UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 30, 2007
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No: 000-51436

ADVANCED LIFE SCIENCES HOLDINGS, INC.(Exact name of registrant as specified in its charter)

DELAWARE	30-0296543
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification no.)

1440 Davey Road

Woodridge, IL 60517

(Address, including zip code of registrants principal executive offices)

Registrant’s telephone number: (630) 739-6744

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  x    No  o

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

Large accelerated filer o     Accelerated filer  o     Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o     No x

As of  November 13, 2007, the registrant had 28,301,677 shares of common stock, $0.01 par value per share, outstanding.

ADVANCED LIFE SCIENCES HOLDINGS, INC.

(A DEVELOPMENT STAGE ENTITY)

INDEX

Form 10-Q

	PART I — FINANCIAL INFORMATION (UNAUDITED)
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and 2006 and for the period from inception (January 1, 1999) through September 30, 2007
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for period from inception (January 1, 1999) through September 30, 2007
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 and for the period from inception (January 1, 1999) through September 30, 2007
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
	PART II — OTHER INFORMATION
Item 5.	Other Information
Item 6.	Exhibits
Signatures
Exhibit Index

1

PART I — FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements (Unaudited)

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,429,484		$	27,054,947
Prepaid insurance	357,219			380,083
Prepaid clinical trial expenses	2,160,667			2,364,512
Other prepaid expenses and deposits	131,718			273,572
Total current assets	9,079,088			30,073,114
PROPERTY AND EQUIPMENT:
Furniture and fixtures	221,418			250,308
Laboratory equipment	159,186			142,928
Computer software and equipment	242,707			231,022
Leasehold improvements	177,253			182,839
Total property and equipment—at cost	800,564			807,097
Less accumulated depreciation	(492,350		)	(398,486		)
Property and equipment—net	308,214			408,611
OTHER LONG-TERM ASSETS:
Deferred financing costs	6,626			26,502
Other assets	1,452			1,452
Total other long-term assets	8,078			27,954
TOTAL ASSETS	$	9,395,380		$	30,509,679
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	3,499,280		$	1,011,396
Accrued clinical trial expenses	3,651,070			1,410,894
Other accrued expenses	639,014			226,881
Accrued interest payable	22,022			22,756
Short-term lease payable	8,024			19,437
Short-term grant payable	476,708			476,708
Short-term notes payable - related party	2,000,000			2,000,000
Short-term notes payable - net of $2,816 debt discount	3,912,184			—
Total current liabilities	14,208,302			5,168,072
Long-term lease payable	14,736			20,076
Long-term grant payable	23,292			23,292
Notes payable - net of $11,266 debt discount	—			3,903,734
Total liabilities	14,246,330			9,115,174
COMMITMENTS AND CONTINGENCIES:
Minority Interest	—			—
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.01 par value—60,000,000 shares authorized;
September 30, 2007 28,294,677 issued and outstanding; December 31, 2006 28,282,677 shares issued and outstanding;	282,947			282,827
Additional paid-in capital	88,922,093			88,370,853
Deficit accumulated during the development stage	(94,055,990		)	(67,259,175		)
Total stockholders’ equity (deficit)	(4,850,950		)	21,394,505
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	9,395,380		$	30,509,679

See notes to unaudited condensed consolidated financial statements.

2

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													Period From
													Inception
													(January 1, 1999)
	Three months ended						Nine months ended						Through
	September 30,						September 30,						September 30,
	2007			2006			2007			2006			2007
Revenue:
Management fees	$	—		$	—		$	—		$	—		$	1,161,180
Grants	—			—			—			35,127			1,035,571
Royalty—related party	—			—			—			—			45,238
Total revenue	—			—			—			35,127			2,241,989
Expenses:
Research and development	3,838,184			5,730,269			21,722,174			11,569,685			70,857,523
Contracted research and development— related party	—			—			—			—			7,980,299
Selling, general and administrative	2,004,357			1,489,502			5,362,769			3,977,514			18,455,282
Total expenses	5,842,541			7,219,771			27,084,943			15,547,199			97,293,104
Loss from operations	(5,842,541		)	(7,219,771		)	(27,084,943		)	(15,512,072		)	(95,051,115		)
Other (income) expense:
Interest Income	(117,332		)	(466,475		)	(638,396		)	(1,267,433		)	(2,562,528		)
Interest expense	116,998			120,649			350,268			393,526			2,506,455
Gain on sale of interest in Sarawak Medichem Pharmaceuticals joint venture	—			—			—			—			(939,052		)
Net other income	(334		)	(345,826		)	(288,128		)	(873,907		)	(995,125		)
Net loss	(5,842,207		)	(6,873,945		)	(26,796,815		)	(14,638,165		)	(94,055,990		)
Less accumulated preferred dividends for the period	43,750			43,750			131,250			131,250			1,451,042
Net loss available to common shareholders	$	(5,885,957	)	$	(6,917,695	)	$	(26,928,065	)	$	(14,769,415	)	$	(95,507,032	)
Basic and diluted net loss per share available to common shareholders	$	(0.21	)	$	(0.24	)	$	(0.95	)	$	(0.57	)
Weighted average number common shares outstanding- basic and diluted	28,294,677			28,268,247			28,292,150			25,962,479
See notes to unaudited condensed consolidated financial statements.

3

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE PERIOD FROM INCEPTION (JANUARY 1, 1999) THROUGH SEPTEMBER 30, 2007

(Unaudited)

