Note Regarding Forward-Looking Statements

This update contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place undue reliance on those statements because they are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include statements regarding our plans, objectives, goals, strategies, future events, capital expenditures, future results, our competitive strengths, our business strategy our industry trends and other statements regarding matters that are not historical facts. These statements often include words such as “may,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our industry experience as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include but are not limited to:

• The availability of additional capital on terms acceptable to us in order to continue to fund our operations, including the filing of Investigational New Drug Applications (INDs) for our two lead product candidates;
• The timing of our product development and evaluation;
• The timing and magnitude of expenditures we may incur in connection with our ongoing research and development activities;
• The results of our preclinical and clinical trials, including the possibility that clinical trials do not replicate the results of our preclinical studies to date;
• The timing and financial consequences of our formation of new business relationships and alliances; and
• The timing and volume of sales of products for which we obtain marketing approval.

You should keep in mind that any forward-looking statement made by us in this report speaks only as of the date of this report. We have no duty to, and do not intend to, update or revise the forward-looking statements in this report after the date of this report.

What’s New at PolyMedix – May 2008

Thank you for taking the time to visit PolyMedix’s website, we appreciate your interest. I am very happy and proud to tell you that on May 8, 2008 we received a notice of no objection letter from Health Canada for our Clinical Trial Application (“CTA”) for our defensin mimetic antibiotic compound, PMX-30063. This notice of no objection allows for the initiation of human clinical studies in Canada. PMX-30063 is the first defensin mimetic antibiotic compound cleared to enter human clinical trials for systemic use, representing an entirely new class of antibiotic drugs. We believe this is a very important milestone for PolyMedix and is our most important achievement to date, as it allows for the start of human clinical trials with our first compound. This novel antibiotic compound represents a fundamental potential breakthrough in the world of infectious diseases, and is the first small molecule defensin mimetic cleared to enter clinical development intended for the treatment of systemic infections, and the first and only such compound which is designed to directly address the growing problem of bacterial drug resistance.

In addition to the press release issued on May 9, we would like to provide you with additional more detailed information on PMX-30063, which is the subject of this “What’s New” update.

PMX-30063 Defensin mimetic antibiotic

Summary

PolyMedix has developed novel non-peptide anti-infective small molecules and polymers. These compounds imitate nature and mimic the activity of host defense proteins. Health Canada accepted our Clinical Trial Application (or “CTA”) for PMX-30063 on May 8, 2008. We believe PMX-30063 is the only systemic antibiotic being developed which mimics the host defense proteins, and thus has a completely different mechanism of action from other antibiotics: one that we believe makes bacterial resistance less likely to develop than with conventional drugs.

Based on pre-clinical laboratory studies conducted by PolyMedix and others to date, PMX-30063 and other PolyMedix antibiotics:

• Have a unique mechanism of action which we believe makes resistance unlikely to develop.
• Have activity against both Gram-positive and Gram-negative bacteria, with a first clinical program with an intravenous (i.v.) formulation to broadly target all Staph infections (pan- Staph).
• Are bactericidal, not simply bacteristatic like many other antibiotics
• Are faster acting than other antibiotics, bactericidal in seconds to minutes
• Are active against drug-resistant bacteria, including clinical isolates of multiple vancomycin resistant Enterococcus (VRE) and methicillin resistant Staphylococcus aureus (MRSA) strains
• Have shown excellent activity in animal studies, with comparable to superior efficacy compared to vancomycin.

Background

The recent stories in the press over the past months regarding outbreaks of drug resistant Staph (MRSA) infections serve as an ominous reminder of the growing problem of drug resistant bacterial infections. A publication by the Infectious Disease Society of America in the journal Clinical Infectious Diseases (2008; 46:155-164), published January 15, 2008, titled “The Epidemic of Antibiotic Resistant Infections” starkly describes the rapidly growing threat. The authors comment, “The ongoing explosion of antibiotic resistant infections continues to plague global and U.S. healthcare…..We are in the midst of an emerging crisis of antibiotic resistance for microbial pathogens in the United States and throughout the world. Epidemic antibiotic resistance has been described in numerous pathogens in varying contexts, including – but not limited to – a global pandemic of methicillin-resistant Staphylococcus aureus infection.”

