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for the corresponding periods in 2006. The increase in revenue for the three month period ended June 30, 2007 compared to 2006 was primarily due to increased research and development funding from both Novo Nordisk and BioGeneriX. The decrease in revenue for the six month period ended June 30, 2007 compared to 2006 was primarily due to recognition of revenue for a substantive milestone under our collaborations with Novo Nordisk in 2006.

          Because our 2007 revenue could be substantially affected by entering into new collaborations and by the financial terms of any new collaborations, we cannot estimate our 2007 revenue. Material cash inflows from proprietary drug development projects are highly uncertain, and we cannot reasonably estimate the period in which we will begin to receive, if ever, material net cash inflows from our major research and development projects. Cash inflows from development-stage products are dependent on several factors, including entering into collaborative agreements, the achievement of certain milestones, and regulatory approvals. We may not receive milestone payments from any existing or future collaborations if a development-stage product fails to meet technical or performance targets or fails to obtain the required regulatory approvals. Further, our revenue from collaborations will be affected by the levels of effort committed and made by our collaborative partners. Even if we achieve technical success in developing drug candidates, our collaborative partners may discontinue development, may not devote the resources necessary to complete development and commence marketing of these products, or they may not successfully market potential products.

     Research and Development Expense

          Our lead therapeutic protein candidates are NE-180 and GlycoPEG-GCSF. NE-180 is a long-acting version of EPO produced in insect cells. EPO is prescribed to stimulate production of red blood cells, and is approved for sale in major markets around the world for treatment of chemotherapy-induced anemia and anemia associated with chronic renal failure. NE-180 is being developed for the treatment of anemia in adult cancer patients with non-myeloid malignancies receiving chemotherapy and for the treatment of anemia associated with chronic kidney disease, including patients on dialysis and patients not on dialysis. During 2006, we completed a Phase I clinical trial for NE-180 in Switzerland. In the first quarter of 2007, we initiated a Phase II human trial to evaluate the safety, tolerability and dose response of NE-180 in cancer patients receiving platinum-based chemotherapy.

          Our second proprietary protein, GlycoPEG-GCSF, is a long-acting version of G-CSF that we are co-developing with BioGeneriX AG, a company of the ratiopharm Group. G-CSF is prescribed to stimulate production of neutrophils (a type of white blood cell) and is approved for sale in major markets around the world for treatment of neutropenia associated with myelosuppressive chemotherapy. In November 2006, BioGeneriX initiated the first of two planned Phase I clinical trials for GlycoPEG-GCSF. In March 2007, BioGeneriX initiated the second Phase I clinical trial for GlycoPEG-GCSF. We expect BioGeneriX to complete both Phase I clinical trials during 2007.

          We have also entered into two agreements with Novo Nordisk A/S to use our GlycoPEGylation technology to develop and commercialize next-generation versions of Factors VIIa, VIII and IX, one of which, Factor VIIa, is currently marketed by Novo Nordisk. In June 2007, Novo Nordisk initiated a Phase I clinical study for GlycoPEG-Factor VIIa. This trial will

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assess the safety and pharmacokinetics of GlycoPEG-Factor VIIa in healthy volunteers. Factor VIIa is used in the treatment of bleeding episodes and for the prevention of bleeding during surgery or invasive procedures in patients with congenital hemophilia with inhibitors to coagulation factors VIII or IX.

          We conduct exploratory research, both independently and with collaborators, on therapeutic candidates, primarily proteins, for development using our enzymatic technology. Successful candidates may be advanced for development through our own proprietary drug program or through our partnering and licensing program, or a combination of the two. Although our primary focus is the development of long-acting proteins (GlycoPEGylation), we are also conducting research to assess opportunities to use our enzymatic technology in other areas (Other Glycotechnology Programs), such as glycopeptides and glycolipids. The following chart sets forth our projects in each of these categories and the stage to which each has been developed:

		Development Stage		Status
GlycoPEGylation:
NE-180		Clinical (Phase II)		Active
GlycoPEG-GCSF		Clinical (Phase I)		Active
GlycoPEG-Factor VIIa		Clinical (Phase I)		Active
Other protein projects		Research/Preclinical		Active
Other Glycotechnology Programs:
Non-protein therapeutic applications		Research		Active
Nutritional applications		N/A		Evaluating
				outlicensing
				opportunities

          The process of bringing drugs from the preclinical research and development stage through Phase I, Phase II, and Phase III clinical trials to FDA or other regulatory approval is time consuming and expensive. Because our announced product candidates are currently in the early clinical and preclinical stages, and there are a variety of potential intermediate clinical and non-clinical outcomes that are inherent in drug development, we cannot reasonably estimate either the timing or costs we will incur to complete these research and development projects. In addition, the timing and costs to complete our research and development projects will be affected by the timing and nature of any collaboration agreements we may enter into with a third party, neither of which we can currently estimate.

          For each of our research and development projects, we incur both direct and indirect expenses. Direct expenses include salaries and other costs of personnel, raw materials, and supplies for each project. We may also incur third-party costs related to these projects, such as contract research, consulting and non-clinical development costs. Indirect expenses include depreciation expense and the costs of operating and maintaining our facilities, property, and equipment, to the extent used for our research and development projects, as well as the costs of general management of our research and development projects.

          Our research and development expenses during the three and six months ended June 30,

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2007 were $7.7 million and $17.6 million, respectively, compared to $7.1 million and $14.4 million for the corresponding periods in 2006. The increase in research and development expenses during the three months ended June 30, 2007, as compared to the same period in 2006 was primarily due to higher clinical and process development costs for NE-180, as well as, higher costs associated with our collaborations with Novo Nordisk and BioGeneriX. The increase in research and development expenses during the six months ended June 30, 2007 as compared to the 2006 period was primarily due to higher clinical and process development costs for NE-180. The following table illustrates research and development expenses incurred during the three and six months ended June 30, 2007 and 2006 for our significant groups of research and development projects (in thousands):

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
GlycoPEGylation		$	5,880			$	4,638			$	12,372			$	8,884
Other Glycotechnology Programs			3				181				38				333
Indirect expenses			1,859				2,232				5,144				5,145
		$	7,742			$	7,051			$	17,554			$	14,362

          GlycoPEGylation

          Our GlycoPEGylation expenses result primarily from development activities, including process, non-clinical and clinical development, associated with our proprietary drug development programs. These expenses increased during the 2007 periods primarily due to the initiation of the Phase II clinical trial for NE-180 and the outside manufacturing of NE-180.

          Other Glycotechnology Programs

          Research and development expenses related to our Other Glycotechnology Programs decreased during the 2007 periods compared to the 2006 periods due to lower payroll and decreased supplies for early stage research.

          Indirect expenses

          Indirect research and development expenses were consistent for the six months ended June 30, 2007 and 2006. Increased costs during the first quarter of 2007 related to the consolidation of our laboratories and offices in February 2007 were offset by lower payroll and supplies expenses for the second quarter of 2007.

     General and Administrative Expense

          General and administrative expenses decreased during the three and six months ended June 30, 2007 to $2.5 million and $5.5 million, respectively, from $3.1 and $6.0 million for the corresponding periods in 2006. These decreases were primarily due to lower legal costs associated with our intellectual property, payroll expenses, and stock-based compensation costs.

     Other Income and Expense

          In connection with the sale of our common stock and warrants to purchase shares of our common stock in March 2007, we recorded the warrants as a liability at their initial fair value using the Black-Scholes option-pricing model and revalue them at each reporting date until they are exercised or expire. Changes in the fair value of the warrants are reported in our Statements of Operations as non-operating income or expense. During the three months ended June 30, 2007, we recorded non-operating income of $1.9 million related to the change in fair value of these warrants. During the six months ended June 30, 2007, we recorded non-operating expense of $4.4 million related to the change in fair value of these warrants. The market price for our common stock has been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of these warrants.

