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Article by DailyStocks_admin    (02-12-13 02:07 AM)

Description

Filed with the SEC from Jan 31 to Feb 6:

NewLink Genetics (NLNK)
Iowa-based agricultural-genetics firm Stine Seed raised its position to 7,077,245 shares (27.7%) by purchasing 880,000 shares on Feb. 4 at $11.40 per share in an underwritten public offering.
BUSINESS OVERVIEW

Overview
We are a biopharmaceutical company focused on discovering, developing and commercializing novel immunotherapeutic products to improve cancer treatment options for patients and physicians. Our portfolio includes biologic and small‑molecule immunotherapy product candidates intended to treat a wide range of oncology indications. Our lead product candidate, HyperAcute Pancreas cancer immunotherapy, or HyperAcute Pancreas, is being studied in a Phase 3 clinical trial in surgically‑resected pancreatic cancer patients that is being performed under a Special Protocol Assessment, or SPA, with the United States Food and Drug Administration, or FDA. We initiated this trial based on encouraging interim Phase 2 data that suggests improvement in both disease-free and overall survival. We have also received Fast Track and Orphan Drug designations from the FDA for this product candidate for the adjuvant treatment of surgically‑resected pancreatic cancer. We have three additional product candidates in clinical development, including our HyperAcute Lung cancer immunotherapy, or HyperAcute Lung, which is being studied in a Phase 1/2 clinical trial at the National Cancer Institute, or NCI, and our HyperAcute Melanoma cancer immunotherapy, or HyperAcute Melanoma, which is being studied in an investigator‑initiated Phase 2 clinical trial. To date, our HyperAcute product candidates have been dosed in more than 200 cancer patients either as a monotherapy or in combination with other therapies and have demonstrated a favorable safety profile.
Our HyperAcute product candidates are based on our proprietary HyperAcute immunotherapy technology, which is designed to stimulate the human immune system. Our HyperAcute product candidates use allogeneic (non‑patient specific) cells from previously established cell lines rather than cells derived from the patient. We believe our approach enables a simpler, more consistent and scalable manufacturing process than therapies based on patient specific tissues or cells. Our product candidates are designed with an objective to harness multiple components of the innate immune system to combat cancer, either as a monotherapy or in combination with current treatment regimens, without incremental toxicity. We are also conducting small‑molecule based research and development with an aim to produce new drugs capable of breaking the immune system’s tolerance to cancer through inhibition of the indoleamine‑(2,3)‑dioxyge nase, or IDO, pathway. We are currently studying our lead IDO pathway inhibitor product candidate, d-1-methyltryptophan, or D-1MT, in collaboration with the NCI, in two Phase 1B/2 clinical trials. We believe that our immunotherapeutic technologies will enable us to discover, develop and commercialize multiple product candidates that can be used either alone or in combination with current therapies to treat cancer.
Our HyperAcute Cancer Immunotherapy Product Candidates
We initiated our Phase 3 clinical trial for HyperAcute Pancreas in May 2010. We expect to evaluate approximately 700 surgically‑resected pancreatic cancer patients in this clinical trial and we are on schedule with our projected enrollment. We plan to complete the first and second interim analyses of data from our Phase 3 clinical trial for HyperAcute Pancreas in late 2012 and 2013, respectively, and to complete patient enrollment in 2013.
The interim data from our fully‑enrolled 70-patient Phase 2 pancreatic cancer clinical trial suggests that HyperAcute Pancreas may improve disease-free and overall survival when given in addition to standard‑of‑care treatment to patients following complete resection of detectable disease. As of May 10, 2011, all patients had reached at least 12 months of follow-up with a median follow-up period of approximately 21 months. The study met its primary objective with an established median disease‑free survival of 14.2 months. The most recent analyses of the secondary endpoint of overall survival showed one‑year overall survival to be 86%. As of May 10, 2011, interim efficacy data for the 26 patients receiving high dose therapy demonstrated median disease-free survival of 15.3 months and a one-year overall survival rate of 96%. To date, HyperAcute Pancreas has demonstrated good tolerability and a favorable safety profile. The most common treatment‑related adverse reactions (reported by at least 5% of patients) for HyperAcute Pancreas were injection site reaction (58%), fatigue (20%), induration (17%), nausea (8%), pruritus (7%), fever (7%), urticaria (6%), anemia (6%) and decreased white blood cell count (6%). There have been no reported grade four adverse events attributed to HyperAcute Pancreas, and less than 8% of the patients treated with HyperAcute Pancreas have experienced a grade three serious adverse event characterized by the investigators as possibly or probably attributable to our product candidate. The NCI’s common terminology criteria, or CTC, categorizes adverse events into five grades, where grade one is mild, grade two is moderate, grade three is severe, grade four is life‑threatening and grade five is death.
Our second most advanced product candidate, HyperAcute Lung, is in a Phase 1/2 clinical trial that is fully enrolled with 54 patients for the treatment of refractory, recurrent or metastatic nonresectable non-small cell lung cancer, or NSCLC. We performed an interim analysis of the 28 patients evaluated in the Phase 2 portion of the study on December 9, 2010, which showed median overall survival of 11.3 months and a one-year survival rate of 46%. Based on our analysis of data from comparable precedent clinical trials of similar patients, we would have expected a median overall survival of approximately eight months. In an interim analysis of 45 patients, HyperAcute Lung demonstrated a favorable safety profile and no dose limiting toxicities. The most common treatment‑related adverse reactions (reported by at least 5% of patients) for HyperAcute Lung were injection site reaction (92%), induration (56%), fatigue (25%), urticaria (12%), anemia (7%), pruritus (7%), lymphopenia (7%), elevated serum amylase (5%), edema (5%), skin pain (5%) and dyspnea (5%). There have been no reported CTC grade four adverse events attributed to HyperAcute Lung and less than 13% of the patients treated with HyperAcute Lung have experienced a CTC grade three serious adverse event characterized by the investigators as possibly or probably attributable to our product candidate. This trial is being conducted at the NCI. We are currently evaluating alternative designs for a Phase 2B/3 clinical trial in NSCLC with an adaptive design, which we plan to initiate in the first half of 2012 and on which we plan to complete the first interim analysis in 2013.
Our HyperAcute Melanoma product candidate is being studied in an investigator‑initiated, fully enrolled 25 patient Phase 2 clinical trial for the treatment of advanced melanoma in combination with an eight-week course of PEG-Intron, a man-made immune modulator. As of September 8, 2011, interim analysis shows encouraging results, with all of the patients developing low levels of autoimmune antibodies and four out of 25 patients developing vitiligo. Vitiligo is an autoimmune condition in which the patient’s immune system attacks melanoctyes in the skin, which are the cells that may turn into melanoma cancer cells. Vitiligo has previously been correlated with a favorable response to therapy in other melanoma immunotherapy studies. To date, HyperAcute Melanoma has demonstrated good tolerability and a favorable safety profile, with no systemic, drug-related serious adverse events characterized by the investigators as possibly or probably attributable to our product candidate. The most common non-serious adverse events reported were local injection site skin reactions, induration, diarrhea and nausea. We anticipate announcing results of the completed clinical trial in the first half of 2012. We anticipate initiating a Phase 2B clinical trial in melanoma in 2012.
Our HyperAcute Cancer Immunotherapy Technology
We believe our HyperAcute immunotherapies operate by exploiting a natural barrier present in humans that protects against infection being transmitted from other mammals. This barrier is related to the enzyme, alpha (1,3) galactosyl transferase, or alpha-GT, which is expressed in the cells of lower mammals but not present in human or other Old World primate cells. The presence of this enzyme results in the expression of a non-human form of carbohydrate called alpha (1,3) galactosyl carbohydrates, or alpha-Gal, on the surface of affected cells. Introducing alpha-Gal-expressing cells to the human or primate immune system activates an immune response from antibodies against alpha-Gal. Antibodies directed against the alpha-Gal epitope are potentially the most abundant natural antibody in humans and represent approximately 1% of circulating human antibodies.
Our HyperAcute immunotherapy product candidates are composed of irradiated, live, allogeneic human cancer cells modified to express the gene that makes alpha-Gal epitopes. This exposure to alpha-Gal stimulates the human immune system to attack and destroy the immunotherapy cells on which alpha-Gal is present by activating complement, an important component of the immune system that is capable of cell destruction. After destruction, we believe the resulting cellular fragments bound by anti alpha-Gal antibodies are processed by the immune system to elicit an enhanced multi‑faceted immune response to tumor‑associated antigens, or TAAs, common to both the immunotherapy and the patient’s tumor cells.

