UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER

For the fiscal year ended December 31, 2017

2021

☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from ______ to

______

Commission file number1-32302

001-32302

atrs-20211231_g1.jpg
ANTARES PHARMA, INC.

(Exact name of registrant as specified in its charter)

A Delaware corporation

I.R.S. Employer Identification No. 41-1350192

100 Princeton South, Suite 300, Ewing, NJ  08628

(State or other jurisdiction of incorporation)
41-1350192
(I.R.S. Employer Identification No.)

100 Princeton South, Suite 300, Ewing, NJ
(Address of principal executive offices)
08628
(Zip Code)
Registrant’s telephone number, including area code: (609) 359-3020

Securities registered pursuant to sectionSection 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock,

par value $0.01 per share

NASDAQ Capital Market

ATRS

NASDAQ

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 ☒

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 ☒

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 ☒ NO ☐

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ☒ 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. ☐

Yes x   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

¨

Accelerated filer

x

☒

Non-accelerated filer		¨

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

¨

☐

Emerging growth company

¨

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

¨

Indicate by check mark ifwhether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒  No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES Yes ☐ NO ☒

Aggregate  No x

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2017,2021, was $459,300,000 (based upon$739.4 million based on the last reported saleclosing price of $3.22$4.36 per share on June 30, 2017, on2021 as reported by the NASDAQ Capital Market).

ThereMarket.

As of February 28, 2022, there were 156,788,986170,106,346 shares of common stock outstanding as of March 1, 2018.

outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the registrant’s 2018 annual meeting of stockholdersProxy Statement to be filed within 120 days after the end of the period covered by this annual  report on Form 10-Kfor the registrant’s 2022 Annual Meeting of Stockholders are incorporated by reference into Part III of this annual reportAnnual Report on Form 10-K.



ANTARES PHARMA, INC.

FORM

Annual Report on Form 10-K

For the Year Ended December 31, 2021

TABLE OF CONTENTS

3
PART I

4

6

33

39

58

53

58

53

59

54

59

54

PART II

60

55

Selected Financial Data56

62

63

56

72

65

73

66

98

99

98

99

98

99

PART III

99

100

99

100

99

100

99

101

99

101

PART IV

100

102

104

103

105



Table of Contents
Note Regarding Forward-Looking Statements

This annual 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. YouUndue reliance should not place undue reliancebe placed 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. YouThese statements can identify these statementsbe identified 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“may,” “continue,” or 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, our commercial operations and product development. In particular, these forward-looking statements include, among others, statements about:

•

our expectations regarding sales of OTREXUP® (methotrexate) injection;

•our expectations about the ongoing COVID-19 pandemic (the “Pandemic”) and any potential disruption or impact to our operations, financial position or cash flows;

•our expectations regarding the continued commercialization of XYOSTED® (testosterone enanthate) injection and the continued growth in prescriptions and revenues related thereto;

•our expectations regarding the commercialization of NOCDURNA® (desmopressin acetate) in the U.S. under a licensing agreement with Ferring International Center S.A. and its affiliates, (“Ferring”) and future sales and revenue from the same;
•our expectations regarding future FDA approval of TLANDO® in the U.S. under a licensing agreement with Lipocine Inc. (“Lipocine”), the manufacturing and commercialization of TLANDO® and future sales and revenue from the same;
•our expectations regarding whether we will exercise the option for LPCN 1111 (“TLANDO XR”) and, if exercised, the future timing and success of the clinical development program for TLANDO XR and future FDA approval, market acceptance and revenue from the same;
•our expectations regarding future sales of OTREXUP® (methotrexate) injection to Otter Pharmaceuticals, LLC (a wholly-owned subsidiary of Assertio Holdings, Inc., together with Assertio Holdings, Inc., as guarantor, individually and collectively referred to as “Otter”) under a newly entered into supply agreement, as well as the ability of Otter to pay remaining installment payments of the purchase price;
•our expectations regarding the ability of our partner, Teva Pharmaceutical Industries, Ltd. (“Teva”), to successfullycontinue to commercialize Epinephrine Injection USP, the generic equivalent version of EpiPen® (“generic epinephrine injection”), and any future revenue related thereto;
•our expectations regarding the ability of the Covis Group S.a.r.l. (“CG”), who acquired AMAG Pharmaceuticals, Inc. (“AMAG”) (collectively CG and AMAG are herein after referred to as “Covis”) in November 2020, to continue to commercialize Makena® (hydroxyprogesterone caproate injection) and our continued future sales to Covis and royalty revenue from the same, in light of the U.S. Food and Drug Administration’s (“FDA”) proposal to withdraw approval of Makena® (hydroxyprogesterone caproate injection) and the timing and outcome of any hearings and future regulatory actions by the FDA;
•our expectations regarding continued sales of Sumatriptan Injection USP to our partner, Teva, and Teva’s ability to distribute and sell Sumatriptan Injection USP;

•

our expectations regarding the continued development of XYOSTEDTM (testosterone enanthate) injection for testosterone replacement therapy and our ability to adequately and timely respond to and resolve the deficiencies raised in the Complete Response Letter received from the United States Food and Drug Administration (“FDA”) for XYOSTEDTM, whether any such response will be accepted by the FDA, and whether FDA approval will be received for XYOSTEDTM;

•

our expectations regarding the ability of our partner, AMAG Pharmaceuticals, Inc. (“AMAG”), to successfully launch and commercialize the Makena® auto injector product;

•

our expectations regarding continued product development with Teva, and the potential FDA approval and AB-rating, of the VIBEX® Epinephrine Pen (“epinephrine auto injector”);

•our expectations regarding continued product development with Teva of the teriparatide disposable pen injector, and exenatide disposable pen injector, and Teva’s ability to obtain FDA approval and AB-rating for each of those products;

the products and if approved Teva’s ability to successfully commercialize the teriparatide disposable pen injector product outside the U.S.;

•our expectations about the development of a rescue pen for an undisclosed drug with our partner Pfizer Inc. (“Pfizer”) and potential future regulatory approval and future revenue from the same;

•our expectations about our development activities with Idorsia Pharmaceuticals Ltd (“Idorsia”) and the timing and successful completionresults of the salePhase 3 clinical trial of our worldwide rights, including certain assets,the drug device combination product for selatogrel, a new chemical entity being developed for the ZOMAJET™ needle-free auto injector device product linetreatment of a suspected acute myocardial infarction (“AMI”) in adult patients with a history of AMI, and the potential future FDA and global regulatory approval of the same;
•our expectations about the development of ATRS-1902 for adrenal crisis rescue, including the timing and results of clinical trials and our anticipated 505(b)(2) NDA filing with the FDA;
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•our expectations about our other internal and external research and development projects, including but not limited to Ferring International Center S.A. (together with Ferring Pharmaceuticals Inc.ATRS-1901 and Ferring B.V. individuallyATRS-1903, the timing and collectively referred to as “Ferring”);

results of clinical trials, and our anticipated continued reliance on third parties in conducting studies, trials and other research and development activities;

•our expectations about the timing and outcome of pending or potential claims and litigation, including without limitation, the pending securities class action and derivative actions;

our expectations regarding trends in pharmaceutical drug delivery characteristics;

•our anticipated continued reliance on contract manufacturers to manufacture, assemble and package our products;

•our anticipated continued reliance on third parties to provide certain services for our products including logistics, warehousing, distribution, invoicing, contract administration and chargeback processing;

•our sales and marketing plans;

•our product development and commercialization plans regarding our other products and product candidates;

timing and results of our research and development projects, including clinical trials, and our anticipated continued reliance on third parties in conducting studies, trials and other research and development activities;

expectation about our future revenues, our cash flows and our ability to support our operations;

operations and maintain profitability;

•our estimates and expectations regarding the sufficiency of our cash resources, anticipated capital requirements and our need for and ability to obtain additional financing,;

if needed;

our expectations and estimates with regard to current accounting practices and •the potential impact of new accounting pronouncements and tax legislation; 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 ofconsidering 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. Forward-looking statements involve known and unknown risks, uncertainties and assumptions, 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 annual 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:

changes •potential business interruptions and/or delays inany financial or operational impact as a result of the regulatory review and approval process;

Pandemic;

our inability to adequately or timely respond to or address deficiencies identified in a CRL from the FDA;

•delays in product introduction or unsuccessful marketing and commercialization efforts by us or our partners;

•interruptions in supply;

supply or an inability to adequately manage third party contract manufacturers to meet customer supply requirements;

•our inability to obtain or maintain adequate third-party payer coverage of marketed products;

•the timing and results of our or our partners’ research projects or clinical trials of product candidates in development;

•actions by the FDA or other regulatory agencies with respect to our products or product candidates of our partners;

•our inability to generate or sustain continued growth in product sales and royalties;
•the lack of market acceptance of our and our partners’ products and future revenues from these products;
•a decrease in business from our major customers and partners;

•our inability to compete successfully against new and existing competitors or to leverage our research and development capabilities or our marketing capabilities;

•our inability to establish and maintain our commercial capabilities, our inability to effectively market our services or obtain and maintain arrangements with our customers, partners and manufacturers;

•our inability to attract and retain key personnel;

•changes or delays in the regulatory review and approval process;

•our inability to effectively protect our intellectual property;

•costs associated with future litigation and the outcome of such litigation;

and

our inability to attract and retain key personnel;

our inability to obtain additional financing, reduce expenses or generate funds when necessary; and

•adverse economic and political conditions.

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The performance of our business and our securities may be adversely affected by these factors and by other factors common to other businesses or to the general economy. Forward-looking statements made by us in this annual report speak only as of the date of this annual report.on which such statements are made. 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.”in Item 1A of Part II of this Annual Report on Form 10-K. New risks and uncertainties come upemerge from time to time, and it is impossible for us to predict these events or how they may affect us. Forward-looking statements are qualified by some or all of these risk factors. Therefore, you should consider these forward-looking statements with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. We do not undertake no obligation to update or revise theany forward-looking statements included in this annual report to reflect events or circumstances after the date of this annual report,on which such statement is made, except as required by law. In light of these risks and significant uncertainties, you should not regard the forward-looking statements in this annual report as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all.

You should carefully review the disclosures and the risk factors described in this Annual Report on Form 10-K and in other documents we file from time to time with the Securities and Exchange Commission (“SEC”), including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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PART I

Item 1.

ITEM 1.    BUSINESS

Company Overview

Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is a specialty pharmaceutical company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  Our strategy is to identify new or existing approved drug formulations and apply our drug delivery technology to enhance the drug delivery methods.technologies that address patient needs in targeted therapeutic areas. We develop, manufacture and commercialize, for ourselves or with partners, novel therapeutic products using our advanced drug delivery systems that are designed to improveprovide commercial or functional advantages such as improved safety and efficacy, reduce side effects,convenience, improved tolerability, and enhanceenhanced patient comfort and adherence. Our subcutaneous injection technology platforms include the VIBEX®We also seek product opportunities that complement and VIBEX® QuickShot® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers as well as disposable multi-dose pen injectors.leverage our commercial platform. We have a portfolio of proprietary and partnered commercial products and severalongoing product candidatesdevelopment programs in advancedvarious stages of development. We have formed significant strategic alliances and partnership arrangements with several different industry leading pharmaceutical companies including Teva and AMAG.  

We market and sell our proprietary productcompanies.

Our FDA-approved products include XYOSTED® (testosterone enanthate) injection; OTREXUP® (methotrexate) injection, which was sold to Otter in December 2021; NOCDURNA® (desmopressin acetate), which is the first FDA-approved subcutaneous methotrexate for once weekly self-administration with an easy-to-use, single dose, disposable auto injector, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritislicensed from Ferring; and adults with severe recalcitrant psoriasis.  

Through our commercialization partner Teva, we sell Sumatriptan Injection USP, indicatedwhich is distributed by Teva. We are also the exclusive supplier of devices to Teva for their Epinephrine Injection USP, the generic equivalent of EpiPen® and EpiPen® Jr.; the devices for Teva’s generic teriparatide; OTREXUP® (methotrexate) injection to Otter beginning in December 2021; and of the U.S.Makena® subcutaneous auto injectors to Covis.

2021 Highlights and Areas of Focus
We achieved several significant operating and financial milestones in 2021:
•Record Revenue and Financial Results – We generated record revenue of $184.0 million for the acute treatment of migraine and cluster headache in adults.  We received FDA approval of our Abbreviated New Drug Application (“ANDA”) for 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilled syringe auto-injectors, a generic equivalentyear ended December 31, 2021 as compared to Imitrex® STATdose Pen®.  Sumatriptan Injection USP is the Company’s first ANDA approval of a complex generic and second product approved using the VIBEX® auto injector platform.

We developed and supply a variation of our VIBEX® QuickShot® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement.  On February 14, 2018, the FDA approved AMAG’s supplemental New Drug Application (“sNDA”)$149.6 million for the Makenayear ended December 31, 2020, representing year-over-year growth of 23.0%. We generated record pre-tax income of $62.3 million resulting in net income and basic earnings per share of $46.3 million and $0.27, respectively, for the year ended December 31, 2021 as compared to net income and basic earnings per share of $56.2 million and $0.34, respectively, for the year ended December 31, 2020. Earnings per share on a fully diluted basis was $0.26 for the year ended December 31, 2021 compared to $0.33 for the year ended December 31, 2020.

•Significant Growth of XYOSTED®subcutaneous auto injector drug-device combination – Our proprietary product which is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past. AMAG is preparing for a launch and expects the MakenaXYOSTED®subcutaneous auto injector to be available in the second half of March 2018. We have commenced manufacturing and supply of devices and commercial product in anticipation of the launch.  

We are developing XYOSTEDTM (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, continued to grow significantly in 2021, generating annual net revenue of $62.2 million for the year ended December 31, 2021 compared to $46.5 million for the year ended December 31, 2020. We attribute this 33.7% increase to successful marketing strategies, achieving and submittedmaintaining targeted reimbursement coverage, and our ability to continue to leverage our virtual capabilities to support the growth in 2021 despite the challenges presented by the Pandemic. XYOSTED® is the only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration of testosterone replacement therapy.

•Expanded Product Portfolio with In-License of TLANDO® – We entered into an exclusive license agreement with Lipocine for the product TLANDO® (testosterone undecanoate) in the U.S., a 505 (b)(2) New Drug Application (“NDA”) totwice-daily oral formulation of testosterone for testosterone replacement therapy indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males. TLANDO® was granted tentative approval from the FDA in December 2016. The NDA submission was accepted2020 and will be eligible for standard review byfinal FDA approval and marketing in the FDA and assigned a Prescription Drug User Fee Act (“PDUFA”U.S. upon expiration of the exclusivity period previously granted to Clarus Therapeutics, Inc. (“Clarus”) target date for completionJATENZO® on March 27, 2022. On February 3, 2022, we announced the FDA’s acceptance of its review by October 20, 2017. On October 20, 2017, we received a Complete Response Letter (“CRL”) from the FDA regarding our NDA resubmission for XYOSTEDTM, which identified two deficienciesTLANDO® with a target action date set for March 28, 2022. We continue to prepare for the launch of TLANDO® in 2022 pending final FDA approval after the expiration of JATENZO®’s exclusivity period.
•Aligned Proprietary Portfolio with Divestiture of OTREXUP® – We divested and indicated that the NDA cannot be approved in its current form. Based on findings insold our clinical program, the FDA stated its concern that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the FDA raised concern regarding the occurrence of depression and suicidality.  On February 21, 2018, we met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTEDTM. We intend to provide further information following the receipt of the official meeting minutes from the FDA, which is typically within 30 days of the meeting date.

We are collaborating with Teva on a VIBEXproprietary product line OTREXUP® auto injector pen containing epinephrine used (methotrexate) injection for the treatment of severe allergic reactions (anaphylaxis).  Teva submitted an amendmentrheumatoid arthritis to the VIBEX® epinephrine pen ANDAOtter in December 2014 and received a CRL from the FDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Teva has disclosed that they submitted a response to this CRL.  We continue to work with Teva toward a potential approval of the epinephrine auto injector pen.

Our other combination product development projects in collaboration with Teva include a multi-dose pen for a generic form of BYETTA® (exenatide injection) for the treatment of diabetes, and another multi-dose pen for a generic form of Forteo® (teriparatide [rDNA origin] injection) for the treatment of osteoporosis. Teva continues to work through the regulatory process with the FDA for exenatide and teriparatide using the ANDA pathway.  Teva and Eli Lilly and Company (“Lilly”) settled their Paragraph IV patent litigation related to Teva’s ANDA for teriparatide, the terms of which have not been disclosed. Teva also successfully completed a decentralized procedure registration process in 17 countries in Europe for teriparatide, and is awaiting patent clearance in the European Union (“EU”) prior to launch.


We also make reusable, needle-free injection devices that administer injectable drugs, which are marketed through Ferring and JCR Pharmaceuticals Co., Ltd. (“JCR”) for use with human growth hormone (hGH). On October 10, 2017, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Ferring (the “Ferring Transaction”) to sell the worldwide rights, including certain assets, related to the needle-free auto injector device product line2021 for a total purchase price of $14.5 million.  

The purchase price is$44.0 million (the “Asset Purchase Agreement”), subject to finalization of changes in closing inventory to be paid in four installments consisting oftransferred. This divestiture allows us to further align our commercial detailing strategy to focus on the following: a $2.0 million upfront payment received upon entry into the Asset Purchase Agreementurology and endocrinology fields to enhance our growth strategy for XYOSTED®, NOCDURNA® and the transferanticipated launch of certain assets; a second installment of $2.75 million received upon delivery of certain documentation and satisfaction of certain conditions primarily related toTLANDO® in 2022. With the needle-free product manufacturing, which occurred in February 2018; a third installment of $4.75 million payable to us upon satisfaction of certain conditions, including further document transfer, the successful completion of a regulatory audit by a notified body, and a pilot manufacturing run under Ferring’s supervision; and a final installment of $5.0 million upon Ferring’s receipt of the CE Mark needed toasset sale, we will continue to commercializemanufacture and supply OTREXUP® to Otter as a partnered product.

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•Significant Progress on Our Adrenal Crisis Rescue Pen (ATRS-1902)– We further advanced our ATRS-1902 development program with positive results from a Phase 1 clinical study for adrenal crisis and were granted Fast Track designation by the needle-free productFDA. The results support the advancement of our ATRS-1902 development program to a pivotal clinical study for the treatment of acute adrenal insufficiency (“adrenal crisis”) in certain territoriesadults and adolescents, using our Vai™ novel proprietary rescue pen platform to deliver a liquid stable formulation of hydrocortisone. We anticipate starting this pivotal clinical study in the final transfersecond quarter of certain product-related inventory, equipment2022 and agreementsexpect to Ferring (the “Completion Date”), which is expected to occursubmit a 505(b)(2) NDA with the FDA by the end of 2018.

2022 pending the success of the pivotal clinical study.

•Continued Navigation of the Global Pandemic– We have taken several measures to manage and minimize the impact of the Pandemic on our business. We have implemented safety measures and protocols to protect the health and safety of our employees and comply with governmental and public health guidelines while ensuring the sustainability of our business operations and continuity of product supply. We continue to monitor the situation, including the COVID-19 variants, and potential effects on our business, suppliers, partners and workforce. We have implemented a hybrid work environment with the ability to shift remote as necessary to limit the number of individuals in our facilities to those necessary for essential functions such as research, development, manufacturing and supply. While our field-based team has resumed in-person interaction with fewer restrictions, we believe we are also well-positioned with our virtual capabilities to continue to engage healthcare professionals and patients through the Pandemic and beyond.
In addition to these significant achievements and areas of focus in 2021, we continued to devote resources and advance our internal research and development programs to further expand our product pipeline. We also made significant progress on partnered development projects, made investments in capital improvements and infrastructure, and maintained a disciplined approach to growth and operating expenditures to support our continued and future growth.
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Product Portfolio Overview
The following table provides an overview of our proprietary and partnered commercial products and product opportunities:
Approved ProductsDrugPartnerDisease/ConditionTerritory
XYOSTED® (testosterone enanthate) injection
TestosteroneNoneTestosterone Replacement Therapy (“TRT”)U.S.
OTREXUP® (methotrexate) injection 1
Methotrexate
None 1
Rheumatoid Arthritis; pJIA, PsoriasisU.S.
NOCDURNA® (desmopressin acetate)
Desmopressin
None 2
Nocturnal PolyuriaU.S.
Epinephrine Injection USP (generic equivalent to EpiPen® and EpiPen® Jr.)
EpinephrineTevaAnaphylaxisU.S.
Sumatriptan Injection USP (generic version of Imitrex® STATdose Pen®)
Sumatriptan succinateTevaMigrainesU.S.
Makena® Subcutaneous Auto Injector
Hydroxy-progesterone caproateCovisReduced Risk of Pre-term BirthU.S.
Teriparatide Injection (generic version of Forsteo®)
TeriparatideTevaOsteoporosisOutside U.S.
Select Products in DevelopmentDrugPartnerIndicationTerritory
TLANDO® (testosterone undecanoate) 3
Testosterone
None 3
Testosterone Replacement Therapy (“TRT”)U.S.
Disposable Pen Injector 4
ExenatideTevaDiabetesU.S.
Disposable Pen InjectorTeriparatideTevaOsteoporosisU.S.
QuickShot® Auto Injector
UndisclosedPfizerUndisclosed Rescue PenU.S.
QuickShot® Auto Injector
SelatogrelIdorsiaAcute Myocardial InfarctionWorldwide
Drug/Device ProductATRS-1901NoneUrologic OncologyU.S.
Drug/Device ProductATRS-1902NoneEndocrinologyU.S.
Drug/Device ProductATRS-1903NoneImmunologyU.S.
1 Certain worldwide assets used in the operation of the OTREXUP® product were sold to Otter in December 2021. We will continue to manufacture and supply needle-free devices untilOTREXUP® to Otter as a partnered product under a separate supply agreement.
2 Distributed and sold by us under an exclusive license agreement with Ferring.
3TLANDO® was granted tentative approval from the Completion DateFDA in December 2020 and will receive paymentbe eligible for devicesfinal FDA approval and marketing in the U.S. upon expiration of the exclusivity period previously granted to Clarus for JATENZO® on March 27, 2022. TLANDO®is expected to be distributed and sold by us under an exclusive license agreement with Lipocine pending final approval from the FDA. We announced the FDA’s acceptance of our application for final approval on February 3, 2022 with a royaltytarget action date set for March 28, 2022.
4 On February 25, 2022, Teva notified us that it was terminating the exenatide program and related agreement due to a lack of commercial viability. The termination is effective August 23, 2022.
For a detailed discussion of our proprietary and partnered approved and marketed products, and other products currently in development, see “Our Products” and “Research and Development” sections below included in Item 1 of Part I of this Annual Report on net product sales in accordance with the existing license and supply agreements.

Form 10-K.

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Corporate Information

Antares is awas incorporated under Delaware corporationlaw in 2005 with principal executive offices located at 100 Princeton South Corporate Center, Suite 300,in Ewing, New Jersey 08628.Jersey. We have two wholly owned subsidiaries in Switzerland (Antares Pharma AG and Antares Pharma IPL AG).  On January 31, 2001, we completed a business combination to acquire the operating subsidiaries of Permatec Holding AG, headquartered in Basel, Switzerland. Upon completion of the transaction, our name was changed from Medi Ject Corporation to Antares Pharma, Inc.

Segment and Geographic Information

We haveoperate under a single reportable operating segment, drug delivery, which includesencompasses all of our self-administered parenteral pharmaceutical products and technologies. SeeSegment and geographic financial information are included in Note 2 and Note 14 to the Consolidated Financial Statements in Item 8 of Part II Item 8 about segment financial information.


Our Product Portfolio

The following table provides an overview and brief description of our products and product opportunities:

Approved Products

Drug

Partner

Indication

Territory

OTREXUP® (methotrexate) injection

Methotrexate

None

Rheumatoid Arthritis; pJIA, Psoriasis

U.S.

Sumatriptan Injection USP (generic equivalent to Imitrex® STATdose Pen®)  

Sumatriptan succinate (4mg and 6mg)

Teva

Migraines

U.S.

Makena® Auto Injector

Hydroxy-progesterone caproate

AMAG

Reduced Risk of Pre-term Birth

Worldwide

ZOMAJET™ Needle-free Injector(1)

hGH (4 mg

and 10 mg)

Ferring

Growth Retardation

Worldwide

Twin-Jector® EZ II Needle-free Injector(1)

hGH

JCR

Growth Retardation

Japan

Products in Development

Drug

Partner

Indication

Territory

XYOSTEDTM (testosterone enanthate) injection

Testosterone

None

Testosterone Replacement Therapy (“TRT”)

U.S.

VIBEX® Auto Injector

Epinephrine

Teva

Anaphylaxis

U.S.

Disposable Pen Injector

Exenatide

Teva

Diabetes

U.S.

Disposable Pen Injector

Teriparatide

Teva

Osteoporosis

U.S.,

Europe(2)

(1)

On October 10, 2017, we entered into an asset purchase agreement with Ferring to sell the worldwide rights, including certain assets, related to the needle-free auto injector device product line. We will continue to manufacture and supply needle-free devices until the Completion Date of the transaction under the existing license and supply agreements.

this Annual Report on Form 10-K.

(2)

Teva completed a decentralized procedure registration process in 17 countries in Europe and is awaiting patent clearance in the EU prior to launch.

Our Strategy and Market Opportunity

Our business strategy is to applygrow the business through targeted investments in internal and partnered product development and other corporate opportunities, as well as leverage our commercial infrastructure, primarily focused in certain therapeutic areas. We have built a robust commercial organization to market and sell our proprietary products and have significant experience in developing drug/device combination products and navigating the regulatory approval process.
Historically, our focus has been primarily the market for self-administered injectable drugs. We identify development and commercialization opportunities, both internally and through partnered or business development opportunities that apply patented drug delivery injection technologytechnologies to new or existing approved drug formulationsformulations. Through these opportunities, we seek to enhance the drug delivery methods.methods and provide commercial and/or functional advantages, such as improved safety and efficacy, reduced side effects, convenience and enhanced patient comfort and adherence. In addition to self-administered injectable drugs, we explore opportunities beyond injectable drugs that may complement our strategy and leverage our capabilities. We pursue these opportunities both on our own or with partners. We believe this strategy offers a distinct value to patients, physicians,healthcare providers, pharmaceutical partners and our shareholders. Our focus is primarily on the market for delivery of self-administered injectable drugs, comprised of non-biologic, small molecule drugs and biological products or biosimilars. Our patented drug delivery technologies, such as the VIBEX® QuickShot®, enable the delivery of highly viscous drug compounds through fine gauge needles.  We believe our technology platforms have potential in both the branded and generic marketplace, and that there are a large number of existing approved drugs that may benefit from an alternate route of delivery such as subcutaneous injection.

Injection is a common drug delivery pathway, and the delivery of pharmaceutical therapies through injection systems often improves the systemic bioavailability of those treatments by overcoming absorption barriers common with oral and, in some cases, transdermal delivery. Improved bioavailability is considered beneficial when consideringevaluating the role of route of administration on pharmaceutical efficacy. We believe that our business modeladvanced injection technology platforms provide drug delivery solutions that can result in improved safety and efficacy, reduced side effects, and enhanced patient comfort and adherence. Many pharmaceutical companies focus on the development of developingimportant chronic care products and emergency rescue therapies that can be administered only by injection. We believe our own pharmaceutical products in targeted therapeutic categories using our pressure-assisted auto injectorsadvanced injection technologies uniquely address these market needs and pen injectors, combined with our strategy to partner with pharmaceutical manufacturers of injectable products outside of our therapeutic focus offers us additional potential to profit from our proprietary injector systems in multiple markets inare well suited for both the future.

branded and generic marketplace.

We and our partners have historically sought, and are in the process of seeking, FDA approval for certain product candidates primarily using the 505(b)(2) NDA (New Drug Application) or ANDA (Abbreviated New Drug Application) approval pathways, as well as more recently the 505(b)(1) NDA pathway with certain partners, which are further described in the “Government RegulationRegulation” section below.below included in Item 1 of Part I of this Annual Report on Form 10-K. Our technology platforms allowsallow for device customization, which can provide multiple opportunities in both the 505(b)(2) NDA and generic market spaces. There are a large number of injectable branded products losing patent protection inspaces, as well as the U.S. in the near term, which will be or have been subject to the ANDA505(b)(1) NDA pathway. By way of example, three of our potential products with our partner Teva (epinephrine auto injector, and teriparatide and exenatide in our pen technology) are being developed as generic versions of the branded products.  Unlike branded products which need to be detailed

According to a physician by a sales force, a generic product with an AB rating may be substitutable at the pharmacy in lieu of the branded product affording a potentially low cost, high market penetration generic product.

Many pharmaceutical companies continue to focus on the development of important chronic care products and therapies that can be administered only by injection. We believe that many of these injectable drugs that are currently under development may eventually be administered by self-injection once they reach the market. Our belief is supported by 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. Additionally, major pharmaceutical companies market directly to consumers and encourage the use of innovative, user-friendly drug delivery systems, offering patients an ability to self-inject products at home. We believe the patient-friendly attributes of our injection technologies meet these market needs.

We believe that many injectable products currently offered in vials could be replaced with user-friendly auto injectors promoting better compliance and improvement in dose accuracy.  Several manufacturers of injectable products have 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 advanced drug delivery systems can result in improved safety and efficacy, reduced side effects, and enhanced patient comfort and adherence.

Cost containment pressure by managed care organizations, 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 chronic care injections and even some acute care injections being administered by a doctor or nurse to self-administration by the patient, 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.  

According to the February 2017Market Research Engine report,Injectable Drug Delivery Market by MarketsandMarkets, it is estimated that the global injectable drug delivery market will grow to $624.5$1.3 billion by 2021,2024, representing a compounded annual growth rate of 11.5% from 2016 - 2021.12.9% in the forecast period. This expected growth is attributable to several factors, including label expansion for approved products, increasing the patient pool for such products, a pipeline of injectable medications at various stages of clinical development, and the increasing incidence of certain diseases that will necessitate the utilization of injectable medications.

See also “Our Products” and “Research and Development” below, included in Item 1 of Part I of this Annual Report on Form 10-K for additional discussion of market size and opportunities relative to the current therapeutic areas associated with our existing portfolio of products and products in development.
Our Competitive Strengths

We have a proven business model of applyingbelieve our patented drug deliverykey competitive strengths are our commercial capabilities and infrastructure, proprietary injection technologytechnologies, and our ability to newform significant strategic alliances with industry-leading pharmaceutical partners to develop and existing therapeuticcommercialize products. We also believe our management team has unique knowledge of, and experience in the drug/device combination product space along with navigating the related regulatory approval process, which creates opportunities for us and in identifying new product candidates that could potentially benefit from our device technology platforms.  We believe ourpotential pharmaceutical partners. Our business model for developing and commercializing proprietary and partnered products has been validated, we believe, by the successive FDA approvals of our NDANDAs for XYOSTED® and OTREXUP® and our ANDA for Sumatriptan Injection USP, and the commercialization of those products, as well as the FDA approval of AMAG’s sNDA forTeva’s AB-rated generic version of the MakenaEpiPen® auto injector utilizing our VIBEX® QuickShot® technology.  

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Intellectual Property, Patents, Trade Secrets and Proprietary Information
We strive to protect and enhance the proprietary technologies that we believe are important to our business and rely on know-how and continuing technological innovation to develop, strengthen and maintain our competitive position. When appropriate, we have obtained, or seek protection for our products and proprietary information by means of U.S. and international patents and trademarks. We currently hold a portfolio of patents with expirations ranging from 2021 to 2038, and numerous patent applications pending in the U.S. and other countries. These patents consist primarily of design, formulation and method-of-use patents.Our intellectual property portfolio includes numerous patents and additional patent applications pending in the U.S. and other countries.  Our patents have expiration dates ranging from 2019 to 2035.
In addition to theour patents and patent applications, we rely on trade secretour proprietary know-how and inventions play an important role in protecting our products and technologies, and provide protection in all of our technologiesbeyond patents and regulatory exclusivity. We strive to preserve the confidentiality of those trade secretsour proprietary know-how and inventions.

inventions by maintaining physical security of our sites and electronic security of our information technology systems. We also require all employees, contractors and third-party 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. Partners with which we have entered into development agreements have the right to certain technology developed in connection with such agreements.

