
              
              
              
              0.17Forfeited
              
              
              ( 771,000
              )
              
              
              0.51Balance
      at December 31, 2009
              
              
              19,311,539
              
              
              $
              0.24
 
 In 2009
and 2008 there were no stock option exercises.
 
 The
weighted-average exercise price, by price range, for outstanding options at
December 31, 2009 was:
  Price
                Range
              
              
              Weighted
      Average
                Remaining
                Contractual Life in Years
              
              
              Outstanding
                Options
              
              
              Exercisable
      Options$0.06-$0.11
              
              
              
              8.6
              
              
              
              7,925,000
              
              
              
              4,287,500$0.14-$0.22
              
              
              
              8.8
              
              
              
              2,062,500
              
              
              
              1,178,126$0.27-$0.45
              
              
              
              6.5
              
              
              
              5,475,000
              
              
              
              5,250,000$0.47-$0.58
              
              
              
              6.3
              
              
              
              3,525,000
              
              
              
              3,154,692$0.74-$3.94
              
              
              
              2.8
              
              
              
              324,039
              
              
              
              324,039Total
              
              
              
              7.5
              
              
              
              19,311,539
              
              
              
              14,194,357Intrinsic
      Value
              
              
              $
              -
              
              
              $
              -
 
 Stock
options are issued at the market price on the date of issuance. Stock options
issued to directors are fully vested upon issuance. Stock options issued to
employees generally vest 25% upfront, then 25% each year for a period of three
years. Stock options vest over each three month period from the date of issuance
to the end of the three year period. These options have a ten year life for as
long as the individuals are employees or directors. In general when an employee
or director terminates employment the options will expire within six
months.
 
 The
intrinsic value was calculated as the difference between the Company’s common
stock closing price on the Over-The-Counter Bulletin Board at December 31, 2009
and the exercise price of the stock option issued multiplied by the number of
stock options. The Company’s common stock price at December 31, 2009 was
$0.25.
   F-16
 
 The
Company’s share-based compensation for the years ended December 31, 2009 and
2008 was $579,066 and $385,616, respectively. At December 31, 2009, the total
compensation cost for stock options not yet recognized was approximately
$440,851 and will be expensed over the next three years.
 
 Warrants to Purchase Common
stock
 
 Warrant
activity for the years ended December 31, 2009 and 2008 was as
follows:
  Warrants
              
              
              Weighted
      Average
                Warrant
      ExercisePriceBalance
      at January 1, 2008
              
              
              29,209,341
              
              
              $
              0.69Granted
              
              
              2,079,444
              
              
              
              0.20Expired
              
              
              (10,938,637
              )
              
              
              1.13Balance
      at December 31, 2008
              
              
              20,350,148
              
              
              $
              0.41Granted
              
              
              32,906,540
              
              
              
              0.18Expired
              
              
              (10,783,814
              )
              
              
              0.38Balance
      at December 31, 2009
              
              
              42,472,874
              
              
              $
              0.24
 
 During
2009, the Company issued 1,575,000 warrants to purchase common stock shares to
consultants in exchange for their services with exercise prices ranging from
$0.10 to $0.31.  Expense charges of $190,655 were recorded during 2009
to reflect these issuances.
 
 The
weighted-average exercise price, by price range, for outstanding warrants at
December 31, 2009 was:
 
 Price
                Range
              
              
              Weighted
      Average
                Remaining
                Contractual Life in Years
              
              
              Outstanding
                Warrants
              
              
              Exercisable
      Warrants$0.06-$0.11
              
              
              
              3.4
              
              
              
              1,350,000
              
              
              
              1,350,000$0.12-$0.14
              
              
              
              4.0
              
              
              
              22,014,035
              
              
              
              22,014,035$0.19-$0.22
              
              
              
              2.4
              
              
              
              2,264,445
              
              
              
              2,264,445$0.28-$0.31
              
              
              
              4.7
              
              
              
              9,357,505
              
              
              
              9,357,505$0.51-$0.63
              
              
              
              .7
              
              
              
              7,486,889
              
              
              
              7,486,889Total
              
              
              
              3.5
              
              
              
              42,472,874
              
              
              
              42,472,874
 
 During
2010, warrants to purchase approximately 7,326,783 shares of the Company’s
common stock will expire.
   F-17
  Note
9. Concentrations
 
 At
December 31, 2009 and 2008, the Company had deposits in major financial
institutions that exceeded the amount under protection by the Securities
Investor Protection Corporation (“SIPC”). Currently we are covered up to
$1,000,000 by the SIPC. The excess amounts at December 31, 2009 and 2008 were
approximately $6,692,000 and $475,000, respectively.
 