Our IDO Pathway Inhibitor Product Candidate
In addition to our HyperAcute product candidates, we are developing D-1MT, a small‑molecule, orally bioavailable product candidate designed to inhibit the IDO pathway. In preclinical models, IDO pathway inhibitors have shown anti-tumor effects in combination with radiotherapy, chemotherapy, targeted therapy or immunotherapy. Through our collaboration with the NCI, we are studying D-1MT in two Phase 1B/2 safety and efficacy clinical trials in various chemotherapy and immunotherapy combinations. One clinical trial combines D-1MT with an Ad-p53 autologous dendritic cell vaccine for solid malignancies with p53 mutations, such as lung, breast and colon cancers. The other clinical trial involves the combined use of D-1MT and Taxotere for patients with advanced stage solid tumors for which Taxotere is the standard‑of‑care treatment, such as metastatic breast, prostate, ovarian and lung cancers. Current Phase 1 data indicates that D-1MT is well tolerated as a single agent and has a manageable safety profile. In addition, D-1MT is well tolerated either in combination with a dendritic cell vaccine or with chemotherapy. We anticipate announcing additional data from these clinical trials in the first half of 2012.
Our Strategy
Our strategy is to discover, develop and commercialize immunotherapeutic products for the treatment of cancer where the needs of patients are unmet by current therapies. The critical components of our business strategy include:
Complete the Phase 3 clinical trial of HyperAcute Pancreas, our lead immunotherapy product candidate, and gain regulatory approval. HyperAcute Pancreas is currently in Phase 3 clinical development in patients with surgically‑resected pancreatic cancer. This clinical trial, which was initiated in May 2010, is an approximately 700‑patient randomized clinical trial being performed under an SPA with the FDA. We expect to evaluate approximately 700 surgically‑resected pancreatic cancer patients in this clinical trial and we are on schedule with our projected enrollment. We plan to complete the first and second interim analyses in late 2012 and 2013, respectively, and to complete patient enrollment in 2013.
Develop sales and marketing infrastructure to commercialize our HyperAcute Pancreas product candidate in the United States and establish commercial partnerships in other regions. We currently own or exclusively license all rights to our HyperAcute product candidates. We intend to commercialize some or all of our HyperAcute product candidates, including HyperAcute Pancreas, in the United States by building an initial specialty sales force of approximately 50 to 100 representatives with a focused marketing effort directed to medical and surgical oncologists. We intend to seek collaborations to develop and commercialize our HyperAcute product candidates outside of the United States, and may seek collaborations for selected indications within the United States.

Advance our HyperAcute Lung and HyperAcute Melanoma product candidates through additional clinical trials. Based on the clinical trial data generated to date by HyperAcute Lung and HyperAcute Melanoma, we plan to pursue further clinical development of these product candidates. We have convened a panel of thought leaders in lung cancer to assist us in planning a Phase 2B/3 clinical trial for NSCLC with an adaptive design, which we plan to initiate during the first half of 2012. We are also currently working to develop clinical trial designs to further study the efficacy of HyperAcute Melanoma either as a stand‑alone or combination therapy and we plan to initiate a Phase 2B clinical trial in 2012.
Expand our manufacturing capabilities for our HyperAcute product candidates. We manufacture HyperAcute Pancreas at our facility in Ames, Iowa and believe our current and planned manufacturing facilities will be adequate to support the initial U.S. commercialization efforts for that product. We intend to maintain control over manufacturing for our HyperAcute product candidates for the U.S. market and may need to expand our manufacturing capacity in the future if more than one of our products are approved.
Investigate our HyperAcute technology in additional oncology indications. We have developed a process to discover and develop new tumor‑specific HyperAcute cancer immunotherapies. In addition to our lead programs in pancreatic cancer, lung cancer and melanoma, we intend to pursue clinical development of this technology in other tumor types.
Develop and commercialize D-1MT, a small‑molecule product candidate, in cancer. In collaboration with the NCI, we have initiated two Phase 1B/2 clinical trials to evaluate use of D-1MT in combination with other approved therapies for solid tumor indications. We also plan to initiate multiple clinical trials of our D-1MT product candidate in combination with other approved and development‑stage cancer therapies, including immunotherapies such as our HyperAcute Lung and HyperAcute Melanoma product candidates.
Cancer Market Overview
Cancer is the second‑leading cause of death in the United States with an estimated 569,000 deaths in 2010 according to the American Cancer Society. Despite a number of advancements in the diagnosis and treatment of cancer over the past decade, overall five-year survival rates from all cancer types is 68% for the period spanning 1999-2005 according to the American Cancer Society.
Cancer is characterized by abnormal cells that grow and proliferate, forming masses called tumors. Under certain circumstances, these proliferating cells can metastasize, or spread, throughout the body and produce deposits of tumor cells called metastases. As the tumors grow, they may cause tissue and organ failure and, ultimately, death. To be effective, cancer therapies must eliminate or control the growth of the cancer.
The specialized cells of the immune system recognize specific chemical structures called antigens. Generally, foreign antigens trigger an immune response that results in the removal of disease‑causing agents from the body. Cancer cells, however, frequently display antigens that are also found on normal cells. The immune system may not be able to distinguish between tumors and normal cells and, thus, may be unable to mount a strong anti-cancer response. Tumors also have various defense mechanisms that may prevent the immune system from fully activating.
Current therapies, such as surgery, radiation, hormone treatments and chemotherapy, do not address this evasive characteristic of cancer and may not have the desired therapeutic effect. Active immunotherapies stimulate the immune system, the body’s natural mechanism for fighting disease, and may overcome some of the limitations of current standard-of-care cancer therapies.