Human Capital
We believe that our success is largely dependent upon our ability to attract and retain qualified employees. We currently have 201 full-time employees and 2 part-time employees, of which 40 employees are based in our New Jersey corporate facility, 65 employees in our Minnesota operations and 98 employees based in the field. Our workforce includes 108 employees directly involved in or supporting our commercial sales organization, 27 in research and development, 37 in manufacturing and quality and 31 in corporate and administrative functions. We are not party to any collective bargaining arrangements. Although we believe that the size of our current workforce is appropriate to achieve our objectives, we may hire additional employees with specialized expertise as we continue to grow our business. We believe that we have been successful to date in attracting skilled and experienced scientific and business professionals.
We continue to focus on building a high performing organization with an engaging work culture and have established initiatives to support this strategic priority. We perform periodic employee engagement surveys, set and monitor retention goals, and intend to invest in training and leadership development to cultivate our emerging leaders. Additionally, we are committed to diversity and inclusion as a core focus of our human capital strategy. We embrace differences, diversity and varying perspectives amongst our employee base, and are proud to be an equal opportunity employer. We do not discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, military or veteran status, sexual orientation or any other protected characteristic established by federal, state or local laws. A diverse workforce, as well as an inclusive culture and work environment, are fundamentally important and strategic to us, beginning with our Board of Directors and extending to all levels of the organization. As of December 31, 2021, our total employee base was 56% diverse on the basis of gender and race. We also have implemented company-wide diversity and inclusion training.
We strongly believe that the success of Antares depends, in part, on open and regular communication with employees to help foster a high performing and engaged workforce. To help ensure that employees fully understand the Company’s long-term strategy and annual goals, along with how their work contributes to the Company’s success, we use a variety of channels to facilitate open and direct communication, including: (i) quarterly CEO Town Hall meetings; (ii) regular ongoing update communications; and (iii) employee engagement surveys.
We believe our success depends upon our ability to attract and retain highly qualified employees. Talent management and leadership development is critical to our ability to execute on our long-term growth strategy.We strive to provide pay, benefits, and services that are competitive to market and create incentives to attract and retain employees. Our compensation package includes market-competitive pay, discretionary broad-based stock grants and bonuses, health care and retirement benefits, paid time off and family leave. We also continue to advance transparency in our pay and representation data by complying with all applicable statutory filing requirements.To help support the development and advancement of our high performing employees, we offer training and development programs encouraging advancement from within and continue to fill our team with strong and experienced management talent. We leverage both formal and informal programs to identify, foster, and retain top talent throughout the organization.
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Our compensation philosophy is to pay for performance, support the Company’s business strategies, and offer competitive compensation arrangements to attract and retain key individuals and therefore, have established a Compensation Committee of the Board of Directors. Consistent with this philosophy, the Compensation Committee considers the impact of our corporate performance in determining compensation for named executive officers, as well as each named executive officer’s individual performance, macroeconomic conditions, and data from peer group companies.
Our Technology and Product Platforms

We are leveraging our experience in device technologies to enhance the product performance of established drugs as well as new drugs in development. Our current portfolio includes the VIBEX® andthe VIBEX® QuickShot® disposable pressure assisted auto injection systems, and disposable pen injection systems.  


Disposable VIBEX® Injectors

A significant challenge beyond discovery of new molecules is how to effectively deliver them by means other than conventional needle and syringe. 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.

Pressure assisted auto injection is a form of parenteral drug delivery that continues to gain acceptance and demand among the medical and patient community. Encompassing a wide variety of sizes and designs, thisour technology operates by using pressure to force the drug, in solution or suspension, through the skin and deposits the drug into the subcutaneous or intramuscular tissue. We have designed disposable, pressure assisted auto injector devices to address acute and chronic medical needs, such as rheumatoid arthritis and psoriasis, allergic reactions, migraine headaches, testosterone deficiency and maternal health. Our current platforms include the VIBEX® andthe VIBEX® QuickShot® disposable pressure assisted auto injection systems, the Vai™ auto injector and disposable pen injection systems. 

VIBEX® Auto Injectors
Our proprietary VIBEX® disposable auto injector systems combine a spring-based power source with a shielded needle, which delivers the needed drug solution subcutaneously or intramuscularly.

In order to 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. We believe the key competitive advantages of the VIBEX® system include:

Rapid reliable subcutaneous or intramuscular injection,

Eliminates sharps disposal

Ease designed to work with conventional pre-filled syringes, rapid injection with ability to deliver viscous solutions, ease of use in emergencies,

and reduced pain.

Reduces psychological barriers because the patient never sees the needle

Reliable subcutaneous or intramuscular injection

Designed around conventional 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. This device is designed around conventional single dose pre-filled syringes, which is a primary drug container, offering ease of transition for potential pharmaceutical partners. Our proprietary product OTREXUP® (product line, excluding the NDA, sold to Otter in December 2021) uses the VIBEX® auto injector system for delivery of methotrexate. We also have two license agreements with Teva for our VIBEX® system, one for anTeva’s generic epinephrine auto injector and the other for our Sumatriptan Injection USP.  Our proprietary product OTREXUP

VIBEX® also uses the VIBEX® auto injector system for delivery of methotrexate.  

VIBEX® QuickShot® Auto Injectors

Our latest

An advancement inof our proprietary line of VIBEX® auto injectors is the VIBEX® QuickShot® auto injector system, which offers a dose capacity of 1 mL or greater in a compact design. VIBEX® QuickShot® is designed to enhance performance on the attributes we believe most critical to patient acceptance, which are speed, comfort and discretion. VIBEX® QuickShot® achieves these advancements by incorporating a novel triggering mechanism and space-saving spring configuration. The unique design also accommodates fast injection of highly viscous drug products that less-powerful conventional auto injectors are typically unable to deliver. Many self-injectable drugs that are currently marketed andor in clinical development are of higher viscosity and are formulated to be administered in a 1 mL dose volume. We are developing products based onOur proprietary product XYOSTED®, and the Makena® subcutaneous auto injector that we developed with our partner Covis, were developed using the VIBEX® QuickShot® auto injector platform. We also have a development agreement with Pfizer to develop a rescue pen utilizing our VIBEX® QuickShot® auto injector system including XYSOSTEDTMwith an undisclosed Pfizer drug. In addition, we have a development agreement with Idorsia for deliverya drug device combination product using a variation of testosterone as replacement therapy in men who have testosterone deficiency. Ourour VIBEX® QuickShot® auto injector device with a new chemical entity selatogrel which is being developed for the treatment of acute myocardial infarction.
Vai™ Auto Injector
We developed the versatile Vai™ auto injector platform to meet evolving market needs. The Vai™ auto injector builds off the capabilities of our VIBEX® and QuickShot® platforms adding automatic needle insertion, subcutaneous or intramuscular injections of up to 1 inch and delivered volumes of up to 2 mL. The Vai™ auto injector can accommodate 1 mL standard, 1 mL long, and 2.25 mL syringes. The auto-insert technology is also used inintended to improve compliance for drug products requiring deep intramuscular injections. This innovative device is easily convertible to different fill volumes and needle lengths and was designed specifically to meet the FDA-approved Makenareliability requirements for emergency use applications while maintaining the simple and intuitive two-step process of administration of the QuickShot® Auto Injector.

Disposable  device.

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Pen Injector System

Our multi-dose, disposable pen injector technology complements our portfolio of single-use pressure assisted auto injector devices. The disposable pen injector device isdevices are designed to deliver drugs by injection through needles from multi-dose cartridges. Our disposable pen injector isinjectors are designed for chronic conditions such as diabetes, which require daily injection of a product. Depending on dosage, our pens can deliver up to thirty days of drug. We have licensed our pen injector device technology to Teva for two potential products: an exenatideproducts in late-stage development: (i) a multi-dose pen with teriparatide for the treatment of osteoporosis (a generic form of Forteo®); and (ii) a multi-dose pen with exenatide for the treatment of diabetes (a generic version of BYETTA®). On February 25, 2022, Teva notified us that it was terminating the exenatide program and related agreement due to a multi-dose pen forlack of commercial viability. The termination is effective August 23, 2022.
Our Products
The following is a discussion of our approved and marketed commercial products, including proprietary and partnered products. For a discussion of other product candidates currently with tentative approval or in development, see the treatment“Products with Tentative Approval” and “Research and Development” sections below included in Item 1 of osteoporosis (a generic formPart I of Forteothis Annual Report on Form 10-K.
XYOSTED®.)

Needle-Free Injectors

Needle-free devices administer injectable drugs by using a spring to push the active ingredient in solution or suspension through a micro-fine opening (testosterone enanthate) Injection

We market and sell in the needle-free syringe. A fine liquid stream then penetratesU.S. our proprietary product XYOSTED® (testosterone enanthate) injection for subcutaneous administration of testosterone replacement therapy (“TRT”) in adult males for conditions associated with a deficiency or absence of endogenous testosterone. XYOSTED® is the skin,only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration and is approved and marketed in three dosage strengths, 50 mg, 75 mg and 100 mg. XYOSTED® provides an easy and virtually pain-free administration, low risk of transference and the dose is dispersed intoability to achieve and maintain steady levels of testosterone.
In the layer


U.S., there are several different formulations for TRT including intramuscular injection, transdermal patches and gels, oral formulations and nasal gels. According to IQVIA National Sales Perspectives® (“NSP”) reporting of fatty, subcutaneous tissue. Needle-free injection combines proven delivery technology for molecules that require parenteral administration with a device that eliminatesnationally projected sales activities, the partoverall U.S. TRT market was approximately $1.4 billion in 2021 based on wholesale acquisition costs (“WAC”). Total prescriptions in the U.S. TRT market grew by 5.1% to 8.0 million prescriptions in 2021 as compared to 2020, entirely driven by an increase in prescriptions of injectables, which increased by 5.4%. The injectable TRT market grew from $484.4 million in 2020 to $545.0 million in 2021, an increase of 12.5% based on WAC. As of December 2021, XYOSTED® commanded approximately 65% and 52% of the injectionbranded TRT market among Urologists and Endocrinologists, respectively.

Competition in the U.S. testosterone replacement market includes transdermal solutions such as AbbVie’s Androgel® 1% and 1.62%, Perrigo’s generic Androgel® Topical Gel, 1.62%, Eli Lilly’s Axiron®, Endo’s Testim® and Fortesta® (and the authorized generic) and Allergan plc’s (“Allergan”) Androderm®. Other forms of TRT include injectables such as Endo’s Aveed®, Pfizer’s Depo®-Testosterone, and several generic oil testosterone products sold by Actavis, Sandoz, Viatris Inc., Teva and others, as well as Testopel® pellets by Endo and JATENZO®,an oral formulation, by Clarus. In addition, Marius Pharmaceuticals has submitted an NDA with the FDA for Kyzatrex, an oral formulation of testosterone, that patients dislike –is pending FDA approval.
OTREXUP® (methotrexate) Injection
Prior to December 2021, we marketed and sold in the needle.  Improving patient comfort through needle-free injection may increase compliance and mitigate the problem of daily injections. However, needle-free devices may be commercially limited due to the high cost of the product and the need for consumable disposables.  

On October 10, 2017, we entered into an asset purchase agreement with Ferring to sell the worldwide rights and transfer certain assets, including intellectual property, related to our needle-free injector device product line. We will continue to manufacture and supply needle-free injector devices until the completion of the transaction, which is expected to occur by the end of 2018.

Our Products and Products in Development

Approved and Marketed Products

OTREXUP® (methotrexate) injection

OTREXUP® isU.S. our proprietary combination product comprised ofOTREXUP® (methotrexate) injection. OTREXUP® is a pre-filled methotrexate syringe and our VIBEX® self-injection system designed to enable rheumatoid arthritis and psoriasis patients to self-inject methotrexate reliably, accurately, comfortably and conveniently at home. OTREXUP® (methotrexate) injection is the first FDA-approved subcutaneous methotrexate injection for once weekly self-administration with an easy-to-use, single dose, disposable auto injector.  Our initial NDA, approved in October 2013, covered the 10 mg, 15 mg, 20 mg and 25 mg dosage strengths.  To date, we have received FDA approval for eight dosage strengths, including 7.5 mg, 10 mg, 12.5 mg, 15 mg, 17.5 mg, 20 mg, 22.5 mg and 25 mg of OTREXUP®.

OTREXUP® isinjector, indicated for use in adults with severe active rheumatoid arthritis (“RA”) or, children with active polyarticular juvenile idiopathic arthritis (“pJIA”) who are intolerant of or had an inadequate response to first‑line therapy, including full dose non‑steroidal anti‑inflammatory agents, and adults with severe recalcitrant psoriasis.  RA is a chronic autoimmune disease, resulting

In December 2021, we sold certain assets used in pain, stiffness, swelling, joint damage, and loss of functionthe operation of the joints. AccordingOTREXUP® product to Otter under an Asset Purchase Agreement for a total purchase price of $44.0 million (the “Asset Purchase Agreement”), subject to finalization of changes in closing inventory to be transferred. Pursuant to a separate supply agreement, Otter is responsible for supplying the Arthritis Foundation, RA affects approximately 1.5 million Americans,pre-filled syringe of methotrexate and we will continue to manufacture and oversee the assembly and packaging of the final product which is almost 0.5% of the U.S. population.  The disease onset generally occurs between the ages of 30sold to 60 yearsOtter as a partnered product. Further, we entered into a license agreement with Otter in women.  In men, it often occurs later in life.  pJIA is the most common rheumatic disease in childhood,which we granted Otter a worldwide, exclusive, fully paid-up license to certain patents relating to OTREXUP® that may also relate to our other products for Otter to commercialize and according to the Arthritis Foundation, juvenile arthritis affects nearly 300,000 childrenotherwise exploit OTREXUP® in the U.S. Methotrexatefield as defined in the license agreement.
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The primary competitor in the RA market is also used to treat psoriasis,Medexus Pharma which is believed to be an autoimmune disease characterized by thick patches of inflamed, scaly skin, created by abnormal, rapid, and excessive proliferation of skin cells.  According to the American Academy of Dermatology, as many as 7.5 million Americans, or approximately 2.2% of the population suffer from psoriasis.  

Methotrexate is considered the first-line disease modifying anti-rheumatic drug (“DMARD”) prescribed to patients with RA according to the Johns Hopkins Arthritis Center.  Methotrexate is usually started at 7.5 mg, 10 mg or 15 mg given orally, once-a-week, and titrated up for greater therapeutic effect, or until the patient incurs side effects.  The maximum oral dose given is generally 20 mg to 25 mg per week (8 to 10, 2.5 mg tablets given in one dose).  Studies have reported as many as 30% to 60% of patients experience gastrointestinal side effects with oral methotrexate, preventing further dose escalation or requiring discontinuation in some patients.  Also, the extent of oral absorption of methotrexate varies considerably between patients.  

We believe that OTREXUP® offers physicians and patients an important alternative to oral methotrexate tablets and vials of the injectable form of the drug administered with a needle and syringe.  OTREXUP® provides physicians and patients a convenient, practical and virtually painless option for administering parenteral methotrexate as an alternative to proceeding directly from oral methotrexate to biologics.  Additionally, OTREXUP® is a self-contained injection device designed to minimize accidental contact with methotrexate, a hazardous drug agent. Since its launch in February 2014, OTREXUP® has been prescribed by over 3,000 physicians. Our marketing data reveals that some physicians regularly use OTREXUP® in RA patients who have experienced an inadequate response to oral methotrexate therapy for reasons of tolerability and/or efficacy.

Medac Pharma Inc. (“Medac Pharma”), a privately held pharmaceutical company, markets and sells Rasuvo®, a once-weekly, subcutaneous, injectablesingle-dose auto-injector of methotrexate indicated for the treatment of rheumatoid arthritis, psoriasis and juvenile idiopathic arthritis (JIA), which is a direct competitor to OTREXUP®. Cumberland Pharmaceuticals, Inc. also recently received FDA approval and launched RediTrex®, a methotrexate injection in the U.S. Competition in the methotrexate market also includes tablets and parenteral dosage forms that are currently marketeddistributed in the U.S. by several generic manufacturers, including Teva, Pfizer, Viatris Inc. (“Pfizer”), Mylan, Inc. (“Mylan”Viatris”), Hospira and Accord Healthcare. In several European countries, Canada, and South Korea, Medac International or its licensees market methotrexate in prefilled syringes (Metoject®Beyond disease modifying anti-rheumatic drugs (“DMARDs”) and have also launched an auto injector with methotrexate in those territories.  Other, other commonly used pharmaceutical treatments for rheumatoid arthritis include analgesics, non-steroidal anti-inflammatory drugs (NSAIDs), corticosteroids DMARDs and biologic response modifiers. In addition to methotrexate, the other DMARDs include azathioprine (Imuran®), cyclosporine (Neoral®), hydroxychloroquine (Plaquenil®), auranofin (Ridura(Ridaura®), leflunomide (Arava®) and sulfasalazine (Azulfidine®). The biologic response modifiers include etanercept (Enbrel®), adalimumab (Humira®), golimumab (Simponi®), tocilizumab (Actemra®), certolizumab (Cimzia®), infliximab (Remicaid(Remicade®), abatacept (Orencia®), and rituximab (Rituxan®). They are often prescribed

NOCDURNA® (desmopressin acetate) Sublingual Tablets
We market and sell NOCDURNA® (desmopressin acetate) in combination with DMARDs such as methotrexate.


Distribution –the U.S., which is the first and only sublingual tablet indicated for the treatment of nocturia due to nocturnal polyuria (“NP”) in adults who awaken at least two times per night to urinate. NOCDURNA® is a sublingual tablet, marketed in two dosage strengths, that dissolves quickly under the tongue without water and has been shown in clinical studies to reduce nighttime urination by nearly half (in patients who average three nighttime bathroom visits.) We have contractedlicense NOCDURNA® from Ferring. We began detailing NOCDURNA® with a third-party logistics provider, Cardinal Health 105, Inc., also known as Specialty Pharmaceutical Services (“Cardinal”), for key services relatedsoft launch in the fourth quarter of 2020 and reintroduced the product through a re-launch strategy to logistics, warehousingincrease awareness and inventory management, distribution, contract administration and chargeback processing, accounts receivable management and call center management. In addition, we utilize third parties to perform various other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services.

Sales and Marketing – We owndemand in the worldwide marketing rights for OTREXUP® and commercialize OTREXUP® on our ownfirst quarter of 2021.

It is estimated that more than 50 million people in the U.S. are affected by nocturia, or frequent waking at night to urinate. Of the approximately 10 million patients diagnosed with nocturia, only about 1.5 million are treated for the condition. One of the leading causes of nocturia is nocturnal polyuria, which is present in up to 88% of nocturia patients. In patients diagnosed with nocturnal polyuria, the kidneys produce too much urine at night. Patients may already be taking medication for overactive bladder (“OAB”) or benign prostatic hyperplasia (“BPH”); however, these medications may not reduce night-time urination because they do not treat NP.
Pharmacological therapy is most useful in treating nocturia due to nocturnal polyuria, including desmopressin, an anti-diuretic hormone therapy. The anti-diuretic effects of desmopressin are mediated by stimulation of vasopressin 2 (“V2”) receptors, thereby increasing water re-absorption in the kidney, and hence reducing urine production. Desmopressin is available as both an oral tablet and a nasal spray. Noctiva™, an FDA-approved nasal formulation of desmopressin acetate, although not currently marketed in the U.S., is the only other FDA-approved branded desmopressin acetate indicated for the treatment of nocturia.
Epinephrine Injection USP
We haveare the exclusive supplier of the device, which we developed, for Teva’s generic Epinephrine Injection USP products, indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients. Teva’s Epinephrine Injection, utilizing our patented VIBEX® injection technology, was approved by the FDA as a generic drug product with an internal commercial organizationAB rating, meaning that includes approximately 50 employees directly involved in our sales efforts.it is therapeutically equivalent to the branded products EpiPen® and EpiPen Jr® and therefore, subject to state law, substitutable at the pharmacy. We have entered into agreements with vendorssupply the device and Teva is responsible for certain commercialization services such as third-party contractingthe drug, assembly and distribution. We may enter into licensingpackaging, distribution and or additional distribution arrangements for commercialization of our products outside the U.S.

Trade – We have contracted with numerous wholesale distributors, including Cardinal, McKesson Corporation (“McKesson”)finished product, for which we also receive royalties on Teva’s net sales.

Epinephrine is used for the treatment of severe allergic reactions (anaphylaxis) to insect venom, foods, drugs and Amerisource Bergen Corporation to distribute our OTREXUP® product to the retail pharmaciesother allergens as well as anaphylaxis to unknown substances or exercise-induced anaphylaxis. Viatris’s EpiPen®, along with its own authorized generic of the Veterans Administration and other governmental agencies.product, continues to be the global market leader in the epinephrine auto injector market. In addition to shipping our product, the major distributors will provide inventory andU.S., sales reports as well as other services.  In exchange for these services, we pay fees to certain distributorsof generic epinephrine injection products were approximately $1.66 billion in 2021 based on a percentage of wholesale acquisition cost.

Third Party ReimbursementWAC, according to the IQVIA NSP report. There are other companies and Pricing – Inalternative products competing in the U.S. market, including the authorized generic for Adrenaclick® marketed by Amneal Pharmaceuticals, Inc. and elsewhere, sales of pharmaceutical products to consumers depend to a significant degree on the availability of coverage and reimbursement by third-party payers, such as government and private insurance plans. Third-party payers increasingly are challenging the prices charged for medical products and services and implementing other cost containment mechanisms. This is especially true in markets where generic options exist.  It is, and will be, time consuming and expensive for us to go through the process of maintaining or seeking reimbursement for our products from Medicaid, Medicare and private payers. Our products and those of our partners may not be considered cost effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis, potentially resulting in contract changes with these major payers.

Third-party payers often utilize a tiered reimbursement system, which may adversely affect demand for OTREXUPKaléo’s AUVI-Q® by placing it in a more expensive patient co-payment tier. Additionally, third party payers may require step edits or prior authorization. We cannot be certain that OTREXUP® will successfully be placed on the list of drugs covered by particular health plan formularies or in a more preferential position on their formularies. Third-party payers are currently demanding, and will most likely continue to demand more aggressive pricing and rebates from Antares for favorable formulary placement of OTREXUP® (Epinephrine Injection, USP). Some states have also created Medicaid preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. If OTREXUP® is not included on these preferred drug lists, it may be subject to prior authorization. Physicians may not be inclined to prescribe it to their Medicaid patients, and even if they do prescribe it, Medicaid may not authorize payment, thereby diminishing the potential market for OTREXUP® in this market segment.

We offer discount card programsAuto-Injector in the formU.S. beginning in February 2017, Adamis Pharmaceuticals also received FDA approval of co-pay coupons to patients for OTREXUPSYMJEPI® in which patients covered by commercial pharmacy benefit plans receive discounts on their prescriptions. We utilize a contract service provider to process and pay claims to patients for actual coupon usage.

Similarly, in order to ensure coverage by Medicare Part D and commercial pharmacy benefit plans, we participate in certain rebate programs, which provide discounted prescriptions to qualified insured patients.  Under these rebate programs, we pay a rebate to the third-party administrator of the program, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. We also provide discounts to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under, an FSS contract negotiated by the Department of Veterans Affairs, including discounts mandated by the Veterans Health Care Act, discounted prescriptions to DoD’s Tricare retail pharmacy program, and discounts to federal grantees and safety net providers referred to as covered entities pursuant to our pharmaceutical pricing agreement with the Department of Health and Human Services and the 340B drug discount program,epinephrine injection, which is required as a conditionmarketed and distributed in the U.S. by US WorldMeds LLC.

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Table of Medicaid coverage. Government agencies ordering under the FSS and covered entities purchase products from the wholesale distributors at the discounted price, and the wholesale distributors then charge back the difference between the current wholesale acquisition cost and the price the entity paid for the product.

Contents

Sumatriptan Injection USP

We, through our partner Teva, sell Sumatriptan Injection USP, indicated in the U.S. for the acute treatment of migraine headaches and cluster headache in adults. We received FDA approval of our ANDA forSumatriptan Injection USP is a generic equivalent to Imitrex® STATdose Pen®, and available in the 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilledpre-filled syringe auto-injectors, a generic equivalent to Imitrex® STATdose Pen®, in December 2015.auto-injectors. We have a license, supply and distribution agreement with Teva, under which Teva is responsible for the manufacture and supply of the drug, and we


manufacture the device and complete assembly and packaging of the finished product. Teva is responsible for commercialization and distribution.

According to a survey commissioned by the National Headache Foundation, migraine affects nearly 37 million Americans.  Migraine headaches are often characterized by a headache of moderate or severe intensity, nausea (the most common characteristic), one-sided and/or pulsating quality, aggravated by routine physical activity, duration of hours to 2-3 days; and an attack frequency anywhere between once a year and once a week.  Healthcare professionals frequently prescribe triptans to stop migraine attacks.

The total U.S. retail anti-migraine triptan market was $5.5$4.9 billion in 20172021 according to Symphony Health Solutions (“Symphony”IQVIA’s National Prescription Audit® (“NPA”), report based on whole-sale acquisition costs (“WAC”).TRx Pharmacy Dollars. The majority of patients who use triptans take oral tablets. Oral drugs accounted for $4.7$4.4 billion of the total, and injectable products accounted for approximately $367$257 million of the total market, measured in terms of WAC. While oral triptans have benefited many migraine sufferers, they are most consistently effective when taken at a relatively early stage in the migraine attack. Studies have shown that injectable sumatriptan is more effective and rapid-acting in the treatment of migraine headache that has reached the moderate to severe level of intensity.

According to Symphony, about 7% of triptan prescriptions are currently for injectable triptans.  Sumatriptan is the only injectable triptan approved for use in the U.S.TRx Pharmacy Dollars. Sumatriptan is currently available in an oral formulation, a nasal spray (Imitrex, GSK and generic) and a needleless injector (Sumavel, Astellas/Zogenix).injectable. There is extensive competition in the sumatriptananti-migraine marketplace and several manufacturers offer versions of injectable sumatriptandrugs with a delivery device, including GSK (Imitrex STATdose Pen®), Teva (AJOVY®), Pfizer (Alsuma), ENDO PharmaceuticalsEndo International plc (Sumavel DosePro)® DosePro®), and Sun Pharma (generic sumatriptan autoinjector) and Dr. Reddy’s Laboratories generic sumatriptan auto-injectorUpsher-Smith (Zembrace SymTouch)® SymTouch®).  One company, Sandoz, Inc. (“Sandoz”) also markets an authorized generic version of GSK’s Imitrex STATdose Pen®.  At least three companies, including Teva, and Fresenius Kabi have FDA approval to market injection sumatriptan in prefilled syringes, although we are not aware of any that presently market this product configuration.  Additionally, several generics manufacturers offer injectable sumatriptan in vials.

Sales, Marketing & Distribution – We have a license, supply and distribution agreement with Teva for the auto injector product containing sumatriptan.  We manufacture the device and perform final assembly and packaging of the product. Teva manufactures and supplies the drug and distributes the finished combination product in the U.S.  Teva also has an option for distribution rights in other territories.  Under the agreement, we received an upfront payment and a milestone payment upon commercial launch, and are compensated at cost for shipments of product to Teva.  In addition, net profits from sales of the product, after deduction of product sales allowances such as discounts, rebates and chargebacks, are split 50/50 between us and Teva.  The term of the agreement is seven years from commercial launch, with automatic one-year renewals unless terminated by either party after the initial term.

Makena® (hydroxyprogesterone caproate injection) Subcutaneous Auto Injector

Makena®

We are the exclusive supplier of the device, a variation of our VIBEX® QuickShot® subcutaneous auto injector developed by us, for the progestin hormone drug Makena® (hydroxyprogesterone caproate)caproate injection). The Makena® subcutaneous auto injector drug-device combination product is the only FDA approved druga ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with a singleone baby and who have a history of singleton spontaneousspontaneously delivered one preterm birth. Makena®baby in the past. The product was approved by the FDA in February 2011 as a weekly intramuscular injection,under the accelerated approval pathway. We are the exclusive supplier of the devices and was granted orphan drug exclusivity through February 3, 2018. Currently, the final assembled and packaged commercial product.
Makena® is administered weekly by a healthcare professional, intramuscularly through a large-gauge needle, with treatment beginning between 16 weeks and 20 weeks and six days of gestation and continuing until 36 weeks and six days of gestation or delivery, whichever happens first.  

Makena®is a progestin whose active ingredient is hydroxyprogesterone caproate (“HPC”), which is a synthetic chemical structurally related to progesterone. Progestins, such as HPC, and progesterone belongthat belongs to a class of drugs called progestogens. Progestogens have been studied to reduce preterm birth and have shown varying results depending upon the subjects enrolled. The active ingredient in Makena®, 17α hydroxyprogesterone caproate (often referred to as 17P), is the only FDA-approved treatment for pregnant women who have had a prior spontaneous preterm birth (which is a substantial risk factor for recurrent preterm birth) and has been and used for more than a decade by healthcare providers to treat patients with a history of spontaneous preterm birth. The approval of Makena® was based on the landmark Meis trial, conducted by the National Institute of Child Health and Human Development and the Maternal-Fetal Medicine Units Network and published in the New England Journal of Medicine in 2003. The Society for Maternal Fetal Medicine Publications Committee published clinical guidelines for the use of progestogens to reduce the risk of preterm birth in the American Journal of Obstetrics and Gynecology in May 2012, which were affirmed in 2014. Preterm birth is defined as a birth prior to 37 weeks of pregnancy.pregnancy being completed. According to the Centers for Disease Control and Prevention National Center for Health Statistics, Report, in 2015,the percentage of preterm births affected nearly 400,000 babies, or oneapproximately 10% of every ten infants bornbirths in the U.S. According in 2020.

In October 2019, Covis announced that the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee met to AMAG, revenue frombetter understand and interpret the PROLONG (Progestin’s Role in Optimizing Neonatal Gestation) confirmatory clinical trial for Makena® grew (hydroxyprogesterone caproate) injection. Nine advisory committee members voted to nearly $400 millionrecommend that the FDA pursue withdrawal of approval for Makena® and seven committee members voted to leave the product on the market under accelerated approval and require a new confirmatory trial. In October 2020, Covis received notice that the FDA is proposing to withdraw approval of Makena® (hydroxyprogesterone caproate injection). Covis then formally requested a public hearing in 2017,response to the FDA’s proposal to withdraw its approval and has stated that it remains committed to working with the company estimates that approximately halfFDA to maintain patient access to Makena® as a treatment option to reduce pre-term birth. In August 2021, Covis announced the FDA had granted the request for a public hearing. A date for such meeting has not been set or announced by either the FDA or Covis.
Teriparatide Injection
We are the exclusive supplier of all eligible patients are currently treated with Makena®. While the 7-year orphan drug exclusivity expiredmulti-dose pen, which we developed, used in February 2018, AMAG does not anticipate aTeva’s generic teriparatide injection product. In 2020, our partner Teva launched Teriparatide Injection, the generic version of Eli Lilly’s branded product Forsteo® featuring the intramuscular formulation of Makena® to enter the market until mid-2018.

The Makena® subcutaneous auto injector we developedAntares multi-dose pen platform, for commercial sale in collaboration with AMAG was designed to enhance performance on the attributes we believe are most critical to healthcare providers and patient acceptance, including decreased time to administer and use of a shorter, thinner nonvisible needle for subcutaneous injection, while potentially providing an alternative to the existing intramuscular methods of administration. The developmentseveral countries outside of the subcutaneous auto-injector was part of AMAG’s broader next-generation program exploring alternative injection methods, sitesU.S. Under an exclusive development, license and formulations.


On February 14, 2018, the FDA approved AMAG’s sNDAsupply agreement with Teva, Antares is responsible for the Makena® subcutaneous auto injector drug-device combination product, which was designed as a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past. AMAG is preparing for a launch and expects the Makena® subcutaneous auto injector to be available in second half of March 2018. We have commenced manufacturing and supply of devicesthe multi-dose pen used in Teva’s generic teriparatide product and commercial product in anticipation of AMAG’s launch of the Makena® subcutaneous auto injector.

Sales, Marketing & Distribution – We have an exclusive license and development agreement with AMAG for the Makena® subcutaneous auto injector. Pursuant to this arrangement, AMAG supplies the pre-filled syringe of the drug to Antares.  Antares manufactures the device andTeva is responsible for the assembly and packaging of the final product, which is sold to AMAG at cost plus margin.  AMAG is also responsible for commercializationsale and distribution of the finished product. The agreement providesAntares is compensated for Antaresdevices sold to Teva and is entitled to receive high single digit to low double digit royalties on net product sales of the Makena® subcutaneous auto injector as well as sales milestones. AMAG primarily sells Makena® to specialty pharmacies, specialty distributors, home infusion companies and pharmacies which, in turn, sell Makena®to healthcare providers, hospitals, government agencies and integrated delivery systems. AMAG plans to continue to offer the intramuscular formulation of Makena® and that the Makena® auto injector will be priced at parity to help ensure timely and affordable access.

