UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2005

Or

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 Number 000-51134

Favrille, Inc.

(Exact name of registrant as specified in its charter)

Delaware		33-0892797
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

10421 Pacific Center Court, Suite 150
San Diego, CA 92121
(Address of principal executive offices, including zip code)

(858) 526-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No ý

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 o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during 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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ¨ Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No ý

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the last sale price of the common stock reported on the Nasdaq National Market on June 30, 2005 was $34,458,779. For purposes of determining this amount, Registrant has defined affiliates to include (a) the executive officers and directors of the Registrant on June 30, 2005 (b) stockholders affiliated with our directors and (c) each stockholder that had informed Registrant by June 30, 2005 that it was the beneficial owner of 10% or more of the outstanding common stock of the Registrant. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.

As of March 23, 2006, there were 28,920,426 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Location in Form 10-K		Incorporated Document
Part III: Items 10, 11, 12 13 and 14		Proxy Statement for 2006 Annual Meeting of Stockholders

Cautionary Note Regarding Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements that involve many risks and uncertainties. These statements relate to future events and our future performance and are based on current expectations, estimates, forecasts and projections about the industry in which we operate and the beliefs and assumptions of our management. In some cases, you can identify forward-looking statements by terms such as “would,” “could,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “targets,” “seek,” or “continue,” the negative of these terms or other variations of such terms. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characterizations of future events or circumstances, are forward-looking statements. These statements are only predictions based upon assumptions that are believed to be reasonable at the time, and are subject to risk and uncertainties. Therefore, actual events or results may differ materially and adversely from those expressed in any forward-looking statement. In evaluating these statements, you should specifically consider the risks described in Item 1A of Part I and elsewhere in this Form 10-K. These factors may cause our actual results to differ materially from any forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1. Business

Overview

We are a biopharmaceutical company focused on the development and commercialization of targeted immunotherapies for the treatment of cancer and other diseases of the immune system. We have developed a proprietary technology that enables us to manufacture active immunotherapy products that are designed to stimulate a patient’s immune system to mount a specific and sustained response to disease. Our lead product candidate, FavId, is an active immunotherapy for the treatment of B-cell non-Hodgkin’s lymphoma, or NHL. We completed enrollment in a pivotal Phase 3 clinical trial of FavId in patients with follicular B-cell NHL in January 2006.

The American Cancer Society estimates that approximately 56,000 people were diagnosed with NHL in the United States in 2005, and the National Cancer Institute, or NCI, has estimated that approximately 332,000 patients suffer from this disease. Approximately 85% of NHL patients have B-cell NHL. We believe that approximately half of these patients have the slow-growing, or indolent, form of the disease. The majority of the remaining patients have a faster growing form of the disease, commonly referred to as aggressive NHL. Only half of these are cured with currently available standards of care. A number of therapies are used to treat indolent B-cell NHL, including the current standard of care, Rituxan^®, which had sales in the United States of approximately $1.8 billion in 2005 for indolent B-cell NHL and other indications. Despite the benefits of current therapies, patients with indolent B-cell NHL still relapse following treatment, and the disease is considered to be incurable.

FavId is being developed for use following treatment with existing standards of care to extend time to disease progression, or TTP, in patients with B-cell NHL. Our Phase 3 clinical trial is designed to evaluate FavId’s ability to extend TTP in patients with follicular B-cell NHL following treatment with Rituxan. Follicular B-cell NHL is the most common form of the indolent disease. We anticipate an analysis of the secondary endpoint, response improvement, during the fourth quarter of 2006. Analysis of the primary endpoint of the trial, TTP, is expected during the second half of 2007. In January 2006 we announced that we received Fast Track designation from the U.S. Food and Drug Administration, or FDA, for FavId.