								Deficit
								Accumulated
						Additional		During the
	Common Stock					Paid-in		Development
	Shares		Amount			Capital		Stage			Total
BALANCE—January 1, 1999 (inception)	—		$	—		$	—	$	—		$	—
Issuance of stock (since inception)	1,588,000		250,000								250,000
Compensation expense related to stock options (since inception)						15,097					15,097
Capital contributions (since inception)	—		—			10,415,599		—			10,415,599
Net loss (since inception)	—		—			—		(13,087,375		)	(13,087,375		)
BALANCE—December 31, 2003	1,588,000		250,000			10,430,696		(13,087,375		)	(2,406,679		)
Issuance of common stock at $0.157 per share	41,685		6,563			—		—			6,563
Compensation expense related to stock options	—		—			5,604		—			5,604
Exchange of shares under recapitalization	(1,629,685	)	(256,563		)	—		—			(256,563		)
Issuance of shares under recapitalization	9,482,015		94,820			161,743		—			256,563
Capital contributions	—		—			2,295,731		—			2,295,731
Issuance of 14,887 warrants	—		—			11,898		—			11,898
Issuance of common stock in exchange for licenses	1,122,569		11,226			8,988,774		—			9,000,000
Net loss	—		—			—		(27,186,918		)	(27,186,918		)
BALANCE—December 31, 2004	10,604,584		106,046			21,894,446		(40,274,293		)	(18,273,801		)
Issuance of common stock, net of offering costs	6,721,814		67,218			29,210,558		—			29,277,776
Issuance of stock related to option exercises	63,924		639			14,240		—			14,879
Compensation expense related to stock options	—		—			696,204		—			696,204
Issuance of common stock in exchange for reduction of milestones payable	600,000		6,000			3,000,000		—			3,006,000
Modification of 14,887 warrants	—		—			18,925		—			18,925
Net loss	—		—			—		(6,444,246		)	(6,444,246		)
BALANCE—December 31, 2005	17,990,322		179,903			54,834,373		(46,718,539		)	8,295,737
Issuance of common stock, net of offering costs	10,233,464		102,335			33,266,653		—			33,368,988
Issuance of stock related to option exercises	58,891		589			8,656		—			9,245
Compensation expense related to stock options	—		—			261,171		—			261,171
Net loss	—		—			—		(20,540,636		)	(20,540,636		)
BALANCE—December 31, 2006	28,282,677		$	282,827		$	88,370,853	$	(67,259,175	)	$	21,394,505
Issuance of stock related to option exercises	12,000		120			1,764		—			1,884
Compensation expense related to stock options	—		—			549,476		—			549,476
Net loss	—		—			—		(26,796,815		)	(26,796,815		)
BALANCE—September 30, 2007	28,294,677		$	282,947		$	88,922,093	$	(94,055,990	)	$	(4,850,950	)
See notes to unaudited condensed consolidated financial statements.

4

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							Inception
							(January 1, 1999)
	Nine months ended						Through
	September 30,						September 30,
	2007			2006			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(26,796,815	)	$	(14,638,165	)	$	(94,055,990	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	157,072			80,959			573,091
Non-cash interest expense	28,326			28,326			91,381
Stock compensation expense	549,476			189,388			1,527,552
Non-cash research and development	—			—			24,466,667
Non-cash settlement of milestone payment	—			—			6,000
Gain on sale of interest in Sarawak Medichem Pharmaceuticals (SMP)	—			—			(939,052		)
Loss on disposal	1,761			—			13,294
Changes in operating assets and liabilities:
Clinical supplies	—			—			533,333
Accounts receivable, related party	—			6,160			—
Prepaid expenses	368,563			(3,081,909		)	(2,649,604		)
Other assets	—			4,610			(1,452		)
Accounts payable	2,487,884			277,110			3,499,280
Accrued expenses	2,652,309			1,616,640			4,290,084
Licenses payable	—			—			(11,000,000		)
Accrued interest on debt	(734		)	(770,848		)	600,085
Net cash flows from operating activities	(20,552,158		)	(16,287,729		)	(73,045,331		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(58,436		)	(258,645		)	(730,348		)
Proceeds from the sale of SMP	—			—			939,052
Proceeds from the sales of investments	—			14,807,158			31,557,158
Purchase of investments	—			(4,332,158		)	(31,557,158		)
Net cash flows from investing activities	(58,436		)	10,216,355			208,704
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and capital contributions	—			33,368,988			69,856,339
Proceeds from issuance of notes payable	—			3,915,000			12,933,691
Payments on notes payable	—			(3,915,000		)	(3,915,000		)
Proceeds from grants	—			—			500,000
Proceeds from stock options exercised	1,884			7,082			32,571
Payments on capital leases	(16,753		)	(12,286		)	(141,490		)
Net cash flows from financing activities	(14,869		)	33,363,784			79,266,111
NET (DECREASE) INCREASE IN CASH	(20,625,463		)	27,292,410			6,429,484
CASH—Beginning of period	27,054,947			4,749,932			—
CASH—End of period	$	6,429,484		$	32,042,342		$	6,429,484
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest	$	310,077		$	1,147,031		$	1,806,300
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Noncash investment activity:
Purchase of property and equipment under capital leases	$	—		$	29,693		$	164,249
Capital expenses included in accounts payable	—			14,404			—
Noncash financing activity:
Issuance of common shares for licenses	—			—			9,000,000
Issuance of common shares for reduction of milestone payment	—			—			3,000,000
Cost of proceeds	—			—			—
Debt discount	—			—			30,823
Deferred financing costs	$	—		$	—		$	30,000

See notes to unaudited condensed consolidated financial statements.

5

ADVANCED LIFE SCIENCES HOLDINGS, INC
( A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

(UNAUDITED)

1. Summary of Significant Accounting Policies

           Nature of Business-Advanced Life Sciences Holdings, Inc. and its subsidiary Advanced Life Sciences, Inc. (together, the “Company”) conduct new drug research and development in the fields of infectious disease, oncology and inflammation.  Since inception, the Company has devoted substantially all of its efforts to activities such as financial planning, capital raising and product development, and has not derived significant revenues from its primary business activity.  Accordingly, the Company is in the development stage, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises.

           Basis of Presentation-The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, unless otherwise noted herein, necessary to present fairly the results of operations, financial position and cash flows have been made.  Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s most recent audited financial statements for the year ended December 31, 2006 and notes thereto. The condensed consolidated financial statements include the accounts of the Advanced Life Sciences Holdings, Inc. and its wholly-owned subsidiary Advanced Life Sciences, Inc. (“ALS Inc.”)  All intercompany balances and transactions have been eliminated.  The results of operations for any interim period are not necessarily indicative of the results of operations expected for the full year.

           The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and liquidation of liabilities in the ordinary course of business.  However, as a result of the Company’s continued losses and current cash and financing position, such realization of assets or liquidation of liabilities, without substantial adjustments is uncertain.  Given this uncertainty, there is significant doubt as to the Company’s ability to continue as a going concern.

           Business and Credit Risks- The Company is subject to risks and uncertainties common to drug discovery companies, including technological change, potential infringement on intellectual property of third parties, new product development, regulatory approval and market acceptance of its products, activities of competitors and its limited operating history.

           The Company has incurred losses since its incorporation in January 1999.  The Company has funded its operations to date primarily from debt financings and capital contributions from its founder and Chief Executive Officer, proceeds from the initial public offering of its common stock and the subsequent sale of its common stock in a private placement.  The Company will not be generating revenues or realizing cash flows from operations in the near term, and will require additional equity or debt financing to meet working capital needs, to fund operating losses associated with research and development and to fund clinical trials.  In order to address its working capital shortfall the Company intends to raise additional capital during 2007 through the issuance of equity securities or through the receipt of milestone payments which would be paid as a result of consummating a commercial partnership for cethromycin, or a combination of both.  Although management believes the Company could obtain such financing, there can be no assurances that such financing will be available in the future at terms acceptable to the Company, if at all.  If the Company raises additional capital by issuing equity securities; its stockholders could experience substantial dilution.  The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

6

2. Private Placement

In March 2006, the Company completed the private placement of 10,233,464 shares of its common stock to a group of institutional investors at $3.53 per share, resulting in gross proceeds of $36.1 million.  In addition to the shares sold, the Company issued warrants to purchase 5,116,732 shares of its common stock at a price of $3.81 per share.  The warrants became exercisable upon issuance and will expire five years from the date of grant.  The warrants contain the right, at the discretion of the purchaser, to convert into common stock through a net exercise provision.  The Company has recorded the issuance of the warrants as a permanent component of equity.  In connection with the offering, the Company paid approximately $2.5 million in underwriting discounts and incurred other offering expenses of approximately $226,000. The net cash proceeds from the offering were approximately $33.4 million.

