Organization and Business Activities

9 Months Ended

Sep. 30, 2011

Organization and Business Activities [Abstract]

Organization and Business Activities

1 –   Organization and Business Activities

We are a development stage biotechnology company focused on developing treatments for life threatening infectious diseases and patients with acute cardiovascular disorders with synthetic small molecule compounds that mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary drug discovery platform, we have created novel defensin mimetic antibiotic compounds, novel heparin antagonist compounds, and other drug compounds intended for human therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our operations have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting pre-clinical testing and human clinical trials of our product candidates, exploring marketing channels and recruiting personnel.

We have incurred operating losses since inception, have not generated any product sales revenues and have not achieved profitable operations. Our deficit accumulated during the development stage through September 30, 2011 was approximately $77,200,000, and we expect to continue to incur substantial losses in future periods.   None of our product candidates have received regulatory approval for commercial sale and our product candidates may never be commercialized.  In addition, all of our product candidates are in the early stages of development and several programs are on hold pending additional financing.  Our development programs require a significant amount of cash to support the development of product candidates.  The progress and results of our current and any future clinical trials or future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory approvals, our business, operating results, financial condition and cash flows will be materially adversely affected.

We are highly dependent on the success of our research, development and licensing efforts and, ultimately, upon regulatory approval and market acceptance of our products under development. Our short and long-term capital requirements depend upon a variety of factors, including the timing and results of our clinical trials, market acceptance for our technologies and product candidates and various other factors. We believe that our current cash and investment balances as of the date of this filing will be sufficient to fund our operations for at least the next 12 months.  Our ability to advance the clinical development of our drug candidates and ultimately seek regulatory approval depends upon our ability to meet the regulatory requirements of the United States Food and Drug Administration (FDA) and other regulatory authorities on an ongoing basis, many of which develop and change over time and are subject to interpretation by such regulatory authorities.  Any changes in regulatory requirements may have significant impacts on the timing and cost of clinical trials, and our ability to complete such trials, if at all.

In April 2011, we closed an equity financing for gross proceeds of $20,000,000, and in March 2010, we closed a debt financing for gross proceeds of $10,000,000.  Proceeds from these financing activities are being used to fund our ongoing clinical development of our lead product candidates PMX-60056 and PMX-30063 and for general corporate purposes.  We may seek additional funds through equity or debt financing, among other sources, or through government grants and contracts.  We may not, however, be able to obtain additional funding on favorable terms, if at all. If we are unable to secure adequate additional funding in the future, we may delay, scale-back or eliminate certain of our planned research, drug discovery and development activities and certain other aspects of our operations and our business until such time as we are successful in securing adequate additional funding. As a result, our business, operating results, financial condition and cash flows may be materially and adversely affected.

Interim Financial Information

The condensed consolidated financial statements include the accounts of PolyMedix, Inc. and its wholly-owned subsidiary, PolyMedix Pharmaceuticals, Inc.  All intercompany accounts and transactions have been eliminated in consolidation.  The information as of September 30, 2011, and for the three- and nine-month periods ended September 30, 2011 and 2010, and the period from August 8, 2002 (Inception) to September 30, 2011 is unaudited, but includes all adjustments (consisting only of normal recurring adjustments) which, in our opinion, are necessary to state fairly the financial information set forth in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The interim results are not necessarily indicative of the results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2010 included in our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 7, 2011.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include the value of our common stock, stock options, warrants, and debt.

Derivative Financial Instruments

We account for certain outstanding warrants as derivative financial instruments in accordance with the interpretive guidance under Accounting Standards Codification (ASC) 815, “Derivatives and Hedging.”  Generally, we do not use derivative financial instruments to hedge exposures to cash flow or market risks. However, certain other financial instruments, specifically certain of our warrants, are classified as derivative liabilities on our statement of financial position which meet the scoping requirements of ASC 815-10-15.   Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period, with the gains and losses recorded currently in our statement of operations as other income and expense.  In doing so, it is necessary to make certain assumptions and estimates to value these derivatives.