In addition to our Phase 3 clinical trial, FavId has been evaluated in several multi-center, open-label Phase 2 clinical trials involving more than 130 patients. We presented long-term follow-up data from our Phase 2 clinical trial of FavId following Rituxan therapy in patients with follicular B-cell NHL at the American Society of Hematology, or ASH, Annual Meeting in Atlanta in December 2005. These data suggest that the administration of FavId following Rituxan may improve response over Rituxan alone and extend TTP compared to historical data of Rituxan alone.

Researchers have been conducting clinical trials of active immunotherapies in patients with B-cell NHL for more than a decade. The results of clinical trials at the Stanford University Medical Center and the NCI suggest that active immunotherapies similar to FavId, when used following chemotherapy, may induce long-term remission and improve survival time among indolent B-cell NHL patients. Despite the promising results of these trials, we believe manufacturing limitations have hindered commercialization of these immunotherapies. We believe that our proprietary technology will enable us to manufacture FavId in a timely and cost-effective manner and will therefore allow us to offer a treatment option not currently available to physicians and patients.

We believe FavId may be effective in treating other types of B-cell NHL as well. Five additional Phase 2 clinical trials of FavId are either ongoing or expected to begin during 2006. One of these clinical trials is being conducted under a separate physician-sponsored Investigational New Drug, or IND, application in the United States. A second of these is being conducted as a physician-sponsored

clinical trial in Switzerland. Moreover, we believe our active immunotherapy expertise and proprietary manufacturing technology will enable us to develop additional product candidates for other oncology indications, such as T-cell lymphoma, and for autoimmune diseases, with an initial focus on multiple sclerosis. We are currently developing a second product candidate, FAV-201, for the treatment of T-cell lymphoma and intend to file an IND and initiate a Phase 1/2 clinical trial evaluating the safety and immune response of FAV-201 in the first half of 2006. We have retained exclusive worldwide commercialization rights to all of our product candidates.

We were incorporated in Delaware in January 2000.

The Immune System

The immune system is the body’s major defense against foreign pathogens, such as viruses and bacteria. The principal cells that make up the immune system are termed white blood cells. A subset of white blood cells known as lymphocytes is essential in generating an effective immune response to disease-causing agents. Lymphocytes consist primarily of B-cells and T-cells, which normally recognize and respond to antigens found within proteins derived from foreign pathogens. The B-cell receptor that recognizes an antigen is called an antibody. Once B-cells recognize antigens, they initiate a sequence of events that results in the immune system’s production of large amounts of antibodies specific to that antigen. These antibodies then circulate throughout the body and bind to their target antigen, thereby flagging pathogens for destruction. This type of immune response is known as the antibody-based, or humoral, immune response.

T-cells are responsible for carrying out what is known as the cell-mediated immune response. T-cell receptors recognize antigens presented on the surface of other cells. When a T-cell recognizes its target, it responds in one of two ways. Either it destroys the target directly, or it produces a variety of proteins that cause the growth and activation of itself and other T-cells and B-cells, which can then destroy the target.

Although any one B-cell or T-cell can recognize and respond to only a single antigen, the human immune system has evolved such that the collective B-cell and T-cell populations can respond to virtually every possible foreign pathogen that a person may encounter in his or her lifetime. Furthermore, the humoral and cell-mediated immune responses have an additional feature of “memory,” which enables B-cells and T-cells to recall an interaction with a foreign antigen and to respond to this antigen in a more rapid and aggressive fashion in the future.

The immune system is generally very effective in destroying pathogens-viruses, bacteria, or other foreign microorganisms that it recognizes as foreign. For this reason, a properly functioning immune system is highly regulated to ensure that its destructive power is not directed against normal tissue. If this regulation breaks down, an immune response may be generated against normal tissue, which can lead to autoimmune diseases, such as multiple sclerosis, rheumatoid arthritis and lupus. In the case of cancer, this strict regulation of the immune system may prevent an effective immune response from being mounted because of the body’s inability to distinguish the cancer as foreign. Researchers believe that teaching the immune system to recognize the proteins associated with cancer cells as foreign will enable the immune system to identify and eliminate cancers, such as lymphoma.