Needle-Free Injectors

Our needle-free auto injector products, including the ZOMAJET™ and Twin-Jector® II, were designed to provide a needle-free means of administering human growth hormone to patients with growth retardation. We have historically sold needle-free injection devices to partners who manufacture and/or market human growth hormone directly. These partners then market our device together with their growth hormone. The device is reusable and designed to last for approximately 3,000 injections (or approximately two years) while the needle-free syringe includedby Teva in the deviceterritories.

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Teriparatide is disposable after approximately one week when used by a patient for injecting from multi-dose vials.

On October 10, 2017 we entered into an asset purchase agreement with Ferring to sell the worldwide rights and transfer certain assets, including intellectual property, related to the needle-free injector device product line. We will continue to manufacture and supply needle-free devices until the completion of the transaction, which is expected to occur by the end of 2018.

Information about Customer and Product Concentrations

Significant customers, from which the Company derived 10% or more of its total revenue in each or any of the years in the three-year period ended December 31, 2017 include: Teva, AMAG, McKesson, AmerisourceBergen, Ferring, and LEO Pharma.  For more detail, please refer to Note 11 – Significant Customers and Concentrations of Risk in the Notes to Consolidated Financial Statements in Part II, Item 8.

The Company derived 10% or more of its total revenue, in each or any of the years in the three-year period ended December 31, 2017, from the following products: OTREXUP®, Sumatriptan Injection USP, auto injector and pen injector devices, and needle-free injector devices and components.  For more detail, please see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.

Products in Development

XYOSTED™ (testosterone) injection

XYOSTED™ (testosterone enanthate) injection is our investigational new drug in development for the treatment of testosterone deficiencyosteoporosis in adult males. The product utilizes our next generation VIBEX® QuickShot® auto injector for self-administered weekly injections of testosterone enanthate in a preservative free formulation for clinically testosterone deficientpostmenopausal women and men requiring testosterone replacement therapy (“TRT”).  The VIBEX® QuickShot® auto injector is designed specifically to provide a fast injection of highly viscous fluids such as testosterone in oil.

We submitted a 505(b)(2) New Drug Application (“NDA”) for XYOSTEDTM to the FDA in December 2016. The NDA submission was accepted for standard review by the FDA and assigned a PDUFA target date for completion of its review by October 20, 2017. On October 20, 2017, we received a CRL from the FDA regarding our NDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. Based on findings in our clinical program, the FDA stated its concerns that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the FDA raised concern regarding the occurrence of depression and suicidality.  On February 21, 2018, we met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTEDTM. We intend to provide further information following the receipt of the official meeting minutes from the FDA, which is typically within 30 days of the meeting date.


The U.S. TRT market in 2017 was approximately $2.2 billion, based on WAC, according to a Symphony report.  Injectable TRT grew from $264.0 million in 2016 to $304.0 million in 2017, an increase of 15.6%. There is significant competition within the TRT market among many pharmaceutical companies including Abbvie, Inc. (formerly Abbott), Lilly, Endo, Pfizer, Sandoz, Mylan and Teva.

Topical formulation of TRT are frequently prescribed in the United States.  Not all men are able to adequately absorb the gel formulations or otherwise find them unacceptable for reasons including risks of transferring the gel to spouses or children, dissatisfaction with the application process, or suboptimal clinical results due to variability in exposure and compliance.  Injectable testosterone is an option for men with an inadequate response to transdermal therapies.

Currently, injectable testosterone is available and represents a majority of all TRT prescriptions. These injections, prescribed as a combination of a vial, needle, and syringe, are usually given deep into the muscle tissue of the buttocks with large bore needles (typically 19 gauge needles).  Injection testosterone is an esterified formulation in oil that is absorbed slowly from the muscle tissue, producing a sustained increase in serum testosterone over time, requiring repeated injections typically administered in the physician’s office every two to four weeks.  The higher doses given to facilitate less frequent injections are sometimes associated with supra-physiologic levels.  Such high levels may lead to polycythemia, a proliferation of red blood cells, which places the patient at increased risk of thrombus or clot formation leadingfracture and for glucocorticoid induced osteoporosis in men and women. According to strokes, heart attacks, pulmonary embolism, and possibly death.   Excessive variability between peak testosterone levels occurring shortly afterEli Lilly’s annual report, 2021 global sales of Forteo® were $801.9 million, of which $441.6 million was generated in the injection to the lowest levels immediately preceding a dose are also associatedU.S.

Products with mood swings.

We are developing XYOSTED™, a once-weekly subcutaneous injectable testosterone product that could be conveniently self-administered at potentially lower dosages given more frequently thanTentative Approval

The following is generally practical with repeated visits to the physician’s office.  XYOSTED™ utilizes a small gauge needle for patient comfort.  See Research and Development below and Part II Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of researchour products with tentative approval from the FDA. For a discussion of other approved and marketed commercial products, including proprietary and partnered products and product candidates currently in development, see the “Our Products” and “Research and Development” sections above and below, respectively, included in Item 1 of Part I of this Annual Report on Form 10-K.
TLANDO® (testosterone undecanoate) Oral Formulation
TLANDO® (testosterone undecanoate) is a twice daily oral formulation of testosterone for XYOSTED™TRT indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males. TLANDO® was granted tentative approval from the FDA in December 2020 and will be eligible for final approval and marketing in the detailsU.S. upon expiration of the exclusivity period previously granted to Clarus for JATENZO® on March 27, 2022. On February 3, 2022, we announced the FDA’s acceptance of our clinical studiesNDA resubmission for TLANDO® in which the FDA designated the NDA as a Class 1 resubmission with a two-month review goal period and results.

set a target action date of March 28, 2022. We continue to prepare for the launch of TLANDO® in 2022 pending final FDA approval after the expiration of JATENZO®’s exclusivity period.

In the U.S., there are several different formulations for TRT including intramuscular injection, transdermal patches and gels, oral formulations and nasal gel. According to IQVIA National Sales Perspectives® (“NSP”) reporting of nationally projected sales activities, the overall U.S. TRT market was approximately $1.4 billion in 2021 based on wholesale acquisition costs (“WAC”). Total prescriptions in the U.S. TRT market grew by 5.1% to 8.0 million prescriptions in 2021 as compared to 2020, entirely driven by an increase in prescriptions of injectables, which increased by 5.4%. The injectable TRT market grew from $484.4 million in 2020 to $545.0 million in 2021, an increase of 12.5% based on WAC.
Competition in the U.S. testosterone replacement market includes topical solutionstransdermal formulations such as Abbvie’sAbbVie’s Androgel® 1% and Androgel® 1.62%, Perrigo’s generic Androgel® Topical Gel, 1.62%, Eli Lilly’s Axiron®, Endo’s FortestaTestim® and TestimFortesta®(and the authorized generic) and Allergan plcplc’s (“Allergan”) Androderm®. Other forms of TRT include injectibles,injectables such as Endo’s Aveed®, Pfizer’s Depo®-Testosterone, and several generic testosterone in oil products sold by Actavis, Sandoz, Mylan,Viatris Inc., Teva and others, as well as Testopel® pellets by Endo.Endo and JATENZO®,an oral formulation, by Clarus. In addition, two additional oral treatmentsMarius Pharmaceuticals has submitted an NDA with the FDA for low testosterone levels are in development. Clarus is developingKyzatrex, an oral formulation of testosterone undecanoate, Rextoro™that is pending final approval.
Research and Lipocine, Inc. (“Lipocine”)Development
We are committed to a strong research and development program, recognizing that the development of new product offerings is important to our future success. An important part of our growth strategy is our continued investment in our evolving research and development activities and new product pipeline. While we are focused on opportunities within urology and endocrinology therapeutic areas, we are also developingexploring new product opportunities beyond these therapeutic areas that could further grow and diversify our portfolio. Our research and development efforts are focused primarily on leveraging our existing product and technology platforms by broadening their applications for use in other drug/device combination products, as well as exploring new pharmaceutical products, technologies and drug delivery methods. We also have a corporate development team that seeks and evaluates new business and product opportunities to further expand our pipeline.
Our research and development programs consist primarily of clinical, regulatory, formulation development, engineering and device development activities for our current products, next generation versions of current products, product extensions, and new proprietary and partnered products and technologies in development. Our internal research and development team works with external consultants, industry experts, physicians and other medical personnel in an oral formulationeffort to drive our product development pipeline. The following is a discussion of testosterone undecanoate, Tlando®.  Acerus Pharmaceuticals markets Natesto™, an intra-nasal testosterone.

VIBEX® with Epinephrine

our significant research and development activities.

ATRS - 1901
We have initiated development of a license,proprietary drug device combination product for the urology oncology market, identified as ATRS-1901, and conducted formulation development work and supply agreement with Tevanon-clinical studies to help advance this program. In 2020, we received a response from the FDA regarding our pre-IND (Investigational New Drug) submission and believe we have determined our clinical and regulatory pathway forward. Our pre-clinical safety studies are ongoing.
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ATRS - 1902
We have identified a program to develop a proprietary drug device combination product for the endocrinology market, an adrenal crisis pen, identified as ATRS-1902. The development program supports a VIBEX® injector we designed for a product containing epinephrine.  Epinephrine is utilizedproposed indication for the treatment of severe allergic reactions (anaphylaxis)acute adrenal insufficiency, known as adrenal crisis, in adults and adolescents, using a novel proprietary auto-injector platform to insect venom, foods, drugsdeliver a liquid stable formulation of hydrocortisone. We have conducted initial formulation work and other allergens as well as anaphylaxisdeveloped a working prototype of a new device to unknown substances or exercise-induced anaphylaxis. Our partner Teva filed an ANDA seeking FDA approval of the product as a generic substitute of Mylan’s branded product EpiPen®. Tevasupport this program.
In June 2021, we submitted an amendmentIND application with the FDA for the initiation of a Phase 1 clinical study of ATRS-1902 for adrenal crisis rescue. The IND application includes the protocol for an initial clinical study to compare the VIBEXpharmacokinetic profile of our novel formulation of hydrocortisone versus Solu-Cortef® epinephrine pen ANDA, which is an anti-inflammatory glucocorticoid and is the current standard of care for the management of acute adrenal crises.
In July 2021, the FDA accepted our IND for ATRS-1902 enabling us to initiate our Phase 1 clinical study. The Phase 1 clinical study designed to evaluate the safety, tolerability and pharmacokinetics (“PK”) of a liquid stable formulation of hydrocortisone was initiated in December 2014September 2021. The study is a cross-over design to establish the PK profile of ATRS-1902 (100 mg) compared to Solu-Cortef® (100 mg), the reference-listed drug, in 32 healthy adults. After this study is completed, we expect to conduct a bioequivalence study and received a CRLsecond human factor study utilizing our proprietary auto-injector technology.
In January 2022, we announced the positive results from the FDA in February 2016 in which, accordingPhase 1 clinical study and were granted Fast Track designation by the FDA. The positive results support the advancement of our ATRS-1902 development program to Teva, the FDA identified certain major deficiencies.  Teva has disclosed that they submitted a response to this CRL.  We continue to work with Teva toward a potential approval of the epinephrine auto injector pen.

Mylan’s EpiPen®, along with its own authorized generic of the product, continues to be the global market leader in the epinephrine auto injector market.  In December 2016, Mylan announced the availability of its lower-priced authorized generic to EpiPen®, intended to address pricing concerns of the branded version. In the U.S., according to Symphony, sales of epinephrine injection products were approximately $2.0 billion in 2017, based on WAC. There are other companies and alternative products competing in or poised to enter the market.  For example, in January 2017, CVS announced that a low-cost epinephrine auto injector option, the authorized generic for Adrenaclick® manufactured by Impax Laboratories, is available at all CVS Pharmacy locations. Kaléo announced the availability of AUVI-Q® (Epinephrine Injection, USP) Auto-Injector in the U.S. beginning in February 2017, and Adamis Pharmaceuticals announced FDA approval of its epinephrine pre-filled syringe NDA.

Disposable Pen Injector with Exenatide

We have a license, development and supply agreement with Teva for a multi-dose pen injector device for use with a generic form of BYETTA® (exenatide injection)pivotal study for the treatment of diabetes.  Teva is working through the U.S. regulatory approval process for its exenatideacute adrenal insufficiency, known as adrenal crisis, using our Vai™ novel proprietary rescue pen using the ANDA pathway.


Exenatide, marketed as BYETTA®, is used along with diet and exerciseplatform to treat type 2 diabetes,deliver a conditionliquid stable formulation of hydrocortisone. We anticipate starting this pivotal study in which the body does not use insulin normally and therefore cannot control the amount of sugaradults in the blood.  Exenatide workssecond quarter of 2022 and expect to submit a 505(b)(2) NDA with the FDA by stimulating the pancreas to secrete insulin when blood sugar levels are high. Insulin helps move sugar fromend of 2022 pending the blood into other body tissues where it is used for energy. Exenatide also slows the emptyingsuccess of the stomachstudy, a further human factors study and causes a decrease in appetite. Exenatide is not used to treat type 1 diabetes, a condition in which the body does not produce insulin and therefore cannot control the amount of sugar in the blood.  Exenatide is not used instead of insulin to treat people with diabetes who need insulin.  Total gross U.S. sales of BYETTA® (exenatide) by AstraZeneca in 2017 were approximately $259 million according to Symphony. BYDUREON®, a long acting formconfirmation of the medication BYETTA®, had approximately $1.04 billionproduct stability from our ongoing stability program.

ATRS-1903
We have initiated development of a proprietary drug device combination product utilizing our rescue pen technology for a rare immunology disorder, identified as ATRS-1903. Formulation development work has been conducted and we anticipate progressing this towards initial clinical testing to evaluate PK and tolerability in gross saleshuman subjects.
Additional Development Programs
We continue to pursue and evaluate other potential new products and product extensions that address patient needs primarily in targeted therapeutic areas. We explore new development opportunities including innovative delivery technologies and improved formulations of existing therapeutics.
Partnered Development Projects
We, in collaboration with our pharmaceutical partners, are engaged in research and development activities utilizing our auto injectors and disposable pen injectors. The development programs typically consist of determination of the U.S.device design, development of prototype tooling, production of prototype devices for testing and clinical studies, and development of commercial tooling and assembly. We expect development related to these products to continue; however, the development timelines are generally controlled by our partners and the extent of near-term and future development will be dependent on decisions made by our partners. The following is a summary of the development stages for select partnered products in 2017 based on WAC, according to Symphony.

Disposable development:

Pen Injector with Teriparatide

We are also developing with Teva, under a license, development and supply agreement, a multi-dose disposable pen injector device with teriparatide for the treatment of osteoporosis. Teva is working toward a regulatory approval with the FDA for a generic version of Forteo® (teriparatide [rDNA origin]rDNA origin injection) using the ANDA pathway. Teva and Eli Lilly and Company (“Lilly”) settled their Paragraph IV patent litigation,See also the terms of which have not been disclosed. Teva also successfully completed a decentralized procedure registration process in 17 countries in Europe“Teriparatide Injection” section above for teriparatide, and is awaiting patent clearance inmore information about the EU prior to launch.

Teriparatide is used for the treatment of osteoporosis in postmenopausal women and men at increased risk of fracture and for glucocorticoid induced osteoporosis in men and women. According to Lilly’s 2017 annual report on Form 10-K, 2017 global sales of Forteo® grew to $1.75 billion, of which $965 million was recorded in the U.S. and $784 million in the rest of the world.

Research and Development

We are committed to a strong research and development program, recognizing that the development of new product offerings is critical to our future success. Our research and development efforts are focused primarily on leveraging our existing product and technology platforms by broadening their applications for use in other drug/device combination products, as well as exploring new pharmaceutical products, technologies and drug delivery methods.

Our research and development programs consists primarily of clinical, regulatory, formulation development, engineering, device development and commercial developmentTeva’s commercialization activities for our current products, next generation versions of current products, and new proprietary and partnered products and technologies in development.  Our internal research and development team worksoutside the U.S.

Pen Injector with external consultants, industry experts, physicians and other medical personnel in an effort to drive a robust product development pipeline. Exenatide
We also have a business development team that actively seeks and evaluates product opportunities and business alliances. In addition, our clinical, quality and regulatory teams are committed to verifying and maintaining the safety and efficacy of our products according to regulatory standards enforced by the FDA and other international regulatory bodies.

We have several products at various stages of development as highlighted in our “Products in Development” section above.  For a discussion of amounts we have spent on research and development activities, see Research and Development in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a discussion of our significant research and development programs.

XYOSTED™ (testosterone) injection.  We arewere developing XYOSTED™ for self-administered weekly injections of testosterone enanthate in a preservative-free formulation indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone: primary hypogonadism (congenital or acquired) and hypogonadotropic hypogonadism (congenital or acquired.)

In December 2012, we conducted a pre-IND (Investigational New Drug application) meeting with the FDA as part of preparing to initiate clinical development of XYOSTEDTM, establishing a path forward.  In September 2013, we announced that the first patients were dosed in a clinical study evaluating the pharmacokinetic (“PK”) profile of testosterone enanthate administered weekly by subcutaneous injection at doses of 50 mg and 100 mg via the XYOSTEDTM auto injector device in adult males with testosterone deficiencies associated with hypogonadism and hypogonadotropic hypogonadism. The study enrolled 39 patients at nine investigative sites in the U.S.  In this study, we showed that either dose of XYOSTEDTM resulted in most patients achieving average levels of testosterone within the normal range from the first dose onward. Patients on the 100 mg dose often had maximum serum concentrations above the FDA recommended range, whereas patients dosed with 50 mg often had levels returning to baseline between doses.  

In November 2014, the last patient was enrolled in a 52-week single arm dose-blinded, concentration controlled multiple-dose, phase III study (QST-13-003) to evaluate the efficacy and safety of XYOSTEDTM administered subcutaneously once each week to testosterone-deficient adult males.  Patients enrolled in this study had a documented diagnosis of hypogonadism and testosterone


deficiency defined as having testosterone levels below 300 ng/dL.  The study included a screening phase, a treatment titration (efficacy) phase and an extended treatment phase.  One hundred fifty patients were enrolled in this study.  Patients meeting all eligibility criteria were assigned to receive a starting dose of XYOSTEDTM once weekly for six weeks.  Adjustments to dose could be made at week seven based upon the week six pre-dose blood level.  The testosterone levels and dose adjustment to regulate testosterone levels were evaluated after 12 weeks of treatment.

The study evaluated the pharmacokinetics of testosterone at the week 12 endpoint relative to the registration endpoints required by the FDA: (i) the primary endpoint of at least 75% of all patients’ Cavg are within the range of 300 to 1100 ng/dL, with a lower limit of a 95% 2-sided confidence interval of greater than or equal to 65%, (ii) the major secondary endpoint for Cmax of at least 85% of patients’ Cmax be less than 1500 ng/dL and no more than 5% of patients have a Cmax greater than 1800 ng/dL. The primary endpoint of Cavg range of  300 to 1100 ng/dL in the population that received one or more doses of XYOSTED™ was met by 139 out of 150 patients, equating to 92.7% with a 95% confidence interval of 87.3% to 96.3%.  Among the 137 patients that completed all 12 weeks of dosing and PK sampling, 98.5% were within the pre-defined range.  The results for the Cavg and Cmax endpoints are summarized in the table below.

Population/Analysis

 

Cavg Lower

limit of the

95% 2-sided

C. I.

 

 

Cavg %   in range

300 – 1100 ng/dL

n (%)

 

 

Cmax <1500

ng/dL

n (%)

 

 

Cmax >1800

ng/dL

n (%)

 

Primary analysis* N=150

 

 

87.3

%

 

139 (92.7

%)

 

137 (91.3

%)**

 

 

0

%

Completers N=137

 

 

94.8

%

 

135 (98.5

%)

 

137 (100

%)

 

 

0

%

Protocol-Required Outcomes

 

 

≥65

%

 

75

%

 

≥85

%

 

 

≤5

%

*

All patients with 1 or more doses, Cavg 0-168 hours post week 12 injection or last measured concentration carried forward

**

Patients without a Cmax determination at week 12 are assigned above 1500 ng/dL

Overall, the regimen demonstrated a mean (± standard deviation) steady state concentration of testosterone of 553.3 ± 127.3 ng/dL at 12 weeks.  Participants in the study remained on XYOSTED™ and were followed for an additional 40 weeks for the collection of safety data.  In October 2015, the last patient in study QST-13-003 received their week 52 treatment, which marked the end of the treatment phase of this study.  

In March 2016, we reported the complete results of study QST-13-003. The safety population, defined as patients who received at least one dose of study drug, was comprised of 150 patients.  The most common treatment-emergent adverse events (TEAE’s) (incidence ≥5%) in this phase III study, irrespective of relationship to the study drug, were increased hematocrit, hypertension, increased prostate-specific antigen, upper respiratory tract infection, sinusitis, injection site bruising and headache. Serious adverse events (SAE’s) reported included one case each of worsening depression, vertigo and suicide.  None of the SAE’s were considered to be related to the study drug by the investigators, however the Company determined that the case of suicide could not be ruled out as potentially being related to study drug, as depression is a labelled adverse event for testosterone products.  There have been no reported adverse events consistent with urticaria (hives), pulmonary oil micro embolism (POME), anaphylaxis or major adverse cardiovascular events in this study.

In June 2015, we finalized and submitted the protocol for a second phase III study (“QST-15-005”) to increase the number of patients evaluated for safety through 26 weeks, and in August 2015, the first patients were enrolled in the study.  QST-15-005 was a dose-blind, multiple-dose, concentration-controlled 26-week supplemental safety and pharmacokinetic study of XYOSTED™, which included a screening phase, a treatment titration phase, and a treatment phase for evaluation of safety and tolerability assessments including vital signs, laboratory assessments, adverse events and injection site assessment. The primary objective was to study the safety of XYOSTED™ administered subcutaneously once each week to adult males with hypogonadism. Patients meeting all eligibility criteria were assigned to receive 75 mg of XYOSTED™ once weekly for six weeks.  According to the protocol, adjustments to dose could be made at week seven based upon the week six Ctrough value.  XYOSTED™ was provided to clinical sites at dosage strengths of 100 mg, 75 mg and 50 mg to be utilized in dose titration.

In early November 2015, enrollment was complete in study QST-15-005. The safety population, defined as patients who received at least one dose of the study drug, consisted of 133 patients dosed with XYOSTED™.  In June 2016, the last patient had completed treatment under QST-15-005, and in September 2016 we announced the results of the study. The most common adverse reactions (incidence ≥5%) in the QST-15-005 study were increased hematocrit, upper respiratory tract infection and injection site ecchymosis. There were four patients with treatment emergent SAE’s, which included one patient with transient visual impairment determined not to be drug related, one patient with appendicitis that was not drug related and one patient with deep vein thrombosis (DVT).  The investigator attributed DVT as possibly drug related, which is consistent with testosterone class label warnings.  The fourth patient had multiple hospitalizations related to septic arthritis and coronary artery disease, with a complicated clinical course


post-angioplasty. These multiple reported events from the fourth patient were deemed not to be drug related, as he had worsening angina prior to enrolling in the study.  There were no reported adverse events consistent with urticaria, POME or anaphylaxis.  The safety data collected also included an assessment of pain.  

Based upon the completion of our clinical and development work and the results of the studies detailed above, we submitted a 505(b)(2) New Drug Application for XYOSTED™ with the FDA in December 2016. The NDA submission was accepted for standard review by the FDA and assigned a PDUFA target date for completion of its review by October 20, 2017.

On October 11, 2017, we received a letter from the FDA stating that, as part of its ongoing review of the NDA, the FDA had identified deficiencies that preclude the continuation of the discussion of labeling and postmarketing requirements/commitments.  On October 20, 2017, we received the Complete Response Letter from the FDA regarding our NDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. Based on findings in studies QST-13-003 and QST-15-005, the FDA stated its concern that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the FDA raised a concern regarding the occurrence of depression and suicidality.  

Following the receipt of the CRL for XYOSTEDTM, we prepared a comprehensive briefing document, which was submitted to the FDA on December 21, 2017 along with a written request for a Type A meeting. A Type A meeting is a formal meeting requested by a sponsor within three months after an FDA regulatory action for purposes of discussing post-CRL activities. On February 21, 2018, we met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTEDTM. We intend to provide further information following the receipt of the official meeting minutes from the FDA, which is typically within 30 days of the meeting date.

Partnered Development Projects.  We, along with our pharmaceutical partner, 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 a product containing epinephrine and for our pen injector devices for use with generic versions of BYETTA® (exenatide) and Forteo® (teriparatide). The development programs consist of determination of the device design, development of prototype tooling, production of prototype devices for testing and clinical studies, and development of commercial tooling and assembly.  We expect development related to these products to continue, however, the development timelines are generally controlled by our partners and the extent of near-term and future development will be dependent on decisions made by our partners. The following is a summary of the development stages for each of the partnered products in development.

VIBEX® with epinephrine

We, in collaboration with Teva, have developed a VIBEX® auto injector device for a product containing epinephrine. Teva is responsible for development work on the drug epinephrine, and we are responsible for development of the device.  Teva filed an ANDA for the VIBEX® epinephrine pen as a generic substitute of Mylan’s branded product, EpiPen®, which was accepted by the FDA, and amended in December 2014.  We have scaled up the commercial tooling and molds for this product and delivered pre-launch quantities of the product in anticipation of a potential approval and launch.  However, Teva received a CRL from the FDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Teva has disclosed that they submitted a response to the FDA’s CRL. We continue to work with Teva toward a potential approval of the epinephrine auto injector pen ANDA.

Exenatide disposable pen injector

We designed and produced, under a license, development and supply agreement with Teva a multi-dose pen injector device for use with a generic form of BYETTA® (exenatide injection) for the treatment of diabetes. Teva iswas working through the U.S. regulatory approval process for its exenatide pen using the ANDA pathway.

Teriparatide disposable On February 25, 2022, Teva notified us that it was terminating the exenatide program and related agreement due to a lack of commercial viability. The termination is effective August 23, 2022.

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Rescue Pen (drug undisclosed)
In August 2018, we entered into a development agreement with Pfizer and began developing a combination drug device rescue pen. This rescue pen will use the Antares QuickShot® auto injector

We also designed and produced for Teva another multi-dose pen foran undisclosed Pfizer drug. In 2021, we continued to work on this development program, and we expect to continue development of this product candidate.

Rescue Device with Selatogrel
In November 2019, we entered into a generic form of Forteo® (teriparatide [rDNA origin] injection)new global agreement with Idorsia to develop a novel, drug-device product containing selatogrel. A new chemical entity, selatogrel, is being developed for the treatment of osteoporosis. Tevaa suspected acute myocardial infarction (“AMI”) in adult patients with a history of AMI. Idorsia will pay for the development of the combination product and will be responsible for applying for and obtaining global regulatory approvals for the product. The parties intend to enter into a separate commercial license and supply agreement pursuant to which we will provide fully assembled and labelled product to Idorsia at cost plus mark-up. Idorsia will then be responsible for global commercialization of the product, pending FDA or foreign approval. We will be entitled to receive royalties on net sales of the commercial product.
In 2020, we completed the initial design phase of the selatogrel device and Idorsia conducted a clinical bridging study utilizing these devices. We completed the usability and reliability studies for the device which has been tailored for emergency use ahead of the Phase 3 study.
According to publications by Idorsia, two Phase 2 studies in patients with stable coronary artery disease and acute myocardial infarction, respectively, have met their pharmacodynamic objectives of significantly inhibiting platelet aggregation. Subcutaneous administration of selatogrel 8 mg and 16 mg has demonstrated a rapid onset of action, within 15 minutes, with the height of its effect extending over 4-8 hours, depending on the dose. Selatogrel was safe and well tolerated in both studies and there were no treatment-emergent serious bleeds.
In December 2020, the FDA designated Idorsia’s investigation of selatogrel for the treatment of a suspected AMI in adult patients with a history of AMI as a “fast-track” development program. This designation is working throughintended to promote communication and collaboration between the FDA and pharmaceutical companies for drugs that treat serious conditions and fill an unmet medical need.
In June 2021, Idorsia announced they initiated its Phase 3 registration study to evaluate the efficacy and safety of self-administered subcutaneous selatogrel, Idorsia’s P2Y12 receptor antagonist, in suspected AMI using Antares’ QuickShot® auto-injector. The study is an international, multi-center, double-blind, randomized, placebo-controlled, parallel-group, Phase 3 study to assess the clinical efficacy and safety of 16 mg of selatogrel when self-administered (on top of standard-of-care) upon occurrence of symptoms suggestive of an acute myocardial infarction. The primary efficacy endpoint is the occurrence of death from any cause, or non-fatal AMI after any study treatment self-administration. The study will enroll approximately 14,000 patients who are at high risk of recurrent AMI, at approximately 250 sites in approximately 30 countries. A Special Protocol Assessment has been agreed with the FDA for Idorsia’s selatogrel, which indicates the FDA is in agreement with the adequacy and acceptability of specific critical elements of overall protocol design (e.g., entry criteria, dose selection, endpoints and planned analyses) for a study intended to support a future marketing application.
According to the American Heart Association, the overall prevalence for myocardial infarction in the U.S. regulatory approval process for a generic version of Forteo® (teriparatide [rDNA origin] injection) usingis about 7.9 million adults. There are also approximately 805,000 heart attacks in the ANDA pathway.  Teva and Eli Lilly and Company (“Lilly”) settled their Paragraph IV patent litigation, the termsU.S. annually, of which 605,000 are first heart attacks and 200,000 happen to people who have not been disclosed. Teva also successfully completedalready had a decentralized procedure registration process in 17 countries in Europeheart attack according to the Centers for teriparatide,Disease Control and is awaiting patent clearance in the EU prior to launch

Prevention.

Manufacturing

We do not own any manufacturing facilities; we use third parties to manufacture our products and product candidates.  Tocandidates, including the extent thatproducts and related components we are the sponsor of a drug/device combinationsupply to our partners. For our products and product or product candidate or to the extent that we are responsible for drug and device operations with regard to products or product candidates, sponsored by our partners, we must ensure that the product


or product candidate isthey are manufactured in accordance with FDA’s current Good Manufacturing Practices (“cGMPs”) for drug products and FDA’s current Quality System Regulations (“QSRs”) for medical devices and equivalent provisions in the EUEuropean Union (“EU”) and elsewhere, which are required as part of the overall obligations necessary, in the EU for instance, to obtain a CE-mark .  To the extent that we are only supplying the device component to one of our partners, we are responsible for compliance with QSRs.necessary. We believe that our third partythird-party manufacturers are currently in compliance with cGMPs, QSRs and QSRs,foreign equivalents, to the extent applicable. Assembly and packaging of all of our products and product candidates is performed by third-party service providers under our direction. All manufacturers and suppliers are monitored and evaluated by our quality department to assess compliance with regulatory requirements and our internal quality standards and benchmarks. We perform quality reviewreviews of manufacturing for all of our product candidates and product release.  

products, and quality releases for all of our product candidates and products that we sponsor or commercialize.

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We utilizeuse a range of third partythird-party manufacturers to manufacture and supply certain components, drugs, final assembly and finished product. Below is a summary of our key production, manufacturing, assembly and packaging arrangements with third parties:

third-party manufacturers for products commercialized by us and our partners:

•We have contracted with Minnesota RubberPhillips-Medisize Corporation (“Phillips”), an international outsource provider of design and Plasticsmanufacturing services, to produce commercial quantities of our QuickShot® auto injector device for XYOSTED®, our QuickShot® auto injector device for the Makena® product with Covis, and our VIBEX® epinephrine auto injector product with Teva.

•We use ComDel Innovation, Inc. (“MRP”ComDel”), a contractdomestic provider of integrated solutions for product development, tooling, and manufacturing, to provide manufacturing services for the VIBEX® sumatriptan auto injector product and for the teriparatide pen product with Teva.
•We have contracted with Jabil Healthcare, an international manufacturing development company to manufacturesupply commercial quantities of our VIBEX® auto injector device for the OTREXUP® product for Otter and assemble our needle-free devices and certain related disposable component parts for our partners Ferring and JCR.  

the VIBEX® epinephrine auto injector product with Teva.

