This management's discussion and analysis of financial condition and results of operations and other portions of this filing contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking information. Factors that may cause such differences include, but are not limited to, availability and cost of financial resources, results of our research and development efforts and clinical trials, product demand, market acceptance and other factors discussed below and in our other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2011. See also the Risk Factors discussed under Item 1A of such Annual Report. This management's discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the year ended December 31, 2011.

OVERVIEW

We are a clinical-stage biotechnology company with a focus on oncology indications. Our lead drug candidate, CBLB502, is being developed for dual indications as a radiation countermeasure under an FDA regulation commonly referred to as the "Animal Rule", and as an anti-cancer agent and an oncologic supportive care therapy under the FDA's traditional drug approval pathway. We anticipate that CBLB502, upon licensure as a radiation countermeasure, will be sold to the U.S. government for the national stockpile and other defense-related purposes, allied foreign governments and the nuclear energy industry, and upon licensure as an anti-cancer agent, will be sold to the public through traditional channels.

Since our inception, we have pursued the research, development and commercialization of products that have the potential to evidence direct anti-cancer activity, prevent and treat acute radiation syndrome and counteract the toxic effects of radio and chemotherapies for oncology patients. Presently, we have nine product candidates in our pipeline that are being developed directly by us and our majority-owned subsidiaries, Incuron, LLC ("Incuron") and Panacela Labs, Inc. ("Panacela").

In addition to CBLB502, our product pipeline includes: CBLB612, an inducer and mobilizer of hematopoietic stem cells; the Curaxin line of anti-cancer product candidates being developed by Incuron, which specifically include CBLC102, a nonproprietary molecule originally used to combat the effects of malaria, which we have identified as having direct anti-cancer properties and CBLC137, a new, proprietary molecule that leverages similar mechanisms of action in combating cancer, and five preclinical product candidates being developed by Panacela (Revercom, Mobilan, Arkil, and Antimycon for anti-cancer applications and Xenomycins for anti-infective applications).

See "Item 1. Business" in our Annual Report on Form 10-K for the year ended December 31, 2011 for more information on our product candidates.

Critical Accounting Policies and Significant Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, income taxes, stock-based compensation, investments and in-process research and development. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates.

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2011. Other than as set forth below, our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

Fair Value of Financial Instruments

We use the Black-Scholes model to determine the fair value of certain common stock warrants on a recurring basis and classify such warrants in Level 3. The Black-Scholes model utilizes inputs consisting of: (i) the closing price of our common stock; (ii) the expected remaining life of the warrants; (iii) the expected volatility using a weighted average of historical volatilities of CBLI and a group of comparable companies; and (iv) the risk-free market rate.

As of March 31, 2012, we held approximately $12.2 million in money market funds, classified as a Level 1 security, and held approximately $5.6 million in accrued expenses classified as a Level 3 security, primarily related to warrants to purchase common stock.

Recently Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820) ("ASU 2011-04"), which contains amendments to achieve common fair value measurement and disclosures in U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 explains how to measure fair value for financial reporting. The guidance does not require fair value measurements in addition to those already required or permitted by other Topics. This ASU was effective for the Company beginning January 1, 2012. The adoption of ASU 2011-04 did not have a material effect on the Company's consolidated results of operations, financial position or liquidity, but did require expanded disclosures as set forth in Note 3, Fair Value of Financial Instruments in the financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income ("ASU 2011-05"). This guidance is intended to increase the prominence of other comprehensive income in financial statements by presenting it in either a single statement or two-statement approach. This ASU was effective for the Company beginning January 1, 2012. The adoption of ASU 2011-05 did not have a material effect on the Company's consolidated results of operations, financial position or liquidity. The Company elected to present comprehensive income in two separate but consecutive statements as part of the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Revenue

Revenue decreased from approximately $2.5 million for the three months ended
March 31, 2011 to approximately $0.9 million for the three months ended March 31
2012, representing a decrease of approximately $1.5 million, or 62%.  This
decrease was due to decreases in research sponsored by the U.S. Department of
Defense ("DoD"), the Defense Threat Reduction Agency ("DTRA"), and the U.S.
Department of Health and Human Services ("HHS"), as set forth in the following
table:

                                                                 Three Months Ended March 31,
     Funding Source                    Program                   2012                  2011             Variance

          DoD                    CBMS-MITS Contract          $     879,834       $      1,875,134     $   (995,300 )
          DTRA                      DTRA Contract                   51,563                356,887         (305,324 )
          HHS                      BARDA Contract                        -                237,748         (237,748 )
     NY State/RPCI          Sponsored Research Agreement                 -                  4,213           (4,213 )

                                                             $     931,397       $      2,473,982     $ (1,542,585 )

Research and Development Expenses

Research and development expenses increased from approximately $5.7 million for the three months ended March 31, 2011 to approximately $6.0 million for the three months ended March 31, 2012, representing an increase of approximately $0.3 million, or 5%. This increase was primarily due to programs relating to Panacela Compounds and CBLB612 that were not active for the three month period ended March 31, 2011. These programs, in the aggregate, accounted for approximately $1.0 million of the growth in research and development expenses. We also experienced an increase in research and development expenses for CBLB502
- Oncology, as we began our Advanced Cancer Trial at Roswell Park Cancer Institute ("RPCI"). These increases were partially offset by a decline in spending related to CBLB502-ARS, as we complete development work and commence pivotal studies.