Our HyperAcute Pancreas Cancer Immunotherapy Product Candidate
Our lead product candidate, HyperAcute Pancreas, is in a Phase 3 clinical trial being performed under an SPA with the FDA. We have also received Fast Track and Orphan Drug designations for this product candidate for the adjuvant treatment of surgically‑resected pancreatic cancer. HyperAcute Pancreas consists of equal doses of two separate allogeneic pancreatic cancer cell lines engineered to express alpha-Gal. Although cells making up naturally occurring pancreatic tumors in patients do not express alpha-Gal, the tumor cells share other molecules, called tumor‑specific or tumor‑associated antigens, with the genetically altered pancreatic cancer cells contained in HyperAcute Pancreas. We believe the molecules that are shared by both the patient’s tumor cells and HyperAcute Pancreas immunotherapy cells allow the antibodies and immune cells that develop against the HyperAcute Pancreas immunotherapy cells to target and destroy the patient’s own tumor cells as well. Each of the modified cell lines is grown in large cultures, harvested, irradiated and packaged. Approximately 150 million cells of each HyperAcute Pancreas cell line (a total of 300 million cells) are given by intradermal injection with each treatment. A series of up to 12 treatments using both cell lines over a period of six months was used in our Phase 2 clinical trial. In our Phase 3 protocol, we are adding an additional series of six maintenance treatments, to be given during the next six months.
Market Opportunity
The American Cancer Society estimates that approximately 44,030 new cases of pancreatic cancer were diagnosed in the United States in 2011. Pancreatic cancer has generally been recognized as an aggressive form of cancer with non-specific initial symptoms, making it difficult to diagnose at an early stage. Due to the difficulty in diagnosis and the aggressive nature of this cancer, the National Cancer Institute estimates a 96% mortality rate is associated with this disease, and the American Cancer Society estimates one-year and five-year overall survival rates of about 24% and 5%, respectively.

Pancreatic cancer can generally be divided into three broad categories: (1) local disease, in which the cancer is confined to the pancreas and can be removed surgically, which is called resection; (2) locally advanced disease, in which the cancer has spread locally and may or may not be eligible for resection because it has invaded tissues that should not be removed, such as key nerves and arteries; and (3) metastatic disease, in which the tumor has spread beyond the region of the pancreas.
According to eMedicine, a healthcare reference website run by WebMD containing peer‑reviewed articles on diseases and medical topics, approximately 20% of pancreatic cancer patients in the United States are eligible for resection at initial diagnosis. These earlier stage, resected patients have significantly better prognoses than patients with later stage disease since they tend to have better nutritional and immune status and significantly lower amounts of micro‑metastatic and residual disease. A study published in the Journal of the American Medical Association , or JAMA , in March 2008 showed that resection followed by chemotherapy or chemoradiotherapy, known as adjuvant therapy, extends median survival to approximately 18 months. We believe the addition of HyperAcute Pancreas to adjuvant standard‑of‑care has the potential to improve median disease-free survival and overall survival in resected pancreatic cancer patients.
Patients with locally advanced nonresectable disease represent an additional 30% of patients at diagnosis and are generally treated with chemotherapy or chemoradiotherapy. We plan to initiate a clinical trial to test the safety and efficacy of HyperAcute Pancreas in locally advanced, nonresectable pancreatic cancer patients. We believe patients with locally advanced nonresectable disease may also benefit from the addition of HyperAcute Pancreas to standard‑of‑care.
Clinical Trials
Phase 3 Clinical Trial
In May 2010, we initiated our Phase 3 clinical trial for HyperAcute Pancreas. This trial is an open‑label, randomized, controlled, multi‑center Phase 3 clinical trial, evaluating approximately 700 Stage I and Stage II surgically‑resected pancreatic cancer patients, according to the American Joint Committee on Cancer classification system, or AJCC system, who have no detectable disease by a CT scan. The primary endpoint of the clinical trial is overall survival, with secondary endpoints of disease-free survival, safety, toxicity and immunological responses. Based on our discussions with the FDA, we plan to enroll up to 722 patients and believe this number of patients will enable us to demonstrate statistically significant improvement in median overall survival at the end of the trial. Additional patients will be accrued, if needed, to maintain adequate numbers for statistical significance. We are on schedule with our projected enrollment and continue to actively recruit additional major medical centers, with high volume of pancreatic cancer surgeries, to participate in this clinical trial.
Current adjuvant standard‑of‑care regimens for post-resection pancreatic cancer patients include gemcitabine alone or a combination of gemcitabine plus 5-FU based chemoradiotherapy. In our Phase 3 clinical trial, 50% of the patients will receive standard adjuvant therapy with HyperAcute Pancreas and 50% will receive standard adjuvant therapy without HyperAcute Pancreas. Data from our Phase 2 clinical trial demonstrated a statistically significant improvement in disease‑free survival at one year for the high dose (300 million cells) arm of the study. Therefore, we selected the 300 million cell dose as the treatment dose for our Phase 3 clinical trial. In addition, we reasoned empirically that considering the observed dose response, higher doses of treatment might provide further benefit. We therefore modified the treatment schedule for all patients receiving HyperAcute Pancreas to increase the number of immunotherapy treatments from 12 to up to 18 treatments given every two weeks over a period of approximately six months followed by six monthly injections. Patients in the study are being monitored with periodic imaging to check for recurrences for at least five years after surgery or until death occurs.
The clinical trial includes interim evaluations for both overall survival and disease-free survival when approximately one-half of the expected number of deaths have occurred and, if needed, again when approximately three‑quarters of the expected number of deaths have occurred. Our SPA specifies that if results show a highly statistically significant effect on survival we may stop the trial and apply for marketing approval. Our statistical modeling indicates that a 45% or 30% improvement in overall survival, relative to controls through the period when one‑half or three‑quarters, respectively, of the expected number of deaths have occurred, would be highly statistically significant. Overall survival refers to the duration of life after surgery. Disease-free survival refers to the period of time after surgical resection when no evidence of disease is detected.
When initially diagnosed, patients eligible for our Phase 3 clinical trials have localized tumors that can potentially be completely removed based upon strict imaging criteria. In addition, the patients are generally strong enough to survive a major surgical procedure that involves an inherent significant risk of death. Patients are not eligible to participate in this trial until pathology and post-operative imaging studies indicate that they are without clinical evidence of residual tumor as observed by a CT scan. As a result, patients admitted to the trials have minimal residual tumor burden and possess generally intact immune systems, characteristics that we believe improve the likelihood of meaningful response.