•

We have contracted with Phillips-Medisize Corporation (“Phillips”), an international outsource provider of design and manufacturing services, to produce clinical and commercial quantities of our VIBEX® QuickShot® auto injector device for XYOSTED™, our VIBEX® QuickShot® device for the Makena® auto injector product with AMAG, our VIBEX® epinephrine auto injector and our pen injector devices for the exenatide pen product with Teva.  

•

We utilize ComDel Innovation, Inc. (“ComDel”), a provider of integrated solutions for product development, tooling, and manufacturing, to provide manufacturing services for the VIBEX® with sumatriptan product and for the teriparatide pen product with Teva.

•

We have contracted with Nypro Inc. (“Nypro”), an international manufacturing development company to supply commercial quantities of our VIBEX® pressure assisted auto injector device for our OTREXUP® and VIBEX® epinephrine products.  

•

We have contracted with Pharmascience Inc. to supply commercial quantities of methotrexate pre-filled syringes for the U.S and Canadian markets for OTREXUP®.  

•

We utilize Sharp Corporation (“Sharp”), an international contract packaging company, to assemble and package OTREXUP®, Sumatriptan Injection USP, and the Makena® auto injector.  

•We have identified a contract manufacturercontracted with Fresenius Kabi to supply commercial quantities of pre-filled syringes of testosterone for XYOSTED™XYOSTED®.

•We also have contracted with Ferring for the commercial supply of NOCDURNA®.
•We use Sharp Corporation (“Sharp”), an international contract packaging company, to assemble and package XYOSTED®, Sumatriptan Injection USP and the Makena® auto injector products, and the OTREXUP® auto injector product for Otter®.
Below is a highlysummary of our key production, manufacturing, assembly and packaging arrangements with third-party manufacturers for TLANDO®:
•We use Pfizer to supply the active pharmaceutical ingredient (“API”).
•We have contracted with NextPharma, an international pharmaceutical manufacturing company, to supply the bulk capsule product.
•We use PCI Pharma Services (“PCI”), an international contract packaging company, to assemble and package TLANDO®.
We have an experienced quality group that works with and regularly inspects or meets with our manufacturers and suppliers to review the manufacturing process for our products and product candidates, and to provide input on quality issues.

matters.

In addition to the above manufacturing capabilities, on July 1, 2019, we entered into a lease for approximately 75,000 square feet of office, laboratory, manufacturing and warehousing space in Minnetonka, Minnesota. We completed the build-out of the facility and began occupying the space in 2020. The new facility supports our administrative functions, product development and quality operations and is intended to provide additional manufacturing and warehousing capabilities in the future.
Commercial Operations
We have built a robust internal commercial organization, consisting of specialty sales representatives, management and support staff, to market and sell our proprietary products XYOSTED®, OTREXUP® and NOCDURNA® in the U.S. As of December 2021, commercialization and distribution of OTREXUP® is the responsibility of Otter in accordance with the Asset Purchase Agreement. In anticipation of final FDA approval, we are preparing to launch TLANDO® in 2022. We have entered into agreements with vendors for certain commercialization services such as third-party logistics, distribution, data analytics and claims processing. We have and may continue to enter into licensing and or additional distribution arrangements for commercialization of our products outside the U.S.
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Distribution – We have contracted with a third-party logistics provider, Cardinal Health 105, Inc., also known as Specialty Pharmaceutical Services (“Cardinal”), for key services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable management and call center management. We also use a division of Cardinal for sample administration. In addition, we use third parties to perform various other services for us relating to regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services.
Trade – We contract with numerous wholesale distributors, including Cardinal, McKesson Corporation (“McKesson”) and AmerisourceBergen Corporation to distribute our proprietaryproducts to retail pharmacies as well as the Veterans Administration and other governmental agencies. In addition to shipping our product, these distributors provide inventory and sales reports as well as other services. In exchange for these services, we pay fees to certain distributors based on a percentage of wholesale acquisition cost. We have also contracted with several specialty pharmacies to support fulfillment of certain prescriptions.
Third Party Reimbursement and Pricing – In the U.S., sales of pharmaceutical products to consumers depend to a significant degree on the availability of coverage and reimbursement by third-party payers, such as government and private insurance plans. Third-party payers are increasingly challenging the pricing of products and services and implementing other cost containment mechanisms, including demanding more aggressive pricing and rebates for favorable formulary placement. This is especially true in markets where generic options exist. Third-party payers often use a tiered reimbursement system and may require step edits or prior authorization. It is time consuming and expensive for us to seek and maintain coverage for our products and to process reimbursements from Medicaid, Medicare and private payers.
Participation in the Medicaid program requires payment of statutory rebates on unit dispenses. Some states have also created Medicaid preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. Some States have implemented statutes imposing other consequences for a manufacturer’s failure in certain circumstances to negotiate supplemental rebates, including but not limited to, ordering managed care plans to limit or reduce reimbursement for a drug provided by a medical practitioner. If our products are not included on these preferred drug lists, they may be subject to prior authorization.
Similarly, in order to ensure coverage by Medicare Part D and commercial pharmacy benefit plans, we participate in certain rebate programs, which provide discounted prescriptions to qualified insured patients. Under these rebate programs, we pay a rebate to the third-party administrator of the program. We also provide discounts to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs, including discounts mandated by the Veterans Health Care Act, discounted prescriptions to Department of Defense’s (“DoD”) Tricare retail pharmacy program, and statutory discounts to federal grantees and safety net providers referred to as covered entities pursuant to our pharmaceutical pricing agreement with the Department of Health and Human Services and the 340B drug discount program, which is required as a condition of Medicaid coverage. Government agencies ordering under the FSS and covered 340B entities purchase products from the wholesale distributors at the discounted price, and the wholesale distributors then charge back the difference between the current wholesale acquisition cost and the price the entity paid for the product.
We also offer co-pay assistance programs to patients for our proprietary products under which patients covered by commercial pharmacy benefit plans receive discounts on their prescriptions. Our XYOSTED® STEADYCare Co-pay Assistance Program provides financial support to most commercially insured patients to assist with out-of-pocket costs of XYOSTED®. In addition, certain commercially insured patients are eligible for our “first fill free” program for XYOSTED® to assist the patient during the initial claims adjudication process. Similar to XYOSTED®, we offer a co-pay assistance program for NOCDURNA®, which also provides financial support to most commercially insured patients to assist with out-of-pocket costs. We use contract service providers to process and pay claims to patients for actual usage. We also offer the ability for patients who do not have insurance, or whose insurance does not cover our proprietary products, the ability to purchase either XYOSTED® or NOCDURNA® with a valid prescription at a cash price via a specialty pharmacy.
International Distribution – We are contracting with a third-party logistics provider, Cardinal, for key services related to logistics, warehousing and inventory management, international shipping, export and customs administration to support our international distributor, Lunatus. We entered into an exclusive distribution agreement with Lunatus in August 2020 to distribute and promote the sale of XYOSTED® in Saudi Arabia and the United Arab Emirates. Lunatus is responsible for obtaining regulatory approval and, assuming approval, for the promotion and commercialization of the product in the territories.
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Sales, Marketing & Distribution of Partnered Products
Our partnered products may encounter some of the same reimbursement issues described above, and although we do not control the reimbursement rate or discounts contracted with third-party payers by our partners, it ultimately affects our royalty payments we receive on net sales. The industry has experienced an increasingly widening gap between gross sales and net sales after discounts.
Epinephrine Injection USP – We are the exclusive supplier of the device used in Teva’s epinephrine injection product. We receive payment for each device sold to Teva and royalties on Teva’s commercial sales of the product. Teva’s epinephrine injection was approved as a generic drug product with an AB rating, meaning that it is therapeutically equivalent to Viatris Inc.’s branded products EpiPen® and EpiPen Jr® and therefore, subject to state law, is substitutable at the pharmacy. Teva is solely responsible for commercialization and distribution of the finished product.
Makena® Subcutaneous Auto Injector – We are the exclusive supplier of the device used in the Makena® subcutaneous auto injector. We receive payment for each device sold to Covis and royalties on Covis’ commercial sales of the product. Covis primarily sells Makena® to specialty pharmacies, specialty distributors, home infusion companies and pharmacies which, in turn, sell Makena®to healthcare providers, hospitals, government agencies and integrated delivery systems. Covis is solely responsible for commercialization and distribution of the finished product.
Sumatriptan Injection USP – We are the exclusive supplier of the product containing sumatriptan which is commercialized by Teva. We are compensated at cost for shipments of product to Teva. In addition, net profits from sales of the product, after deduction of product sales allowances such as discounts, rebates and chargebacks, are split 50/50 between us and Teva. Teva is solely responsible for commercialization and distribution of the finished product.
Teriparatide Injection – We are the exclusive supplier of the pen injection device used in Teva’s Teriparatide Injection product outside the U.S. Teva launched its generic version of Forsteo® in certain territories outside the U.S. in 2020. We receive payment for each device sold to Teva and royalties on Teva’s commercial sales of the product in the territories. Teva is solely responsible for commercialization and distribution of the finished product.
OTREXUP® (methotrexate) Injection – Pursuant to the Asset Purchase Agreement, license agreement and supply agreement, we are the exclusive supplier of the device used in OTREXUP® beginning in December 2021. We receive payment for each device sold to Otter. Otter is solely responsible for commercialization and distribution of the finished product.
Information about Revenues and Customer Concentrations
For information about revenues and customer concentrations, see Item 7 of Part II of this Annual Report on Form 10-K. Significant customers from which we derive 10% or more of our total revenue in each or any of the years in the three-year period ended December 31, 2021 include: Teva, McKesson, AmerisourceBergen Corporation, Cardinal Health and Covis. For more detailed information, see Note 14 – Revenues, Significant Customers and Concentrations of Risk in the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.
Collaborative Arrangements and License Agreements

We have entered into significant partnering arrangements and licensing agreements with Teva, AMAG,Covis, Pfizer, Idorsia and other pharmaceutical partners. The following is a summary of thosecertain agreements.

Teva License, Development and Supply Agreements

In July 2006, we entered into an exclusive License, Developmentlicense, development and Supplysupply Agreement with Teva for an epinephrine auto injector product to be marketed in the U.S. and Canada. Pursuant to the agreement, Teva is obligated to purchase all of its delivery device requirements from us. We received an upfront cash payment and a milestone payment upon FDA product approval. We also receive a negotiated purchase price for each device sold, as well as royalties on Teva’s futurecommercial sales of the product. This agreement has been amended to provide for payment of capital equipment and other ongoing development work that was outside the scope of the original agreement. The agreement will continue until the expiration of the last to expire patent that is filed no later than 12 months after FDA approval. We have multiple patents that have been granted by the USPTOUnited States Patent and Trademark Officer (“USPTO”) that cover thisthis product, the latest of which will expire in 2033. We have and plan to continue to file patent applications covering this product.

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In December 2007, we entered into a license, development and supply agreement with Teva under which we developed and will supply a disposable pen injector for two therapeutic products: exenatide and teriparatide. Under the agreement, we received an upfront payment and development milestones, and may receive royalties on future product sales. This agreement has been amended numerous times and provides for payment of capital equipment and other development work that was outside the scope of the original agreement. This agreement will continue until the later of December 2017 or the expiration date of the last to expire patent covering the device or product that is filed no later than 12 months after FDA approval and will be automatically renewed for successive


periods of two years each. Currently, the expiration date of the last to expire patent is 2035,2035. On February 25, 2022, Teva notified us that it was terminating the exenatide program and we have filed additional patent applications that, if granted, would expire beyond that date.

related agreement due to a lack of commercial viability. The termination is effective August 23, 2022.

In November 2012, we entered into a license, supply and distribution agreement with Teva for an auto injector product containing sumatriptan for the treatment of migraines. Under the agreement, we received an upfront payment and a milestone payment upon commercial launch, which occurred in June 2016.launch. Teva is responsible for the manufacture and supply of the drug, and we are responsible for the manufacture and supply of the device and assembly and packaging of the finished product. We are compensated at cost for product shipment to Teva and Teva distributes the product in the U.S. Teva also received an option for distribution rights in other territories. In addition, net profits are split 50/50 between us and Teva. The term of the agreement continues seven years from commercial launch, which was in June 2016, with automatic one-year renewals unless terminated sooner by either party in accordance with the terms of the agreement.

AMAG Development and License Agreement

Covis Agreements
In September 2014, we entered into a development and license agreement with Lumara Health, Inc., which was subsequently acquired by AMAG, which was subsequently acquired by Covis, to develop and supply an auto injector system for use with Makena®, a progestin drug (hydroxyprogesterone caproate)indicated to reduce the risk of preterm birth.Under the agreement, we granted an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, and received an upfront payment for our license and development activities. We are also entitled to milestone payments upon the achievement of pre-determined amounts of net sales of the product.

AMAG

Covis was responsible for the clinical development and preparation, submission and maintenance of all regulatory applications, and is responsible for the manufacture and supply of the drug to be used in the product, and to market, distribute and sell the product. We are the exclusive supplier of the auto injection system devices for the product and are responsible for the manufacture and supply of the devices and final assembly and packaging of the finished product. Under the arrangement, we will receive payment for each device, and royalties based on the net sales of products commencing on product launch in a particular country until the product is no longer developed, marketed, sold or offered for sale in such country. The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of products and decrease after the expiration of licensed patents or where there are generic equivalents to the auto injector product being sold in a particular country.

Ferring Agreements

In January 2003,March 2018, we entered into a revised License Agreementmanufacturing 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 devicesCovis for the field of hGH until the expirationexclusive supply of the last to expiredevices and fully assembled and packaged final finished product of the patents in any country in the territory. We granted to Ferring similar non-exclusive rights outside of the prescribed manufacturing territory.  In 2007, we amended this agreement providing for non-exclusive rights in Asia along with other changes to financial terms of the agreement.  We receive a purchase price and a royalty for each device sold to Ferring and a royalty on their hGH sales if we meet certain product quality metrics. This agreement will remain in effect until the completion of the Ferring Transaction, as described in Part I, Item 1. Business “Overview” section above.

In September 2006, we entered into a Supply Agreement with Teva, and in December 2014, Ferring acquired the U.S. rights from Teva and assumed Teva’s obligations under the Supply Agreement.  Pursuant to the agreement, Ferring is obligated to purchase all of its delivery device requirements from us for hGH marketed in the U.S. We received an upfront cash and milestone payments and are entitled to royalty payments on net sales of hGH, as well as a purchase price for each device sold.  The original term of this agreement extended through September 2013, which was amended in May 2013 to provide for one-year automatic renewals unless terminated by either party six months ahead of the expiring term.   This agreement will remain in effect until the completion of the Ferring Transaction, as described in Part I, Item 1. Business “Overview” section above.

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, milestone payments and will receive additional milestone payments as certain defined product development milestones are achieved.  The agreement is effective until the last to expire patent.

Other Agreements

We have a licensing agreement with Allergan, plc, under which we receive royalties on sales of their oxybutynin gel product GelniqueMakena® 10%.subcutaneous auto injector. The term of the agreement ends onis concurrent with the later of April 2024 or the expiration dateterm of the last to expire patent.


development and license agreement and will continue until such time as commercialization of the product is halted. We havereceive a licensingcontracted price per unit on each product manufactured.

Pfizer Agreement
In August 2018, we entered into a development agreement with Meda (acquired by MylanPfizer to jointly develop a combination drug device rescue pen. This rescue pen will use the Antares QuickShot® auto injector and an undisclosed Pfizer drug. In 2021, we continued to work on this development program, and we expect to continue development of this product candidate.
Idorsia Agreement
In November 2019, we entered into a new global agreement with Idorsia to develop a novel, drug-device product containing selatogrel. A new chemical entity selatogrel is being developed for the treatment of a suspected AMI in 2016), underadult patients with a history of AMI. Idorsia will pay for the development of the combination product and will be responsible for applying for and obtaining global regulatory approvals for the product. The parties intend to enter into a separate commercial license and supply agreement pursuant to which weAntares will provide fully assembled and labelled product to Idorsia at cost plus mark-up. Idorsia will then be responsible for global commercialization of the product, pending FDA or foreign approval. Antares will be entitled to receive royalties on net sales of Elestrin®.

Proprietary Rights

When appropriate,the commercial product.

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Ferring Agreement
In October 2020, we actively seek protectionentered into an exclusive license and commercial supply agreement with Ferring 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 pendingthe marketed product NOCDURNA® (desmopressin acetate) in the U.S., which is indicated for the treatment of nocturia due to nocturnal polyuria (NP) in adults who awaken at least two times per night to urinate. Under the terms of the license agreement, the Company paid Ferring an upfront payment of $5.0 million upon execution and other countries.  Our patents havepaid an additional $2.5 million on October 1, 2021. Ferring is eligible for tiered royalties and additional commercial milestone payments potentially totaling up to $17.5 million based on our net sales of NOCDURNA® in the U.S.
Lipocine Agreement
In October 2021, we entered into an exclusive license agreement with Lipocine for the product TLANDO® (testosterone undecanoate) in the U.S., a twice-daily oral formulation of testosterone for testosterone replacement therapy indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males. TLANDO® was granted tentative approval from the FDA in December 2020 and will be eligible for final approval and marketing in the U.S. upon expiration dates ranging from 2019of the exclusivity period previously granted to 2035.Clarus for JATENZO® on March 27, 2022. On February 3, 2022, we announced the FDA’s acceptance of our NDA resubmission for TLANDO® with a target action date set for March 28, 2022. We continue to prepare for the launch of TLANDO® in 2022 pending final FDA approval after the expiration of JATENZO®’s exclusivity period. Under the terms of the license agreement, we paid Lipocine an upfront payment of $11.0 million. Lipocine is eligible for additional milestone payments up to $10.0 million and tiered royalty and commercial milestones based on net sales of TLANDO® in the U.S. We will be responsible for the manufacturing and commercialization of TLANDO®.
The license agreement also grants us the option to license and develop LPCN 1111 (TLANDO XR) in the U.S., a potential once daily oral testosterone product containing testosterone tridecanoate in development for the treatment of hypogonadism in adult males. Results of the Phase 2b study for TLANDO XR met its primary endpoints, including identifying the dose expected to be tested in a Phase 3 study. TLANDO XR was well tolerated with no drug-related severe or serious adverse events reported and the target Phase 3 dose also met its primary and secondary endpoints in the Phase 2b study. TLANDO XR is an investigational drug containing tridecanoate and has not been approved by the FDA, nor has the name been approved. If elected, upon exercise of the option, we will be required to pay an additional $4.0 million in license fees in two installments and will be responsible for additional development and commercial milestone payments as well as tiered royalties on net sales of TLANDO XR in the U.S. In addition, we will be responsible for completing the development program including the conduct of a Phase 3 clinical trial and applying for regulatory approval in the U.S.
Otter Agreement
In December 2021, we entered into an Asset Purchase Agreement with Otter to issued patentssell certain worldwide assets used in the operation of the OTREXUP® product line for $44.0 million, subject to finalization of changes in closing inventory to be transferred, and patent applications,a license agreement for rights to commercialize OTREXUP®. Simultaneously, we are also protectedentered into a supply agreement with Otter to manufacture the VIBEX® auto-injection system device, designed and developed to incorporate a pre-filled syringe for delivery of methotrexate, assemble, package, label and supply the final OTREXUP® product and related samples to Otter at cost plus mark-up. Otter is responsible for manufacturing, formulation and testing of methotrexate and the corresponding pre-filled syringe for assembly with the device manufactured by trade secrets in allus, along with the commercialization and distribution of OTREXUP®.
Seasonality of Business
Certain parts of our technologies.

Some of our technology is developed on our behalfbusiness may be affected 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 weseasonality. Customer purchases have entered into development agreements have the right to certain technology developedhistorically been lower in connection with such agreements.

Seasonality of Business

We do not believe seasonality has a significant impact on our business.  However, we typically see lower OTREXUP® sales during the first quarter which we believe is driven byof the year due to the resetting of high-deductible health insurance deductibles at the beginningplans. Seasonality affects quarterly comparisons within any fiscal year; however, we believe this impact is generally not material to our annual consolidated results. Our revenues may be influenced by many factors, including regulatory and reimbursement approvals, timing of each year.

product launches, acquisitions or divestitures, holiday schedules, and other macro-economic conditions.

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Competition

The pharmaceutical and medical device and biotechnology industries are intensely competitive and subject to rapid and significant technological change. We have a wide range of competitors depending upon the branded or generic marketplace, the therapeutic product category, and the product type, including dosage strengths and route of administration. Our competitors include established biotechnology development companies, specialty pharmaceutical companies, major brand name and generic manufacturers of pharmaceuticals such as Teva, Mylan,Viatris, Eli Lilly and Endo, as well as a wide range of medical device companies that sell a single or limited number of competitive products or participate in only a specific market segment. Our competitors also include third party contract medical device design and development companies such as Scandinavian Health Ltd. (“SHL”), Ypsomed AG, West Pharmaceutical and Owen Mumford Ltd. (“Owen Mumford”). Many of our competitors have greater financial and other resources than we have, such as more commercial resources, larger research and development staffs and more extensive marketing and manufacturing organizations. Smaller or early stage emerging companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.

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.

If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both. Branded products not only face competition from other brands, but also from generic versions. Generic versions are generally significantly less expensive than branded versions, and, where available, may be required in preference to the branded version under third-party reimbursement programs, or substituted by pharmacies. Most new products that we introduce must compete with other products already on the market or products that are later developed by competitors. Manufacturers of generic pharmaceuticals typically invest far less in research and development than research-based pharmaceutical companies and therefore can price their products significantly lower than branded products. Accordingly, when a branded product loses its market exclusivity, it normally faces intense price competition from generic forms of the product. To successfully compete for business with managed care and pharmacy benefitsbenefit management organizations, we must often demonstrate that our products offer not only medical benefits but also cost advantages as compared with other forms of care.

Newly introduced generic products with limited or no other generic competition typically command higher prices initially. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. As a result, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop


and launch new generic products in a timely and cost efficientcost-efficient manner and to maintain efficient, high quality manufacturing capabilities.

Industry Trends

Based upon our experience, we believe the following significant trends have important implications for the growth of our business. Recent trends in the pharmaceutical industry include merger and acquisition activity leading to further market consolidation. In many cases, the resulting combined pharmaceutical companies are bigger and have more financial, technical and market strength and greater resources, which increases competitive pressure in the industry.

There is ongoing effort by public and private payers to reduce the cost of drugs and reduce the overall cost of health care. There continues to be greater pressure on drug manufacturers to provide greater discounts and rebates on their products. The drug distribution channels are complex and involve many different parties. Recently, such channels have undergone and continue to undergo consolidation. Drug wholesalers and retail drug chains have merged or consolidated resulting in significantly larger organizations with greater resources and bargaining power controlling multiple levels of the drug distribution network. Consequently, pharmaceutical companies are facing increasing pressure to reduce prices. Additionally, the emergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of managed care organizations and similar institutions, enable those groups to demand larger price discounts on our products. For example, there has been a recent trend of largeLarge wholesalers and retailer customers forming partnerships, such as the alliance between CVS and Cardinal Health.have continued to form partnerships. As a result of this consolidation among wholesale distributors as well as the growth of large retail drug store chains, a small number of large wholesale distributors control a significant share of the market.

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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 U.S. 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, controlled substance security, export, import, storage, record keeping, safety and other reporting, sampling, advertising, marketing, 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 (“FFDCA”) and the regulations thereunder, and noncompliance can result in a variety of regulatory enforcement actions ranging from warning letters, product detentions, device alerts or field corrections to recalls, seizures, manufacturing shut downs, quarantines, refusal of the government to approve NDAs or ANDAs, or supplements to the same, clinical holds, injunctive actions, withdrawal of approvals, civil or criminal actions or penalties, disgorgement, adverse publicity, labeling revisions, dear healthcare provider letters, FDA debarment, exclusion from Federal healthcare programs, contract debarment or refusal of future orders under existing government contracts, consent decrees, and corporate integrity agreements. Furthermore, new government requirements may be established that could delay or prevent regulatory approval of our products under development.

Drug Approval Process

FDA approval of our own and our partners’ products is required before the products may be commercialized in the United States. U.S. Section 505 of the FFDCA describes three regulatory pathways for marketing authorization for a new drug:

•A 505(b)(1) NDA is an application that is used for the approval of a new drug that contains full reports of investigations of safety and effectiveness.

•A 505(b)(2) NDA is an application where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This alternate route for regulatory approval permits the applicant to rely in part upon the FDA’s findings of safety and effectiveness for previously approved products and/or published scientific literature. The FDA may then approve

•Section 505(j) establishes an abbreviated approval process for generic versions of approved drug products through the newsubmission of an ANDA. An ANDA provides for marketing of a drug product candidate for all or some ofthat has the labeled indications for whichsame active ingredients in the reference product has been approved, as well as for any new strength, dosage form,same strengths, route of administration, or indication soughtand dosage form as the listed drug, which has the same labeling, performance, characteristics, and intended use as the listed drug, and has been shown to be bioequivalent to the listed drug. ANDA applicants are generally required to conduct bioequivalence testing to confirm pharmaceutical and therapeutic equivalence to the branded reference drug. Generic versions of drugs can often be substituted by pharmacists under prescriptions written for the 505(b)(2) applicant that is supported by new clinical data and/or published scientific literature.

branded reference drug, pursuant to state laws.
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•

Section 505(j) establishes an abbreviated approval process for generic versions of approved drug products through the submission of an ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths, route of administration, and dosage form as the listed drug, which has the same labeling, performance, characteristics, and intended use as the listed drug, and has been shown to be bioequivalent to the listed drug. Limited changes to these factors are permitted in some cases but must be pre-approved by the FDA via a suitability petition. The


FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if, among other reasons, the FDA determines that it is not equivalent to the referenced listed innovator drug, if it is intended for a different use, or if it is not subject to an approved suitability petition. ANDA applicants are generally required to conduct bioequivalence testing to confirm pharmaceutical and therapeutic equivalence to the branded reference drug. Generic versions of drugs can often be substituted by pharmacists under prescriptions written for the branded reference drug, pursuant to state laws.

For both NDAs and ANDAs, the FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing methods and controls are adequate to assure and preserve the product’s identity, strength, quality, safety, potency, and purity.

The following table provides a summary description of the various regulatory pathways:

ANDA

ANDA505(b)(2) NDA

505(b)(1) NDA

Clinical Trials/Testing

Required

Generally, bioequivalence.

Yes, to address potential differences between the branded reference product and the 505(b)(2) product, as well as bridging studies.

Yes, full reports of safety and efficacy.

Results in Orange Book

Listed Patents

No

No

Yes, for novel formulations, other enhancements and new indications.

Yes

Exclusivity

Exclusivity

Potential for 180 days against other generic filers if first generic to filefilea substantially complete application containing a paragraph IV certification that is lawfully maintained.

Potential for 30-month stay if ANDA or 505(b)(2) applicant citing our or our partners’ product as a reference listed drug includes a paragraph IV certification. Also, potential for three- or five-year exclusivity, like 505(b)(1) NDAs.

Potential of five years for a new chemical entity, or three years for new clinical investigations (other than bioavailability and bioequivalence studies) that are essential to approval of the application. Potential for 30-month stay if ANDA or 505(b)(2) applicant citing our or our partners’ product as a reference listed drug includes a paragraph IV certification.

Potential for five years for a new chemical entity, or three years for new clinical investigations (other than  bioavailability and bioequivalence  studies) that are essential to approval of the application. Potential for 30-month stay if ANDA or 505(b)(2) applicant citing our or our partners’ product as a reference listed drug includes a paragraph IV certification.

Patent Certification Required

Yes

Yes

No

Patent Certification

   Required

Yes

Yes

No

Potential orphan drug

   designationOrphan Drug Designation Drug Status

No

No

Yes

Yes

Yes

NDA Submission

The process required by the FDA before a new drug pharmaceutical product or a change to an already approved pharmaceutical product, may be approved for marketing in the U.S. generally involves:

•pre-clinical laboratory and animal tests;

•submission to the FDA of an Investigational New Drug (“IND”) application, which must be in effect before clinical trials may begin;

•adequate and well controlled human clinical trials to establish the safety and efficacy of the drug for its intended indication(s);


•development of manufacturing processes to ensure the drug’s identity, strength, quality and purity;

•

development of manufacturing processes to ensure the drug’s identity, strength, quality, and purity;

•submission to the FDA of aan NDA;

•FDA compliance inspections and/or clearance of all manufacturers and facilities, as well as select clinical trial sites; and

•FDA review of the NDA in order to determine, among other things, whether the drug is safe and effective for its intended uses.

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The preclinical and clinical testing and approval process takes many years and the actual time required to obtain approval, if any, may vary substantially based upon the type, complexity and novelty of the product or disease. Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including cGLPs. The results of preclinical testing are submitted to the FDA as part of an IND, to support human clinical trials along with other information, including information about product chemistry, manufacturing and controls, available scientific literature, and a proposed clinical trial protocol. Some preclinical testing may continue even after the IND is submitted.

A In the case of drug product candidates for which the sponsor will seek marketing approval via a 505(b)(2) NDA application, some of a proposed clinical trial must submit an the above information may be abbreviated or omitted.

IND application to the FDA before a clinical trial may commence.  The IND applicationapplications automatically becomesbecome effective 30 days after receipt by the FDA, unless the FDA within the 30-day time period, raises concerns or questions relating to one or more proposed clinical trials and places the clinical trial on a clinical hold. If the FDA places a trial on clinical hold, including concerns that human research subjects will be exposedthe sponsor must address the issue to unreasonable health risks.the FDA’s satisfaction before the trial may begin. In addition, an independent Institutional Review Board (“IRB”), covering each site proposing to conduct the clinical trial or a central IRB must review, approve and approvemonitor the plan for any clinical trial, subject communications, and informed consent information for subjects before the trial commences at that site and it must monitor the study until completed.commences. The FDA, the IRB or the sponsor may suspend a clinical trial, place a trial on hold or discontinue a trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the IRB's or FDA’s requirements.

grounds.

Once an IND is in effect, each new clinical protocol and any amendments to the protocols must be submitted to the IND for FDA review, and to the IRB for approval. Progress reports detailing the results of the clinical trials must also be submitted at least annually to the FDA and the IRB and more frequently if serious adverse events or other significant safety information is found.

Sponsors of clinical trials generally must register and report, at the NIH-maintained website ClinicalTrials.gov, key parameters of certain clinical trials, including clinical trial results within set timeframes.timeframes, with the exception of PK studies. Failure to submit the required information to ClinicalTrials.gov can result in monetary penalties. Investigators must also provide certain information to the clinical trial sponsors to enable sponsors to make certain financial disclosures to the FDA. Moreover, under the 21st Century Cures Act, manufacturers or distributors of investigational drugs for the diagnosis, monitoring or treatment of one or more serious diseases or conditions must have a publicly available policy concerning expanded access to investigational drugs.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients in accordance with the applicable protocol and all applicable laws, rules and regulations. Clinical trials are typically conducted in sequential phases, which may overlap, though in the case of a 505(b)(2) NDA, some study requirements may be abbreviated. Studies, in addition to the below, such as pediatric studies, may also be required by the FDA:

FDA:

•Phase I -– During phasePhase I, when the drug is initially given to human subjects, the product is tested for safety, dosage tolerance, absorption, distribution, metabolism and excretion. Phase I studies are often conducted with healthy volunteers depending on the drug being tested. If possible, Phase 1I trials may also be used to gain an initial indication of product effectiveness.

•Phase II -– Phase II involves controlled studies in a limited patient population, typically patients with the conditions needing treatment, to evaluate preliminarily the efficacy of the product for specific, targeted indications; determine dosage tolerance and optimal dosage; and identify possible adverse effects and safety risks.

•Pivotal or Phase III -– Adequate and well-controlled trials are undertaken in phasePhase III in order to evaluate efficacy and safety in a comprehensive fashion within an expanded patient population for seeking approval of the new drug. Typically, two Phase III trials are required by FDA for product approval.