                                          Three Months Ended March 31,
                                             2012                2011          Variance

 CBLB502 - ARS                          $     3,806,968       $ 4,504,932     $ (697,964 )
 Curaxins                                     1,030,303         1,121,628        (91,325 )
 General                                              -            59,603        (59,603 )
 Panacela Compounds                             665,579                 -        665,579
 CBLB612                                        286,749                 -        286,749
 CBLB502 - Oncology                             196,202            22,770        173,432

Total research & development expenses   $     5,985,801       $ 5,708,933     $  276,868

General and Administrative Expenses

General and administrative costs increased from approximately $1.9 million for the three months ended March 31, 2011 to approximately $2.4 million for the three months ended March 31, 2012. This represents an increase of approximately $0.5 million or 29%. Approximately $0.3 million, or 55%, of this increase was related to the general and administrative expenses of our new subsidiary Panacela, which commenced operations in the fourth quarter of 2011. The remaining increase of approximately $0.2 million, or 45% of the increase, was related to a variety of cost increases between the periods, none of which were individually significant, including: increases in personnel costs, travel and professional fees related to business development and investor relation activities, and an increase in outside finance and legal fees in part related to improved financial reporting systems, controls and general corporate governance.

Other Income and Expenses

Other income increased from a net expense of approximately $0.6 million for the three months ended March 31, 2011 to net income of approximately $1.1 million for the three months ended March 31, 2012, representing an increase of approximately $1.7 million, or 271%. This increase was primarily attributable to the periodic fair valuation of the Company's warrant liability which generated non-cash income of approximately $1.7 million for the three months ended March 31, 2012 as compared to non-cash expense of approximately $0.7 million for the three months ended March 31, 2011, for a total increase of approximately $2.4 million between the periods. This increase was partially offset by an increase in foreign currency exchange losses between the periods of approximately $0.7 million.

Liquidity and Capital Resources

At March 31, 2012, we had approximately $18.1 million in cash and cash equivalents and $5.5 million in short-term investments, along with accounts receivable of approximately $0.8 million, and approximately $1.8 million in funded backlog from the federal government. On April 30, 2012, we announced that the Russian Federation opened an IND for CBLC137 which is a funding milestone for our Incuron subsidiary, and we expect Incuron will receive 194 million Russian Rubbles during the second quarter of 2012, or approximately $6.6 million at current exchange rates. Additionally, Incuron has approximately $4.0 million (based on current exchange rates) of unfunded backlog available to it under its development grant from Skolkovo.

We are also in active discussions with BARDA and DoD for continued funding of our research and development of CBLB502 as a medical countermeasure for acute radiation syndrome. In addition, we are actively responding to all other contract and grant award possibilities we believe appropriate. However, there can be no assurance that any of these contract and grant award applications will result in funding.

Operating Activities

Net cash used in operations increased from approximately $0.8 million for the three months ended March 31, 2011 to approximately $4.8 million for the three months ended March 31, 2012, representing an increase of approximately $3.9 million, or 469%. After adjusting for non-cash items, the net loss increased by approximately $2.9 million between the periods and the changes in working capital items netted an additional cash usage of approximately $1.0 million.

Investing Activities

Net cash used in investing activities decreased from approximately $1.7 million during the three months ended March 31, 2011 to approximately $82,000 during the three months ended March 31, 2012, representing a decrease of approximately $1.6 million, or 95%. For the three months ended March 31, 2012, the net cash used in investing activities was limited to the purchase of equipment of approximately $82,000. For the three months ended March 31, 2011, the net cash used in investing activities included the purchase of short-term investments of approximately $1.4 million, equipment of approximately $168,000, and patents of approximately $120,000. As discussed in Note 2 to the audited financial statements included in our Annual Report on Form 10-K, we adopted a more restrictive standard of capitalization of intellectual property costs during the quarter ended September 30, 2011.

Financing Activities

For the three months ended March 31, 2012, cash flows from financing activities were negligible. For the three months ended March 31, 2011, cash provided by financing activities included an investment in Incuron of approximately $2.3 million by the non-controlling interest holder in such subsidiary and the exercise of options and warrants for approximately $1.2 million, for a total of cash provided by financing operations of approximately $3.5 million.

Other

We have incurred cumulative net losses and expect to incur additional losses to perform further research and development activities. We do not have commercial products and have limited capital resources. We will need additional funds to complete the development of our products. Our plans with regard to these matters may include seeking additional capital through a combination of government contracts, collaborative agreements, strategic alliances, research grants, and future equity and debt financing. Although we continue to pursue these plans, there is no assurance that we will be successful in obtaining future financing on commercially reasonable terms or that we will be able to secure funding from anticipated government contracts and grants.

We believe that our existing funds combined with cash flows from existing government grants and contracts will be sufficient to support our operations into 2013. The success of our company is dependent upon commercializing our research and development programs and our ability to obtain adequate future financing. If we are unable to raise adequate capital and/or achieve profitable operations, future operations might need to be scaled back or discontinued. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets and liabilities that might result from the outcome of these uncertainties.

Impact of Inflation

We believe that our results of operations are not dependent upon moderate changes in inflation rates.

Impact of Exchange Rate Fluctuations

From time-to-time, our operations are somewhat dependent upon changes in foreign currency exchange rates, however at March 31, 2012, we were not obligated to make payments in foreign currencies.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.