Bacterial infections occur when bacteria that naturally exist in the body or that are inhaled, ingested or otherwise acquired are not controlled by our immune systems. The antibiotics used to treat these infections are classified as either broad spectrum or narrow spectrum. The broad spectrum antibiotics are typically oral antibiotics used to treat community-acquired infections, whereas the narrow spectrum antibiotics are typically intravenous antibiotics used to treat specific bacteria in the hospital setting with the exception of penicillin. According to IMS Health, the annual worldwide market for antibiotics was $25.0 billion in 2005, which includes U.S. sales of $8.5 billion for oral antibiotics, consisting of $7.0 billion in the adult market and $1.5 billion in the pediatric market. IMS Health estimates that, in 2005, beta-lactams had a 42.7% market share of the adult oral antibiotic market representing over 90 million prescriptions and a 74.5% market share of the pediatric oral antibiotic market representing over 40 million prescriptions.

Oral antibiotics are classified as either first- or second-line therapies for each disease state by the key opinion leader physicians who write the adult and pediatric antibiotic treatment guidelines, such as those published by the Sinus and Allergy Health Partnership and American Academy of Pediatrics. First-line therapy includes both branded and generic antibiotics and constitutes a larger market than second-line therapy which currently includes primarily branded products.

In December 2005, the Company submitted its NDA for Orapem for four indications: acute bacterial sinusitis; community-acquired pneumonia; acute exacerbation of chronic bronchitis; and uncomplicated skin and skin structure infections. The Company is currently conducting a Phase III placebo-controlled clinical trial for acute exacerbation of chronic bronchitis for adult use.

Orapem is a member of the penem class of beta-lactam antibiotics. If approved by the FDA, it would be the first oral penem available outside of Japan. The Company believes that with its broad spectrum of activity, increased potency and safety and tolerability profile, Orapem would be appropriate for use as a first-line therapy.

The Company’s second product candidate, REP8839, has exhibited promising activity in pre-clinical studies against Staphylococcus aureus, including methicillin-resistant S. aureus, or MRSA. The Company is developing REP8839 for topical use for skin and wound infections, eradication of S. aureus in hospital settings and prevention of MRSA infections in hospital settings. The Company expects to file an IND application for the clinical development of a REP8839/mupirocin combination product in 2006. Mupirocin is a widely used topical antibiotic.

Research and development expenses were $29.2 million for the year ended December 31, 2005 compared to $16.3 million for the year ended December 31, 2004.

Selling, general and administrative expenses were $5.3 million for the year ended December 31, 2005, as compared to $3.0 million for the year ended December 31, 2004.

Interest and other income was $0.7 million for the year ended December 31, 2005, as compared to $0.2 million for the year ended December 31, 2004.