UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from __________ to __________
Commission file number 1-32302
ANTARES PHARMA, INC.
(Exact name of registrant as specified in its charter)
A Delaware corporation
I.R.S. Employer Identification No. 41-1350192
250 Phillips Boulevard, Suite 290, Ewing, NJ 08618
Registrant’s telephone number, including area code: (609) 359-3020
Securities registered pursuant to section 12(b) of the Act:
Title of each class
Common Stock
Name of each exchange on which registered
NYSE Amex
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES[ ] NO[X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES[ ] NO[X]
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[ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES[X] NO[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non –accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES[ ] NO[X]
Aggregate market value of the voting and non-voting common stock held by nonaffiliates of the registrant as of June 30,
2009, was $49,908,000 (based upon the last reported sale price of $0.89 per share on June 30, 2009, on NYSE Amex).
There were 82,361,434 shares of common stock outstanding as of March 15, 2010.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the registrant’s 2010 annual meeting of stockholders to be filed within 120
days after the end of the period covered by this annual report on Form 10-K are incorporated by reference into Part III
of this annual report on Form 10-K.
Item 1.
BUSINESS
PART I
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place
undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our
operations and business environment, all of which are difficult to predict and many of which are beyond our control.
You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such
statements may include words such as “anticipate,” “will,” “estimate,” “expect,” “project,” “intend,” “should,”
“plan,” “believe,” “hope,” and other words and terms of similar meaning in connection with any discussion of,
among other things, future operating or financial performance, strategic initiatives and business strategies,
regulatory or competitive environments, our intellectual property and product development. In particular, these
forward-looking statements include, among others, statements about:
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our expectations regarding product developments with Teva Pharmaceutical Industries, Ltd. (“Teva”);
our expectations regarding trends in pharmaceutical drug delivery characteristics;
our anticipated penetration into the market for traditional drug injection devices (such as needles and
syringes) with our technology;
our anticipated continued reliance on contract manufacturers to manufacture our products;
our marketing and product development plans;
our future cash flow and our ability to support our operations;
our projected net loss for the year ending December 31, 2010;
our ability to raise additional funds in light of our current and projected level of operations and general
economic conditions; and
other statements regarding matters that are not historical facts or statements of current condition.
These forward-looking statements are based on assumptions that we have made in light of our industry
experience as well as our perceptions of historical trends, current conditions, expected future developments and
other factors we believe are appropriate under the circumstances. As you read and consider this annual report, you
should understand that these statements are not guarantees of performance results. They involve risks, uncertainties
and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions,
you should be aware that many factors could affect our actual financial results or results of operations and could
cause actual results to differ materially from those in the forward-looking statements. You should keep in mind that
forward-looking statements made by us in this annual report speak only as of the date of this annual report. Actual
results could differ materially from those currently anticipated as a result of a number of risk factors, including, but
not limited to, the risks and uncertainties discussed under the caption “Risk Factors.” New risks and uncertainties
come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no
duty to, and do not intend to update or revise the forward-looking statements in this annual report after the date of
this annual report. In light of these risks and uncertainties, you should keep in mind that any forward-looking
statement in this annual report or elsewhere might not occur.
Overview
Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is an emerging pharma company that
focuses on self-injection pharmaceutical products and technologies and topical gel-based products. Our
subcutaneous injection technology platforms include Vibex™ disposable pressure-assisted auto injectors, Vision™
reusable needle-free injectors, and disposable multi-use pen injectors. In the injector area, we have a multi-product
deal with Teva that includes Tev-Tropin® human growth hormone and have partnerships with Ferring
Pharmaceuticals BV (“Ferring”) and JCR Pharmaceuticals Co., Ltd. (“JCR”) that include their human growth
hormone (“hGH”) products. In the gel-based area, our lead product candidate, Anturol®, an oxybutynin ATD™ gel
for the treatment of overactive bladder (“OAB”), is currently under evaluation in a pivotal Phase 3 trial. We also
have a partnership with BioSante Pharmaceuticals, Inc. (“BioSante”) that includes LibiGel® (transdermal
testosterone gel) in Phase 3 clinical development for the treatment of female sexual dysfunction (“FSD”), and
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Elestrin® (estradiol gel) for the treatment of moderate-to-severe vasomotor symptoms associated with menopause,
which is currently marketed in the U.S. Two of our technologies have generated FDA approved products. Our
products and product opportunities are summarized and briefly described below:
Indication
Partners
Concept
Prototype for
Clinical Evaluation
Design
Finalization
Regulatory
Submission
Commercialization
Products
Injection Devices
Product
Medi-Jector Vision® Needle-
free Injector
Zomajet® 2 Vision and
Zomajet® Vision X Needle-
free Injector
Twin-Jector® EZ II Needle-
free Injector
Tjet® Needle-free Injector
Vibex™ Pressure Assisted
Auto Injector Platform:
- AJ-IM (prefilled syringe)
- AJ-S (prefilled syringe)
- AJ-S (prefilled syringe)
Insulin
hGH
hGH
hGH
Undisclosed Product #1
Undisclosed Product #2
NSAID
None
Ferring
JCR
Teva
Teva
Teva
None
Teva
Teva
Disposable Pen Injector
Disposable Pen Injector
Undisclosed Product #3
Undisclosed Product #4
Transdermal Delivery Gels
Indication
Partners
Formulation
Development
Preclinical
Testing
Clinical Phase
I II III
Regulatory
Submission
Commercialization
Product
Estradiol ATD™ (Elestrin® )
Anturol® (oxybutynin) ATD™
Testosterone ATD™
(LibiGel® for Women
Nestorone®/Estradiol ATD™
Gel
Hot flashes and vaginal
atrophy hormone therapy
Overactive bladder
syndrome
Female sexual dysfunction
Contraception
Undisclosed ATD™ Gel
Undisclosed
Ropinirole ATD™ Gel
CNS/Restless Leg
Syndrome
Pressure Assisted Injection Devices
BioSante
None
BioSante
Population
Council
Ferring
Jazz
Pharma-
ceuticals
Our injection device platform features three main products: reusable needle-free injectors, disposable pressure
assisted auto injectors and disposable pen injectors. Each is briefly described below:
• Reusable needle-free injectors deliver precise medication doses through high-speed, pressurized liquid
penetration of the skin without a needle. Our current needle-free injector product is a reusable, variable-dose
device engineered to last for two years and is designed for easy use, facilitating self-injection with a disposable
syringe to assure safety and efficacy. The injector employs a disposable plastic needle-free syringe, which
offers high precision liquid medication delivery through an opening that is approximately half the diameter of a
standard, 30-gauge needle. The associated sterile plastic disposables, needle-free syringes and adapters, are
designed for use as appropriate for the drug and indication.
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We have sold our needle-free injection system for use in more than 30 countries to deliver either human growth
hormone (“hGH”) or insulin. The product is marketed by our partners for use with hGH as Tjet®, by Teva in
the U.S.; Zomajet® 2 Vision and Zomajet® Vision X, by Ferring in Europe and Asia; and Twin-Jector® EZ II,
by JCR in Japan, and is sold as the Medi-Jector VISION® over-the-counter (“OTC”) or by prescription in the
U.S. for use by patients for insulin. We refer to our reusable needle-free injector as the Vision™ and/or Tjet®.
• Disposable pressure assisted auto injectors employ the same basic technology developed for our needle-free
devices, a controlled pressure delivery of drugs into the body utilizing a spring power source. Combining
pressure with a hidden needle supports the design of a disposable, single-use injection system compatible with
conventional glass drug containers. This system, the Vibex™, is designed to economically provide highly
reliable fast subcutaneous injections with minimal discomfort and improved convenience in conjunction with
the enhanced safety of a shielded needle. After use, the device can be disposed of without the typical “sharps”
disposal concerns. We and our potential partners have successfully tested the device in multiple patient
preference studies. We continue to explore product extensions within this category, including the targeting of
various body sites and devices with multiple dose, variable dose and user-fillable applications.
• Disposable pen injectors are needle-based devices designed to deliver multiple injections from multi-dose drug
cartridges. The devices contain mechanisms that specify the dose to be delivered by defining the amount of
movement by the stopper in the cartridge with each device actuation. In contrast to our reusable needle-free
injectors, the cartridge drug container is integral to the pen injector and after utilizing all the drug from the
cartridge, the entire device is then disposed.
Transdermal Gel System
Our transdermal system consists of a unique formulation in semisolid dosage forms (gels) that delivers
medication efficiently and minimize gastrointestinal impact, as well as the initial liver metabolism effect of some
orally ingested drugs. Our gels are hydro-alcoholic and contain a combination of permeation enhancers to promote
rapid drug absorption through the skin following application, which is typically to the arms, shoulders, or abdomen.
Our transdermal gel system provides the option of delivering both systemically (penetrating into and through the
subcutaneous tissues and then into the circulatory system) as well as locally (e.g. topically for skin and soft tissue
injury, infection and local inflammation). Typically, the gel is administered daily, and is effective on a sustained
release basis over approximately a 24-hour period of time. Our gel system is known as our Advanced Transdermal
Delivery (“ATD™”) gels.
History
On January 31, 2001, we (Antares, formerly known as Medi-Ject Corporation, or Medi-Ject) completed a
business combination to acquire the three operating subsidiaries of Permatec Holding AG (“Permatec”),
headquartered in Basel, Switzerland. The transaction was accounted for as a reverse acquisition, as Permatec’s
shareholders initially held a majority of the outstanding stock of Medi-Ject. Medi-Ject was at that time, focused on
delivering drugs across the skin using needle-free technology, and Permatec specialized in delivering drugs across
the skin using transdermal patch and gel technologies as well as developing oral disintegrating tablet technology.
With both companies focused on drug delivery but with a focus on different sectors, it was believed that a business
combination would be attractive to both pharmaceutical partners and to our stockholders. Upon completion of the
transaction our name was changed from Medi-Ject Corporation to Antares Pharma, Inc.
Our Parenteral Medicines (device) division is located in Minneapolis, Minnesota, where we develop and
manufacture with partners novel pressure assisted injectors, with and without needles, which allow patients to self-
inject drugs. We make a reusable, needle-free, spring-action injector device known as the Vision™ and Tjet®, which
is legally marketed for use with insulin and human growth hormone. We have had success in achieving distribution
of our device for use with hGH through licenses to pharmaceutical partners, and it has resulted in continuing market
growth and, we believe, a high degree of customer satisfaction. Distribution of growth hormone injectors occurs in
the U.S., Europe, Japan and other Asian countries through our pharmaceutical company relationships.
We have also developed variations of the needle-free injector by adding a very small hidden needle to a pre-
filled, single-use disposable injector, called the Vibex™ pressure assisted auto injection system. This system is an
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alternative to the needle-free system for use with injectable drugs in unit dose containers and is suitable for branded
and branded generic injectables. We also developed a disposable multi-dose pen injector for use with standard
multi-dose cartridges. We have entered into multiple licenses for these devices mainly in the U.S. and Canada with
Teva.
Our Pharma division is located both in the U.S. and in Muttenz, Switzerland, where we develop pharmaceutical
products utilizing our transdermal systems. Several licensing agreements with pharmaceutical companies of various
sizes have led to successful clinical evaluation of our formulations. In 2006, the United States Food and Drug
Administration (“FDA”) approved our first transdermal gel with a partner’s drug product for the treatment of
vasomotor symptoms in post-menopausal women. We are also developing our own transdermal gel-based products
for the market and have recently completed enrollment in a pivotal Phase III safety and efficacy trial for Anturol®,
our oxybutynin transdermal gel product for overactive bladder.
We believe that our transdermal gels minimize first pass liver metabolism, gastro intestinal effects and skin
erythema. Other advantages include cosmetic elegance and ease of application as compared to transdermal patches
and have potential applications in such therapeutic markets as hormone replacement, overactive bladder,
contraception, pain management and central nervous system therapies.
We operate in the drug delivery sector of the pharmaceutical industry. Companies in this sector generally
leverage technology and know-how in the area of drug formulation and product development to pharmaceutical
manufacturers through licensing and development agreements while continuing to develop their own products for
the marketplace. We also view many pharmaceutical and biotechnology companies as collaborators and primary
customers. We have negotiated and executed licensing relationships in the needle-free devices segment in the U.S.,
Europe and Asia, the auto injector segment in the U.S. and Canada, the disposable pen injector segment worldwide,
and the transdermal gels segment for which we have several development programs in place worldwide, including
the United States and Europe. In addition, we continue to market our re-usable needle-free devices for the self
administration of insulin in the U.S. market through distributors and have a non-exclusive license for our technology
in the diabetes and obesity fields.
We are a Delaware corporation with principal executive offices located at Princeton Crossroads Corporate
Center, 250 Phillips Boulevard, Suite 290, Ewing, New Jersey 08618. Our telephone number is (609) 359-3020. We
have wholly-owned subsidiaries in Switzerland (Antares Pharma AG and Antares Pharma IPL AG) and the
Netherland Antilles (Permatec NV).
Products and Technology
We are leveraging our experience in drug delivery systems to enhance the product performance of established
drugs as well as new drugs in development. Our current portfolio includes transdermal Advanced ATD™ gels;
disposable pressure assisted auto injection systems (Vibex™); disposable pen injection systems; and reusable
needle-free injection systems (Vision™).
SELF-ADMINISTRATION OF INJECTABLE BIOLOGIC DRUGS
Injectable biologic drugs generated a reported $125 billion in global revenue in 2008. Given the market
success of several recent biologic drugs, pharmaceutical firms are increasingly reliant upon biologic drug candidates
in their product pipelines, fueling growth expectations for the biologic drugs. Industry analysts project that
biologics will account for 50% of the 100 top selling drugs by 2014, up from 28% in 2008.
Biological drugs are often used in managing chronic medical conditions, presenting a need for repeated
injections over time. Cost containment pressure by managed care combined with patient preferences for
convenience and comfort are driving a change in the treatment setting from the health care facility to patients’
homes. This trend is creating a shift from the injection being given by a doctor or nurse to self-administration by the
patient or administration by a family member or other lay caregiver. This shift has produced a transition in how
injectable drugs are configured to facilitate use by consumers. In many therapeutic categories pre-filled syringes
and other injection systems offering greater ease-of-use and security for patients now exceed vials in unit volume,
often at substantial unit price premium. These therapeutic categories and example products include:
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Diabetes
Condition
Growth deficiency
Rheumatoid Arthritis
Multiple Sclerosis
Chronic Hepatitis C
Anemia/Neutropenia
Pressure Assisted Auto Injection
Products
Humalog (Lilly), Novolog (Novo Nordisk), Apidra
(Sanofi Aventis), Lantus (Sanofi Aventis), Levemir
(Novo Nordisk), Byetta (Lilly)
Genotropin (Pfizer), Tev-Tropin (Teva), Humatrope
(Lilly), Nutropin AQ (Roche), Noridtropin (Novo
Nordisk), Saizen/Serostem (EMD Serono), Omnitrope
(Sandoz)
Enbrel (Amgen, Pfizer), Humira (Abbott), Simponi
(Centocor Ortho Biotech), Cimzia (UCB)
Avonex (Biogen Idec), Betaseron (Bayer), Copaxone
(Teva), Rebif (EMD Serono)
Intron-A
(Merck)
Aranesp (Amgen), Neulasta (Amgen)
(Roche), Peg-Intron
(Merck), Pegasys
The most significant challenge beyond discovery of new molecules is how to effectively deliver them by means
other than conventional injection technology. The majority of these molecules have not, to date, been amenable to
oral administration due to a combination of several factors, including breakdown in the gastrointestinal tract,
fundamentally poor absorption, or high first pass liver metabolism. Pulmonary delivery of these molecules, as an
alternative to injections, has also been pursued without commercial success. Many companies have expended
considerable effort in searching for less invasive ways to deliver such molecules that may allow them to achieve
higher market acceptance, particularly for those requiring patient self-administration.
Pressure assisted auto injection is a form of parenteral drug delivery that continues to gain acceptance among
the medical community. Encompassing a wide variety of sizes and designs, this technology operates by using
pressure to force the drug, in solution or suspension, through the skin and deposits the drug into the subcutaneous
tissue.
Needle-Free Injectors
Needle-free injection combines proven delivery technology for molecules that require parenteral administration
with a device that eliminates the part of the injection that patients dislike – the needle. Improving patient comfort
through needle-free injection may increase compliance and mitigate the problem of daily injections. Needle-free
delivery eliminates the risk of needlestick injuries as well, which occur frequently in institutions in the U.S., and can
result in disease transmission to healthcare workers.
One of the primary factors influencing development in the category of needle-free injection is the inherent
problematic dependence on needles. It is also recognized that greater willingness to accept injection therapy could
have a beneficial impact on disease outcomes. For example, patients with diabetes appear to be reluctant to engage
in intensive disease management, at least in part because of concerns over increased frequency of injections.
Similarly, patients with diabetes who are ineffectively managed with oral hypoglycemic agents are reluctant to
transition to insulin injections in a timely manner because of injection concerns.
The advent of these technologies has, to date, had a minor influence within the injectable sector, and they have
failed to produce the deep market penetration that many within the industry believe they are capable of gaining.
Several factors are believed to contribute to this lack of market penetration, beginning with older needle-free
injection systems. Many of the early needle-free injection systems had an assortment of drawbacks associated with
both performance and cost efficiency. With potential consumers aware of these historical shortcomings, current
technologies promising greater efficiency and lower prices have failed to gain wide acceptance in the industry.
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Our Injection Products
Vision™ / Tjet®
The Vision™/Tjet® has been sold for use in more than 30 countries to deliver either insulin or hGH. The
product features a reusable, spring-based power source and disposable needle-free syringe, which acts as the
pathway for the injectable drug through the skin and allows for easy viewing of the medication dose prior to
injection. The device’s primary advantages are its ease of use and cost efficiency. The product is also reusable, with
each device designed to last for approximately 3,000 injections (or approximately two years) while the needle-free
syringe, when used with insulin or hGH, is disposable after approximately one week when used by a single patient
for injecting from multi-dose vials.
The Vision™/Tjet® administers injectables by using a spring to push the active ingredient in solution or
suspension through a micro-fine opening in the needle-free syringe. The opening is approximately half the diameter
of a standard 30-gauge needle. A fine liquid stream then penetrates the skin, and the dose is dispersed into the layer
of fatty, subcutaneous tissue. The drug is subsequently distributed throughout the body, successfully producing the
desired effect.
We believe this method of administration is a particularly attractive alternative to the needle and syringe for the
groups of patients described below:
Patient Candidates for Needle-Free Injection
• Young adults and children
• Patients looking for an alternative to needles
• Patients mixing drugs
• Patients unable to comply with a prescribed needle program
• Patients transitioning from oral medication
• New patients beginning an injection treatment program
The Vision™/Tjet® is primarily used in the U.S., Europe, Asia, Japan and elsewhere to provide a needle-free
means of administering human growth hormone to patients with growth retardation. We typically sell our injection
devices to partners in these markets who manufacture and/or market human growth hormone directly. The partners
then market our device with their growth hormone. We receive benefits from these agreements in the form of
product sales and royalties on sales of their products. In 2008, our partner, Teva, supported the filing of a
supplemental new drug application (“sNDA”) to provide the Tjet® to hGH patients in the U.S. In June of 2009, the
FDA approved the sNDA and in August of 2009 Teva launched the Tjet® device.
Disposable (Vibex™) Injectors
Beyond reusable needle-free injector technologies, we have designed disposable, pressure assisted auto injector
devices to address acute medical needs, such as allergic reactions, migraine headaches, acute pain, emesis and other
daily therapies, as well as potentially for the delivery of vaccines. Our proprietary Vibex™ disposable product
combines a low-energy, spring-based power source with a small, hidden needle, which delivers the needed drug
solution subcutaneously or, in the case of vaccines, subdermally.
In order to minimize the anxiety and perceived pain associated with injection-based technologies, the Vibex™
system features a triggering collar that shields the needle from view. The patented retracting collar springs back and
locks in place as a protective needle guard after the injection, making the device safe for general disposal. In clinical
studies, this device has outperformed other delivery methods in terms of completeness of injection and user
preference, while limiting pain and bleeding. A summary of the key competitive advantages of the Vibex™ system
is provided below:
7
Competitive Advantages of Vibex™ Disposable Injectors
• Rapid injection
• Eliminates sharps disposal
• Ease of use in emergencies
• Reduces psychological barriers since the patient never sees the needle
• Reliable subcutaneous injection
• Designed around conventional cartridges or pre-filled syringes
The primary goal of the Vibex™ disposable pressure assisted auto injector is to provide a fast, safe, and time-
efficient method of self-injection that addresses the patient’s need for immediate relief. This device is designed
around conventional cartridges or pre-filled syringes, which are primary drug containers, offering ease of transition
for potential pharmaceutical partners. We have signed two license agreements with Teva for our Vibex™ system
for two undisclosed products, and we are currently developing a proprietary product using the Vibex™ in the area of
pain management.
Disposable Pen Injector System
Our most recently developed product, the pen injector, complements our portfolio of pressure assisted auto
injector devices. The disposable pen injector device is designed to deliver drugs by injection through needles from
multi-dose cartridges. The disposable pen is in the stage of development where devices are being used in clinical
evaluations. Although differing from the other pressure assisted injection strategies common to the above portfolio
of injection therapy, this device includes a dosing mechanism design that is drawn from our variable dose needle-
free technology. We have signed a license agreement with Teva for our pen injector device for two undisclosed
products.
TRANSDERMAL DRUG DELIVERY
Transdermal drug delivery has emerged as a generally safe and patient-friendly method of drug delivery. The
commercialization of transdermal products for controlled drug delivery began over two decades ago. In more recent
years, transdermal gels, creams and sprays have become increasingly popular as alternative drug delivery systems.
Among transdermal products currently marketed are nitroglycerin for angina, diclofenac gel for pain, scopolamine
for motion sickness, fentanyl for pain control, nicotine for smoking cessation, estrogen for hormone therapy,
clonidine for hypertension, lidocaine for topical anesthesia, testosterone for hypogonadism, and a combination of
estradiol and a norelgestimate for contraception. Skin penetration enhancers are often used to enhance drug
permeation through the dermal layers.
The primary goal of transdermal drug delivery is to effectively penetrate the surface of the skin via topical
administration. When successful, transdermal drug delivery provides an easy and painless method of administration.
The protective capabilities of the skin, however, often act as a barrier to effective delivery. Since the primary role of
the skin is to provide protection against infection and physical damage, the organ can prevent certain
pharmaceuticals from entering the body as well. As a result, a limited number of active substances are able to cross
the skin’s surface.
Despite these limitations, transdermal drug delivery is still viewed as a highly attractive method of
administration for certain therapeutics. As a high concentration of capillaries is located immediately below the skin,
transdermal administration provides an easy means of access to systemic circulation. Transdermal systems can be
designed to minimize absorption of the active drug in the blood circulation as is needed in topical applications. This
allows a build-up of drug in the layers underlying the skin, leading to an increased residence time in the targeted
tissue. Transdermal systems can also be designed to release an active ingredient over extended periods of time,
providing benefits similar to depot injections and implants, without the need for an invasive procedure. If required,
patients are also able to interrupt dosing by removing a patch or discontinuing the application of a gel. Finally, this
delivery technology typically minimizes first-pass metabolism by the liver as well as many of the gastrointestinal
concerns of many orally ingested drugs.
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Transdermal Gels
While transdermal patches remain an important aspect of the transdermal drug delivery market, transdermal
gels have emerged as another viable means of administering an increasingly wide array of active pharmaceutical
treatments. The concept of transdermal gels parallels that of the transdermal patch in the creation of a drug reservoir
to provide sustained delivery of therapeutic quantities of a drug. While a patch provides this from an external
reservoir, gel formulations typically create a subdermal reservoir of the medication. Transdermal patches, however,
sometimes result in more adverse events, specifically skin irritation events associated principally with the occlusive
nature of patches and the use of adhesives that contain residual solvents and irritant monomers. Most of these
factors are minimized in transdermal gels.
Gels also provide drug developers with an opportunity to explore a wide variety of potential applications. Due
to the physicochemical properties of the excipients employed in gels, combined with the enhanced solubilization
properties, a broad range of active agents can be formulated. These solubilization properties allow for higher
concentrations of the active ingredient to be incorporated for delivery. The enhanced viscosity in gels further
enhances the patient’s ability to apply the product with little-to-no adverse cosmetic effect. There is also relatively
little limitation in the surface area to which a gel can be applied, as opposed to patches, allowing greater quantities
of drug to be transported if required.
We have developed our ATD™ gel technology that utilizes a combination of permeation enhancers to further
bolster a pharmaceutical agent’s ability to penetrate the skin, which leads to a sustained plasma profile of the active
agent, without the skin irritation and cosmetic concerns often associated with patches.
Our Transdermal Products
Our ATD™ system successfully penetrates the skin to deliver a variety of treatments. The gels consist of a
hydro-alcoholic base including a combination of permeation enhancers. The gels are also designed to be absorbed
quickly through the skin after application, which is typically to the arms, shoulders, or abdomen, and release the
active ingredient into the blood stream predictably over approximately a 24 hour period of time. The following is a
summary of the competitive advantages of our ATD™ gel system:
Competitive Advantages of ATD™ Gel System
• Discrete
• Easy application
• Cosmetically appealing compared with patches
• Reduced skin irritancy compared with patches
• Application of once per day for most products
• Potential for delivery of larger medication doses
• Potential for delivery of multiple active drugs
• Ability to be either systemic or topical
Our ATD™ gel products are being developed by both us and our pharmaceutical partner. The following is a
summary of the products being developed/commercialized.
Anturol®
Our lead product candidate, Anturol®, is an oxybutynin ATD™ gel for the treatment of OAB (overactive
bladder), and is currently under evaluation in a pivotal Phase 3 trial. Enrollment in the trial was completed in
March of 2010 and we expect to file a new drug application (“NDA”) in 2010. We intend to seek a marketing
partner to help fund the development of Anturol® and to commercially launch Anturol® if approved by the FDA.
9
Elestrin®
Elestrin® is a transdermal estradiol gel for the treatment of moderate-to-severe vasomotor symptoms associated
with menopause. We licensed the rights to Elestrin® in the U.S. and other markets to our partner BioSante through a
license agreement under which we receive milestone payments and royalties. BioSante has sublicensed Elestrin® to
Azur Pharma, who is currently marketing Elestrin® in the U.S.
LibiGel®
LibiGel® is a transdermal testosterone gel for the treatment of female sexual dysfunction being developed by
our partner BioSante. LibiGel® is currently in a Phase 3 clinical study. If LibiGel® is approved by the FDA, we are
entitled to milestone and royalty payments from BioSante.
Nestorone®
We have a joint development agreement with the Population Council, an international, non-profit research
organization, to develop contraceptive formulation products containing Nestorone®, by using the Population
Council’s patented compound and other proprietary information covering the compound, and our transdermal
delivery gel technology. We are responsible for research and development activities as they relate to ATD
formulation and manufacturing and the Population Council will be responsible for clinical trial design development
and management. In 2010, we announced with the Population Council successful results from a dose-finding Phase
II trial for the contraceptive gel. Together, we expect to identify a worldwide or regional commercial development
partner as clinical data becomes available.
Ropinirole
We have a worldwide product development and license agreement with Jazz Pharmaceuticals (“Jazz”) for
Ropinerole which is being developed to treat a central nervous system (“CNS”) disorder that will utilize our
transdermal gel delivery technology ATD™. Under the agreement, an upfront payment, development milestones,
and royalties on product sales are to be received by us under certain circumstances.
Market Opportunity
Needle-free Injectors / Auto Injectors / Pen Injectors
Our parenteral/device focus is specifically on the market for delivery of self-administered injectable drugs,
comprised mainly of biological products. According to a September 2008 Deutsche Bank Global Market Research
Report, U.S. sales of biological drugs in 2007 were approximately $42 billion. The same report states that $25
billion worth of these drugs are losing patent exclusivity between now and 2016, making them prime targets for
follow-on biologics. Self-administered injectable biologics account for the main portion—over $22 billion—of
those facing future competition from follow-on biologics. Since, by design, follow-on biologic molecules will be
nearly identical to the innovator biologic, both the innovator and follow-on manufacturers will seek other ways to
differentiate their products in the market. We believe that manufacturers will look to proprietary advantages in the
designs of the self-administration devices, such as those offered by our injection device platforms, as a key way to
compete in the market.
In a May 2009 report, Greystone Associates estimated the worldwide hGH market in 2008 at $2.8 billion. The
hGH market has significant competition with major pharmaceutical companies such as Lilly, Roche, Pfizer,
NovoNordisk and Merck Serono among others. Sandoz introduced Omnitrope as a lower cost biosimilar hGH in
Europe in 2005 and the U.S. in 2006. However, despite a 25% lower price the product achieved only a 0.8% hGH
market share by 2007. We believe that other product attributes, including patient comfort and ease-of-use, play a
key role, along with price and promotion, in determining performance in the market. Our pharmaceutical partner in
Europe, Ferring, has made significant inroads in the hGH market using our needle-free injector, marketed as the
Zomajet® 2 Vision for their 4 mg formulation and Zomajet® Vision X for their 10 mg formulation, and we expect
similar progress in the U.S. market with our partner Teva. Teva entered the hGH market without the benefit of an
injection device and initially struggled to gain market share. Since the launch of the Tjet® needle-free device in late
10
2009, sales of Teva’s hGH Tev-Tropin® have increased monthly. This early trend supports the notion that devices
can increase patient use of a partner’s brand of drug due to the benefits of a device.