3. Related Party Transactions

           The Company’s Chief Executive Officer, Michael T. Flavin Ph.D., loaned $2.0 million to the Company in 2001 (see Note 4).  Interest expense of $116,000 and $136,000 was recorded for the nine months ended September 30, 2007 and 2006, respectively, related to the note.

           The Company’s line of credit is secured by substantially all of the Company’s assets, except that the collateral specifically excludes any rights that the Company has as a result of its license agreement with Abbott Laboratories for cethromycin, and is further secured by 2.5 million shares of the Company’s stock held by ALS Ventures, LLC (see Note 4), which is beneficially owned by the Company’s Chief Executive Officer.

           The Company leases facilities from the BioStart Property Group, LLC. (“BioStart”), a wholly-owned subsidiary of Flavin Ventures, which is owned by the Company’s Chief Executive Officer.  Lease payments totaled approximately $206,000 and $187,000 for the nine months ended September 30, 2007 and 2006, respectively.

4. Debt Obligations

           In September 2001, the Company incurred indebtedness under a $2.0 million promissory note with the Chief Executive Officer of the Company, which bears interest at 7.75%.  Accrued but unpaid interest is added to the outstanding principal annually.  Principal plus accrued interest is due in a lump sum on December 31, 2007.  In May 2006, the Company’s Board of Directors authorized the payment of accumulated interest on the loan with the Chief Executive Officer, totaling $837,000. The authorization also provides for monthly payments of accumulated interest until the loan matures on December 31, 2007.  As of September 30, 2007 and December 31, 2006, the Company had $2.0 million outstanding under the note.

           The Company has a $4.0 million line of credit with a financial institution.  Interest under the line is payable monthly at a fixed interest rate of 6.75% per annum, and outstanding principal and interest are payable on January 1, 2008.  The line of credit is secured by substantially all of the Company’s assets, except that the collateral specifically excludes any rights that the Company has a result of its license agreement with Abbott Laboratories for cethromycin.  The line of credit is further secured by 2.5 million shares of the Company’s common stock held by ALS Ventures, LLC.  As of September 30, 2007 and December 31, 2006, the Company had $3.9 million outstanding under the note.  In connection with the line of credit, the financial institution received a warrant entitling it to purchase 14,887 shares of the Company’s common stock at an exercise price of $5.00 per share, subject to certain adjustments.  The warrant is immediately exercisable and will terminate, if not exercised, on December 21, 2009. The warrant was valued, using the Black-Scholes option pricing model, at $27,000. The amount was recorded as a discount to the related debt and is being amortized to interest expense over the term of the debt.

7

5.Commitments

           Vendor Contracts- The Company administers its cethromycin development program largely under contracts with third parties.  To date, contracts totaling $40.9 million have been executed related to the cethromycin program, which includes anthrax related studies.  The remaining balance of $9.2 million is expected to be paid over the next six months.  In addition, to date the Company has executed $423,000 in contracts related to the ALS-357 program, of which the majority of the remaining balance of $202,000 is expected to be paid in 2007.

           Grant Payable- In April 2005, the Company was awarded a $500,000 grant from the State of Illinois to fund expansion of its corporate headquarters in Woodridge, Illinois.  Under the terms of the grant, the Company is to utilize the funds for construction costs associated with expanding its corporate headquarters and create 100 full-time jobs at the same location between January 31, 2005 and June 30, 2007 (“grant period”).  During the second quarter of 2007 the period in which construction costs could be expended was extended six months to December 31, 2007 and the period that the Company has to create 100 full time jobs was extended 3.5 years to December 31, 2010.  Funds that are not expended in a manner consistent with the grant award are to be repaid at the end of the grant period.  In addition, if the Company does not create the specified number of full-time jobs, it is required to repay the grant proceeds on a pro-rata basis of actual jobs created compared to the total defined in the grant.  As of September 30, 2007 the Company classified approximately $477,000 of the grant proceeds as a short term liability based upon the actual costs of the facility expansion incurred and the number of jobs created during the grant period.  The remaining $23,000 has been classified as a long-term liability as the Company must maintain the positions created during the grant period through December 31, 2010.  If the Company does not maintain the positions created until December 31, 2010, it will owe the State of Illinois grant proceeds equal to a pro-rata share of the positions that were retained as compared to the total created during the grant period.

6.Minority Interest

           The Series A preferred stock (“Series A Preferred Stock”) of the Company’s  subsidiary, ALS, Inc., is held by deCODE Genetics (“deCODE”) as a result of ALS Inc.’s spin-off from MediChem Life Sciences in January 1999, and MediChem’s subsequent acquisition by deCODE Genetics in March 2002. deCODE provides analytical services to the Company on an as needed basis.

           As of September 30, 2007, ALS Inc. had 250,000 shares of Series A Cumulative Preferred Stock authorized, issued and outstanding to deCODE. The Series A Preferred Stock is nonvoting except as to certain matters including the issuance of any class of stock ranking prior to the shares of Series A Preferred Stock, or the merger or consolidation of ALS Inc. if such merger would adversely affect the powers, preferences or rights of the Series A Preferred Stock. The Series A Preferred stockholder is entitled to receive dividends payable in cash at the rate of 7.0% per annum per share on the amount of liquidation preference of the shares.  Dividends are only payable when, as and if declared by our board of directors.

7.Stock Option Grants

           For the nine months ended September 30, 2007 and 2006, the Company granted stock options to purchase up to 739,300 and 300,790 shares of common stock, respectively, to certain employees and scientific advisory board members and directors. The exercise price of the options was the market price of the Company’s common stock on the date of grant.  The Company recognized compensation expense totaling approximately $184,000 and $72,000 for the three months ended September 30, 2007 and 2006, respectively and $549,000 and $189,000 for the nine months ended September 30, 2007 and 2006, respectively, in accordance with SFAS No. 123 (R), Share based Payment.