CEO BACKGROUND

Ernest J. Talarico, III has served as a director since 1999. Mr. Talarico has worked for Mesirow Financial Holdings, Inc., a diversified financial services firm headquartered in Chicago, Illinois since 1998, where he has been a Managing Director since June 2008. Prior to becoming Managing Director, Mr. Talarico served as Senior Vice President from 2005 to 2008, Vice President from 2003 to 2005 and Investment Executive from 1998 to 2003. Mr. Talarico specializes in financial planning and asset allocation, as well as other wealth accumulation and preservation strategies for individuals and businesses. Mr. Talarico sits on several boards and committees, including the Mutual Fund Committee at Mesirow Financial and the Select Advisory Board and Committee at Mesirow Financial. Mr. Talarico has also been the Chairman for the local chapter of the Cystic Fibrosis Foundation and the Founder and Chairman of the Talarico Ataxia Foundation. Mr. Talarico holds a bachelor's degree from the University of Iowa as well as licenses in equities, options and managed futures.

Paul R. Edick was appointed to the Board of Directors on July 29, 2011. Since July 2010, Mr. Edick has been the Chief Executive Officer of Durata Therapeutics, a start-up biopharmaceutical company. From 2008 to 2010, Mr. Edick was Chief Executive Officer of Ganic Pharmaceuticals, a specialty pharmaceutical company. From 2006 to 2008, Mr. Edick was Chief Executive Officer of MedPointe Healthcare Inc., a specialty pharmaceutical company until its acquisition. From 2002 to 2006, Mr. Edick was President of MedPointe Healthcare Inc. From 1994 to 2002, Mr. Edick worked in a series of positions at G. D. Searle and its acquirer, Pharmacia Corporation, where he led G. D. Searle's U.S. managed care organization from 1994 to 1995, its U.S. marketing organization from 1995 to 1996 and its Global Pain & Inflammation Business from 1996 to 1997. In 1998, Mr. Edick was named G. D. Searle's VP-Canada & Latin America. In 1999, Mr. Edick became President of Asia Pacific, Canada & Latin America. In 2000, upon Pharmacia's acquisition of G. D. Searle, Mr. Edick was named Group Vice President and President, Asia Pacific/Latin America at Pharmacia. From 2008 to 2011, Mr. Edick was a director and Chairman of the Board of Directors of Life Cycle Pharma, a public technology-based biotech company located in Copenhagen, Denmark. In addition, Mr. Edick has been a director of Amerita, Inc. since 2000 and was a director of Informed Medical Communications from 2006 to 2011. Mr. Edick holds a B.A. in Psychology from Hamilton College, Clinton.

Joseph Saluri has served as a director since May 2010. Mr. Saluri has served as Vice President and General Counsel for Stine Seed Company and its affiliates since July 1999. As part of his duties for Stine, he works to establish collaborative licensing, research and marketing alliances with international biotechnology and agribusiness companies, in addition to managing the legal and intellectual property affairs for the Stine Companies. Previous to his employment with Stine, Mr. Saluri was an attorney and solicitor at law with Nicholas Critelli Associates, PC, in Des Moines and London. Mr. Saluri received a B.S./B.A. from Drake University and a J.D. from Drake University Law School.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview
We are a biopharmaceutical company focused on discovering, developing and commercializing novel immunotherapeutic products to improve cancer treatment options for patients. Our portfolio includes biologic and small‑molecule immunotherapy product candidates to treat a wide range of oncology indications. Our lead product candidate, HyperAcute Pancreas, is being studied in a Phase 3 clinical trial in surgically‑resected pancreatic cancer patients that is being performed under a Special Protocol Assessment, or SPA, with the United States Food and Drug Administration, or FDA. We initiated this trial based on encouraging Phase 2 data that suggests improvement in both disease-free and overall survival. We have three additional product candidates in clinical development, including HyperAcute Lung, which is being studied in a Phase 1/2 clinical trial conducted at the National Cancer Institute, or NCI, and HyperAcute Melanoma, which is being studied in an investigator‑initiated Phase 2 clinical trial. To date, our HyperAcute product candidates have been dosed in more than 200 cancer patients, either as a monotherapy or in combination with other therapies, and have demonstrated a favorable safety profile.
Our HyperAcute product candidates are based on our proprietary HyperAcute immunotherapy technology, which is designed to stimulate the human immune system. Our product candidates are designed with an objective to harness multiple components of the innate immune system to combat cancer, either as a monotherapy or in combination with current treatment regimens without incremental toxicity. We are also conducting small‑molecule based research and development with an aim to produce new drugs capable of breaking the immune system’s tolerance to cancer through inhibition of the indoleamine‑(2,3)‑dioxyge nase, or IDO, pathway. We are currently studying our lead IDO pathway inhibitor product candidate, d-1-methyltryptophan, or D-1MT, in collaboration with the National Cancer Institute, or NCI, in multiple Phase 1B/2 clinical trials. We believe that our immunotherapeutic technologies will enable us to discover, develop and commercialize multiple product candidates that can be used either alone or in combination to enhance or potentially replace current therapies to treat cancer with underserved patient populations and significant market potential.
We are a development stage company and have incurred significant losses since our inception. As of December 31, 2011 , we had an accumulated deficit of $81.5 million . We incurred a net loss of $18.1 million , $16.2 million and $10.0 million for the years ended December 31, 2011 , 2010 , and 2009 , respectively. We expect our losses to increase over the next several years as we advance into late-stage clinical trials and pursue regulatory approval of our product candidates. In addition, if one or more of our product candidates are approved for marketing, we will incur significant expenses for the initiation of commercialization activities.
On October 19, 2011, the Company’s board of directors approved a 2.1-for-one reverse split of the Company’s common stock to be effected prior to the effective date of the Company’s IPO. In connection with the reverse split, the Company filed a Certificate of Amendment of the Restated Certificate of Incorporation with the Secretary of State of Delaware on October 25, 2011 making the reverse split effective. All share and per share amounts have been retroactively restated in the accompanying financial statements and notes for all periods presented.
Initial Public Offering
On November 16, 2011, we completed our initial public offering, or IPO, of common stock pursuant to a Registration Statement on Form S-1that was declared effective on November 10, 2011. We sold 6,200,000 shares of our common stock, at a price of $7.00 per share. As a result of the IPO, we raised a total of $37.6 million in net proceeds after deducting underwriting discounts and commissions of $3.0 million and offering expenses of $2.9 million. Costs directly associated with our IPO were capitalized and recorded as deferred IPO costs prior to the closing of the IPO. These costs have been recorded as a reduction of the proceeds received in arriving at the amount to be recorded in additional paid-in capital. Upon the closing of the IPO, 14,270,113 shares of our convertible preferred stock automatically converted into 10,719,353 shares of our common stock, which also reflected conversion price adjustments to our preferred stock.
Financial Overview
Revenues
From our inception through December 31, 2011 , we have not generated any revenue from product sales. We have generated $5.7 million in grant revenue from our inception through December 31, 2011 , which is primarily attributable to research and development being performed by our subsidiary, BioProtection Systems Corporation, or BPS, under contracts and grants with the Department of Defense, or DOD, and the National Institutes of Health, or NIH.
In the future, we may generate revenue from a variety of sources, including product sales if we develop products which are approved for sale, license fees, and milestone, research and development and royalty payments in connection with strategic collaborations or licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research and development reimbursements, milestone and other payments we may receive under potential strategic collaborations, and the amount and timing of payments we may receive upon the sale of any products, if approved, to the extent any are successfully commercialized. We do not expect to generate revenue from product sales for several years, if ever. If we fail to complete the development of our product candidates in a timely manner or to obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Tax Loss Carryforwards
The valuation allowance for deferred tax assets as of December 31, 2011 and 2010 was $18.9 million and $15.0 million, respectively. The net change in the total valuation allowance for the years ended December 31, 2011 and 2010 was an increase of $3.9 million and $3.4 million, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment. Valuation allowances have been established for the entire amount of the net deferred tax assets as of December 31, 2011 and 2010 , due to the uncertainty of future recoverability.