Other injectable drugs that are presently self-administered and may be suitable for injection with our systems
include therapies for the prevention of blood clots and treatments for multiple sclerosis, migraine headaches,
inflammatory diseases, impotence, infertility, AIDS and hepatitis. We believe that many injectable drugs currently
under development will be administered by self-injection once they reach the market. Our belief is supported by the
continuing development of important chronic care products that can only be given by injection, the ongoing effort to
reduce hospital and institutional costs by early patient release, and the gathering momentum of new classes of drugs
that require injection. A partial list of such drugs (and their manufacturer) introduced in recent years that require self
injection include Cimzia® (UCB), Simponi® (Centocor Ortho Biotech), Enbrel® (Amgen, Pfizer) and Humira®
(Abbott) for treatment of rheumatoid arthritis, Epogen® and Aranesp® (Amgen) for treatment of anemia, Forteo™
(Lilly) for treatment of osteoporosis, Intron® A (Merck) and Roferon® (Roche) for hepatitis C, Lantus® (sanofi
aventis) and Byetta® (Lilly) for diabetes, Rebif® (EMD Serono) for multiple sclerosis, Copaxone® (Teva) for
multiple sclerosis and Gonal-F® (EMD Serono) for fertility treatment.
We believe a significant portion of injectable products currently offered in vials could be replaced with user
friendly injectors promoting better compliance and decreasing sharps concerns. Several manufacturers of injectable
products have recently introduced convenient alternatives to vials, such as prefilled syringes and injector systems;
and an increasing proportion of people who self-administer drugs are transitioning to prefilled syringes and other
injector systems when offered. We believe that our injection technologies offer further improvements in
convenience and comfort for patients self-administering injectable products and that our business model of working
with pharmaceutical company partners has the potential for further market penetration. In addition to partnering
with manufacturers of injectable products, we anticipate developing our own pharmaceutical products using our
pressure assisted auto injectors in the future.
Anturol®
According to a March 2010 Cowen Therapeutic Outlook Report, the worldwide market for urinary incontinence
was $2.1 billion in 2009 and is estimated to be $2.3 billion by 2014. During this period, new treatments of
overactive bladder (OAB) are expected to grow from $0.9 billion to $2.0 billion, offset by generic erosion of older
brands such as Detrol LA (Pfizer). It is estimated that half of the U.S. adults suffering from OAB either are too
embarrassed to discuss the symptoms or are not aware that pharmacological treatment is available. Patient
acceptance of older incontinence drugs, such as oral oxybutynin, is hindered by anticholinergic side-effects
including moderate to severe dry mouth, constipation and somnolence. A goal of transdermal delivery is to
minimize these common anticholinergic side effects. In clinical trials other transdermal gel and patch oxybutynin
products have reported an incidence of anticholinergic side effects comparable to placebo. We have recently
completed enrollment in a Phase III study of Anturol® oxybutynin gel to treat urinary incontinence.
Elestrin® and LibiGel®
According to IMS Health, the U.S. hormone replacement market, including estrogens, progestogens, and
estrogen-progestogen and estrogen-androgen combinations, was $2.1 billion in 2008, up 3.7% from 2007 despite a
slight decrease in the number of prescriptions. According to industry estimates, approximately six million women in
the U.S. currently are receiving some form of estrogen or combined estrogen hormone therapy. IMS Health reported
the current market in the U.S. for single-entity estrogen products was approximately $1.4 billion in 2007, of which
the transdermal segment, mostly patches, was about $260 million.
According to IMS Health, the U.S. market for transdermal testosterone therapies grew approximately 22 percent
in 2007 to $624 million from $510 million in 2006. Further growth in this sector may be achieved by the use of
testosterone products in both male and female applications. We believe that a new market opportunity exists with
the use of low dose testosterone for treatment of FSD, a disorder according to published reports that affects an
estimated 40-55% of all women and for which no drug is currently approved in the U.S. Antares Pharma, along
with its U.S. partner BioSante, has a low dose testosterone product named LibiGel®, which has completed Phase II
testing for FSD and is currently in Phase III clinical trials. We have the exclusive rights in Europe and elsewhere
outside the United States for LibiGel®. As evidenced in Europe, we believe that global patient demand for
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transdermal hormone therapy products will continue to increase. Evidence of this belief is the commercial launch,
in France, Italy, Spain, U.K., Germany and others, by Proctor and Gamble of the Intrinsa® Patch, a testosterone
transdermal patch for FSD.
Nestorone® Gel (Contraception)
Worldwide sales of hormonal contraceptives in 2008 was $6.2 billion according to an October 2009 report by
Datamonitor. Oral contraceptives account for about 86% of market with the remainder consisting of hormonal
implants, injections and intra-uterine systems according to a 2007 report by Business Insights. Transdermal
contraceptive systems provide women an attractive alternative to the pill by offering convenience and discretion.
The Company is collaborating with the Population Council (an international, nonprofit research organization) to
develop a novel hormonal contraceptive comprising a combination of the progestin Nestorone® and a form of
estrogen, called 17β-estradiol (E2), which is chemically identical to the naturally occurring estrogen. This
combination was chosen because of their potential for offering a superior tolerability and safety profile compared to
other commonly used hormonal contraceptives. Nestorone is a novel synthetic progestin that has been shown to be
highly effective at stopping ovulation at a low dose. It has no androgenic hormonal effects and has a good safety
profile. It is not active when taken orally and is therefore especially appropriate for topical application. When
delivered by the transdermal route, Estradiol (E2) has the advantage of being a much less potent estrogen than the
commonly used contraceptive ethinyl estradiol (EE) and therefore may have a lower risk of causing venous
thromboembolism.
Ropinirole Gel
The central nervous system consists of the brain and spinal cord. Disorders of this system are many, varied and
frequently severe, affecting a large portion of the population. These debilitating disorders include diseases such as
Parkinson’s disease, restless leg syndrome, epilepsy and migraine and psychotic disorders such as anxiety, bipolar
disorder, depression and schizophrenia. In addition, chronic pain is a neurological response to disease or injury; or it
may have no readily apparent cause. Regardless of the cause, chronic pain can have devastating effects on those
suffering from it.
Current treatments for CNS disorders vary in effectiveness, but there are many conditions for which there are
few safe and effective drugs. Cowen & Co. estimates that nearly $41 billion was spent in 2009 on prescription CNS
drugs. They estimate that another $6.7 billion was spent in 2009 on pain management prescriptions consisting
primarily of opioid drugs and nonsteroidal anti-inflammatory drugs. Many CNS and chronic pain drugs merely treat
the symptoms and do not provide cures. According to the World Health Organization, diseases of the CNS will
constitute an increasing medical need in this century, attributable to an exponential increase of these diseases after
the age of 65 combined with an aging population. Ropinirole and Pramipexole are products being used for CNS
disorders, particularly parkinsons disease and Restless Leg Syndrome (RLS). Oral therapies for RLS such as
Ropinirole and Pramipexole generated U.S. sales of $660 million in 2007 prior to introduction of generic versions of
the products.
Industry Trends
Based upon our experience in the healthcare industry, we believe the following significant trends in healthcare
have important implications for the growth of our business.
Major pharmaceutical companies market directly to consumers and encourage the use of innovative, user-
friendly drug delivery systems, offering patients a wider choice of dosage forms. We believe the patient-friendly
attributes of our injection technologies and transdermal gels meet these market needs.
We believe transdermal gel formulations offer patients more choices and added convenience with no
compromise of efficacy. Our ATD™ gel technology is based upon so-called GRAS (“Generally Recognized as
Safe”) substances, meaning the toxicology profiles of the ingredients are known and widely used. We believe this
approach has a major regulatory benefit and may reduce the cost and time of product development and approval.
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Many drugs, including selected protein biopharmaceuticals, are degraded in the gastrointestinal tract and may
only be administered through the skin by injection. Injection therefore remains the mainstay of protein delivery. The
growing number of protein biopharmaceuticals requiring injection may have limited commercial potential if patient
compliance with conventional injection treatment is not optimal. The failure to take all prescribed injections can lead
to increased health complications for the patient, decreased drug sales for pharmaceutical companies and increased
healthcare costs for society. In addition, it is becoming increasingly recognized that conventional needles and
syringes are inherently unreliable and require special and often costly disposal methods. Industry expectations are
that improvements in protein delivery systems such as our injector platform will continue to be accepted by the
market.
In addition to the increase in the number of drugs requiring self-injection, recommended changes in the
frequency of injections may contribute to an increase in the number of self-injections. Follow-on biologic drug
legislation continues to gather momentum in the United States Congress. In order to differentiate follow-on
biologics, novel patented delivery systems are becoming more important to extend product proprietary position as
well as secure patient preference.
Furthermore, patented pharmaceutical products continue to be challenged by generic companies once
substantial proprietary sales are generated. All of our proprietary delivery systems may provide pharmaceutical
companies with the ability to protect and extend the life of a product.
Finally, when a drug loses patent protection, the branded version of the drug typically faces competition from
generic alternatives. It may be possible to preserve market share by altering the delivery method, e.g., a single daily
controlled release dosage form rather than two to four pills a day. We expect branded and specialty pharmaceutical
companies will continue to seek differentiating drug delivery characteristics to defend against generic competition
and to optimize convenience to patients. The altered delivery method may be an injection device or a novel
transdermal formulation that may offer therapeutic advantages, convenience or improved dosage schedules. Major
pharmaceutical companies now focus on life cycle management of their products to maximize return on investment
and often consider phased product improvement opportunities to maintain competitiveness.
Competition
Competition in the transdermal delivery market includes companies like Watson Pharmaceuticals, Solvay,
Acrux, NexMed, Inc., Auxillium, Inc., Novavax, Inc. and many others. Competition in the disposable, single-use
injector market includes, but is not limited to, Ypsomed AG, SHL Group AB, OwenMumford Ltd., West
Pharmaceuticals, Becton Dickinson, Haselmeir GmbH, Elcam Medical and Vetter Pharma, while competition in the
reusable needle-free injector market includes Bioject Medical Technologies Inc. and The Medical House PLC.
Additionally, in the drug injection field we face competition from internal groups within large pharmaceutical
companies as well as design houses which complete the design of devices for companies but don’t have
manufacturing management capabilities.
Competition in the injectable drug delivery market is intensifying. We face competition from traditional needles
and syringes as well as newer pen-like and sheathed needle syringes and other injection systems as well as
alternative drug delivery methods including oral, transdermal and pulmonary delivery systems. Nevertheless, the
majority of injections are still currently administered using needles. Because injections are typically only used when
other drug delivery methods are not feasible, the auto injector systems may be made obsolete by the development or
introduction of drugs or drug delivery methods which do not require injection for the treatment of conditions we
have currently targeted. In addition, because we intend to, at least in part, enter into collaborative arrangements with
pharmaceutical companies, our competitive position will depend upon the competitive position of the
pharmaceutical company with which we collaborate for each drug application.
Research and Development
We currently perform clinical development work primarily in our Ewing, NJ corporate location for our own
portfolio of products. Additionally, we perform parenteral product development work primarily at our Minneapolis,
MN facility. We have various products at earlier stages of development as highlighted in our products schedule
above.
13
We currently have a pharmaceutical product candidate in our own clinical studies listed below. Additionally,
pharmaceutical partners are developing compounds using our technology (see “Collaborative Arrangements and
License Agreements”).
ANTUROL® We are currently evaluating Anturol® for the treatment of OAB. Anturol® is the anticholinergic
active substance oxybutynin delivered by our proprietary ATD™ gel that is used to achieve therapeutic blood levels
of the active compound that can be sustained over 24 hours after a single, daily application. It is believed that
Anturol® may offer equal or increased oxybutynin to the metabolite ratio, thus resulting in decreased reporting of
adverse events when compared to patients taking comparable oral products. In addition, Anturol® may also be more
cosmetically appealing than patches and have less irritation and allergic reactions as well as comparable or
decreased reporting of adverse events.
Summary of Clinical Data
In February 2006, we announced the results of our Phase II dose ranging study for Anturol®. The study was an
open label, single period, randomized study using 48 healthy subjects and three different doses of Anturol® over a
20 day period. Variables tested included accumulation of the dose, dose proportionality, decay of plasma levels, skin
tolerability and other adverse events.
The overall conclusions of the study were positive. Dose proportionality occurred within the tested dosing
range. A steady state was achieved after three applications (i.e., three days). The incidences of dry mouth were
minimal and similar to other transdermals while significantly improved over comparable oral medications.
Additionally, skin tolerance (i.e. local skin irritation) was excellent.
In October 2007, we announced that the first patients were dosed in the pivotal trial designed to evaluate
efficacy of Anturol® when administered topically once daily for 12 weeks in patients predominantly with urge
incontinence episodes. The randomized, double-blind, parallel, placebo controlled, multi-center trial is to involve
600 patients (200 per arm) using two dose strengths (selected from the Phase II clinical trial) versus a placebo. The
primary end point of the trial will be efficacy against the placebo defined as the reduction in the number of urinary
incontinence episodes experienced. Secondary end points include changes from baseline in urinary urgency, average
daily urinary frequency, patient perceptions as well as safety and tolerability including skin irritation. Enrollment
was completed in March of 2010 with an expected NDA filing time, if data is successful, in the fourth quarter of
2010.
Device Development Projects. We are engaged in research and development activities related to our Vibex™
disposable pressure assisted auto injectors and our disposable pen injectors. We have signed license agreements
with Teva for our Vibex™ system for two undisclosed products and for our pen injector device for two undisclosed
products. Our pressure assisted auto injectors are designed to deliver drugs by injection from single dose prefilled
syringes. The disposable pen injector device is designed to deliver drugs by injection through needles from multi-
dose cartridges. The development programs consist of determination of the device design, development of prototype
tooling, production of prototype devices for testing and clinical studies, performance of clinical studies, and
development of commercial tooling and assembly. The following is a summary of the development stage for the
four products in development with Teva.
Vibex™ undisclosed product #1
We have designed the Vibex™ for the first undisclosed product and are currently scaling up the commercial
tooling and molds for this product. During 2009, we received approximately $4,000,000 from Teva for this tooling
as well as other development work for this program. From a regulatory standpoint Teva filed this product as an
ANDA, and the FDA accepted the filing as such. Currently, Teva is conducting its own development work on the
drug as well as conducting user studies with the device. An amendment to the ANDA is expected to be filed with
the FDA and then the FDA is expected to complete its review of the ANDA, the timing of which is completely
dependent on the FDA.
14
Vibex™ undisclosed product #2
We have designed the Vibex™ for the second undisclosed product and have completed the majority of the
commercial tooling and molds for the product. From a regulatory standpoint Teva filed the product as an
abbreviated new drug application (“ANDA”) and the FDA rejected the filing as such. The FDA’s rejection was
based primarily on the opinion that the device was sufficiently different than the innovator’s device not to warrant
an ANDA. We believe we can redesign the device to address the FDA’s concern of device similarity and are
currently working on the redesign.
Disposable pen injector #1
We have designed the pen injector and provided clinical supplies for the first pen injector product to Teva. We
have not completed any commercial tooling to date. From a regulatory standpoint Teva has conducted a
bioequivalence study for the product and determined the appropriate regulatory pathway is a 505(b)(2). The FDA
has requested a safety study be conducted in support of the filing. Teva is currently determining the clinical design
and cost for this program.
Disposable pen injector #2
We have early prototype designs for the second pen injector product. Teva believes the regulatory pathway is
an ANDA pathway. Currently Teva is designing the development program.
The development timelines of the auto and pen injectors related to the Teva products are controlled by Teva.
We expect development related to the Teva products to continue in 2010, but the timing and extent of near-term
future development will be dependent on decisions made by Teva.
See Research and Development Programs in Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations – for amounts spent on Company sponsored research and development
activities.
Manufacturing
We do not have the facilities or capabilities to commercially manufacture any of our products and product
candidates. We have no current plans to establish a manufacturing facility. We expect that we will be dependent to a
significant extent on contract manufacturers for commercial scale manufacturing of our product candidates in
accordance with regulatory standards. Contract manufacturers may utilize their own technology, technology
developed by us, or technology acquired or licensed from third parties. When contract manufacturers develop
proprietary process technology, our reliance on such contract manufacturers is increased. Technology transfer from
the original contract manufacturer may be required. Any such technology transfer may also require transfer of
requisite data for regulatory purposes, including information contained in a proprietary drug master file (“DMF”)
held by a contract manufacturer. FDA approval of the new manufacturer and manufacturing site would also be
required.
We have contracted with a commercial supplier of pharmaceutical chemicals to supply us with the active
pharmaceutical ingredient of oxybutynin for clinical quantities of Anturol® in a manner that meets FDA
requirements via reference to their DMF for oxybutynin. We have contracted with Patheon, Inc. (“Patheon”), a
manufacturing development company, to supply clinical quantities of Anturol® gel in a manner that may meet FDA
requirements. The FDA has not approved the manufacturing processes for Anturol® at Patheon at this time. We
have completed commercial scale up activities associated with Anturol® manufacturing required for the NDA.
We are responsible for U.S. device manufacturing in compliance with current Quality System Regulations
(“QSR”) established by the FDA and by the centralized European regulatory authority (Medical Device Directive).
Injector and disposable parts are manufactured by third-party suppliers and are assembled by a third-party supplier
for our needle-free device for all of our partners. Packaging is performed by a third-party supplier under our
direction. Product release is performed by us. We have contracted with Nypro Inc. (“Nypro”), an international
15
manufacturing development company to supply commercial quantities of our Vibex™ pressure assisted auto injector
device in compliance with FDA QSR regulations.
Sales and Marketing
We expect to currently market most of our products through other more established pharmaceutical companies
while continuing marketing of our insulin injection devices and related disposable components in the U.S. In the
future and as we develop more products in niche therapeutic areas, we will consider developing commercial
capabilities.
During 2009, 2008 and 2007, international revenue accounted for approximately 47%, 74% and 55% of total
revenue. Europe accounted for 94%, 93% and 91% of international revenue in 2009, 2008 and 2007, with the
remainder coming primarily from Asia. Ferring accounted for 39%, 60% and 39% of our worldwide revenues in
2009, 2008 and 2007. BioSante accounted for 2%, 12% and 36% and JCR accounted for 2%, 5% and 4% of our
worldwide revenues in 2009, 2008 and 2007. Revenue from Ferring and JCR resulted from sales of injection
devices and related disposable components for their hGH formulations. In 2008 and 2007, the BioSante revenue
resulted primarily from license fees and milestone payments related to Elestrin®, received under a sublicense
arrangement related to an existing license agreement with BioSante.
See Results of Operations – Revenues in Part II, Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations – for a discussion of our products and services revenues and Note 13 to the
Consolidated Financial Statements for revenues by geographic area.
Collaborative Arrangements and License Agreements
The following table describes significant existing pharmaceutical and device relationships and license
agreements:
Partner
Ferring
Ferring
Teva
JCR
Teva
Teva
Teva
Teva
BioSante
Drug
hGH (4mg formulation)
hGH (10 mg formulation)
hGH
hGH
Undisclosed
Product #1
Undisclosed
Product #2
Undisclosed
Product #3
Undisclosed
Product #4
Estradiol (Elestrin®)
Testosterone (LibiGel®)
Jazz Pharmaceuticals
Ropinirole
Population Council
Nestorone®/Estradiol
Ferring
Undisclosed
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Market Segment
Growth Retardation
(U.S., Europe, Asia & Pacific)
Growth Retardation
(U.S., Europe, Asia & Pacific)
Growth Retardation
(United States)
Growth Retardation
(Japan)
Undisclosed
(U.S. and Canada)
Undisclosed
(United States)
Undisclosed
(North America, Europe & others)
Undisclosed
(North America, Europe & others)
Hormone replacement therapy
(North America, other countries)
Female sexual dysfunction
(North America, other countries)
Central Nervous System
(Worldwide)
Contraception
(Worldwide)
Undisclosed
(Worldwide)
Product
Needle Free
Zomajet® 2 Vision
Needle Free
Zomajet® Vision X
Needle Free
Tjet®
Needle Free
Twin-Jector® EZ II
Auto Injector
Disposable Device
Auto Injector
Disposable Device
Disposable Pen
Injector Device
Disposable Pen
Injector Device
ATD™ Gel
ATD™ Gel
ATD™ Gel
ATD™ Gel
ATD™ Gel
The table above summarizes agreements under which our partners are selling products, conducting clinical
evaluation, and performing development of our products. For competitive reasons, our partners may not divulge
their name, the product name or the exact stage of clinical development.
In June 2000, we granted an exclusive license to BioSante to develop and commercialize three of our gel
technology products and one patch technology product for use in hormone replacement therapy in North America
and other countries. Subsequently, the license for the patch technology product was returned to us in exchange for a
fourth gel based product. BioSante paid us $1 million upon execution of the agreement and is also required to make
royalty payments once commercial sales of the products have begun. The royalty payments are based on a
percentage of sales of the products and must be paid for a period of 10 years following the first commercial sale of
the products, or when the last patent for the products expires, whichever is later. The agreement also provides for
milestone payments to us upon the occurrence of certain events related to regulatory filings and approvals. In
November 2006, BioSante entered into a sublicense and marketing agreement with Bradley Pharmaceuticals, Inc.
(“Bradley”) for Elestrin® (formerly Bio-E-Gel). BioSante received an upfront payment from Bradley which
triggered a payment to us of $875,000. In December 2006, the FDA approved Elestrin® for marketing in the United
States triggering payments to us totaling $2.6 million, which were received in 2007. We also received royalties on
sales of Elestrin®. Bradley was acquired by Nycomed Inc. in February 2008 and returned Elestrin® to BioSante. In
December 2008, Elestrin® was sublicensed to Azur Pharmaceuticals (“Azur”) and subsequently relaunched in 2009.
As a result of the sublicense agreement with Azur, we received payments from BioSante of $462,500 in December
2008. In addition, we will receive royalties on sales of Elestrin® as well as potential sales-based milestone
payments.
In January 2003, we entered into a revised License Agreement with Ferring, under which we licensed certain of
our intellectual property and extended the territories available to Ferring for use of certain of our reusable needle-
free injection devices to include all countries and territories in the world except Asia/Pacific. Specifically, we
granted to Ferring an exclusive, royalty-bearing license, within a prescribed manufacturing territory, to utilize
certain of our reusable needle-free injector devices for the field of hGH until the expiration of the last to expire of
the patents in any country in the territory. We granted to Ferring similar non-exclusive rights outside of the
prescribed manufacturing territory. In addition, we granted to Ferring a non-exclusive right to make and have made
the equipment required to manufacture the licensed products, and an exclusive, royalty-free license in a prescribed
territory to use and sell the licensed products under certain circumstances. In 2007, we amended this agreement
providing for non-exclusive rights in Asia along with other changes to financial terms of the agreement.
In 2004, JCR initiated a campaign to broaden its marketing efforts for human growth hormone under a purchase
agreement with our needle free injector.
In November 2005, we signed an agreement with Sicor Pharmaceuticals Inc., an affiliate of Teva, under which
Sicor is obligated to purchase all of its injection delivery device requirements from us for an undisclosed product to
be marketed in the United States. Sicor also received an option for rights in other territories. The license agreement
included, among other things, an upfront cash payment, milestone fees, a negotiated purchase price for each device
sold, and royalties on sales of their product.
In July 2006, we entered into an exclusive License Development and Supply Agreement with Sicor
Pharmaceuticals Inc., an affiliate of Teva. Pursuant to the agreement; the affiliate is obligated to purchase all of its
delivery device requirements from us for an undisclosed product to be marketed in the United States and Canada.
We received an upfront cash payment, and will receive milestone fees, a negotiated purchase price for each device
sold, as well as royalties on sales of their product. In December 2008, this agreement was amended to include
development work that was outside the scope of the original agreement, resulting in additional payments to us. In
2009 the agreement was again amended providing for payment of capital equipment and other development work.
In July 2006, we entered into a joint development agreement with the Population Council, an international, non-
profit research organization, to develop contraceptive formulation products containing Nestorone®, by using the
Population Council’s patented compound and other proprietary information covering the compound, and our
transdermal delivery gel technology. Under the terms of the joint development agreement, we are responsible for
research and development activities as they relate to ATD formulation and manufacturing. The Population Council
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will be responsible for clinical trial design development and management. Together, we expect to identify a
worldwide or regional commercial development partner as clinical data becomes available.
In September 2006, we entered into a Supply Agreement with Teva. Pursuant to the agreement, Teva is
obligated to purchase all of its delivery device requirements from us for hGH marketed in the United States. We
received an upfront cash payment, and will receive milestone fees and a royalty payment on Teva’s net sales of
hGH, as well as a purchase price for each device sold.
In July 2007, we entered into a worldwide product development and license agreement with Jazz for ropinirole
which is being developed to treat a CNS disorder that will utilize our transdermal gel delivery technology ATD™.
Under the agreement, an upfront payment, development milestones, and royalties on product sales are to be received
by us under certain circumstances.
In December 2007, we entered into a license, development and supply agreement with Teva under which we
will develop and supply a disposable pen injector for use with two undisclosed patient-administered pharmaceutical
products. Under the agreement, an upfront payment, development milestones, and royalties on product sales are to
be received by us under certain circumstances.
In November 2009 we entered into a license agreement with Ferring under which we licensed certain of our
patents and agreed to transfer know-how for our transdermal gel technology for certain pharmaceutical products.
Under this agreement, we received an upfront payment and will receive milestone payments as certain defined
milestones are achieved.
Distribution/supply agreements are arrangements under which our products are supplied to end-users through
the distributor or supplier. We provide the distributor/supplier with injection devices and related disposable
components, and the distributor/supplier often receives a margin on sales. We currently have a number of
distribution/supply arrangements under which the distributors/suppliers sell our needle-free injection devices and
related disposable components for use with insulin.
Seasonality of Business
We do not believe our business, either device or pharmaceutical, is subject to seasonality. We are subject to and
affected by the business practices of our pharmaceutical/device partners. Inventory practices of our partners may
subject us to product sales fluctuations quarter to quarter or year over year. Additionally, development revenue we
derive from our partners is subject to fluctuation based on the number of programs being conducted by our partners
as well as delays or lack of funding for those programs.
Proprietary Rights
When appropriate, we actively seek protection for our products and proprietary information by means of U.S.
and international patents and trademarks. We currently hold numerous patents and numerous additional patent
applications pending in the U.S. and other countries. Our patents have expiration dates ranging from 2015 to 2023.
In addition to issued patents and patent applications, we are also protected by trade secrets in all of our technology
platforms.
Some of our technology is developed on our behalf by independent outside contractors. To protect the rights of
our proprietary know-how and technology, Company policy requires all employees and consultants with access to
proprietary information to execute confidentiality agreements prohibiting the disclosure of confidential information
to anyone outside the Company. These agreements also require disclosure and assignment to us of discoveries and
inventions made by such individuals while devoted to Company-sponsored activities. Companies with which we
have entered into development agreements have the right to certain technology developed in connection with such
agreements.
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Government Regulation
Any potential products discovered, developed and manufactured by us or our collaborative partners must
comply with, comprehensive regulation by the FDA in the United States and by comparable authorities in other
countries. These national agencies and other federal, state, and local entities regulate, among other things, the pre-
clinical and clinical testing, safety, effectiveness, approval, manufacturing operations, quality, labeling, distribution,
marketing, export, storage, record keeping, event reporting, advertising and promotion of pharmaceutical products
and medical devices. Facilities and certain company records are also subject to inspections by the FDA and
comparable authorities or their representatives. The FDA has broad discretion in enforcing the Federal Food, Drug
and Cosmetic Act (“FD&C Act”) and the regulations thereunder, and noncompliance can result in a variety of
regulatory steps ranging from warning letters, product detentions, device alerts or field corrections to mandatory
recalls, seizures, injunctive actions and civil or criminal actions or penalties.
Drug Approval Process
Transdermal and topical products indicated for the treatment of systemic or local treatments respectively are
regulated by the FDA in the U.S. and other similar regulatory agencies in other countries as drug products.
Transdermal and topical products are considered to be controlled release dosage forms and may not be marketed in
the U.S. until they have been demonstrated to be safe and effective. The regulatory approval routes for transdermal
and topical products include the filing of an NDA for new drugs, new indications of approved drugs or new dosage
forms of approved drugs. Alternatively, these dosage forms can obtain marketing approval as a generic product by
the filing of an ANDA, providing the new generic product is bioequivalent to and has the same labeling as a
comparable approved product or as a filing under Section 505(b)(2) of the FD&C Act where there is an acceptable
reference product. Many topical products for local treatment do not require the filing of either an NDA or ANDA,
providing that these products comply with existing OTC monographs. The combination of the drug, its dosage form
and label claims, and FDA requirements will ultimately determine which regulatory approval route will be required.
The process required by the FDA before a new drug (pharmaceutical product) or a new route of administration
of a pharmaceutical product may be approved for marketing in the United States generally involves:
(cid:131) pre-clinical laboratory and animal tests;
(cid:131) submission to the FDA of an investigational new drug (“IND”) application, which must be in effect before
clinical trials may begin;
(cid:131) adequate and well controlled human clinical trials to establish the safety and efficacy of the drug for its
intended indication(s);
(cid:131) FDA compliance inspection and/or clearance of all manufacturers;
(cid:131) submission to the FDA of an NDA; and
(cid:131) FDA review of the NDA or product license application in order to determine, among other things, whether
the drug is safe and effective for its intended uses.
Pre-clinical tests include laboratory evaluation of product chemistry and formulation, as well as animal studies,
to assess the potential safety and efficacy of the product. Certain pre-clinical tests must comply with FDA
regulations regarding current good laboratory practices. The results of the pre-clinical tests are submitted to the FDA
as part of an IND, to support human clinical trials and are reviewed by the FDA, with patient safety as the primary
objective, prior to the IND commencement of human clinical trials.
