Infectious diseases are caused by pathogens present in the environment, such as bacteria, fungi and viruses that enter the body through the skin or mucous membranes of the lungs, nasal passages or gastrointestinal tract, and overwhelm the body’s immune system. These pathogens establish themselves in various tissues and organs throughout the body and cause a number of serious and, in some cases, lethal infections, including infections of the bloodstream, skin, heart, lungs and urinary tract.

The market for anti-infective agents consists of three main categories: antibacterials (often referred to as antibiotics), antifungals and antivirals. Antibiotics work by inhibiting a function essential to the pathogen’s survival, usually by binding to and thereby inhibiting one or occasionally more than one specific “target” in a bacterial pathogen. Antibiotics are classified by both the type of bacteria for which they are effective, such as gram-positive or gram-negative pathogens, as well as their basic molecular structure, which is known as their antibiotic “class.”

According to IMS Health, antibiotics designed to treat serious infections caused by resistant gram-positive bacteria accounted for approximately $945 million in U.S. sales in 2006 and this market is rapidly growing. Uses of antibiotics to treat serious gram-positive infections have increased at a compounded annual growth rate of 12% since 2002, while revenues have increased more rapidly due to the introduction of premium priced antibiotics into the market. Vancomycin, the first clinically useful glycopeptide, was introduced in 1958 and, according to IMS Health, still accounts for 85% of courses of therapy in the United States for resistant gram-positive pathogens.

The Company plans on commercializing oritavancin through its own direct sales force in the United States and in select other countries, and to out-license oritavancin to, or collaborate with, third parties in other countries. In addition to oritavancin, the Company has discovered another antibiotic that is currently in pre-clinical development for the treatment of osteomyelitis.

Oritavancin is a novel semi-synthetic glycopeptide antibiotic for the treatment of serious gram-positive infections. Oritavancin has completed two Phase 3 studies for the treatment of cSSSI in which the primary endpoints were successfully met. In addition, oritavancin completed two Phase 2 trials for the treatment of bacteremia with successful outcomes.

Oritavancin is synthetically modified from a naturally occurring compound, and was originally discovered and developed by Lilly to combat a broad spectrum of gram-positive pathogens in response to the emergence of pathogens resistant to vancomycin, the most commonly prescribed antibiotic for resistant gram-positive infections.

As a glycopeptide, oritavancin shares some properties of other members of the glycopeptide class of antibiotics, which includes vancomycin, the current standard of care for serious gram-positive infections in the U.S. and Europe, as well as telavancin, for which an NDA was submitted in 2006 by Theravance, Inc. As a result, the Company believes that oritavancin could provide physicians with an efficacious and novel antibiotic for the treatment of serious gram-positive infections while providing significant pharmoeconomic benefits by reducing the need for patient monitoring and shortening hospital stays.

The Company expects that oritavancin will initially be used for patients not improving after treatment of vancomycin, for patients with identified vancomycin-resistant pathogens, or in hospitals or regions where the incidence of pathogens resistant to other drugs is high.

Research and development expense for the fiscal year ended December 31, 2006 was $11.5 million, compared to $4.5 million for the fiscal year ended May 31, 2005.

General and administrative expense for the fiscal year ended December 31, 2006 was $3.7 million, compared to $1.4 million for the fiscal year ended May 31, 2005.

Interest income for the fiscal year ended December 31, 2006 was $280,000, compared to $78,000 for the fiscal year ended May 31, 2005.

Interest expense for the fiscal year ended December 31, 2006 was $14.6 million, compared to $211,000 for the fiscal year ended May 31, 2005.