The market for therapeutic proteins, including recombinant human proteins and monoclonal antibodies, is projected to grow at twice the rate of the market for small molecule drugs, or synthetic pharmaceutical compounds, and is expected to increase from $51 billion in 2005 to $87 billion in 2010, according to Kalorama Information.

Therapeutic proteins have traditionally been produced primarily in microbial systems, such as E. coli and yeast systems, or mammalian systems, such as Chinese hamster ovary, or CHO, systems. These traditional production systems are employed to produce a wide range of therapeutic proteins and protein candidates, although each system has a number of inherent drawbacks, including the need for significant capital investments, long lead times to establish manufacturing facilities, and high costs of production.

Monoclonal antibodies are currently being used and developed primarily to treat cancers, autoimmune diseases, infectious diseases and inflammatory diseases, and according to Kalorama Information, are the fastest growing class of products in the pharmaceutical industry. The effectiveness of monoclonal antibodies, particularly those targeting oncology indications, is greatly impacted by the glycosylation structure of one section of the antibody, known as the Fc region.

Research has shown that if the Fc region of the antibody is modified to create an optimized glycosylation structure, the ability of the antibody to bind to immune cells, and to stimulate those immune cells to destroy diseased cells, can be greatly enhanced. There are a limited number of technologies that have the potential to modify the glycosylation structures of antibodies to improve Fc function. Each of these technologies is subject to the limitations of existing production systems, such as the expression of a heterogeneous mix of glycosylation structures or a historic lack of utility in the production of monoclonal antibodies.

The Company has also developed two other product candidates that capitalize on the benefits of the LEX System, which it is advancing toward clinical trials: BLX-155, a direct-acting thrombolytic designed to dissolve blood clots in patients; and BLX-301, an anti-CD20 antibody the Company is optimizing for the treatment of non-Hodgkin’s B-cell lymphoma and other diseases.

The LEX System facilitates the development of proteins whose complexity and other properties limit their commercial viability in traditional production systems.

The Company is developing Locteron to improve patient care by providing a more favorable side-effect profile and more convenient dosing. Locteron incorporates PolyActive, a patented controlled-release technology which provides a gradual release of interferon alfa to patients without the high initial blood levels associated with the significant side effects experienced by patients today. Locteron is also formulated to allow dosing once every two weeks, a substantial improvement in patient convenience compared to currently marketed pegylated interferon alfa products that require dosing every week.

BLX-155 is a direct-acting thrombolytic that the Company is developing to dissolve blood clots in patients with certain diseases or conditions such as acute peripheral arterial disease, deep vein thrombosis and hemodialysis graft thrombosis.

BLX-301 is an anti-CD20 antibody that the Company is optimizing for the treatment of non-Hodgkin’s B-cell lymphoma and other diseases. BLX-301 is based on the capability of the LEX System to optimize the sugar chain component, or glycosylation structure, of monoclonal antibodies to increase their potency and efficacy.

Research and development expense was $5.3 million for the three months ended March 31, 2007, consistent with the $5.1 million in expense for the three months ended March 31, 2006.

General and administrative expense was $1.1 million for the three months ended March 31, 2007, consistent with the $1.1 million in expense for the three months ended March 31, 2006.

Interest income was $0.1 million for the three months ended March 31, 2007, compared to $0.3 million for the three months ended March 31, 2006.