Clinical trials are conducted according to protocols that detail matters such as a description of the condition to
be treated, the objectives of the study, a description of the patient population eligible for the study and the
parameters to be used to monitor safety and efficacy. Each protocol must be submitted to the FDA as part of the
IND. Protocols must be conducted in accordance with FDA regulations concerning good clinical practices to ensure
the quality and integrity of clinical trial results and data. Failure to adhere to good clinical practices and the
protocols may result in FDA rejection of clinical trial results and data, and may delay or prevent the FDA from
approving the drug for commercial use.
Clinical trials are typically conducted in three sequential Phases, which may overlap. During Phase I, when the
drug is initially given to human subjects, the product is tested for safety, dosage tolerance, absorption, distribution,
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metabolism and excretion. Phase I studies are often conducted with healthy volunteers depending on the drug being
tested; however, in oncology, Phase I trials are more often conducted in cancer patients. Phase II involves studies in
a limited patient population, typically patients with the conditions needing treatment, to:
(cid:131) evaluate preliminarily the efficacy of the product for specific, targeted indications;
(cid:131) determine dosage tolerance and optimal dosage; and
(cid:131)
identify possible adverse effects and safety risks.
Pivotal or Phase III adequate and well-controlled trials are undertaken in order to evaluate efficacy and safety in
a comprehensive fashion within an expanded patient population for the purpose of registering the new drug. The
FDA may suspend or terminate clinical trials at any point in this process if it concludes that patients are being
exposed to an unacceptable health risk or if they decide it is unethical to continue the study. Results of pre-clinical
and clinical trials must be summarized in comprehensive reports for the FDA. In addition, the results of Phase III
studies are often subject to rigorous statistical analyses. This data may be presented in accordance with the
guidelines for the International Committee of Harmonization that can facilitate registration in the United States, the
EU and Japan.
FDA approval of our own and our collaborators’ products is required before the products may be
commercialized in the United States. FDA approval of an NDA will be based, among other factors, on the
comprehensive reporting of clinical data, risk/benefit analysis, animal studies and manufacturing processes and
facilities. The process of obtaining NDA approvals from the FDA can be costly and time consuming and may be
affected by unanticipated delays.
A sNDA is a submission to an existing NDA that provides for changes to the NDA and therefore requires FDA
approval. Changes to the NDA that require FDA approval are the subject of either the active ingredients, the drug
product and/or the labeling. A supplement is required to fully describe the change.
Both before and after market approval is obtained, a product, its manufacturer and the holder of the NDA for
the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage,
including after approval, may result in various adverse consequences, including the FDA’s delay in approving or
refusal to approve a product, withdrawal of an approved product from the market and the imposition of criminal
penalties against the manufacturer and NDA holder. In addition, later discovery of previously unknown problems
may result in restrictions on the product, manufacturer or NDA holder, including withdrawal of the product from the
market. Furthermore, new government requirements may be established that could delay or prevent regulatory
approval of our products under development.
FDA approval is required before a generic drug equivalent can be marketed. We seek approval for such
products by submitting an ANDA to the FDA. When processing an ANDA, the FDA waives the requirement of
conducting complete clinical studies, although it normally requires bioavailability and/or bioequivalence studies.
“Bioavailability” indicates the extent of absorption of a drug product in the blood stream. “Bioequivalence”
indicates that the active drug substance that is the subject of the ANDA submission is equivalent to the previously
approved drug. An ANDA may be submitted for a drug on the basis that it is the equivalent of a previously approved
drug or, in the case of a new dosage form, is suitable for use for the indications specified.
The timing of final FDA approval of an ANDA depends on a variety of factors, including whether the applicant
challenges any listed patents for the drug and whether the brand-name manufacturer is entitled to one or more
statutory exclusivity periods, during which the FDA may be prohibited from accepting applications for, or
approving, generic products. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a
patent, and thus block ANDAs from being approved on the patent expiration date. For example, in certain
circumstances the FDA may extend the exclusivity of a product by six months past the date of patent expiry if the
manufacturer undertakes studies on the effect of their product in children, a so-called pediatric extension.
Before approving a product, either through the NDA or ANDA route, the FDA also requires that our procedures
and operations or those of our contracted manufacturer conform to Current Good Manufacturing Practice (“cGMP”)
regulations, relating to good manufacturing practices as defined in the U.S. Code of Federal Regulations. We and
our contracted manufacturer must follow the cGMP regulations at all times during the manufacture of our products.
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We will continue to spend significant time, money and effort in the areas of production and quality testing to help
ensure full compliance with cGMP regulations and continued marketing of our products now or in the future.
If the FDA believes a company is not in compliance with cGMP, sanctions may be imposed upon that company
including:
(cid:131) withholding from the company new drug approvals as well as approvals for supplemental changes to
existing applications;
(cid:131) preventing the company from receiving the necessary export licenses to export its products; and
(cid:131) classifying the company as an “unacceptable supplier” and thereby disqualifying the company from selling
products to federal agencies.
Our drug products such as Anturol® gel and Nestorone® gel, as well as our products being developed by our
partners are subject to the above regulations. Anturol® and Nestorone® will be subject to the NDA process. Device
combination products developed and currently being developed by our partner Teva are subject to the sNDA,
ANDA and 505(b)(2) regulations cited above.
Device Approval Process
Products regulated as medical devices can be commercially distributed in the United States following approval
by the FDA, through a finding of substantial equivalence to a marketed product, or by having been exempted from
the FD&C Act and regulations thereunder. In cases of substantial equivalence, under Section 510(k) of the FD&C
Act, certain products qualify for a pre-market notification (“PMN”) of the manufacturer’s intention to commence
marketing the product. The manufacturer must, among other things, establish in the PMN that the product to be
marketed is substantially equivalent to another legally marketed product (that it has the same intended use and that it
is as safe and effective as a legally marketed device and does not raise questions of safety and effectiveness that are
different from those associated with the legally marketed device). Marketing may commence when the FDA issues a
letter finding substantial equivalence to such a legally marketed device. The FDA may require, in connection with a
PMN, that it be provided with animal and/or human test results. If a medical device does not qualify for PMN, the
manufacturer must file a pre-market approval (“PMA”) application under Section 515 of the FD&C Act. A PMA
must show that the device is safe and effective. A PMA is generally a much more complex submission than a
510(k) notification, typically requiring more extensive pre-filing testing and a longer FDA review process.
Drug delivery systems such as injectors may be legally marketed as a medical device or may be evaluated as
part of the drug approval process such as a NDA or a Product License Application (“PLA”). Combination
drug/device products raise unique scientific, technical and regulatory issues. The FDA has established an Office of
Combination Products (“OCP”) to address the challenges associated with the review and regulation of combination
products. The OCP assists in determining strategies for the approval of drug/delivery combinations and assuring
agreement within the FDA on review responsibilities. To the extent permitted under the FD&C Act and current
FDA policy, we intend to seek regulatory review for drug delivery systems for use in specific drug applications
under the medical device provisions, rather than under the new drug provisions, of the FD&C Act. Device
regulatory filings could take the form of a PMN, PMA, or the filing of a device master file (“MAF”). In some cases,
the device specific information may need to be filed as part of the drug approval submission, and in those cases we
will seek agreement from the Agency for review of the device portion of the submission by the Center for Devices
and Radiological Health (“CDRH”) under the medical device provisions of the law.
A MAF filing typically supports a regulatory filing in the approval pathway. Where common data elements
may be part of several submissions for regulatory approval, as in the case of information supporting an injection
platform; a MAF filing with the FDA may be the preferred route. A delivery device that is considered a product
only when combined with a drug, and where such a device is applicable to a variety of drugs, represents another
opportunity for such a filing. We intend to pursue such strategies as permitted by the law and as directed by the
FDA either through guidance documents or discussions.
In addition to submission when a device is being introduced into the market for the first time, a PMN is also
required when the manufacturer makes a change or modification to a previously marketed device that could
significantly affect safety or effectiveness, or where there is a major change or modification in the intended use or in
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the manufacture of the device. When any change or modification is made in a device or its intended use, the
manufacturer is expected to make the initial determination as to whether the change or modification is of a kind that
would necessitate the filing of a new 510(k) notification. The Vision™ injection system is a legally marketed device
under Section 510(k) of the FD&C Act for insulin. In the future we or our partners may submit additional 510(k)
notifications with regard to further device design improvements and uses with additional drug therapies.
If the FDA concludes that any or all of our new injectors must be handled under the new drug provisions of the
FD&C Act, substantially greater regulatory requirements and approval times will be imposed. Use of a modified
new product with a previously unapproved new drug likely will be handled as part of the NDA for the new drug
itself. Under these circumstances, the device component will be handled as a drug accessory and will be approved, if
ever, only when the NDA itself is approved. Our injectors may be required to be approved as a combination
drug/device product under a sNDA for use with previously approved drugs. Under these circumstances, our device
could be used with the drug only if and when the supplemental NDA is approved for this purpose. It is possible that,
for some or even all drugs, the FDA may take the position that a drug-specific approval must be obtained through a
full NDA or supplemental NDA before the device may be packaged and sold in combination with a particular drug.
Teva, a pharmaceutical partner of ours, filed a sNDA with the FDA for hGH for use with our Tjet® device in July
2008. The sNDA was approved in June of 2009. Teva launched the Tjet® device in August of 2009 for use in
delivery of Teva’s form of hGH, Tev-Tropin®.
To the extent that our modified injectors are packaged with the drug, as part of a drug delivery system, the
entire package may be subject to the requirements for drug/device combination products. These include drug
manufacturing requirements, drug adverse reaction reporting requirements, and all of the restrictions that apply to
drug labeling and advertising. In general, the drug requirements under the FD&C Act are more onerous than medical
device requirements. These requirements could have a substantial adverse impact on our ability to commercialize
our products and our operations.
The FD&C Act also regulates quality control and manufacturing procedures by requiring that we and our
contract manufacturers demonstrate compliance with the current QSR. The FDA’s interpretation and enforcement of
these requirements have been increasingly strict in recent years and seem likely to be even more stringent in the
future. The FDA monitors compliance with these requirements by requiring manufacturers to register with the FDA
and by conducting periodic FDA inspections of manufacturing facilities. If the inspector observes conditions that
might violate the QSR, the manufacturer must correct those conditions or explain them satisfactorily. Failure to
adhere to QSR requirements would cause the devices produced to be considered in violation of the FDA Act and
subject to FDA enforcement action that might include physical removal of the devices from the marketplace.
The FDA’s Medical Device Reporting Regulation requires companies to provide information to the FDA on the
occurrence of any death or serious injuries alleged to have been associated with the use of their products, as well as
any product malfunction that would likely cause or contribute to a death or serious injury if the malfunction were to
recur. In addition, FDA regulations prohibit a device from being marketed for unapproved or uncleared indications.
If the FDA believes that a company is not in compliance with these regulations, it could institute proceedings to
detain or seize company products, issue a recall, seek injunctive relief or assess civil and criminal penalties against
the company or its executive officers, directors or employees.
In addition to regulations enforced by the FDA, we must also comply with regulations under the Occupational
Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other federal, state and local regulations.
Foreign Approval Process
In addition to regulations in the United States, we are subject to various foreign regulations governing clinical
trials and the commercial sales and distribution of our products. We must obtain approval of a product by the
comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the
product in those countries. The requirements governing the conduct of clinical trials, product licensing, pricing and
reimbursement and the regulatory approval process all vary greatly from country to country. Additionally, the time it
takes to complete the approval process in foreign countries may be longer or shorter than that required for FDA
approval. Foreign regulatory approvals of our products are necessary whether or not we obtain FDA approval for
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such products. Finally, before a new drug may be exported from the United States, it must either be approved for
marketing in the United States or meet the requirements of exportation of an unapproved drug under Section 802 of
the Export Reform and Enhancement Act or comply with FDA regulations pertaining to INDs.
Under European Union regulatory systems, we are permitted to submit marketing authorizations under either a
centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing
authorization that is valid for all member states of the European Union. The decentralized procedure provides for
mutual recognition of national approval decisions by permitting the holder of a national marketing authorization to
submit an application to the remaining member states. Within 90 days of receiving the applications and assessment
report, each member state must decide whether to recognize approval.
Sales of medical devices outside of the U.S. are subject to foreign legal and regulatory requirements. Certain of
our transdermal and injection systems have been approved for sale only in certain foreign jurisdictions. Legal
restrictions on the sale of imported medical devices and products vary from country to country. The time required to
obtain approval by a foreign country may be longer or shorter than that required for FDA approval, and the
requirements may differ. We rely upon the companies marketing our injectors in foreign countries to obtain the
necessary regulatory approvals for sales of our products in those countries. Generally, products having an effective
section 510(k) clearance or PMA may be exported without further FDA authorization.
We have obtained ISO 13485: 2003 certification, the medical device industry standard for our quality systems.
This certification shows that our development and manufacturing comply with standards for quality assurance,
design capability and manufacturing process control. Such certification, along with compliance with the European
Medical Device Directive enables us to affix the CE Mark (a certification indicating that a product has met EU
consumer safety, health or environmental requirements) to current products and supply the device with a Declaration
of Conformity. Semi-annual audits by our notified body, British Standards Institute, are required to demonstrate
continued compliance.
Employees
We believe that our success is largely dependent upon our ability to attract and retain qualified personnel in the
research, development, manufacturing, business development and commercialization fields. As of March 15, 2010,
we had 19 full-time employees, of whom 17 are in the United States. Of the 19 employees, 10 are primarily involved
in research, development and manufacturing activities, two are primarily involved in business development and
commercialization, with the remainder engaged in executive and administrative capacities. Although we believe that
we are appropriately sized to focus on our mission, we intend to add personnel with specialized expertise, as needed.
We believe that we have been successful to date in attracting skilled and experienced scientific and business
professionals. We consider our employee relations to be good, and none of our employees are represented by any
labor union or other collective bargaining unit.
Available Information
We file with the United States Securities and Exchange Commission (“SEC”) annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other documents as required by
applicable law and regulations. The public may read and copy any materials that we file with the SEC at the SEC’s
Public Reference Room at 100 F Street, N. E., Washington, DC 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 (1-800-732-0330). The SEC
maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other
We maintain an Internet site
information regarding
(http://www.antarespharma.com). We make available free of charge on or through our Internet website our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these
reports, as soon as reasonably practicable after electronically filing those documents with or furnishing them to the
SEC. The information on our website is not incorporated into and is not a part of this annual report.
that file electronically with
the SEC.
issuers
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Item 1A. RISK FACTORS
The following “risk factors” contain important information about us and our business and should be read in their
entirety. Additional risks and uncertainties not known to us or that we now believe to be not material could also
impair our business. If any of the following risks actually occur, our business, results of operations and financial
condition could suffer significantly. As a result, the market price of our common stock could decline and you could
lose all of your investment. In this Section, the terms the “Company,” “we”, “our” and “us” refer to Antares
Pharma, Inc.
Risks Related to Our Operations
We have incurred significant losses to date, and there is no guarantee that we will ever become profitable.
We incurred net losses of $10,290,752 and $12,690,453 in the fiscal years ended 2009 and 2008, respectively.
In addition, we have accumulated aggregate net losses from the inception of business through December 31, 2009 of
$130,882,597. In addition, we expect to report a net loss for the year ending December 31, 2010. The costs for
research and product development of our drug delivery technologies along with marketing and selling expenses and
general and administrative expenses have been the principal causes of our losses. We may not ever become
profitable and if we do not become profitable your investment would be harmed.
We may need additional capital in the future in order to continue our operations.
In July of 2009, we completed a registered direct offering of our common stock and warrants in which we
received aggregate gross proceeds of $8,500,000. In September of 2009, we received gross proceeds of $3,000,000
from an additional registered direct offering of common stock and warrants. In September 2009, we used
approximately $3,000,000 of the stock sales proceeds to pay down an existing credit facility. In addition, we
received proceeds from warrant and stock option exercises of $105,622 and $1,319,950 in 2009 and 2008,
respectively. If additional capital is needed in the near term to support operations, the current economic and market
conditions may make it difficult to raise additional funds through debt or equity financings.
At December 31, 2009 we had cash and cash equivalents of $13,559,088. Although the combination of our
current cash and cash equivalents balance and projected product sales, product development, license revenues,
milestone payments and royalties may provide us with sufficient funds to support operations for the next 12 months,
we may need to pursue a financing or reduce expenditures as necessary to meet our cash requirements over the next
12 months. If we do obtain such financing, we cannot assure that the amount or the terms of such financing will be
as attractive as we may desire. If we are unable to obtain such financing when needed, or if the amount of such
financing is not sufficient, it may be necessary for us to take significant cost saving measures or generate funding in
ways that may negatively affect our business in the future. To reduce expenses, we may be forced to make
personnel reductions, eliminate departments or curtail or discontinue development programs. To generate funds, it
may be necessary to monetize future royalty streams, sell intellectual property, divest of technology platforms or
liquidate assets. However, there is no assurance that, if required, we will be able to generate sufficient funds or
reduce spending to provide the required liquidity.
Long-term capital requirements will depend on numerous factors, including, but not limited to, the status of
collaborative arrangements, the progress of research and development programs and the receipt of revenues from
sales of products. Our ability to achieve and/or sustain profitable operations depends on a number of factors, many
of which are beyond our control. These factors include, but are not limited to, the following:
•
•
•
•
•
•
timing of our partners’ development, regulatory and commercialization plans;
the demand for our technologies from current and future biotechnology and pharmaceutical partners;
our ability to manufacture products efficiently, at the appropriate commercial scale, and with the required
quality;
our ability to increase and continue to outsource manufacturing capacity to allow for new product introductions;
the level of product competition and of price competition;
patient acceptance of our current and future products;
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•
•
•
•
•
•
•
our ability to develop additional commercial applications for our products;
our limited regulatory and commercialization experience;
our ability to obtain regulatory approvals;
our ability to attract the right personnel to execute our plans;
our ability to develop, maintain or acquire patent positions;
our ability to control costs; and
general economic conditions.
The failure of any of our third-party licensees to develop, obtain regulatory approvals for, market, distribute and
sell our products as planned may result in us not meeting revenue and profit targets.
Pharmaceutical company partners such as Teva help us develop, obtain regulatory approvals for, manufacture
and sell our products. If one or more of these pharmaceutical company partners fail to pursue the development or
marketing of the products as planned, our revenues and profits may not reach expectations or may decline. We may
not be able to control the timing and other aspects of the development of products because pharmaceutical company
partners may have priorities that differ from ours. Therefore, commercialization of products under development
may be delayed unexpectedly. Generally speaking, in the near term, we do not intend to have a direct marketing
channel to consumers for our drug delivery products or technologies except through current distributor agreements
in the United States for our insulin delivery device. Therefore, the success of the marketing organizations of our
pharmaceutical company partners, as well as the level of priority assigned to the marketing of the products by these
entities, which may differ from our priorities, will determine the success of the products incorporating our
technologies. Competition in this market could also force us to reduce the prices of our technologies below
currently planned levels, which could adversely affect our revenues and future profitability.
Additionally, there is no assurance that regulatory filings by our partners in the U.S. will be deemed sufficient
by the FDA, potentially delaying product launches.
We currently depend on a limited number of customers for the majority of our revenue, and the loss of any one of
these customers could substantially reduce our revenue and impact our liquidity.
For the year ended December 31, 2009, we derived approximately 39% of our revenue from Ferring and 38%
from Teva. For the year ended December 31, 2008, we derived approximately 60% of our revenue from Ferring and
12% of our revenue from BioSante. The revenue from Ferring was primarily product sales and royalties. The
revenue from Teva was license and development revenue and product sales. The revenue from BioSante was
primarily milestone based and will likely not be recurring in the near future.
The loss of any of these customers or partners or reduction in our business activities could cause our revenues to
decrease significantly, increase our continuing losses from operations and, ultimately, could require us to cease
operations. If we cannot broaden our customer base, we will continue to depend on a few customers for the majority
of our revenues. Additionally, if we are unable to negotiate favorable business terms with these customers in the
future, our revenues and gross profits may be insufficient to allow us to achieve and/or sustain profitability or
continue operations.
We have entered into four license, development and/or supply agreements for five potential products since
November of 2005 with Teva or an affiliate of Teva. To date we have received FDA approval of one of those
products, the Tjet® needle-free device for use with hGH. Teva is currently marketing the Tjet® device to its patients
and we expect product sales and royalties from this product into the future. Although certain upfront and milestone
payments have been received for the other programs with Teva, timelines have been extended and there can be no
assurance that there ever will be commercial sales or future milestone payments under these other agreements.
In July 2007, we entered into a worldwide product development and license agreement with Jazz. Under the
agreement an upfront payment, development milestones, and royalties on product sales are to be paid to us under
certain circumstances. The development program conducted by Jazz is currently on hold and we may never receive
any compensation other than the upfront payment earned at agreement execution and other development revenue.
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In June 2000, we entered into an exclusive agreement to license four applications of our drug-delivery
technology to BioSante. BioSante is using the licensed technology for the development of hormone replacement
therapy products that include LibiGel® (transdermal testosterone gel) in Phase 3 clinical development for the
treatment of FSD, and Elestrin® (estradiol gel) for the treatment of moderate-to-severe vasomotor symptoms
associated with menopause, and currently marketed in the U.S. Under the agreement an upfront payment,
development milestones and royalties on product sales are to be paid to us. We also receive a portion of any
sublicense fees received by BioSante.
Part of our business model is to be commercially oriented by further developing our own products, and we may not
have sufficient resources to fully execute our plan.
We must make choices as to the drugs that we develop on our own. We may not make the correct choice of
drug or technologies when combined with a drug, which may not be accepted by the marketplace as we expected or
at all. FDA approval processes for the drugs and drugs with devices may be longer in time and/or more costly
and/or require more extended clinical evaluation than anticipated. Funds required to bring our own products to
market may be more than anticipated or may not be available at all. We have limited experience in development of
compounds, regulatory matters and bringing such products to market; therefore, we may experience difficulties in
execution of development of internal product candidates.
If we or our third-party manufacturer are unable to supply Ferring with our devices pursuant to our current device
license agreement with Ferring, Ferring could own a fully paid up license for certain of our intellectual property.
Pursuant to our license agreement with Ferring, we licensed certain of our intellectual property related to our
needle-free injection devices, including a license that allows Ferring to manufacture our devices on its own under
certain circumstances for use with its hGH product. In accordance with the license agreement, we entered into a
manufacturing agreement with a third party to manufacture our devices for Ferring. If we or this third party are
unable to meet our obligations to supply Ferring with our devices, Ferring would own a fully paid up license to
manufacture our devices and to use and exploit our intellectual property in connection with Ferring’s human growth
hormone product. In such an event, we would no longer receive product sales and manufacturing margins from
Ferring; however we would still receive royalties.
If we do not develop and maintain relationships with manufacturers of our drug candidates, then we may be unable
to successfully manufacture and sell our pharmaceutical products.
We do not possess the capabilities or facilities to manufacture commercial quantities of Anturol®, which is
currently in development for overactive bladder, or any other of our future drug candidates. We must contract with
manufacturers to produce Anturol® according to government regulations. Our future development and delivery of
our product candidates depends on the timely, profitable and competitive performance of these manufacturers. A
limited number of manufacturers exist which are capable of manufacturing our product candidates. We may fail to
contract with the necessary manufacturers or we may contract with manufactures on terms that may not be favorable
to us. Our manufacturers must obtain FDA approval for their manufacturing processes, and we have no control over
this approval process. Additionally, use of contract manufacturers exposes us to risks in the manufacturer's business
such as their potential inability to perform from a technical, operational or financial standpoint.
We have contracted with a commercial supplier of pharmaceutical chemicals to supply us with the active
pharmaceutical ingredient of oxybutynin for clinical quantities of Anturol® in a manner that meets FDA
requirements via reference of their DMF for oxybutynin. Additionally, we have contracted with Patheon, a
manufacturing development company, to supply clinical quantities of Anturol® in a manner that meets FDA
requirements. The FDA has not approved the manufacturing processes of Patheon for Anturol®. Any failure by
Patheon or our supplier of the active ingredient oxybutynin to achieve or maintain compliance with FDA standards
could significantly harm our business since we do not currently have approved secondary manufacturers for
Anturol® gel or oxybutynin.
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If we do not develop and maintain relationships with manufacturers of our device products, then we may be unable
to successfully manufacture and sell our device products.
Our device manufacturing for our needle-free device has involved the assembly of products from machined
stainless steel and composite components in limited quantities. Our planned future device business may necessitate
changes and additions to our contract manufacturing and assembly process due to the anticipated larger scale of
manufacturing in our business plan. Our devices must be manufactured in compliance with regulatory requirements,
in a timely manner and in sufficient quantities while maintaining quality and acceptable manufacturing costs. In the
course of these changes and additions to our manufacturing and production methods, we may encounter difficulties,
including problems involving scale-up, yields, quality control and assurance, product reliability, manufacturing
costs, existing and new equipment and component supplies, any of which could result in significant delays in
production.
We operate under a manufacturing agreement with Minnesota Rubber and Plastics (“MRP”), a contract
manufacturing company, who manufactures and assembles our needle-free devices and certain related disposable
component parts for our partners Teva, Ferring and JCR. There can be no assurance that MRP will be able to
continue to meet these regulatory requirements or our own quality control standards. Therefore, there can be no
assurance that we will be able to successfully produce and manufacture our products. Our pharmaceutical partners
retain the right to audit the quality systems of our manufacturing partner, and there can be no assurance that MRP
will be successful in these audits. Any of these failures would negatively impact our business, financial condition
and results of operations. We will also continue to outsource manufacturing of our future disposable injection
products to third parties. Such products will be price sensitive and may be required to be manufactured in large
quantities, and we have no assurance that this can be done. Additionally, use of contract manufacturers exposes us
to risks in the manufacturers’ business such as their potential inability to perform from a technical, operational or
financial standpoint.
We have contracted with Nypro, an international manufacturing development company to commercialize our
Vibex™ pressure assisted auto injector device in compliance with FDA QSR regulations. Any failure by Nypro to
successfully manufacture the pressure assisted auto injector device in commercial quantities, be in compliance with
regulatory regulations, or pass the audits by our pharmaceutical partner would have a negative impact on our future
revenue expectations.
We rely on third parties to supply components for our products, and any failure to retain relationships with these
third parties could negatively impact our ability to manufacture our products.
Certain of our technologies contain a number of customized components manufactured by various third parties.
Regulatory requirements applicable to manufacturing can make substitution of suppliers costly and time-consuming.
In the event that we could not obtain adequate quantities of these customized components from our suppliers, there
can be no assurance that we would be able to access alternative sources of such components within a reasonable
period of time, on acceptable terms or at all. The unavailability of adequate quantities, the inability to develop
alternative sources, a reduction or interruption in supply or a significant increase in the price of components could
have a material adverse effect on our ability to manufacture and market our products.
Our products have achieved only limited acceptance by patients and physicians, which continues to restrict
marketing penetration and the resulting sales of more of our products.
Our business ultimately depends on patient and physician acceptance of our reusable needle-free injectors,
disposable pressure assisted auto injectors, transdermal gels and our other drug delivery technologies as an
alternative to more traditional forms of drug delivery, including injections using a needle, orally ingested drugs and
more traditional transdermal patch products. To date, our drug delivery technologies have achieved only limited
acceptance from such parties. The degree of acceptance of our drug delivery systems depends on a number of
factors. These factors include, but are not limited to, the following:
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advantages over alternative drug delivery systems or similar products from other companies;
demonstrated clinical efficacy, safety and enhanced patient compliance;
cost-effectiveness;
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convenience and ease of use of injectors and transdermal gels;
•
• marketing and distribution support; and
•
successful launch of our pharmaceutical partners products which utilize our devices.
Physicians may refuse to prescribe products incorporating our drug delivery technologies if they believe that the
active ingredient is better administered to a patient using alternative drug delivery technologies, that the time
required to explain use of the technologies to the patient would not be offset by advantages, or they believe that the
delivery method will result in patient noncompliance. Factors such as patient perceptions that a gel is inconvenient
to apply or that devices do not deliver the drug at the same rate as conventional drug delivery methods may cause
patients to reject our drug delivery technologies. Because only a limited number of products incorporating our drug
delivery technologies are commercially available, we cannot yet fully assess the level of market acceptance of our
drug delivery technologies.
If transdermal gels do not achieve greater market acceptance, we may be unable to achieve profitability.
Because transdermal gels are not a widely understood method of drug delivery, our potential partners and
consumers may have little experience with such products. Our assumption of higher value may not be shared by the
potential partner and consumer. To date, transdermal gels have gained successful entry into only a limited number
of markets such as the testosterone replacement market. There can be no assurance that transdermal gels will ever
gain market acceptance beyond these markets sufficient to allow us to achieve and/or sustain profitable operations in
this product area.
Elestrin®, our transdermal estradiol gel, was launched by BioSante’s marketing partner Bradley in June 2007.
Bradley was acquired by Nycomed in February 2008. BioSante reacquired Elestrin® from Nycomed and in
December 2008 relicensed all manufacturing, distribution and marketing responsibilities of Elestrin® to Azur. The
multiple licenses of Elestrin® has had a negative impact on the marketing efforts of Elestrin® and to date, the market
penetration of Elestrin® has been low.
We are developing Anturol®, our oxybutynin gel for overactive bladder. We may seek a pharmaceutical partner
to assist in the development and marketing of this potential product. However, we may be unsuccessful in
partnering Anturol® which may delay or affect the timing of the potential product launch due to availability of
resources if Anturol® is ultimately approved by the FDA.
As health insurance companies and other third-party payors increasingly challenge the products and services for
which they will provide coverage, our individual consumers may not be able to receive adequate reimbursement or
may be unable to afford to use our products, which could substantially reduce our revenues and negatively impact
our business as a whole.
Our injector device products are currently sold in the European Community and elsewhere for use with human
growth hormone and in the United States for use with human growth hormone and insulin. In the case of human
growth hormone, our products are generally provided to users at no cost by the drug supplier.