As of December 31, 2011 and December 31, 2010 , we had federal net operating loss carryforwards of $76.2 million and $62.1 million and federal research credit carryforwards of $2.9 million and $2.1 million, respectively, that expire at various dates from 2020 through 2031. Sections 382 and 383 of the Internal Revenue Code limit a corporation’s ability to utilize its net operating loss carryforwards and certain other tax attributes (including research credits) to offset any future taxable income or tax if the corporation experiences a cumulative ownership change of more than 50% over any rolling three year period. State net operating loss carryforwards (and certain other tax attributes) may be similarly limited. An ownership change can therefore result in significantly greater tax liabilities than a corporation would incur in the absence of such a change and any increased liabilities could adversely affect the corporation’s business, results of operations, financial condition and cash flow.

Based on a preliminary analysis, we believe that, from its inception through December 31, 2009, NewLink experienced Section 382 ownership changes in September 2001 and March 2003. These two ownership changes limit NewLink’s ability to utilize its federal net operating loss carryforwards (and certain other tax attributes) that accrued prior to the 2003 ownership change. In addition, the net operating loss carryforwards (and certain other tax attributes) of our subsidiary may be limited by Sections 382 and 383 as a result of a prior ownership change of the subsidiary.

Additional analysis will be required to determine whether changes in our ownership since December 31, 2009 and/or changes in our ownership that resulted from our IPO have caused another ownership change to occur. Any such change could result in significant limitations on all of our net operating loss carryforwards and other tax attributes.

Even if another ownership change has not occurred, additional ownership changes may occur in the future as a result of events over which we will have little or no control, including purchases and sales of our equity by our 5% stockholders, the emergence of new 5% stockholders, additional equity offerings or redemptions of our stock or certain changes in the ownership of any of our 5% stockholders.

Income tax expense was $0 for the years ended December 31, 2011 and 2010 . Income tax expense differs from the amount that would be expected after applying the statutory United States federal income tax rate primarily due to changes in the valuation allowance for deferred taxes.
Critical Accounting Policies and Significant Judgments and Estimates
We have prepared our financial statements in accordance with United States generally accepted accounting principles. Our preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the financial statements, as well as revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions. We have reviewed our critical accounting policies and estimates with the Audit Committee of our Board of Directors.
While our significant accounting policies are described in more detail in note 2 to our financial statements included later in this annual report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Comparison of the Years Ended December 31, 2011 and 2010

Revenues. Revenues for the twelve months ended December 31, 2011 were $1.9 million, decreasing from $2.1 million for the same period in 2010. The decrease in revenue of $207,000 was due to a one-time Qualifying Therapeutic Discovery Project Grant in 2010 of $244,000 offset by increased grant billings on research under various DOD contracts and NIH grants of $37,000. On September 21, 2011, BPS entered into an amendment to a DOD contract extending the contract period to September 24, 2013 and increasing the aggregate amounts for which BPS may receive reimbursements by $3.4 million to a total of up to approximately $7.1 million.

Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2011 were $14.3 million, increasing from $12.7 million for the same period in 2010. The $1.6 million increase was primarily due to an increase of $744,000 in personnel-related expenses and an increase of $888,000 in clinical trial expense, contract research and other expenses offset by a decrease of $43,000 in equipment and supplies.

General and Administrative Expenses. General and administrative expenses for the twelve months ended December 31, 2011 were $5.7 million, decreasing from $6.1 million for the same period in 2010. The $400,000 decrease was primarily due to a decrease of $984,000 in legal fees and $65,000 in licensing fees, offset by an increase of $406,000 in personnel expenses, $108,000 in accounting expenses, $91,000 in recruiting, and $44,000 in insurance and other expenses.

Interest Income and Expense. Interest expense for the twelve months ended December 31, 2011 was $42,000, compared to $47,000 for the same period in 2010. Interest income for the twelve months ended December 31, 2011 was $11,000, compared to$75,000 for the same period in 2010.

Other Income (Expense). Miscellaneous income, net for the twelve months ended December 31, 2011 was $5,000, compared to $71,000 for the same period in 2010. Miscellaneous income for the twelve months ended December 31, 2011 was primarily attributable to the receipt of training credits from the State of Iowa.

Comparison of the Years Ended December 31, 2010 and 2009

Revenues. Revenues for the year ended December 31, 2010 were $2.1 million, increasing from $934,000 for the same period in 2009. The increase in revenue of $1.1 million was due to an increase in billings of $860,000 by BPS under various DOD contracts and NIH grants and the receipt of $240,000 in section 48D income tax credits by NewLink.
Research and Development Expenses. Research and development expenses for the year ended December 31, 2010 were $12.7 million, increasing from $7.6 million for the same period in 2009. The $5.1 million increase was due to a $2.4 million increase in equipment, supplies and occupancy costs including the acquisition of in-process research and development, accompanied by a $1.9 million increase in personnel‑related expenses and an $800,000 increase in outside clinical and other expenses including direct development expenses for our clinical trial activities.
General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2010 were $6.1 million, increasing from $3.7 million for the same period in 2009. The $2.4 million increase was primarily due to a $1.0 million increase in professional fees, a $864,000 increase in personnel‑related expenses, a $129,000 increase in equipment, supplies and occupancy costs, and a $374,000 increase in other costs.
Interest Income and Expense. Interest expense for the year ended December 31, 2010 was $47,000, compared to $9,000 for the same period in 2009. The $38,000 increase was due to increased borrowings under notes payable and capital lease obligations. Interest income for the year ended December 31, 2010 was $75,000, compared to $132,000 for the same period in 2009. The $57,000 decrease was primarily due to a decrease in interest rates, partially offset by an increase in our average cash balances.
Other Income (Expense). Miscellaneous income, net for the year ended December 31, 2010 was $71,000, compared to $19,000 for the same period in 2009.