In the case of 505(b)(2) NDAs, the above studies may be abbreviated. Following marketing approval, sponsors may also voluntarily or be required to conduct additional studies, called Phase IV studies.
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In some cases, FDA programs may be available to expedite or simplify the process of drug development and FDA marketing application review. For instance, drug products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means the FDA may approve the product based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. A drug candidate approved on this basis is subject to the FDA’s prior review of promotional materials. Accelerated approval products are also required to conduct rigorous post-marketing compliance requirements, including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the drug or biologic from the market on an expedited basis. If the FDA proposes withdrawing an accelerated approval, the agency provides the applicant with an opportunity for a hearing. If the applicant files a timely request for a hearing, the applicant must submit any data and information to the FDA upon which it plans to rely. At the hearing, an advisory committee is asked to review the applicable issues and provide advice and recommendations to the FDA.
Sponsors may also request that a product be designated under the FDA’s fast track program.Under this program, products that are intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need, if so designated by the FDA, are eligible for more frequent development meetings and correspondence with the FDA. In addition, to the above traditional kindsFDA may initiate review of data requiredsections of an application before the application is complete. This “rolling review” is available if the applicant provides and the FDA approves a schedule for the remaining information. In some cases, a fast-track product may be eligible for other FDA programs intended to expedite product development and approval for serious and life-threatening diseases. Notably, however, such designations and programs may be withdrawn by the FDA and such designations and programs do not guarantee that a product will ultimately be successfully developed or approved for marketing.
Another program that is intended to facilitate development is the special protocol assessment (“SPA”) program. Under this program, a sponsor may be able to request a special protocol assessment, or SPA to reach agreement with the FDA on certain studies. If a written agreement is reached regarding the applicable study protocol, the agreement will be binding on the FDA and the protocol may not be changed by the sponsor or the FDA after the trial begins except with the written agreement of the sponsor and the FDA or if the FDA determines that a NDA,substantial scientific issue essential to determining the recently passed 21st Century Cures Act, provides for FDA acceptancesafety or efficacy of the product candidate was identified after the testing began. An SPA is not binding if new kinds of data such as patient experience data, real world evidence for previously approved products,circumstances arise, and for appropriate indications sought through supplemental marketing applications, data summaries.

there is no guarantee that a study will support an approval even if the study is subject to an SPA.

In addition, under the Pediatric Research Equity Act, or PREA, aan NDA or supplement to aan NDA for a new active ingredient, indication, dosage form, dosage regimen, or route of administration must contain data that areis adequate to assess the safety and


effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

The FDA, an IRB, or a sponsor may suspend or terminate clinical trials at any point in this process on various grounds, including a finding that patients are being exposed to an unacceptable health risk, if they decide it is unethical to continue the study, the clinical trial is not being conducted in accordance with FDA or IRB requirements, or based on evolving business objectives or the competitive climate. 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 subject to rigorous statistical analyses.

Following marketing approval, sponsors may also voluntarily or be required to conduct additional studies, called Phase IV studies.  For instance, the FDA may approve a NDA for a product candidate, but require that the sponsor conduct additional clinical trials to further assess the drug after NDA approval under a post-approval commitment. In addition, a sponsor may decide to conduct additional clinical trials after the FDA has approved a NDA.

The results of drug development, pre-clinical studies and clinical trials are submitted to the FDA as part of aan NDA. NDAs also must contain extensive chemistry, manufacturing and control information. In most cases, the submission of aan NDA is subject to a substantial application user fee. Fee waivers or reductions are available in certain circumstances.

Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive review.review and will be accepted for filing. The FDA may request additional information rather than accept aan NDA for filing. Once the submission is accepted for filing, the FDA’s goal is to review 90% of all applications for non-New Molecular Entities (“NMEs”), within ten months from the submission date. For NMEs, the FDA has the goal of completing its review of 90% of applications within ten months of the 60-day filing date. The FDA, however, may give a priority review designation to drugs that are intended to treat serious conditions and, if approved, would provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of the serious conditions. A priority review means that the goal for the FDA is to review an application within six months of the submission date for nonnon-NMEs and within six months of the 60-day filing date for NMEs. These timeframes, however, are only goals, which the FDA may not meet. Moreover, the review process may also be extended if the FDA requests or the NDA sponsor otherwise provides substantial additional information or clarification regarding the submission.

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The FDA may also choose or be required to refer drugs to advisory committees when it is determined that an advisory committee’s expertise would be beneficial to the regulatory decision-making process, including the evaluation of new technology. An advisory committee is a panel that includes clinicians and other experts, which review, evaluate, and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

After evaluating the NDA and all related information, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter authorizing marketing for specific conditions, or, in some cases, a CRLComplete Response Letter (“CRL”) describing the application deficiencies. If a CRL is issued, the applicant may either resubmit the NDA addressing all of the deficiencies identified in the letter; withdraw the application;application or request an opportunity for a hearing. The FDA has the goal of reviewing 90% of application resubmissions in either two or six months of the resubmission date, depending on the kind of resubmission. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If and when those conditions have been met toa product meets the FDA’s satisfaction,approval standards but the approval of the product cannot be made effective before the expiration of patents or exclusivities held by the reference listed drug, the FDA may issue an approval letter. Ana tentative approval letter authorizes commercial marketingto the applicant. Under these circumstances, the FDA delays the final approval of the drugproduct until all patent or exclusivity issues have been resolved. Products with specific prescribingtentative approvals may not be marketed until the FDA issues a final approval. Following a tentative approval, applicants may amend their application; however, amendments may delay the FDA’s ability to finalize the approval as the FDA must review and approve the amendment. In order to obtain final approval, the applicant must submit a request to the FDA for final approval (which we did for TLANDO® on January 28, 2022 with acceptance by the FDA announced on February 3, 2022). The FDA’s review of requests for final approval may take a number of months and depends on the content of the request and the kind of application. Even if a product has received tentative approval, there is no guarantee that the product will receive final approval, as new information for specific indications.

may emerge that changes the FDA’s prior determination.

ANDA Submissions

Much like NDAs, FDA approval is required before a generic drug equivalent to a listed drug can be marketed. Generic drugs are the pharmaceutical and therapeutic equivalents of branded products, and are generally marketed under their generic (chemical) names rather than by brand names.

A pharmaceutical company seeking to market a generic version of a branded drug must file aan ANDA with the FDA. For ANDAs, applicants are not required to conduct complete clinical studies. Such applications, though, normally require bioavailability and/or bioequivalence studies. “Bioavailability” indicates the rate and extent to which the active ingredient or active moiety is absorbed from a drug product and becomes available at the site of drug action. “Bioequivalence” indicates that there are no significant differences in the rate and extent to which the active ingredient or active moiety becomes available at the site of drug action, when administered at the same molar dose and under similar conditions in an appropriately designed study. Generic drug products must be bioequivalent to a drug product approved by the FDA under a NDA application, referred to as a reference listed drug.  While an IND, in many cases, is not required for bioavailability and bioequivalence testing, such studies must still be conducted in accordance with Good Clinical Practices (“GCPs”) and under the supervision of an IRB.


Like NDAs, ANDAs must be accompanied by user fees. For generic drugs, other fees, such as fees for drug master files, program fees and fees for manufacturing facilities, also may also be required to be paid by the applicant, manufacturer, and/or drug master file holder.

Following submission of an ANDA, the FDA has 60 days to evaluate the application to determine if it is substantially complete. If the agency finds that the application is substantially complete, it will receive the application and begin its substantive review. As part of this substantive review, the FDA will determine whether or not the generic version submitted by the company meets the necessary approval standards, including bioequivalence to the reference listed drug, adequate chemistry, manufacturing and controls, and manufacturing facilities and clinical study sites passing pre-approval inspections. Under the FDA’s Generic Drug User Fee Act performance goals, the FDA has the goal of reviewing and acting on 90% of standard original ANDAs within ten months of submission.  Certainsubmission; however, certain factors such as the availability of other approved drug products, certain patent certifications, and certain exclusivities, may result in an ANDA being considered to be a priority ANDA, which can result inlengthen or shorten this review time being shortened to eight months, provided that a sufficiently complete and accurate pre-submission facility correspondence is submitted to FDA two months before the ANDA submission, and information provided in this correspondence remains unchanged.  

timeline.

Following its completion of the review of aan ANDA, the FDA will either issue an approval letter authorizing marketing for specific conditions, or a CRL. If a CRL is issued, the applicant may either respond to the FDA addressing all of the deficiencies identified in the letter;letter, withdraw the application;application or request an opportunity for a hearing. The FDA has the goal of reviewing 90% of applicants’ CRL responses within eight or ten months, depending on whether a preapproval inspection is required.  This timeframe may be shortened to six or eight months, respectively, for priority responses and provided that certain criteria are met.  Even with the applicant’s submission of this additional information, the FDA ultimately may decide that thealso tentatively approve an ANDA application, does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

as described above.

Upon approval, the FDA will rate generic drug products in the Orange Book. Products meeting bioequivalence standards will typically receive an AB rating. Under state law, such generic drug products may be able to be substituted at the pharmacy for the brand-name drug without the intervention of the prescribing physician, unless otherwise specified by the patient or physician,physician. Many third partythird-party payers of prescription drugs (e.g., health insurance plans, Medicare and Medicaid programs) have adopted policies to encourage the substitution of the lower-priced AB-rated generic drugs for the higher-priced branded drugs when an AB-rated generic drug is available as generic drugs are sold generally at prices below those of the corresponding branded products. Generic drugs may provide a cost-effective alternative for consumers while maintaining the same active ingredient(s), dosage form, strength, route of administration, and conditions of use as the branded product.

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Generally Applicable Requirements

Clinical trials for all product candidates must be conducted in accordance with GCPs.GCPs, which include the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial as well as review and approval of the study by an IRB. Before approving an application, the FDA may inspect one or more clinical trial sites to assure compliance with GCPs.

Further, during development, the manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and active pharmaceutical ingredients imported into the United StatesU.S. are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the United StatesU.S. is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.

For both NDAs and ANDAs, the FDA also may require submission of a risk evaluation and mitigation strategy (“REMS”) or REMS, to ensure that the benefits of the drug outweigh the risks of the drug. The REMS plan could include medication guides, physician communication plans, and elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools. An assessment of the REMS must also be conducted at set intervals. Following product approval, a REMS may also be required by the FDA if new safety information is discovered and the FDA determines that a REMS is necessary to ensure that the benefits of the drug outweigh the risks of the drug.  

After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Further, should new safety information arise, additional testing, product labeling or FDA notification may be required.


The Hatch-Waxman Amendments, Regulatory Exclusivity, and Patent Term Extension

Orange Book Patent Listing

When aan NDA is submitted to the FDA seeking approval of a drug, including a 505(b)(2) NDA, the applicant is required to list certain patents whose claims cover the applicant'sapplicant’s product or method of use with the FDA. Upon approval of aan NDA, each of the patents listed in the application for the drug is then published in the Orange Book. In an effort to clarify which patents must be listed in the Orange Book, in January 2021, Congress passed the Orange Book Transparency Act of 2020, which largely codifies the FDA’s existing practices into the FDCA.
The Orange Book listed NDA products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA thatthat: (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires and approval will not be sought until after the patent expiration; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV patent certification. The applicant may also elect to submit a "section viii"“section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. Generally, the ANDA or 505(b)(2) NDA approval cannot be made effective by FDA until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a paragraph IV certification or if the applicant is not seeking approval of a patented method of use.

If the ANDA or 505(b)(2) applicant makes a paragraph IV certification challenging an Orange Book-listed patent, a notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers.

If the NDA holder or patent owners of the listed drug asserts an infringement of the patent in court within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from making the approval of the ANDA or 505(b)(2) application effective until the earlier of 30 months from the receipt of the paragraph IV certification, the expiration of the patent, the settlement of the lawsuit, a decision in the infringement case that is favorable to the applicant, or such shorter or longer period as may be ordered by a court. The ANDA or 505(b)(2) application approval also will not be made effective until any applicable non-patent exclusivity listed in the Orange Book for the reference drug has expired as described in further detail below.

Recently, Congress, the Administration and administrative agencies have introduced and/or taken certain measures to increase drug competition and thus, decrease drug prices, including with respect to drug importation, making reference product available to facilitate the development and testing of generic and 505(b)(2) products, and shared and individual REMS. New legislative and regulatory efforts could ultimately have an adverse impact on our business and results of operation.
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Non-Patent Exclusivity

The holder of thean NDA for the listed drug may be entitled to a period of non-patent exclusivity, during which the FDA cannot make the approval of an ANDA or 505(b)(2) application that relies on the listed drug effective. For example, a pharmaceutical manufacturer may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity (“NCE”), during which is a drug that contains an active moiety that has not been approved by FDA in any other NDA. An "active moiety" is defined as the molecule or ion responsible for the drug substance's physiological or pharmacological action. During the five year exclusivity period, the FDA cannot accept for filing any ANDA seeking approval of a generic version of that drug or any 505(b)(2) NDAapplication for filing for the same active moiety andexcept that relies on the FDA's findings regarding that drug, except that FDA may accept an application for filing after four years if the follow-on applicant makes a paragraph IV certification.

The holder of aan NDA, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product or a new dosage form or route of administration, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted or sponsored by the applicant. Should this occur, the FDA would be precluded from making the approval of any ANDA or 505(b)(2) application effective for the protected modification until after that three yearthree-year exclusivity period has run.ended. However, unlike NCE exclusivity, the FDA can accept an application and begin the review process during the exclusivity period.

As a general matter, because the three year exclusivity is related to the product’s changed condition only, it does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic or modified versions of the original, unmodified drug product.  Instead, three year exclusivity prohibits the FDA making the approval of subsequent ANDAs Five-year and 505(b)(2) NDAs that seek approval for that same changed condition and that reference the drug product with the three year exclusivity effective. Five year and three yearthree-year exclusivity will also not delay the submission or approval of a full NDA.

In addition, an applicant submitting an ANDA to the FDA may be entitled to a 180 day180-day market exclusivity period with respect to subsequently filed generic applications if such applicant is the first to submit a substantially complete application to the FDA and whose filing includes a Paragraphparagraph IV certification that the applicable patent(s) are invalid, unenforceable and/or not infringed, obtains approval, and launches the product in the marketplace without triggering any statutory forfeiture provisions. An ANDA for a product designated as competitive generic therapy that does not otherwise have patent or exclusivity protections listed in the Orange Book and that is the first approved applicant, is also eligible for a period of 180 days of regulatory exclusivity with respect to other ANDAs.


These ANDA exclusivity periods, however, can be lost under certain circumstances. Competitive generic therapies are products for which there is not more than one approved drug included in the Orange Book.

Pediatric exclusivity is another type of non‑non‑patent marketing exclusivity in the United StatesU.S. and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory and statutory exclusivity for NDA products, including the non‑non‑patent exclusivity period described above and patent protections. This six‑six‑month exclusivity may be granted if aan NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data dodoes not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the required time frames, whatever statutory or regulatory periods of exclusivity or Orange Book listed patent protection cover the drug are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve an ANDA or 505(b)(2) application owing to regulatory exclusivity or listed patents. Moreover, pediatric exclusivity attaches to all formulations, dosage forms, and indications for products with existing marketing exclusivity or patent life that contain the same active moiety as that which was studied.

If approved, drug products may also be eligible for periods of U.S. patent term restoration.restoration if the approval is the first permitted commercial marketing for the product. If granted, patent term restoration extends the patent life of a single unexpired patent, that has not previously been extended, for a maximum of five years. The total patent life of the product with the extension also cannot exceed fourteen years from the product’product’s approval date. Subject to the prior limitations, the period of the extension is calculated by adding half of the time from the effective date of an IND to the initial submission of a marketing application, and all of the time between the submission of the marketing application and its approval. This period may be reduced by any time that the applicant did not act with due diligence. Whether any of our product candidates will be eligible for patent term restoration is currently unknown. Later, the applicable regulatory authorities may determine that we are not eligible for such restoration periods.

Depending on the drug product, other periods of regulatory exclusivity, such as orphan drug product exclusivity, may also block subsequent applicants.

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Orphan Drug Designation

Some jurisdictions, including the United States,U.S., may designate drugs for relatively small patient populations as orphan drugs. Pursuant to the Orphan Drug Act, the FDA grants orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States,U.S. or affectingaffects more than 200,000 in the United StatesU.S. and for which there is no reasonable expectation that the cost of developing and making the product available in the United StatesU.S. will be recovered from United StatesU.S. sales. Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain orphan designation if there is a product already approved by the FDA that is intended for the same indication and that is considered by the FDA to be the same as the already approved product. This plausible hypothesis must be demonstrated to receive orphan exclusivity.  This hypothesis must be demonstrated to obtain orphan exclusivity. Orphan drug designation provides certain benefits, such as the opportunity for grants, tax credits, application user fee waivers, and exemption from program user fees under certain circumstances. The tax advantages, however, were recently limited in the 2017 Tax Cuts and Jobs Act. If approved for the orphan designation, orphan designated drugs may receive seven years of exclusivity, which, subject to certain exceptions, protects the drug from FDA approval of another drug with the same principal molecular features for the same orphan indication. The FDA may, however, approve a product with the same principal molecular features for the same orphan indication during this time period if such product is able to demonstrate clinical superiority. The FDA may further approve a product with the same principal molecular features for a different indication, or a different product for the same indication during the orphan exclusivity period. Orphan exclusivity can also be lost under certain circumstances, such as the inability of the application holder to ensure sufficient quantities of the product. Orphan drugs are also exempt from the above discussed PREA requirements.

Orphan drugs are not, however, exempt from pediatric testing for molecularly targeted oncology drugs.

Combination Drug/Device Regulation

Our products and our products marketed by our partners, as well as our products being developed by our partners are most often categorized as “drug-device combination products” because they contain both a drug and a device to administer the drug. To date, our and our partners’ combination products have been regulated as drug, and are therefore subject to the NDA, ANDA, sNDA, sANDA and 505(b)(2) drug approval process and regulations. 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 device combinations and assuring agreement within the FDA on review responsibilities. The device specific information is filed with the FDA as part of the drug approval submission or it may be filed separately in the form of a device master file, also known as the master access file (“MAF”). A MAF is not an FDA approval submission but is a filing that can be used to provide supporting data for our partners’ drug approval submissions. A MAF will be reviewed by the FDA only when referenced in an approval submission. By filing a MAF,


we are able to provide information directly to the FDA, which can then be referenced by our partners in their drug approval submissions without having to share our proprietary information directly with our partners.

Where common data elements may be part of several submissions for regulatory approval, as in the case of information supporting an injection system, a MAF filing with the FDA may be the preferred route. A delivery device that is applicable to a variety of drug/device combination products, represents another opportunity for such a filing. Another option would be to obtain a 510(k) premarket clearance, de novo authorization, or premarket approval (“PMA”) from the FDA for our delivery device as a stand-alone product. The type of premarket submission required is based on the FDA device classification for the delivery device (Class I, II, III, or not yet classified). We intend to pursue such strategies as permitted by the law and as directed by the FDA either through guidance documents or discussions.

Development of a device with a specific drug will likely will be handled as part of the marketing application for the drug product, which may be aan NDA, ANDA, or supplemental application. Under these circumstances, the device component is only approved if the drug component is approved.

To the extent that our injectors are packaged with the drug as part of a drug delivery system, the entire package will be subject to the requirements for drug/device combination products. These include drug manufacturing requirements, drug adverse reaction and other reporting requirements, and all of the restrictions that apply to drug labeling and advertising. Additionally, such products will also be subject to certain device requirements, including QSRs and certain reporting requirements, such as medical device reporting requirements.reports. Sponsors of clinical studies using investigational devices are also required to comply with the FDA’s investigational device exemption regulations. These requirements necessitate additional expenditures of time and resources, which could have a substantial adverse impact on our ability to commercialize our products and our operations.

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Other Post-Approval Requirements and Promotional Activities

Any product manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements related to manufacturing, recordkeeping, reporting, including adverse experience reporting, drug shortage reporting, and periodic reporting, product sampling and distribution, advertising, marketing, and promotion, and post‑approval obligations imposed as a condition of approval, such as Phase IV clinical trials, REMS and surveillance to assess safety and effectiveness after commercialization.

There also are continuing annual user fee requirements. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register and/orand, in the case of generic drug products, self-identify their establishments with the FDA and certain state agencies and list their drug products. Device manufacturers must also register their facilities and list the devices that they design, develop, manufacture or import, except those subject to a drug approval. These facilities must also pay annual registration fees. The distribution of prescription pharmaceutical product samples is also subject to the Prescription Drug Marketing Act (“PDMA”).

FDA post-approval requirements are continually evolving. For example, in March 2020, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which includes various provisions regarding FDA drug shortage and manufacturing volume reporting requirements, as well as provisions regarding supply chain security, such as risk management plan requirements, and the promotion of supply chain redundancy and domestic manufacturing. As part of the CARES Act implementation, the FDA recently issued guidance on the reporting of the volume of drugs produced, which reporting will require additional administrative efforts by drug manufacturers.
The FDA closely regulates the post-approval marketing and promotion of drugs and devices, including standards and regulations for direct-to-consumer advertising, dissemination of off-label information, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in indications, labeling or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require us to develop additional data or conduct additional preclinical studies and clinical trials. Failure to comply with these requirements can result in adverse publicity, Warning Letters, Untitled Letters, corrective advertising and potential civil and criminal penalties, as well as liability under the civil False Claims Act, exclusion from participation in federal healthcare programs, mandatory compliance programs under corporate integrity agreements, debarment, and refusal of government contracts among other consequences.

Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use. Specifically, manufacturers and product sponsors may not promote a product for off-label uses and must also comply with the FDA’s other promotional requirements.

Manufacturing and Quality Regulations

The FDA established regulations to require that the methods used in, and the facilities and controls used for, the manufacture, processing, packing and holding of drugs and medical devices conform to cGMPs and QSRs. The cGMP regulations the FDA enforces are comprehensive, and cover all aspects of manufacturing operations and require the conduct of investigations and FDA reporting under certain circumstances. The cGMP regulations for devices, called the Quality System Regulation, are also comprehensive and cover all aspects of device manufacture, fromdesign, quality and manufacturing, including, for example, pre-production design requirements and validation tovalidation; production and process controls; complaint handling and investigations; corrective and preventative actions; and distribution, installation


and servicing, insofar as they bear upon the safe and effective use of the device and whether the device otherwise meets the requirements of the FFDCA.servicing. Compliance with the regulations requires a continuous commitment of time, money and effort in all operational areas.

Concurrent with clinical trials, companies must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP and QSR requirements. The FDA conducts pre-approval inspections of facilities engaged in the development, design, import, manufacture, processing, packing, testing and holding of the drugs and devices subject to NDAs and ANDAs. In addition, manufacturers of both pharmaceutical products and active pharmaceutical ingredients (APIs) used to formulate the drug also ordinarily undergo a pre-approval inspection. Failure of any facility to pass a pre-approval inspection will result in delayed or non-approval and would have a material adverse effect on our business, results of operations, financial condition and cash flows.

The FDA also conducts periodic inspections of drug and device facilities to assess the cGMP/QSR status of marketed products. Following such inspections,Before approval of an application, the FDA may issue an untitled letter as an initial correspondence that cites violations that do not meet the thresholdwill typically also conduct facility inspections to ensure cGMP/QSR compliance.

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Table of regulatory significance for a Warning Letter. FDA guidelines also provide for the issuance of Warning Letters for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may be expected to result in an enforcement action. Finally, the FDA could issue a Form 483 Notice of Inspectional Observations. Moreover, depending on the violation, the FDA could take more significant enforcement actions as a result of inspectional findings.  Any of the foregoing could cause us to modify certain activities identified during the inspection. If the FDA were to find serious cGMP/QSR non-compliance during such an inspection, it could take other regulatory actions that could adversely affect our business, results of operations, financial condition and cash flows. Imported API and other components needed to manufacture our products could be rejected by U.S. Customs. In respect to domestic establishments, the FDA could initiate product seizures or request or in some instances require product recalls and seek to enjoin or otherwise limit a product’s manufacture and distribution. In certain circumstances, violations could support civil penalties, criminal prosecutions, and sanctions that include preventing that company from receiving the necessary licenses to export its products, among other consequences.

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Controlled Substances Regulation

Certain of our drug products are considered “controlled substances” as defined in the Controlled Substances Act (“CSA”) and implementing regulations, which, depending on the controlled substance schedule, establish certain registration, security, monitoring, reporting, storage, distribution, importation, inventory, quota, record keeping, prescribing, dispensing, and other requirements administered by the Drug Enforcement Agency (“DEA”). The DEA regulates controlled substances as Schedule I, II, III, IV or V substances, with Schedule I and II substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. These requirements are directly applicable to us and also applicable to our contract manufacturers and to distributors, prescribers and dispensers of our products.

The DEA regulates the handling of controlled substances through a closed chain of distribution. This control extends to the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.

The active ingredient in our pending XYOSTED™ product, testosterone, is listed by the DEA as a Schedule III substance under the CSA. Consequently, if in the future XYOSTED™ is approved by the FDA, XYOSTED™ will be subject to certain regulations under the CSA. For example, certain prescription requirements must be met for the dispensing of Schedule III controlled substances both on the federal and state level.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule.

The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a periodic basis. Security requirements vary by controlled substance schedule.  Certain reports must also be made for controlled substances, such as reports for thefts or significant losses of any controlled substance.substance and reports of suspicious orders. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in administrative, civil or criminal enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations. In certain circumstances, violations could result in criminal proceedings.

action. Individual states may also regulate controlled substances, and we, as well as our third-party suppliers and manufacturers, are subject to such regulation by several states with respect to the manufacture and distribution of certain controlled substances.


Foreign Approval Process

In addition to regulations in the U.S., we (and, where appropriate, our partners marketing medicinal products incorporating our devices) are subject to various foreign regulations governing clinical trials, manufacturing, and the commercial sales and distribution of our medicinal products. We and/or our partners must obtain approval of a medicinal 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, manufacturing, 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 such products. Finally, before a new drug may be exported from the U.S., it must either be approved for marketing in the U.S. 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.

In the European Union (“EU”),EU, marketing authorizations for medicinal products can be obtained through several different procedures, principally the centralized procedure, the decentralized procedure and the mutual recognition procedure. The centralized procedure allows a company to submit a single application to the European Medicines Agency (“EMA”), which may provide a positive opinion regarding the application to the effect that it meets certain safety, quality and efficacy requirements. A centralized marketing authorization will be granted based on a positive opinion of the EMA as approved by the European Commission. It is valid in all EU member states and three of the four European Free Trade Association countries (Iceland, Liechtenstein and Norway). The centralized procedure is mandatory for certain medicinal products, including orphan medicinal products and biologic products, and optional for certain other high technology products. The decentralized procedure allows companies to file identical applications for authorization to several EU member states simultaneously for medicinal products that have not yet been authorized in any EU member state. The competent authority of one EU member state, selected by the applicant (the Reference Member State), assesses the application for marketing authorization. The competent authorities of the other EU member states for which marketing authorizations are sought (concerned member states) are subsequently required to grant marketing authorization for their territories on the basis of this assessment except where grounds of potential serious risk to public health require an authorization to be refused. The mutual recognitionThis procedure allows companies that have a medicinal product already authorized in one EU member state to apply for this authorization to be recognized by the competent authorities in other EU member states.

The mutual recognition procedure applies in the case where a marketing authorization for the same medicinal product has already been granted by an EU/European Economic Area (“EEA”) member state, whereas the decentralized procedure is applicable if no marketing authorization exists. Since January 1, 2021, the United Kingdom has separate approval processes to the EU as a consequence of Brexit.

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In so far as our products may be soldplaced on the market as medical devices outside of the U.S. (as opposed to a delivery system of a medicinal product), we are also subject to foreign legal and regulatory requirements. 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 primarily rely upon the companiescompanies’ marketing our injectors in foreign countries to obtain the necessary regulatory approvals for sales of our products in those countries.

Our Minneapolis Quality Management System has ISO 13485: 2003 certification, the medical device industry standard for our quality systems. This certification shows that our device development and manufacturing comply with standards for quality assurance, design capability and manufacturing process control. Such certification, along with compliance with the EU Medical Devices Regulation 2017/745 (which replaced the European Medical Device Directive 93/42/EC (to be replaced in 2020 by the EU Medical Devices Regulation 2017/745)on May 27, 2020), 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. Regular surveillance audits by our notified body, British Standards Institute, are required to demonstrate continued compliance.

Other Healthcare Laws and Compliance Requirements

In the United States,U.S., the research, manufacturing, distribution, marketing, sale and promotion of drug products and medical devices are subject to numerous regulations by various federal, state and local authorities.

We are subject to various U.S. federal and state laws restricting certain marketing practices in the pharmaceutical industry, including anti-kickback laws and false claims laws. The federal healthcare program anti-kickbackAnti-Kickback Statute is a criminal statute that prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce, reward or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs.programs, except for activities protected by narrowly-drawn statutory and regulatory safe harbors. HHS recently promulgated a regulation that is effective in two phases. First, the regulation excludes from the definition of “remuneration” limited categories of (a) PBM rebates or other reductions in price to a plan sponsor under Medicare Part D or a Medicaid Managed Care Organization plan reflected in point-of sale reductions in price and (b) PBM service fees. Second, effective January 1, 2023, the regulation expressly provides that rebates to plan sponsors under Medicare Part D either directly to the plan sponsor under Medicare Part D, or indirectly through a pharmacy benefit manager will not be protected under the anti-kickback discount safe harbor. Liability under the federal anti-kickback statuteAnti-Kickback Statute may be established without a person or entity having actual knowledge of the statute or specific intent to violate it.it, and a violation of the Anti-Kickback Statute may be grounds for a government or whistleblower claim under the federal False Claims Act. Violations of the federal anti-kickback statuteAnti-Kickback Statute may be punished by civil and criminal fines, imprisonment, and/or exclusion from participation in federal healthcare programs. Separately, the Beneficiary Inducement Civil Monetary Penalties Law imposes similar restrictions on interactions between the biopharmaceutical industry and federal healthcare program beneficiaries.
The federal civil False Claims Act, also known as the False Claims Act prohibits, among other things, any person from knowingly presenting or causing to be presented a false or fraudulent claim for payment of federal funds, orfunds; knowingly making or causing to be made, a false statement to get a false claim paid. Violationspaid; knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; conspiring to defraud the government by getting a false or fraudulent claim paid or approved by the government; or knowingly making, using or causing to be made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Claims may be pursued by whistleblowers through qui tam actions, even if the government declines to intervene. Intent to deceive is not necessary to establish civil liability, which may be predicated on reckless disregard for or deliberate ignorance of the truth. The civil False Claims Act authorizes imposition of treble damages and a civil penalty for each false claim, such as an invoice, submitted for payment and may result in significant financial penalties and damages.

 The criminal federal False Claims Act imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false fictitious or fraudulent. Conviction or civil judgment for violation of the False Claims Act can also result in debarment from government procurement programs and exclusion from participation in federal healthcare programs.

The Civil Monetary Penalties Statute further imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Federal consumer protection and unfair competition laws also broadly regulate marketplace activities and activities that potentially harm consumers.

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The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), also created federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payer (e.g., public or private), knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. The ACA amended the intent requirement of certain of these criminal statutes so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it.
Various federal and state health carehealthcare programs obligate us to report drug pricing information that is used as the basis for their reimbursement rates for pharmacies and other health carehealthcare providers including under the Medicaid and Medicare programs, prices charged certain federal agencies and non-federal purchasers, and required manufacturer rebates on prescriptions paid by Medicaid and other plans. Payment for a manufacturer’s drugs by these programs is conditioned on submission of this pricing information. States, such as California, have also enacted transparency laws that require manufacturers to report price increases and related information. Some government health carehealthcare programs impose penalties if drug price increases exceed specified percentages or inflation rates, and these penalties can result in mandatory penny prices for certain federal and 340B program customers. customers or rebates equal to 100% of average price. Failure to comply with the rules for calculating and submitting pricing information or otherwise overcharging the government or its beneficiaries could expose us tomay result in criminal, civil, or administrative sanctions or enforcement actions, including False Claims Act liability.

In addition, the Physician Payment Sunshine Act provisions of the Healthcare Reform Act require extensive tracking of certain payments and other transfers of value to physicians (as defined under the Social Security Act), certain other types of healthcare professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives licensed in the U.S.), and U.S. teaching hospitals, as well as ownership and publicinvestment interest held by physicians and their immediate family members. Payments made to principal investigators and research institutions at teaching hospitals for clinical trials are also included within this law for reporting purposes. These payments and other transfers of value are required to be reported to the Centers for Medicare and Medicaid Services (“CMS”), which publishes the data collected, and governmentpublicly on the CMS Open Payments website. Government agencies and private entities may inquire about our marketing practices, orand government entities may pursue other enforcement activities based on the disclosures in those public reports. The Sunshine Act and similarSimilar state laws also impose reporting requirements for various types of payments and other transfers of value to physicianshealthcare providers and teaching hospitals.organizations, including marketing and promotional expenses, and impose various types of gift bans and other compliance requirements on manufacturers. Failure to comply with required reporting requirements, gift bans and other compliance requirements under these laws could subject manufacturers and others to substantial civil money penalties.