Although it is impossible for us to identify the amount of sales of our products that our customers will submit
for payment to third-party insurers, at least some of these sales may be dependent in part on the availability of
adequate reimbursement from these third-party healthcare payors. Currently, insurance companies and other third-
party payors reimburse the cost of certain technologies on a case-by-case basis and may refuse reimbursement if
they do not perceive benefits to a technology’s use in a particular case. Third-party payors are increasingly
challenging the pricing of medical products and devices, and there can be no assurance that such third-party payors
will not in the future increasingly reject claims for coverage of the cost of certain of our technologies. Insurance and
third-party payor practice vary from country to country, and changes in practices could negatively affect our
business if the cost burden for our technologies were shifted more to the patient. Therefore, there can be no
assurance that adequate levels of reimbursement will be available to enable us to achieve or maintain market
acceptance of our products or technologies or maintain price levels sufficient to realize profitable operations. There
is also a possibility of increased government control or influence over a broad range of healthcare expenditures in
the future. Any such trend could negatively impact the market for our drug delivery products and technologies.
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Elestrin®, for which we receive royalties from our partner based on any commercial sales, was launched in June
2007. We have no way of knowing at this time if health insurance companies’ reimbursement has negatively
impacted patient use of Elestrin®.
Our Tjet® device was launched in the U.S. in 2009 for use with hGH by Teva. Although Teva currently
provides the device and disposables at no cost to the patient, the amount of health insurance reimbursement of
Teva’s hGH, Tev-Tropin®, has a direct impact on the device product sales and royalty due from Teva to us.
The loss of any existing licensing agreements or the failure to enter into new licensing agreements could
substantially affect our revenue.
One of our primary business pathways requires us to enter into license agreements with pharmaceutical and
biotechnology companies covering the development, manufacture, use and marketing of drug delivery technologies
with specific drug therapies. Under these arrangements, the partner companies typically assist us in the development
of systems for such drug therapies and collect or sponsor the collection of the appropriate data for submission for
regulatory approval of the use of the drug delivery technology with the licensed drug therapy. Our licensees may
also be responsible for distribution and marketing of the technologies for these drug therapies either worldwide or in
specific territories. We are currently a party to a number of such agreements, all of which are currently in varying
stages of development. We may not be able to meet future milestones established in our agreements (such
milestones generally being structured around satisfactory completion of certain phases of clinical development,
regulatory approvals and commercialization of our product) and thus, would not receive the fees expected from such
arrangements, related future royalties or product sales. Moreover, there can be no assurance that we will be
successful in executing additional collaborative agreements or that existing or future agreements will result in
increased sales of our drug delivery technologies. In such event, our business, results of operations and financial
condition could be adversely affected, and our revenues and gross profits may be insufficient to allow us to achieve
and/or sustain profitability. As a result of our collaborative agreements, we are dependent upon the development,
data collection and marketing efforts of our licensees. The amount and timing of resources such licensees devote to
these efforts are not within our control, and such licensees could make material decisions regarding these efforts that
could adversely affect our future financial condition and results of operations. In addition, factors that adversely
impact the introduction and level of sales of any drug or drug device covered by such licensing arrangements,
including competition within the pharmaceutical and medical device industries, the timing of regulatory or other
approvals and intellectual property litigation, may also negatively affect sales of our drug delivery technology. We
are relying on partners such as Teva, Ferring, BioSante and Jazz for future milestone, sales and royalty revenue.
Any or all of these partners may never commercialize a product with our technologies or significant delays in
anticipated launches of these products may occur. Any potential loss of anticipated future revenue could have an
adverse affect on our business and the value of your investment.
If we cannot develop and market our products as rapidly or cost-effectively as our competitors, then we may never
be able to achieve profitable operations.
Competitors in the overactive bladder, injector device and other markets, some with greater resources and
experience than us, may enter these markets, as there is an increasing recognition of a need for less invasive methods
of delivering drugs. Our success depends, in part, upon maintaining a competitive position in the development of
products and technologies in rapidly evolving fields. If we cannot maintain competitive products and technologies,
our current and potential pharmaceutical company partners may choose to adopt the drug delivery technologies of
our competitors. Companies that compete with our technologies include Watson Pharmaceuticals, Ipsomed, Owen
Mumford, Elcam, SHL, Bioject Medical Technologies, Inc., Auxillium, Aradigm, Zogenix, Inc., Columbia
Laboratories, Inc., NexMed, Inc. and West Pharmaceuticals, along with other companies. We also compete
generally with other drug delivery, biotechnology and pharmaceutical companies engaged in the development of
alternative drug delivery technologies or new drug research and testing. Many of these competitors have
substantially greater financial, technological, manufacturing, marketing, managerial and research and development
resources and experience than we do, and, therefore, represent significant competition.
Additionally, new drug delivery technologies are mostly used only with drugs for which other drug delivery
methods are not possible, in particular with biopharmaceutical proteins (drugs derived from living organisms, such
as insulin and human growth hormone) that cannot currently be delivered orally or transdermally. Transdermal
29
patches and gels are also used for drugs that cannot be delivered orally or where oral delivery has other limitations
(such as high first pass drug metabolism, meaning that the drug dissipates quickly in the digestive system and,
therefore, requires frequent administration). Many companies, both large and small, are engaged in research and
development efforts on less invasive methods of delivering drugs that cannot be taken orally. The successful
development and commercial introduction of such non-injection techniques could have a material adverse effect on
our business, financial condition, results of operations and general prospects.
Competitors may succeed in developing competing technologies or obtaining governmental approval for
products before we do. Competitors’ products may gain market acceptance more rapidly than our products, or may
be priced more favorably than our products. Developments by competitors may render our products, or potential
products, noncompetitive or obsolete.
One of our competitors, Watson Pharmaceuticals, completed a Phase III study of its own oxybutynin gel
(Gelnique®) for OAB in January 2008 and in January 2009 Gelnique was approved by the FDA. Watson’s launch of
their oxybutynin gel is well ahead of Anturol’s potential launch which may limit the success of Anturol® in the
market, if approved. Additionally, Watson has greater resources than we do, which may impact our ability to be
competitive in the OAB market.
Although we have applied for, and have received, several patents, we may be unable to protect our intellectual
property, which would negatively affect our ability to compete.
Our success depends, in part, on our ability to obtain and enforce patents for our products, processes and
technologies and to preserve our trade secrets and other proprietary information. If we cannot do so, our
competitors may exploit our innovations and deprive us of the ability to realize revenues and profits from our
developments.
We currently hold numerous patents and numerous patent applications pending in the U.S. and other countries.
Our current patents may not be valid or enforceable and may not protect us against competitors that challenge our
patents, obtain their own patents that may have an adverse effect on our ability to conduct business, or are able to
otherwise circumvent our patents. Additionally, our technologies are complex and one patent may not be sufficient
to protect our products where a series of patents may be needed. Further, we may not have the necessary financial
resources to enforce or defend our patents or patent applications. In addition, any patent applications we may have
made or may make relating to inventions for our actual or potential products, processes and technologies may not
result in patents being issued or may result in patents that provide insufficient or incomplete coverage for our
inventions.
To protect our trade secrets and proprietary technologies and processes, we rely, in part, on confidentiality
agreements with employees, consultants and advisors. These agreements may not provide adequate protection for
our trade secrets and other proprietary information in the event of any unauthorized use or disclosure, or if others
lawfully and independently develop the same or similar information.
Others may bring infringement claims against us, which could be time-consuming and expensive to defend.
Third parties may claim that the manufacture, use or sale of our drug delivery technologies infringe their patent
rights. If such claims are asserted, we may have to seek licenses, defend infringement actions or challenge the
validity of those patents in the patent office or the courts. If we cannot avoid infringement or obtain required
licenses on acceptable terms, we may not be able to continue to develop and commercialize our product candidates.
Even if we were able to obtain rights to a third party’s intellectual property, these rights may be non-exclusive,
thereby giving our competitors potential access to the same intellectual property. If we are found liable for
infringement or are not able to have these patents declared invalid, we may be liable for significant monetary
damages, encounter significant delays in bringing products to market or be precluded from participating in the
manufacture, use or sale of products or methods of drug delivery covered by patents of others. Even if we were able
to prevail, any litigation could be costly and time-consuming and could divert the attention of our management and
key personnel from our business operations. We may not have identified, or be able to identify in the future, United
States or foreign patents that pose a risk of potential infringement claims. Furthermore, in the event a patent
infringement suit is brought against us, the development, manufacture or potential sale of product candidates
30
claimed to infringe on a third party’s intellectual property may have to stop or be delayed. Ultimately, we may be
unable to commercialize some of our product candidates as a result of patent infringement claims, which could harm
our business.
We are aware of two related U.S. patents issued to Watson Pharmaceuticals relating to a gel formulation of
oxybutynin (Gelnique®). We believe that we do not infringe these patents and that they should not have been
granted. We may seek to invalidate these patents but there can be no assurance that we will prevail. If the patents
are determined to be valid and if Anturol® is approved, we may be delayed in our marketing of Anturol® or incur
significant expenses defending our patent position which may adversely affect the potential market value of
Anturol®.
We are aware that one of our partners has been sued for infringement by another party related to a potential
product incorporating one of our devices. We believe the claim has no merit but we have no assurance that our
partner will prevail in the suit, which could result in significant litigation cost, product launch delay or ultimately the
abandonment of the potential product incorporating our device.
Our business may suffer if we lose certain key officers or employees or if we are not able to add additional key
officers or employees necessary to reach our goals.
The success of our business is materially dependent upon the continued services of certain of our key officers
and employees. The loss of such key personnel could have a material adverse effect on our business, operating
results or financial condition. There can be no assurance that we will be successful in retaining key personnel. We
consider our employee relations to be good; however, competition for personnel is intense and we cannot assume
that we will continue to be able to attract and retain personnel of high caliber.
We are involved in international markets, and this subjects us to additional business risks.
We license and distribute our products in the European Community, Asia and the United States. These
geographic localities provide economically and politically stable environments in which to operate. However, in the
future, we intend to introduce products through partnerships in other countries. As we expand our geographic
market, we will face additional ongoing complexity to our business and may encounter the following additional
risks:
increased complexity and costs of managing international operations;
protectionist laws and business practices that favor local companies;
dependence on local vendors;
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• multiple, conflicting and changing governmental laws and regulations;
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difficulties in enforcing our legal rights;
reduced or limited protections of intellectual property rights; and
political and economic instability.
A significant portion of our international revenues is denominated in foreign currencies. An increase in the
value of the U.S. dollar relative to these currencies may make our products more expensive and, thus, less
competitive in foreign markets.
If we make any acquisitions, we will incur a variety of costs and might never successfully integrate the acquired
product or business into ours.
We might attempt to acquire products or businesses that we believe are a strategic complement to our business
model. We might encounter operating difficulties and expenditures relating to integrating an acquired product or
business. These acquisitions might require significant management attention that would otherwise be available for
ongoing development of our business. In addition, we might never realize the anticipated benefits of any
acquisition. We might also make dilutive issuances of equity securities, incur debt or experience a decrease in cash
available for our operations, or incur contingent liabilities and/or amortization expenses relating to goodwill and
other intangible assets, in connection with future acquisitions.
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If we do not have adequate insurance for product liability or clinical trial claims, then we may be subject to
significant expenses relating to these claims.
Our business entails the risk of product liability and clinical trial claims. Although we have not experienced any
material claims to date, any such claims could have a material adverse impact on our business. Insurance coverage
is expensive and may be difficult to obtain, and may not be available in the future on acceptable terms, or at all. We
maintain product and clinical trial liability insurance with coverage of $5 million per occurrence and an annual
aggregate maximum of $5 million and evaluate our insurance requirements on an ongoing basis. If the coverage
limits of the product liability insurance are not adequate, a claim brought against us, whether covered by insurance
or not, could have a material adverse effect on our business, results of operations, financial condition and cash
flows.
Risks Related to General Economic Conditions
Uncertainty in the global credit markets could adversely affect our ability to obtain financing, and we cannot assure
that financing will be available to us on favorable terms or at all.
The global credit markets have experienced significant dislocations and liquidity disruptions. These
circumstances have materially impacted liquidity in the financial markets. Continued uncertainty in the financial
markets may negatively impact our ability to access additional financing, which could negatively affect our ability to
fund our current operations as well as our future development and our business could be adversely affected. A
prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive
financing, and may require us to adjust our business plan accordingly.
In addition, if we raise additional financing via issuance of securities, such future issuance of our securities may
result in substantial dilution to existing stockholders.
We are susceptible to the current conditions of the global economy. If the conditions do not improve, our business
could be adversely affected.
The current uncertainty in global economic conditions have resulted in a substantial slowdown in the global
economy that could affect our business and financial performance by reducing the prices that our customers and
third party payors may be willing or able to pay for our products. These conditions may also reduce demand for our
products, which could in turn negatively impact our sales and revenue generation and result in a material adverse
effect on our business, cash flow, results of operations, financial position and prospects. In addition, we may
experience difficulties in scaling our operations to react to various economic pressures.
Risks Related to Regulatory Matters
We or our licensees may incur significant costs seeking approval for our products, which could delay the realization
of revenue and, ultimately, decrease our revenues from such products.
The design, development, testing, manufacturing and marketing of pharmaceutical compounds and medical
devices are subject to regulation by governmental authorities, including the FDA and comparable regulatory
authorities in other countries. The approval process is generally lengthy, expensive and subject to unanticipated
delays. Currently we, along with our partners, are actively pursuing marketing approval for a number of products
from regulatory authorities in other countries and anticipate seeking regulatory approval from the FDA for products
developed internally and pursuant to our license agreements. In the future we, or our partners, may need to seek
approval for newly developed products. Our revenue and profit will depend, in part, on the successful introduction
and marketing of some or all of such products by our partners or us.
Applicants for FDA approval often must submit extensive clinical data and supporting information to the FDA.
Varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent
regulatory approval of a drug product. Changes in FDA approval policy during the development period, or changes
in regulatory review for each submitted new drug application also may cause delays or rejection of an approval.
Even if the FDA approves a product, the approval may limit the uses or “indications” for which a product may be
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marketed, or may require further studies. The FDA also can withdraw product clearances and approvals for failure
to comply with regulatory requirements or if unforeseen problems follow initial marketing.
We are currently developing Anturol® for the treatment of overactive bladder (OAB). Anturol® is the
anticholinergic oxybutynin delivered by our proprietary ATD™ gel that is used to achieve therapeutic blood levels
of the active compound that can be sustained over 24 hours after a single, daily application.
In February 2006, we announced the results of our Phase II dose ranging study for our ATD™ oxybutynin gel
product Anturol®. The study was an open label, single period, randomized study using 48 healthy subjects and three
different doses of Anturol® over a 20 day period. Our overall conclusions of the study were positive. The FDA
however, may not concur with our analysis of the data.
In July 2007, we completed a special protocol assessment (“SPA”) with the FDA for a pivotal trial of Anturol®.
A SPA documents the FDA's agreement that the design and planned analysis of the trial adequately addresses
objectives, in support of a regulatory submission such as a NDA. The completion of the SPA does not ensure
success of the trial or that the FDA will ultimately accept the results of the trial and we may never receive FDA
approval for Anturol® and without FDA approval, we cannot market or sell Anturol® in the U.S.
In October 2007, we announced the first patient dosing in a pivotal safety and efficacy trial of Anturol® for
OAB. The three arm study will enroll approximately 600 patients for a 12-week clinical trial. The randomized,
double-blind, placebo controlled, multi-center trial will principally evaluate the efficacy of Anturol® when
administered topically once daily for 12 weeks. The primary end point of the trial will be efficacy against the
placebo defined as the reduction in the number of urinary incontinence episodes experienced. Secondary end points
include changes from baseline in urinary urgency, average daily urinary frequency, patient perceptions as well as
safety and tolerability. In March of 2010 we announced that enrollment in the Phase III study was complete. The
completion of enrollment of the trial does not ensure success of the trial. Anturol® may prove to not be efficacious
and may not beat placebo or may have undesired side effects not previously experienced. Additionally, the FDA
may require further studies for approval. Any of these potential outcomes could have a negative impact on the
value of our stock price.
We are also developing, with our partners, injection devices for use with our partner’s drugs. The regulatory
path for approval of such combination products maybe subject to review by several centers within the FDA and
although precedent and guidance exists for the requirements for such combination products, there is no assurance
that the FDA will not change what it requires or how it reviews such submissions. Human clinical testing may be
required by the FDA in order to commercialize these devices and there can be no assurance that such trials will be
successful. Such changes in review processes or the requirement for clinical studies could delay anticipated launch
dates or be at a cost which makes launching the device cost prohibitive for our partners. Such delay or failure to
launch these devices could adversely affect our revenues and future profitability.
In December 2008, one of our device partners, Teva, filed an ANDA for their undisclosed product. The ANDA
submission was accepted by the FDA. Teva is in the process of completing the work required for the submission.
The submission of the ANDA does not ensure that the FDA will approve the filing and without FDA approval we
cannot market or sell our injector for use with this drug product in the U.S.
As part of our device regulatory strategy, we have filed two MAFs with the FDA. These MAFs are reviewed as
part of a product application review. Amendments are made to the MAFs as appropriate either because of design
changes, additional test data or in response to questions from the FDA. The submission of a MAF does not
guarantee that the MAF contains all the information required for product approval.
In other jurisdictions, we, and the pharmaceutical companies with whom we are developing technologies (both
drugs and devices), must obtain required regulatory approvals from regulatory agencies and comply with extensive
regulations regarding safety and quality. If approvals to market the products are delayed, if we fail to receive these
approvals, or if we lose previously received approvals, our revenues may not materialize or may decline. We may
not be able to obtain all necessary regulatory approvals. Additionally, clinical data that we generate or obtain from
partners from FDA regulatory filings may not be sufficient for regulatory filings in other jurisdictions and we may
be required to incur significant costs in obtaining those regulatory approvals.
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The 505(b)(2) and 505(j) (ANDA) regulatory pathway for many of our potential products is uncertain and could
result in unexpected costs and delays of approvals.
Transdermal and topical products indicated for the treatment of systemic or local treatments respectively are
regulated by the FDA in the U.S. and other similar regulatory agencies in other countries as drug products.
Transdermal and topical products are considered to be controlled release dosage forms and may not be marketed in
the U.S. until they have been demonstrated to be safe and effective. The regulatory approval routes for transdermal
and topical products include the filing of an NDA for new drugs, new indications of approved drugs or new dosage
forms of approved drugs. Alternatively, these dosage forms can obtain marketing approval as a generic product by
the filing of an ANDA, providing the new generic product is bioequivalent to and has the same labeling as a
comparable approved product or as a filing under Section 505(b)(2) where there is an acceptable reference product.
Other topical products for local treatment do not require the filing of either an NDA or ANDA, providing that these
products comply with existing OTC monographs. The combination of the drug, its dosage form and label claims
and FDA requirement will ultimately determine which regulatory approval route will be required.
Many of our transdermal product candidates may be developed via the 505(b)(2) route. The 505(b)(2)
regulatory pathway is continually evolving and advice provided in the present is based on current standards, which
may or may not be applicable when we potentially submit an NDA. Additionally, we must reference the most
similar predicate products when submitting a 505(b)(2) application. It is therefore probable that:
•
•
should a more appropriate reference product(s) be approved by the FDA at any time before or during the review
of our NDA, we would be required to submit a new application referencing the more appropriate product;
the FDA cannot disclose whether such predicate product(s) is under development or has been submitted at any
time during another company’s review cycle.
Drug delivery systems such as injectors are reviewed by the FDA and may be legally marketed as a medical
device or may be evaluated as part of the drug approval process. Combination drug/device products raise unique
scientific, technical and regulatory issues. The FDA has established the OCP to address the challenges associated
with the review and regulation of combination products. The OCP assists in determining strategies for the approval
of drug/delivery combinations and assuring agreement within the FDA on review responsibilities. We may seek
approval for a product including an injector and a generic pharmaceutical by filing an ANDA claiming
bioequivalence and the same labeling as a comparable referenced product or as a filing under Section 505(b)(2) if
there is an acceptable reference product. In reviewing the ANDA filing, the agency may decide that the unique
nature of combination products allows them to dispute the claims of bioequivalence and/or same labeling resulting
in our re-filing the application under Section 505(b)(2). If such combination products require filing under Section
505(b)(2) we may incur delays in product approval and may incur additional costs associated with testing including
clinical trials. The result of an approval for a combination product under Section 505(b)(2) may result in additional
selling expenses and a decrease in market acceptance due to the lack of substitutability by pharmacies or
formularies.
If the use of our injection devices require additions to or modifications of the drug labeling regulated by the
FDA, the review of this labeling may be undertaken by the FDA’s Office of Surveillance and Epidemiology (OSE).
With the heightened concern surrounding medical errors, the Division of Medication Errors and Technical Support
(DMETS) has the responsibility of reviewing all pre-marketing labeling. Since such labeling can include device
instructions for use, DMETS may be involved in evaluating device usage parameters. These reviews could increase
the time needed for review completion of a successful application and may require additional studies, such as usage
studies, to establish the validity of the instructions. Such reviews and requirement may extend the time necessary
for the approval of drug-device combinations. Such was the case for the approval of our needle-free device for use
with hGH. The approval process took much more time than contemplated, which resulted in lost revenues.
Accordingly, these regulations and the FDA’s interpretation of them might impair our ability to obtain product
approval or effectively market our products.
34
Our business could be harmed if we fail to comply with regulatory requirements and, as a result, are subject to
sanctions.
If we, or pharmaceutical companies with whom we are developing technologies, fail to comply with applicable
regulatory requirements, the pharmaceutical companies, and we, may be subject to sanctions, including the
following:
fines;
product seizures or recalls;
injunctions;
refusals to permit products to be imported into or exported out of the applicable regulatory jurisdiction;
total or partial suspension of production;
• warning letters;
•
•
•
•
•
• withdrawals of previously approved marketing applications; or
•
criminal prosecutions.
Our revenues may be limited if the marketing claims asserted about our products are not approved.
Once a drug product is approved by the FDA, the Division of Drug Marketing, Advertising and
Communication, the FDA’s marketing surveillance department within the Center for Drugs, must approve marketing
claims asserted by our pharmaceutical company partners. If we or a pharmaceutical company partner fails to obtain
from the Division of Drug Marketing acceptable marketing claims for a product incorporating our drug
technologies, our revenues from that product may be limited. Marketing claims are the basis for a product’s
labeling, advertising and promotion. The claims the pharmaceutical company partners are asserting about our drug
delivery technologies, or the drug product itself, may not be approved by the Division of Drug Marketing.
Product liability claims related to participation in clinical trials or the use or misuse of our products could prove to
be costly to defend and could harm our business reputation.
The testing, manufacturing and marketing of products utilizing our drug delivery technologies may expose us to
potential product liability and other claims resulting from their use in practice or in clinical development. If any such
claims against us are successful, we may be required to make significant compensation payments. Any
indemnification that we have obtained, or may obtain, from contract research organizations or pharmaceutical
companies conducting human clinical trials on our behalf may not protect us from product liability claims or from
the costs of related litigation. Similarly, any indemnification we have obtained, or may obtain, from pharmaceutical
companies with whom we are developing drug delivery technologies may not protect us from product liability
claims from the consumers of those products or from the costs of related litigation. If we are subject to a product
liability claim, our product liability insurance may not reimburse us, or may not be sufficient to reimburse us, for
any expenses or losses that may have been suffered. A successful product liability claim against us, if not covered
by, or if in excess of our product liability insurance, may require us to make significant compensation payments,
which would be reflected as expenses on our statement of operations. Adverse claim experience for our products or
licensed technologies or medical device, pharmaceutical or insurance industry trends may make it difficult for us to
obtain product liability insurance or we may be forced to pay very high premiums, and there can be no assurance
that insurance coverage will continue to be available on commercially reasonable terms or at all.
Risks Related to our Common Stock
Future conversions or exercises by holders of warrants or options could substantially dilute our common stock.
As of March 15, 2010, we have warrants outstanding that are exercisable, at prices ranging from $0.80 per share
to $3.78 per share, for an aggregate of approximately 18,300,000 shares of our common stock. We also have
options outstanding that are exercisable, at exercise prices ranging from $0.37 to $4.56 per share, for an aggregate of
approximately 8,000,000 shares of our common stock. Purchasers of our common stock could therefore experience
substantial dilution of their investment upon exercise of the above warrants or options. The majority of the shares of
our common stock issuable upon exercise of the warrants or options held by these investors are currently registered.
35
Sales of our common stock by our officers and directors may lower the market price of our common stock.
As of March 15, 2010, our officers and directors beneficially owned an aggregate of approximately 16,300,000
shares (or approximately 19%) of our outstanding common stock, including stock options exercisable within 60
days. If our officers and directors, or other stockholders, sell a substantial amount of our common stock, it could
cause the market price of our common stock to decrease and could hamper our ability to raise capital through the
sale of our equity securities.
We do not expect to pay dividends in the foreseeable future.
We intend to retain any earnings in the foreseeable future for our continued growth and, thus, do not expect to
declare or pay any cash dividends in the foreseeable future.
Anti-takeover effects of certain certificate of incorporation and bylaw provisions could discourage, delay or prevent
a change in control.
Our certificate of incorporation and bylaws could discourage, delay or prevent persons from acquiring or
attempting to acquire us. Our certificate of incorporation authorizes our board of directors, without action of our
stockholders, to designate and issue preferred stock in one or more series, with such rights, preferences and
privileges as the board of directors shall determine. In addition, our bylaws grant our board of directors the
authority to adopt, amend or repeal all or any of our bylaws, subject to the power of the stockholders to change or
repeal the bylaws. In addition, our bylaws limit who may call meetings of our stockholders.
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 2.
PROPERTIES.
We lease approximately 7,000 square feet of office space in Ewing, New Jersey for our corporate headquarters
facility. The lease will terminate in January 2012. We believe the facility will be sufficient to meet our requirements
through the lease period at this location.
We lease approximately 9,300 square feet of office and laboratory space in Plymouth, a suburb of Minneapolis,
Minnesota, and sublease approximately half of this space to another company. The lease will terminate in April
2011. We believe the facilities will be sufficient to meet our requirements through the lease period at this location.
We also lease a small amount of office space in Muttenz, Switzerland. The lease is month-to-month and
requires a three month notice prior to termination. We believe the facilities will be sufficient to meet our
requirements through the lease period at this location.
Item 3.
LEGAL PROCEEDINGS.
None.
Item 4.
RESERVED.
36
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock trades on the NYSE Amex, formerly known as the American Stock Exchange, under the
symbol “AIS.” The following table sets forth the per share high and low closing sales prices of our common stock,
as reported by the NYSE Amex, for each quarterly period during the two most recent fiscal years.
2009:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2008:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$
$
$
$
$
$
$
$
0.48
1.06
1.21
1.27
1.08
1.02
0.88
0.69
$
$
$
$
$
$
$
$
0.36
0.40
0.76
1.07
0.88
0.50
0.65
0.32
Common Shareholders
As of March 15, 2010, we had 112 shareholders of record of our common stock.
Dividends
We have not paid or declared any cash dividends on our common stock during the past ten years. We have no
intention of paying cash dividends in the foreseeable future on our common stock.
37
Performance Graph
The graph below provides an indication of cumulative total stockholder returns (“Total Return”) for the
Company as compared with the Amex Composite Index and the Amex Biotechnology Stock Index weighted by
market value at each measurement point. The graph covers the period beginning December 31, 2004, through
December 31, 2009. The graph assumes $100 was invested in each of our Common Stock, the Amex Composite
Index and the Amex Biotechnology Stock Index on December 31, 2004 (based upon the closing price of each). Total
Return assumes reinvestment of dividends.
$200.00
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
Antares
Pharma, Inc.
Amex
Composite
Index
Amex
Biotechnology
Stock Index
2004
2005
2006
2007
2008
2009
31-Dec
31-Dec
31-Dec
31-Dec
31-Dec
31-Dec
Antares Pharma
Composite Index
Biotechnology Stock Index
December 31,
2004
December 31,
2005
December 31,
2006
December 31,
2007
December 31,
2008
December 31,
2009
$ 100.00
$ 114.81
$ 88.89
$ 72.59
$ 27.41
$ 84.44
100.00
122.64
143.37
168.00
97.43
127.23
100.00
125.11
138.59
144.51
118.91
173.11
38
Item 6.
SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data. The selected financial data is derived from, and is
qualified by reference to, our consolidated financial statements accompanying this annual report (amounts expressed
in thousands, except per share amounts).
2009
2008
2007
2006
2005
At December 31,
Balance Sheet Data:
$
Cash and cash equivalents
Short-term investments
Working capital
Total assets
Long-term liabilities, less current maturities
Accumulated deficit
Total stockholders’ equity
13,559
-
8,307
19,143
2,051
(130,883)
8,851
$
13,096
-
7,537
19,911
5,297
(120,592)
7,243
$
9,759
16,301
21,891
30,217
7,295
(107,901)
17,499
$
2,706
4,953
5,979
11,534
3,556
(99,322 )
5,080
$
2,718
-
965
6,166
3,062
(91,123)
757
Year Ended December 31,
2009
2008
2007
2006
2005
$
3,506
$
3,350
$
3,211
$
2,195
$
1,512
184
374
155
2,225
1,137
3,677
1,161
4,839
9,677
(8,589)
91
(8,498)
-
(50)
Statement of Operations Data:
Product sales
Development revenue
Licensing fees
Royalties
Revenues
Cost of revenues (1)
Research and development
Sales, marketing and business development
General and administrative (2)
Operating expenses
Operating loss
Net other income (expense)
Net loss
2,607
1,595
603
8,311
4,140
7,903
1,051
4,911
13,865
(9,694)
(597)
541
1,238
532
5,661
2,020
7,866
1,625
6,348
956
3,231
459
7,857
3,442
5,362
1,641
6,058
594
1,254
225
4,268
1,556
3,778
1,350
5,861
15,839
13,061
10,989
Deemed dividend to warrant holder
Preferred stock dividends
Net loss applicable to common shares
-
-
$ (10,291)
(12,198)
(8,646)
(492)
67
(10,291)
(12,690)
(8,579)
-
-
-
-
(8,277 )
177
(8,100 )
(99 )
-
$ (12,690) $
(8,579)
$
(8,199 )
$
(8,548)
Net loss per common share (3) (4)
$
(0.14)
$
(0.19) $
(0.14)
$
(0.16 )
$
(0.21)
Weighted average number of common shares
73,489
67,233
59,605
51,582
41,460
In 2007 we recorded non-cash impairment of prepaid license discount and related charges of $1,439.