Immunotherapy

Immunotherapy is designed to use a person’s immune system to fight diseases, including cancer. Immunotherapy enables the immune system to target and destroy diseased cells and has far fewer side effects than other therapies, such as surgery, chemotherapy and radiation therapy. There are two types of immunotherapy used to treat cancer: passive immunotherapy and active immunotherapy.

Passive immunotherapy utilizes large doses of infused antibodies that bind to antigens primarily expressed by a tumor cell and by few or no normal cells. These antibodies circulate throughout the bloodstream, binding to antigens on targeted cells, thereby flagging them for destruction. One of the most widely used passive immunotherapies for the treatment of B-cell NHL is Rituxan. Rituxan has demonstrated the ability to induce a clinical response – at least a 50% reduction in tumor burden – in approximately 50% of patients with indolent B-cell NHL with few side effects. In patients who respond to Rituxan, this response lasts on average approximately 12 months. Despite their widespread use in fighting cancer, passive immunotherapies such as Rituxan suffer from significant limitations, including a limited duration of efficacy and the development of resistance. Additional passive immunotherapies have attempted to overcome the shortcomings of Rituxan by linking antibodies to radioactive molecules that can directly destroy the cell to which the antibody is bound. However, improvements in time to disease progression, if any, have been modest.

Active immunotherapy teaches the patient’s own immune system to recognize and fight cancer. Active immunotherapy is designed to program the immune system to generate a sustained and robust humoral (B-cell) and cell-mediated (T-cell) immune response. Idiotype immunotherapy, including our product candidate, FavId, for the treatment of B-cell NHL, is an example of active immunotherapy. In the case of B-cell NHL, the antibody protein made by a person’s B-cell NHL is used as a target for immune attack. The unique antigens in this antibody protein are referred to as the idiotype. The immune system can differentiate between lymphoma cells and normal B-cells based on their idiotype. As a result, following successful idiotype immunotherapy, a patient’s immune response is

specific to their B-cell lymphoma.

Development of Active Idiotype Immunotherapy

Active idiotype immunotherapy has been studied in patients with B-cell NHL since the late 1980’s and has shown substantial promise in clinical trials. Trials conducted at the Stanford University Medical Center and the NCI evaluated the use of active idiotype immunotherapy in treating patients with indolent B-cell NHL. The results suggest that active idiotype immunotherapy significantly increases the duration of response in patients previously placed into remission with chemotherapy. Remission is defined as at least a 50% reduction in tumor burden. The immunotherapy administered in both the Stanford and NCI trials was similar to FavId in that it involved the combination of an idiotype protein derived from a patient’s tumor with a foreign protein, keyhole limpet hemocyanin, or KLH. KLH is a protein derived from shellfish that elicits a strong immune response.

In the Stanford trial, 21 of 41 patients treated with idiotype immunotherapy mounted an immune response to their idiotype protein. The median TTP in these patients was calculated to be 7.9 years, compared to a median TTP of 1.3 years for the patients who failed to mount an immune response. For purposes of this trial, TTP was defined as the interval between the date of last dose of chemotherapy and the recurrence of disease. The median TTP for the responding patients was calculated based on available data using a statistical method known as Kaplan-Meier analysis, which allows for the estimation of a median time when not all of the patients have reached the event being measured at the time of analysis. The results from this trial were published in the medical journal Blood in May 1997.

In an attempt to increase the idiotype-specific immune response, the NCI trial supplemented the idiotype immunotherapy with granulocyte macrophage colony stimulating factor, or GM-CSF, a white blood cell growth factor designed to enhance the immune response. Lymphoma-specific immune responses were reported for 19 of the 20 patients in the trial, and the most recent update from this trial in December 2005 indicates that with a median follow-up time of 9.2 years, 45% of patients remain in continuous complete remission with an overall survival rate of 90%. The trial also showed that the immunotherapy converted eight of 11 patients tested to a molecular remission, which means no evidence of tumor could be seen even at the more sensitive level of DNA detection. The preliminary results from the NCI trial were published in the medical journal Nature Medicine in October 1999, and the most recent update from this trial was published in the medical journal Blood in November 2003.