8. Net Loss Per Share

           Basic loss per share is computed by dividing net loss by the number of weighted average common shares outstanding during the reporting period.  Diluted loss per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period.  The computation of diluted shares outstanding for the periods ended September 30, 2007 and 2006 excludes incremental shares of 6,995,119 and 6,254,965, related to employee stock options and warrants.  These shares are excluded due to their anti-dilutive effect as a result of the Company’s losses for the periods ended September 30, 2007 and 2006.

8

9.Income Taxes

In 2006, the Financial Accounting Standards Board issued Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”).  FIN 48 requires reporting of taxes based on tax positions which meet a more likely than not standard and which are measured at their more likely than not settlement.  Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits.  FIN 48 also provides guidance on the presentation of tax matters and the recognition of potential IRS interest and penalties.

           The provisions of FIN 48 became effective on January 1, 2007, and had no effect on the Company’s financial position, cash flows or results of operations upon adoption as the Company does not have any unrecognized tax benefits.  The Company also evaluated its tax positions as of September 30, 2007 and reached the same conclusion.

           The Company classifies penalty and interest expense related to income tax liabilities as an income tax expense. There are no interest and penalties recognized in the statement of operations or accrued on the balance sheet.

           The Company files tax returns in the US, and in the state of Illinois.  The tax years 2003 through 2006 remain open to examination by the major taxing jurisdictions to which the Company is subject.

10. Recent Accounting Pronouncements

           In March 2007, the Emerging Issues Task Force (“EITF”) issued a tentative conclusion on EITF 07-03, “ Accounting for Advance Payments for Goods or Services to Be Used in Future Research and Development “ and the FASB ratified the tentative conclusion.  EITF 07-03 addresses the diversity which exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. Under this conclusion, an entity would defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-03 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007. The Company does not expect the adoption of EITF 07-03 to have a material impact on its consolidated financial statements.

9

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

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel drugs in the areas of infectious disease, oncology and inflammation.  Using our internal discovery capabilities and our network of pharmaceutical and academic partners, we have assembled a promising pipeline of clinical and preclinical product candidates.  Our most advanced product candidate, cethromycin, is a second generation ketolide antibiotic in Phase III clinical development for the treatment of respiratory tract infections.  We also have product candidates in earlier stages of development for the treatment of indications including inflammation-related tissue damage and malignant melanoma.

None of our product candidates have been approved by the United States Food and Drug Administration (“FDA”) or any comparable foreign agencies, and we have not generated any significant revenues to date.  Our ability to generate revenues in the future will depend on our ability to meet development or regulatory milestones under any license agreements that trigger payments to us, to enter into new license agreements for other products or territories and to receive regulatory approvals for, and successfully commercialize, our product candidates either directly or through commercial partners.

Since our inception we have incurred net losses each year.  Our net loss for the nine months ended September 30, 2007 was $26.8 million.  As of September 30, 2007, we had an accumulated deficit of $94.1 million.  Our operations to date have been funded principally through proceeds from our initial public offering (“IPO”) in August 2005, our private placement in March 2006, debt and capital contributions made by our Chief Executive Officer and borrowings under our bank line of credit.  We currently do not have sufficient cash or other funding available to complete our anticipated business activities during 2007.  As a result, there is significant doubt about our ability to continue as a going concern.

In December 2005, we initiated two pivotal Phase III clinical trials for cethromycin which compare cethromycin with standard of care therapies for community acquired pneumonia (CAP) in the United States, Canada, Europe, South America and South Africa.  Each trial seeks to demonstrate statistical non-inferiority to a comparator using a 95% confidence interval.  Clinical cure rate serves as the primary endpoint in each trial with bacteriological eradication serving as the secondary endpoint.

During the second quarter of 2007 we completed the first of two pivotal Phase III clinical trials.  In the trial, cethromycin achieved non-inferiority in its primary endpoint of per protocol clinical cure rate compared to Biaxin ® (clarithromycin) in CAP.  Cethromycin was evaluated using a 300 mg once-daily dosing regimen compared to 250 mg twice-daily dosing for Biaxin ® , both over a seven-day course of therapy.  No drug-related serious adverse events were observed in any study subject.  Liver function tests and electrocardiogram monitoring demonstrated no significant differences between subjects receiving cethromycin and subjects receiving Biaxin ® , consistent with the hepatic and cardiac side effect profile reported in cethromycin’s previous clinical trials.  We expect to have initial data from the second trial in the fall of 2007.  This timeline depends on our contract research organization’s ability to collect, compile and report data from this study.

Cethromycin has also been demonstrated to have significant in vitro activity against over 30 anthrax (Bacillus anthracis) strains.  During the second quarter of 2007, we concluded a study testing cethromycin’s efficacy in treating inhalation anthrax post-exposure for prophylaxis in non-human primates.  Results from this study demonstrated that a thirty (30) day course of oral cethromycin at a 16 mg/kg of once-daily dosing (equivalent 300 mg) was 100% protective against a lethal dose of inhaled B. anthracis Ames strain spores.

Clinical testing for our product candidates has been delayed from our initial plans, resulting in increased development costs.  As a result, we will need to raise capital to fund operating activities during 2007 and beyond.  Such a capital raise could be achieved by the sale of additional common stock, the receipt of milestone payments which would be paid to us as a result of entering into a commercial partnership for cethromycin, or a combination of both.

10

Even if our pivotal Phase III clinical trials of cethromycin are successfully completed, we do not expect to receive FDA approval for commercialization until 2009 at the earliest.  As of September 30, 2007, we estimate that our cethromycin development program, excluding $40.0 million of milestone payments due to Abbott, will incur an additional $6.8 million in research and development expenses which includes $4.5 million to complete the cethromycin clinical trials and $2.3 million for the preparation of the cethromycin NDA and other commercialization-related costs.  We expect to incur expenses up to $69,000 to in connection with our non-human primate studies which determined cethromycin’s efficacy for the prophylactic treatment of inhalation anthrax.  Our $10.0 million and $30.0 million Abbott milestone payments are triggered upon submitting an NDA and receiving FDA approval, respectively.  Development timelines and related costs are difficult to estimate and may vary significantly from our current estimates.

If cethromycin is approved for marketing by the FDA, we plan to sell cethromycin using a commercial partner to access the primary care physician market and to build and utilize a focused internal sales force that will market directly to early adopters such as, but not limited to, pulmonary medicine and infectious disease physicians.

Results of Operations

Three months ended September 30, 2007 compared to three months ended September 30, 2006

Revenue.The Company had no revenue for the three months periods ended September 30, 2007 and 2006.