          Interest income during the three and six months ended June 30, 2007 increased to $502,000 and $774,000, respectively, from $308,000 and $674,000 for the corresponding periods in 2006. The increase during the 2007 periods compared to the 2006 periods was primarily due to higher cash balances during the second quarter of 2007. Our interest income during the remainder of 2007 is difficult to project, and will depend largely on prevailing interest rates and whether we receive cash from entering into any new collaborative agreements or by completing any additional equity or debt financings during the year.

          Interest expense during the three and six months ended June 30, 2007 decreased to $48,000 and $88,000, respectively, from $325,000 and $633,000 for the corresponding periods in 2006. Lower average debt balances in the 2007 period accounted for the decrease. Our interest expense during the remainder of 2007 is difficult to project and will depend on whether we enter into any new debt agreements. See “Financing Activities – Debt Financing Activities” in the Liquidity and Capital Resources section of this Form 10-Q for a description of the material features of our debt financings.

          During the three months ended June 30, 2007, we sold Pennsylvania research and development tax credits, resulting in the recognition of $533,000 of income tax benefit.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Equity Price Risk

          We are exposed to certain risks arising from changes in the price of our common stock, primarily due to the potential effect of changes in fair value of the warrant liability related to the warrants issued in March 2007. The warrant liability is revalued at its current fair value using the Black-Scholes option-pricing model at each reporting date until the warrants are exercised or expire, and is subject to significant increases or decreases in value due to the effects of changes in the price of our common stock at period end and the related calculation of volatility. Changes in the fair value of warrants are reported in our Statements of Operations as non-operating income or expense.

     Foreign Exchange Risk

          We have entered into some agreements denominated, wholly or partly, in Euros or other foreign currencies, and, in the future, we may enter into additional, significant agreements

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denominated in foreign currencies. If the values of these currencies increase against the dollar, our costs would increase. To date, we have not entered into any contracts to reduce the risk of fluctuations in currency exchange rates. In the future, depending upon the amounts payable under any such agreements, we may enter into forward foreign exchange contracts to reduce the risk of unpredictable changes in these costs. However, due to the variability of timing and amount of payments under any such agreements, foreign exchange contracts may not mitigate the potential adverse impact on our financial results.

Item 4. Controls and Procedures

     Evaluation of disclosure controls and procedures

          We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such phrase is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (Exchange Act), as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, our management concluded that these controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, as amended, is recorded, processed, summarized and reported as specified in SEC rules and forms. There were no changes during our last fiscal quarter in these controls or procedures identified in connection with the evaluation, or in other factors that have materially affected, or are reasonable likely to materially affect, these controls or procedures.

     Changes in internal control over financial reporting

          There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

          Set forth below is a discussion of the material changes in our risk factors as previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2006 (“Form 10-K”).

          The information presented below updates, and should be read in conjunction with, the risk factors and other information disclosed in the Form 10-K.

     Developments in our product categories may adversely affect our ability to commercialize our product candidates.

          Our business focus is on the development of next-generation therapeutic proteins that we believe will be competitive with best-in-class protein drugs currently on the market. Because we seek to introduce products into already established markets, we are subject to the positive and negative effects of those marketplaces, including public and regulatory developments related to the product categories as a whole. For instance, the success of a large number of competitive products in our product categories would likely reduce or eliminate the commercial opportunity for our product candidates. (See the risk factor in our Form 10-K entitled “Our competitors may develop better or more successful products.”) Likewise, the failure or negative results of products similar to ours could diminish the commercial opportunity for our product candidates by, among other factors, increasing public safety concerns or imposing governmental restrictions applicable to all products in the drug category. Failed or less than favorable clinical trial results of other drugs in our product categories could adversely affect our ability to gain regulatory approval of our product candidates by increasing government examination and complexity of clinical trials. Government and public concerns over safety issues associated with pharmaceutical and biological products could potentially result in termination of clinical trials on entire classes of drug candidates, lengthen the trial process for product categories, increase legal and production costs relating to certain drug categories, and/or expand the safety labeling for approved products. (See the risk factor in our Form 10-K entitled “Non-clinical and clinical trial results for our products may not be favorable.”)

          One of our lead product candidates, NE-180, is an erythropoiesis-stimulating agent (ESA), a drug category that has been subject to increased scrutiny by regulatory authorities due to results from clinical trials conducted on ESA drug products that showed increased risk of death and serious cardiovascular events. On March 9, 2007, the FDA announced revised product labeling for ESAs, including updated warnings, a new boxed warning and modifications to dosing instructions. In May 2007, the FDA held a meeting of the Oncologic Drugs Advisory Committee (ODAC) to review the safety of ESAs based on the results of certain clinical studies. Following its May 2007 meeting, ODAC recommended that the FDA issue restrictions on the usage of currently marketed ESAs, including limitations on the treatment of certain types of cancer and the duration of treatment. In April 2007, the European Medicines Agency (EMEA) announced that it is reviewing the safety of all centrally-authorized EPOs, and the FDA has scheduled a September 2007 joint meeting of the Cardiovascular and Renal Drug Advisory Committee and the Drug Safety and Risk Management Advisory Committee to discuss the risks and benefits of ESAs. Some U.S. insurers have recently announced plans to limit payments for certain anemia medications, including EPO. (For further discussion on the impact of medical reimbursement policies on our product candidates, see the risk factor in our 10-K entitled

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“Third-party reimbursement for our collaborators’ or our future product candidates may not be adequate.”) Any changes in product labeling and reimbursement policies, and any further regulatory action by the FDA, EMEA or other governmental agencies (including any further revisions to labeling), could adversely affect the conduct of our clinical trials and the commercialization opportunities for our drug candidates.

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

     Our Annual Meeting of Stockholders was held on May 4, 2007.

     The motions before stockholders were:

     1. The election of seven directors for a one-year term or until the election and qualification of their successors.

		Votes				Votes				Votes								Broker
Name of Director		For				Against				Withheld				Abstentions				Nonvotes
Brian H. Dovey			44,081,788				—				216,708				—				—
L. Patrick Gage, Ph.D.			44,135,267				—				163,229				—				—
William F. Hamilton, Ph.D.			44,135,067				—				163,429				—				—
Douglas J. MacMaster, Jr.			44,094,188				—				204,308				—				—
H. Stewart Parker			43,822,647				—				475,849				—				—
Mark H. Rachesky, M.D.			41,937,221				—				2,361,275				—				—
George J. Vergis, Ph.D.			44,120,367				—				178,129				—				—

     2. The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2007.

Votes For			44,279,332
Votes Against			5,100
Votes Withheld			—
Abstentions			14,065
Broker Nonvotes			—

     3. An amendment to our 2004 Equity Incentive Plan to increase the number of shares issuable under the plan by 1,000,000 shares.

Votes For			33,673,908
Votes Against			206,547
Votes Withheld			—
Abstentions			14,347
Broker Nonvotes			10,403,695

     4. An amendment of our certificate of incorporation to increase the number of shares of Common Stock authorized for issuance by us from 75,000,000 to 150,000,000 and to increase the number of shares of Series A Junior Participating Preferred Shares authorized for issuance by us from 300,000 to 1,500,000.

Votes For			31,404,673
Votes Against			2,466,849
Votes Withheld			—
Abstentions			23,280
Broker Nonvotes			10,403,695

     Accordingly, all of the matters voted upon by the stockholders were approved, and all of the nominees for election as directors were elected.

Item 6. Exhibits

3.1*		First Amendment of the Fourth Amended and Restated Certificate of Incorporation.
10.1††		Neose Technologies, Inc. 2004 Equity Incentive Plan, as amended (Exhibit 99.1)(1)
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

Exhibit Index

Exhibit		Description
3.1		First Amendment of the Fourth Amended and Restated Certificate of Incorporation.
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.