The majority of states also have statutes or regulations similar to the federal anti-kickback lawconsumer protection and theunfair competition laws, Anti-Kickback Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply to reimbursement for healthcare items and services regardless of the payer.payer type, including private payers. A number of states now have implemented transparency laws requiring manufacturers to report pricing information and require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual physicians in the states. Other states restrict when and where pharmaceutical companies may provide meals to prescribers or engage in other marketing related activities. Some states require the posting of information relating to clinical studies and their outcomes. In addition, California, Connecticut, Massachusetts and Nevadasome states require pharmaceutical companies to abide by the pharmaceutical industry’s voluntary compliance guidelines and implement compliance programs or marketing codes of conduct.

 Failure to comply with state laws could result in regulatory enforcement actions, including the assessment of significant administrative penalties.

Although we may not provide financial assistance to Medicare patients taking drugs sold by us, the OIGOffice of Inspector General (“OIG”) has established guidelines that permit pharmaceutical manufacturers to make donations to charitable organizations whothat provide co-pay assistance to Medicare patients, provided that such organizations, among other things, are bona fide charities, are entirely independent of and not controlled by the manufacturer, provide aid to applicants on a first-come basis according to consistent objective financial criteria, and do not link aid to use of a donor’s product. If we, or our vendors or donation recipients are deemed to fail to comply with relevant laws, regulations or evolving government guidance in the operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions.

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The Veterans Health Care Act of 1992 requires, as a condition of payment by certain federal agencies and the Medicaid program, that manufacturers of “covered drugs” enter into a Master Agreement, Pharmaceutical Pricing Agreement, and Federal Supply Schedule (“FSS”) contract with the Department of Veterans Affairs through which their covered drugs must be offered for sale at a mandatory ceiling price to certain federal agencies, including the VA and Department of Defense. FSS contracts require compliance with applicable federal procurement laws and regulations, including disclosure of commercial prices during contract negotiations and maintenance of price relationships during the term of the contract, and subject manufacturers to contractual remedies as well as administrative, civil and criminal sanctions. The Veterans Health Care Act also requires manufacturers to enter into pricing agreements with the Department of Health and Human Services to charge no more than a different ceiling price (derived from the Medicaid rebate percentage) to covered entities participating in the 340B drug discount program. Failure to provide the mandatory discount may subject the manufacturer to specific civil monetary penalties, including when subsequent ceiling price recalculations due to pricing data submitted to CMS or new drug price estimations result in a covered entity having paid more that the revised ceiling price and the manufacturer has failed or refused to refund or credit a covered entity. Termination of either of these agreements under the Veterans Health Care Act also jeopardizes payment by Medicaid for the manufacturer’s drugs.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, which we refer to together as the Healthcare Reform Act, expanded healthcare coverage within the U.S., primarily through establishment of state insurance exchanges and expansion of the Medicaid program. This law substantially changed the way healthcare is financed by both governmental and private insurers and significantly impacts the pharmaceutical industry. Changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, payment of an annual fee by manufacturers of branded drugs and biological products based on their share of the federal market, benefits for patients within a coverage gap in the Medicare Part D prescription drug program (commonly known as the “donut hole”), rules regarding prescription drug benefits under the health insurance exchanges, changes to the Medicaid Drug Rebate program, expansion of the Public Health Service’s 340B drug pricing discount program, or 340B program,and fraud and abuse and enforcement. These changes impact existing government healthcare programs and are resulting in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. The Affordable Care Act has since been amended to repeal the individual health insurance mandate, change price reporting rules for authorized generics, and increase manufacturers’ share of Medicare Part D prescription costs in the donut hole, and other provisions of the law may be repealed and replaced by Congress, which may greatly affect these government and third-party programs and their effect on our business.

In addition, we may be subject to, or our marketing activities may be limited by, data privacy and security regulation by both the federal government and the states in which we conduct our business. TheOne such statute is the Health Insurance Portability and Accountability Act of 1996 ("HIPPAA"(“HIPAA”) and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”). HIPAA established uniform federal standards for certain "covered“covered entities,"” which are certain healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, governing the conduct of specified electronic healthcare transactions, and protecting the security and privacy of protected health information. The American Recoveryinformation, and Reinvestment Act of 2009, commonly referred tomandating security breach notification standards. In addition, other federal and state privacy laws, such as the economic stimulus package, includedCalifornia Consumer Privacy Act, may govern the Health Information Technology for Economic and Clinical Health Act ("HITECH"), which expanded certain of HIPAA's privacy and security standards. Amongof personal information in certain circumstances, many of which differ from each other things, HITECH makes HIPAA's security standards and certain privacy standards directly applicable to business associates. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

significant ways, thus complicating compliance efforts.

The Foreign Corrupt Practices Act (“FCPA”) further prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United StatesU.S. to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States,U.S., can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.

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If our operations are found to be in violation of any of the healthhealthcare regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, disgorgement, contractual damages, reputational harm, exclusion from participation in government healthcare programs, debarment prohibiting participation in government procurement and non-procurement covered transactions, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, private qui tam actions brought by individual whistleblowers in the name of the government or refusal to allow us to enter into supply contracts, including government contracts and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, the U.S.regulations. In particular, in the EU the data privacy regime (the General Data Protection Regulation which came into effect on May 25, 2018) is regarded as stricter than in the US and the coming into force of the General Data Protection Regulation on 25 May 2018 is in broad terms more restrictive than the current EUU.S. data protection laws. EU laws restrict the export of personal data outside the EU, for instance to the US,U.S., unless certain safeguards are in place.

EU laws and industry codes also restrict certain marketing practices, including inappropriate inducements.

Third-Party Payer Coverage and Reimbursement

The commercial success of the approved products in our portfolio depends, in part, upon the availability of coverage and adequate reimbursement from third-party payers at the federal, state and private levels. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payers to reimburse all or part of the associated healthcare costs. Sales of our product portfolio will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our product portfolio will be paid by health maintenance, managed care, pharmacy benefit and/or similar healthcare management organizations, or are reimbursed by government health administration authorities, such as Medicare and Medicaid, private healthhealthcare coverage insurers and other third-party payers. The market for our product portfolio will depend significantly on access to third-party payers'payers’ formularies or lists of treatments for which third-party payers provide coverage and reimbursement.

Also, third-party payers are developing increasingly sophisticated methods of controlling healthcare costs. For example, for high costhigh-cost specialty drugs, third party payers have begun demanding value-based pricing in which price is linked to performance metrics. Recent state enactments establish significant negative incentives requiring negotiation of supplemental rebates, and a recent CMS regulation, implemented a most-favored nations pricing model seeking to lower prices under Medicare Part B by tying the costs of certain medicines to cheaper prices in other developed countries. This regulation was rescinded by a final rule published December 29, 2021; however, legislative and executive branch proposals also seek to establish this type of pricing for certain federal healthcare programs. Further, coverage and reimbursement for therapeutic products can differ significantly from payer to payer. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payer separately, with no assurance that adequate coverage and reimbursement will be obtained. The cost of pharmaceuticals and medical devices continues to generate substantial governmental and third-party payer scrutiny. We expect that the pharmaceutical industry will experience continued pricing pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations and additional legislative and administrative proposals. Our results of operations and business could be adversely affected by current and future third-party payer policies as well as healthcare legislative and administrative reforms.

Some third-party payers also require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, these requirements or any announcement or adoption of such proposals could have a material adverse effect on our ability to obtain adequate prices for our product portfolio and to operate profitably.

In international markets, there are health technology assessment regimes with price ceilings and supply and demand side restraints on specific products and therapies and profit controls in certain countries includingmost EU member states as well as the UK.United Kingdom. There can be no assurance that our products will be considered medically reasonable and necessary for a specific indication, that our products will be considered cost-effective by third-party payers, that an adequate level of reimbursement will be available or that the third-party payers'payers’ reimbursement policies will not adversely affect our ability to sell our products profitably.

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Healthcare Reform

In the United StatesU.S. and foreign jurisdictions, the legislative landscape continues to evolve. There have been a number of legislative and regulatory changes to the healthcare system that will likely affect our future operations. In particular, there have been and continue to be a number of initiatives at the United StatesU.S. federal and state levels that seek to reduce healthcare costs, improve access, and improve quality. The Affordable Care Act (“ACA”), passed in 2010, provided more Americans with health carehealthcare coverage


while attempting to curb the growth in healthcare spending in the United States.U.S. The legislation included reforms to patient rights and protections, rules for insurance companies, taxes, tax breaks, funding and spending, and amended other laws including the Food, Drug and Cosmetics Act. Since enactment of the ACA, some of its provisions have been repealed or amended, and other provisions may be repealed and replaced by Congress. Some of the main provisions of the ACA that affected the pharmaceutical and biotechnology industry include, among others, the following:

•an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

•an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and inclusion of Medicaid managed care plan utilization in manufacturers’ rebate obligations;

obligations;

•new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated;

•a new Medicare Part D coverage gap discount program;

•expansion of eligibility criteria for Medicaid programs thereby potentially increasing manufacturers'manufacturers’ Medicaid rebate liability;

•expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

•expansion of healthcare fraud and abuse laws, including the federal civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

noncompliance.

Since enactment of the ACA, some of its provisions have been repealed or amended, and other provisions may be repealed and replaced by Congress.

The Drug Supply Chain Security Act imposes on manufacturers of certain pharmaceutical products obligations related to product tracking and tracing, among others. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, will be required to label the drug product with a product identifier, and are required to keep certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers is required to be done electronically. Manufacturers are also required to verify that purchasers of the manufacturers'manufacturers’ products are appropriately licensed. Further, manufacturers have drug product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death. Similar requirements are also imposed on other trading partners in the supply chain.

We expect that additional state and federal healthcare reform measures will be adopted in the future. Legislators and regulators at both the federal and state level are increasingly focused on containing the cost of drugs, and there has been increasing legislative and enforcement interest in the United StatesU.S. with respect to specialty drug pricing practices. Specifically, there have been recent U.S. Congressionalcongressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient support programs, and reform government program reimbursement methodologies for drugs. For example, California recently enacted a transparency law requiring manufacturers to report drug price increases and related information, and CMS reducedincluding the payment ratereasons for certain hospitals purchasing outpatient drugs at the 340B program discounted price.  In 2016, CMS issued a final rule regardingprice increases. Congress also amended the Medicaid drug rebate program,statute to alter price reporting of branded products sold as authorized generics, which among other things, reviseseffectively increases the manner in whichrebates paid on the “average manufacturer price” isbrand. Recent executive orders focusing on domestic sourcing also have required government agencies, to be calculated by manufacturers participatingthe maximum extent practicable, to limit procurement of essential medicines, including epinephrine, to products that are manufactured in the programU.S. from U.S. API and implements certain amendmentsother critical inputs. The list of essential medicines is established by the FDA and subject to the Medicaid rebate statute created under the ACA. However, certain aspects of the proposed rule have yet to be finalized.  Similarly, 340B program guidance was finalized in early 2017 but its effective date has been deferredchange. These and the guidance may be reissued. Anyany additional healthcare reform and procurement measures could further constrain our business or limit the amounts that federal and state governments will pay for healthcare products and services, which could result in additional pricing pressures.

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Other Regulatory Requirements

and Considerations

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. We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA and other government agencies have broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on us.


Employees

We believe that our success is largely dependent upon our ability to attract and retain qualified personnel The effects of potential future changes in regulations or new legislation, if any, as a result of the research, development, manufacturing, business development and commercialization fields. As of March 1, 2018, we had 111 full-time employees. Of the 111 employees, 44new administration are primarily involved in research, development and manufacturing activities, 48 are primarily involved in commercialization and sales, 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.

also unknown.

Available Information

We file with the United StatesU.S. 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 sitea website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We maintain an Internet site (http://www.antarespharma.com).  We make available free of charge on or through our Internet website (http://www.antarespharma.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable, amendments to thesethose reports filed or furnished pursuant to the Exchange Act, 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.

Annual report on Form 10-K.

Item 1A.

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 $16.7 million and $24.3 million for the years ended December 31, 2017 and 2016, respectively.  In addition, we had an accumulated deficit at December 31, 2017 of $270.3 million. The costs for research and development of our products, product candidates and drug delivery technologies, and certain product candidates of our partners, 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 could be harmed.

We may need additional capital in the future in order to continue our operations.

At December 31, 2017, we had cash, cash equivalents and investments of $31.6 million.  We believe the combination of our current cash and projected product sales, product development fees, license revenues, milestone payments and royalties should provide us with sufficient funds to meet our obligations and support operations through at least the first quarter of 2019.  However, we have not historically generated, and do not currently generate, enough revenue or operating cash flow to support our operations, and continue to operate primarily by raising capital through equity and debt financing arrangements. We reported net losses of $16.7 million, $24.3 million and $20.7 million, and negative cash flows from operations for each of the years ended December 31, and 2017, 2016 and 2015, respectively. To the extent additional financing is needed, the failure to raise necessary cash may require the Company to defer or delay spending related to a potential approval and launch of XYOSTEDTM, or curtail other controllable costs and discretionary spending for new research and development issues.

We have funded our operations with proceeds from borrowings under a long-term debt financing arrangement.  On June 6, 2017 we entered into a loan and security agreement with Hercules Capital, Inc. for a term loan of up to $35.0 million.  The principal balance outstanding under this loan was $25.0 million as of December 31, 2017. We may, but are not obligated to, request one or more additional advances of at least $5.0 million not to exceed $10.0 million in the aggregate, subject to the achievement of certain


corporate milestones and satisfying customary conditions. We must achieve the corporate milestones and request additional advances prior to September 30, 2018, which is currently unlikely to occur.

We have also entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which we may offer and sell, from time to time at our sole discretion, shares of common stock having an aggregate offering price of up to $30.0 million. Cowen may sell the common stock by any method permitted by law deemed to be an “at the market offering” (the “ATM”) as defined in Rule 415 of the Securities Act of 1933, as amended. We are not obligated to make any sales of our common stock under the Sales Agreement and as of the date of this report we have not sold any common stock pursuant to the Sales Agreement.

If we do obtain additional financing or sell shares under the ATM, we cannot assure that the amount or the terms of such financing will be as attractive as we may desire, and your equity interest in the company may be diluted. If we are unable to obtain 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 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:

•

our ability to successfully market and sell OTREXUP®; 

our ability to successfully develop and obtain regulatory approval for our own product candidates such as XYOSTED™, and if approved, successfully commercialize the same;

•

our and our partners’ ability to obtain regulatory approval, and where applicable to obtain an AB-rating, of partnered products including VIBEX® epinephrine, multi dose pens for use with exenatide and teriparatide, and others;

•

the success of our partners in launching and commercializing new products, such as AMAG’s Makena® auto injector, and selling our existing products such as Sumatriptan Injection USP;

our ability to successfully build commercial channels and sell future products if we choose not to partner the product;

our ability to manufacture, or have manufactured, products efficiently, at the appropriate commercial scale, and with the required quality;

timing of our and our partners’ development, regulatory and commercialization plans;

the demand for our technologies from current and future pharmaceutical partners;

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;

our ability to obtain reimbursement for our products from third-party payers;

our ability to develop additional commercial applications for our products;

our ability to attract and retain 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.


We have significant outstanding indebtedness under a loan and security agreement. If we do not have sufficient cash available to repay the outstanding indebtedness as it becomes due, or if an event of default were to occur providing Hercules Capital, Inc.that provides Wells Fargo Bank, National Association the right to accelerate the outstanding balance of the loan and to take possession of some or all of our collateral securing the loan, either situation could have a materiallymaterial adverse effect on our business.

In June 2017,

On November 1, 2021, we entered into a loan and security agreement, referred to hereinCredit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent for the Hercules Loan Agreement, with Hercules Capital, Inc., or Hercules,lenders, for a term loancredit facilities in an aggregate principal amount of up to $35.0 million.$40.0 million with a maturity date of November 1, 2024. The first advanceCredit Agreement consists of $25.0a $20.0 million was funded upon the execution of the Herculesterm loan facility (the “Term Loan Agreement on June 6, 2017, which hasFacility”) and will be used for working capital and general corporate purposes. Under terms of the Hercules Loan Agreement, we may, but are not obligated to, request one or more additional advances of at leasta $20.0 million revolving credit facility, $5.0 million not to exceed $10.0of which is available for the issuance of letters of credit and $1.0 million inof which is available for swingline loans (the “Revolving Credit Facility”), (collectively the aggregate, subject to the Company achieving certain corporate milestones prior to September 30, 2018 and satisfying customary conditions.  We can make no assurances that we will meet such corporate milestones within the specified time frame that would give us the ability to request additional advances.

The Hercules Loan Agreement is“Credit Facilities”), which are secured by substantially all of our propertyassets. The Term Loan Facility was funded upon execution of the Credit Agreement with the proceeds used to repay our $20.0 million Term Loan with Hercules Capital and to pay fees and expenses incurred in connection with the early repayment. The Revolving Credit Facility remains available for future use and is expected to be used for ongoing working capital requirements and other thangeneral corporate purposes as needed. Payments under the Term Loan Facility are due in consecutive quarterly installments on the last business day of each of March, June, September and December, commencing on March 31, 2022. Interest accrues at either the base rate or LIBOR plus the applicable margin, which varies based on our intellectual property.consolidated total leverage ratio and will initially be 1.50% for base rate loans and 2.50% for LIBOR loans. The term loan accruestransaction is expected to provide approximately $1.2 million in annual interest at a calculated prime-based variable rate with a maximumexpense savings based on an interest rate of 9.50%approximately 2.60% (one-month LIBOR rate plus the applicable margin of 2.50%) as of December 31, 2021.

There is no guarantee that healthcare providers and requirespatients will adopt our or our partners’ products or continue to use or prescribe our or our partners’ products, or that we and our partners will be able to receive and maintain adequate payer coverage and reimbursement.
Successful sales of our products depend on the paymentcontinued prescription by healthcare providers, adoption by patients, and the availability of an additional endadequate coverage and reimbursement from third-party payers. There is no guarantee that healthcare and patients’ providers will adopt any newly approved products or continue to prescribe and use products, or that insurers and
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Table of term charge equal to 4.25% of the total principal amount of all advances under the loan. The term loan matures on July 1, 2022.

The Hercules Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties, including financial reporting obligations and limitations on dividends, indebtedness, liens, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. Our business may be adversely affected by the restrictions on our ability to operate our business. The Hercules Loan Agreement also contains other customary provisions,Contents

governmental healthcare programs, such as expenseMedicare and Medicaid, will provide adequate coverage and reimbursement, non-disclosure obligations, as well as indemnification rightsor will not disadvantage our products through imposition of prior authorization, step therapy, high co-payments, or similar formulary management techniques. For instance, coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Additionally, certain third-party payers restrict or block access to patients for new products until a clinical review has occurred or clinical evidence is provided to support the benefit of the lenders. Upon the occurrence of an event of defaultbenefits for covered patients. Many states also use formularies and following any applicable cure periods, if any, a default interest rate of an additional 4.00% may be appliedpreferred drug lists to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Hercules Loan Agreement.        

Additionally, we may be required to repay the outstanding indebtedness plus penalties immediately under the term loan if an event of default occurs under the Hercules Loan Agreement.  Under the Hercules Loan Agreement, an event of default will occur if, among other things, we fail to make payments as required under the Hercules Loan Agreement, we breach or default in the performance of any covenant or secured obligation under the Hercules Loan Agreement, a circumstance occurs that would reasonably be expected to have a material adverse effect on the Company, we become unable to pay our debts as they come due or are otherwise insolvent, we or our assets become subject to certain legal proceedings such as bankruptcy proceedings, a cross default to other indebtedness obligations of the Companyobtain supplemental Medicaid rebates in excess of $500,000,those required for Medicaid coverage. The industry competition to be included in such formularies and not disadvantaged often leads to downward pricing pressures on pharmaceutical companies. Any labeled limitations on the use of a product or warnings could discourage adoption of the product by patients, healthcare providers, and insurers.

To ensure sales, manufacturers often must provide multiple discounts on the same drug in the chain of distribution to the healthcare provider and the payer. Further, manufacturers are required to assume responsibility for a stop orderpercentage of Medicare Part D prescription costs for innovator drugs and biologics while the beneficiary is issued with respectin the coverage gap. Increasingly, payers are looking for metrics and performance-based pricing to justify increased costs of therapeutic advancements. Even if coverage is obtained, the net realization from price concessions may negatively impact our common stock.

Weprofitability. Government health programs also impose inflation penalties that may have adverse consequences if we increase prices in the future. Moreover, we and our partners may experience a delay in receiving coverage and reimbursement for any new products or may not have enough available cashreceive adequate levels of coverage or reimbursement at all. New competitive products may be able to raise additional funds through equity or debt financings to repay such indebtedness atapproved, and payers may disadvantage our products in favor of the newly approved products and technologies. If the time any such event of default occurs. In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Hercules could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the loan for its benefit, which collateral includes all of our property other than our intellectual property. Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.

We have limited sales and marketing experience as a Company.

We launched OTREXUP® in February 2014. Although we have hired highly qualified personnel with specialized expertise, as a company, we have limited experience commercializing pharmaceutical products on our own. In order to commercialize OTREXUP®, we have built our sales, marketing, distribution, managerial and other non-technical capabilities and have made arrangements with third parties to perform these services when needed. In January 2015, we hired sales representatives and district managers to fill our  sales territories.  We have the exclusive U.S. marketing rights to OTREXUP® for the treatment of psoriasis, however, we have limited commercial resources and may incur incremental sales and marketing costsobtain coverage is lengthy, if we choose to market OTREXUP® for the treatment of psoriasis in the U.S. and may be unsuccessful in this commercial strategy.  To the extent we rely on third parties to commercialize OTREXUP® in the future, we may receive less revenues or incur more expenses than if we had commercialized OTREXUP® ourselves. In addition, we may have limited control over the sales efforts of any third parties involved in our commercialization efforts. Regardless of whether we commercialize our products ourselves or rely on third parties, we will be responsible for compliance with FDA’s laws and regulations concerning marketing and promotion.  Should our employees or the employees of a third party fail to comply with these requirements, we may face regulatory enforcement action. If we are unable to successfully implementobtain or maintain adequate coverage, or if the rebates we negotiate are higher than anticipated, it may negatively impact our salesrevenue from product sales.

Additionally, if healthcare providers and marketing planspatients do not adopt any new product, or if insurers restrict patient access or disadvantage our or our partners’ products in their formularies or otherwise do not provide adequate coverage and drive adoption by patientsreimbursement, we and physicians of OTREXUP® through our sales, marketing and commercialization efforts, then wepartners may not be able to generate sustainable revenuesrevenue growth from product sales and royalties which will have a material adverse effect on our business and future product opportunities. Similarly,We and our partners, accordingly, may need to take steps to assist patients in their ability to afford our products, such as offering bridge programs, free-trials, discounts, rebates and co-pay coupon programs.
New information concerning our or our partners’ products learned through required post-approval studies and product use may also result in changes to our or our partners’ products. Should any of these events occur, they could have a material and adverse effect on our operations and business.
Any post-approval requirements, including Phase IV studies may also require the dedication of substantial time and resources. By example, as a post-marketing requirement for XYOSTED®, we must conduct a pediatric study. The FDA has also asked us to conduct a separate label comprehension study that assesses patients’ understanding of key risk messages in the Medication Guide for XYOSTED® and a study of testosterone replacement therapy in pediatric males ages 14 years and older for conditions associated with a deficiency or absence of endogenous testosterone. The label comprehension study findings may result in revisions to the Medication Guide to optimize patients’ understanding of important risks of XYOSTED® and potentially other label restrictions or changes. The FDA found that our first label comprehension study did not fulfill the post approval requirement and, thus, we are preparing to conduct a new label comprehension study, which must be completed by the middle of 2023 and will require dedication of funds and resources. Additionally, the outcome of any post-approval studies, including the pediatric study, is uncertain and may not result in an expanded label indication or could result in additional labeling requirements or other post-approval restrictions or regulatory actions.
Additionally, use of our or our partners’ products by patients and in Phase IV and post-marketing studies may result in the discovery of new information concerning the products. This may result in regulatory or other actions, including, product liability actions, enforcement actions, distribution and manufacturing restrictions, changes to product labeling and promotional materials, the imposition of post-market requirements, such as REMS or additional Phase IV studies, withdrawal of marketing application approvals, withdrawal of the product from the market, refusal to approve new marketing applications or supplements, product recalls, clinical holds and suspension of clinical studies, safety alerts, dear healthcare provider letters, adverse publicity, and reimbursement and insurance coverage consequences, among others. Should any of these events occur, they could have a material and adverse effect on our operations and business. By way of example, in October 2020 the FDA proposed that Makena® be withdrawn from the market following a review by the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee. Covis subsequently requested an FDA public hearing, and the FDA has granted the request. The FDA has not yet set a date for the public hearing. While, at this time, Makena® may still be marketed, we do not yet know what the FDA’s ultimate decision will be and whether resources that it dedicated to Makena® will be reduced. The uncertainty with
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regard to Makena® has negatively impacted our product revenue and royalties from Covis and may adversely impact the business.
Our employees, independent contractors, consultants, commercial partners, manufacturers, principal investigators, or contract research organizations (“CROs”) may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, independent contractors, consultants, commercial partners, manufacturers, investigators or CROs could include intentional, reckless, negligent, or unintentional failures to comply with FDA regulations, comply with applicable fraud and abuse laws, provide accurate information to the FDA, properly calculate pricing information required by federal programs, comply with federal procurement rules or contract terms, report financial information or data accurately or disclose unauthorized activities to us. This misconduct could also involve the improper use or misrepresentation of information obtained during clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter this type of misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Moreover, it is possible for a whistleblower to pursue a False Claims Act (“FCA”) case against us based on the actions or inactions of these third parties even if the government considers the claim unmeritorious and declines to intervene, which could require us to incur costs defending against such a claim. Further, due to the risk that a judgment in an FCA case could result in exclusion from federal health programs or debarment from procurement programs, whistleblower cases often result in large settlements. If any such actions are instituted against us, and we are not successful in maintaining the necessary commercial infrastructure, including sales representatives, managed care, medical affairs and pharmacovigilance teams. The development of


commercialization capabilities to market OTREXUP® has been and will continue to be expensive and time-consuming. As we continue to develop, maintain and grow these capabilities, we willdefending ourselves or asserting our rights, those actions could have to compete with other pharmaceutical companies to recruit, hire, train and retain sales and marketing personnel. If we have underestimated the necessary sales and marketing capabilities or have not established the necessary infrastructure to support successful commercialization, or if our efforts to do so take more time and expense than anticipated, our ability to market and sell OTREXUP® may be adversely affected.

The sale of OTREXUP® requiresa significant resources, and if we do not achieve the sales expected, we may lose the substantial investment made in OTREXUP®.

We have and expect to continue to devote substantial resources to establish and maintain a sales and marketing capability for OTREXUP®.  If we are unsuccessful in our commercialization efforts and do not achieve the sales levels of OTREXUP® that we expect, we may be unable to recover the large investment we have made in research, development, manufacturing, inventory and marketing efforts, andimpact on our business, and financial condition, could be materially adversely affected.

and results of operations, including the imposition of significant fines or other sanctions.

We rely on third parties to perform many necessary services for OTREXUP®,our products including services related to the distribution, invoicing, rebates and contract administration, co-pay program administration, sample distribution and administration, storage and transportation of our products.

We

Depending on the product, we have retained third-party service providers to perform a variety of functions related to the saledistribution, invoicing, rebates and contract administration, co-pay program administration, sample distribution and administration, storage and transportation of our products, key aspects of which are out of our direct control. For example, we rely on Cardinal to provide key services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable management and call center management, and, as a result, most of our finished goods inventory is stored at a single warehouse maintained by the service provider. We place substantial reliance on this providerthese providers as well as other third-party providers that perform services for us, including, depending on the product, entrusting our inventories of products to their care and handling. We also may rely on third parties to administer our drug price reporting and rebate payments and contracting obligations under federal programs; however,programs. Despite our reliance on third parties, we are responsible for compliance with the applicable legal and program requirements. IfBy example, in certain states, we are required to hold licenses to distribute our employees orproducts in these third-party service providers fail tostates and must comply with applicable laws and regulations, we and/or they may face regulatory or False Claims Act enforcement action.the associated state laws. Moreover, if these third-party service providers fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us or encounter physical damage or a natural disaster at their facilities, our ability to deliver productproducts to meet commercial demand would be significantly impaired. In addition, we utilizemay use third parties to perform various other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If our employees or any third-party service providers fail to comply with applicable laws and regulations, we and/or they may face regulatory or FCA enforcement actions. Moreover, if the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market our products could be jeopardized or we and/or they could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.

The increase in the number of competitors targeting generic and 505(b)(2) ANDA opportunities and seeking U.S. market exclusivity may adversely affect our revenues and profits.

Our ability to achieve continued growth and profitability through sales of generic pharmaceuticals is

We are dependent on numerous third parties in our supply chain for the supply and manufacture of our products and our partners’ continued success in challenging patents, developing non-infringing products or developing products with increased complexity to provide opportunities with U.S. market exclusivity or limited competition.

Our or our partners’ products may be eligible for periods of regulatory exclusivity.  For those products being developed using the 505(b)(2) NDA pathway, we or our partners may be eligible for three years of marketing exclusivity, provided that we or they conduct clinical trials, other than bioavailability or bioequivalence trials, that are essential to approval of the application.  This, however, is a limited exclusivity, in that it will not block full competitor NDAs and only protects the change presented by the 505(b)(2) application.  Competitors may also not refer to our or our partners’ drug products as reference listed drugs, in which case, they would not be blocked by the three-year period of exclusivity.

To the extent that we or our partner succeed in being the first to market a generic version of a product, and particularly if we or our partner receives a 180-day period of exclusivity in the U.S. market, as a result of being the first applicant to submit a substantially complete ANDA with a paragraph IV certification and successfully launch the product as provided under the Hatch-Waxman Act, our and our partners’ sales, profits and profitability can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of an equivalent product. Even after the exclusivity period ends, there is often continuing benefit for a time from having the first generic product in the market.

Similarly, to the extent we are able to receive exclusivity for our products approved through the 505(b)(2) pathway, our sales, profits, and profitability can be positively impacted.  However, we may not be granted the periods of regulatory exclusivity that we anticipate, and if we do not receive such periods, we may be subject to ANDA and/or 505(b)(2) competition sooner than we anticipate.


Additionally, the number of generic manufacturers targeting significant new generic opportunities with Hatch-Waxman exclusivity, or which are complex to develop, continues to increase. Additionally, many of the smaller generic manufacturers have increased their capabilities, level of sophistication and development resources in recent years. Other companies may also be developing drugs using the 505(b)(2) pathway that are substantially similar to our products and/or product candidates. The failure to successfully develop and commercialize highly complex generic and 505(b)(2) products could adversely affect our sales and profitability. For instance, to the extent that another company receives a period of regulatory exclusivity, the FDA would not make our application effective during that company’s exclusivity period.  This would delay our and our partners’ marketing of products and may prevent us or them from establishing a sufficient market share for our product.  Similarly, should another company obtain FDA approval for a pharmaceutically equivalent product to one of our product candidates, we may no longer be able to use the 505(b)(2) pathway.  In that case, it is the FDA’s policy that the appropriate submission would be an ANDA. We may, however, not be able to immediately submit an ANDA or have an ANDA approval made effective, as we could be blocked by others’ periods of patent and regulatory exclusivity protection.

The 180-day market exclusivity period is triggered by commercial marketing of the generic product or, in certain cases, by a final court decision holding the applicable patents to be invalid, unenforceable or not infringed. The 180-day exclusivity period may also be triggered by a settlement order or consent decree, or the withdrawal of the patent information by the reference listed drug sponsor.  However, the exclusivity period can be forfeited by our failure to obtain tentative approval of our product or to launch a product within a specified statutory period. The Hatch-Waxman Act also contains other forfeiture provisions that may deprive the first “Paragraph IV” filer of exclusivity if certain conditions are met, some of which may be outside our control. Accordingly, we may face the risk that our exclusivity period is triggered or forfeited before we are able to commercialize a product and therefore may not be able to exploit a given exclusivity period for specific products.

We face intense competition from companies that have greater resources and capabilities.

Many of our competitors are larger and have substantially longer experience in the development and marketing of innovative and specialty consumer-oriented products. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development and marketing of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or noncompetitive before we can recover the expenses incurred in connection with their development. In addition, for these product categories we must demonstrate to physicians, patients and third-party payers the benefits of our products relative to competing products that are often more familiar or otherwise better established. If competitors introduce new products or new variations on their existing products, our marketed products, even those protected by patents, may be replaced in the marketplace, we may never be able to establish a sufficient market shareor we may be required to lower our prices.