Research and development expense. Research and development expenses decreased $1.9 million to $3.8 million for the three months ended September 30, 2007 compared to $5.7 million for the three months ended September 30, 2006.  We completed enrollment and released the results of the first of two pivotal Phase III trials during the second quarter of 2007. As a result, clinical trial expenses incurred during the third quarter of this year were $816,000 lower than the same quarter last year.  Concurrent to our clinical trials, in the second quarter of 2006, we initiated the bulk-scale manufacturing of the cethromycin Active Pharmaceutical Ingredient (“API”) as is required for inclusion in our cethromycin NDA.  The manufacturing process was successfully completed during the third quarter of this year and, as a result, costs related to manufacturing decreased $1.2 million as compared to the same period last year.  Expenses related to our study testing cethromycin’s efficacy in treating inhalation anthrax post-exposure for prophylaxis in non-human primates declined $66,000 during the third quarter as the study was completed in the second quarter of 2007.  These declines were offset by increases of $149,000 in research and development salaries and related benefits resulting from additional clinical personnel,  and $64,000 of expenses related to ALS-357 development program.  We believe that the majority of the remaining clinical trial costs will be incurred during the fourth quarter of this year with the conclusion of our second trial.  From that point forward our research and development expenses will shift from clinical trial and manufacturing based to NDA compilation and manufacturing of API to be used in our commercial launch. We estimate that the expense to complete the trials including the expense to compile and submit the NDA, but excluding milestones payable to Abbott is $6.8 million, of which the majority is expected to be recognized over the remainder of this year.  Milestones payable to Abbott total $40 million and are contingent upon the filing of the NDA, $10.0 million,  and approval of the NDA by the FDA, $30.0 million, and are expected to be recognized in 2008 and 2009, respectively.

General and administrative expense.General and administrative expense increased $515,000 to $2.0 million for the three months ended September 30, 2007 as compared to the three months ended September 30, 2006.  Approximately $238,000 of the total increase was attributable to higher compensation costs of existing personnel as well as compensation for new employees in the legal and accounting functions that will manage the Company’s Sarbanes-Oxley compliance program.    Marketing expense related to the branding of cethromycin compound increased $199,000.  General corporate expenses increased $39,000.  Expenses related to our facilities increased $39,000 resulting from the expansion of our corporate offices to accommodate additional personnel which occurred during the fourth quarter of 2006.

11

Interest income. Interest income decreased $349,000 to $117,000 for the three months ended September 30, 2007.  Interest income is derived through the investment of our IPO and private placement proceeds in money market funds, until they are used in operations.  The decrease in interest income reflects lower cash balances this quarter versus the same quarter the prior year.

Interest expense. Interest expense decreased $4,000 to $117,000 for the three months ended September 30, 2007.

Nine months ended September 30, 2007 compared to six months ended September 30, 2006

Revenue.The Company had no revenue for the nine months ended September 30, 2007 compared to $35,000 for the nine months ended September 30, 2006.  Revenue in 2006 resulted from a Phase I grant that was awarded in the third quarter of 2005.

Research and development expense. Research and development expenses increased $10.1 million to $21.7 million for the nine months ended September 30, 2007 compared to $11.6 million for the nine months ended September 30, 2006.  Of the total increase in research and development expenses of $10.1 million, $4.5 million of this increase consists of the costs to conduct or pivotal Phase III clinical trials of our lead compound cethromycin, $4.1 million relates to the compilation of the cethromycin NDA and NDA directed studies, $1.0 million was incurred in our anthrax and ALS-357 development programs and $479,000 was incurred for general research and development expenses, including personnel costs.

General and administrative expense. General and administrative expense increased $1.4 million to $5.4 million for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006.   Approximately $820,000 of the total increase was attributable to higher compensation costs of existing personnel as well as compensation for new employees in the legal and accounting functions that will manage the Company’s Sarbanes-Oxley compliance program.  Marketing expense related to the branding of cethromycin increased $300,000.  Expenses related to our facilities increased $125,000 resulting from the expansion of our corporate offices to accommodate additional personnel which occurred during the fourth quarter of 2006.  General corporate expenses increased $138,000.

Interest income. Interest income decreased $629,000 to $638,000 for the nine months ended September 30, 2007 due to lower cash balances in the current year.

Interest expense.Interest expense decreased $44,000 to $350,000 for the nine months ended September 30, 2007.  In May of 2006 we restructured our line of credit from a variable rate based on Prime to a fixed rate of 6.75%.  As a result, the effective rate of interest on our line of credit decreased 1.8% which decreased our interest expense for the first nine months of 2007 as compared to the first nine months of 2006, by $44,000.

12

Liquidity and Capital Resources

We have devoted substantially all of our cash resources to research and development and general and administrative expenses.  To date, we have not generated any revenues from the sale of products, and we do not expect to generate any such revenues for a number of years, if at all.  As a result, we have incurred an accumulated deficit of $94.1 million as of September 30, 2007 and we expect to incur significant operating losses for the foreseeable future.    Cash and cash equivalents was $6.4 million as of September 30, 2007.  Since our inception in 1999 to August 2005, we financed our operations primarily through debt and capital contributions from our founder and controlling stockholder and borrowings under our bank line of credit.  In August 2005 we completed our initial public offering in which we raised $28.7 million, net of underwriters discount and offering costs.  In March 2006 we completed a private placement in which we raised $33.4 million, net of underwriters discount and offering costs.  As of September 30, 2007 we had a working capital deficit of $5.1 million.

In September 2001, our Chief Executive Officer made a $2.0 million loan to us.  The loan accrues interest at the rate of 7.75%, compounded annually, and is due and payable on December 31, 2007.  The balance of the loan and accrued interest was $2.0 million as of September 30, 2007.

We have a $4.0 million line of credit with a local financial institution.  As of September 30, 2007, the line of credit had an outstanding balance of $3.9 million bearing interest of 6.75% per annum.  Interest is payable monthly, and the line of credit matures on January 1, 2008.  The line of credit is secured by substantially all the assets of the Company, excluding any rights that we have under of our license agreement with Abbott Laboratories for cethromycin.  The line of credit is also secured by 2.5 million shares of our common stock held by Flavin Ventures, LLC. (see Note 4 to the unaudited condensed consolidated financial statements).

During the nine months ended September 30, 2007, cash used in operating activities totaled $20.6 million.  Approximately $15.3 million was used for the development of cethromycin, $941,000 for Anthrax trials, $419,000 for research activities related to our proprietary portfolio of compounds and $3.9 million for general operations net of $685,000 in interest income.