More and more bacterial infections are becoming resistant to current drug treatments. According to the Association of Professionals in Infection Control and Epidemiology (APIC), in a statement dated February 14, 2008, “70% of infections may now be resistant to antibiotics”.

We believe PMX-30063 is unique among antibiotics in being the first small-molecule mimetic of host defense proteins being developed for systemic use. Because it attacks bacteria with a biophysical, rather than a biochemical, mechanism of action, we believe is unlikely that resistance will readily develop to PMX-30063. To the best of PolyMedix’s knowledge, we are the only company currently working on antibiotic drugs of this nature. With bacterial infection currently ranking as the fourth leading cause of death in the U.S., and one of the fastest growing causes of death (700% increase over the past ten years), we believe PMX-30063 represents a significant market opportunity and addresses a major medical need.

The host defense proteins, such as the magainins, cecropins, and defensins, are produced in all higher forms of life and provide a first line of defense against bacterial infections. These defense peptides are part of the nonhumoral response that keep humans from rapidly succumbing to
infections. There are many different classes of natural host defense peptides, most with 20-40 amino acids. Although host defense peptides are composed of many different sequences, their physicochemical properties are very similar. These peptides are amphiphilic, having patially separated hydrophobic and charged regions. Thus, they represent a “molecular Janus” having both a hydrophobic face and a spatially opposing hydrophilic face. This amphiphilic character, rather than the precise amino acid sequence, is believed to be responsible for their antimicrobial activity.

PolyMedix has thus learned from nature in mimicking one of the oldest and most effective immune system defenses, used by virtually all higher life forms as their first line of defense against bacterial infection.

These compounds have a highly unique mechanism of action: directly lysing (disrupting) bacterial cell membranes. The biophysical mechanism of action of PMX-30063 is completely different from the biochemical mechanism of action of other antibiotics. Thus, we believe it appears unlikely that bacterial resistance can easily develop to this mechanism and to PMX-30063.

Proof of Principle

Based on pre-clinical laboratory studies conducted by PolyMedix and others, PMX-30063 has demonstrated several critical characteristics which we believe fundamentally and significantly distinguish it from host defense proteins and other antibiotics. The following results have not been achieved with the host defense proteins, and demonstrate the utility of PolyMedix’s PMX-30063:

• Systemically active in animal models – compound dosed intravenously achieves significant efficacy in multiple animal disease models
   
• Significant selectivity for bacteria vs. human cells – selectivity ratios of 100->10,000 compared with 10-20 for host defense proteins
   
• Well tolerated in animals – acute doses demonstrate Maximal No-Effect Doses with blood levels many times higher than bactericidal concentrations.
   
• Good drug like properties – pharmacokinetics, half-life, serum binding, and tolerability profiles characteristic of good drugs.
   
• Ease of synthesis – a true small molecule, only 5 step synthesis for PMX-30063 (unlike the 50-70+ steps for host defense proteins).

These results have not been demonstrated with host defense proteins, and were achieved in less than three years of research from program initiation.

We expect that the first application of PMX-30063 will be an injectable formulation for broad use against Staph infections (pan-Staph - many forms of Staph, not simply MRSA). The clinical indications for this include skin and soft tissue structure infections, respiratory tract infections, urinary tract infections, and complicated abdominal infections including gynecological.

Specificity for bacteria – do not harm mammalian cells

Antimicrobial peptides, and PMX-30063, take advantage of differences in the composition of bacteria versus mammalian cells to selectively bind to and attack their targets. Bacteria have more negatively charged groups on the outer surface of their membranes than mammalian cells. Bacterial membranes also lack cholesterol, an essential component of all mammalian membranes. PolyMedix used de novo design to design non-peptidic compounds that home in on membranes that lack cholesterol and have a high degree of negative charged phospholipids – thus, they are specific and selective for bacterial cell membranes:

Moreover, PolyMedix’s computational technology has allowed us to refine the Structure-Activity Relationship (SAR) of these compounds and produce small molecule compounds which are both more potent and more selective than natural host defense proteins. Selectivity studies have been done against several mammalian cell types, including mouse 3T3 cells, and human HepG2 (liver) and red blood cells, with excellent selectivity for a number of compounds. Representative data for the clinical leads are below:

Thus, compared with host defense proteins, PolyMedix’s compounds are:

• Much smaller – 1/5 to 1/10 the molecular weight (500-950 vs. 6000)
• More potent – 50-100 times greater potency than natural host defense proteins
• Much more selective and less toxic – indices 100 - >10,000 vs. 10 – 20, about 1,000 more selective for bacteria vs. mammalian cells
• Are non-peptide small molecules vs. proteins – PolyMedix compounds are completely synthetic, and thus much easier and less expensive to synthesize
• PolyMedix compounds have good drug-like properties and are useful for systemic administration, unlike the host defense proteins

In Vitro Activity

PMX-30063 has demonstrated robust and selective in vitro antibacterial activity. The bactericidal activity against some drug resistant strains of human clinical isolates is summarized below.

The media often talks about “MRSA” or “drug resistant Staph”. In actuality, there are hundreds of different strains of Staph bacteria, and dozens of drug resistant forms. In our laboratory studies we have examined the activity of PMX-30063 against 148 different types of Staph bacteria, including multiple strains of Staphylococcus aureus (including MRSA), Staphylococcus epidermidis, and Staphylococcus hemolyticus. We have tested activity of PMX-30063 against 89 different drug-resistant strains of Staph. The results are summarized below:

The data illustrated in the above table show that PMX-30063 (and a related compound, PMX-30016) are effective against resistant strains of Staph bacteria, and that the minimum inhibitory concentration (MIC) of both compounds remains constant at therapeutically relevant dose levels
regardless of the resistance profile of the Staph bacteria strain. We believe these results both support our goal of initially developing PMX-30063 as a treatment for broad Staph infections, as well as demonstrate that the mechanisms by which Staph bacteria become resistant to conventional antibiotics do not seem to affect the activity of PMX-30063.

The antibiotic activity of PolyMedix’s compounds has been replicated and confirmed by outside laboratories. These results from this set of experiments show the PolyMedix antimicrobial compounds have comparable potency to reference antibiotic drugs, and with superior activity against certain multidrug-resistant bacterial strains such as methicillin-resistant Staph. aureus (MRSA) and vancomycin resistant Enterococcus.

Animal Efficacy Studies

PMX-30063 has been tested for efficacy in vivo in mouse (dosing by i.v. bolus) and rat (dosing by i.v. infusion) thigh burden models, a widely used and accepted animal model for evaluating antibacterial activity of preclinical compounds.

Methods

In the mouse model, neutropenic mice are inoculated in the posterior thigh muscles with S. aureus ATCC13709 (3 x 105 inoculum) and then treated with compound by single i.v. bolus administration. Bacterial quantitation is done at 4 or 24 hours post infection/treatment by aseptically removing the thigh muscles, homogenizing and plating serial dilutions of the homogenate. Vancomycin, dosed optimally (10 mg/kg, s.c.) is used as the positive control.

The antimicrobial activities of PMX-30063 in the mouse and rat model are robust at multiple time points. Studies (examples shown below) show that PMX-30063 (right) and PMX-30016 are comparably to more efficacious than vancomycin, with maximal efficacy of a 99.99%-99.999% reduction in bacterial counts with only two injections:

PMX-30063 has also been tested in animal models against MRSA, with comparable efficacy, as shown below:

Systemic infection: sepsis

In the following experiments, a systemic infection, sepsis, was produced in animals by administration of a lethal dose of Staph aureus by intraperitoneal (i.p.) injection. In this experiment two i.v. bolus doses of PMX-30063 or PMX-30016 were given, with the following representative results:

This sepsis model is considered a robust infection, as the bacteria spread throughout the body. This important result demonstrates that PMX-30063 is able to reach any compartment of the body wherever the bacteria may be resident, and was able to be completely effective against systemic sepsis infection with only two doses.