Barriers to Commercialization

Although the Stanford and NCI clinical trials demonstrated favorable results, substantial manufacturing difficulties have limited further development of an active idiotype immunotherapeutic approach to the treatment of B-cell NHL. The manufacturing process used to produce the idiotype immunotherapies studied at Stanford and the NCI has lengthy and inconsistent production timelines and is labor-intensive, with a reported manufacturing failure rate as high as 15%. As a result, we believe this process would make active idiotype immunotherapies produced using this process difficult to commercialize.

Our Solution for the Commercial Production of Active Idiotype Immunotherapy

We have developed a proprietary technology that we believe enables us to overcome historical limitations to the manufacturing and commercialization of active idiotype immunotherapies. Our technology utilizes an insect-cell virus that carries genetic information that is identical to a patient’s lymphoma. By introducing this virus into an insect cell line, we can produce sufficient quantities of idiotype protein for our immunotherapy. We believe our manufacturing process has the following benefits:

• Rapid Production Cycle. We manufacture FavId and deliver it to the patient in eight weeks. We believe our production cycle time is a number of months shorter than previously reported cycle times for manufacturing idiotype immunotherapies for B-cell NHL. Our production timeline allows us to administer FavId at what we believe is the optimal time following treatment with Rituxan.

• Reliable Manufacturing. Our underlying production method for each patient will not change regardless of the number of units of FavId produced. This small-scale unit operation is easily replicated to produce multiple patient therapies simultaneously without the risks associated with traditional scale-up for commercial production.

• Automation. This small-scale unit operation is amenable to automation. The time required to identify the genetic information used to construct the insect-cell expression vector has been reduced by technological advances, including automation, some of which are the result of the human genome project. We believe that many other steps in the production of FavId can be automated.

Our production process requires standardized small volumes, is readily reproducible, and requires limited production time. As a result, we believe our cost of production can allow for a commercially viable product with gross margins similar to those seen for other biopharmaceuticals and enable physicians to use FavId in concert with all existing standards of care for indolent B-cell NHL,

including Rituxan.

Our Development Programs

The chart below summarizes the status of ongoing, recently completed and currently planned clinical and preclinical development programs. We have retained exclusive worldwide commercialization rights to all of our product candidates.

Product	Indication	Patient Population	Status
FavId
Following Rituxan	Follicular B-cell NHL	Treatment-naïve or relapsed/refractory patients(1)	Phase 3 trial enrollment complete: analysis of secondary endpoint, response improvement, fourth quarter 2006; analysis of primary endpoint, TTP, second half of 2007
Following Rituxan	Follicular B-cell NHL	Treatment-naïve or relapsed/refractory patients	Phase 2 trial enrollment complete: patients in long-term follow-up
Single agent	Indolent B-cell NHL	Relapsed/refractory patients	Phase 2 trial enrollment complete: patients in long-term follow-up
Following autologous stem cell transplant	Indolent B-cell NHL	Patients eligible for autologous stem cell transplant	Phase 2 trial enrolling patients(2)
With maintenance Rituxan	Indolent B-cell NHL	Treatment-naïve patients	Phase 2 trial enrolling patients
Single agent	Non-follicular B-cell NHL	Treatment-naïve or relapsed/refractory patients	Phase 2 trial enrolling patients(2)
Following prior therapy	Follicular B-cell NHL	Patients who progressed in our Phase 3 trial without receiving FavId	Phase 2 trial enrolling patients
Following chemotherapy/Rituxan in patients with aggressive NHL	Aggressive B-cell NHL	Treatment-naïve patients	Randomized double-blind controlled Phase 2/3 trial open for enrollment
FAV-201	T-cell lymphoma	Previously treated patients	Phase 1/2 trial expected start: first half 2006
Autoimmune Disease Candidate	Multiple sclerosis	Not applicable	Preclinical development

(1) Patients are considered relapsed if their lymphoma has returned after a response to prior therapy. Patients are considered refractory if they have not responded to prior treatments.