13

Contractual Obligations

As of September 30, 2007, the annual amounts of future minimum payments under debt obligations, interest, lease obligations and other long term liabilities consisting of executed research, development and license agreements are as follows:

	Payments Due by December 31,
	2007		2008		2009		2010		2011		Total
Notes payable	$	2,000,000	$	3,915,000	$	—	$	—	$	—	$	5,915,000
Interest	140,626		2,842		1,633		304		—		145,405
Cethromycin development costs	3,542,000		5,200,000		—		—		—		8,742,000
Anthrax clinical studies	210,000		18,000		—		—		—		228,000
ALS-357 clinical supplies	77,000		125,000		—		—		—		202,000
Operating leases	60,243		160,648		—		—		—		220,891
Capital leases	1,653		7,259		8,468		4,350		—		21,730
Total	$	6,031,522	$	9,428,749	$	10,101	$	4,654	$	—	$	15,475,026

The above table does not include certain potential product based milestones under our license agreement with Abbott.  We will owe Abbott $10.0 million if we submit an NDA for cethromycin and $30.0 million if and when the FDA approves the NDA, which we estimate will occur in 2008 and 2009, respectively.   Thereafter, we would owe Abbott an additional $2.5 million upon reaching $200 million in aggregate net sales of cethromycin and $5.0 million upon reaching $400 million in aggregate net sales.  The periods in which milestone obligations become payable, if at all, are only estimates due to uncertainties associated with the completion of the clinical studies and related regulatory filings.

Our commitments under operating leases shown above consist of payments made to a related party relating to our facility lease in Woodridge, Illinois, which expires in September of 2008.

In the first nine months of 2007 we executed contracts totaling $4.1 million. Other contracts totaling $425,000 were executed after September 30, 2007, resulting in total contracts executed for 2007 of $4.5 million.  Of the total contracts executed, $3.0 million related to the compilation of our cethromycin NDA and NDA directed studies and $1.5 million related to clinical trials.  We anticipate executing additional contracts totaling $2.2 million related to our clinical development of cethromycin.  Of this amount, $2.0 million represents the costs we will incur to complete the pivotal Phase III pivotal clinical trials; $200,000 related to the compilation of our cethromycin NDA and NDA directed studies.

Remaining payments due under all existing and anticipated cethromycin development contracts, including anthrax studies, total $11.6 million and are expected to be made over the next six months.  The majority of these payments are milestone based.  The periods in which milestone obligations become payable are only estimates due to uncertainties in clinical trial completion timelines.

                To fund these contracts and our existing development commitments, indebtedness and general operating expenses we need to raise additional operating capital during 2007.  Such a capital raise could be achieved by the sale of additional common stock, the receipt of milestone payments which would be paid to us as a result of entering into a commercial partnership for cethromycin, or a combination of both.  Based upon current market conditions and discussions with potential commercial partners, we believe sufficient funds can be raised in 2007 to continue our development of cethromycin and fund our other research and corporate expenditures through the expected approval of our cethromycin NDA.  Although we believe we can obtain sufficient financing, there can be no assurances that such financing will be available, or available at terms acceptable to us.  We currently do not have sufficient cash or other funding available to complete our anticipated business activities during 2007 and are working with certain vendors and partners to extend payment terms and take other appropriate actions to conserve cash.  As a result, there is significant doubt about our ability to continue as a going concern.

14

                Our future capital uses and requirements depend on numerous forward-looking factors.  These factors include, but are not limited to, the following:

•progress in our clinical development programs, as well as the magnitude of these programs;

•the timing, receipt and amount of milestone and other payments, if any, from present and future collaborators;

•our ability to raise additional capital through the sale of common stock or the receipt of milestone payments that would be paid to us as a result of our entering into a commercial partnership for cethromycin, or a combination of both;

•our ability to establish and maintain additional collaborative arrangements;

•the resources, time and costs required to successfully initiate and complete our preclinical and clinical trials, obtain regulatory approvals, protect our intellectual property and obtain and maintain licenses to third-party intellectual property;

•the cost of preparing, filing, prosecuting, maintaining and enforcing patent claims; and

•the timing, receipt and amount of sales and royalties, if any, from our potential products.

        If, at any time, our prospects for financing our clinical development programs are limited, we may decide to reduce research and development expenses by delaying or discontinuing certain programs.

Critical Accounting Policies and 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 accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.  We review our estimates on an ongoing basis.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  While our significant accounting policies are described in more detail in the notes to our financial statements included in this annual report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

        In-Process Research and Development

        We recognize in-process research and development in accordance with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method and the AICPA Technical Practice Aid, Assets Acquired in a Business Combination to be used in Research and Development Activities:  A Focus on Software, Electronic Devices, and Pharmaceutical  Industries.  Assets to be used in research and development activities, specifically, compounds that have yet to receive new drug approval from the FDA and would have no alternative use should approval not be given, are immediately charged to income when acquired.

                In December 2004, we incurred $24.5 million of in-process research and development expense as a result of entering into our exclusive license with Abbott Laboratories for cethromycin.  We determined to immediately expense the purchased in-process research and development costs because the ultimate outcome of clinical trials for cethromycin is unknown and, therefore, FDA approval is uncertain.  As part of the consideration for the cethromycin license, we issued to Abbott shares of our common stock. In order to determine the value of the common stock issued to Abbott, we relied on the arms-length nature of the transaction, precedent market data and several internal valuation models and studies.  An independent appraisal was also obtained to provide additional support for the valuation methodologies utilized.  By their nature, valuations involve judgments of management that

15

rely on estimates regarding the timing and amount of cash flows and discount rates that, if changed, could significantly affect the conclusions as to value.

                Research and Development

                Research and development expenses consist of internal research costs and fees paid for contract research in conjunction with the research and development of our proprietary product portfolio.  All such costs are expensed as incurred.  Clinical trial costs incurred by third parties are expensed as the contracted work is performed.  We estimate both the total cost and time period of the trials and the percent completed as of that accounting date.  We believe that the estimates made as of September 30, 2007 are reflective of the actual expenses incurred as of that date.

                Stock-based Compensation

                We account for stock-based awards to employees and non-employees using the accounting provisions of Statement of Financial Accounting Standards No. 123(R) Share-based Payments which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation.  We use a Black-Scholes options-pricing model to determine the fair value of each option grant as of the date of grant for expense incurred.  The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options.  Since the Company has a limited history of stock activity, expected volatility is based on historical data from several peer public companies with similar product portfolios to us.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected lives for options granted represents the period of time that options granted are expected to be outstanding and is derived from the contractual terms of the options granted.

Forward-Looking Statements and Risk Factors

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.   Forward-looking statements often are proceeded by words such as “believes,” “expects,” “may,” “anticipates,” “plans,” “intends,” “assumes,” “will” or similar expressions.  Forward-looking statements reflect management’s current expectations, as of the date of this report, and involve certain risks and uncertainties.   Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.   Some of the factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include the “Risk Factors” described in our Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is currently confined to our cash and cash equivalents.  We currently do not hedge interest rate exposure. We have not used derivative financial instruments for speculation or trading purposes.  Because of the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have a significant impact on their realized value.