Experimental Data – Lack of Susceptibility to

Bacterial Drug Resistance

To experimentally measure the development of resistance (or the lack thereof) by bacteria to the antimicrobial activity of the PolyMedix antibiotic compounds, Staph. aureus has been exposed serially in the presence of sub-lethal concentrations of PMX- 0063, as well as other related compounds PMX-30006, PMX-70004, PMX-10072, and PMX-10066. This is the socalled serial passage broth micro-dilution method that is a gold standard in the industry and is widely used to measure the development of resistance to many common antibiotics. As positive controls, two widely used fluoroquinolone antibiotic drugs were included in the assay, ciprofloxacin (Cipro) and norfloxacin. Bacteria, including Staph. aureus, readily develop resistance to conventional antibiotics in this experimental model.

The experiment is done by growing bacteria in the presence of increasing concentrations of an antibiotic drug (either a PolyMedix compound or a positive control). The culture tube containing the highest concentration of drug where bacterial growth is seen after 24 hours is selected and the bacteria are re-passaged with a fresh dilution series of compound. This process is repeated every 24 hours for 16 passages and the MIC (minimum inhibitory concentration, the lowest dose required to kill the bacteria) is noted at every passage. The development of resistance is indicated by a progressive increase in the MIC over time (passages). Conventional antibiotic drugs typically show significant bacterial resistance developing after 3-5 passages. The host defense proteins have been studied in this model and show no resistance even at up to 16 passages.

S. aureus was passaged in the presence of sub-MIC concentrations of the PolyMedix compounds and control antibiotics for 17 passages and the results are shown below. Resistance is readily observed for both ciprofloxacin and norfloxacin (as early as passage 3), with a greater than 100-fold increase in MIC, whereas no consistent increases in MIC values are apparent for the PolyMedix compounds. We believe these results are very encouraging, and experimentally demonstrate the low likelihood of resistance developing to our compounds. These results have now been replicated in two outside laboratories (in addition to PolyMedix’s laboratories), with the experiments now having been done 14 times.

This serial passage study has also been performed specifically with PMX-30063 against MRSA, with the results shown below:

The lack of susceptibility to drug resistance of PMX-30063 directly addresses one of the most serious problems, and one of the greatest commercial opportunities, in medicine. We believe our antibiotic compounds may be the first for which bacterial resistance is unlikely to develop. These results have also been replicated by an outside academic collaborator, also demonstrating a lack of drug resistance when testing an oral pathogen, Staphylococcus saprophyticus.

Current Development Status

The GLP (Good Laboratory Practices) compliant toxicology, safety pharmacology and genotoxicity studies for PMX-30063 have been completed, which indicate that an effective therapeutic index for PMX-30063 may be achieved.

Health Canada accepted the CTA application for PMX-30063 on May 8, 2008. The first Phase I studies will include -

PolyMedix hopes to commence dosing and clinical studies as soon as is possible. Additional clinical and other studies will be required to obtain regulatory approval to commercially sell PMX-30063, and to obtain FDA approval in the U.S. and other countries.

Future Clinical Plans

The first formulation of PMX-30063 which is being developed is an intravenous form, for use in serious infections in hospitalized patients. The first clinical indication planned to be pursued for PMX-30063 is pan-Staph – that is, to broadly target Staph infections, including multiple strains of Staphylococcus aureus, Staphylococcus epidermidis, and Staphylococcus hemolyticus. Staph infections are one of the more common infections treated in hospitals, of a total estimated 7 million patients treated annually in hospitals for infections.

Staph infections can take a number of forms, including –

• Complex skin and soft tissue structure infections
• Respiratory infections, such as pneumonia and bronchitis
• Urinary tract
• Abdominal and gynecological

SBIR Grant Support

PolyMedix has received a total of four SBIR grants (out of four applied for – a 100% success rate) to support the development of these novel antibiotic agents: animal studies of biomimetic antibiotic agents; therapeutic development of biomimetic antibiotic agents; study of activity against biowarfare pathogens; and development of a sanitizing hand lotion.