In 2007 and 2006 we recorded non-cash patent impairment charges of $296 and $139, respectively.
(1)
(2)
(3) Basic and diluted loss per share amounts are identical as the effect of potential common shares is anti-dilutive.
(4) We have not paid any dividends on our common stock since inception.
39
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion in conjunction with Item 1A. (“Risk Factors”) and our audited consolidated financial
statements included elsewhere in this annual report. Some of the statements in the following discussion are forward-looking
statements. See “Special Note Regarding Forward-Looking Statements” and “Forward-Looking Statements in Management’s
Discussion and Analysis.”
Forward-Looking Statements in Management’s Discussion and Analysis
Management’s discussion and analysis of the significant changes in the consolidated results of operations,
financial condition and cash flows of the Company is set forth below. Certain statements in this report may be
considered to be “forward-looking statements” as that term is defined in the U.S. Private Securities Litigation
Reform Act of 1995, such as statements that include the words “expect,” “estimate,” “project,” “anticipate,”
“should,” “intend,” “probability,” “risk,” “target,” “objective” and other words and terms of similar meaning in
connection with any discussion of, among other things, future operating or financial performance, strategic
initiatives and business strategies, regulatory or competitive environments, our intellectual property and product
development. In particular, these forward-looking statements include, among others, statements about:
•
•
•
•
•
•
•
the impact of new accounting pronouncements;
our expectations regarding the product development of Anturol®;
our expectations regarding continued product development with Teva;
our plans regarding potential manufacturing and marketing partners;
our future cash flow;
our expectations regarding a net loss for the year ending December 31, 2010;
our ability to raise additional financing, reduce expenses or generate funds in light of our current and
projected level of operations and general economic conditions.
The words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” and similar
expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that
a statement is not forward-looking. Forward-looking statements involve known and unknown risks, uncertainties
and achievements, and other factors that may cause our or our industry’s actual results, levels of activity,
performance, or achievements to be materially different from the information expressed or implied by these
forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement
contained in this report, we caution you that these statements are based on a combination of facts and factors
currently known by us and projections of the future about which we cannot be certain. Many factors may affect our
ability to achieve our objectives, including:
•
•
•
•
•
delays in product introduction and marketing or interruptions in supply;
a decrease in business from our major customers and partners;
our inability to compete successfully against new and existing competitors or to leverage our marketing
capabilities and our research and development capabilities;
our inability to obtain additional financing, reduce expenses or generate funds when necessary;
our inability to attract and retain key personnel;
40
•
•
adverse economic and political conditions; and
our inability to effectively market our services or obtain and maintain arrangements with our customers,
partners and manufacturers.
In addition, you should refer to the “Risk Factors” section of this Form 10-K report for a discussion of other
factors that may cause our actual results to differ materially from those described by our forward-looking statements.
As a result of these factors, we cannot assure you that the forward-looking statements contained in this report will
prove to be accurate and, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.
We encourage readers of this report to understand forward-looking statements to be strategic objectives rather
than absolute targets of future performance. Forward-looking statements speak only as of the date they are made.
We do not intend to update publicly any forward-looking statements to reflect circumstances or events that occur
after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events except as
required by law. In light of the significant uncertainties in these forward-looking statements, you should not regard
these statements as a representation or warranty by us or any other person that we will achieve our objectives and
plans in any specified time frame, if at all.
The following discussion and analysis, the purpose of which is to provide investors and others with information
that we believe to be necessary for an understanding of our financial condition, changes in financial condition and
results of operations, should be read in conjunction with the financial statements, notes and other information
contained in this report.
Overview
Antares Pharma, Inc. is an emerging pharma company that focuses on self-injection pharmaceutical products
and technologies and topical gel-based products. Our subcutaneous injection technology platforms include Vibex™
disposable pressure-assisted auto injectors, Vision™ reusable needle-free injectors, and disposable multi-use pen
injectors. We currently view pharmaceutical and biotechnology companies as our primary customers.
In the injector area, we have licensed our reusable needle-free injection device for use with hGH to Teva,
Ferring and JCR. In August 2009, we announced that Teva launched its Tjet® injector system, which uses our
needle-free device to administer Teva’s Tev-Tropin® brand hGH. We have also licensed both disposable auto and
pen injection devices to Teva for use in undisclosed fields and territories. In 2009, we received a payment of
$4,076,375 from Teva for tooling and for an advance for the design, development and purchase of additional tooling
and automation equipment, all of which is related to an undisclosed, fixed, single-dose, disposable injector product
using our Vibex™ auto injector platform. In addition, we continue to support existing customers of our reusable
needle-free devices for the home or alternate site administration of insulin in the U.S. market through distributors.
In the gel-based area, our lead product candidate, Anturol®, an oxybutynin ATD™ gel for the treatment of
OAB, is currently under evaluation in a pivotal Phase 3 trial, for which we expect to file an NDA in 2010. Spending
on this program in 2009 was approximately $5,200,000 and we expect spending in 2010 to be approximately
$5,000,000. We also have a partnership with BioSante that includes LibiGel® (transdermal testosterone gel) in
Phase 3 clinical development for the treatment of FSD, and Elestrin® (estradiol gel) for the treatment of moderate-
to-severe vasomotor symptoms associated with menopause, and currently marketed in the U.S.
We have operating facilities in the U.S. and Switzerland. Our U.S. operation manufactures and markets our
reusable needle-free injection devices and related disposables, and develops our disposable pressure-assisted auto
injector and pen injector systems. These operations, including all development and some U.S. administrative
activities, are located in Minneapolis, Minnesota. We also have operations located in Switzerland, which is focused
on our transdermal gels and has a number of license agreements with pharmaceutical companies for the application
of our drug delivery systems. Our corporate offices are located in Ewing, New Jersey.
In order to better position ourselves to take advantage of potential growth opportunities and to fund future
operations, during 2009 we raised additional capital and took steps to reduce our monthly cash obligations. In the
third quarter of 2009, we raised gross proceeds of $11,500,000 through the sale of shares of our common stock and
41
warrants. We used approximately $3,000,000 of these proceeds to pay off the remaining balance of our credit
facility, eliminating our monthly debt service requirements. In the fourth quarter of 2009, we reduced our monthly
overhead when we entered into an Asset Purchase Agreement with Ferring. Under this agreement, Ferring assumed
responsibility for all of our facility and equipment lease obligations in connection with our operations in
Switzerland, and the majority of our employees at that location were hired by Ferring effective January 1, 2010.
Subsequent to the Ferring agreement we entered into a month-to-month facility lease agreement at a new Swiss
location in a much smaller space at a significantly reduced monthly rate.
We have reported net losses of $10,290,752, $12,690,453 and $8,578,939 in the fiscal years ended 2009, 2008
and 2007, respectively. We have accumulated aggregate net losses from the inception of business through
December 31, 2009 of $130,882,597. In addition, we expect to report a net loss for the year ending December 31,
2010. We have not historically generated sufficient revenue to provide the cash needed to support our operations,
and have continued to operate primarily by raising capital and incurring debt. At December 31, 2009 we had cash
and cash equivalents of $13,559,088. We believe that the combination of our current cash and cash equivalents
balance, our recent reductions in our monthly cash outflows, our projected product sales, product development
revenue, license revenues, milestone payments and royalties will provide us with sufficient funds to support
operations for at least the next 12 months.
Critical Accounting Policies and Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting
principles (GAAP), management must make decisions that impact reported amounts and related disclosures. Such
decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which
to base accounting estimates. In reaching such decisions, management applies judgment based on its understanding
and analysis of relevant circumstances. Note 2 to the consolidated financial statements provides a summary of the
significant accounting policies followed in the preparation of the consolidated financial statements. The following
accounting policies are considered by management to be the most critical to the presentation of the consolidated
financial statements because they require the most difficult, subjective and complex judgments.
Revenue Recognition
A significant portion of our revenue relates to product sales for which revenue is recognized upon shipment,
with limited judgment required related to product returns. Product sales are shipped FOB shipping point. We also
enter into license arrangements that are often complex as they may involve license, development and manufacturing
components. Licensing revenue recognition requires significant management judgment to evaluate the effective
terms of agreements, our performance commitments and determination of fair value of the various deliverables
under the arrangement. In the third quarter of 2009, we elected early adoption of Financial Accounting Standards
Board (“FASB”) Accounting Standards Update (“ASU”) 2009-13, “Revenue Arrangements with Multiple
Deliverables” (“ASU 2009-13”) with retrospective application to January 1, 2009. ASU 2009-13, which amended
FASB ASC 605-25, “Multiple-Element Arrangements,” is effective for arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, but allows for early adoption. ASU 2009-13 requires a
vendor to allocate revenue to each unit of accounting in arrangements involving multiple deliverables. It changes
the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its
best estimate of the standalone selling price of deliverables when vendor specific objective evidence or third party
evidence of selling price is not available. As discussed further in Note 12 to our consolidated financial statements,
adoption of this accounting pronouncement in 2009 resulted in the recognition of revenue deferred in prior years of
$481,833 and the recognition of costs previously deferred of $615,256 in connection with one of our License,
Development and Supply Agreements with Teva that became subject to the new accounting pronouncement after a
material modification to the agreement occurred. As a result of adoption of ASU 2009-13, deferred revenues and
deferred costs associated with this agreement with Teva will be recognized as revenues and expenses earlier than
would otherwise have occurred. We also expect revenues and expenses generated in connection with future multiple
element arrangements will often be recognized over shorter periods than would have occurred prior to adoption of
ASU 2009-13.
We have a number of arrangements that were not affected by adoption of ASU 2009-13, and the accounting for
these arrangements will continue under the prior accounting standards unless an arrangement is materially modified,
42
as defined in the new accounting standard. The prior accounting standards address when and, if so, how an
arrangement involving multiple deliverables should be divided into separate units of accounting. In some
arrangements, the different revenue-generating activities (deliverables) are sufficiently separable, and there exists
sufficient evidence of their fair values to separately account for some or all of the deliverables (that is, there are
separate units of accounting). In other arrangements, some or all of the deliverables are not independently
functional, or there is not sufficient evidence of their fair values to account for them separately. Our ability or
inability to establish objective evidence of fair value for the deliverable portions of the contracts significantly
impacted the time period over which revenues are being recognized. For instance, if there was no objective fair
value of undelivered elements of a contract, then we were required to treat a multi-deliverable contract as one unit of
accounting, resulting in all revenue being deferred and recognized over the entire contract period.
We have deferred significant revenue amounts ($7,362,066 at December 31, 2009) where non-refundable cash
payments have been received, but the revenue is not immediately recognized due to the long-term nature of the
respective agreements. Subsequent factors affecting the initial estimate of the effective terms of agreements could
either increase or decrease the period over which the deferred revenue is recognized.
Due to the requirement to defer significant amounts of revenue and the extended period over which the revenue
will be recognized, along with the requirement to recognize certain deferred development costs over an extended
period of time, revenue recognized and cost of revenue may be materially different from cash flows.
On an overall basis, our reported revenues can differ significantly from billings and/or accrued billings based on
terms in agreements with customers. The table below is presented to help explain the impact of the deferral of
revenue on reported revenues, and is not meant to be a substitute for accounting or presentation requirements under
U.S. generally accepted accounting principles.
Product sales
Development fees
Licensing fees and milestone payments
Royalties
Billings received and/or accrued per contract terms
Deferred billings received and/or accrued
Deferred revenue recognized
Amortization of prepaid license discount
Total revenue as reported
2009
$ 3,506,510
5,095,125
2,272,047
602,816
11,476,498
(6,633,477)
3,468,041
-
$ 8,311,062
2008
$ 3,349,532
1,481,254
762,500
314,189
5,907,475
(1,387,380 )
1,140,616
-
$ 5,660,711
2007
$ 3,211,397
912,172
3,478,642
218,042
7,820,253
(1,068,804)
1,195,880
(90,333)
$ 7,856,996
Valuation of Long-Lived and Intangible Assets and Goodwill
Long-lived assets, including patent rights, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset or asset group. This analysis can be very subjective as we rely upon signed
distribution or license agreements with variable cash flows to substantiate the recoverability of long-lived assets. If
such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
Each year we review patent costs for impairment and identify patents related to products for which there are no
signed distribution or license agreements or for which no revenues or cash flows are anticipated. In 2007, we
recognized impairment charges of $296,338 in general and administrative expenses, which represented the gross
carrying amount, net of accumulated amortization, for the identified patents. No impairment charges were
recognized in 2008 or 2009. The 2007 impairment charge relates to the amendment to the agreement with Eli Lilly
and Co. (“Lilly”) discussed further in Note 11 to the consolidated financial statements. The gross carrying amount
and accumulated amortization of patents, which are our only intangible assets subject to amortization, were
$1,665,519 and $923,120 at December 31, 2009 and were $1,471,536 and $826,680 at December 31, 2008. The
43
estimated aggregate patent amortization expense for the next five years is $91,000, $66,000, $60,000, $60,000 and
$60,000 in 2010, 2011, 2012, 2013 and 2014.
We have $1,095,355 of goodwill recorded as of December 31, 2009 that relates to our Minnesota operations.
We evaluate the carrying amount of goodwill during the fourth quarter of each year and between annual evaluations
if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit
below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change
in legal factors or in business climate, (2) unanticipated competition, (3) an adverse action or assessment by a
regulator, or (4) a sustained significant drop in our stock price. When evaluating whether goodwill is impaired, we
compare the fair value of the Minnesota operations to the carrying amount, including goodwill. If the carrying
amount of the Minnesota operations exceeds its fair value, then the amount of the impairment loss must be
measured. The impairment loss would be calculated by comparing the implied fair value of goodwill to its carrying
amount. In calculating the implied fair value of goodwill, the fair value of the Minnesota operations would be
allocated to all of its other assets and liabilities based on their fair values. The excess of the fair value of the
Minnesota operations over the amount assigned to its other assets and liabilities is the implied fair value of goodwill.
An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. Our
evaluation of goodwill completed during 2009, 2008 and 2007 resulted in no impairment losses.
Results of Operations
Years Ended December 31, 2009, 2008 and 2007
Revenues
Product sales were $3,506,510, $3,349,532 and $3,211,397 for the years ended December 31, 2009, 2008 and
2007. Product sales include sales of reusable needle-free injector devices, related parts, disposable components, and
repairs. In 2009, 2008 and 2007, revenue from sales of needle-free injector devices totaled $1,291,250, $1,045,296
and $1,027,986. Sales of disposable components in 2009, 2008 and 2007 totaled $2,131,525, $2,201,076 and
$2,100,253. The 2009 increase in device sales and decrease in sales of disposable components was primarily a
result of the combination of first year sales to Teva in connection with Teva’s launch of our Tjet needle-free device
with their hGH Tev-Tropin® and a decrease in sales to Ferring. Device sales to Teva exceeded the decrease in
device sales to Ferring, while the decrease in sales of disposable components to Ferring exceeded sales of disposable
components to Teva. Product sales in 2008 compared to 2007 were relatively unchanged, due primarily to Ferring
sales being approximately the same each year. We believe Ferring sales fluctuations from quarter to quarter and the
decrease from the prior year are driven mainly by Ferring inventory management practices and we expect product
sales to Ferring to normalize in the first quarter of 2010.
Development revenue was $2,606,516, $540,557 and $955,402 for the years ended December 31, 2009, 2008
and 2007. The increase in 2009 compared to 2008 was primarily due to auto injector development work under a
License, Development and Supply agreement with Teva originally signed in July 2006. In 2009, in connection with
an amendment to this License, Development and Supply Agreement, Teva purchased tooling in process from us that
had a carrying value of approximately $1,200,000 and paid us in advance for the design, development and purchase
of additional tooling and automation equipment. We received a payment under this amendment in the amount of
$4,076,375, all of which was initially recorded as deferred revenue. Approximately $1,600,000 of the development
revenue recognized in 2009 was related to work done under this Teva agreement, as amended. The balance of the
revenue in 2009 of approximately $1,000,000 and the 2008 revenue was attributable primarily to projects related to
our proprietary ATD™ gel technology. The revenue in 2007 was attributable primarily to an agreement related to
our oral disintegrating tablet technology, along with recognized revenue in connection with our proprietary ATD™
gel technology.
Licensing revenue was $1,595,220, $1,238,211 and $3,231,305 for the years ended December 31, 2009, 2008
and 2007. Licensing revenue in 2009 included approximately $350,000 recognized that had been previously
deferred and represents a portion of payments received from Teva under a License, Development and Supply
Agreement for a product utilizing our auto injector technology. This revenue was recognized as a result of adopting
a new revenue recognition accounting standard, as described in Note 12 to the consolidated financial statements.
The licensing revenue in 2009 also included a milestone payment received from Teva in connection with Teva’s
44
launch of our Tjet needle-free device with their hGH Tev-Tropin®. In addition, in 2009 we recognized licensing
revenue of approximately $315,000 in connection with a License Agreement with Ferring executed in November
2009, described in more detail in Note 11 to the consolidated financial statements, which included an upfront
payment and milestone payments. Also in 2009, approximately $338,000 of a previously deferred license fee
related to our oral disintegrating tablet technology was recognized after the customer terminated the agreement due
to technical challenges with their drug molecule. The licensing revenue in 2008 and 2007 included $462,500 and
$2,625,000, respectively, received under sublicense arrangements related to an existing license agreement with
BioSante related to Elestrin® (formerly Bio-E-Gel). The remaining licensing revenue in each year is primarily due
to recognizing portions of previously deferred amounts related to upfront license fees or milestone payments
received under various agreements.
Royalty revenue was $602,816, $532,411 and $458,892 for the years ended December 31, 2009, 2008 and
2007. Nearly all royalty revenue has been related to our reusable needle-free injection device, and has been
generated primarily under the license agreement with Ferring described in more detail in Note 11 to the consolidated
financial statements. Royalties from Ferring are earned on device sales and under a provision in the Ferring
agreement in which royalties are triggered by the achievement of certain quality standards. The increase in 2009
compared to 2008 was partially due to an increase in the royalty from Ferring related to the achievement of certain
quality standards and partially due to an increase in royalties from BioSante related to Elestrin®. The increase in
2008 compared to 2007 was primarily related to the increase in the number of injector devices sold to Ferring.
Total revenue was $8,311,062, $5,660,711 and $7,856,996 for the years ended December 31, 2009, 2008 and
2007. The increase in 2009 compared to 2008 was primarily due to an increase in development revenue related to
auto injector development work under a License, Development and Supply agreement with Teva. The decrease in
2008 compared to 2007 was primarily due to $2,625,000 received in 2007 under a sublicense arrangement related to
an existing license agreement with BioSante.
Cost of Revenues and Gross Margins
The costs of product sales are primarily related to reusable injection devices and disposable components. Cost
of product sales were $1,813,385, $1,889,317 and $1,768,799 for the years ended December 31, 2009, 2008 and
2007, representing gross margins of 48%, 44% and 45%, respectively. The gross margin increase in 2009 from
2008 was primarily due to an inventory write-down in 2008, along with a combined impact of other factors
including selling price increases, changes in the mix of products sold, and variations in exchange rates between the
Euro and the US Dollar which can affect our gross margins realized on a portion of our product sales to Ferring.
The cost of development revenue consists of labor costs, direct external costs and an allocation of certain
overhead expenses based on actual costs and time spent in these revenue-generating activities. Cost of development
revenue was $2,326,449, $130,268 and $234,583 for the years ended December 31, 2009, 2008 and 2007. The
significant increase in 2009 compared to 2008 and 2007 was due to development costs recognized related to a
License, Development and Supply Agreement with Teva for a product utilizing our auto injector technology.
Approximately $615,000 of the development costs in 2009 were previously deferred costs recognized after adoption
of the new revenue recognition accounting standard, as described in Note 12 to our consolidated financial
statements. Development costs that were being deferred in connection with the Teva agreement were related to both
licensing and development revenue that had been deferred. An additional $1,300,000 of development costs were
recognized in 2009 in connection with revenue recognized related to the Teva agreement. The remaining
development costs in 2009 of approximately $410,000 and the development costs in 2008 were attributable
primarily to projects related to our proprietary ATD™ gel technology, while the majority of development costs in
2007 were incurred in connection with an agreement involving our oral disintegrating tablet technology.
Impairment of prepaid license discount of $2,215,596, partially offset by recognizing deferred revenue net of
deferred costs, resulted in a net non-cash impairment charge of $1,438,638 in 2007. As discussed in Note 11 to the
consolidated financial statements, we determined it was unlikely that future cash flows from a License Agreement
with Lilly would exceed the unamortized prepaid license discount (recorded as contra equity in the stockholders’
equity section of the balance sheet). In addition, we determined that the carrying amount of related capitalized
patent costs of $296,338 was impaired, and was recorded in general and administrative expenses in the 2007
consolidated statement of operations.
45
Research and Development
The majority of research and development expenses consist of external costs for studies and analysis activities,
design work and prototype development. While we are typically engaged in research and development activities
involving each of our drug delivery platforms, over 75% of the total research and development expenses in each
year were generated in connection with projects related to our transdermal gel products. Research and development
expenses were $7,902,486, $7,866,499 and $5,362,291 for the years ended December 31, 2009, 2008 and 2007.
Although the total research and development expense in 2009 increased only slightly compared to 2008, the costs
directly associated with the Phase III study of Anturol® increased by approximately $1,400,000 to $5,200,000, while
costs associated with certain other projects decreased. The increase in 2008 compared to 2007 was mainly due to an
increase of approximately $1,900,000 in expenses related to the Phase III study of Anturol® and an increase of
approximately $450,000 in connection with establishing an internal clinical and regulatory department in early 2008.
Sales, Marketing and Business Development
Sales, marketing and business development expenses were $1,051,030, $1,624,599 and $1,640,875 for the years
ended December 31, 2009, 2008 and 2007. The decrease in 2009 is primarily due to reductions in payroll costs
associated with headcount reductions. In 2008, increases in expenses related to marketing research were offset by
decreases in legal expenses.
General and Administrative
General and administrative expenses were $4,911,356, $6,347,997 and $6,057,396 for the years ended
December 31, 2009, 2008 and 2007. The decrease in 2009 compared to 2008 and the increase in 2008 compared to
2007 was mainly due to the expense in 2008 associated with a separation agreement with Jack Stover, our former
Chief Executive Officer, and the hiring of Paul Wotton who started as Chief Operating Officer in July of 2008 and
was appointed Chief Executive Officer in October 2008. The decrease in 2009 compared to 2008 was also impacted
by a decrease in overhead costs and patent related expenses. The increase in 2008 compared to 2007 due mainly to
payroll cost increases was partially offset by a reduction in patent impairment charges from approximately $296,000
in 2007 to zero in 2008.
Other Income (Expense)
Other income (expense), net, was ($597,108), ($492,484) and $66,647 for the years ended December 31, 2009,
2008 and 2007. In 2009, interest income decreased to $27,270 from $553,061 in 2008, due to a reduction in market
interest rates received on invested funds and a lower average cash balance. Interest expense decreased in 2009 to
$633,459 from $1,021,675 in 2008 due primarily to a lower average principal balance of our credit facility in 2009
compared to 2008 and due to the retirement of our credit facility in 2009. The change to expense in 2008 from
income in 2007 was due to a decrease in interest income and an increase in interest expense. In 2008, interest
income decreased to $553,061 from $872,095 in 2007 due primarily to a reduction in market interest rates received
on invested funds. Interest expense increased in 2008 to $1,021,675 from $772,417 in 2007 in connection with
notes payable that originated in the first and fourth quarters of 2007 that were outstanding for the full year of 2008.
Liquidity and Capital Resources
We have reported net losses of $10,290,752, $12,690,453 and $8,578,939 in the fiscal years ended 2009, 2008
and 2007. We have accumulated aggregate net losses from the inception of business through December 31, 2009 of
$130,882,597. In addition, we expect to report a net loss for the year ending December 31, 2010. We have not
historically generated, and do not currently generate, enough revenue to provide the cash needed to support our
operations, and have continued to operate primarily by raising capital and incurring debt. In our 2008 Annual
Report on Form 10-K we disclosed there was uncertainty about our ability to continue as a going concern. In 2009
we resolved this uncertainty. In order to better position ourselves to take advantage of potential growth
opportunities and to fund future operations, during 2009 we raised additional capital and took steps to reduce our
monthly cash obligations.
46
In July 2009, we raised gross proceeds of $8,500,000 in a registered direct offering through the sale of shares of
our common stock and warrants. We sold a total of 10,625,000 units, each unit consisting of (i) one share of
common stock and (ii) one warrant to purchase 0.4 of a share of common stock (or a total of 4,250,000 shares), at a
purchase price of $0.80 per unit. The warrants will be exercisable six months after issuance at $1.00 per share and
will expire five years from the date of issuance.
In September 2009, we raised gross proceeds of $3,000,000 through the sale of 2,727,273 units to certain
institutional investors, each unit consisting of (i) one share of common stock and (ii) one warrant to purchase 0.4 of
a share of common stock (or a total of 1,090,909 shares), at a purchase price of $1.10 per unit. The warrants will be
exercisable six months after issuance at $1.15 per share and will expire five years from the date of issuance.
The proceeds from the sale of common stock and warrants in September 2009 were used to pay off the
remaining balance of our credit facility, reducing our monthly debt service requirements. The credit facility had
originated in 2007, when we received gross proceeds of $7,500,000 in two tranches of $5,000,000 and $2,500,000 to
help fund working capital needs. The per annum interest rate was 12.7% in the case of the first tranche and 11% in
the case of the second tranche. The maturity date (i) with respect to the first tranche was forty-two months from
February 2007 and (ii) with respect to the second tranche was thirty-six months from December 2007.
In the fourth quarter of 2009, we reduced our monthly overhead when we entered into an Asset Purchase
Agreement with Ferring. Under this agreement, Ferring assumed responsibility for all of our facility and equipment
lease obligations in connection with our operations in Switzerland, and the majority of our employees at that
location were hired by Ferring effective January 1, 2010. Subsequent to the Ferring agreement we entered into a
month-to-month facility lease agreement at a new Swiss location in a much smaller space at a significantly reduced
monthly rate.
At December 31, 2009 we had cash and cash equivalents of $13,559,088. We believe that the combination of
our current cash and cash equivalents balance and projected product sales, product development, license revenues,
milestone payments and royalties will provide us with sufficient funds to support operations for at least the next 12
months. We do not currently have any bank credit lines. In the future, if we need additional financing and are
unable to obtain such financing when needed, or obtain it on favorable terms, we may be required to curtail
development of new products, limit expansion of operations or accept financing terms that are not as attractive as we
may desire.
Net Cash Used in Operating Activities
Operating cash inflows are generated primarily from product sales, license and development fees and royalties.
Operating cash outflows consist principally of expenditures for manufacturing costs, general and administrative
costs, research and development projects and sales, marketing and business development activities. Net cash used in
operating activities was $5,099,560, $10,324,412 and $5,394,276 for the years ended December 31, 2009, 2008 and
2007. Net operating cash outflows were primarily the result of net losses of $10,290,752, $12,690,453 and
$8,578,939 in 2009, 2008 and 2007, adjusted by noncash expenses and changes in operating assets and liabilities.
In 2009, the net loss decreased by $2,399,701 to $10,290,752 from $12,690,453 in 2008 primarily as a result of
an increase in gross profit of $530,102 and decreases in general and administrative expenses of $1,436,641 and sales
marketing and business development expenses of $573,569.
In 2008, the net loss increased by $4,111,514 to $12,690,453 from $8,578,939 in 2007. This increase was due
to a number of factors which consisted primarily of the following:
•
•
•
•
an increase in research and development expenses of approximately $2,500,000 related mainly to the
Anturol® Phase III trial;
a decrease in gross profit of approximately $800,000 due mainly to a reduction in licensing revenue
from BioSante of approximately $2,200,000 which was partially offset by a reduction in cost of
revenue of approximately $1,400,000 related to impairment charges recognized in 2007 in connection
with the Lilly agreement;
an increase in general and administrative expenses of approximately $300,000;
a decrease in interest income of approximately $300,000; and
47
•
an increase in interest expense of approximately $250,000.
Noncash expenses totaled $1,554,876, $1,713,321 and $4,276,731 in 2009, 2008 and 2007. The decrease in
2009 compared to 2008 was primarily due to reductions in depreciation and amortization of $56,936 and
amortization of debt discount and issuance costs of $63,028 and a gain on disposal of equipment, molds, furniture
and fixtures of $70,506. The decrease in 2008 compared to 2007 was mainly due to the impairment charges in 2007
related to the Lilly License Agreement, including the prepaid license discount impairment and amortization charge
of $2,305,929 and the patent rights impairment charge of $296,338.
In 2009, the change in operating assets and liabilities generated cash of $3,636,316. This was mainly the result
of payments received from Teva and Ferring under license and development agreements, much of which was
recorded as deferred revenue which increased by $3,171,277 in 2009. Other operating assets and liabilities changed
by a net of $465,039, with the most significant change being a decrease in deferred costs of $1,099,072 due mainly
to costs recognized in connection with development revenue recognized under a License, Development and Supply
Agreement with Teva for a product utilizing our auto injector technology.