Our most liquid assets are cash and cash equivalents.  Because of their liquidity, these assets are not directly affected by inflation.  We also believe that we have intangible assets in the value of our intellectual property.  In accordance with generally accepted accounting principles, we have not capitalized the value of this intellectual property on our balance sheet.  Due to the nature of this intellectual property, we believe that these intangible assets are not affected by inflation.  Because we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations.  However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report.  Based upon that evaluation, management has concluded that our disclosure controls and procedures are effectively designed to ensure that information

16

we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

17

PART II — OTHER INFORMATION

Item 5. Other Information

On November 14, 2007 the company issued the following press release:

Advanced Life Sciences Announces Third Quarter 2007 Financial Results

CHICAGO, IL, November 14, 2007/PRNewswire/: — Advanced Life Sciences Holdings, Inc. (Nasdaq: ADLS), a biopharmaceutical company engaged in the discovery, development and commercialization of novel drugs in the therapeutic areas of infection, cancer and respiratory diseases, today announced its financial results for the third quarter ended September 30, 2007.

The net loss for the three months ended September 30, 2007 was $5.8 million or a loss of $0.21 per share compared to $6.9 million or a loss of $0.24 per share for the three months ended September 30, 2006.  The lower net loss reflects decreased development expenses associated with the closing of two pivotal phase III clinical trials for cethromycin, CL-05 and CL-06.

“We are excited to be completing the clinical phase of development of cethromycin, said Michael T. Flavin, Ph.D., chairman and chief executive officer of Advanced Life Sciences.  “We had a very productive third quarter, wrapping up Trial CL-05, continuing our work toward the NDA submission for cethromycin, and furthering our discussions with prospective partners.  We have also been working to advance cethromycin as a treatment for inhalation anthrax and preparing ALS-357, a potential topical treatment for metastatic melanoma, toward clinical development.”

The company ended the third quarter of 2007 with cash totaling $6.4 million.

Operating Expense Analysis

•Research and development expenses for the three months ended September 30, 2007 totaled $3.8 million compared to $5.7 million for the comparable period ended September 30, 2006.  This decrease was attributable to the completion of Trial CL-06, the first of our two clinical trials, and related trial expenses, as well as a reduction in costs associated with the manufacture of drug product.

•Selling, general and administrative expenses were $2.0 million in the third quarter compared to $1.5 million for the same quarter of last year.   This increase was due primarily to higher compensation costs and increased costs associated with Sarbanes-Oxley compliance.

Third Quarter and Other Recent Achievements

•Released positive top line data from Trial CL-06, the first of two pivotal phase III clinical trials to assess the use of cethromycin as a treatment for community acquired pneumonia (CAP), in which cethromycin met all endpoints;

•Fielded and further developed interest from potential new regional commercial development partners;

•Completed API manufacturing and initiated stability testing to support the CMC requirements for the potential cethromycin NDA submission;

•Presented 11 posters on cethromycin at The American Society for Microbiology’s 47th Annual Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in Chicago — September 17 - 20 and the 45^th Annual Meeting of the Infectious Disease Society of America (IDSA) in San Diego — October 4 - 7;

•Hosted satellite symposium on current treatment options for drug-resistant CAP at the ICAAC Conference;

•Announced commencement of collaboration with the National Institute of Allergy and Infectious Diseases (NIAID), the lead governmental institute supporting biodefense research, to evaluate cethromycin as a treatment for anthrax and other high-priority biodefense agents.

•Granted Orphan Drug status by the FDA for the use of ALS-357 for the topical treatment of metastatic melanoma

•Advanced development of ALS-357 with clinical materials manufactured and placed on stability for the Phase I/II melanoma program; and

•Held two Cethromycin National Advisory Board meetings, consisting of 10 thought leaders in the area of respiratory tract infections and antibiotic therapies.

-MORE-

18

Business Outlook for the Fourth Quarter 2007

•Release data from Trial CL-05, the second of two pivotal phase III clinical trials for the use of cethromycin to treat CAP;

•Advance negotiations with potential commercial partners for cethromycin;

•Conduct further NDA submission activities and pre-launch medical education programs relating to cethromycin as a treatment for CAP;

•Continue collaborations with NIAID and The U.S. Army Medical Research Institute for Infectious Diseases (USAMRIID) to explore cethromycin’s activity against high-priority bioterror agents; and

•Prepare to initiate the Phase I/II clinical trial of ALS-357 as a treatment for melanoma.

Financial Guidance for the Fourth Quarter of 2007

Advanced Life Sciences expects its fourth quarter 2007 cash requirements to fall within the range of $5.5 million to $6.0 million.  The Company will address its capital needs through the issuance of equity securities and/or by the receipt of payments that may result from the consummation of a commercial partnership for cethromycin.  Although management believes the Company could obtain such financing, there can be no assurances that such financing will be available in the future at terms acceptable to the Company, if at all.

Conference Call Details

Advanced Life Sciences will host a conference call and live webcast at 9:00 a.m. Eastern Time on Thursday, November 15, 2007 to discuss the company’s third quarter financial results.

The conference call will be webcast simultaneously over the Internet.  Please visit the Investor Relations section of Advanced Life Sciences’ website www.advancedlifesciences.com.  Alternatively, callers may participate in the conference call by dialing 866-510-0704 (domestic) or 617-597-5362 (international).  The passcode for the conference call is 57071751.  A telephone replay of the call will also be available for 48 hours.  Callers may access the telephone replay by dialing (domestic) 888-286-8010 or 617-801-6888 (international), passcode 51192916.

About Advanced Life Sciences

Advanced Life Sciences is a biopharmaceutical company engaged in the discovery, development and commercialization of novel drugs in the therapeutic areas of infection, cancer and inflammation.  The company’s lead candidate, cethromycin, is a novel once-a-day antibiotic in late-stage clinical development for the treatment of respiratory tract infections.

About Cethromycin

Advanced Life Sciences is developing cethromycin, a novel once-a-day antibiotic in response to the emerging bacterial resistance observed in the treatment of community acquired pneumonia (CAP).  Cethromycin has been tested in approximately 5,500 human subjects during clinical trials.

The company is currently conducting pivotal Phase III clinical trials of cethromycin for the treatment of mild-to-moderate CAP.  Advanced Life Sciences believes that cethromycin, if approved, would build upon the growing market opportunity in the antibiotic marketplace and address the critical need for antibiotics that overcome bacterial resistance.