In addition, our specialty pharmaceuticals business requires much greater use of a direct sales force than does our generic business. Our ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel. Competition for qualified sales personnel is intense. We may also need to enter into co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force is not large enough or sufficiently well-aligned to achieve maximum penetration in the market. Any failure to attract or retain qualified sales personnel or to enter into third-party arrangements on favorable terms could prevent us from successfully maintaining current sales levels or commercializing new innovative and specialty products.

We depend on Teva to manufacture and supply the drug and to distribute and commercialize VIBEX® Sumatriptan in the U.S.

We have entered into a license, supply and distribution agreement with Teva to distribute VIBEX® Sumatriptan, an auto injector product containing sumatriptan for the treatment of migraines.  Under our arrangement, we will manufacture the auto injector and are responsible for final assembly and packaging of the final product and Teva will manufacture and supply the drug sumatriptan and distribute and commercialize the product in the U.S. Teva also has an option for rights in other territories.  

There is no guarantee that our partnership with Teva to distribute VIBEX® Sumatriptan will be successful.  Teva controls the manufacture and supply of the drug, sumatriptan, which is necessary for the production of VIBEX® Sumatriptan. If, at any time, Teva ceases to manufacture and supply us with sumatriptan or fails to produce sufficient supplies of the drug, we will be unable to produce a finished product or sell our auto injectors designed for this product to Teva.  In addition, if Teva is not able to produce sufficient supplies of the drug in accordance with cGMPs, we also will be unable to produce a finished product and we and/or Teva may be subject to regulatory enforcement action. We also rely on Teva to commercialize and distribute the product within the U.S. and if Teva is unsuccessful in commercializing the product, the resulting revenue may be lower than expected.  Additionally, we may disagree with Teva on certain business strategies or its manufacturing and distribution decisions.  Such decisions by Teva may be beyond our control and may impact the success of VIBEX® Sumatriptan and we may receive less revenue than desired or expected. We have


invested significant resources in the development of VIBEX® Sumatriptan,and, if our partnership with Teva is not profitable or is terminated for any reason, we may not receive a return on our investment and may suffer significant losses.

We depend on AMAG to manufacture and supply the drug and distribute and commercialize a variation of our VIBEX® QuickShot® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena® worldwide.

We have entered into a license, development and supply agreement with AMAG to distribute a variation of our VIBEX® QuickShot® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena®, the Makena® Auto Injector.  AMAG is preparing for a launch and expects the device to be available in the second half of March 2018.

There is no guarantee that our partnership with AMAG will be successful.  AMAG controls the manufacture and supply of the drug, hydroxyprogesterone caproate, and has complete control over the launch and continuous commercialization and marketing of Makena® Auto Injector worldwide. If, at any time, AMAG ceases to manufacture and supply us with hydroxyprogesterone caproate or fails to produce sufficient supplies of the drug, we will be unable to produce a finished product or sell our auto injectors for this product to AMAG.  In addition, if AMAG is unable to produce sufficient supplies of the drug in accordance with cGMPs, we also will be unable to produce a finished product and we and/or AMAG may be subject to regulatory enforcement action. We will also rely on AMAG to commercialize and distribute the product worldwide and if AMAG is unsuccessful in commercializing the product, the resulting revenue may be lower than expected.  Additionally, we may disagree with AMAG on certain business strategies or its manufacturing and distribution decisions.  Such decisions by AMAG may be beyond our control and may impact the success of the Makena® Auto Injector and we may receive less revenue than desired or expected.

We are also relying on AMAG to convert patients from using the current intramuscular formulation of Makena® to the subcutaneous formulation of Makena® by, in part, pricing the Makena® Auto Injector at parity to ensure timely and affordable access.  However, such decisions will be made by AMAG and may be beyond our control, which could impact the sales of the product and we may receive less revenue than desired or expected.  Further, we and AMAG are subject to potential competition regarding the a generic version of the intramuscular formulation of the drug, which presumably would be less costly for patients.  This competition could result in receiving less revenue than expected.

We rely on third parties to manufacture our and our partners’ product. If we do not develop and maintain relationships with suppliers, manufacturers, assemblers and/or assemblerslicensees of our and our partners’ drug/device products or product candidates, or if such third parties are unable to supply or manufacture or supply product,products or assemble and package the final products, we may be unable to successfully manufacture, assembly,assemble, package and sell our and our partners’ products, which could have a material adverse effect on our business.

The availability of our products and product candidates depends upon our ability to procure the raw materials, components, packaging materials and finished products that we need from third parties. We have entered into supply agreements with numerous third-party suppliers, many of which are currently our single source for the materials necessary for certain of our products. If any of these or other third parties are unable to supply their respective components for any reason, including due to violations of the FDA’s QSR or cGMP requirements, our or our partners’ ability to manufacture the finished product will be adversely affected and our ability to meet the supply and demand for any sales of such products and the resulting revenue therefrom will be negatively affected. Additionally, as many of our components are manufactured by sole third-party suppliers, in the event of a failure to supply, we may not be able to find alternative third suppliers in a timely or cost-effective manner.
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Moreover, any failure to comply with the applicable regulatory requirements could subject us, our suppliers, or our collaborators to regulatory enforcement actions or recalls. In the case of product candidates, our and our partners’ ability to conduct the necessary studies would also be adversely impacted.
We do not possess thecurrently use our own facilities to manufacture commercial quantities of our or our partners’ drug/device combination products including OTREXUP®,  VIBEX® Sumatriptan Injection USP, Makena® auto injectors or any other of our or our partners’ products or product candidates.components. We also do not possess the facilities to manufacture clinical supplies of any product candidates.  Wecurrently must contract with third parties and/or our partners to produce products, components, and product candidates and to assemble and package finished products and related components according to specifications and government regulations.  The future development and delivery of our and our partners’ products and product candidates depends on the capability, timely, profitable and competitive performance of these third parties.  A limited number of manufacturers exist that are capable of manufacturing our and our partners’ products and product candidates. We and our partners may fail to contract with the necessary third parties or we and our partners may contract with third parties on terms that may not be favorable to us.  

Our and our partners’ contract manufacturers must comply with all applicable manufacturing requirements, including cGMPs for drug products and QSRs for medical devices. Before approving any marketing application, FDA will inspectThe future development and delivery of our and our partners’ products and product candidates depend on the product manufacturing facilities. Wecapability, as well as the timely, profitable and competitive performance of these third parties and/or our partners, must obtainin addition to their initial and continued FDA approval for a product’s or product candidate’s manufacturing processfollowing regulatory authority facility inspections and facilities to receive product marketing approval, which wecompliance. There is also no assurance that such third parties and/or our partners may never obtain or may notwill be ablewilling to maintain. Moreover, following product approval, FDA regularly also inspects drug and device manufacturers to ensure continued compliance with FDA’s requirements.  If we or our partners are not able to obtain or maintain this approval and regulatory compliance, we and/or they would not be able to receive product approval, and commercialize and/manufacture, assemble or sell the applicable products.  Moreover, should any manufacturer fail to comply with the applicable regulatory requirements, we,drug/device products or components or that they will not encounter manufacturing delays, problems, or difficulties. A limited number of manufacturers exist that can manufacture our partners, and/or the manufacturer may face regulatory consequences, including enforcement actions and/orand our partners’ products, components, and product recalls.  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. Failure by a contract manufacturer to supply product, could have a material adverse effect on our ability to generate revenue and profit.

candidates.

In addition, contract manufacturers may utilizeuse their own technology, technology developed by us, technology developed by our partners, or technology acquired or licensed from third parties. When contract manufacturers develop proprietary process technology, our reliance on such contract manufacturers is increased. TechnologyA technology transfer from the original contract manufacturer may be required. Any such technology transfer may also require the transfer of requisite data for regulatory purposes, including information


contained in a proprietary drug or device master file held by a contract manufacturer. We and/or our partners would be dependent on the contract manufacturer for the maintenance and right of reference to the drug or device master file. If the contract manufacturer fails to maintain a drug or device master file or withdraws our or our partners’ right of reference, we and/or our partners may no longer be able to manufacture, develop, market, and sell our or our partners’ products or product candidates.  FDA approval of the new manufacturer and manufacturing site, as well as certain changes to the manufacturing process, would also be required.

We have entered intorely on multiple commercial supply agreementsarrangements with third-party manufacturers for, including, without limitation:

the supply of the methotrexate drug substance;

the manufacture of prefillable syringes;

the manufacture of device components;

the production of the methotrexate drug substance and sumatriptan in pre-filled syringes;

•

the manufacture and partial assembly of VIBEX® auto injectors; and

the final assembly and packaging of our products and product candidates and our partners’ products and product candidates.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including:

reliance on the third party for regulatory compliance, quality assurance and adequate training in management of manufacturing staff;

the possible breach of the manufacturing agreement by the third party because of factors beyond our control;

failure to supply adequate quantities of product or product candidates or failure to supply product or product candidates meeting the required product specification or other manufacturing requirements; and

the possibility of termination or non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

We and our partners depend on these third-party manufacturers to comply with cGMPs/QSRs enforced by the FDA and other regulatory requirements and to deliver materials on a timely basis.  To the extent that a contract manufacturer cannot deliver adequate quantities of clinical supplies, our or our partners’ product development efforts may be delayed.  To the extent that a contract manufacturer cannot deliver adequate quantities of commercial products, our commercialization efforts would be inhibited and as a result our revenue and profit may be adversely impacted.  In addition, because regulatory approval to manufacture a drug is site-specific, the FDA and other regulatory authorities will repeatedly inspect our and our partners’ current and future third-party manufacturers’ facilities for compliance with cGMPs/QSRs.  If we, our partners, or third-party manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may issue warning letters or suspend or withdraw our regulatory approval for approved or in-market products, refuse to approve any marketing applications, or refuse to allow future or current development of product candidates, among other things.manufacturers. Our third-party manufacturers may also fail to pass the audits by our or our partners’ internal quality and regulatory group. Any of these actions could delay or prevent our development of products, delay or prevent the submission of these products for regulatory approval, delay or prevent marketing approval, or result in insufficient product or product candidate quantity to support commercial demand or development. We may also be required to replace manufacturers, which would be time consuming and expensive, and we may not be able to reach favorable agreements with or FDA approval for alternative manufacturers. As a result, our business, financial condition and results of operations could be seriously harmed.

In addition to the above manufacturing capabilities provided by third party manufacturers, on July 1, 2019, we entered into a lease for office, laboratory, manufacturing and warehousing space in Minnetonka, Minnesota. We completed the build-out of the facility and began occupying the space in 2020. The new facility supports our administrative functions, product development and quality operations, and is intended to provide additional manufacturing and warehousing capabilities in the future. If we begin manufacturing or producing commercial products in the future, we will be subject to the same risks as our third-party manufacturers. We may also not be able to begin product manufacturing and production in a timely manner due to a number of different reasons, including, but not limited, an inability to obtain the necessary supplies, labor and expertise. We may also be delayed if we are not able to obtain necessary licensing and regulatory authority inspections in a timely manner, such as due to inspection restrictions during the Pandemic. Any failure to commence operations at our own facilities could have a material impact on our business.
Some of our suppliers may experience disruption to their respective supply chains due to the effects of the COVID-19 pandemic (“Pandemic”), which could delay, prevent or impair our development or commercialization efforts.
We obtain certain critical materials and components used in manufacturing our products from third-party suppliers whose operations may be directly or indirectly affected by the Pandemic. If we are unable to obtain these critical materials and components in sufficient quantities and in a timely manner, our supply of product for commercialization may be disrupted or delayed which could have a material impact on our revenue and the development, testing and clinical study of our products and product candidates might be delayed or infeasible, and regulatory approval or commercialization of our products and product candidates might be delayed, not obtained or hindered, which could significantly harm our business.
See additional risk factors associated with manufacturing in the section “Risks Related to Regulatory Matters.”

In addition, we may consider entering into additional manufacturing arrangements with third party manufacturers. In each case, we will incur significant costs in obtaining the regulatory approvals and taking the other steps necessary to begin commercial production by these manufacturers.


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We are dependentrely on numerous third parties in our supply chain for the commercial supplymany of our productspartners to manufacture and partners’ products most of which are currently single source suppliers,supply the drug for their product and if any of these single-source suppliers are not able to satisfy demanddistribute and alternative sources are not available, the manufacturing and distribution of our products and our partners’ products could be delayed and our business could be harmed.

The availability of our products for commercial sale depends upon our ability to procure the raw materials, components, packaging materials and finished products we need from third parties. commercialize their products.

We have entered into license and supply agreements with numerous third party suppliers,several different partners.Under many of whichthe arrangements, our partners are currently our single sourceresponsible for supplying the drug product and we are responsible for manufacturing the auto injector and for final assembly and packaging of the final product.Our partners are responsible for the materials necessary for certaindistribution and commercialization of the products in the U.S.
There is no guarantee that our arrangements with any of our products.  For example, we currently havepartners will be successful.Our partners typically control the following single source suppliers in our supply chain for the commercialmanufacture and supply of OTREXUP®, Sumatriptan Injection USP and the Makena® auto injector:

The supplier of the active pharmaceutical ingredient (“API”)drug for methotrexate;

Pharmascience for supply of commercial quantities of methotrexate pre-filled syringes;

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Nypro for the supply of commercial quantities of the VIBEX® auto injectors for Otrexup®;

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ComDel for the supply of commercial quantities of the VIBEX® auto injectors for Sumatriptan Injection USP;

Teva for the supply of commercial quantities of the pre-filled syringes for Sumatruptan Injection USP;

Phillips for the supply of commercial quantities of the VIBEX® QuickShot® device for the Makena® auto injector product

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Sharp for assembly and packaging of OTREXUP®, Sumatriptan Injection USP and Makena® auto injector; and

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Cardinal for services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable management and call center management for OTREXUP®.

their auto-injector product.If, at any of these third partiestime, our partner is unable to source their drug or ceases to manufacture and supply its respective component for any reason, including dueus with their drug or fails to violationsproduce sufficient supplies of the FDA’s QSR or cGMP requirements, our ability to manufacture the finished product will be adversely affected and our ability to meet the distribution requirements for any product sales of such products and the resulting revenue therefrom will be negatively affected. Accordingly, there can be no assurance that any failure in any part of our supply chain will not have a material adverse effect on our ability to generate revenue from our products which depend on third party suppliers, which in turn could have a material adverse effect on our business, results of operations and financial condition.

To mitigate some of the short-term risk of relying on single source suppliers, we intend to build a safety stock of component and or of finished goods inventories.  However, there can be no assurance that these inventories will be adequate or that we will be able to maintain our desired level of safety stock.  Additionally, maintaining a high level of safety stock exposes us to additional risks such as excess and obsolete inventory if the sales volume of OTREXUP® or our other products do not meet our forecasts.

If we do not develop and maintain relationships with manufacturers of our device products, thendrug, we may be unable to successfully manufacture andproduce a finished product or sell our device products.

Our device manufacturingauto injectors designed for our needle-free device has involved the assembly of products from machined stainless steel and composite components in limited quantities.  Our device manufacturing for our VIBEX® auto injector for OTREXUP® and Sumatriptan Injection USP, and our Vibex® QuickShot®  auto injector for Makena®, involves high volume production of numerous complex parts as well as assembly of those parts.  The manufacturetheir product.In addition, if any of our devicepartners are not able to produce sufficient supplies of the drug in accordance with cGMPs, we also will be unable to produce a finished product and we and/or our partner may be subject to regulatory enforcement action.We also rely on our partners to commercialize and distribute their product within the U.S. and if they are unsuccessful in commercializing the product, the resulting revenue may be lower than expected.In many instances, our partners hold the marketing authorization for their products must also comply with applicable regulatory requirements. To the extent that manufacturers do notand should our partner fail to comply with the applicable regulatory requirements, we, they,our partner or our partnerswe may be subject to regulatory enforcement action.

Our planned future device business There may necessitate changesbe instances in which we hold the marketing authorization of the product, and additions to our contract manufacturing and assembly process or the use of a secondary manufacturer 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,therefore, 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,face greater risk of regulatory enforcement should any of which could result in significant delays in production. We may also need to obtain FDA approval for any such changes, which may not be granted.

We rely on Nypro, Phillips and ComDel to manufacture our devices.  Any failure by our contract manufacturers to successfully manufacture the pressure assisted auto injector device in commercial quantities, be in compliance with regulatory regulations, or pass the audits by our internal quality and regulatory group or pharmaceutical partner would have a negative impact on our future revenue expectations.


We use Sharp for final assembly and packaging of many of our and our partners’ products.  Any failure by Sharp to successfully perform final assembly and packaging of our or our partners’ products, or be in compliance with regulatory requirements, may result in product shipment delays and may have a negative impact on our product availability and future revenue expectations.

MRP manufactures and assembles our needle-free devices and certain related disposable component parts for our partners Ferring and JCR.  There can be no assurance that MRP will be ablefail 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 continue 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.

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 and may require regulatory approval. 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. Moreover, to the extent that manufacturers do not comply with the applicable regulatory requirements,requirements.Any enforcement action could impact the ability to produce, market, commercialize, sell, and distribute the finished drug product, and in turn, our revenue. Additionally, our partners’ control the distribution and commercialization strategies for their products and we they,may disagree with their decision or our partnersbusiness strategies. Such decisions may be subject to regulatory enforcement action.

If we are unable to achieveimpact the success of their product commercialization, and maintain adequate levels of coverage and reimbursement for OTREXUP®, or any of our other product candidates for which we may receive regulatory approval, their commercial success may be severely hindered.

Successful sales ofless revenue than desired or expected. Also, as our products depend on the availability of adequate coverage and reimbursement from third-party payers. Patients whopartners are prescribed medicine for the treatment of their conditions generally rely on third-party payerssubject to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payers is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverage is approved, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

In addition, the market for our products will depend significantly on access to third-party payors' drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. Many states use formularies to obtain supplemental Medicaid rebates in excess of those required for Medicaid coverage.  The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. To ensure sales, manufacturers often must provide multiple discounts on the same drug in the chain of distribution to the health care providerproduct development and the payer.  Further, manufacturers are required to assume responsibility for Medicare Part D prescription costs in the donut hole.  Increasingly, payors are looking for metrics and performance-based pricing to justify increased cost of therapeutic advancements.  Even if coverage is obtained, the net realization from price concessions may negativelycommercialization risks as us, any adverse impact our profitability.  Government health programs also impose inflation penalties which may have adverse consequences if we increase prices in the future.

Our partnered products encounter similar issues in obtaining reimbursement from third-party payers. While we are unable to control the reimbursement rate or discounts contracted with third-party payers byon our partners these rates ultimately affect our profit sharing on Sumatriptan Injection USP with Teva and royalties on products such as the Makena® Subcutaneous Auto-Injector, Elestrin® and Gelnique®.

Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the U.S., no uniform policy of coverage and reimbursement for drug products exists among third-party payers. Therefore, coverage and reimbursement for drug products can differ significantly from payer to payer.

Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the U.S. and in international markets. Third-party coverage and reimbursement for OTREXUP® or any of our other product candidates for which


we may receive regulatory approval may not be available or adequate in either the U.S. or international markets, which could have a materialan adverse effectimpact on our business, results of operations, financial condition and prospects.

us.

We may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label” use of drugs or medical devices.

devices, or otherwise promoted or marketed approved products in a manner inconsistent with the FDA’s requirements.

In the U.S. and certain other jurisdictions, companies may not promote drugs or medical devices for “off-label” uses, that is, uses that are not described in the product’s labeling and that differ from those that were approved or cleared by the FDA or other foreign regulatory agencies. Under what is known in the C’s as the “practice of medicine,” physicians and other healthcare practitioners may prescribe drug products and use medical devices for off-label or unapproved uses, and such uses are common across some medical specialties. Although the FDA does not regulate a physician’s choice of medications, treatments or product uses, the FFDCAFederal Food, Drug and Cosmetic Act and FDA regulations significantly restrict permissible communications on the subject of off-label uses of drug products and medical devices by pharmaceutical and medical device companies. The FDA, the Federal Trade Commission (“FTC”), the Office of the Inspector General of the Department of Health and Human Services (“HHS-OIG”), the Department of Justice (“DOJ”) and various state Attorneys General also actively enforce laws and regulations that prohibit the promotion of off-label uses. As the sponsorsponsors of FDA approved products, we and our partners will not only be responsible for the actions of the companies but also can be held liable for the actions of employees and contractors, requiring that all employees and contractors engaging in regulated functions, such as product promotion, be adequately trained and monitored, which requires time and monetary expenditures.

If the FDA determines that a company has improperly promoted a product “off label” or otherwise not in accordance with the agency’s promotional requirements, the FDA may issue a warning letter or seek other enforcement action to limit or restrict certain promotional activities or materials or seek to have product withdrawn from the market or seize product, among other enforcement requirements. In addition, a company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil fines, criminal fines and penalties, civil damages and exclusion from federal funded healthcare programs such as Medicare and Medicaid and/or government contracting, consent decrees and corporate integrity agreements, as well as potential liability under the federal False Claims ActFCA and applicable state false claims acts. Conduct giving rise to such liability could also form the basis for private civil litigation by third-party payers or other persons allegedly harmed by such conduct.

Notwithstanding

Moreover, in addition to the regulatory restrictions on off-label promotion, the FDA’s regulationsthere are other FDA restrictions on and judicial case law allow companies to engage in some forms ofrequirements concerning product promotion and advertising, such as requirements that such communications be truthful and non-misleading and non-promotional scientific speechadequately supported. The FDA also has requirements concerning the off-label usesdistribution of their products. We have endeavored to establish and implement extensive compliance programs in order to instruct employees on complying with the relevant advertising and promotion legal requirements. Nonetheless, thedrug samples. The FDA HHS-OIG, the DOJ and/or the state Attorneys General, and other regulatorsauthorities may take the position that we are not in compliance with suchpromotional, advertising, and marketing requirements, and, if such non-compliance is proven, we may be subject to significant liability, including but not limited to administrative, civil and criminal penalties and fines.

The failurefines, in addition to regulatory enforcement actions.

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Table of any of our third-party licensees to develop, obtain regulatory approvals for, market, distribute and sell their products as planned may result in us not meeting revenue and profit targets.

We partner with pharmaceutical companies, such as Teva, to develop, obtain regulatory approvals for, manufacture and sell our products and technologies along with their products. We are substantially dependent on these partners to perform their obligations under our agreements with them, in accordance with all applicable regulatory requirements.  If one or more of these pharmaceutical company partners fail to pursue  the development or marketing of, fail to perform their contractual obligations in accordance with all regulatory requirements, or are unable to receive marketing approval for our and our partners’ products as planned, our revenues and profits may not reach expectations or may decline. While we have agreements with our partners, we do not have any direct control over their activities. For instance, 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.  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 or our partners to reduce the prices of our technologies below currently planned levels, which could adversely affect our revenues and future profitability.

ContentsFor example, we are currently working with Teva on four products: VIBEX® with epinephrine, VIBEX® with sumatriptan, and two pen products with exenatide and teriparatide.  While VIBEX® with sumatriptan received FDA approval, there is no assurance that development of these other products will continue or that the other three will ultimately receive FDA approval in a timely manner or at all, or if FDA approved they will be a significant revenue source for us. By way of example, Teva received a CRL for the VIBEX® epinephrine pen ANDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Teva has disclosed that they submitted a response to this CRL.  We continue to work with Teva toward a potential approval of the epinephrine


auto injector ANDA, which remains under active review at the FDA.  However, there is no guarantee that an ANDA for the epinephrine auto injector will ultimately be approved by the FDA.

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

liquidity.

For the year ended December 31, 2017,2021, we derived approximately 38%42% of our revenue from Teva and 16% from AMAG.Teva. In addition, we derivederived a significant portion of our product sales revenue from shipment of OTREXUP® to ourwholesale distributors including McKesson, AmerisourceBergen and Cardinal Health, which each accounted for approximately 16%13%, 12% and 11% of total revenues in 2017.

the year ended December 31, 2021, respectively. The loss of any of these significant customers or partners or reduction in our business activities could cause our revenues to decrease significantly and increaseimpact our continuing lossesincome from operations. If OTREXUP® iswe do not successful and we cannot broaden our customer base, we will continue to depend on athese 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.

None of our significant license or collaboration agreements are perpetual in nature.  Each has a specified termination date and may be terminated in advance of the termination date or renewal date by either party under different circumstances, for example a breach by us.

Most of our total revenues are generated from a small number of products.

We generate product sales from a limited number of individual products.  If we or our partners are unable to continue to market any one or a number of those products, such as OTREXUP® or our partnered device products, such as Sumatriptan Injection USP, then our total revenues, results of operations and cash flows could be materially adversely affected.  For example, if any of the products were to lose market share as the result of the entry of new competitors, or if the selling prices of any of these products were to decline significantly, there would be a direct negative impact on our reported revenues.

We have become more commercially oriented by further developing our own products and less dependent on our pharmaceutical partners, 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 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 bringing such products to market; therefore, we may experience difficulties in execution of development of internal product candidates.

If medical doctors do not prescribe our products or our partners’ products, or the medical profession or patients do not accept our products or our partners’ products, or managed care organizations do not cover our products or disadvantage them on their formularies, our ability to grow or maintain our revenues will be limited.

Our business is dependent on market acceptance of our products and those of our partners by physicians, healthcare payers, patients and the medical community. Medical doctors’ willingness to prescribe, and patients’ willingness to accept, our products and those of our partners depend on many factors, including:

perceived safety and efficacy of our products;

the approved indications and claims for products, and any restrictions on the use of such products, including warnings, contraindications, restrictions, and REMS;

convenience and ease of administration;

prevalence and severity of adverse side effects in both clinical trials and commercial use;

availability of alternative treatments and perceived advantages/disadvantages;

cost effectiveness;

substitutability under state pharmacy laws, in the case of generic products;

effectiveness of our marketing strategy and the pricing of our products;


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publicity concerning our products or competing products; and

third-party coverage or reimbursement for our products and those of our partners.

Even though we have received regulatory approval for OTREXUP® and other products, and even if we receive regulatory approval and satisfy the above criteria for any of our product candidates, physicians may not prescribe, and patients may not accept, our products if we do not promote our products effectively. Factors that could affect our success in marketing our products include:

the adequacy and effectiveness of our sales force and that of any partners or international partner’s sales force;

the adequacy and effectiveness of our production, distribution and marketing capabilities and those of our international partners;

the success of competing treatments or products, including generics; and

the availability and extent of reimbursement from third-party payers for our products and those of our partners.

If any of our products or product candidates or those of our partners fails to achieve market acceptance, we may not be able to market and sell the products successfully, which would limit our ability to generate revenue and could harm our business.

The failure of our licensees to perform under any of our existing licensing agreements or the failure of our licensees/partners to develop and obtain regulatory approval for their product candidates or the failure to enter into new licensing agreements could substantially affect our revenue.

One of our business strategies to reduce development risk is to enter into license agreements with pharmaceutical companies covering the development, manufacture, use and marketing of our drug delivery devices with specific drug therapies. Under these arrangements, the partners typically assist us in the development of the product and sponsor the collection of the appropriate data for submission for regulatory approval of the use of the drug delivery device with the licensed drug therapy. Our licensees may also be responsible for distribution and marketing of the product or technologies for these 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 or products. 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. If one or more of these pharmaceutical company partners fail to pursue the development or marketing of, or are unable to receive marketing approval for our and our partners’ products as planned, or fail to perform their contractual obligations in accordance with all regulatory requirements, our revenues and profits may not reach expectations or may decline. 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. For instance, competition in this market could also force us or our partners to reduce the prices of our technologies below currently planned levels, which could adversely affect our revenues and future profitability. Moreover, our partners and licensees will be subject to many of the same regulatory risks as we are. To the extent that they are not able to comply with the applicable regulatory requirements or are not able to obtain or maintain regulatory product approvals, we and they may be subject to regulatory enforcement action, theirthe performance of their obligations under their contracts with us may be inhibited, and we may not be able to realize the benefit of the relationship.

We are relying on partners such as Teva, Covis, Pfizer and AMAGIdorsia for future milestone, sales and royalty revenue. Our partners may fail to obtain FDA approvalor foreign approvals of a product with our technologies or may be unsuccessful in commercializing a product. There is no assurance that development of our partners’ products will continue or that they will ultimately receive FDA approval in a timely manner or at all, or if FDA approved, they will be a significant revenue source for us. Significant delays in anticipated launches of these products in development may occur.  For example, Teva submitted an amendment to the VIBEX® epinephrine pen ANDA in December 2014 and received a CRL from the FDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Due to the major nature of the CRL, Teva’s previously anticipated approval and launch was substantially delayed. There can be no assurances that the ANDA for the epinephrine pen will be approved by the FDA, or that the product will ultimately be launched. While we assist our partners in some cases in obtaining regulatory approvals and advancing new products, we depend on these partners and cannot control their decision-making or progress in achieving such goals. Any potential loss of anticipated future revenue could have an adverse effect on our business and the value of your investment.

Timing

An increase in the number of competitors targeting generic and results505(b)(2) ANDA opportunities and seeking U.S. market exclusivity may adversely affect our revenues and profits.
Our ability to achieve continued growth and profitability through sales of clinical trials to demonstrate the safety and efficacy of products as well as the FDA’s approval of products are uncertain.

Drug developmentpharmaceuticals is an inherently risky and uncertain process.  Before obtaining regulatory approvals for the sale of any new product candidates, wedependent on our and our partners must demonstrate through preclinical studies and clinical trials that the product is safe and

partners’ continued success in challenging patents, developing non-infringing products or developing products with improved efficacy,

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effective for each intended use. Preclinical and clinical studies may fail

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safety or usability to demonstrate the safety and effectiveness of a productprovide opportunities with U.S. market exclusivity or may not be completed on schedule or at all. Likewise, we and our partners may not be able to demonstrate through clinical trials that a product candidate’s therapeutic benefits outweigh its risks. Even promising results from preclinical and early clinical studies do not always accurately predict results in later, large scale trials. A failure to demonstrate safety and efficacy could or would result in the failure to obtain regulatory approvals.

The rate of patient enrollment sometimes delays completion of clinical studies for a number of reasons. For example, therelimited competition. There is substantial competition to enroll patients in clinical trials and such competition has delayed clinical development of our products in the past. For example, patients may not enroll in clinical trials at the rate expected or patients may drop out after enrolling in the trials or during the trials. Delays in planned patient enrollment can result in increased development costs and delays in regulatory approval. In addition, we rely on collaboration partners that may control or make changes in trial protocol and design enhancements, or encounter clinical trial compliance-related issues, which may also delay clinical trials. Product supplies may be delayed or be insufficient to treat the patients participating in the clinical trials, or manufacturers or suppliers may not meet the requirements of the FDA or foreign regulatory authorities, such as those relating to cGMP.pharmaceutical industry. We and our partners will face competition from generic drug products, drug products that are similar to our or our partners’ products, drug products containing the same active ingredient as our or our partners’ products, and drug products for the same indication as our or our partners’ products.

Our or our partners’ products may also experience delaysbe eligible for periods of regulatory exclusivity, as described elsewhere in obtaining, or we and our partnersthis annual report. This exclusivity, however, may not obtain, required initial and continuing approvaladequately protect our or our partners’ products from competition. If any periods of our clinical trials from institutional review boards, the FDA, or other applicable regulatory authorities. We cannot assure youexclusivity that we or our partners willmay have not experience delaysadequately protected the applicable product or undesired results in theseif we or any other clinical trials.  For example,they do not receive or lose anticipated periods of regulatory exclusivity, we or they may be subject to abbreviated new drug application (“ANDA”) and/or 505(b)(2) competition sooner than we anticipate. We or our partners may also be subject to increased generic competition sooner than anticipated as the FDA, Congress, and the Administration have taken steps to facilitate the approval of generic products and increase competition in the prescription drug market. New legislative and regulatory efforts could ultimately have an adverse impact on our business and results of operation.
Further, regardless of any granted exclusivities, we or our partners may issue a CRL in response to one offace competition from products or product uses that are not otherwise blocked by our or our partners’ NDA submissions.  Ifpatents or exclusivities. For example, exclusivity does not prevent physicians from prescribing a CRLsimilar product even if it is issuednot approved for anythe same indication. By further example, in 2019, the FDA approved Clarus’s product, JATENZO®, an oral testosterone undecanoate capsule for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone. The introduction of JATENZO®, which was launched for commercial sale in February 2020, and other oral or competing testosterone products may materially impact our sales of XYOSTED®.Moreover, we or our partners may face competition from other products intended for the same use and/or that otherwise contain the same active ingredients, which may be less expensive than our or our partners’ product candidates, weproducts. Any increase or our partner will be delayed in marketing that product candidate, we or our partner may need to conduct additional clinical trials, and the FDA could convene an advisory committee to obtain expert advice on issues that resultedchanges in the CRL being issued.  Clinical trials may also be suspended, placed on hold, or terminated by us, institutional review boards, the FDA, or other applicable regulatory authoritiescompetitive landscape for a number of reasons, including failure to comply with the applicable regulatory requirements, including GCPs, and issues involving subject safety.