(2) This trial is physician-sponsored, which means that a physician, rather than Favrille, is responsible for managing the conduct of the trial and the resulting data. The responsible physician has filed an IND with the FDA or similar regulatory authority in Switzerland for the study and is the owner of that IND. We will provide FavId at our own expense for use in physician-sponsored trials and, in some cases, funding.

FavId for B-Cell NHL

Overview

Our lead product candidate, FavId, is an active immunotherapy that is based upon unique genetic information extracted from a patient’s tumor. We completed enrollment in a pivotal Phase 3 clinical trial evaluating FavId in treatment-naïve or relapsed or refractory follicular B-cell NHL patients following treatment with Rituxan in January 2006. Follicular lymphoma accounts for the majority of all indolent B-cell NHL cases. To date, we have conducted several multi-center, open-label Phase 2 clinical trials of FavId involving more than 130 indolent B-cell NHL patients. Five additional Phase 2 clinical trials of FavId are either ongoing or expected to begin during 2006. One of these clinical trials is being conducted under a separate physician-sponsored IND in the United States. A second is being conducted as a physician-sponsored clinical trial in Switzerland. We currently retain exclusive worldwide commercialization rights to FavId.

Market Opportunity

The American Cancer Society cites NHL as the sixth most common form of cancer and the sixth leading cause of death among cancers in the United States. The American Cancer Society estimated that approximately 56,000 people were diagnosed with NHL in the United States in 2005, and the NCI has estimated that approximately 332,000 patients suffer from this disease. B-cell NHL is a cancer of B-cell lymphocytes, the body’s white blood cells principally responsible for fighting disease. Approximately 85% of NHL patients in the United States have B-cell NHL. We believe that approximately half of these patients have the indolent form of the disease. Although indolent B-cell NHL is slow-growing, it is incurable with existing therapies and inevitably fatal. The median survival time for patients diagnosed with advanced stages of indolent B-cell NHL is estimated to be between seven and ten years.

Current Treatments

Overview. B-cell NHL is composed of a diverse group of malignancies with varying patterns of behavior and responses to treatment. Both the prognosis for patients with this disease, and the treatment that they are likely to receive, depend on the histologic type and stage. B-cell NHL is commonly divided into two groups: indolent NHL and aggressive NHL. Indolent B-cell NHL has a relatively good prognosis, with a median survival as long as 10 years. Early-stage indolent B-cell NHL can be effectively treated and often cured with radiation therapy alone. Patients with advanced stage indolent B-cell NHL are not considered curable but generally respond to treatment with a remission. These remissions are generally temporary, however, and patients require additional treatments when they relapse. Aggressive B-cell NHL has a shorter natural history. Only 50% of these patients can be cured with chemotherapy alone or with combinations of chemotherapy and Rituxan. If patients relapse after treatment, the vast majority of relapses occur in the first two years following therapy.

Chemotherapy. Prior to Rituxan’s availability, chemotherapy was traditionally used as the primary therapy for most patients with B-cell NHL. Chemotherapy is typically administered in repeated cycles over three to eight months and can substantially reduce the amount of lymphoma and often achieve remission. Patients receiving chemotherapy generally experience a number of side effects, including fatigue, nausea, hair loss and increased risk of infection. These side effects may result in the need for supportive care, including additional therapies and hospitalization. Patients also experience late side effects such as sterility, myelodysplastic syndromes, second cancers, and heart dysfunction. The toxicity and inconvenience of chemotherapy can impose a heavy strain on a patient’s overall quality of life.