-MORE-

19

Forward-Looking Statements

Any statements contained in this press release that relate to future plans, events or performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Except for historical information, the statements made in this press release are forward-looking statements about Advanced Life Sciences Holdings, Inc., including statements regarding the clinical trials and regulatory pathway of cethromycin.  Forward-looking statements represent our management’s judgment regarding future events and are accurate at the time they are made.  The Company does not undertake any obligations to update any forward-looking statements whether as a result of new information, future events or otherwise.  Our actual results could differ materially from those discussed herein due to several factors including the success and timing of our clinical trials and our ability to obtain and maintain  regulatory approval and labeling of our product candidates; our plans to develop and commercialize our product candidates; the loss of key scientific or management personnel; the size and growth of potential markets for our product candidates and our ability to serve those markets; regulatory developments in the U.S. and foreign countries; the rate and degree of market acceptance of any future products; the accuracy of our estimates regarding expenses, capital requirements, and our ability to access capital through partnerships, stock offerings and future revenues; our ability to obtain and maintain intellectual property protection for our product candidates; the successful development of our sales and marketing capabilities; the success of competing drugs that become available; and the performance of third party collaborators and manufacturers.  These and additional risks and uncertainties are detailed in the Company’s filings with the Securities and Exchange Commission.

###

20

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,429,484		$	27,054,947
Prepaid insurance	357,219			380,083
Prepaid clinical trial expenses	2,160,667			2,364,512
Other prepaid expenses and deposits	131,718			273,572
Total current assets	9,079,088			30,073,114
PROPERTY AND EQUIPMENT:
Furniture and fixtures	221,418			250,308
Laboratory equipment	159,186			142,928
Computer software and equipment	242,707			231,022
Leasehold improvements	177,253			182,839
Total property and equipment–at cost	800,564			807,097
Less accumulated depreciation	(492,350		)	(398,486		)
Property and equipment–net	308,214			408,611
OTHER LONG-TERM ASSETS:
Deferred financing costs	6,626			26,502
Other assets	1,452			1,452
Total other long-term assets	8,078			27,954
TOTAL ASSETS	$	9,395,380		$	30,509,679
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	3,499,280		$	1,011,396
Accrued clinical trial expenses	3,651,070			1,410,894
Other accrued expenses	639,014			226,881
Accrued interest payable	22,022			22,756
Short-term lease payable	8,024			19,437
Short-term grant payable	476,708			476,708
Short-term notes payable - related party	2,000,000			2,000,000
Short-term notes payable - net of $2,816 debt discount	3,912,184			—
Total current liabilities	14,208,302			5,168,072
Long-term lease payable	14,736			20,076
Long-term grant payable	23,292			23,292
Notes payable - net of $11,266 debt discount	—			3,903,734
Total liabilities	14,246,330			9,115,174
COMMITMENTS AND CONTINGENCIES:
Minority Interest	—			—
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, $0.01 par value–60,000,000 shares authorized;
September 30, 2007 28,294,677 issued and outstanding; December 31, 2006 28,282,677 shares issued and outstanding;	282,947			282,827
Additional paid-in capital	88,922,093			88,370,853
Deficit accumulated during the development stage	(94,055,990		)	(67,259,175		)
Total stockholders’ equity (deficit)	(4,850,950		)	21,394,505
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	9,395,380		$	30,509,679

See notes to unaudited condensed consolidated financial statements.

21

ADVANCED LIFE SCIENCES HOLDINGS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													Period From
													Inception
													(January 1, 1999)
	Three months ended September 30,						Nine months ended September 30,						Through
	2007			2006			2007			2006			September 30,2007
Revenue:
Management fees	$	—		$	—		$	—		$	—		$	1,161,180
Grants	—			—			—			35,127			1,035,571
Royalty–related party	—			—			—			—			45,238
Total revenue	—			—			—			35,127			2,241,989
Expenses:
Research and development	3,838,184			5,730,269			21,722,174			11,569,685			70,857,523
Contracted research and development– related party	—			—			—			—			7,980,299
Selling, general and administrative	2,004,357			1,489,502			5,362,769			3,977,514			18,455,282
Total expenses	5,842,541			7,219,771			27,084,943			15,547,199			97,293,104
Loss from operations	(5,842,541		)	(7,219,771		)	(27,084,943		)	(15,512,072		)	(95,051,115		)
Other (income) expense:
Interest Income	(117,332		)	(466,475		)	(638,396		)	(1,267,433		)	(2,562,528		)
Interest expense	116,998			120,649			350,268			393,526			2,506,455
Gain on sale of interest in Sarawak Medichem Pharmaceuticals joint venture	—			—			—			—			(939,052		)
Net other income	(334		)	(345,826		)	(288,128		)	(873,907		)	(995,125		)
Net loss	(5,842,207		)	(6,873,945		)	(26,796,815		)	(14,638,165		)	(94,055,990		)
Less accumulated preferred dividends for the period	43,750			43,750			131,250			131,250			1,451,042
Net loss available to common shareholders	$	(5,885,957	)	$	(6,917,695	)	$	(26,928,065	)	$	(14,769,415	)	$	(95,507,032	)
Basic and diluted net loss per share available to common shareholders	$	(0.21	)	$	(0.24	)	$	(0.95	)	$	(0.57	)
Weighted average number common shares outstanding- basic and diluted	28,294,677			28,268,247			28,292,150			25,962,479

See notes to unaudited condensed consolidated financial statements.

22

Item 6. Exhibits

The following is a list of exhibits filed as part of this Form 10-Q:

Number	Description
10.1	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Michael T. Flavin, Ph.D.
10.2	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and John L. Flavin.
10.3	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and R. Richard Wieland, II.
10.4	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Suseelan Pookote, Ph.D.
10.5	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Ze-Qi Xu, Ph.D.
10.6	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Patrick W. Flavin.
10.7	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and David Eiznhamer, Ph.D.
10.8	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Michael J. Cogan.
10.9	Fourth Amendment to License Agreement dated November 13, 2007 by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer 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.

23

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.

Advanced Life Sciences Holdings, Inc.
By:	/s/ Michael T. Flavin, Ph.D.
	Michael T. Flavin, Ph.D.
	Chairman of the Board, President
	and Chief Executive Officer
By:	/s/ R. Richard Wieland II
	R. Richard Wieland II
	Executive Vice President and
	Chief Financial Officer

Dated: November 14, 2007

24

EXHIBIT INDEX

Number	Description
10.1	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Michael T. Flavin, Ph.D.
10.2	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and John L. Flavin.
10.3	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and R. Richard Wieland, II.
10.4	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Suseelan Pookote, Ph.D.
10.5	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Ze-Qi Xu, Ph.D.
10.6	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Patrick W. Flavin.
10.7	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and David Eiznhamer, Ph.D.
10.8	Amended and Restated Employment Agreement dated November 13, 2007 between Advanced Life Sciences, Inc. and Michael J. Cogan.
10.9	Fourth Amendment to License Agreement dated November 13, 2007 by and between Abbott Laboratories and Advanced Life Sciences Holdings, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer 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.

25