 Note
10. Commitments and Contingencies
 
 The
Company has a contractual obligation of approximately $3.3 million as of
December 31, 2009 in connection with a collaboration with Numoda for the execution of its
confirmatory  Phase 3 clinical trial of orBec®
that began in September 2009 and is expected to complete in first half of
2011.
 
 The
Company also has several licensing agreements with consultants and universities,
which upon clinical or commercialization success may require the payment of
milestones and/or royalties if and when achieved. However, there can be no
assurance that clinical or commercialization success will occur.
 
 On April
1, 2009, the Company entered into a sub-lease agreement through March 31, 2012
for office space in Princeton, New Jersey. The Company was required to provide 4
months of rent as a security deposit. The rent for the first 18 months will be
approximately $7,500 per month, or $17.00 per square foot. This rent increases
to approximately $7,650 per month, or $17.50 per square foot, for the remaining
18 months.
 
 On April
24, 2008, the Company signed a three year lease for a copier.
 
 Employees
with employment contracts have severance agreements that will provide separation
benefits from the Company if they are involuntarily separated from
employment.
 
 As a
result of the above agreements, the Company has future contractual obligations
over the next five years as follows:
 
 Year
              
              Research and Development
              
              
              Property and
                Other Leases
              
              
              Total2010
              
              $
              3,013,640
              
              
              $
              95,398
              
              
              $
              3,109,0382011
              
              
              631,440
              
              
              
              92,699
              
              
              
              724,1392012
              
              
              155,000
              
              
              
              22,950
              
              
              
              177,9502013
              
              
              75,000
              
              
              
              -
              
              
              
              75,0002014
              
              
              75,000
              
              
              
              -
              
              
              
              75,000Total
              
              $
              3,950,080
              
              
              $
              211,047
              
              
              $
              4,161,127
   F-18
  Note
11. Operating Segments
 
 The
Company maintains two active operating segments:  BioTherapeutics and
BioDefense.  Each segment includes an element of overhead costs
specifically associated with its operations. A corporate shared services group
responsible for support functions generic to both operating segments is
presented separately.
 
 For the Year Ended December
    31,2009
              
              
              2008RevenuesBioDefense
              
              $
              1,670,536
              
              
              $
              2,269,647BioTherapeutics
              
              
              1,145,501
              
              
              
              40,618Total
              
              $
              2,816,037
              
              
              $
              2,310,265Loss
      from OperationsBioDefense
              
              $
              (389,157
              )
              
              $
              (132,272
              )BioTherapeutics
              
              
              (3,444,838
              )
              
              
              (1,556,429
              )Corporate
              
              
              (2,217,301
              )
              
              
              (1,767,123
              )Total
              
              $
              (6,051,296
              )
              
              $
              (3,455,824
              )Amortization
      and Depreciation ExpenseBioDefense
              
              $
              91,420
              
              
              $
              85,354BioTherapeutics
              
              
              77,496
              
              
              
              58,829Corporate
              
              
              6,688
              
              
              
              5,000Total
              
              $
              175,604
              
              
              $
              149,183Interest
      Income, NetCorporate
              
              $
              21,920
              
              
              $
              37,073Stock-Based
      CompensationBioDefense
              
              $
              66,434
              
              
              $
              92,822BioTherapeutics
              
              
              144,398
              
              
              
              89,346Corporate
              
              
              368,234
              
              
              
              203,448Total
              
              $
              579,066
              
              
              $
              385,616As of December 31,2009
              
              
              
              2008Identifiable
      AssetsBioDefense
              
              $
              787,225
              
              
              $
              1,076,854BioTherapeutics
              
              
              784,282
              
              
              
              650,179Corporate
              
              
              7,812,775
              
              
              
              1,635,702Total
              
              $
              9,384,282
              
              
              $
              3,362,735
 
 
 F-19
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors of Soligenix, Inc.,
 
 We have
audited the accompanying consolidated balance sheets of Soligenix, Inc.
(formerly DOR BioPharma, Inc.) and subsidiaries as of December 31, 2009 and 2008
and the related consolidated statements of operations, changes in shareholders'
equity and cash flows for the years ended December 31, 2009 and 2008. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropri­ate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 31,  2009 and 2008, and the results of its operations and its
cash flows  for the years ended December 31, 2009 and 2008, in
conformity with U.S. generally accepted accounting principles.
 
 
 /s/ Amper, Politziner &
Mattia, LLP
 
 Edison,
New Jersey
 March 31,
2010