Passive Immunotherapy. Several passive immunotherapy products have been approved for the treatment of B-cell NHL, including Rituxan, Zevalin and Bexxar. Rituxan is the leading passive immunotherapy approved for the treatment of B-cell NHL and is being used for both indolent and aggressive B-cell NHL. Standard treatment with Rituxan alone involves four weekly intravenous infusions over a 22-day period. Rituxan is considered to be significantly less toxic to the bone marrow than chemotherapy. Rituxan is a monoclonal antibody that can induce a remission in approximately 50% of patients with indolent B-cell NHL. In these responding patients, the remission lasts approximately 12 months. Unfortunately, as with patients with indolent B-cell NHL who receive chemotherapy, patients treated with Rituxan eventually relapse. Several clinical trials have suggested that additional doses of Rituxan as a maintenance therapy can improve the time before patients with follicular B-cell NHL relapse. In addition, combinations of Rituxan and chemotherapeutic or immunostimulatory drugs at various doses and schedules may provide patients with an increase in TTP over that expected with Rituxan alone. When administered with chemotherapy to patients with aggressive B-cell NHL, Rituxan can increase the cure rate and the TTP.

Rituxan used either alone or in combination with another therapy is the current standard of care for the treatment of B-cell NHL patients. Sales of Rituxan in the United States have grown from $162 million in 1998 to approximately $1.8 billion in 2005. Our clinical registration strategy involves the administration of FavId to the group of patients who would receive Rituxan, that is combine active and passive immunotherapies. Since Rituxan is the current standard of care, we believe this approach of FavId used in combination with Rituxan treatment will allow the largest number of patients with B-cell NHL to benefit.

Clinical Development

Pivotal Phase 3 Clinical Trial – FavId Following Rituxan. We completed enrollment in a Phase 3 clinical trial of FavId in patients with follicular B-cell NHL in January 2006. This trial was initiated in July 2004 with an enrollment target of 342 eligible patients. The randomized, double-blind, placebo-controlled trial is being conducted at 67 oncology centers and more than 100 sites across the U.S. Approximately 80 percent of the patients enrolled are treatment-naïve, with the remainder either relapsed from or refractory to prior therapies.

We obtain tumor cells via biopsy from each patient to establish the genetic profile of the tumor for our use in manufacturing the patient’s FavId. In addition, a CT scan is conducted in order to measure tumor burden before Rituxan treatment. Each patient then receives the standard four doses of Rituxan alone at one-week intervals while the patient’s FavId is being manufactured. Five weeks after the last dose of Rituxan is administered, the patient is re-evaluated and a CT scan is conducted to assess the patient’s response to Rituxan. A patient whose disease remains stable or improves following treatment with Rituxan is randomized to receive either FavId

with GM-CSF or placebo with GM-CSF. During the induction phase, randomized patients receive monthly injections of FavId or placebo for six months. If a patient’s lymphoma remains under control after the induction phase, the patient receives maintenance injections of FavId or placebo given every other month for a year and then every third month until the time of disease progression. Throughout the trial, patients receive CT scans every three months to determine whether their lymphoma is under control. During the trial, patients do not receive any cancer therapy other than that administered in the trial. However, once a patient’s disease progresses, the patient’s participation in the trial terminates.

The primary endpoint of the trial is TTP, which in this protocol is the time that elapses between randomization and disease progression. The trial is designed to demonstrate a statistically significant improvement in median TTP in those patients treated with FavId compared to those patients treated with placebo. We expect an analysis of the TTP data during the second half of 2007. The trial will also include an analysis based on a secondary endpoint, response improvement, which we anticipate will occur during the fourth quarter of 2006.

We have a Special Protocol Assessment, or SPA, from the FDA for our Phase 3 clinical trial. In the SPA process, the FDA reviewed the design, size and planned analysis of our Phase 3 clinical trial and provided comments regarding the trial’s adequacy to form a basis for approval of a Biologics Licensing Application, or BLA, if the trial is successful in meeting its predetermined objectives. The FDA’s written agreement is binding, except in limited circumstances, such as when a substantial scientific issue essential to determining the safety or effectiveness of a product candidate is identified after the Phase 3 clinical trial is commenced.