In 2008, the change in operating assets and liabilities generated cash of $652,720. Changes resulting in the
generation of cash included increases in accounts payable and deferred revenue and a decrease in prepaid expenses
and other current assets. Accounts payable increased by $1,195,006 primarily due to costs incurred in connection
with the Phase III study of Anturol®. Deferred revenue increased by $554,717 due primarily to payments received
and deferred in connection with injector device development projects. The decrease in prepaid expenses and other
current assets was due to a reduction in prepaid expenses related to the Phase III study of Anturol®. Changes
resulting in the use of cash included increases in accounts receivable and other assets. Accounts receivable
increased by $853,964 primarily due to invoices generated in December related to injector device projects. Deferred
costs increased by $740,276 due to costs incurred and deferred related to injector device projects.
In 2007, the change in operating assets and liabilities resulted in a use of cash of $1,092,068. This was
primarily due to a decrease in deferred revenue of $1,061,916, which was mainly the result of eliminating the
deferred revenue related to the Lilly agreement. Other changes included increases in prepaid expenses and other
current assets of $452,224 and deferred costs of $340,004, which were partially offset by a decrease in accounts
receivable of $379,129 and an increase in accrued expenses and other current liabilities of $441,698. The increases
in prepaid expenses and deferred costs were the result of costs incurred in connection with development projects
related mainly to injector devices and Anturol®. The increase in accrued expenses was primarily due to
compensation related accruals such as bonuses, along with accruals for project costs and certain professional fees.
Net Cash Provided by (Used in) Investing Activities
In 2009, cash used in investing activities was $12,584, consisting of additions to patent rights of $176,541,
purchases of equipment, molds, furniture and fixtures of $11,043, and net of proceeds from sales of equipment,
molds, furniture and fixtures of $175,000. Investing activities in 2008 and 2007 were comprised primarily of short-
term investment purchases and maturities. All short-term investments were commercial paper or U.S. government
agency discount notes that matured within six to twelve months of purchase and were classified as held-to-maturity
because we had the positive intent and ability to hold the securities to maturity. In 2008, as short term investments
matured, the proceeds of $16,015,057 were either used to fund operations or were invested in a money market
account with an interest rate that equaled or exceeded interest rates available on most short-term investments as
market interest rates were decreasing during the year. In 2007, the use of cash to purchase securities exceeded cash
generated from maturities by $11,163,507, due to availability of funds for investment provided primarily by the
private placement and the debt financing. Investing activities in 2008 and 2007 also included additions to patent
rights of $177,425 and $145,590 and purchases of equipment, molds, furniture and fixtures of $1,379,344 and
$96,575. The 2008 purchases of equipment, molds, furniture and fixtures were primarily for tooling and production
equipment related to commercial injector device deals with Teva.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by (used in) financing activities totaled $5,606,808, $(808,641) and $23,851,897 for the
years ended December 31, 2009, 2008 and 2007. In 2009, we received net proceeds of $10,527,650 from the sale of
48
common stock and warrants, we made payments on long term debt of $5,026,464 and we received $105,622 from
the exercise of warrants and stock options. In 2008, principal payments on long term debt totaled $2,128,591 and
proceeds received from the exercise of warrants totaled $1,319,950. In 2007, we received net proceeds of
$14,742,671 from the private placement of common stock in which a total of 10,000,000 shares of common stock
were sold at a price of $1.60 per share. In addition, in 2007 we received proceeds of $2,292,692 from the exercise
of warrants and stock options and received proceeds of $7,500,000 from debt financings. In 2007, cash was used
for debt principal payments and debt issuance costs, which totaled $492,745 and $190,721, respectively.
Our contractual cash obligations at December 31, 2009 are associated with operating leases and are summarized
in the following table:
Payment Due by Period
Total
334,898
Less than
1 year
$ 192,823
1-3
years
$ 142,075
4-5
years
After 5
years
$
-
$
-
Total contractual cash obligations $
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, including any arrangements with any structured finance,
special purpose or variable interest entities.
Research and Development Programs
During 2009, our research and development activities were primarily related to Anturol® and device
development projects.
Anturol®. We are currently evaluating Anturol® for the treatment of OAB (overactive bladder). In the fourth
quarter of 2007 we initiated a Phase III pivotal trial designed to evaluate the efficacy of Anturol® when administered
topically once daily for 12 weeks in patients predominantly with urge incontinence episodes. The randomized,
double-blind, parallel, placebo-controlled, multi-center trial is expected to involve 600 patients (200 per arm) using
two dose strengths (selected from the Phase II clinical trial) versus a placebo. Enrollment expanded to approximately
sixty centers throughout the United States in 2009. In addition to the Phase III trial, we have incurred significant
costs related to Anturol® manufacturing development. We have contracted with Patheon, Inc. (“Patheon”), a
manufacturing development company, to supply clinical quantities of Anturol® and to develop a commercial
manufacturing process for Anturol®. With Patheon, we have completed limited commercial scale up activities
associated with Anturol® manufacturing. As of December 31, 2009, we have incurred total external costs of
approximately $12,900,000 in connection with our Anturol® research and development, of which approximately
$5,200,000 was incurred in the year ended December 31, 2009. We intend to seek a marketing partner to help fund
the development of Anturol® and to commercially launch Anturol® if approved by the FDA. To date, we have not
entered into an agreement with a marketing partner. However, in the third quarter of 2009, we raised gross proceeds
of $11,500,000 through the sale of shares of our common stock and warrants. Because of the additional funding
received, we will continue the Anturol® development program and expect total expenses for Anturol® to be
approximately $5,000,000 in 2010. Although the Phase III program for Anturol® will continue, the rate of progress
of the program will be determined by the level of expenditures, which may be affected by the timing of engaging a
marketing partner.
Device Development Projects. We are engaged in research and development activities related to our Vibex™
disposable pressure-assisted auto injectors and our disposable pen injectors. We have signed license agreements
with Teva for our Vibex™ system for two undisclosed products and for our pen injector device for two undisclosed
products. Our pressure-assisted auto injectors are designed to deliver drugs by injection from single-dose prefilled
syringes. The auto injectors are in the advanced commercial stage of development. The disposable pen injector
device is designed to deliver drugs by injection through needles from multi-dose cartridges. The disposable pen is in
the early stage of development where devices are being evaluated in clinical studies. Our development programs
consist of determination of the device design, development of prototype tooling, production of prototype devices for
testing and clinical studies, performance of clinical studies, and development of commercial tooling and assembly.
As of December 31, 2009, we have incurred total external costs of approximately $4,400,000 in connection with
49
research and development activities associated with our auto and pen injectors, of which approximately $900,000
was incurred in the year ended December 31, 2009. As of December 31, 2009, approximately $3,200,000 of the
total costs of $4,400,000 had been deferred, of which approximately $1,800,000 has been recognized as cost of sales
and $1,400,000 remains deferred. This remaining deferred balance will be recognized as cost of sales over the same
period as the related deferred revenue will be recognized. The development timelines of the auto and pen injectors
related to the Teva products are controlled by Teva. We expect development related to the Teva products to
continue in 2009, but the timing and extent of near-term future development will be dependent on certain decisions
made by Teva. In 2009 we received a payment from Teva in the amount of $4,076,375 in connection with an
amendment to a License, Development and Supply Agreement signed in July 2006 related to an undisclosed, fixed,
single-dose, disposable injector product using our Vibex™ auto injector platform. Although this payment and
certain upfront and milestone payments have been received from Teva, there have been no commercial sales from
the auto injector or pen injector programs, timelines have been extended and there can be no assurance that there
ever will be commercial sales or future milestone payments under these agreements.
Other research and development costs. In addition to the Anturol® project and Teva related device
development projects, we incur direct costs in connection with other research and development projects related to
our technologies and indirect costs that include salaries, administrative and other overhead costs of managing our
research and development projects. Total other research and development costs were approximately $2,700,000 for
the year ended December 31, 2009.
Item 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary market risk exposure is foreign exchange rate fluctuations of the Swiss Franc to the U.S. dollar as
the financial position and operating results of our subsidiaries in Switzerland are translated into U.S. dollars for
consolidation. Our exposure to foreign exchange rate fluctuations also arises from transferring funds to our Swiss
subsidiaries in Swiss Francs. In addition, we have exposure to exchange rate fluctuations between the Euro and the
U.S. dollar in connection with the licensing agreement entered into in January 2003 with Ferring, which established
pricing in Euros for products sold under the supply agreement and for all royalties. In March 2007, we amended the
2003 agreement with Ferring, establishing prices in U.S. dollars rather than Euros for certain products, reducing the
exchange rate risk. Most of our sales and licensing fees are denominated in U.S. dollars, thereby significantly
mitigating the risk of exchange rate fluctuations on trade receivables. We do not currently use derivative financial
instruments to hedge against exchange rate risk. Because exposure increases as intercompany balances grow, we
will continue to evaluate the need to initiate hedging programs to mitigate the impact of foreign exchange rate
fluctuations on intercompany balances. The effect of foreign exchange rate fluctuations on our financial results for
the years ended December 31, 2009, 2008 and 2007 was not material.
Typically, our short-term investments are commercial paper or U.S. government agency discount notes that
mature within six to twelve months of purchase. The market value of such investments fluctuates with current
market interest rates. In general, as rates increase, the market value of a debt instrument is expected to decrease. The
opposite is also true. To minimize such market risk, we have in the past and to the extent possible, will continue in
the future, to hold such debt instruments to maturity at which time the debt instrument will be redeemed at its stated
or face value. Due to the short duration and nature of these instruments, we do not believe that we have a material
exposure to interest rate risk related to our investment portfolio. We had no short-term investments at December 31,
2009.
50
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ANTARES PHARMA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2009 and 2008
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Stockholders’ Equity and Comprehensive Loss for the
Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
Notes to Consolidated Financial Statements
52
53
54
55
56
57
58
51
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Antares Pharma, Inc. (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States and include those policies and procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the United States;
• Provide reasonable assurance that receipts and expenditures of the Company are being made only in
accordance with authorization of management and directors of the Company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
Company management assessed the effectiveness of its internal control over financial reporting as of December 31,
2009. In making this assessment, management used the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
its assessment, management has concluded that the Company’s internal control over financial reporting was
effective as of December 31, 2009.
This annual report does not include an attestation report of the Company’s independent registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s report in this annual report.
/s/ Paul K. Wotton
Dr. Paul K. Wotton
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert F. Apple
Robert F. Apple
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
March 23, 2010
March 23, 2010
52
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Antares Pharma, Inc.:
We have audited the accompanying consolidated balance sheets of Antares Pharma, Inc. and subsidiaries (the
Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’
equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31,
2009. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Antares Pharma, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in
conformity with U.S. generally accepted accounting principles.
As disclosed in notes 2 and 12 to the consolidated financial statements, the Company adopted Financial
Accounting Standards Board Accounting Standards Update 2009-13, Revenue Arrangements with Multiple
Deliverables, in the third quarter of 2009 with retrospective application to January 1, 2009.
/s/ KPMG LLP
Minneapolis, Minnesota
March 23, 2010
53
ANTARES PHARMA, INC.
CONSOLIDATED BALANCE SHEETS
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $10,000
Inventories
Deferred costs
Prepaid expenses and other current assets
$
Total current assets
Equipment, molds, furniture and fixtures, net
Patent rights, net
Goodwill
Deferred costs
Other assets
December 31,
December 31,
2009
2008
13,559,088
1,542,272
329,553
963,053
155,255
16,549,221
317,310
742,399
1,095,355
408,250
30,838
$
13,096,298
1,334,648
182,038
-
294,818
14,907,802
1,788,163
644,856
1,095,355
1,292,090
183,139
Total Assets
$
19,143,373
$
19,911,405
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
Accrued expenses and other liabilities
Notes payable and capital leases, net of discount of $0 and $121,762,
$
1,882,158
1,048,619
$
2,103,493
1,382,306
respectively
Deferred revenue
Total current liabilities
Notes payable and capital leases, net of discount of $0 and $32,427, respectively
Deferred revenue – long term
Total liabilities
Stockholders’ Equity:
Preferred Stock: $0.01 par; authorized 3,000,000 shares, none outstanding
Common Stock: $0.01 par; authorized 150,000,000 shares;
81,799,541 and 68,049,666 issued and outstanding at
December 31, 2009 and 2008, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total Liabilities and Stockholders’ Equity
$
-
5,311,516
8,242,293
-
2,050,550
10,292,843
2,705,070
1,179,820
7,370,689
2,239,550
3,057,901
12,668,140
-
-
817,995
139,614,459
(130,882,597 )
(699,327 )
8,850,530
19,143,373
$
680,496
127,926,205
(120,591,845)
(771,591)
7,243,265
19,911,405
See accompanying notes to consolidated financial statements.
54
ANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue:
Product sales
Development revenue
Licensing revenue
Royalties
Total revenue
Cost of revenue:
Cost of product sales
Cost of development revenue
Impairment of prepaid license discount and
related charges
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales, marketing and business development
General and administrative
$
Years Ended December 31,
2009
2008
2007
$
$
3,506,510
2,606,516
1,595,220
602,816
8,311,062
1,813,385
2,326,449
-
4,139,834
4,171,228
3,349,532
540,557
1,238,211
532,411
5,660,711
1,889,317
130,268
-
2,019,585
3,641,126
3,211,397
955,402
3,231,305
458,892
7,856,996
1,768,799
234,583
1,438,638
3,442,020
4,414,976
7,902,486
1,051,030
4,911,356
13,864,872
7,866,499
1,624,599
6,347,997
15,839,095
5,362,291
1,640,875
6,057,396
13,060,562
Operating loss
(9,693,644)
(12,197,969 )
(8,645,586)
Other income (expense):
Interest income
Interest expense
Foreign exchange gains (losses)
Other, net
27,270
(633,459)
(40,861)
49,942
(597,108)
553,061
(1,021,675 )
17,001
(40,871 )
(492,484 )
872,095
(772,417)
(46,268)
13,237
66,647
Net loss applicable to common shares
$
(10,290,752)
$
(12,690,453 ) $
(8,578,939)
Basic and diluted net loss per common share
$
(0.14)
$
(0.19 ) $
(0.14)
Basic and diluted weighted average common shares
outstanding
73,488,507
67,232,889
59,604,646
See accompanying notes to consolidated financial statements.
55
ANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS
Years Ended December 31, 2007, 2008 and 2009
Common Stock
Number
of
Shares
Amount
Additional
Paid-In
Capital
Prepaid
License
Discount
Accumulated
Deficit
53,319,622 $ 533,196 $ 106,792,974 $ (2,305,929)$ (99,322,453 ) $
Accumulated
Other
Comprehensive
Loss
(617,343) $
Total
Stockholders’
Equity
5,080,445
December 31, 2006
Issuance of common stock in private
placement
10,000,000
100,000
14,642,671
Issuance of warrants in debt
financing
Exercise of warrants and options
Stock-based compensation
Impairment and amortization of
prepaid license discount
Net loss
Translation adjustments
Comprehensive loss
December 31, 2007
Exercise of warrants
Stock-based compensation
Net loss
Translation adjustments
Comprehensive loss
December 31, 2008
Issuance of common stock
Exercise of warrants and options
Stock-based compensation
Net loss
Translation adjustments
Comprehensive loss
December 31, 2009
-
2,187,317
22,727
-
21,873
227
505,379
2,270,819
1,218,810
-
-
-
-
24,000
1,200
-
-
-
-
-
-
-
62,529,666 655,296
2,400,000
120,000
-
-
-
68,049,666 680,496
13,352,273
152,082
245,520
-
-
-
133,523
1,521
2,455
-
-
-
-
-
-
-
125,430,653
1,295,950
1,199,602
-
-
-
127,926,205
10,394,127
104,101
1,190,026
-
-
-
81,799,541 $ 817,995 $ 139,614,459 $
-
-
-
-
-
-
-
-
-
-
-
-
14,742,671
505,379
2,292,692
1,219,037
(12,690,453 )
-
(8,578,939 )
-
-
(107,901,392 )
-
-
2,305,929
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- $ (130,882,597 ) $
-
-
(120,591,845 )
-
-
-
(10,290,752 )
-
-
-
-
(67,923)
-
-
-
-
(86,325)
-
2,305,929
(8,578,939)
(67,923)
(8,646,862)
(685,266) 17,499,291
1,319,950
1,200,802
(12,690,453)
(86,325)
(12,776,778)
7,243,265
10,527,650
105,622
1,192,481
(10,290,752)
72,264
(10,218,488)
8,850,530
-
-
-
-
72,264
-
(699,327) $
(771,591)
See accompanying notes to consolidated financial statements.
56
ANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net loss
Years Ended December 31,
2009
2008
2007
$ (10,290,752)
$ (12,690,453 )
$
(8,578,939)
Adjustments to reconcile net loss to net
cash used in operating activities:
Patent rights impairment charge
Depreciation and amortization
Gain on sale of equipment, molds, furniture and fixtures
Stock-based compensation expense
Amortization of debt discount and issuance costs
Impairment and amortization of prepaid license discount
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Deferred costs
Other assets
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Net cash used in operating activities
Cash flows from investing activities:
Purchase of short-term investments
Proceeds from maturity of short-term investments
Proceeds from sales of equipment, molds, furniture and
fixtures
Additions to patent rights
Purchases of equipment, molds, furniture and fixtures
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock, net
Proceeds from exercise of warrants and stock options
Proceeds from notes payable, net of debt issuance costs
Principal payments on notes payable
Net cash provided by (used in) financing activities
-
226,384
(70,506)
1,192,479
206,519
-
(239,440)
(147,515)
130,761
1,099,072
147,734
(201,161)
(324,412)
3,171,277
(5,099,560)
-
283,320
-
1,160,454
269,547
-
(853,964 )
(56,629 )
659,726
(740,276 )
(562 )
1,195,006
(105,298 )
554,717
(10,324,412 )
296,338
251,827
-
1,202,603
220,034
2,305,929
379,129
(40,630)
(452,224)
(340,004)
(435)
(17,686)
441,698
(1,061,916)
(5,394,276)
-
-
-
16,015,057
(24,326,544)
13,163,037
175,000
(176,541)
(11,043)
(12,584)
-
(177,425 )
(1,379,344 )
14,458,288
-
(145,590)
(96,575)
(11,405,672)
10,527,650
105,622
-
(5,026,464)
5,606,808
-
1,319,950
-
(2,128,591 )
(808,641 )
14,742,671
2,292,692
7,309,279
(492,745)
23,851,897
Effect of exchange rate changes on cash and cash equivalents
(31,874)
12,139
928
Net increase in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of year
462,790
3,337,374
7,052,877
13,096,298
$ 13,559,088
9,758,924
$ 13,096,298
$
2,706,047
9,758,924
See accompanying notes to consolidated financial statements.
57
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Antares Pharma, Inc. (the “Company” or “Antares”) is an emerging pharma company that focuses on self-
injection pharmaceutical products and technologies and topical gel-based products. The Company's subcutaneous
injection technology platforms include Vibex™ disposable pressure-assisted auto injectors, Vision™ reusable
needle-free injectors, and disposable multi-use pen injectors. Pharmaceutical and biotechnology companies are
viewed as the Company’s primary customers.
In the injector area, the Company has licensed its reusable needle-free injection device for use with human
growth hormone to Teva Pharmaceutical Industries, Ltd. (“Teva”), Ferring Pharmaceuticals BV (“Ferring”) and JCR
Pharmaceuticals Co., Ltd. (“JCR”). In August 2009, the Company announced that Teva launched its Tjet® injector
system, which uses the Company’s needle-free device to administer Teva’s Tev-Tropin® brand human growth
hormone. The Company has also licensed both disposable auto and pen injection devices to Teva for use in
undisclosed fields and territories. In 2009, the Company received a payment of $4,076,375 from Teva for tooling
and for an advance for the design, development and purchase of additional tooling and automation equipment, all of
which is related to an undisclosed, fixed, single-dose, disposable injector product using the Company’s Vibex™
auto injector platform. In addition, the Company continues to support existing customers of its reusable needle-free
devices for the home or alternate site administration of insulin in the U.S. market through distributors.
In the gel-based area, the Company’s lead product candidate, Anturol®, an oxybutynin ATD™ gel for the
treatment of OAB (overactive bladder), is currently under evaluation in a pivotal Phase 3 trial, for which the
Company expects to file an NDA in 2010. The Company also has a partnership with BioSante Pharmaceuticals, Inc.
(“BioSante”) that includes LibiGel® (transdermal testosterone gel) in Phase 3 clinical development for the treatment
of female sexual dysfunction (FSD), and Elestrin® (estradiol gel) for the treatment of moderate-to-severe vasomotor
symptoms associated with menopause, and currently marketed in the U.S.
The Company has operating facilities in the U.S. and Switzerland. The U.S. operation manufactures and
markets the Company’s reusable needle-free injection devices and related disposables, and develops its disposable
pressure-assisted auto injector and pen injector systems. These operations, including all development and some U.S.
administrative activities, are located in Minneapolis, Minnesota. The Company also has operations located in
Switzerland, which is focused on transdermal gels and has a number of license agreements with pharmaceutical
companies for the application of its drug delivery systems. The Company’s corporate offices are located in Ewing,
New Jersey.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Antares Pharma, Inc. and its three
wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Company’s significant accounting estimates
relate to the revenue recognition periods for license revenues, product warranty accruals and determination of the
fair value and recoverability of goodwill and patent rights. Actual results could differ from these estimates.
Foreign Currency Translation
The majority of the foreign subsidiaries revenues are denominated in U.S. dollars, and any required funding of
the subsidiaries is provided by the U.S. parent. Nearly all operating expenses of the foreign subsidiaries, including
labor, materials, leasing arrangements and other operating costs, are denominated in Swiss Francs. Additionally,
58
bank accounts held by foreign subsidiaries are denominated in Swiss Francs, there is a low volume of intercompany
transactions and there is not an extensive interrelationship between the operations of the subsidiaries and the parent
company. As such, the Company has determined that the Swiss Franc is the functional currency for its three foreign
subsidiaries. The reporting currency for the Company is the United States Dollar (“USD”). The financial statements
of the Company’s three foreign subsidiaries are translated into USD for consolidation purposes. All assets and
liabilities are translated using period-end exchange rates and statements of operations items are translated using
average exchange rates for the period. The resulting translation adjustments are recorded as a separate component of
stockholders’ equity. Sales to certain customers by the U.S. parent are in currencies other than the U.S. dollar and
are subject to foreign currency exchange rate fluctuations. Foreign currency transaction gains and losses are
included in the statements of operations.
Cash Equivalents
The Company considers highly liquid debt instruments with original maturities of 90 days or less to be cash
equivalents.
Allowance for Doubtful Accounts
Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains
allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required
payments. The Company considers the following factors when determining the collectibility of specific customer
accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends,
and changes in customer payment terms. If the financial condition of the Company’s customers were to deteriorate,
adversely affecting their ability to make payments, additional allowances would be required. The Company
provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance.
Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a
charge to the valuation allowance and a credit to accounts receivable. The Company recorded no bad debt expense
in each of the last three years. The allowance for doubtful accounts balance was $10,000 at December 31, 2009,
2008 and 2007.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. Certain
components of the Company’s products are provided by a limited number of vendors, and the Company’s
production and assembly operations are outsourced to a third-party supplier. Disruption of supply from key vendors
or the third-party supplier may have a material adverse impact on the Company’s operations.
Equipment, Molds, Furniture, and Fixtures
Equipment, molds, furniture, and fixtures are stated at cost and are depreciated using the straight-line method
over their estimated useful lives ranging from three to ten years. Certain equipment and furniture held under capital
leases is classified in equipment, molds, furniture and fixtures and is amortized using the straight-line method over
the lease term or estimated useful life, and the related obligations are recorded as liabilities. Lease amortization is
included in depreciation expense. Depreciation expense was $135,411, $158,864 and $137,085 for the years ended
December 31, 2009, 2008 and 2007, respectively.
Goodwill
The Company has $1,095,355 of goodwill recorded as of December 31, 2009 that relates to the Minnesota
operations. The Company evaluates the carrying amount of goodwill during the fourth quarter of each year and
between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair
value of the Minnesota reporting unit below its carrying amount. Such circumstances could include, but are not
limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, (3)
an adverse action or assessment by a regulator, or (4) a sustained significant drop in the Company’s stock price.
When evaluating whether goodwill is impaired, the Company compares the fair value of the Minnesota operations to
the carrying amount, including goodwill. If the carrying amount of the Minnesota operations exceeds its fair value,
59
then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing
the implied fair value of goodwill to its carrying amount. In calculating the implied fair value of goodwill, the fair
value of the Minnesota operations would be allocated to all of its other assets and liabilities based on their fair
values. The excess of the fair value of the Minnesota operations over the amount assigned to its other assets and
liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount
of goodwill exceeds its implied fair value. The Company’s evaluation of goodwill completed during 2009, 2008 and
2007 resulted in no impairment losses.
Patent Rights
The Company capitalizes the cost of obtaining patent rights. These capitalized costs are being amortized on a
straight-line basis over periods ranging from six to fifteen years beginning on the earlier of the date the patent is
issued or the first commercial sale of product utilizing such patent rights. Amortization expense for the years ended
December 31, 2009, 2008 and 2007 was $99,313, $124,455 and $112,383, respectively.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets, including patent rights, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset or asset group. This analysis can be very subjective as the Company relies
upon signed distribution or license agreements with variable cash flows to substantiate the recoverability of long-
lived assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
Each year the Company reviews patent costs for impairment and identifies patents related to products for which
there are no signed distribution or license agreements or for which no revenues or cash flows are anticipated. In
2007 the Company recognized an impairment charge of $296,338 in general and administrative expenses, which
represented the gross carrying amount net of accumulated amortization for the identified patents. No impairment
charges were recognized in 2009 or 2008. The 2007 impairment charge related to the amendment of the agreement
with Eli Lilly and Co. (“Lilly”) and is discussed further in Note 11. The gross carrying amount and accumulated
amortization of patents, which are the only intangible assets of the Company subject to amortization, were
$1,665,519 and $923,120, respectively, at December 31, 2009 and were $1,471,536 and $826,680, respectively, at
December 31, 2008. The Company’s estimated aggregate patent amortization expense for the next five years is
$91,000, $66,000, $60,000, $60,000 and $60,000 in 2010, 2011, 2012, 2013 and 2014, respectively.
Fair Value of Financial Instruments
Cash and cash equivalents are stated at cost, which approximates fair value. The fair value of notes payable
was approximately $4,923,000 at December 31, 2008, estimated using rates that may be available to the Company
for debt with similar remaining maturities.
Revenue Recognition
The Company sells its proprietary reusable needle-free injectors and related disposable products through
pharmaceutical and medical product distributors. The Company’s reusable injectors and related disposable products
are not interchangeable with any competitive products and must be used together. The Company recognizes revenue
upon shipment when title transfers. The Company offers no price protection or return rights other than for customary
warranty claims. Sales terms and pricing are governed by sales and distribution agreements.
The Company also records revenue from license fees, milestone payments and royalties. License fees and
milestone payments received under contracts originating prior to June 15, 2003 are accounted for under the
cumulative deferral method. This method defers milestone payments with amortization to income over the contract
term on a straight-line basis commencing with the achievement of a contractual milestone. If the Company is
60
required to refund any portion of a milestone payment, the milestone will not be amortized into revenue until the
repayment obligation no longer exists.
Licensing revenue recognition requires significant management judgment to evaluate the effective terms of
agreements, the Company’s performance commitments and determination of fair value of the various deliverables
under the arrangement. In the third quarter of 2009, the Company elected early adoption of Financial Accounting
Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-13, “Revenue Arrangements with Multiple
Deliverables” (“ASU 2009-13”). ASU 2009-13, which amended FASB ASC 605-25, “Multiple-Element
Arrangements,” is effective for arrangements entered into or materially modified in fiscal years beginning on or after
June 15, 2010, but allows for early adoption. ASU 2009-13 requires a vendor to allocate revenue to each unit of
accounting in arrangements involving multiple deliverables. It changes the level of evidence of standalone selling
price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price
of deliverables when vendor specific objective evidence or third party evidence of selling price is not available. As
a result of adoption of ASU 2009-13, deferred revenues and deferred costs associated with one License,
Development and Supply Agreements with Teva will be recognized as revenues and expenses earlier than would
otherwise have occurred. Revenues and expenses generated in connection with future multiple element
arrangements will likely often be recognized over shorter periods than would have occurred prior to adoption of
ASU 2009-13. The impact of adoption of ASU 2009-13 is discussed further in Note 12 to the consolidated financial
statements.
The Company has a number of arrangements that were not affected by adoption of ASU 2009-13, and the
accounting for these arrangements will continue under the prior accounting standards unless an arrangement is
materially modified, as defined in the new accounting standard. The prior accounting standards address when and,
if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting. In
some arrangements, the different revenue-generating activities (deliverables) are sufficiently separable, and there
exists sufficient evidence of their fair values to separately account for some or all of the deliverables (that is, there
are separate units of accounting). In other arrangements, some or all of the deliverables are not independently
functional, or there is not sufficient evidence of their fair values to account for them separately. The ability or
inability to establish objective evidence of fair value for the deliverable portions of the contracts significantly
impacted the time period over which revenues are being recognized. For instance, if there was no objective fair
value of undelivered elements of a contract, then a multi-deliverable contract was required to be treated as one unit
of accounting, resulting in all revenue being deferred and recognized over the entire contract period.
