Infectious diseases can be caused by bacteria present in the environment that enter the body through the skin or mucous membranes of the lungs, nasal passages and GI tract. These bacteria can be pathogenic, or disease-causing, and can overwhelm the body\\\'s immune system by establishing themselves throughout the body in various tissues and organs where they proliferate. This can cause a number of serious and, in some cases, fatal infections, including those of the GI tract, urinary tract, respiratory tract, bloodstream, skin and heart.

The anti-infective market is one of the largest therapeutic categories worldwide. According to IMS Health, the combined market for prescription antibacterial drugs in 2004 for the United States, Japan, Korea, Germany, France, Italy, the United Kingdom and Spain exceeded $20.0 billion.

The market for anti-infective products is generally divided into two categories, nosocomial infections, which represent approximately 30% of the anti-infectives market, and community-acquired infections, which represent approximately 70% of the anti-infectives market. According to the U.S. Centers for Disease Control and Prevention, or CDC, approximately two million nosocomial infections occur annually in the United States and these infections can increase average length of hospital stays by approximately seven to nine days.

Approximately four million nosocomial infections occur annually in Europe, three million in North America, two million in South America and two million in East Asia (excluding China). Nosocomial infections are costly to address, with an estimated annual aggregate healthcare cost in the United States and the United Kingdom of approximately $4.5 billion and $1.9 billion, respectively. In addition, in the United States, nosocomial infections cause approximately 80,000 deaths annually, making them one of the five leading causes of death in the United States.

Difimicin is a differentiated antibiotic for the treatment of CDAD, the most common nosocomial diarrhea. Specifically, Difimicin has a narrow spectrum of activity against certain gram-positive bacteria. Pre-clinical data indicates that Difimicin is bactericidal and acts by inhibiting RNA polymerase, a bacterial enzyme.

Prulifloxacin is a prodrug in the fluoroquinolone class of antibiotics, a widely-used class of broad-spectrum antibiotics. A prodrug is an inactive form of a compound that is converted in the body to an active drug either by spontaneous chemical reaction or through the enzymatic process. Following oral administration, Prulifloxacin is converted to ulifloxacin, which is rapidly bactericidal by killing susceptible bacterial pathogens through inhibition of DNA replication.

OPopS is a computer-aided method that enables the rapid and low cost synthesis of a wide array of carbohydrate-based compounds. Using its OPopS technology, the Company is developing a pipeline of promising new drug candidates for the treatment of various indications including osteoarthritis and breast cancer. The most advanced pipeline product candidates are:

- OPT-88: A Therapy for Osteoarthritis. The Company intends to develop its carbohydrate-based product candidate OPT-88 as a disease-modifying intra-articular, or within the cavity of a joint, therapy for osteoarthritis.

- OPT-822/OPT-821: A Cancer Immunotherapy. The Company is currently developing its carbohydrate-based product candidate OPT-822 combined with OPT-822\\\'s adjuvant therapy OPT-821, a carbohydrate-based immunostimulant, for the treatment of metastatic breast cancer.

- OPT-1068 and OPT-1273: Macrolide and Ketolide Antibiotics

Research and development expense increased to $5.7 million for the six months ended June 30, 2006 from $3.3 million for the six months ended June 30, 2005.

General and administrative expense of $1.3 million for the six months ended June 30, 2006 was relatively consistent with the $1.4 million for the six months ended June 30, 2005.

Net interest income (expense) and other increased to $649,000 for the six months ended June 30, 2006 from interest expense of $185,000 for the six months ended June 30, 2005, an increase of $834,000.