In January 2006 we announced that we received Fast Track designation from the FDA for FavId. Fast Track designation is granted for a new drug that is intended to treat a serious or life-threatening condition and demonstrates the potential to address an unmet medical need and as a result is eligible for priority review by the FDA. This action by the FDA has the potential to save Favrille valuable time in the regulatory approval process and serves as an acknowledgement of the potential for FavId in the treatment of follicular B-cell NHL.

Phase 2 Clinical Trial – FavId Following Rituxan. We initiated a Phase 2 clinical trial of FavId in patients with follicular B-cell NHL who were candidates for Rituxan therapy in June 2002. Initially, this trial was limited to relapsed or refractory patients who had previously undergone treatment with Rituxan, chemotherapy or both. In April 2003, we expanded the entry criteria for this trial to include patients with no prior treatment for their lymphoma. The open-label Phase 2 trial was conducted at 20 sites. Enrollment in this trial was completed in December 2003. A total of 103 patients were enrolled in the trial, of which 89 had stable disease or a better response to Rituxan and received FavId, including 55 who were relapsed from or refractory to prior treatments and 34 who were treatment-naïve.

We obtained tumor cells via biopsy from each patient to establish the genetic profile of the tumor for our use in manufacturing the patient’s FavId. In addition, a CT scan was conducted in order to measure tumor burden before Rituxan treatment. Each patient then received four doses of Rituxan alone at one-week intervals while the patient’s FavId was being manufactured. Approximately eight weeks after the last dose of Rituxan, the patient was re-evaluated and a CT scan was conducted to assess the patient’s response to Rituxan. Patients whose disease remained stable or improved following Rituxan treatment received monthly injections of FavId and GM-CSF for six months. If a patient remains progression free after this induction period, the patient continues to receive maintenance injections of FavId given every other month for a year and then every third month until the time of disease progression. Throughout the trial, patients receive CT scans every three months to determine whether their lymphoma is under control. During the trial, patients do not receive any cancer therapy other than that administered in the trial. However, once a patient’s disease progresses, the patient’s participation in the trial terminates.

Long-term follow-up data from this Phase 2 trial were reported at the ASH Annual Meeting in Atlanta in December 2005. In an oral presentation entitled “Extended Follow-Up and Analysis with Central Radiological Review of Patients Receiving FavId (Id/KLH) Vaccine Following Rituximab,” Omer Koc, M.D., a clinical trial principal investigator and Staff Physician, Hematology/Oncology, at the Cleveland Clinic Foundation, reported that the administration of FavId following Rituxan appears to improve response over Rituxan alone and extend TTP compared to historical data of Rituxan alone. The data also compare favorably with previous immunotherapy clinical trials in patients with B-cell NHL that have used chemotherapy to induce remissions.

Treatment-naïve patients who responded to an initial course of Rituxan with a partial or complete remission, or Rituxan responder population, demonstrated the longest TTP, with only 4 of 23 or 17% of patients in this subpopulation having progressed as of December 2005 at a median observation period of approximately 22 months. In addition, only 10 of 35, or 29% of the total treatment-naïve population and 10 of 44, or 23%, of the Rituxan-responder population (including those that were not treatment-naïve) had progressed as of December 2005.

As this Phase 2 clinical trial enrolled both patients that were relapsed or refractory from prior treatment and patients who had received no prior treatment for their lymphoma, we can only compare our preliminary results for these subsets of our patient population with available published data. One clinical trial published by Dr. Thomas E. Witzig in the Journal of Clinical Oncology in May 2002 reported results for 58 follicular B-cell NHL patients relapsed from or refractory to chemotherapy who were subsequently treated with

PART I

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions

Item 14. Principal Accounting Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES