Abeona Therapeutics - 10-Q quarterly report FY

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 0-9314

ACCESS PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		83-0221517
(State or other jurisdiction of		(I.R.S. Employer I.D. No.)
incorporation or organization)

	2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
	(Address of principal executive offices)

(214) 905-5100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of August 12, 2009, there were 12,225,036 shares of Access Pharmaceuticals, Inc. Common Stock issued and outstanding. Also as of August 12, 2009, there were 3,120.3617 shares of Series A Convertible Preferred Stock issued and outstanding, and such shares were convertible into 10,401,196 shares of Common Stock.

ACCESS PHARMACEUTICALS, INC.

INDEX

PART I - FINANCIAL INFORMATION			Page No.

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets at June 30, 2009
		(unaudited) and December 31, 2008 (unaudited)	15

		Condensed Consolidated Statements of Operations (unaudited) for the
		three and six months ended June 30, 2009 and June 30, 2008	16

		Condensed Consolidated Statement of Stockholders’ Deficit (unaudited)
		for the six months ended June 30, 2009	17

		Condensed Consolidated Statements of Cash Flows (unaudited) for the
		six months ended June 30, 2009 and June 30, 2008	18

		Notes to Unaudited Condensed Consolidated Financial Statements	19

	Item 2.	Management's Discussion and Analysis of Financial Condition and
		Results of Operations	2

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9

	Item 4T.	Controls and Procedures	9


PART II - OTHER INFORMATION

	Item 1.	Legal Proceedings	11

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	11

	Item 3.	Defaults Under Senior Securities	11

	Item 4.	Submission of Matters to a Vote of Security Holders	11

	Item 5.	Other Information	12

	Item 6.	Exhibits	12

SIGNATURES			14

CERTIFICATIONS

PART I –FINANCIAL INFORMATION

This Quarterly Report (including the information incorporated by reference) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties including, but not limited to the uncertainties associated with research and development activities, clinical trials, our ability to raise capital, the timing of and our ability to achieve regulatory approvals, dependence on others to market our licensed products, collaborations, future cash flow, the timing and receipt of licensing and milestone revenues, the future success of our marketed products and products in development, our sales projections, and the sales projections of our licensing partners, our ability to achieve licensing milestones and other risks described below as well as those discussed elsewhere in this Quarterly Report, documents incorporated by reference and other documents and reports that we file periodically with the Securities and Exchange Commission. These statements include, without limitation, statements relating to our ability to continue as a going concern, anticipated product approvals and timing thereof, product opportunities, clinical trials and U.S. Food and Drug Administration (“FDA”) applications, as well as our drug development strategy, our clinical development organization, expectations regarding our rate of technological developments and competition, our expectations regarding minimizing development risk and developing and introducing technology, the size of our targeted markets, the terms of future licensing arrangements, our ability to secure additional financing for our operations and our expected cash burn rate. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “could,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors,” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by such forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of filing this Quarterly Report to conform such statements to actual results.

ITEM 1. FINANCIAL STATEMENTS

The response to this Item is submitted as a separate section of this report.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Access Pharmaceuticals, Inc. (together with our subsidiaries, “We”, “Access” or the “Company”) is a Delaware corporation. We are an emerging biopharmaceutical company focused on developing a range of pharmaceutical products primarily based upon our nanopolymer chemistry technologies and other drug delivery technologies. We currently have one approved product, one product at Phase 3 of clinical development, four products in Phase 2 of clinical development and four products in pre-clinical development. Low priority clinical and pre-clinical programs will be dependent on our ability to enter into collaborative arrangements. Our description of our business, including our list of products and patents, takes into consideration our acquisition of MacroChem Corporation which closed February 25, 2009.

MuGard™ is our approved product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is no established treatment. The market for mucositis treatment is estimated to be in excess of $1 billion world-wide. MuGard, a proprietary nanopolymer formulation, has received marketing allowance in the U.S. from the Food & Drug Administration (“FDA”). MuGard has been launched in Germany, Italy, UK, Greece and the Nordic countries by our European commercial partner, SpePharm.

Our lead development candidate for the treatment of cancer is ProLindac™, a nanopolymer DACH-platinum prodrug. We recently completed a Phase 2 clinical trial on ProLindac in the EU in patients with ovarian cancer. The clinical study had positive safety and efficacy results. We are currently planning a number of combination trials, looking at combining ProLindac with other cancer agents such as taxol and gemcitabine, in solid tumor indications including colorectal and ovarian. The DACH-platinum incorporated in ProLindac is the same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis), which has sales in excess of $2.0 billion.

Thiarabine, or 4-thio Ara-C, is a next generation nucleoside analog licensed from Southern Research Institute. Previously named SR9025 and OSI-7836, the compound has been in two Phase 1/2 solid tumor human clinical trials and was shown to have anti-tumor activity. We are working with leukemia and lymphoma specialists at MD Anderson Cancer Center in Houston and intend to initiate additional Phase 2 clinical trials in adult AML, ALL and other indications.

Cobalamin™ is our proprietary preclinical nanopolymer oral drug delivery technology based on the natural vitamin B12 oral uptake mechanism. We are currently developing a product for the oral delivery of insulin, and are conducting sponsored development of a product for oral delivery of human growth hormone.

·	Angiolix® is our preclinical humanized monoclonal antibody which acts as an anti-angiogenesis factor and is targeted to lactadherin, a glycoprotein secreted by cancer cells, notably breast, ovarian and colorectal cancers.

·	Cobalamin-mediated cancer targeted delivery is a preclinical technology which makes use of the fact that cell surface receptors for vitamins such as B12 are often overexpressed by cancer cells.

Access Drug Portfolio

Compound	Originator	Technology	Indication	Clinical Stage (1)

MuGard™	Access	Mucoadhesive liquid	Mucositis	(510k) Marketing clearance received
ProLindacTM (Polymer Platinate, AP5346)	Access / Univ of London	Synthetic polymer	Cancer	Phase 2
Thiarabine (4-thio Ara-C)	Southern Research Institute	Small molecule	Cancer	Phase 1/2
Oral Insulin	Access	Cobalamin	Diabetes	Pre-clinical
Oral Delivery System	Access	Cobalamin	Various	Pre-clinical
Angiolix®	Immunodex, Inc.	Humanized monoclonal antibody	Cancer	Pre-clinical
Cobalamin-Targeted Therapeutics	Access	Cobalamin	Anti-tumor	Pre-clinical

(1)	For more information, see “Government Regulation” under Item 1 in our Annual Report on Form 10-K for the year ended December 31, 2008.

RECENT EVENTS

On August 3, 2009, we announced that we commenced a new clinical study of ProLindac in France. The study will examine dose levels and regimens of ProLindac monotherapy in cancer patients, provide additional data to support design of combinations studies, and extend the safety database. Two ovarian cancer patients have been enrolled in the study to date, and it is anticipated 6 to 12 patients will be enrolled this year in advance of enrolling patients in trial evaluating ProLindac in combination with other chemotherapies.

On July 29, 2009, we announced that we are evaluating strategic options for the commercialization of MuGard in North America. Frank Jacobucci, formerly President & CEO of Milestone Biosciences, has joined Access as a consultant, and will assist with ongoing reimbursement, manufacturing and commercial launch activities at Access, while discussions with potential licensee and co-promotion partners is ongoing.

On July 23, 2009 we announced that our European partner, SpePharm, is collecting data from a post approval study of MuGard in head and neck cancer patients undergoing radiation treatment in the UK showing prevention of oral mucositis. In a multi-center study expected to enroll a total of 280 patients, patients are provided with seven weeks of MuGard therapy, and begin using MuGard one week prior to radiation treatment and then throughout the subsequent six weeks of planned therapy. The first 140 patients being treated in this assessment study have been enrolled and treated, and as of the time of the update, none of these patients have experienced any oral mucositis.

On July 7, 2009 we announced new preclinical data demonstrating that thiarabine shows remarkable efficacy in the prevention and treatment of rheumatoid arthritis (RA). In a well-established animal model for RA, an exceptional restoration of joint structure was observed in the studies, which were conducted at Wayne State University School of Medicine and at Southern Research Institute.

On June 17, 2009 we announced that we signed evaluation agreements with two biopharmaceutical companies for our Cobalamin™ Oral Drug Delivery Technology. Under the terms of the agreements, both companies plan to evaluate Access’ oral insulin product in preclinical models as a prerequisite to entering licensing discussions.

On February 25, 2009, we closed our acquisition of MacroChem Corporation through the issuance of an aggregate of approximately 2.5 million shares of our common stock. In addition, we cancelled all of the outstanding debt of MacroChem in exchange for the issuance of 859,172 shares of our unregistered common stock.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through private sales of common stock, preferred stock, convertible notes and through licensing agreements. Our principal source of liquidity is cash and cash equivalents. Licensing fees provided some funding for operations during the quarter ended June 30, 2009. As of June 30, 2009, our cash and cash equivalents were $1,231,000 and our net cash burn rate for the six months ended June 30, 2009, was approximately $241,000 per month. As of June 30, 2009, our working capital deficit was $5,842,000. Our working capital deficit at June 30, 2009 represented an increase of $1,187,000 as compared to our working capital deficit as of December 31, 2008 of $4,655,000. The increase in the working capital deficit at June 30, 2009 reflects milestone payments from our licensing agreements offset by operating expenses which included manufacturing product scale-up for our new ProLindac trial and MacroChem expenses. As of June 30, 2009, we had one convertible note outstanding in the principle amount of $5.5 million which is due September 13, 2011.

After the quarter closed we received $1,000,000 in license receipts from an existing license agreement. Our cash balance at August 12, 2009 was $1,553,000.

As of June 30, 2009, the Company did not have enough capital to achieve its long-term goals. If we raise additional funds by selling equity securities, the relative equity ownership of our existing investors would be diluted and the new investors could obtain terms more favorable than previous investors. A failure to obtain necessary additional capital in the future could jeopardize our operations.

We have generally incurred negative cash flows from operations since inception, and have expended, and expect to continue to expend in the future, substantial funds to complete our planned product development efforts. Since inception, our expenses have significantly exceeded revenues, resulting in an accumulated deficit as of June 30, 2009 of $241,226,000. We expect that our capital resources will be adequate to fund our current level of operations into the first quarter of 2010. However, our ability to fund operations over this time could change significantly depending upon changes to future operational funding obligations or capital expenditures. As a result we may be required to seek additional financing sources within the next twelve months. We cannot assure you that we will ever be able to generate significant product revenue or achieve or sustain profitability.

In order to conserve cash for the operations of Access, management, employees and consultants reduced their monthly stipends. Some consultants also agreed to take common stock and warrants for their services.

Since our inception, we have devoted our resources primarily to fund our research and development programs. We have been unprofitable since inception and to date have received limited revenues from the sale of products. We cannot assure you that we will be able to generate sufficient product revenues to attain profitability on a sustained basis or at all. We expect to incur losses for the next several years as we continue to invest in product research and development, preclinical studies, clinical trials and regulatory compliance.

SECOND QUARTER 2009 COMPARED TO SECOND QUARTER 2008

On February 25, 2009, we closed our acquisition of MacroChem Corporation through the issuance of an aggregate of approximately 2.5 million shares of our common stock. Prior to our acquisition of MacroChem, SCO, an investment company, held a majority of Access’ and MacroChem’s voting stock. Specifically, SCO owned 53% of the voting stock of Access and 63% of the voting stock of MacroChem. A non-controlling interest of 37% existed at the merger date of MacroChem. In addition, certain members of SCO’s management serve on the board of directors of both Access and MacroChem. Based on these facts, Access and MacroChem were deemed under the common control of SCO. As the entities were deemed under common control, the acquisition was recorded using the pooling-of-interest method and the financial information for all periods presented reflects the financial statements of the combined companies in accordance with Appendix D of Statement of Financial Accounting Standards No. 141R (SFAS 141R), “Business Combinations,” for entities under common control.

Our licensing revenue for the second quarter of 2009 was $63,000 as compared to $22,000 for 2008, an increase of $41,000. We recognize licensing revenue over the period of the performance obligation under our licensing agreements.

We had sponsored research and development income of $110,000 in 2008. The research and development agreement was completed in 2008.

Total research and development spending for the second quarter of 2009 was $582,000, as compared to $10,855,000 for 2008, a decrease of $10,273,000. The decrease in expenses was primarily due to:

·	research and development expenses incurred by MacroChem in the second quarter of 2008, which are no longer ongoing, and MacroChem’s acquisition of Virium on April 18, 2008, which resulted in a second quarter non-cash in-process research and development expense ($9,657,000);

·	lower costs for product manufacturing for a new ProLindac clinical trial in 2009 as some manufacturing is complete and a clinical trial has started ($459,000);

·	lower salary and related expenses ($67,000);

·	lower scientific consulting expenses ($63,000) ;

·	offset by higher expenses due to the cost of option grants ($72,000); and

·	other net decreases in research spending ($99,000).

Total general and administrative expenses were $1,507,000 for the second quarter of 2009, a decrease of $772,000 compared to 2008 expenses of $2,279,000 for the same quarter. The decrease in expenses was due primarily to the following:

·	general and administrative expenses incurred by MacroChem in the second quarter of 2008 that are no longer ongoing ($1,177,000);

·	lower patent expenses ($172,000);

·	lower salary and related expenses ($17,000);

·	offset by higher business professional expenses ($214,000);

·	higher shareholder consultant expenses ($185,000);

·	higher expenses due to the cost of option grants ($96,000);

·	accrual of potential liquidated damages under an investor rights agreement with certain investors ($109,000); and

·	other net decreases in general and administrative expenses ($10,000).

Depreciation and amortization was $66,000 for the second quarter of 2009, as compared to $78,000 for 2008, a decrease of $12,000. The decrease in expenses was primarily due to assets becoming fully depreciated.

Total operating expenses for the second quarter of 2009, were $2,155,000 as compared to total operating expenses of $13,212,000 for same period in 2008, a decrease of $11,057,000 for the reasons listed above.

Interest and miscellaneous income was $2,000 for the second quarter of 2009, as compared to $40,000 for the same period in 2008, a decrease of $38,000. The decrease in interest and miscellaneous income was due to lower average cash balances during 2009 versus 2008.

Interest and other expense was $118,000 for the second quarter of 2009, as compared to $221,000 in 2008, a decrease of $103,000. The decrease in interest and other expense was due to MacroChem notes payable that were exchanged and cancelled for shares of our common stock in connection with our acquisition of MacroChem. The notes payable were issued in the second quarter of 2008.

Preferred stock dividends of $483,000 were accrued for the second quarter of 2009 and $517,000 for 2008, a decrease of $34,000. The decrease is due to preferred shareholders converting their ownership to common stock. Dividends are paid semi-annually in either cash or common stock.

Net loss allocable to common stockholders for the second quarter of 2009, was $2,691,000, or a $0.24 basic and diluted loss per common share, compared with a loss of $13,778,000, or a $1.69 basic and diluted loss per common share for the same period in 2008, a decreased loss of $11,087,000.

SIX MONTHS ENDED JUNE 30, 2009 COMPARED TO SIX MONTHS ENDED JUNE 30, 2008

Our licensing revenue for the first six months of 2009 was $104,000 as compared to $39,000 for the same period of 2008. We recognize licensing revenue over the period of the performance obligation under our licensing agreement. We have received upfront licensing payments from SpePharm Holding, B.V., RHEI, JCOM and ASK.

We had sponsored research and development income of $131,000 in 2008. The research and development agreement was completed in 2008.

Total research and development spending for the first six months of 2009 was $1,269,000, as compared to $21,012,000 for the same period in 2008, a decrease of $19,743,000. The decrease in expenses was primarily due to:

·	the Somanta acquisition resulted in a one-time non-cash in-process research and development expense in the first quarter of 2008 ($8,879,000);

·	research and development expenses incurred by MacroChem in the first six months of 2008, which are no longer ongoing ($465,000);

·	MacroChem’s acquisition of Virium on April 18, 2008 which resulted in a one-time non-cash in-process research and development expense ($9,657,000);

·	lower costs for product manufacturing due to the start of a new ProLindac clinical trial ($594,000);

·	lower salary and related expenses ($60,000);

·	lower scientific consulting expenses ($60,000);

·	lower travel expenses ($56,000);

·	offset by higher expenses due to option grants ($95,000); and

·	other net decreases in research spending ($67,000).

Total general and administrative expenses were $2,754,000 for the first six months of 2009, a decrease of $1,364,000 over 2008 expenses of $4,118,000. The decrease in spending was due primarily to the following:

·	general and administrative expenses incurred by MacroChem in the first six months of 2008 that are no longer ongoing ($1,996,000);

·	lower salary and related expenses ($38,000);

·	offset by higher business professional expenses ($302,000);

accrual of potential liquidated damages under an investor rights agreement with certain investors ($267,000);

· higher shareholder consultant expenses ($153,000);

·	higher expenses due to the cost of option grants ($73,000); and

·	other net decreases in general and administrative expenses ($125,000).

Depreciation and amortization was $132,000 for the first six months of 2009 as compared to $166,000 for the same period in 2008 reflecting a decrease of $34,000. The decrease in depreciation and amortization was due to assets becoming fully depreciated.

Total operating expenses for the first six months of 2009 were $4,155,000 as compared to total operating expenses of $25,296,000 for same period in 2008, a decrease of $21,141,000 for the reasons listed above.

Interest and miscellaneous income was $16,000 for the first six months of 2009 as compared to $141,000 for the same period of 2008, a decrease of $125,000. The decrease in interest and miscellaneous income was due to lower average cash balances during 2009 versus 2008.

Interest and other expense was $262,000 for the first six months of 2009 as compared to $329,000 in 2008, a decrease of $67,000. The decrease in interest and other expense was due to MacroChem notes payable that were exchanged and cancelled for shares of our common stock in connection with our acquisition of MacroChem. The notes payable were issued in the second quarter of 2008.

Preferred stock dividends of $963,000 were accrued for the first six months of 2009 and $1,042,000 for 2008, a decrease of $79,000. The decrease is due to preferred shareholders converting their ownership to common stock offset by a placement of preferred stock that closed in February 4, 2008. Dividends are paid semi-annually in either cash or common stock.

On February 4, 2008, we issued 272.5 shares of our Series A Preferred Stock. The shares are convertible into common stock at $3.00 per share. Based on the price of our common stock on February 4, 2008 a new conversion price was calculated for the Series A Preferred Stock and was considered to be “in the money” at the time of the agreement to exchange the convertible notes for preferred stock. This resulted in a beneficial conversion feature. The preferred stockholder has the right at any time to convert all or any lesser portion of the Series A Preferred Stock into common stock. This resulted in an intrinsic value of the preferred stock. The difference between the implied value of the preferred stock and the beneficial conversion feature was treated as preferred stock dividends of $857,000.

An additional $451,000 in preferred stock dividends was recorded in the first quarter of 2008. The change was due to preferred stock dividends and the beneficial conversion feature associated with the warrants issued in association with the sale of preferred stock in November 2007.

Net loss allocable to common stockholders for the first six months of 2009 was $5,260,000, or a $0.48 basic and diluted loss per common share, compared with a loss of $27,664,000, or a $3.45 basic and diluted loss per common share for the same period in 2008, a decreased loss of $22,404,000.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Act”)) as of June 30, 2009. Based on this evaluation, our CEO and CFO concluded that, as of June 30, 2009, our disclosure controls and procedures were not effective. This conclusion was based on the existence of the material weaknesses in our internal control over financial reporting previously disclosed and discussed below.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded in our Annual Report on Form 10-K for the year ended December 31, 2008 that there is a material weakness in our internal control over financial reporting. As of the date of this report on Form 10-Q, we have not remediated such material weakness and as a result, our Chief Executive Officer and Chief Financial Officer have concluded that a material weakness continues to exist as of the end of the period covered by this Quarterly Report on Form 10-Q and our disclosure controls and procedures were not effective. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness relates to the monitoring and review of work performed by our Chief Financial Officer in the preparation of financial statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with the annual audit. All of our financial reporting is carried out by our Chief Financial Officer. This lack of accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.

In order to mitigate this material weakness to the fullest extent possible, all financial statements are reviewed by the Chief Executive Officer as well as the Chairman of the Audit Committee for reasonableness. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.

Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 9, 2009, we issued 30,000 shares of Access common stock to a former executive of MacroChem for the settlement of his employment agreement. The settlement agreements specify that a portion of the settlement be paid in common stock. The issuance of shares of our common stock in settlement of these accounts was made pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as amended.

In June 2009, we issued 126,667 shares Access common stock to several consultants for their consulting expenses. The issuance of shares of our common stock in settlement of these accounts was made pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Pursuant to the terms of the Certificate of Designations, Rights and Preferences of our Series A Cumulative Convertible Preferred Stock, we are required to pay dividends in cash or shares of our common stock, semi-annually, at the rate of 6% per annum. If funds are not currently available to pay cash dividends or if a cash payment of dividends would be impermissible under Delaware law, we may in certain circumstances pay such dividends in shares of the Company’s common stock. In order to pay such dividends in shares of the Company’s common stock, there must either be an effective registration statement covering the resale of the dividend shares, the resale must be permissible subject to an exemption from registration, or the respective holders of Series A Preferred Stock must agree to accept restricted common stock as payment of such dividends. In the event none of these three circumstances are met, and the dividends have not been paid in cash or shares of the Company’s common stock, the dividends shall continue to accrue until they are paid in cash or shares of the Company’s common stock. The Company has accrued as of June 30, 2009, dividends payable of $1,866,000.

Pursuant to the terms of an Investor Rights Agreement with the Purchasers of Series A Preferred Stock, the Company is required to maintain an effective registration statement with respect to certain shares issuable upon conversion of our outstanding preferred stock. As of June 30, 2009, the Securities and Exchange Commission had not yet declared a registration statement effective with respect to all of the shares covered by the Investor Rights Agreement, and as a result, the Company accrued $992,000 in liquidated damages as of June 30, 2009. A registration statement filed by Access relating to a portion of such securities was declared effective on November 13, 2008.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of stockholders was held on May 27, 2009 in New York, N.Y. At that meeting the following matters were submitted to a vote of the stockholders of record. The proposals were approved by the stockholders, as follows:

—

Three directors were re-elected for three years terms with the following votes:

Steven H. Rouhandeh; 14,763,704- For; and 173,600-Withheld Authority

Stephen B. Howell, MD; 14,754,551- For; and 182,753- Withheld Authority

David P. Luci; 14,670,070- For; and 267,234- Withheld Authority

The terms of office as a director of Access of each of Mark J. Ahn, Mark J. Alvino, Esteban Cvitkovic and Jeffrey B. Davis continued after the meeting.

—

A proposal to ratify the appointment of Whitley Penn LLP as independent certified public accounts for the Company for the fiscal year ending December 31, 2009 was approved with 14,764,474- For; 13,021- Against; and 35,809- Abstain.

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

Exhibits:

2.2	Agreement and Plan of Merger, by and among Access Pharmaceuticals, Inc., Somanta Acquisition Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and Somanta Limited, dated April 18, 2007. (Incorporated by reference to Exhibit 2.1 to our Form 8-K dated April 18, 2007)

2.3	Agreement and Plan of Merger, by and among Access Pharmaceuticals, Inc., MACM Acquisition Corporation and MacroChem Corporation, dated July 9, 2008.

3.0 Articles of incorporation and bylaws:

3.1	Certificate of Incorporation (Incorporated by Reference to Exhibit 3(a) of our Form 8-B dated July 12, 1989, Commission File Number 9-9134)

3.2 Certificate of Amendment of Certificate of Incorporation filed August 21, 1992

3.3	Certificate of Merger filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031)

3.4	Certificate of Amendment of Certificate of Incorporation filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031)

3.5	Certificate of Amendment of Certificate of Incorporation filed July 18, 1996. (Incorporated by reference to Exhibit 3.8 of our Form 10-K for the year ended December 31, 1996)

3.6	Certificate of Amendment of Certificate of Incorporation filed June 18, 1998. (Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter ended June 30, 1998)

3.7	Certificate of Amendment of Certificate of Incorporation filed July 31, 2000. (Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter ended March 31, 2001)

3.8	Certificate of Designations of Series A Junior Participating Preferred Stock filed November 7, 2001 (Incorporated by reference to Exhibit 4.1.h of our Registration Statement on Form S-8, dated December 14, 2001, Commission File No. 333-75136)

3.9	Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 of our Form 10-Q for the quarter ended June 30, 1996)

3.10	Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock (Incorporated by reference to Exhibit 3.10 to our Form 10-K for the year ended December 31, 2007)

3.11	Certificate of Amendment to Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock filed June 11, 2008 (Incorporated by reference to Exhibit 3.11 of our Form 10-Q for the quarter ended June 30, 2008)

31.1	Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

31.2	Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

32.1*

Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

32.2*

Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

______________

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities and Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACCESS PHARMACEUTICALS, INC.

Date:	August 12, 2009	By:	/s/ Jeffrey B. Davis
			Jeffrey B. Davis
			Chief Executive Officer
			(Principal Executive Officer)

Date:	August 12, 2009	By:	/s/ Stephen B. Thompson
			Stephen B. Thompson
			Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	June 30, 2009	December 31, 2008
ASSETS	(unaudited)	(unaudited) (See Note 4)
Current assets Cash and cash equivalents Receivables Prepaid expenses and other current assets	$ 1,231,000 15,000 56,000	$ 2,677,000 147,000 173,000
Total current assets	1,302,000	2,997,000
Property and equipment, net	70,000	95,000
Patents, net	909,000	1,015,000
Other assets	70,000	123,000
Total assets	$ 2,351,000	$ 4,230,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities Accounts payable Accrued expenses Dividends payable Accrued interest payable Notes payable Current portion of deferred revenue	$ 3,653,000 1,029,000 1,866,000 340,000 - 256,000	$ 3,824,000 798,000 1,896,000 145,000 825,000 164,000
Total current liabilities	7,144,000	7,652,000
Long-term deferred revenue Long-term debt	3,533,000 5,500,000	2,245,000 5,500,000
Total liabilities	16,177,000	15,397,000
Commitments and contingencies
Stockholders' deficit Convertible Series A preferred stock - $.01 par value; authorized 2,000,000 shares; 3,207.8617 issued at June 30, 2009 and 3,242.8617 at December 31, 2008 Common stock - $.01 par value; authorized 100,000,000 shares; issued, 11,613,605 at June 30, 2009 and 9,467,474 at December 31, 2008 Additional paid-in capital Notes receivable from stockholders Treasury stock, at cost – 163 shares Accumulated deficit	- 116,000 228,333,000 (1,045,000) (4,000) (241,226,000)	- 95,000 225,753,000 (1,045,000) (4,000) (235,966,000)
Total stockholders' deficit	(13,826,000)	(11,167,000)
Total liabilities and stockholders' deficit	$ 2,351,000	$ 4,230,000

The accompanying notes are an integral part of these consolidated statements.

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2009			2008 (See Note 4)			2009 (See Note 4)			2008 (See Note 4)
Revenues
License revenues	$	63,000		$	22,000		$	104,000		$	39,000
Sponsored research and development		-			110,000			-			131,000
Total revenues		63,000			132,000			104,000			170,000

Expenses
Research and development		582,000			10,855,000			1,269,000			21,012,000
General and administrative		1,507,000			2,279,000			2,754,000			4,118,000
Depreciation and amortization		66,000			78,000			132,000			166,000
Total expenses		2,155,000			13,212,000			4,155,000			25,296,000

Loss from operations		(2,092,000	)		(13,080,000	)		(4,051,000	)		(25,126,000	)

Interest and miscellaneous income		2,000			40,000			16,000			141,000
Interest and other expense		(118,000	)		(221,000	)		(262,000	)		(329,000	)
		(116,000	)		(181,000	)		(246,000	)		(188,000	)
Net loss		(2,208,000	)		(13,261,000	)		(4,297,000	)		(25,314,000	)

Less preferred stock dividends		483,000			517,000			963,000			2,350,000
Net loss allocable to common stockholders	$	(2,691,000	)	$	(13,778,000	)	$	(5,260,000	)	$	(27,664,000	)

Basic and diluted loss per common share Net loss allocable to common shareholders	$	(0.24	)	$	(1.69	)	$	(0.48	)	$	(3.45	)

Weighted average basic and diluted common shares outstanding		11,406,700			8,135,869			10,954,472			8,008,064

The accompanying notes are an integral part of these consolidated statements.

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Deficit

(unaudited)

	Common Stock			Preferred Stock								Notes
									Additional			receivable
									paid-in			from			Treasury			Accumulated
	Shares		Amount	Shares			Amount		capital			stockholders			stock			deficit

Access-MacroChem, as if combined at December 31, 2008 (See Note 4)	9,467,000	$	95,000	3,242.8617		$	-	$	225,753,000		$	(1,045,000	)	$	(4,000	)	$	(235,966,000	)
Common stock issued for preferred dividends	894,000		9,000	-			-		847,000			-			-			-
Warrants issued for services	-		-	-			-		24,000			-			-			-
Stock option compensation expense	-		-	-			-		56,000			-			-			-
Common stock issued to MacroChem noteholders for notes and accrued interest	859,000		8,000	-			-		851,000			-			-			-
Common stock issued to former MacroChem executives	95,000		1,000	-			-		132,000			-			-			-
Preferred dividends	-		-	-			-		-			-			-			(480,000	)
Net loss	-		-	-			-		-			-			-			(2,089,000	)
Balance at March 31, 2009	11,315,000		113,000	3,242.8617			-		227,663,000			(1,045,000	)		(4,000	)		(238,535,000	)

Warrants issued for services	-		-	-			-		27,000			-			-			-
Stock option compensation expense	-		-	-			-		252,000			-			-			-
Preferred stock converted into common stock	117,000		1,000	(35.0000	)		-		(1,000	)		-			-			-
Common stock issued to former MacroChem executives	30,000		-	-			-		64,000			-			-			-
Common stock issued for cash exercise of options	25,000		-	-			-		14,000			-			-			-
Restricted common stock issued for services	127,000		2,000	-			-		314,000			-			-			-
Preferred dividends	-		-	-			-		-			-			-			(483,000	)
Net loss	-		-	-			-		-			-			-			(2,208,000	)
Balance at June 30, 2009	11,614,000	$	116,000	3,207.8617		$	-	$	228,333,000		$	(1,045,000	)	$	(4,000	)	$	(241,226,000	)

The accompanying notes are an integral part of these consolidated statements.

Access Pharmaceuticals, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Six Months ended June 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(4,297,000	)	$	(25,314,000	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		132,000			166,000
Stock option expense		308,000			673,000
Stock and warrants issued for services		564,000			100,000
Acquired in-process research and development		-			18,536,000
Change in operating assets and liabilities:
Receivables		132,000			(70,000	)
Prepaid expenses and other current assets		117,000			(255,000	)
Other assets		53,000			-
Accounts payable and accrued expenses		60,000			(754,000	)
Dividends payable		(137,000	)		(25,000	)
Accrued interest payable		229,000			209,000
Deferred revenue		1,380,000			1,069,000
Net cash used in operating activities		(1,459,000	)		(5,665,000	)

Cash flows from investing activities:
Capital expenditures		(2,000	)		(31,000	)
Proceeds from sale of asset		1,000			-
Redemptions of short-term investments and certificate of deposits		-			1,470,000
Virium acquisition by MacroChem, net of cash acquired		-			(240,000	)
Somanta acquisition, net of cash acquired		-			(65,000	)
Net cash provided by (used in) investing activities		(1,000	)		1,134,000

Cash flows from financing activities:
Proceeds from debt issuance		-			400,000
Payments of notes payable		-			(639,000	)
Proceeds from exercise of common stock options		14,000			15,000
Proceeds from preferred stock issuances, net of costs		-			2,444,000
Net cash provided by financing activities		14,000			2,220,000

Net decrease in cash and cash equivalents		(1,446,000	)		(2,311,000	)
Cash and cash equivalents at beginning of period		2,677,000			2,582,000
Cash and cash equivalents at end of period	$	1,231,000		$	271,000

Supplemental cash flow information:
Cash paid for interest	$	-		$	8,000

Supplemental disclosure of noncash transactions:
Shares issued for payables, notes payable and accrued interest		859,000			1,576,000
Shares issued for dividends on preferred stock		856,000			-
Preferred stock dividends in dividends payable		963,000			525,000
Beneficial conversion feature – February 2008 preferred stock dividends November 2007 preferred stock dividends correction		- -			857,000 451,000
Preferred stock issuance costs paid in cash		-			281,000
Debt discount related to MacroChem convertible debt issuance		-			93,000

The accompanying notes are an integral part of these consolidated statements.

Access Pharmaceuticals, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Three Months Ended June 30, 2009 and 2008

(unaudited)

(1)	Interim Financial Statements

The consolidated balance sheet as of June 30, 2009, and the consolidated statements of operations and cash flows for the three and six months ended June 30, 2009, and 2008, were prepared by management without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise disclosed, necessary for the fair presentation of the financial position, results of operations, and changes in financial position for such periods, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these interim financial statements be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008. The results of operations for the period ended June 30, 2009, are not necessarily indicative of the operating results which may be expected for a full year. The consolidated balance sheet as of December 31, 2008, contains financial information taken from the audited Access financial statements as of that date and is combined with the unaudited financial data from MacroChem, as discussed further in Note 4.

The report of our independent registered public accounting firm for the fiscal year ended December 31, 2008, contained a fourth explanatory paragraph to reflect its significant doubt about our ability to continue as a going concern as a result of our history of losses and our liquidity position, as discussed herein and in this Form 10-Q. We expect that our capital resources and expected receipts due under our license agreements will be adequate to fund our current level of operations into the first quarter of 2010. If we are unable to obtain adequate capital funding in the future or enter into future license agreements for our products, we may not be able to continue as a going concern, which would have an adverse effect on our business and operations, and investors’ investment in us may decline.

(2) Intangible Assets

Intangible assets consist of the following (in thousands):

	June 30, 2009		December 31, 2008
	Gross carrying value	Accumulated amortization	Gross carrying value	Accumulated Amortization
Amortizable intangible assets Patents	$ 2,624	$ 1,715	$ 2,624	$1,609

Amortization expense related to intangible assets totaled $53,000 and $106,000 for each of the three and six months ended June 30, 2009 and totaled $53,000 and $107,000 for each of the three and six months ended June 30, 2008. The aggregate estimated amortization expense for intangible assets remaining as of June 30, 2009 is as follows (in thousands):

2009		$ 106
2010		212
2011		212
2012		82
2013		44
over 5 years		253

Total		$ 909

(3) Liquidity

The Company incurred significant losses allocable to common stockholders of $5,260,000 for the six months ended June 30, 2009 and $30,794,000 for the year ended December 31, 2008. At June 30, 2009, our working capital deficit was $5,842,000. We expect that our capital resources and receipts due under our license agreements will be adequate to fund our current level of operations into the first quarter of 2010. However, our ability to fund operations over this time could change significantly depending upon changes to future operational funding obligations or capital expenditures. As a result we may be required to seek additional financing sources and enter into future licensing agreements for our products within the next twelve months.

After the quarter closed, we received $1,000,000 in license receipts from an existing license agreement. Our cash balance at August 12, 2009 was $1,553,000.

(4) MacroChem Acquisition

On February 25, 2009, the Company issued approximately 2,500,000 shares of its common stock in exchange for 100% of the outstanding stock and warrants of MacroChem Corporation (“MacroChem”). MacroChem’s principal activities are to develop and seek to commercialize pharmaceutical products using its proprietary drug delivery technologies. Its portfolio of proprietary product candidates is based on its drug delivery technologies: Soft Enhancement of Percutaneous Absorption (SEPA), MacroDerm and DermaPass. Its SEPA topical drug delivery technology enhances the efficiency and rate of diffusion of drugs into and through the skin. Currently, it has two clinical stage investigational new drugs: EcoNail, for the treatment of fungal infections of the nails and Pexiganan, for the treatment of mild diabetic foot infection (DFI).

Prior to our acquisition of MacroChem, SCO, an investment company, held a majority of Access’ and MacroChem’s voting stock. Specifically, SCO owned 53% of the voting stock of Access and 63% of the voting stock of MacroChem. A non-controlling interest of 37% existed at the merger date of MacroChem. In addition, certain members of SCO’s management serve on the board of directors of both Access and MacroChem. Based on these facts, Access and MacroChem were deemed under the common control of SCO. As the entities were deemed under common control, the acquisition was recorded using the pooling-of-interest method and the financial information for all periods presented reflects the financial statements of the combined companies in accordance with Appendix D of Statement of Financial Accounting Standards No. 141R (SFAS 141R), “Business Combinations,” for entities under common control.

Upon acquisition, all outstanding warrants and any other dilutive instruments in MacroChem’s stock were cancelled. The in-the-money warrants converted with the common stock. In addition to the merger, the noteholders of MacroChem agreed to exchange their notes and interest due on the notes in the total amount of $859,000 for 859,000 restricted shares of the Access’ common stock. The value of the shares issued was determined based on the carrying value of the debt, which was established to be the more readily determinable fair value.

In addition, we issued 125,000 shares of Access common stock to former executives of MacroChem for the settlement of employment agreements.

In connection with the exchange of equity interests, $106,000 in merger costs were expensed.

The income statement for all periods presented reflects the combined carrying amount of revenue and expenses. Below is a reconciliation of summary financial data for the period ended June 30, 2009 and the combined MacroChem financial data for the six months ended June 30, 2008 and the twelve months ended December 31, 2008. The balance sheet as of December 31, 2008 also reflects the combined entities.

Following is a summary balance sheet at December 31, 2008:


	Access Pharmaceuticals			MacroChem Corporation			Combined
Current assets	$	3,550,000		$	82,000		$	2,997,000
Total assets		4,257,000			608,000			4,230,000
Current liabilities		4,906,000			3,485,000			7,652,000
Long-term deferred revenue		2,245,000			29,000			2,245,000
Long-term debt		5,500,000			-			5,500,000
Stockholders’ deficit		(8,394,000	)		(2,906,000	)		(11,167,000	)

Intercompany receivables/payables of $635,000 and intercompany deferred revenue of $29,000 were eliminated. Warrant liability of $104,000 is eliminated from liabilities because it was cancelled upon acquitistion

Following is a summary statement of operations for the six months ended June 30, 2009 and June 30, 2008 and for the year ended December 31, 2008:

	For the six months ended June 30, 2009									For the year ended December 31, 2008

	Access Pharmaceuticals			MacroChem Corporation			Combined			Access Pharmaceuticals			MacroChem Corporation			Combined
Total revenues	$	103,000		$	1,000		$	104,000		$	291,000		$	4,000		$	295,000

Expenses
Research and development		1,269,000			-			1,269,000			12,613,000			10,698,000			23,311,000
General and administrative		2,558,000			196,000			2,754,000			4,340,000			3,044,000			7,384,000
Depreciation and amortization		105,000			27,000			132,000			253,000			55,000			308,000
Total expenses		3,932,000			223,000			4,155,000			17,206,000			13,797,000			31,003,000

Loss from operations		(3,829,000	)		(222,000	)		(4,051,000	)		(16,915,000	)		(13,793,000	)		(30,708,000	)

Interest and miscellaneous income		16,000			-			16,000			178,000			33,000			211,000
Interest and other expense		(236,000	)		(26,000	)		(262,000	)		(478,000	)		(433,000	)		(911,000	)
Gain on change in value of warrant liability		-			-			-			-			3,972,000			3,972,000
		(220,000	)		(26,000	)		(246,000	)		(300,000	)		3,572,000			3,272,000
Loss from operations		(4,049,000	)		(248,000	)		(4,297,000	)		(17,215,000	)		(10,221,000	)		(27,436,000	)
Less preferred stock dividends		(963,000	)		-			(963,000	)		(3,358,000	)		-			(3,358,000	)
Net loss allocable to common stockholders	$	(5,012,000	)	$	(248,000	)	$	(5,260,000	)	$	(20,573,000	)	$	(10,221,000	)	$	(30,794,000	)

Basic and diluted loss per common share
Net loss allocable to common stockholders		-			-		$	(0.48	)		-			-		$	(3.69	)
Weighted average basic and diluted common shares outstanding		-			-			10,954,472			-			-			8,354,031

		For the six months ended June, 2008
		Access Pharmaceuticals			MacroChem Corporation			Combined
Total revenues	$	170,000		$	-		$	170,000

Expenses
Research and development		10,824,000			10,188,000			21,012,000
General and administrative		1,933,000			2,185,000			4,118,000
Depreciation and amortization		131,000			35,000			166,000
Total expenses		12,888,000			12,408,000			25,296,000

Loss from operations		(12,718,000	)		(12,408,000	)		(25,126,000	)

Interest and miscellaneous income		105,000			7,000			112,000
Interest and other expense		(225,000	)		(75,000	)		(300,000	)
		(120,000	)		(68,000	)		(188,000	)
Loss from operations		(12,838,000	)		(12,476,000	)		(25,314,000	)
Less preferred stock dividends		(2,350,000	)		-			(2,350,000	)
Net loss allocable to common stockholders	$	(15,188,000	)	$	(12,476,000	)	$	(27,664,000	)

Basic and diluted loss per common share
Net loss allocable to common stockholders		-			-		$	(3.45	)
Weighted average basic and diluted common shares outstanding		-			-			8,008,064

For the three months ended June, 2008
		Access Pharmaceuticals			MacroChem Corporation			Combined
Total revenues	$	132,000		$	-		$	132,000

Expenses
Research and development		1,179,000			9,676,000			10,855,000
General and administrative		1,044,000			1,234,000			2,279,000
Depreciation and amortization		64,000			14,000			78,000
Total expenses		2,287,000			10,925,000			13,212,000

Loss from operations		(2,155,000	)		(10,925,000	)		(13,080,000	)

Interest and miscellaneous income		29,000			11,000			40,000
Interest and other expense		(117,000	)		(104,000	)		(221,000	)
		(88,000	)		(93,000	)		(181,000	)
Loss from operations		(2,243,000	)		(11,018,000	)		(13,261,000	)
Less preferred stock dividends		(517,000	)		-			(517,000	)
Net loss allocable to common stockholders	$	(2,760,000	)	$	(11,018,000	)	$	(13,778,000	)

Basic and diluted loss per common share
Net loss allocable to common stockholders		-			-		$	(1.69	)
Weighted average basic and diluted common shares outstanding		-			-			8,135,869

(5) Stock Based Compensation

For the three and six months ended June 30, 2009 we recognized stock-based compensation expense of $252,000 and $308,000. For the three and six months ended June 30, 2008 we recognized stock-based compensation expense of $503,000 and $673,000.

The following table summarizes stock-based compensation for the three and six months ended June 30, 2009, and 2008:

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
Research and development	$	99,000	$	26,000	$	135,000	$	39,000
General and administrative		153,000		477,000		173,000		634,000
Stock-based compensation expense included in operating expense	$	252,000	$	503,000	$	308,000	$	673,000

We granted 475,000 stock options during the second quarter of 2009 and granted no stock options in the same period of 2008. MacroChem options were cancelled upon acquistion by Access and are no longer outstanding.

Our weighted average Black-Scholes fair value assumptions used to value the 2009 and 2008 first six months grants are as follows:


	6/30/09	6/30/08
Expected life	5.5 yrs	6.2 yrs
Risk free interest rate	2.4 %	3.0 %
Expected volatility(a)	114 %	133%
Expected dividend yield	0.0 %	0.0 %

(a)	Reflects movements in our stock price over the most recent historical period equivalent to the expected life.

(6) Related Parties

David P. Luci, one of our directors, was also the President & Chief Business Officer of MacroChem, with which we acquired on February 25, 2009 pursuant to the Merger Agreement dated July 9, 2008. We signed an amended Consulting, Settlement and Release Agreement with Mr. Luci on March 16, 2009 where he received 60,000 shares of our restricted common stock and $27,500 in a one time cash payment to settle his rights under a previous consulting agreement with MacroChem. On June 1, 2009 we signed a consulting agreement with Mr. Luci where Mr. Luci will provide consulting services to Access for cash compensation of $9,415 per month and for 200,000 shares of our restricted common stock and a cash bonus if certain events occur, as defined in the agreement. The restricted common stock vests 66,667 shares on June 1, 2009, 66,666 shares on January 1, 2010 and 66,667 shares on June 1, 2010.

(7) Fair Value of Financial Instruments

SFAS 107-1, Interim Disclosure About Fair Value of Financial Instruments, requires disclosure about the fair value of all financial assets and liabilities for which it is practicable to estimate. The carrying value of cash, cash equivalents, receivables, accounts payable and accruals approximate fair value due to the short maturity of these items. The carrying value of the convertible long-term debt is at book value which approximates the fair value as the interest rate is at market value.

(8) Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through August 12, 2009, the date the financial statements were issued.

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