At December 31, 2009, $7,362,066 of non-refundable cash payments received have been recorded as deferred
revenue in cases where the revenue is not immediately recognized due to the long-term nature of the respective
agreements. Subsequent factors affecting the initial estimate of the effective terms of agreements could either
increase or decrease the period over which the deferred revenue is recognized.
Stock-Based Compensation
The Company records compensation expense associated with share based awards granted to employees at the
fair value of the award on the date of grant. The expense is recognized over the period during which an employee is
required to provide services in exchange for the award.
The Company uses the Black-Scholes option valuation model to determine the fair value of stock options. The
fair value model includes various assumptions, including the expected volatility and expected life of the awards.
Stock-based instruments granted to nonemployees are recorded at their fair value on the measurement date,
which is typically the vesting date.
Product Warranty
The Company provides a warranty on its reusable needle-free injector devices. Warranty terms for devices sold
to end-users by dealers and distributors are included in the device instruction manual included with each device sold.
Warranty terms for devices sold to corporate customers who provide their own warranty terms to end-users are
included in the contracts with the corporate customers. The Company is obligated to repair or replace, at the
61
Company’s option, a device found to be defective due to use of defective materials or faulty workmanship. The
warranty does not apply to any product that has been used in violation of instructions as to the use of the product or
to any product that has been neglected, altered, abused or used for a purpose other than the one for which it was
manufactured. The warranty also does not apply to any damage or defect caused by unauthorized repair or the use of
unauthorized parts. The warranty period on a device is typically 24 months from either the date of retail sale of the
device by a dealer or distributor or the date of shipment to a customer if specified by contract. The Company
recognizes the estimated cost of warranty obligations at the time the products are shipped based on historical claims
incurred by the Company. Actual warranty claim costs could differ from these estimates. Warranty liability activity
is as follows:
Balance at
Beginning of
Year
Provisions
Claims
Balance at
End of
Year
2009
2008
$
$
20,000
20,000
$
$
13,129 $
8,496 $
(13,129)
(8,496)
$
$
20,000
20,000
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to
historical net losses of the Company, a valuation allowance is established to offset the net deferred tax asset balance
for all years presented.
Net Loss Per Share
Basic net loss per share is computed by dividing net income or loss available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed
similar to basic net loss per share except that the weighted average shares outstanding are increased to include
additional shares from the assumed exercise of stock options and warrants, if dilutive. The number of additional
shares is calculated by assuming that outstanding stock options or warrants were exercised and that the proceeds
from such exercise were used to acquire shares of common stock at the average market price during the reporting
period. All potentially dilutive common shares were excluded from the calculation because they were anti-dilutive
for all periods presented.
Potentially dilutive securities at December 31, 2009, 2008 and 2007, excluded from dilutive loss per share as
their effect is anti-dilutive, are as follows:
Stock options and warrants
26,635,093
26,268,701
28,723,412
2009
2008
2007
New Accounting Pronouncements
Effective July 1, 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, “The
FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS No. 168 reduces the U.S. GAAP hierarchy to
two levels, one that is authoritative and one that is not. The Company began to use the new guidance and reflect the
new accounting guidance references when referring to GAAP for the quarterly period ended September 30, 2009,
and all subsequent periods. As the guidance was not intended to change or alter existing GAAP, adoption of this
pronouncement did not have an effect on the Company’s consolidated financial statements.
62
Effective January 1, 2009, the Company adopted FASB ASC 805, “Business Combinations” (formerly SFAS
141R). This establishes principles and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired in the business combination. ASC 805 also establishes disclosure requirements to enable the
evaluation of the nature and financial effects of the business combination. Adoption of ASC 805 will apply
prospectively to business combinations completed after January 1, 2009.
Effective January 1, 2009, the Company adopted the provisions of ASC 815, “Derivatives and Hedging” that
were issued with Emerging Issues Task Force Issue 07-5, “Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock.” This provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including
evaluating the instrument's contingent exercise and settlement provisions. The adoption of this pronouncement did
not have an impact on the Company’s consolidated financial statements.
The Company adopted the provisions of ASC 820-10, “Fair Value Measurements and Disclosures” (formerly
SFAS No. 157), with respect to non-financial assets and liabilities effective January 1, 2009. This pronouncement
defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value
measurements. The adoption of ASC 820-10 did not have an impact on the Company’s consolidated financial
statements.
In May 2009, the FASB issued ASC 855, “Subsequent Events” (formerly SFAS 165), which establishes general
standards of accounting for, and requires disclosure of, events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In February 2010, ASC 855 was amended by ASU
2010-09 eliminating the requirement to disclose the date through which subsequent events have been evaluated. The
adoption of ASC 855, as amended by ASU 2010-09, did not have an impact on the Company’s consolidated
financial statements.
In the third quarter of 2009, the Company elected early adoption of FASB ASU 2009-13, “Revenue
Arrangements with Multiple Deliverables.” ASU 2009-13, which amended FASB ASC 605-25, “Multiple-Element
Arrangements,” is effective for arrangements entered into or materially modified in fiscal years beginning on or after
June 15, 2010, but allows for early adoption. ASU 2009-13 requires a vendor to allocate revenue to each unit of
accounting in arrangements involving multiple deliverables based on the relative selling price of each deliverable. It
also changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor
to make its best estimate of the standalone selling price of deliverables when more objective evidence of selling
price is not available. The impact of adopting this pronouncement is discussed in Note 12 to the consolidated
financial statements.
3. Liquidity
The Company has reported net losses of $10,290,752, $12,690,453 and $8,578,939 in the fiscal years ended
2009, 2008 and 2007, respectively, and the Company has accumulated aggregate net losses from the inception of
business through December 31, 2009 of $130,882,597. In addition, the Company expects to report a net loss for the
year ending December 31, 2010. The Company has not historically generated sufficient revenue to provide the cash
needed to support operations, and has continued to operate primarily by raising capital and incurring debt. The
Company disclosed in its 2008 Annual Report on Form 10-K that there was uncertainty about its ability to continue
as a going concern. In 2009 this uncertainty was resolved.
In order to be in a better position to take advantage of potential growth opportunities and to fund future
operations, during 2009 the Company raised additional capital and took steps to reduce its monthly cash obligations.
In the third quarter of 2009, the Company raised gross proceeds of $11,500,000 through the sale of shares of its
common stock and warrants. Approximately $3,000,000 of the proceeds was used to pay off the remaining balance
of the Company’s credit facility, eliminating the monthly debt service requirements. In the fourth quarter of 2009,
the Company reduced its monthly overhead when it entered into an Asset Purchase Agreement with Ferring. Under
this agreement, Ferring assumed responsibility for all of the Company’s facility and equipment lease obligations in
connection with its operations in Switzerland, and the majority of the Company’s employees at that location were
hired by Ferring effective January 1, 2010. Subsequent to the Ferring agreement, the Company entered into a
63
month-to-month facility lease agreement at a new Swiss location in a much smaller space at a significantly reduced
monthly rate.
At December 31, 2009, the Company had cash and cash equivalents of $13,559,088. The Company believes
that the combination of the current cash and cash equivalents balance, the recent reductions in its monthly cash
outflows, the projected product sales, product development revenue, license revenues, milestone payments and
royalties will provide sufficient funds to support operations for at least the next 12 months.
4. Composition of Certain Financial Statement Captions
Inventories:
Raw material
Finished goods
Equipment, molds, furniture and fixtures:
Furniture, fixtures and office equipment
Production molds and equipment
Molds and tooling in process
Less accumulated depreciation
Patent rights:
Patent rights
Less accumulated amortization
Accrued expenses and other liabilities:
Accrued employee compensation and benefits
Other liabilities
5. Notes Payable
December 31,
December 31,
2009
2008
$
$
$
$
250,718
78,835
329,553
$
$
103,456
78,582
182,038
713,809
1,348,701
105,800
(1,851,000 )
317,310
$ 1,395,209
2,458,692
1,395,325
(3,461,063)
$ 1,788,163
$ 1,665,519
(923,120 )
742,399
$
$ 1,471,536
(826,680)
644,856
$
$
490,773
557,846
$ 1,048,619
$
994,810
387,496
$ 1,382,306
In September 2009, the remaining balance of the Company’s credit facility was paid off with the proceeds from
the sale of common stock and warrants. In 2007, the Company received gross proceeds of $7,500,000 in two
tranches of $5,000,000 and $2,500,000 under a credit facility to help fund working capital needs. The per annum
interest rate was 12.7% in the case of the first tranche and 11% in the case of the second tranche. The maturity date
(i) with respect to the first tranche was forty-two months from February 2007 and (ii) with respect to the second
tranche was thirty-six months from December 2007.
Total interest expense related to the credit facility was $620,304, $996,832 and $756,262 in 2009, 2008 and
2007, respectively, of which $206,519, $269,546 and $221,775 in 2009, 2008 and 2007, respectively, was noncash
interest consisting of amortization of debt discount and debt issuance costs.
6. Leases
The Company has non-cancelable operating leases for its corporate headquarters facility in Ewing, New Jersey,
and its office, research and development facility in Minneapolis, MN. The leases require payment of all executory
costs such as maintenance and property taxes. The Company also leases certain equipment and furniture under
various operating leases. The Company had no equipment under capital leases at December 31, 2009, as these
leases were assumed by Ferring in the Asset Purchase Agreement discussed in Note 11 to the consolidated financial
64
statements. The cost of equipment and furniture under capital leases was $213,386 and $116,923 and accumulated
amortization was $54,673 and $15,507 at December 31, 2008 and 2007, respectively.
Rent expense, net, incurred for the years ended December 31, 2009, 2008 and 2007 was $378,425, $395,031
and $353,966, respectively.
Future minimum lease payments under operating leases as of December 31, 2009 are $163,681, $133,580 and
$8,496 for the years ended December 31, 2010, 2011 and 2012, respectively.
7.
Income Taxes
The Company incurred losses for both book and tax purposes for all applicable jurisdictions in each of the years
in the three-year period ended December 31, 2009, and, accordingly, no income taxes were provided. The Company
was subject to taxes in both the U.S. and Switzerland in each of the years in the three-year period ended December
31, 2009. Effective tax rates differ from statutory income tax rates in the years ended December 31, 2009, 2008 and
2007 as follows:
Statutory income tax rate
State income taxes, net of federal benefit
Valuation allowance increase
Effect of foreign operations
Expiration of unused net operating loss and credit carryforwards
Nondeductible items
Other
2009
2008
2007
(34.0)%
(0.3)
4.6
17.4
10.2
1.9
0.2
0.0%
(34.0)%
(0.4)
17.2
16.4
1.7
1.7
(2.6)
0.0%
(34.0)%
(0.6)
11.5
11.9
2.8
5.6
2.8
0.0%
Deferred tax assets as of December 31, 2009 and 2008 consist of the following:
Net operating loss carryforward – U.S.
Net operating loss carryforward – Switzerland
Research and development tax credit carryforward
Deferred revenue
Depreciation and amortization
Stock-based compensation
Other
Less valuation allowance
2009
2008
$ 16,060,000
7,261,000
909,000
785,000
119,000
1,189,000
876,000
27,199,000
(27,199,000)
—
$
$ 16,415,000
6,547,000
919,000
636,000
208,000
1,114,000
641,000
26,480,000
(26,480,000 )
—
$
The valuation allowance for deferred tax assets as of December 31, 2009 and 2008 was $27,199,000 and
$26,480,000, respectively. The net change in the total valuation allowance for the years ended December 31, 2009
and 2008 was an increase of $719,000 and $2,522,000, respectively. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making
this assessment. Due to the uncertainty of realizing the deferred tax asset, management has recorded a valuation
allowance against the entire deferred tax asset.
65
The Company has a U.S. federal net operating loss carryforward at December 31, 2009, of approximately
$43,600,000, which, subject to limitations of Internal Revenue Code Section 382, is available to reduce income
taxes payable in future years. If not used, this carryforward will expire in years 2010 through 2029, with
approximately $7,047,000 expiring over the next three years. Additionally, the Company has a research credit
carryforward of approximately $909,000. These credits expire in years 2010 through 2029.
The Company also has a Swiss net operating loss carryforward at December 31, 2009, of approximately
$53,800,000, which is available to reduce income taxes payable in future years. If not used, this carryforward will
expire in years 2010 through 2016, with approximately $19,800,000 expiring over the next three years.
Utilization of U.S. net operating losses and tax credits of Antares Pharma, Inc. are subject to annual limitations
under Internal Revenue Code Sections 382 and 383, respectively, as a result of significant changes in ownership,
including the business combination with Permatec, private placements, warrant exercises and conversion of Series D
Convertible Preferred Stock. Subsequent significant equity changes, including exercise of outstanding warrants,
could further limit the utilization of the net operating losses and credits. The annual limitations have not yet been
determined; however, when the annual limitations are determined, the gross deferred tax assets for the net operating
losses and tax credits will be reduced with a reduction in the valuation allowance of a like amount.
The Company adopted the provisions of a FASB accounting standard contained in ASC 740-10 related to
accounting for uncertainty in income taxes. Implementation of this accounting standard had no impact on the
consolidated financial statements. As of both the date of adoption, and as of December 31, 2009, the unrecognized
tax benefit accrual was zero. The Company has decided to classify any future interest and penalties as a component
of income tax expense if incurred. To date, there have been no interest or penalties charged or accrued in relation to
unrecognized tax benefits.
8. Stockholders’ Equity
Common Stock
In July 2009, the Company raised gross proceeds of $8,500,000 in a registered direct offering through the sale
of shares of its common stock and warrants. The Company sold a total of 10,625,000 units, each unit consisting of
(i) one share of common stock and (ii) one warrant to purchase 0.4 of a share of common stock (or a total of
4,250,000 shares), at a purchase price of $0.80 per unit. The warrants will be exercisable six months after issuance
at $1.00 per share and will expire five years from the date of issuance.
In September 2009, the Company raised gross proceeds of $3,000,000 through the sale of 2,727,273 units to
certain institutional investors, each unit consisting of (i) one share of common stock and (ii) one warrant to purchase
0.4 of a share of common stock (or a total of 1,090,909 shares), at a purchase price of $1.10 per unit. The warrants
will be exercisable six months after issuance at $1.15 per share and will expire five years from the date of issuance.
In July of 2007, the Company received proceeds of $14,742,671, net of offering costs of $1,257,329, in a
private placement of its common stock in which a total of 10,000,000 shares of common stock were sold at a price
of $1.60 per share. In connection with the private placement, the Company issued five-year warrants to purchase an
aggregate of 3,800,000 shares of common stock with an exercise price of $2.00 per share.
Warrant and stock option exercises during 2009, 2008 and 2007 resulted in proceeds of $105,622, $1,319,950
and $2,292,692, respectively, and in the issuance of 152,082, 2,400,000 and 2,187,317 shares of common stock,
respectively.
Stock Options and Warrants
The Company’s 2008 Equity Compensation Plan (the “Plan”), which became effective on May 14, 2008,
merged all active prior stock option and equity incentive plans and this new plan into one plan. The Plan allows for
grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock
appreciation rights, dividend equivalents and other stock-based awards. All of the Company’s officers, directors,
employees, consultants and advisors are eligible to receive grants under the Plan. Under the Plan, the maximum
66
number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares.
Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value
on the dates of grant. The term of the options range from three to eleven years and they vest in varying periods. As
of December 31, 2009, the Plan had 1,069,694 shares available for grant. The number of shares available for grant
does not take into consideration potential stock awards that could result in the issuance of shares of common stock if
certain performance conditions are met, discussed under “Stock Awards” below. Stock option exercises are satisfied
through the issuance of new shares.
A summary of stock option activity under the Plan as of December 31, 2009 and the changes during the year
then ended is as follows:
Outstanding at December 31, 2008
Granted/Issued
Exercised
Cancelled
Outstanding at December 31, 2009
Exercisable at December 31, 2009
Number of
Shares
8,056,656
1,245,936
(72,082)
(890,826)
8,339,684
5,880,573
Weighted
Average
Exercise
Price ($)
1.19
0.90
0.77
1.38
1.13
1.28
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value ($)
6.6
5.6
2,001,379
1,091,783
As of December 31, 2009, there was approximately $1,000,000 of total unrecognized compensation cost related
to nonvested outstanding stock options that is expected to be recognized over a weighted average period of
approximately 2.0 years.
Stock option expense recognized in 2009, 2008 and 2007 was approximately $973,000, $1,076,000 and
$1,146,000, respectively. In 2009 and 2008, expense included approximately $54,000 and $65,000, respectively,
recognized due to modifications of option terms for employees whose employment with the Company ended in
those years. The per share weighted average fair value of options granted during 2009, 2008 and 2007 was
estimated as $0.52, $0.40 and $1.14, respectively, on the date of grant using the Black-Scholes option pricing model
based on the assumptions noted in the table below. Expected volatilities are based on the historical volatility of the
Company’s stock. The weighted average expected life is based on both historical and anticipated employee
behavior.
Risk-free interest rate
Annualized volatility
Weighted average expected life, in years
Expected dividend yield
2009
December 31,
2008
2.2%
72.0%
5.0
0.0%
2.9%
70.0%
5.0
0.0%
2007
4.7%
109.0%
5.0
0.0%
67
Stock option and warrant activity is summarized as follows:
Options
Warrants
Outstanding at December 31, 2006
Granted/Issued
Exercised
Cancelled
Outstanding at December 31, 2007
Granted/Issued
Exercised
Cancelled
Outstanding at December 31, 2008
Granted/Issued
Exercised
Cancelled
Number of
Shares
4,426,759
1,307,632
(35,000)
(117,000)
5,582,391
3,477,023
-
(1,002,758)
8,056,656
1,245,936
(72,082)
(890,826)
Outstanding at December 31, 2009
8,339,684
Weighted
Average Price
1.65
1.42
1.54
2.31
1.58
0.66
-
1.55
1.19
0.90
0.77
1.38
1.13
Number of
Shares
21,272,783
4,440,000
(2,430,095)
(141,667)
23,141,021
-
(2,400,000)
(2,528,976)
18,212,045
5,500,909
(80,000)
(5,337,545)
18,295,409
Weighted
Average Price
1.35
1.89
1.09
1.10
1.49
-
0.55
1.19
1.65
1.02
1.00
1.27
1.56
The following table summarizes information concerning currently outstanding and exercisable options and
warrants by price range at December 31, 2009:
Number of Shares
Outstanding
Outstanding
Weighted Average
Remaining Life
In Years
Exercisable
Weighted Average
Exercise Price
Number
Exercisable
Weighted Average
Exercise Price
2,041,511
1,893,274
2,335,009
1,863,832
206,058
8,339,684
6,140,909
7,354,500
3,800,000
1,000,000
18,295,409
26,635,093
9.0
6.3
6.9
4.5
1.7
6.6
4.3
1.2
2.5
3.5
2.6
3.9
$ 0.49
0.80
1.24
1.64
4.56
1.13
1.00
1.50
2.00
3.78
1.56
1.43
968,526
1,300,440
1,570,301
1,835,248
206,058
5,880,573
6,140,909
7,354,500
3,800,000
1,000,000
18,295,409
24,175,982
$ 0.50
0.79
1.31
1.64
4.56
1.28
1.00
1.50
2.00
3.78
1.56
1.49
Price Range
Option Plans:
$
0.37 to 0.53
0.70 to 0.96
1.01 to 1.50
1.51 to 1.77
4.56
Warrants:
$
0.80 to 1.15
1.50
2.00
3.78
Total Options &
Warrants
Stock Awards
The employment agreements with the Chief Executive Officer, Chief Financial Officer and other members of
executive management include stock-based incentives under which the executives could be awarded up to
approximately 1,380,000 shares of common stock upon the occurrence of various triggering events. Of these shares,
135,227, 22,727 and 22,727 were awarded in 2009, 2008 and 2007, respectively. A total of approximately
$133,000, $11,000 and $91,000 in compensation expense was recorded in 2009, 2008 and 2007, respectively, in
connection with the shares awarded and others considered probable of achievement.
In 2008, four executive officers received stock awards totaling 180,000 shares of common stock. The stock
awards vest in equal annual installments over a three year period and 60,000 of these shares vested in 2009.
Expense is recognized on a straight line basis over the vesting period and is based on the fair value of the stock on
the grant date. The fair value of the stock awards is determined based on the number of shares granted and the
market price of the Company’s common stock on the date of grant. Expense recognized in connection with these
68
awards was approximately $49,000 and $28,000 in 2009 and 2008, respectively. The weighted average fair value of
the shares granted in 2008 was $0.82 per share.
In 2008, the Company’s former Chief Executive Officer was granted 70,000 shares of common stock in
connection with his separation agreement. The Company recognized $35,000 of expense based on the market price
of $0.50 per share of the Company’s common stock on the date of grant.
In addition to the shares granted to executive management, in 2009 and 2008 a total of 50,293 and 27,273
shares of common stock, respectively, were granted to directors and employees as part of annual compensation or
bonuses.
9. Employee 401(k) Savings Plan
The Company sponsors a 401(k) defined contribution retirement savings plan that covers all U.S. employees
who have met minimum age and service requirements. Under the plan, eligible employees may contribute up to 50%
of their annual compensation into the plan up to the IRS annual limits. At the discretion of the Board of Directors,
the Company may contribute elective amounts to the plan, allocated in proportion to employee contributions to the
plan, employee’s salary, or both. For the years ended December 31, 2009, 2008 and 2007, the Company elected to
make contributions to the plan totaling $72,537, $61,180 and $75,553, respectively.
10. Supplemental Disclosures of Cash Flow Information
Cash paid for interest during the years ended December 31, 2009, 2008 and 2007 was $476,907, $677,456 and
$550,642, respectively.
11. License Agreements
Teva License Development and Supply Agreements
In December 2007, the Company entered into a license, development and supply agreement with Teva under
which the Company will develop and supply a disposable pen injector for use with two undisclosed patient-
administered pharmaceutical products. Under the agreement, an upfront payment, development milestones, and
royalties on Teva’s product sales, as well as a purchase price for each device sold are to be received by the Company
under certain circumstances. Based on an analysis under accounting literature applicable at the time of the
agreement, the entire arrangement is considered a single unit of accounting. Therefore, payments received and
development costs incurred will be deferred and will be recognized from the start of manufacturing through the end
of the initial contract period.
In September 2006, the Company entered into a Supply Agreement with Teva Pursuant to the agreement, Teva
is obligated to purchase all of its needle-free delivery device requirements from Antares for hGH to be marketed in
the United States. Antares received an upfront cash payment, and will receive milestone fees and a royalty payment
on Teva’s net sales, as well as a purchase price for each device sold. The upfront payment was recognized as
revenue over the development period. The milestone fees and royalties will be recognized as revenue when earned.
In 2009, the Company received a milestone payment from Teva in connection with Teva’s launch of the Company’s
Tjet needle-free device with their hGH Tev-Tropin®.
In July 2006, the Company entered into an exclusive License Development and Supply Agreement with an
affiliate of Teva, Sicor Pharmaceuticals Inc. Pursuant to the agreement, the affiliate is obligated to purchase all of
its delivery device requirements from Antares for an undisclosed product to be marketed in the United States and
Canada. Antares received an upfront cash payment, and will receive milestone fees, a negotiated purchase price for
each device sold, as well as royalties on sales of their product. As discussed in Note 12 to the consolidated financial
statements, in the third quarter of 2009 this agreement was amended and the accounting for the revenue and costs
under this agreement was changed.
In November 2005, the Company signed an agreement with an affiliate of Teva, Sicor Pharmaceuticals Inc.,
under which Sicor is obligated to purchase all of its injection delivery device requirements from Antares for an
69
undisclosed product to be marketed in the United States. Sicor also received an option for rights in other territories.
The license agreement included, among other things, an upfront cash payment, milestone fees, a negotiated purchase
price for each device sold, and royalties on sales of their product. In addition, pursuant to a Stock Purchase
Agreement, Sicor purchased 400,000 shares of Antares common stock at a per share price of $1.25. Antares granted
Sicor certain registration rights with respect to the purchased shares of common stock. Based on an analysis under
accounting literature applicable the time of the agreement, the entire arrangement is considered a single unit of
accounting. Therefore, payments received and development costs incurred will be deferred and will be recognized
from the start of manufacturing through the end of the initial contract period.
Eli Lilly Development and License Agreement
On September 12, 2003, the Company entered into a Development and License Agreement (the “License
Agreement”) with Lilly. Under the License Agreement, the Company granted Lilly an exclusive license to certain of
the Company’s reusable needle-free technology in the fields of diabetes and obesity. The Company also granted an
option to Lilly to apply the technology in one additional therapeutic area. Additionally, the Company issued to Lilly
a ten-year warrant to purchase shares of the Company’s common stock. The Company granted Lilly certain
registration rights with respect to the shares of common stock issuable upon exercise of the warrant. At the time of
the grant, the Company determined that the fair value of the warrant was $2,943,739 using the Black-Scholes option
pricing model. The fair value of the warrant was recorded to additional paid in capital and to prepaid license
discount, a contra equity account.
The Company reached the conclusion that although there are multiple deliverables in the contract, the entire
contract must be accounted for as one unit of accounting. Therefore, all revenue was being deferred when billed
under the contract terms and was being recognized into revenue on a straight-line basis over the remaining life of the
contract. All related costs were also being deferred and recognized as expense over the remaining life of the contract
on a straight-line basis. The prepaid license discount was being amortized against revenue on a straight-line basis
over the life of the contract.
In March of 2008 the Company entered into a second amendment to the original development and license
agreement with Lilly dated September 12, 2003. The amendment narrowed the scope of the license grant to Lilly
under the agreement whereby (a) certain devices (as defined in the agreement) owned by the Company are no longer
licensed to Lilly, including the Company’s MJ7 device, (b) the scope of the license for the remaining devices
licensed to Lilly are converted to nonexclusive from exclusive and (c) the scope of such remaining nonexclusive
license is limited to use with a smaller subset of compounds in a narrower field of use. The Company is now able to
exclusively license and supply certain devices that were previously licensed to Lilly under the agreement. In
connection with the return of rights with respect to the devices, no device development plan is required going
forward.
Considering the renegotiations with Lilly and drafts of the then pending amendment, the Company evaluated
the prepaid license discount related to the original agreement (recorded as contra equity in the stockholders’ equity
section of the balance sheet) for potential impairment in connection with the preparation and review of the 2007
consolidated financial statements. Given that Lilly was no longer committed to development of the Company’s
product on the previously agreed upon timeline under the agreement, the Company determined it was unlikely that
future cash flows would be received that would exceed the unamortized carrying amount, indicating that the
recorded prepaid license discount was impaired. In addition, the Company determined that capitalized patent costs
associated with the agreement had been impaired. The Company also recognized related deferred revenue and
deferred costs related to the agreement. Accordingly, the Company recorded a net non-cash charge to earnings in
the fourth quarter of 2008 totaling $1,629,060, consisting principally of the patent impairment charge of $296,338
and the impairment of prepaid license discount and related charges of $1,438,638. The patent impairment charge
was recorded in general and administrative expense, while the impairment of prepaid license discount and
recognition of deferred revenue and deferred costs was recorded in cost of revenue. The net impact to stockholders’
equity was an increase of approximately $480,000 as a result of the recognition of deferred revenue in excess of
deferred costs and patent impairment charges.
70
Ferring Agreements
On November 6, 2009, the Company entered into an Exclusive License Agreement with Ferring, under which
the Company licensed certain of its patents and agreed to transfer know-how for its transdermal gel technology for
certain pharmaceutical products. This agreement has no impact on Antares’ current licenses, the transdermal
clinical pipeline, or marketed products, including Anturol®, LibiGel®, Nestorone, and Elestrin®. Also on November
6, 2009, in tandem with the execution of the Exclusive License Agreement, the Company entered into an Asset
Purchase Agreement (the “Purchase Agreement”) with Ferring. Pursuant to the terms and conditions of the
Purchase Agreement, Ferring purchased from the Company all of the assets, including equipment, fixtures, fittings
and inventory, located at the Company’s research and development facility located in Allschwil, Switzerland (the
“Facility”). Further pursuant to the terms and conditions of the Purchase Agreement, Ferring assumed the
contractual obligations related to the Facility, including the real property lease for the Facility, and continued to
employ the employees working at the Facility. In addition, the Company entered into a Consultancy Services
Agreement with Ferring for a period of 12 months, under which the Company will provide services in connection
with development of certain pharmaceutical products under the Exclusive License Agreement. Under these
agreements the Company received upfront license fees, payments for assets and payments for services rendered
under the consultancy agreement. In addition, the Company will receive milestone payments as certain defined
milestones are achieved and will continue to receive monthly payments over the term of the consultancy agreement.
Although there are three separate agreements with Ferring, they were all entered into at essentially the same
time and therefore are presumed to have been negotiated as a package. This package of arrangements was evaluated
as a single arrangement for purposes of applying the applicable accounting standard. Payments received under the
Exclusive License Agreement will be recognized over the 12 month period of the Consultancy Services Agreement,
as this is the period of time the Company will be involved in development. Milestone payments received in
connection with milestones reached after the services agreement has ended will be recognized when the milestone
payment is received. The amount received from Ferring for the assets sold resulted in a gain, which was recorded in
other income.
The Company entered into a License Agreement, dated January 22, 2003, with Ferring, under which the
Company licensed certain of its intellectual property and extended the territories available to Ferring for use of
certain of the Company’s reusable needle-free injector devices. Specifically, the Company granted to Ferring an
exclusive, perpetual, irrevocable, royalty-bearing license, within a prescribed manufacturing territory, to
manufacture certain of the Company’s reusable needle-free injector devices for the field of human growth hormone.
The Company granted to Ferring similar non-exclusive rights outside of the prescribed manufacturing territory. In
addition, the Company granted to Ferring a non-exclusive right to make and have made the equipment required to
manufacture the licensed products, and an exclusive, perpetual, royalty-free license in a prescribed territory to use
and sell the licensed products.