The SBIR to support development of an antibiotic drug is an Advanced Technology SBIR, for which PolyMedix has received approximately $3 million to date. All grant objectives have been successfully completed, with all goals met.

Future Development

PolyMedix hopes to develop both PMX-30063 and other defensin-mimetic antibiotic compounds for additional uses, including:

• Ophthalmic formulation – PolyMedix has developed and tested an ophthalmic formulation of PMX-30063 for ocular (eye) infections. It is hoped to initiate clinical studies of this ophthalmic compound once additional financing is secured.
   
• Oral formulation – PolyMedix has started testing of an oral non-absorbed formulation of PMX-30063 for serious gastrointestinal infections such as Clostridium difficile and Shigella. It is hoped to continue testing and development of an oral formulation once additional financing is received.
   
• Antimicrobial polymers and oligomers for biomaterials applications. These polymer and oligomer biomaterials (PMX-50003, PMX-70004) are structurally distinct from PMX30063 but are amphiphilic and share the same basic mechanism of action as PMX-30063 drug. However they are easily synthesized and can be economically produced in large quantities. Advantages of the polymers and oligomers being used for biomaterial applications include:
   
• A unique mechanism of action which we believe makes bacterial resistance unlikely to develop
• Potent, broad spectrum activity against over 150 both Gram-positive and Gram-negative bacteria
• Rapidly bactericidal in minutes
• Polymer synthesis appears straightforward
• Active against drug-resistant bacteria, including clinical isolates of multiple VRE and MRSA strains
• Non-toxic to skin and eye in preliminary testing
• Long lasting antimicrobial effect
• Do not need to leech from material to exert their effects – makes the material itself inherently antimicrobial

Antimicrobial polymers can be used for materials applications to create self-sterilizing surfaces and develop bactericidal products, such as paints, plastics, personal care products, and textiles.

Antimicrobial plastics and other materials have been developed. Here, a bactericidal PolyMedix polymer was incorporated into medical grade PVC catheter tubing, which was then exposed to E.coli. Results show a robust antibacterial effect:

Bibliography

Scientific publications and presentations at scientific conferences related to PMX-30063 and PolyMedix’s antibiotic program include:

Som, A., Vemparala, S., Ivanov, I. and Tew G.N.. 2008. Synthetic mimics of antimicrobial peptides. Biopolymers 90: 83-93.

Gabriel, G.J. and Tew, G.N.. 2008. Conformationally rigid proteomimetics: a case study in designing antimicrobial aryl oligomers. Org. Biomol. Chem. 6: 417-423.

H. Weinkauf, B. Brehm-Stecher, 2008. „Wide-Spectrum Biomimetic Antimicrobial Systems”, Presentation at American Society of Microbiology 6th Annual Biodefense and Emerging Diseases Research Meeting, February 24-27, 2008, Baltimore, MD

Beckloff, N., Laube, D., Castro, T., Furgang, D., Park, S., Perlin, D., Clements, D., Tang, H., Scott, R.W., Tew, G.N. and Diamond, G.. 2007. ctivity of an antimicrobial peptide mimetic against planktonic and biofilm cultures of oral pathogens. Antimicrob. Agents Chemother. 51:4125-4132.

Yang, L., Gordon, V.D., Mishra, A., Som, A., Purdy, K.R., Davis, M.A., Tew, G.N. and Wong, G.C.. 2007. Synthetic antimicrobial oligomers induce a composition-dependent topological transition in membranes. J. Am. Chem. Soc. 129: 12141-12147.

Gabriel, G.J., Som, A., Madkour, A.E., Eren, T. And Tew, G.N.. 2007. Infectious disease: Connecting innate immunity to biocidal polymers. Mater. Sci. Eng. R. Rep. 57: 28-64.

R.W. Scott, D. Liu, D.J. Clements, G.N. Tew, W.F. DeGrado, 2006. “In Vivo Activities of Amphiphilic Biomimetic Compounds”, Presentation at the American Society for Microbiology's (ASM) Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC), San Francisco, California, September 30, 2006.

Tang, H., Doerksen, R. J., Jones, T. V., Klein, M. L., and Tew, G. N.. 2006. Biomimetic facially amphiphilic antibacterial oligomers with conformationally stiff backbones. Chem. Biol. 13: 427- 435.

Nusslein, K., Arnt, L., Rennie, J., Owens, C., and Tew, G.N.. 2006. Broad-spectrum antibacterial activity by a novel abiogenic peptide mimic. Microbiology 152: 1913-1918.

Arnt, L., Rennie, J.R., Linser, S., Willumeit, R. and Tew, G.N.. 2006. Membrane activity of biomimetic facially amphiphilic antibiotics. J. Phys. Chem. B. 110: 3527-3532.

Tew, G. N., Clements, D., Tang. H., Arnt, L. and Scott, R. W.. 2006. Antimicrobial activity of an abiotic host defense protein mimic. Biochem. Biophys. Acta. 1758:1387-1392.

Kuroda, K. and DeGrado, W. F.. 2005. Amphiphilic Polymethacrylate derivatives as antimicrobial agents. J. Am. Chem. Soc. 127: 4128-4129.

Tang, H., Doerksen, R. J. and Tew, G. N.. 2005. Synthesis of urea oligomers and their antibacterial activity. Chem. Commun. (Camb) 28: 1537-1539.

Ilker, M. F., Nusslein, K., Tew, G. N. and Coughlin, E. B.. 2004. Tuning the hemolytic and antibacterial activities of amphiphilic polynorbornene derivatives. J. Am. Chem. Soc. 126: 15870-15875.

Liu, D., Choi, S., Chen, B., Doerksen, R. J., Clements, D. J., Winkler, J. D., Klein, M. D. and DeGrado, W. F.. 2004. Nontoxic membrane-active antimicrobial arylamide oligomers. Angew. Chem. Int. Ed. 43: 1158-1158.

Arnt, L., Nusslein, K. and Tew, G. N.. 2004. Nonhemolytic abiogenic polymers as antimicrobial peptide mimics. J. Polymer Sci. 42: 3860-3864.

Arnt, L. and Tew, G. N. 2002. New poly(phenyleneethynylene)s with cationic, facially amphiphilic structures. J. Am. Chem. Soc. 124: 7664-7665.

Tew, G. N., Liu, D., Chen, B., Doerksen, R. J., Kaplan, J., Carroll, P. J., Klein, M. L. and DeGrado, W. F.. 2002. De novo design of biomimetic antimicrobial polymers. Proc. Natl. Acad. Sci. USA 99: 5110-5114.

Liu, D. and DeGrado, W. F.. 2001. De novo design, synthesis, and characterization of antimicrobial beta-peptides. J. Am. Chem. Soc. 123: 7553-7559.

Hamuro, Y., Schneider, J. P., and DeGrado, W. F.. 1999. De novo design of antibacterial betapeptides. J. Am. Chem. Soc. 121: 12200-12201.

Ivanov, I., Vemparala, S., Pophristic, V., Kuroda, K., DeGrado, W. F., McCammon, J. A. and Klein, M. L.. 2006. Characterization of nonbiological antimicrobial polymers in aqueous solution and at water-lipid interphases from all-atom molecular dynamics. J. Am. Chem. Soc. 128: 1778-
1779.

Pophristic, V., Vemparala, S., Ivanov, I., Liu, Z., Klein, M.L. and DeGrado, W.F.. 2006. Controlling the shape and flexibility of arylamides: a combined ab initio, ab initio molecular dynamics, and classical molecular dynamics study. J. Phys. Chem. B. 110: 3517-3526.

Doerksen, R. J., Chen, B., Liu, D., Tew, G. N., DeGrado, W. F. and Klein, M. L.. 2004. Controlling the conformation of arylamides: computational studies of intramolecular hydrogen bonds between amides and ethers or thioethers. Chemistry 10: 5008-5016.

Doerksen, R. J., Chen, B. and Klein, M. L.. 2003. Intramolecular hydrogen bonds: ab initio Car-Parrinello simulations of arylamide torsions. Chem. Phys. Lett. 380: 150-157.

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