Initial Public Offering

On November 16, 2011, we completed our initial public offering, or IPO, of common stock pursuant to a Registration Statement on Form S-1 that was declared effective on November 10, 2011. We sold 6,200,000 shares of our common stock, at a price of $7.00 per share. The underwriters had an option for a period of 30 days to purchase, on the same terms and conditions set forth above, up to an additional 930,000 shares of our common stock to cover overallotments. None of the overallotment shares were purchased under this option. As a result of the IPO, we raised a total of $37.6 million in net proceeds after deducting underwriting discounts and commissions of $3.0 million and offering expenses of $2.9 million. Costs directly associated with our IPO were capitalized and recorded as deferred IPO costs prior to the closing of the IPO. These costs have been recorded as a reduction of the proceeds received in arriving at the amount to be recorded in additional paid-in capital. Upon the closing of the IPO, 14,270,113 shares of our convertible preferred stock automatically converted into 10,719,353 shares of our common stock, which also reflected conversion price adjustments to our preferred stock.
Series E Preferred Stock
On December 13, 2010 we completed the sale of 248,320 shares of our Series E preferred stock at a price per share of $31.25, which resulted in aggregate proceeds of $7.8 million. On June 20, 2011, we issued and sold to an investor an additional 160,000 shares of Series E preferred stock at a purchase price of $31.25 per share, which resulted in gross proceeds of $5.0 million. Each share of Series E preferred stock converted into approximately 5.252 shares of our common stock at the closing of the IPO.
On January 7, 2011, we acquired the minority interest in BPS. We issued 276,304 shares of our Series E preferred stock as consideration for this acquisition.
Loan Agreements
March 2005 Iowa Department of Economic Development Loan
In March 2005, we entered into a $6.0 million forgivable loan agreement with the Iowa Department of Economic Development, or the IDED. Under the agreement, in the absence of default, there were no principal or interest payments due until the completion date for the project. The balance outstanding under the loan agreement was $6.0 million as of December 31, 2011. The project provided us with financial assistance for research and product development activities at our Iowa State University Research Park facility. The project called for the creation of 315 jobs at the time of commercialization and retention of 35 jobs with total project expenditures of $189.9 million for clinical trials, research and development activities, building construction, equipment purchases, and other working capital needs. As of December 31, 2011, we believe we had created 36 jobs, retained 35 jobs and incurred $72.4 million of project expenditures. Additionally, under the agreement, we were obligated to pay a minimum of 0.25% royalties on all gross revenues of any products we bring to market with a cumulative maximum royalty amount due of $3.2 million. Substantially all of our assets were pledged to secure this loan.
On March 26, 2012, the Company entered into a Settlement Agreement (the “IEDA Agreement”) with the Iowa Economic Development Authority (“IEDA”), as successor in interest to the Iowa Department of Economic Development (“IDED”). Under the terms of the IEDA Agreement, the forgivable loan agreement between the Company and IEDA (as successor to IDED) was terminated and the Company was thereby released from the forgivable loan agreement's job creation, project expenditure, royalty and other requirements in exchange for agreeing to pay a royalty of 0.50% on all gross revenues of any products that the Company brings to market, with a cumulative maximum royalty obligation due of $6.8 million. Additionally, under the IEDA Agreement, the IEDA released its security interest in the Company's assets. The Company is obligated to maintain its business in the State of Iowa until the royalty obligation under the IEDA Agreement is satisfied.
September 2007 IDED High Quality Job Creation Program Tax Credit
In September 2007, we entered into a master contract and associated funding agreement, or HQJC Agreement, with the IDED under its high quality job creation program. We amended the HQJC Agreement in 2010 to extend the dates by which certain job creation and investment requirements were to be met to March 18, 2011.
The terms of the HQJC Agreement, as amended, require us by March 18, 2012, to make a qualifying investment in real estate or depreciable assets of at least $2.0 million, to finalize the lease of our new executive offices and manufacturing facilities and to create at least 45 new full time equivalent jobs in Iowa of which at least 14 must be high quality, or HQJC jobs. In order to qualify as high quality jobs, the jobs created must be at a compensation levels that exceed the county average hourly wage of $17.31. We fulfilled two of the three requirements by March 18, 2010. We have made a qualified investment in real estate and finalized the lease of our new offices and manufacturing facility. As of December 31, 2011, we have created 37 new jobs of which 22 were HQJC jobs. In addition, we are required to retain the HQJC jobs through March 18, 2013. If we fail to meet this requirement we will be required to repay all tax credits received under the HQJC Agreement. As of December 31, 2011, we had maintained our base employment of 34 full time equivalent jobs in addition to the 37 newly created jobs.
Under the HQJC Agreement, we received a tax credit of $414,000, which was refunded to us between March 2006 and October 2009. Under the HQJC Agreement, the IDED may require us to repay the entire amount of the tax credit upon certain events of default, which include our experiencing a substantial layoff, relocating a substantial portion of our business or our research and development outside of Iowa, failing to offer certain employee benefits or failing to reinvest at least 1.0% of our pre-tax profits from our Iowa facility in research and development in Iowa. In addition, prior notice and consent of the IDED is required during the term of the HQJC Agreement for any material changes in our business or our research and development activities.
March 2010 City of Ames Forgivable Loan
In March 2010, we entered into a $400,000 forgivable loan agreement with the City of Ames, Iowa and the Ames Chamber of Commerce, jointly, as lenders. The project provides us with financial assistance to construct new facilities within the Ames city limits. In the absence of a default, there are no principal or interest payments due until the expected completion date for the project, which is March 10, 2015.
The project calls for our creating or retaining at least 70 full-time jobs located in Ames, Iowa as of March 10, 2012 and the creation or maintenance of at least 150 full-time positions located in Ames, Iowa as of March 10, 2015. The agreement also calls for our entering into a five-year building lease with the option for extension for an additional five years of not less than 20,000 square feet within the corporate limits of the City of Ames by March 10, 2015. If, as of March 10, 2015, we have fulfilled the terms of the loan agreement, the loan will be forgiven. If on March 10, 2012 and March 10, 2015, we have failed to create or retain at least 70 full-time jobs and 150 full-time jobs in Ames, Iowa, respectively, we will be required to repay approximately $3,100 per job not created or retained following the respective date. As of December 31, 2011, we had created or retained an aggregate of 69 full-time jobs in Ames, Iowa. As of December 31, 2011, $300,000 of the total $400,000 forgivable loan was advanced to us with the final $100,000 pending certification to the City of Ames regarding the creation of a threshold level of jobs. In the event of default, including failure to repay any amounts under the loan when due, we will be required to repay the note, including 6.5% interest per annum, beginning at the date of default.
Operating Capital Requirements

We anticipate that we will continue to generate significant operating losses for the next several years as we incur expenses related to the research and development of our HyperAcute immunotherapy and IDO pathway inhibitor product candidates, build commercial capabilities and expand our corporate infrastructure. Including the funds received on November 16, 2011 from our IPO, we believe that we have sufficient cash and cash equivalents and certificates of deposit to fund our operations through at least the end of 2013.

We may seek to sell additional equity or debt securities or obtain a credit facility if our available cash and cash equivalents are insufficient to satisfy our liquidity requirements or if we develop additional opportunities to do so. The sale of additional equity and debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned research, development and commercialization activities, which could harm our business.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing novel immunotherapeutic products to improve cancer treatment options for patients and physicians. Our portfolio includes biologic and small-molecule immunotherapy product candidates intended to treat a wide range of oncology indications. Our lead product candidate, HyperAcute Pancreas cancer immunotherapy (algenpantucel-L), or HyperAcute Pancreas, is being studied in two Phase 3 clinical trials; one in surgically-resected pancreatic cancer patients that is being performed under a Special Protocol Assessment, or SPA, with the United States Food and Drug Administration, or FDA, and one in locally advance pancreatic cancer patients. We initiated these trials based on encouraging Phase 2 data that suggests improvement in both disease-free and overall survival. We have also received Fast Track and Orphan Drug designations from the FDA for this product candidate for the adjuvant treatment of surgically-resected pancreatic cancer. We have three additional product candidates in clinical development, including our HyperAcute Lung cancer immunotherapy (tergenpumatucel-L), or HyperAcute Lung, and our HyperAcute Melanoma cancer immunotherapy, or HyperAcute Melanoma, which is being studied in an investigator-initiated Phase 2 clinical trial. To date, our HyperAcute product candidates have been dosed in more than 300 cancer patients, either as a monotherapy or in combination with other therapies, and have demonstrated a favorable safety profile.

Our HyperAcute product candidates are based on our proprietary HyperAcute immunotherapy technology, which is designed to stimulate the human immune system. Our HyperAcute product candidates use allogeneic (non-patient specific) cells from previously established cell lines rather than cells derived from the patient. We believe our approach enables a simpler, more consistent and scalable manufacturing process than therapies based on patient specific tissues or cells. Our product candidates are designed with an objective to harness multiple components of the innate immune system to combat cancer, either as a monotherapy or in combination with current treatment regimens without incremental toxicity. We are also conducting small-molecule based research and development with an aim to produce new drugs capable of breaking the immune system’s tolerance to cancer through inhibition of the indoleamine-(2,3)-dioxyge nase, or IDO, pathway. We are currently studying our lead IDO pathway inhibitor product candidate, indoximod or d-1-methyltryptophan (D1-MT), in multiple Phase 2 studies in breast cancer and prostate cancer. We believe that our immunotherapeutic technologies will enable us to discover, develop and commercialize multiple product candidates that can be used either alone or in combination to enhance or potentially replace current therapies to treat cancer with underserved patient populations and significant market potential.

BioProtection Systems Corporation, or BPS, was founded by us as a subsidiary in 2005 to research, develop and commercialize vaccines to control the spread of emerging lethal viruses and infectious diseases, improve the efficacy of existing vaccines and provide rapid-response prophylactic and therapeutic treatment for pathogens most likely to enter the human population through pandemics or even acts of bioterrorism. BPS is based upon three core technologies, each of which can be leveraged into the infectious disease or biodefense fields. The first is our HyperAcute immunotherapy technology, which is currently focused on enhancing vaccines for influenza. The second technology, based on a yellow fever virus, is in licensed from the University of California at San Francisco. The third technology is replication competent recombinant Vesicular Stomatitus Vaccine, or rVSV, an advanced vaccine technology developed for the Marburg and Ebola viruses.

We are a development stage company and have incurred significant losses since our inception. As of September 30, 2012 , we had an accumulated deficit of $98.5 million . We incurred a net loss of $17.0 million , $12.3 million , and $98.4 million , for the nine months ended September 30, 2012 and 2011 , and since inception, respectively. We expect our losses to increase over the next several years as we advance into late-stage clinical trials and pursue regulatory approval of our product candidates. In addition, if one or more of our product candidates are approved for marketing, we will incur significant expenses for the initiation of commercialization activities.

On October 19, 2011, our board of directors approved a 2.1-for-one reverse split of the Company’s common stock which became effective upon filing of a Certificate of Amendment of the Restated Certificate of Incorporation with the Secretary of State of Delaware on October 25, 2011. All share and per share amounts have been retroactively restated in the accompanying financial statements and notes for all periods presented.

Financial Overview

Revenues

From our inception through September 30, 2012 , we have not generated any revenue from product sales. We have generated $7.1 million in grant revenue from our inception through September 30, 2012 , which is primarily attributable to research and development being performed by our subsidiary, BioProtection Systems Corporation, or BPS, under contracts and grants with the Department of Defense, or DOD, and the National Institutes of Health, or NIH.

In the future, we may generate revenue from a variety of sources, including product sales if we develop products which are approved for sale, license fees, and milestone, research and development and royalty payments in connection with strategic collaborations or licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research and development reimbursements, milestone and other payments we may receive under potential strategic collaborations, and the amount and timing of payments we may receive upon the sale of any products, if approved, to the extent any are successfully commercialized. We do not expect to generate revenue from product sales for several years, if ever. If we fail to complete the development of our product candidates in a timely manner or to obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, business development, information technology, legal and human resources functions. Other general and administrative expenses include facility costs not otherwise associated with research and development expenses, intellectual property prosecution and defense costs and professional fees for legal, consulting, auditing and tax services.

We anticipate that our general and administrative expenses will continue to increase over the next several years for, among others, the following reasons:

•
we expect our general and administrative expenses to increase as a result of increased payroll, expanded infrastructure and higher consulting, legal, auditing and tax services and investor relations costs, and director and officer insurance premiums associated with being a public company;
•
we expect to incur increased general and administrative expenses to support our research and development activities, which we expect to expand as we continue to advance the clinical development of our product candidates; and
•
we may also begin to incur expenses related to the planned sales and marketing of our product candidates in anticipation of commercial launch before we receive regulatory approval, if any, of a product candidate.

Interest Income and Interest Expense

Interest income consists of interest earned on our cash and cash equivalents and certificates of deposit. The primary objective of our investment policy is capital preservation. We expect our interest income to increase as we invest the net proceeds from the offering pending their use in our operations.

Interest expense consists primarily of interest, amortization of debt discount and amortization of deferred financing costs associated with our loans payable.

Tax Loss Carryforwards

The valuation allowance for deferred tax assets as of September 30, 2012 and December 31, 2011 was $22.2 million and $18.9 million , respectively. The net change in the total valuation allowance for the nine months ended September 30, 2012 and 2011 was an increase of $3.3 million and $2.6 million , respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment. Valuation allowances have been established for the entire amount of the net deferred tax assets as of September 30, 2012 and December 31, 2011 , due to the uncertainty of future recoverability.

As of September 30, 2012 and December 31, 2011 , we had federal net operating loss carryforwards of $89.5 million and $76.2 million and federal research credit carryforwards of $3.4 million and $2.9 million , respectively, that expire at various dates from 2019 through 2032. Sections 382 and 383 of the Internal Revenue Code limit a corporation’s ability to utilize its net operating loss carryforwards and certain other tax attributes (including research credits) to offset any future taxable income or tax if the corporation experiences a cumulative ownership change of more than 50% over any rolling three year period. State net operating loss carryforwards (and certain other tax attributes) may be similarly limited. An ownership change can therefore result in significantly greater tax liabilities than a corporation would incur in the absence of such a change and any increased liabilities could adversely affect the corporation’s business, results of operations, financial condition and cash flow.

Based on a preliminary analysis, we believe that, from its inception through December 31, 2009, NewLink experienced Section 382 ownership changes in September 2001 and March 2003. These two ownership changes limit NewLink’s ability to utilize its federal net operating loss carryforwards (and certain other tax attributes) that accrued prior to the 2003 ownership change. In addition, the net operating loss carryforwards (and certain other tax attributes) of our subsidiary may be limited by Sections 382 and 383 as a result of a prior ownership change of the subsidiary.

Additional analysis will be required to determine whether changes in our ownership since December 31, 2009 and/or changes in our ownership that resulted from our IPO have caused another ownership change to occur. Any such change could result in significant limitations on all of our net operating loss carryforwards and other tax attributes.

Even if another ownership change has not occurred, additional ownership changes may occur in the future as a result of events over which we will have little or no control, including purchases and sales of our equity by our 5% stockholders, the emergence of new 5% stockholders, additional equity offerings or redemptions of our stock or certain changes in the ownership of any of our 5% stockholders.

Income tax expense was $0 for the nine months ended September 30, 2012 and 2011 . Income tax expense differs from the amount that would be expected after applying the statutory United States federal income tax rate primarily due to changes in the valuation allowance for deferred taxes.

Critical Accounting Policies and Significant Judgments and Estimates

We have prepared our financial statements in accordance with United States generally accepted accounting principles. Our preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the financial statements, as well as revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

Our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, discusses our most critical accounting policies. Since December 31, 2011, there have been no material changes in the critical accounting policies discussed in the 2011 Annual Report.

Results of Operations

Comparison of the Three Months Ended September 30, 2012 and 2011

Revenues. Revenues for the three months ended September 30, 2012 were $327,000 , decreasing from $430,000 for the same period in 2011 . The decrease in revenue of $103,000 was due to decreased research by BPS under various DOD contracts and NIH grants as amended.

Research and Development Expenses. Research and development expenses for the three months ended September 30, 2012 were $4.8 million , increasing from $3.3 million for the same period in 2011 . The $1.5 million increase was primarily due to an increase of $990,000 in clinical trial expense, contract research and other expenses accompanied by a $351,000 increase in personnel-related expenses and an increase of $137,000 in equipment, supplies and occupancy expenses. The increase in clinical trial expense is primarily attributable to higher levels of patient counts enrolled in our clinical trials and the increase in personnel-related expense is attributable to both increases in headcount and compensation levels.

General and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2012 were $1.4 million , increasing from $1.1 million for the same period in 2011 . The $295,000 increase was primarily due to a $397,000 increase in other expenses including professional fees, director and officer insurance and software subscriptions offset by a decrease of $101,000 in personnel expenses.

Interest Income and Expense. Interest expense for the three months ended September 30, 2012 was $6,000 , compared to $16,000 for the same period in 2011 . Interest income for the three months ended September 30, 2012 was $3,000 , compared to $2,000 for the same period in 2011 .

Comparison of the Nine Months Ended September 30, 2012 and 2011

Revenues. Revenues for the nine months ended September 30, 2012 were $1.4 million , and $1.6 million for the same period in 2011 . The decrease in revenue of $183,000 was due to reduced research by BPS under various DOD contracts and NIH grants as amended.

Research and Development Expenses. Research and development expenses for the nine months ended September 30, 2012 were $13.3 million , increasing from $10.3 million for the same period in 2011 . The $3.1 million increase was primarily due to an $1.8 million increase in pancreatic clinical trial expenses, contract research, consulting and other expenses, accompanied by a $1.0 million increase in personnel-related expenses and a $235,000 increase in equipment, supplies and occupancy expenses. The increase in clinical trial expense is primarily attributable to higher levels of patient counts enrolled in our clinical trials and the increase in personnel-related expense is attributable to both increases in headcount and compensation levels.

General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2012 were $5.0 million , increasing from $3.6 million for the same period in 2011 . The $1.4 million increase was primarily due to a $847,000 increase in professional fees, director and officer insurance, software subscriptions, and other expenses, accompanied by a $599,000 increase in personnel-related expenses. The increases in professional fees, director and officer insurance and software subscriptions are attributable to our public company status and the increase in personnel-related expense is attributable to both increases in compensation levels and share-based compensation.

Interest Income and Expense. Interest expense for the nine months ended September 30, 2012 was $26,000 , compared to $31,000 for the same period in 2011 . Interest income for the nine months ended September 30, 2012 was $11,000 , compared to $10,000 for the same period in 2011 .

Other Income (Expense). Miscellaneous (expense) income, net for the nine months ended September 30, 2012 was $(21,000) , compared to $1,000 for the same period in 2011 . Miscellaneous (expense) income, net for the nine months ended September 30, 2012 was primarily attributable to a loss on the sale of fixed assets.

perating Capital Requirements

We anticipate that we will continue to generate significant operating losses for the next several years as we incur expenses related to the research and development of our HyperAcute immunotherapy and IDO pathway inhibitor product candidates, build commercial capabilities and expand our corporate infrastructure. Including the funds received from our initial public offering, or IPO, we believe that we have sufficient cash and cash equivalents and certificates of deposit to fund our operations through at least the end of 2013.

We may seek to sell additional equity or debt securities or obtain a credit facility if our available cash and cash equivalents are insufficient to satisfy our liquidity requirements or if we develop additional opportunities to do so. The sale of additional equity and debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned research, development and commercialization activities, which could harm our business.

Contractual Obligations and Commitments

Our contractual obligations are disclosed in our Annual Report on Form 10-K (as amended) filed with the SEC on March 30, 2012. In March 2005, we entered into a $6.0 million forgivable loan agreement with the Iowa Department of Economic Development, or the IDED. Under the agreement, in the absence of default, there were no principal or interest payments due until the completion date for the project. The balance outstanding under the loan agreement was $6.0 million as of December 31, 2011. The project provided us with financial assistance for research and product development activities at our Iowa State University Research Park facility. The project called for job creation and project expenditures for clinical trials, research and development activities, building construction, equipment purchases, and other working capital needs. Additionally, under the agreement, we were obligated to pay a minimum of 0.25% royalties on all gross revenues of any products we bring to market with a cumulative maximum royalty amount due of $3.2 million. Substantially all of our assets were pledged to secure this loan.

On March 26, 2012, we entered into a settlement agreement with the Iowa Economic Development Authority, or the IEDA, which is the successor organization to the Iowa Department of Economic Development, or IDED. Under the terms of the settlement agreement the IDED forgivable loan agreement was terminated and we were thereby released from its job creation, project expenditure, royalty and other requirements in exchange for agreeing to pay a minimum of 0.50% royalties on all gross revenues of any products we bring to market with a cumulative maximum royalty amount due of $6.8 million. Additionally, under the settlement agreement, the IEDA released its security interest in our assets. The obligation to maintain our business in the State of Iowa while amounts remain outstanding is a continuing obligation under the terms of the settlement agreement.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under Securities and Exchange Commission, or SEC, rules.

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