As consideration for the license grants, Ferring paid the Company an upfront payment upon execution of the
License Agreement, and paid an additional milestone in 2003. Ferring will also pay the Company royalties for each
device manufactured by or on behalf of Ferring, including devices manufactured by the Company. Beginning in
2004, a portion of the license fee received in 2003 was credited against future royalties owed by Ferring, until such
amount is exhausted. These royalty obligations expire, on a country-by-country basis, when the respective patents
for the products expire, despite the fact that the License Agreement does not itself expire until the last of such
patents expires. The license fees have been deferred and are being recognized in income over the period from 2003
through expiration of the patents in 2016.
In March 2007, the Company amended the agreement increasing the royalty rate and device pricing, included a
next generation device and provided for payment principally in U.S. dollars rather than Euros.
BioSante License Agreement
In June 2000, the Company entered into an exclusive agreement to license four applications of its drug-delivery
technology to BioSante in the United States, Canada, China, Australia, New Zealand, South Africa, Israel, Mexico,
Malaysia and Indonesia (collectively, “the BioSante Territories”). The Company is required to transfer technology
know-how to BioSante until each country’s regulatory authorities approve the licensed product. BioSante will use
71
the licensed technology for the development of hormone replacement therapy products. At the signing of the
contract, BioSante made an upfront payment to the Company, a portion of which, per the terms of the contract, was
used to partially offset a later payment made to the Company as a result of an upfront payment received by BioSante
under a sublicense agreement. The initial upfront payment received by the Company was for the delivery of
intellectual property to BioSante.
The Company will receive payments upon the achievement of certain milestones and will receive from
BioSante a royalty from the sale of licensed products. The Company will also receive a portion of any sublicense
fees received by BioSante.
Under the cumulative deferral method, the Company ratably recognizes revenue related to milestone payments
from the date of achievement of the milestone through the estimated date of receipt of final regulatory approval in
the BioSante Territory. The Company is recognizing the initial milestone payment in revenue over a 129-month
period. All other milestone payments will be recognized ratably on a product-by-product basis from the date the
milestone payment is earned and all repayment obligations have been satisfied until the receipt of final regulatory
approval in the BioSante Territory for each respective product. It is expected that these milestones will be earned at
various dates from January 2010 to December 2011 and will be recognized as revenue over periods of up to 24
months.
In November 2006, BioSante entered into a sublicense and marketing agreement with Bradley Pharmaceuticals,
Inc. for Elestrin® (formerly Bio-E-Gel). BioSante received an upfront payment from Bradley which triggered a
payment to the Company of $875,000. In December 2006 the FDA approved for marketing Elestrin® in the United
States triggering payments to the Company totaling $2,625,000, which was received in 2007. In 2008, BioSante
reacquired the rights to Elestrin® and entered into new marketing agreements in December, triggering payments to
the Company of $462,500. Because final regulatory approval for this product was obtained by BioSante and
Antares had no further obligations in connection with this product, the sublicense payments of $462,500, $2,625,000
and $875,000 received in 2008, 2007 and 2006, respectively, were recognized as revenue in those years. In
addition, the Company has received royalties on sales of Elestrin®, which have been recognized as revenue when
received.
In August 2001, BioSante entered into an exclusive agreement with Solvay Pharmaceuticals (“Solvay”) in
which Solvay has sublicensed from BioSante the U.S. and Canadian rights to an estrogen/progestogen combination
transdermal hormone replacement gel product, one of the four drug-delivery products the Company has licensed to
BioSante. Under the terms of the license agreement between the Company and BioSante, the Company received a
portion of the up front payment made by Solvay to BioSante, net of the portion of the initial up front payment the
Company received from BioSante intended to offset sublicense up front payments. The Company is also entitled to a
portion of any milestone payments or royalties BioSante receives from Solvay under the sublicense agreement. The
Company is recognizing the payment received from BioSante in revenue over an 108-month period. The Company
received a milestone payment in 2003 and is recognizing revenue over a period of 91 months. All other milestone
payments will be recognized ratably from the date the milestone payment is earned until the receipt of final
regulatory approval in the U.S. and Canada.
Jazz License Agreement
In July 2007, we entered into a worldwide product development and license agreement with Jazz
Pharmaceuticals (“Jazz”) for a product being developed to treat a CNS disorder that will utilize our transdermal gel
delivery technology. Under the agreement, an upfront payment, development milestones, and royalties on product
sales are to be received by us under certain circumstances. The upfront payment is being recognized as revenue
over the development period. The milestone fees and royalties will be recognized as revenue when earned.
Solvay License Agreement
In June 1999, the Company entered into an exclusive agreement to license one application of its gel based drug-
delivery technology to Solvay in all countries except the United States, Canada, Japan and Korea (collectively, ‘‘the
Solvay Territories’’). The Company is required to transfer technology know-how and to provide developmental
assistance to Solvay until each country’s applicable regulatory authorities approve the licensed product. Solvay will
72
reimburse the Company for all technical assistance provided during Solvay’s development. Solvay will use the
licensed technology for the development of a hormone replacement therapy gel. The license agreement required
Solvay to pay the Company a milestone payment upon signing of the license, milestones upon the start of Phase
IIb/III clinical trials, additional milestones upon the first submission by Solvay to regulatory authorities in the
Solvay Territories and upon the first completed registration in Germany, France or the United Kingdom. The
Company will receive from Solvay a royalty from the sale of licensed products. In 2002, the agreement was
amended to change the terms associated with certain milestone payments. Development work performed by Solvay
has been limited due to concerns about certain forms of hormone replacement therapy that have been debated in
scientific literature.
Under the cumulative deferral method, the Company ratably recognizes revenue related to milestone payments
from the date of achievement of the milestone through the estimated date of completion.
Other License Agreements
In September 2007, we entered into a worldwide product development and license agreement with an
undisclosed company for a product in the field of opioid analgesia that utilized our oral disintegrating tablet delivery
technology. Under the agreement, an upfront payment, development milestones, and royalties on product sales were
to be received by us under certain circumstances. The upfront payment was being recognized as revenue over the
development period. In 2009, we recognized revenue of approximately $338,000 representing the unrecognized
portion of previously deferred payments received in connection with this agreement after the customer terminated
the agreement due to technical challenges with their drug molecule.
12. Revenue Recognition Change
As discussed in Note 2, the Company elected early adoption of ASU 2009-13. The Company elected to adopt
ASU 2009-13 on a prospective basis, with retrospective application to January 1, 2009.
During the third quarter of 2009, the Company amended the License, Development and Supply Agreement with
Teva originally entered into in July of 2006. Under the terms of the amendment, the Company received a payment
of $4,076,375 from Teva for tooling in process that had a carrying value of approximately $1,200,000 and for an
advance for the design, development and purchase of additional tooling and automation equipment, all of which is
related to an undisclosed, fixed, single-dose, disposable injector product using the Company’s Vibex™ auto injector
platform. The changes to the agreement related to this payment along with various other changes to the original
terms resulted in a material modification to the agreement. Because the agreement was materially modified, the
accounting was re-evaluated under ASU 2009-13, and the provisions of ASU 2009-13 were applied as if they were
applicable from inception of the agreement. The re-evaluation resulted in the agreement being separated into three
units of accounting and resulted in changes to both the method of revenue recognition and the period over which
revenue will be recognized. Under the new accounting, the original license fee and milestone payments received
will be recognized as revenue over the development period, the $4,076,375 payment received will be recognized as
revenue as various tools and equipment are completed and delivered, and revenue during the manufacturing period
will be recognized as devices are sold and royalties are earned. The accounting literature applicable at the time of
the original agreement required the entire arrangement to be considered a single unit of accounting. Therefore, the
payments received and the development costs incurred were being deferred and would have been recognized from
the start of manufacturing through the end of the initial contract period. The amendment and adoption of ASU
2009-13 resulted in the recognition of revenue previously deferred of $434,111 and the recognition of costs
previously deferred of $536,732 recorded on a cumulative catch-up basis in the third quarter of 2009. For the year
ended December 31, 2009, the adoption of ASU 2009-13 resulted in the recognition of revenue previously deferred
of $481,833 and the recognition of costs previously deferred of $615,256. Also, tooling in process of approximately
$1,200,000 sold to Teva was reclassified from equipment, molds, furniture and fixtures to deferred costs and will be
recognized as cost of sales upon revenue recognition. Adoption of ASU 2009-13 had no impact on the accounting
for any of the Company’s other revenue arrangements containing multiple deliverables.
The tables below show amounts for the four quarterly and the full year periods of 2009 under the following
three scenarios: (i) as reported with adoption of ASU 2009-13 in the third quarter of 2009, (ii) as if ASU 2009-13
had been adopted on January 1, 2009, (iii) as if ASU 2009-13 had not been adopted in 2009.
73
Amounts as reported with adoption of ASU 2009-13 in the third quarter of 2009:
Three Months Ended
March 31,
2009
June 30,
2009
September 30,
2009
$
680,170
425,707
2,026,403
$
299,674 $
82,379
1,661,844
382,788 $
658,276
2,041,172
December 31,
Year Ended
December 31,
2009
1,243,884 $
428,858
2,581,643
2009
2,606,516
1,595,220
8,311,062
267,739
711,855
1,314,548
(2,539,742 )
(2,736,707 )
96,711
620,642
1,041,202
(2,061,921 )
(2,253,611 )
701,960
1,212,194
828,978
(2,612,294 )
(2,893,834 )
1,260,039
1,595,143
986,500
(2,479,687 )
(2,406,600 )
2,326,449
4,139,834
4,171,228
(9,693,644 )
(10,290,752 )
Development revenue
Licensing revenue
Total revenue
Cost of development
and licensing revenue
Total cost of revenue
Gross profit
Operating loss
Net loss
Basic and diluted net
loss per common share $
(0.04 ) $
(0.03 ) $
(0.04 ) $
(0.03 ) $
(0.14 )
Amounts as if ASU 2009-13 had been adopted on January 1, 2009:
Three Months Ended
March 31,
2009
June 30,
2009
September 30,
2009
$
746,837
697,707
2,365,070
$
321,896 $
107,879
1,709,566
293,899 $
360,776
1,654,783
December 31,
Year Ended
December 31,
2009
1,243,884 $
428,858
2,581,643
2009
2,606,516
1,595,220
8,311,062
645,054
1,089,170
1,275,900
(2,578,390 )
(2,775,355 )
175,235
699,166
1,010,400
(2,092,723 )
(2,284,413 )
246,121
756,355
898,428
(2,542,844 )
(2,824,384 )
1,260,039
1,595,143
986,500
(2,479,687 )
(2,406,600 )
2,326,449
4,139,834
4,171,228
(9,693,644 )
(10,290,752 )
Development revenue
Licensing revenue
Total revenue
Cost of development
and licensing revenue
Total cost of revenue
Gross profit
Operating loss
Net loss
Basic and diluted net
loss per common share $
(0.04 ) $
(0.03 ) $
(0.04 ) $
(0.03 ) $
(0.14 )
Amounts as if ASU 2009-13 had not been adopted in 2009:
Three Months Ended
March 31,
2009
June 30,
2009
September 30,
2009
$
680,170
425,707
2,026,403
$
299,674 $
82,379
1,661,844
271,677 $
335,276
1,607,061
December 31,
Year Ended
December 31,
2009
1,221,662 $
403,358
2,533,921
2009
2,473,183
1,246,720
7,829,229
267,739
711,855
1,314,548
(2,539,742 )
(2,736,707 )
96,711
620,642
1,041,202
(2,061,921 )
(2,253,611 )
165,228
675,462
931,599
(2,509,673 )
(2,791,213 )
1,181,515
1,516,619
1,017,302
(2,448,885 )
(2,375,798 )
1,711,193
3,524,578
4,304,651
(9,560,221 )
(10,157,329 )
Development revenue
Licensing revenue
Total revenue
Cost of development
and licensing revenue
Total cost of revenue
Gross profit
Operating loss
Net loss
Basic and diluted net
loss per common share $
(0.04 ) $
(0.03 ) $
(0.04 ) $
(0.03 ) $
(0.14 )
74
13. Segment Information and Significant Customers
The Company has one operating segment, drug delivery, which includes the development of drug delivery
transdermal products and drug delivery injection devices and supplies.
The geographic distributions of the Company’s identifiable assets and revenues are summarized in the
following tables:
The Company has total assets located in two countries as follows:
December 31,
2009
2008
Switzerland
United States of America 17,384,011
$ 1,759,362 $ 1,154,987
18,756,418
$19,143,373 $19,911,405
Revenues by customer location are summarized as follows:
United States of America
Europe
Other
2009
For the Years Ended December 31,
2008
$ 4,427,822 $1,451,092 $3,576,310
3,915,031
365,655
$ 8,311,062 $5,660,711 $7,856,996
3,668,941
214,299
3,899,115
310,504
2007
The following summarizes significant customers comprising 10% or more of total revenue for the years ended
December 31:
Ferring
Teva
BioSante
2009
2008
$ 3,247,758 $3,383,071 $3,080,545
181,091
2,836,016
3,134,830
206,820
90,905
668,853
2007
The following summarizes significant customers comprising 10% or more of outstanding accounts receivable as
of December 31:
Ferring
Teva
2009
2008
$ 1,325,436 $ 360,035
918,948
121,810
75
14. Quarterly Financial Data (unaudited)
First
Second
Third (3)
Fourth
2009:
Total revenues (1)
Gross profit (1)
Net loss applicable to common shares (1)
Net loss per common share (1) (2)
Weighted average shares
2008:
Total revenues
Gross profit
Net loss applicable to common shares
Net loss per common share (2)
Weighted average shares
$ 2,365,070 $ 1,709,566 $ 1,654,783 $ 2,581,643
986,500
(2,406,600)
(0.03)
81,755,905
1,275,900
(2,775,355)
(0.04)
68,049,666
898,428
(2,824,384 )
(0.04 )
75,870,525
1,010,400
(2,284,413)
(0.03)
68,101,137
$ 1,114,378 $ 1,390,115 $ 1,388,582 $ 1,767,636
1,330,786
(2,743,151)
(0.04)
67,986,514
662,330
(3,497,698)
(0.05)
65,628,567
792,604
(3,188,834 )
(0.05 )
67,979,666
855,406
(3,260,770)
(0.05)
67,320,325
(1) The 2009 quarterly data is shown with retrospective application of ASU 2009-13, “Revenue Arrangements with
Multiple Deliverables,” to January 1, 2009, as described in note 12 to the consolidated financial statements.
(2) Net loss per common share is computed based upon the weighted average number of shares outstanding during
each period. Basic and diluted loss per share amounts are identical as the effect of potential common shares is
anti-dilutive.
(3) The third quarter 2009 financial results have been revised for an immaterial correction of an error. The
Company adopted ASU 2009-13 in the third quarter and recorded the impact of adoption in the financial results
for the three-months ended September 30, 2009. This accounting standard should have been applied
retrospectively to the beginning of the year and the impact of adoption included in the first quarter financial
results. The result of this correction is a decrease to total revenues in the third quarter of $386,389, an increase
to gross profit of $69,450, and a decrease to net loss applicable to common shares of $69,450. This correction
did not affect year-to-date total revenues, gross profit and net loss applicable to common shares, and did not
affect quarter and year-to-date net loss per common share and weighted average shares.
76
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this annual report. Based on such evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of the end of
the period covered by this annual report have been designed and are functioning effectively to provide reasonable
assurance that the information required to be disclosed by the Company in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and is accumulated and communicated to management, including the Company’s
principal executive and principal financial officers, or person performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
Internal Control Over Financial Reporting.
There have not been any changes in the Company’s internal control over financial reporting during the fiscal
quarter to which this annual report relates that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
the Company have been detected. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
Management’s report on internal control over financial reporting is included in Item 8, Financial Statements
and Supplementary Data, of this annual report on Form 10-K.
Item 9B. OTHER INFORMATION.
None.
77
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information required by this item concerning our directors will be set forth under the caption “Election of
Directors” in our definitive proxy statement for our 2010 annual meeting, and is incorporated herein by reference.
Information required by this item concerning our executive officers will be set forth under the caption
“Executive Officers of the Company” in our definitive proxy statement for our 2010 annual meeting, and is
incorporated herein by reference.
Information required by this item concerning compliance with Section 16(a) of the Exchange Act, as amended,
will be set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive
proxy statement for our 2010 annual meeting, and is incorporated herein by reference.
Information required by this item concerning the audit committee of the Company, the audit committee
financial expert of the Company and any material changes to the way in which security holders may recommend
nominees to the Company’s Board of Directors will be set forth under the caption “Corporate Governance” in our
definitive proxy statement for our 2010 annual meeting, and is incorporated herein by reference.
The Board of Directors adopted a Code of Business Conduct and Ethics, which is posted on our website at
www.antarespharma.com that is applicable to all employees and directors. We will provide copies of our Code of
Business Conduct and Ethics without charge upon request. To obtain a copy, please visit our website or send your
written request to Antares Pharma, Inc., 250 Phillips Boulevard, Suite 290, Ewing, NJ 08618, Attn: Corporate
Secretary. With respect to any amendments or waivers of this Code of Business Conduct and Ethics (to the
extent applicable to the Company’s chief executive officer, principal accounting officer or controller, or persons
performing similar functions) the Company intends to either post such amendments or waivers on its website or
disclose such amendments or waivers pursuant to a Current Report on Form 8-K.
Item 11. EXECUTIVE COMPENSATION.
Information required by this item will be set forth under the caption “Executive Compensation” in our definitive
proxy statement for our 2010 annual meeting, and is incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Information required by this item concerning ownership will be set forth under the caption “Security
Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2010 annual
meeting, and is incorporated herein by reference.
The following table provides information for our equity compensation plans as of December 31, 2009:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-
average
exercise price of
outstanding
options,
warrants and
rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding shares
reflected in the first
column)
8,339,684 $
1.19
1,069,694
Plan Category
Equity compensation plans approved
by security holders
78
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required by this item will be set forth under the captions “Certain Relationships and Related
Transactions” and “Corporate Governance” in our definitive proxy statement for our 2010 annual meeting, and is
incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Information required by this item will be set forth under the caption “Ratification of Selection of Independent
Registered Public Accountants” in our definitive proxy statement for our 2010 annual meeting, and is incorporated
herein by reference.
79
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this annual report:
(1) Financial Statements - see Part II
(2) Financial Statement Schedules
All schedules have been omitted because they are not applicable, are immaterial or are not required because
the information is included in the consolidated financial statements or the notes thereto.
(3) Item 601 Exhibits - see list of Exhibits below
(b) Exhibits
The following is a list of exhibits filed as part of this annual report on Form 10-K.
Exhibit
No.
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Description
Certificate of Incorporation (Filed as an exhibit to Schedule 14A on March 18, 2005 and
incorporated herein by reference.)
Certificate of Amendment of Certificate of Incorporation (filed as exhibit 3.1 to Form 8-K on
May 19, 2008 and incorporated herein by reference.)
Bylaws (Filed as an exhibit to Schedule 14A on March 18, 2005 and incorporated herein by
reference.)
Amended and Restated Bylaws of Antares Pharma, Inc. adopted as of May 11, 2007 (Filed as
exhibit 3.1 to Form 8-K on May 15, 2007 and incorporated herein by reference.)
Form of Certificate for Common Stock (Filed as an exhibit to Form S-1/A on August 15,
1996 and incorporated herein by reference.)
Registration Rights Agreement with Permatec Holding AG dated January 31, 2001 (Filed as
Exhibit 10.2 to Form 10-K for the year ended December 31, 2000 and incorporated herein by
reference.)
Warrant Agreement with Eli Lilly and Company dated September 12, 2003 (Filed as exhibit
10.60 to Form 8-K on September 18, 2003 and incorporated herein by reference.)
Registration Rights Agreement with Eli Lilly and Company dated September 12, 2003 (Filed
as exhibit 10.61 to Form 8-K on September 18, 2003 and incorporated herein by reference.)
Stock Purchase Agreement with Sicor Pharmaceuticals, Inc., dated November 23, 2005 (Filed
as exhibit 10.55 to Form 10-K for the year ended December 31, 2005 and incorporated herein
by reference.)
Form of Common Stock and Warrant Purchase Agreement, dated February 27, 2006 (Filed as
exhibit 10.57 to Form 10-K for the year ended December 31, 2005 and incorporated herein by
reference.)
Form of Investors Rights Agreement, dated March 2, 2006 (Filed as exhibit 10.58 to Form
10-K for the year ended December 31, 2005 and incorporated herein by reference.)
Form of Common Stock Purchase Warrant, dated March 2, 2006 (Filed as exhibit 10.59 to
Form 10-K for the year ended December 31, 2005 and incorporated herein by reference.)
Form of Common Stock Purchase Warrant and Related Schedule of Holders and Other Terms
(Filed as exhibit 4.7 to Form S-3/A Registration Statement on May 16, 2006 and incorporated
herein by reference.)
Registration Rights Agreement by and among Antares Pharma, Inc., MMV Financial Inc. and
HSBC Capital (Canada) Inc., dated February 26, 2007 (Filed as exhibit 4.1 to Form 8-K on
March 2, 2007 and incorporated herein by reference.)
80
4.11
Warrant for the Purchase of Shares of Common Stock issued by Antares Pharma, Inc. to
MMV Financial Inc., dated February 26, 2007 (Filed as exhibit 4.2 to Form 8-K on March 2,
2007 and incorporated herein by reference.)
4.12
Warrant for the Purchase of Shares of Common Stock issued by Antares Pharma, Inc. to
HSBC Capital (Canada) Inc., dated February 26, 2007 (Filed as exhibit 4.3 to Form 8-K on
March 2, 2007 and incorporated herein by reference.)
4.13
Common Stock and Warrant Purchase Agreement, dated June 29, 2007, by and between
Antares Pharma, Inc. and the Purchasers party thereto (Filed as exhibit 4.1 to Form 8-K on
July 2, 2007 and incorporated herein by reference.)
4.14
Form of Investor Rights Agreement (Filed as exhibit 4.2 to Form 8-K on July 2, 2007 and
incorporated herein by reference.)
4.15
Form of Warrant (Filed as exhibit 4.3 to Form 8-K on July 2, 2007 and incorporated herein
by reference.)
4.16
Form of Warrant to Purchase Common Stock (Filed as Exhibit 4.1 to Form 8-K on July 24,
2009 and incorporated herein by reference).
4.17
Form of Warrant to Purchase Common Stock (Filed as Exhibit 4.1 to Form 8-K on September
18, 2009 and incorporated herein by reference).
4.18
Form of Subscription Agreement, by and between Antares Pharma, Inc. and the investor party
thereto (Filed as Exhibit 10.2 to Form 8-K filed on July 24, 2009 and incorporated herein by
reference).
4.19
Form of Subscription Agreement, by and between Antares Pharma, Inc. and the investor party
thereto (Filed as Exhibit 10.1 to Form 8-K filed on September 18, 2009 and incorporated
herein by reference).
10.0
Stock Purchase Agreement with Permatec Holding AG, Permatec Pharma AG, Permatec
Technologie AG and Permatec NV with First and Second Amendments
dated July 14, 2000 (Filed as an exhibit to Schedule 14A on December 28, 2000 and
incorporated herein by reference.)
10.1
Third Amendment to Stock Purchase Agreement, dated January 31, 2001 (Filed as exhibit
10.1 to Form 10-K for the year ended December 31, 2000 and incorporated herein by
reference.)
10.2*
Agreement with Becton Dickinson dated January 1, 1999 (Filed as exhibit 10.24 to Form 10-
K for the year ended December 31, 1998 and incorporated herein by reference.)
10.3*
License Agreement with Solvay Pharmaceuticals BV, dated June 9, 1999 (Filed as exhibit
10.33 to Form 10-K/A for the year ended December 31, 2001 and incorporated herein by
reference.)
10.4*
License Agreement with BioSante Pharmaceuticals, Inc., dated June 13, 2000 (Filed as
exhibit 10.34 to Form 10-K/A for the year ended December 31, 2001 and incorporated herein
by reference.)
10.5*
Amendment No. 1 to License Agreement with BioSante Pharmaceuticals, Inc., dated May 20,
10.6*
10.7*
10.8*
2001 (Filed as exhibit 10.35 to Form 10-K/A for the year ended December 31, 2001 and
incorporated herein by reference.)
Amendment No. 2 to License Agreement with BioSante Pharmaceuticals, Inc., dated July 5,
2001 (Filed as exhibit 10.36 to Form 10-K/A for the year ended December 31, 2001 and
incorporated herein by reference.)
Amendment No. 3 to License Agreement with BioSante Pharmaceuticals, Inc., dated August
28, 2001 (Filed as exhibit 10.37 to Form 10-K/A for the year ended December 31, 2001 and
incorporated herein by reference.)
Amendment No. 4 to License Agreement with BioSante Pharmaceuticals, Inc., dated August
8, 2002 (Filed as exhibit 10.38 to Form 10-K/A for the year ended December 31, 2001 and
incorporated herein by reference.)
10.9*
10.10
License Agreement between Antares Pharma, Inc. and Ferring, dated January 21, 2003 (Filed
as exhibit 10.47 to Form 8-K on February 20, 2003 and incorporated herein by reference.)
Securities and Exchange Agreement, dated September 12, 2003 (Filed as exhibit 10.57 to
Form 8-K on September 15, 2003 and incorporated herein by reference.)
81
10.11*
Development and License Agreement, dated September 12, 2003, with Eli Lilly and
Company (Filed as exhibit 10.59 to Form 8-K on September 18, 2003 and incorporated herein
by reference.)
10.12
Second Amendment to the Development and License Agreement with Eli Lily and Company
dated March 20, 2008 (Filed as Exhibit 10.1 to Form 10-Q for the Quarter Ended March 31,
2008 and incorporated herein by reference.)
10.13
Office lease with The Trustees Under the Will and of the Estate of James Campbell,
Deceased, dated February 19, 2004 (Filed as exhibit 10.65 to Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.)
10.14
Form of Indemnification Agreement, dated February 11, 2008, between Antares Pharma, Inc.
and each of its directors and executive officers (Filed as exhibit 10.1 to Form 8-K on
February 13, 2008 and incorporated herein by reference.)
10.15* Development Supply Agreement, dated June 22, 2005 (Filed as exhibit 10.69 to Form 10-Q
for the quarter ended June 30, 2005 and incorporated herein by reference.)
10.16*
License Development and Supply Agreement with Sicor Pharmaceuticals, Inc., dated
November 23, 2005 (Filed as exhibit 10.54 to Form 10-K for the year ended December 31,
2005 and incorporated herein by reference.)
10.17+
Senior Management Agreement by and between Antares Pharma, Inc. and Robert F. Apple,
dated February 9, 2006 (Filed as exhibit 10.1 to Form 8-K on February 14, 2006 and
incorporated herein by reference.)
10.18+
Amendment to Senior Management Agreement with Robert F. Apple, dated November 12,
2008. (Filed as Exhibit 10.1 to Form 10-Q for the Quarter Ended September 30, 2008 and
incorporated herein by reference.)
10.19+
Employment agreement with Peter Sadowski, Ph.D., dated October 13, 2006 (Filed as exhibit
10.20+
10.1 to Form 8-K on October 16, 2006 and incorporated herein by reference.)
Amendment to Employment Agreement with Peter Sadowski, Ph. D., dated November 12,
2008 (Filed as Exhibit 10.2 to Form 10-Q for the Quarter Ended September 30, 2008 and
incorporated herein by reference.)
10.21+
Employment agreement with Dario Carrara, dated October 13, 2006 (Filed as exhibit 10.2 to
10.22
10.23+
10.24
Form 8-K on October 16, 2006 and incorporated herein by reference.)
Amendment to Employment Agreement with Dario Carrara, dated November 12,2008 (Filed
as Exhibit 10.3 to Form 10-Q for the Quarter Ended September 30, 2008 and incorporated
herein by reference.)
Employment Agreement, dated July 7, 2008 by and between Antares Pharma, Inc. and Dr.
Paul K. Wotton (Filed as Exhibit 10.1 to Form 8-K on July 7, 2008 and incorporated herein
by reference.)
Lease Agreement, dated as of May 15, 2006, between the Company and 250 Phillips
Associates LLC (Filed as exhibit 10.2 to From 10-Q for the quarter ended June 30, 2006 and
incorporated herein by reference.)
10.25
Antares Pharma, Inc. 2008 Equity Compensation Plan (Filed as exhibit 10.1 to Form 8-K on
21.1
23.1
31.1
31.2
32.1
32.2
*
+
May 19, 2008 and incorporated herein by reference.)
Subsidiaries of the Registrant
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Section 302 CEO Certification
Section 302 CFO Certification
Section 906 CEO Certification
Section 906 CFO Certification
Confidential portions of this document have been redacted and have been separately filed
with the Securities and Exchange Commission.
Indicates management contract or compensatory plan or arrangement.
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of
Ewing, State of New Jersey, on March 23, 2010.
ANTARES PHARMA, INC.
/s/Paul K. Wotton
Dr. Paul K. Wotton
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this annual report has
been signed by the following persons on behalf of the registrant in the capacities indicated on March 23, 2010.
Signature
Title
/s/Paul K. Wotton
Dr. Paul K. Wotton
/s/Robert F. Apple
Robert F. Apple
/s/Leonard S. Jacob
Dr. Leonard S. Jacob
/s/Thomas J. Garrity
Thomas J. Garrity
/s/Jacques Gonella
Dr. Jacques Gonella
/s/Anton G. Gueth
Anton G. Gueth
/s/Rajesh Shrotriya
Dr. Rajesh Shrotriya
/s/Eamonn P. Hobbs
Eamonn P. Hobbs
President and Chief Executive Officer, Director
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Director, Chairman of the Board
Director
Director
Director
Director
Director
83