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Not much is known about this lifeform, not even its origin. It is assumed that it may either be a native lifeform of LV-223 or was brought there by the Space Jockeys.
It could possibly be a worm mutated by the black liquid created by the Space Jockeys, since it is only seen AFTER the black liquid covers a great part of the ground, after they are seen, the normal worms are not seen again. This seems to be a likely theory, as the liquid is known to mutate and transform living creatures.
It may perhaps have been a bio-weapon used by the Space Jockeys or some kind of an experiment, a genetic mutation experiment that went wrong.As seen in the movie, it is safe to say that the Hammerpede is aggressive as it would attack any living creature that was nearby. When it detects a host, it will approach and attack by wrapping around the prey's arm (it is believed that the Hammerpede appears to be extremely strong, strong enough to coil around a man's arm and possibly break it). And similarity much like the Xenomorphs, the Hammerpede has acid for blood.
The Hammerpede's size is no more than a snake size and its appearance is almost similar to a cobra. The Hammerpede lacks eyes, and how it detects its prey is a mystery, perhaps it "sees" through movement or heat signature, or "senses" things around it like the Xenomorph. How the Hammerpede attacks its prey is by moving with an exceeding speed, it attaches itself to the victim's arm (as seen in the movie), then goes down the throat of the host, presumably killing the host by suffication. The way it attacks may resemble the Facehugger, however it is unknown if it is impregnating its victim or just feasting on the victim's insides.
It could be one of the stages of the Proto-Xeno, seen at the end of Prometheus, but it's not confirmed.