We cannot assure you that the FDA or foreign regulatory agencies will approve, clear for marketing or certify any products developed by us or our partners, on a timely basis, if at all for any number of reasons.  For example, the FDA or foreign regulatory authorities may disagree with our or our partners’ conductproducts may impact product sales and the amount that can be charged for a given product.

Additionally, the number of generic manufacturers targeting significant new generic opportunities with Hatch-Waxman exclusivity, or which are complex to develop, continues to increase. Other companies may also be developing drugs using the studies or study design, may find manufacturers or manufacturing procedures505(b)(2) pathway that are substantially similar to be inadequate, may find that product candidates are not safe and effective or that they present unacceptable adverse events or risks, or may find that studies were not conducted in accordance with the applicable regulatory requirements.  Moreover, if granted, such approvals may be subject to certain limits or other costly and burdensome requirements.  Such limits and requirements may include warnings, including black box warnings, limitations on the indicated use, including the applicable population, contraindications, Risk Evaluation and Mitigation Strategies, and post-approval studiesour products and/or monitoring.product candidates. The FDA or foreign regulatory authorities may not agree with the assessment by us or our clinical partners of the clinical data or they may interpret it differently. Such regulatory authorities may require additional or expanded clinical trials. For example, on October 20, 2017, we received from the FDA a CRL for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. Based on findings in our clinical studies, the FDA stated its concern that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the CRL raised concern regarding the occurrence of depression and suicidality. Depending on the outcome of any actions that we must take to address the FDA’s concerns, we may not receive regulatory approval for XYOSTEDTM. Any limitation on use imposed by the FDA or foreign regulatory agencies or delay in or failure to obtain FDA approvals or clearances ofsuccessfully develop and commercialize highly complex products developed by us and our partners would adversely affect the marketing of these products and our ability to generate product revenue, which wouldcould adversely affect our financial conditionsales and resultsprofitability. For instance, to the extent that another company receives a period of operations.

Before obtaining regulatory approvals for certain generic products, weexclusivity, the FDA may not accept or make our application effective during that company’s exclusivity period. This would delay our and our partners must conduct limited clinical or other trials to show comparability to the branded products. A failure to obtain satisfactory results in these trials wouldpartners’ marketing of products and may prevent us or them from obtaining required regulatory approvals.

If we are not ableestablishing a sufficient market share for our product. Similarly, should another company obtain FDA approval for a pharmaceutically equivalent product to establish new collaborations, we may have to alter our development and commercialization plans.

The development and potential commercialization of our product candidates will require substantial additional cash to fund expenses. For someone of our product candidates, we may decideno longer be able to partner with pharmaceutical and biotechnology companies foruse the development and potential commercialization of those product candidates.

We face significant competition in seeking505(b)(2) pathway. In that case, it is the FDA’s policy that the appropriate collaboration partners. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the partner’s resources and experience, the terms and conditions of the proposed collaboration and the proposed partner’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or other regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The partner may also consider alternative product candidates or technologies for similar indications that maysubmission would be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate.an ANDA. We may, also be restricted under future


license agreements from entering into agreements on certain terms with potential partners. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future partners.

We mayhowever, not be able to negotiate collaborations on a timely basis, on acceptable termsimmediately submit an ANDA or at all. Ifhave an ANDA approval made effective, as we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenues. We may face competition from generic products, 505(b)(2) products, full NDA products, biologics, and biosimilars.  Competition from generic and/or biosimilar products in the U.S. or other markets could result in lower cost products, which could lower our value proposition relative to that of costlier branded products and decrease the revenue we receive for our products.

Continued consolidation in the pharmaceutical industry, and particularly in the generic pharmaceutical industry, could impact our existing partnerships, products and product candidates  

There are a limited number of companies with sufficient scale and commercial reach to effectively market many of our products. Recent trends in the pharmaceutical industry suggest additional market consolidation, further concentrating financial, technical and market strength and resources and increasing competitive pressure in the industry.  For example, in 2016 Teva completed its acquisition of the generic business of Allergan (formerly Actavis). We are presently working with Teva on four products, VIBEX® with epinephrine, Sumatriptan Injection USP, a pen product with exenatide, and a pen product with teriparatide.  Acquisitions and integrations are time and resource intensive and Teva’s attention and resources could be diverted to other acquisition or integration related activities or opportunities, which could potentially delay or negatively impact the successblocked by others’ periods of some of our products with Teva.  For other products, increased consolidation could lead to more intense competitionpatent and pricing pressure which could have a result in a substantial decrease in our revenues and harm our operating results.  Consolidation may also lead to changes in personnel at our partners, potentially impacting the composition of our relationship teams at these partners and leading to material delays in the development and marketing of our products.

regulatory exclusivity protection.

Although we have applied for and/or have received several patents and trademarks, 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 and device 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 have 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 products and 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. Even issued patents may later be modified or declared invalid by the U.S. Patent and Trademark Office by analogous foreign offices or in legal proceedings. In addition, any patent applications we may have made or may make relating to inventions for our actual or potential products 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.

We may seek to protect our patent rights by asserting an allegation of infringement against third parties. For instance, for any products approved via the NDA pathway, we will be required to submit certain patent information for inclusion in the FDA’s Orange Book. There is no guarantee, however, that we will be able to obtain patents that may be included in the Orange Book. To the extent that we do not include a patent in the Orange Book, we would not be able to avail ourselves of the
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protections provided in the Hatch Waxman Act, including the possibility of a 30-month stay. To the extent that we include a patent in the Orange Book that should not be included, we could also face legal action.
If third parties identify our products as reference listed drugs in any ANDAANDAs or 505(b)(2) applications, they will be required to provide patent certifications in their applications for our listed patents, and notifications to us. In the event such third parties make paragraph IV certifications, we would be entitled to file a patent infringement lawsuit, and if that is accomplished within 45 days after receiving the notification, it would trigger a 30-month stay against the FDA making the approval of the third party’s application effective. Patent litigation is costly and time consuming and the outcome is uncertain. There is no assurance of success with any patent litigation. Depending on the ultimate outcome of the litigation it may have an adverse effect on results of operations and our


market penetration. For example, basedWe may also determine that it is not in our business interest to file a patent infringement lawsuit in response to a paragraph IV certification.

To protect our trade secrets and proprietary technologies and processes, we rely, in part, on a Medac press release in January 2014, we became aware that Medac submitted a NDA to the FDAconfidentiality agreements with employees, consultants and advisors. These agreements may not provide adequate protection for an auto-pen containing methotrexate. On February 28, 2014, Antares sued Medacour trade secrets and its foreign parent, medac GmbH (together, “Medac”),other proprietary information in the United States District Court forevent of any unauthorized use or disclosure, or if others lawfully and independently develop the Districtsame or similar information. In addition, we may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of Delaware, alleging infringementthird parties. We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of twoour employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of the Company’s patents for technology regarding an auto injectorsuccess in defending these claims, and an auto injector containing methotrexate.  In April 2015, Antares, Medac, LEO Pharma, Inc.if we do not prevail, we could be required to pay substantial damages and LEO Pharm A/S entered intocould lose rights to important intellectual property. Even if we are successful, litigation could result in substantial cost and be a settlement agreement pursuantdistraction to which the proceedings related to Antares’ patents, as well as patent claims filed by Medac against Antares, LEO Pharmaour management and LEO Pharma A/S, were dismissed with prejudice (the “Medac Settlement”). The settlement agreement provides for a royalty-free cross-license under the patents named in the proceedings and their families allowing the manufacture and sale of OTREXUP® (methotrexate) injection and RASUVO® in and for the U.S.

other employees.

Others may bring infringement claims against us, which could be time-consuming and expensive to defend and the outcomes could be uncertain.

Third parties may claim that the manufacture, use or sale of our drug delivery technologies infringeinfringes their patent rights. As with any litigation where claims may be asserted, we may have to seek licenses, defend infringement actions or challenge the validity of those patents in the patent officeU.S. Patent and Trademark Office or the courts. If these claims are not resolved favorably, 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. Moreover, because we are developing and may develop products using the ANDA and/or 505(b)(2) pathways, we may face a greater risk of patent infringement lawsuits and associated 30-month stay in the event that we or our partners make a paragraph IV certification as part of our FDA marketing application. If we are found liable for infringement or are not able to have these patents declared invalid or unenforceable, 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.others’ patents. Any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. In addition, there is risk that a court will order us or our partners to pay the other party damages for having violated the other party's patents. We may not have identified, or be able to identify in the future, U.S. or foreign patents that pose a risk of potential infringement claims. In addition, a 505(b)(2) application or ANDA approval will not be made effective until any existing nonpatent exclusivities have expired or, if possible, is carved out from the label. Accordingly, we may invest a significant amount of time and expense in the development of one or more product candidates only to be subject to significant delay and patent litigation. Ultimately, we may be unable to commercialize some of our product candidates as a result of patent infringement claims, which could potentially harm our business.

Additionally, we are developing and may develop other products in the future for ourselves and/or our partners using the ANDA and/or 505(b)(2) pathways.  Our partners may also do the same. There can be no assurance that those products do not follow the same type of litigation process as the epinephrine case which could delay or prohibit the launch of those potential products.  We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our partners’ products and/or product candidates and/or proprietary technologies infringe their intellectual property rights, including litigation resulting from filing under Paragraph IV of the Hatch-Waxman Act. These lawsuits could claim that there are existing patent rights for such drug and this type of litigation can be costly and could adversely affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents. Moreover, regardless of whether we and/or our partners are ultimately successful in defending a patent infringement suit, we and/or they may be significantly delayed by a 30 month stay in the event we and/or they make a paragraph IV certification.

Product liability, and product recalls and related claims could harm our business.

The development, manufacture, testing, marketing and sale of pharmaceutical products and medical devices are associated with significant risks of product liability claims or recalls. Side effects or adverse events known or reported to be associated with, or manufacturing defects in, the products sold by us could exacerbate a patient’s condition or could result in serious injury or impairments or even death. This could result in product liability claims and/or recalls of one or more of our products.

Product liability claims may be brought by individuals seeking relief for themselves, or by groups seeking to represent a class of injured patients. Further, third party payers, either individually or as a putative class, may bring actions seeking to recover monies spent on one of our products. While we have not had to defend against any product liability claims to date, as sales of our products increase, we may have product liability claims made against us. The risk of product liability claims may also increase if a company receives a warning letter from a regulatory or other enforcement agency. We cannot predict the frequency, outcome or

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cost to defend any such claims.

Product liability insurance coverage is expensive, can be difficult to obtain and may not be available in the future on acceptable terms, or at all. Our product liability insurance may not cover all of the future liabilities we might incur in connection with the development, manufacture or sale of our products. In addition, we may not continuebe able to be ablecontinue to obtain insurance on satisfactory terms or in adequate amounts.

A

While we maintain product and clinical trial liability insurance and evaluate our insurance requirements on an ongoing basis, a successful claim or claims brought against us in excess of available insurance coverage could subject us to significant liabilities and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Such claims could also harm our reputation and the reputation of our products, adversely affecting our ability to market our products


successfully. Product liability claims can also result in regulatory consequences, including, but not limited to investigations and regulatory enforcement actions, as well as recalls, revocation of approvals, or labeling, marketing or promotional restrictions or changes. In addition, defending a product liability lawsuit is expensive and can divert the attention of key employees from operating our business.

Product recalls Such claims can also impact our ability to initiate or complete clinical trials.

To the extent that a product fails to conform to its specifications or comply with the applicable laws or regulations, we or our partners may be issued at our discretionrequired to or atmay decide to voluntarily recall the discretion of our suppliers, government agencies and other entitiesproduct or regulatory authorities may request or require that have regulatory authority for pharmaceutical and medical device sales.we recall a product even if there is no immediate potential harm to a patient. Any recall of our products or products or their components that we supply to our partners could materially adversely affect our business by rendering us unable to sell that productthose products or components for some time and by adversely affecting our reputation. Recalls are costly and take time and effort to administer. Even if a recall only initially relates to a single product, product batch, or a portion of a batch, recalls may later be expanded to additional products or batches or we or our partners may incur additional costs and need to dedicate additional efforts to investigate and rule out the potential for additional impacted products or batches. Moreover, if any of our partners recall a product due to an issue with a product or component that we supplied, they may claim that we are responsible for such issue and may seek to recover the costs related to such recall or be entitled to certain contractual remedies from us, Recalls may further result in decreased demand for our or our partners’ products, could cause our partners or distributors to return products to us for which we may be required to provide refunds or replacement products, or could result in product shortages. Recalls may also require regulatory reporting and prompt regulators to conduct additional inspections of our or our partners’ or contractors’ facilities, which could result in findings of noncompliance and regulatory enforcement actions. A recall could also result in product liability claims by individuals and third partythird-party payers. In addition, product liability claims or other safety issues could result in an investigation of the safety or efficacy of our products, our manufacturing processes and facilities, or our marketing programs conducted by the FDA the European Medicines Agency (“EMA”) or the authorities of the EU member states. Such investigations could also potentially lead to a recall of our products or more serious enforcement actions, limitations on the indications for which they may be used, or suspension, variation, or withdrawal of approval. Any such regulatory action by the FDA, the EMAEuropean Medicines Agency (“EMA”) or the competent authorities of the EU member states could lead to product liability lawsuits as well.

If we do not have adequate insurance for product liability or clinical trial claims, then we may be subject

We depend on information technology and computer systems 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 and evaluate our insurance requirements on an ongoing basis.  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.  Additionally, 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 onoperate our business, results of operations, financial condition and cash flows.

If we are unable to retain our key personnel, and continue to attract additional professional staff, we may be unable to maintainany failures or expand our business.

Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors will remain highly dependent, in large part, upon our ability to attract and retain qualified scientific, technical and commercial personnel. The loss of key scientific, technical and commercial personnel or the failure to recruit additional key scientific, technical and commercial personnel could have a material adverse effect on our business. While we have employment agreements with our key executives, we cannot assure you that we will succeed in retaining personnel or their services under existing agreements. There is intense competition for qualified personnel in the areas of our activities, and we cannot assure you that we will be able to continue to attract and retain the qualified personnel necessary for the development of our business.

Our business and operations would suffer in the event of failuresinterruptions in our internal computer systems.

systems, including a data breach or cybersecurity incident, could have a negative impact on our business.

Despite the implementation of security measures, our internal computer systems and those of our current and any future partners, contractors and consultants are vulnerable to cybersecurity attacks including damage from computer viruses, unauthorized access, attacks by computer hackers and ransomware, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our manufacturing activities, development programs and our business operations. For example, the loss of manufacturing records or clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential, protected health or proprietary information, we could incur liability or damage to our reputation, and the further commercialization and development of our products and product candidates could be delayed.

If Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data, including our intellectual property, or trade secrets or the personal information of our employees, patients or other business partners may be exposed to unauthorized persons or to the public. There can be no assurance that our efforts, or the efforts of our partners and vendors, will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

Our corporate compliance program cannot guarantee that we make any acquisitions,are in compliance with all potentially applicable laws and regulations, and we have incurred and will continue to incur costs relating to compliance with applicable laws and regulations.
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As a pharmaceutical technology company, we are subject to a large body of legal and regulatory requirements, guidance, and recommendations from a variety of costsregulatory authorities, such as the FDA, the EMA, and might never successfully integrateHHS OIG. In addition, as a publicly traded company we are subject to significant regulations, including the acquired product or business into ours.

We might attempt to acquire products or businesses thatSarbanes-Oxley Act of 2002. While we have developed and instituted a corporate compliance program based on what we believe are a strategic complementthe current best practices and continue to update the program in response to newly implemented regulatory requirements and guidance, we cannot ensure that we are or will be in compliance with all potentially applicable regulations. Failure to comply with all potentially applicable laws and regulations could lead to the imposition of fines, cause the value of our common stock to decline, and impede our ability to raise capital or list our securities on certain securities exchanges.

We face uncertainty and risks related to the outbreak of the novel coronavirus disease, COVID-19, which could significantly disrupt our operations and may materially and adversely impact our business model. We might encounterand financial conditions.
The Pandemic continues to evolve, including the spread of new more contagious virus strains, and the related risks and uncertainty could materially and adversely affect our business, operating difficultiesresults and expenditures relatingfinancial conditions.
Our sales force has been subject to integrating an acquired product or business.  These acquisitions might


require significant management attention that would otherwise be available for ongoing developmentvarying limitations on its ability to visit physicians, and we are utilizing virtual meeting platforms and other forms of social media to connect with our business.  In addition,existing and potential customers and healthcare professionals. The restrictions and closures imposed as a result of the Pandemic have also limited patient access to physicians, and we might never realize the anticipated benefits of any acquisition. We might also make dilutive issuances of equity securities, incur debt orhave experienced, and may continue to experience, a decrease in cash availablenew prescriptions for our proprietary products. Our partners may also experience a decrease in demand for our partnered products due to the Pandemic or the related restrictions. While we have taken measures to help minimize the potential impact of the various government orders, the effects of these restrictions may negatively impact productivity and demand for our products, disrupt our business and delay development programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These restrictions and others in the future, as well as the continued uncertainty on the duration, scope and severity of the Pandemic, could negatively impact our business, operating results and financial condition.

We currently rely on many third parties to source active pharmaceutical ingredient and drug products, manufacture and assemble our devices, distribute finished products and provide various logistics activities for our business. If any of these third parties are adversely impacted by the Pandemic or the restrictions resulting from the outbreak, for example, one of our third party manufacturers’ facility had a temporary shutdown as a result of a positive COVID-19 diagnosis by an employee, if they are not able to obtain necessary supplies, or if they need to prioritize other products or customers over us or our partners, we may experience delays or disruptions in our product supply chain which could have a material and adverse impact on our business. Additionally, if we or any of these third parties require a regulatory authority inspection, we or they may be delayed in obtaining such inspection as a result of the Pandemic. These third parties may also need to deviate from their standard manufacturing procedures as a result of the Pandemic, which could adversely impact our or our partners’ products. These third parties may also need to deviate from their standard manufacturing procedures as a result of the Pandemic, which could adversely impact our or our partners’ products.
In addition, to the extent that we or our partners are conducting clinical trials, the Pandemic could cause delays or disruptions in these or future development programs. The foregoing may require that we consult with relevant review and ethics committees, Institutional Review Boards (“IRBs”) and the FDA, and could negatively impact our business. We may also need to make filings to the applicable regulatory authorities to account for changes that are necessary to continue to adapt to the Pandemic.
As the Pandemic continues, it may impact our and our partner’s business operations in any number of ways. This has been recognized by the FDA, which has promulgated a number of guidance specific on operations during the Pandemic. As the Pandemic develops, the regulatory guidance may continue to change and evolve, requiring that we and our partners continue to adapt to new requirements.
The full extent to which the Pandemic may impact our business or the economy as a whole is unknown and will depend on future developments, which are highly uncertain and cannot be predicted, such as the ultimate spread and rate of infection, the duration of the Pandemic, travel restrictions and social distancing requirements, business closures or business disruptions and the effectiveness of actions taken in the U.S. and in other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. These effects could have a material adverse impact on our business and operations. To the extent the Pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section and in the “Risk Factor” section in our other filings with the Securities and Exchange Commission. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
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We have historically incurred significant losses, and there is no guarantee that we can sustain or grow our profitability.
Although we generated net income of $46.3 million and $56.2 million for the years ended December 31, 2021 and 2020, respectively, we incurred net losses of $2.0 million for the year ended December 31, 2019. In addition, we had an accumulated deficit as of December 31, 2021 of $176.3 million. The costs for research and development of our products, product candidates and drug delivery technologies, along with marketing and selling expenses and general and administrative expenses, have been the principal causes of our historical losses. Although we have reported net earnings and earnings per share in recent two most recent annual periods, there is no guarantee we will continue to post profitable results of operations or incur contingent liabilities and/maintain profitability on an annual or amortization expenses relating to goodwill and other intangible assets, in connection with future acquisitions.

quarterly basis.

Risks Related to Regulatory Matters

Our and our partners’ product candidates including XYOSTEDTM, are subject to the inherent risk of product development and clinical trials, in that product development and clinical trials may not be successful, and they may not receive regulatory marketing approval on a timely basis or at all. If we or our partners fail to obtain, or have delays in obtaining, regulatory approvals for any product candidates, our business, financial condition and results of operations may be materially adversely affected.

We

The design, development, testing, manufacturing and our partnersmarketing of pharmaceutical compounds and medical devices are not permittedsubject to market any product candidates,regulation by governmental authorities, including XYOSTEDTM, in the United States unless and until we or they obtain regulatory approval from the FDA. To market the product in the United States, we or our partners must submit to the FDA and obtain FDA approval of a marketing application.  Wecomparable regulatory authorities in other countries and our partners have historically used FDA’s 505(b)(2) NDAis an inherently risky and ANDA pathways.  A 505(b)(2) NDA must be supported by extensive clinical and preclinical data, as well as extensive information regarding chemistry, manufacturing and controls, or CMC, to demonstrate the safety and effectiveness of the applicable product candidate.  An ANDA must be supported by studies demonstrating that the product candidate is bioequivalent to the reference listed drug, as well as extensive information regarding CMC. The number and types of preclinical studies and clinical trials that will be required varies depending on the product candidate, the approval pathway, the disease or condition that the product candidate is designed to target and the regulations applicable to any particular product candidate.

uncertain process. To conduct our and our partners’ clinical and preclinical studies, we and they rely on third parties, including Contract Research OrganizationsCROs and clinical trial sites to carry out the studies in accordance with the written protocol, the instructions, our and our partners’ agreements with them, and the applicable regulatory requirements. There is no guarantee that we or our partners will be able to negotiate agreements with these third parties on acceptable terms, on a timely basis, or at all. To the extent that these third parties do not carry out their responsibilities, as is required, or to the extent that we, our partners, or such third parties terminate the applicable agreements, we or our partners may need to replace them, which may take significant time, effort, and expense. Additionally, we or our partners may be subject to regulatory enforcement action for such third parties’ and our or our partners’ actions, and the FDA or foreign regulatory authorities may find that the study data that is generated by such third parties cannot form the basis for approval of a marketing application, requiring that we or our partners conduct additional preclinical and clinical studies.

Moreover, investigators and CROs may be subject to conflicts of interest that compromise or appear to compromise the resulting data. Such third parties may also have relationships with other entities that they may prioritize over the conduct of our or our partners’ studies.

Despite the time and expense associated with preclinical and clinical studies, failure can occur at any stage, and we or our partners could encounter problems that cause us or they to repeat or perform additional preclinical studies, CMCchemistry, manufacturing and controls (“CMC”) studies or clinical trials. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates or that may increase the cost of development, including, failure to receive FDA or IRB authorization to begin or continue a trial, negative or inconclusive results, slow or insufficient subject enrollment, failure to obtain adequate clinical supply of product candidates that meet the applicable regulatory quality requirements, and failure by us, our partners, Contract Research Organizations,CROs, and clinical trial sites to follow the applicable regulatory requirements, including GCPs. We or our partners may also not have sufficient funding to conduct or complete a clinical trial or pay the substantial FDA application user fees.
The FDA and similar foreign authorities could also delay, limit or deny approval of a product candidate for many reasons, including because they:

may not deem a product candidate to be adequately safe and effective;

effective or, in the case of a generic drug product, bioequivalent to the reference listed drug; may not find that we have adequately bridged to the reference listed drug, in the case of a 505(b)(2) application; may not find the data, including foreign data, from preclinical studies, CMC studies and clinical trials to be sufficient to support a claim of safety and efficacy;

may interpret data from preclinical studies, CMC studies and clinical trials significantly differently than we or our partners do;

may not approve the manufacturing processes or facilities associated with our product candidates;

may not agree with the pathway that we or our partners have chosen for our product candidates, requiring us to pursue more difficult approval pathways, including submitting full NDAs;

NDAs, or may not agree with our or our partners’ intended indications; may find that our or our partners reliance on a reference listed drug for an ANDA or 505(b)(2) application or literature for a 505(b)(2) application is not appropriate;

may not agree with the design and/or implementation of our clinical and/or pre-clinical studies;

may require us to conduct additional clinical and/or pre-clinical studies;

studies or gather additional information or data; may find safety or efficacy issues with respect to a reference listed drug, either before or after a product candidate’s approval; may change approval policies (including with respect to our product candidates’ class of drugs), or adopt new regulations; may not meet their review goal dates; or

may not accept a submission due to, among other reasons, the content or formatting of the submission.


Significant delays also could shorten any periods during which we or our partners may have the exclusive right to commercialize our product candidates, orwhich would allow competitors to bring products to market before we do.

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Undesirable side effects caused by any product candidate that we or our partners develop, a lack of bioequivalence for ANDA product candidates, and/or an inability to demonstrate product candidate efficacy could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications or cause us or our partners to evaluate the future of our development programs. Undesirable side effects could also interrupt, delay, or halt clinical trials. The regulatory review and approval process is lengthy, expensive and inherently uncertain.

By example,

Our and our partners’ reliance on FDA’s 505(b)(2) and ANDA pathways may also impact the risk of development that we submitted a 505(b)(2) NDA to the FDA in December 2016 for XYOSTEDTM. The NDA submission was accepted for standard review by the FDA and assigned a PDUFA target date for completion of its review by October 20, 2017. On October 20, 2017, we received a CRL from the FDA regarding our NDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. Based on findings in our clinical program, the FDA stated its concerns that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the FDA also raised concern regarding the occurrence of depression and suicidality.  On February 21, 2018, we met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTEDTM. Even if we are able to submit a response to the CRL for XYOSTEDTM, there is no guarantee that the FDA will deem XYOSTEDTM to be approvable.  Moreover, even if XYOSTEDTM  or any other product candidates are approved, they maywould not be subject to certain limits or other costly and burdensome requirements.  For instance, the product candidates may be subject to limitations on the indicated uses for which the products may be marketed, distribution restrictions, or to other conditions of approval; may contain significant safety warnings, including boxed warnings, contraindications, and precautions; may not be approved with label statements necessary or desirable for successful commercialization; or may contain requirements for costly post‑market testing and surveillance or other requirements, including REMS, to monitor the safety or efficacy of the products.   By example,under a number of testosterone products carry boxed warnings and REMS, one of which includes requirements for healthcare provider education and training, enrollment in the REMS program, and certain in-office monitoring steps, in addition to other requirements.  Other testosterone products include REMS that require that providers read certain materials to patients so that patients learn about the product risks.  Testosterone products must also include certain class-wide warnings, which we will also likely be required to have.

Failure to obtain, or delays in obtaining, regulatory approvals may:

•

adversely affect the commercialization of the current version of XYOSTEDTM or any products that we develop in the future;

impose additional costs on us or our partners;

diminish any competitive advantages that may be attained; and

adversely affect our or our partners’ ability to generate revenues.

Moreover, the reference listed drugs for our or our partners’ product candidates will impact our or our partners’ ultimate product approvals.  By example, the labels for our or our partners’ product candidates, in the case of ANDA products will, and in the case of 505(b)(2) NDA products may include the same warnings, precautions, limitations, and other safety information as the reference listed drugs.  Any future actions or inquiries by the FDA with respect to the reference listed drug may require that we or our partners make changes to our labeling, change or abandon development programs that rely on such reference listed drugs, or, possibly, withdraw the product from the market.  Any of the foregoing may impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

We, or our licensees, may incur significant time and 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 the U.S. and other countries for products developed internally and pursuant to our license agreements.  In the future we, or our partners, may need to seek approval for significant changes to existing products or 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 NDA


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 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 developing our own combination products such as XYOSTED™ (testosterone) as well as injection devices for use with our partner’s drugs.  The regulatory path for approval of such combination products may be 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 products and 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 product or device cost prohibitive for ourselves or our partners. Such delay or failure to launch these products or devices could adversely affect our revenues and future profitability.

We and our partners’ product candidates may also be subject to additional regulatory review.  By example the product candidates will be reviewed by different offices within FDA to ensure that the drug labeling adequately discloses all relevant information and risks.  Additionally, the instructions for use for the product candidates will be reviewed for accuracy, ease of use and educational requirements.full NDA. 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.  

Our business and product development may also be adversely affected by the result and timing of the FDA’s review of Teva’s ANDA for its epinephrine product and exenatide and teriparatide pen products as we cannot market or sell our injector for use with these drug products in the U.S. until they have been approved by the FDA. Teva submitted an amendment to the VIBEX® epinephrine pen ANDA in December 2014 and received a CRL from the FDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Due to the major nature of the CRL, Teva’s previously anticipated launch date was substantially delayed.

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.

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.

Many of our and our partners’ drug/device combination product candidates may be developed via the 505(b)(2) or the ANDA route. Both the 505(b)(2) and ANDA regulatory pathways are continually evolving and advice provided in the present is based on current standards, which may or may not be applicable when we or our partner potentially submit a NDA or ANDA.evolving. Based on evolving regulatory policies, we or our partners may not be able to use the 505(b)(2) or ANDA pathwayspathway in the future, requiring that we or they pursue the costlier and time consuming 505(b)(1) full NDA pathway. We or our partners may also face delays or impediments to the approval of any product candidates if a competitor files a citizen petition with the FDA. Moreover, any FDA intervening approvals of drug products that are the same or similar to our or our partners’ product candidates could impact our potential market position and prospects, as well as impact the approval of suchour or our partners’ product candidates. By example, should the FDA approve a product that is pharmaceutically equivalent to one of our or our partners’ 505(b)(2) NDA product candidates before we or they submit a marketing application, we or they would be required to change the marketing application to an ANDA application. Similarly, should FDA approve a product that is more similar to any of our or our partners’ ANDA product candidates than the current reference listed drug, we or our partners may be required to change the reference listed drug for the ANDA. Either of these scenarios could require additional development work, and clinical or preclinical studies. FDA intervening approvals could also delay the timeframe within which we or our partners may submit product applications to the FDA or within which the FDA may make approvals of such applications effective, due to periods of patent protections and regulatory exclusivities for the newly approved product. Because the FDA cannot disclose whether such predicate product(s)product is under development or has been submitted at any time during another company’s review cycle, we would not know whether there are any intervening products or applications until such product or application is approved.

Drug delivery systems

Should the FDA or another regulatory authority refuse to approve any of our or our partners’ product candidates, we or they will be delayed in marketing, may need to conduct additional studies and collect additional data and information, and may need to make changes to the product candidates or their manufacturing processes, any of which could materially harm our business and results of operation. Moreover, if granted, any regulatory approvals may be subject to certain limits or other costly and burdensome requirements, such as injectors are reviewedlabeled warnings, including box warnings, limitations on the indicated use, and post-approval requirements. The FDA also can withdraw product clearances and approvals for failure to comply with regulatory requirements or if unforeseen problems follow initial marketing. Any limitation on use imposed by the FDA and may be legally marketed as a medical device or may be evaluated as partforeign regulatory agencies would adversely affect the marketing of the drug approval process.   Combination drug/devicethese products raise unique scientific, technical and regulatory issues. The FDA has established the 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.  We or our partners 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.  In addition, approval under the 505(b)(2) or ANDA regulatory pathway is not a guarantee of an exclusive position for the approved product in the marketplace.

Accordingly, these regulations and the FDA’s interpretation of them might impair our ability to generate product revenue, which would adversely affect our financial condition and results of operations.

With respect to any new products, we may also face increased risk with respect to regulatory approval, compliance and commercialization. By example, while TLANDO® has received tentative FDA approval, it may never receive final approval. Moreover, to the extent that we do not have prior experience with a specific kind of product, such as the TLANDO® gel capsules, we will need to acquire the necessary experience and expertise to successfully manufacture and commercialize the product, which we may never be able to do.
In other jurisdictions, we, and the pharmaceutical companies with which we are developing technologies (both drugs and devices), must obtain product approvalrequired 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 a reasonable time, or at all, or effectively market our products.

other jurisdictions and we may be required to incur significant costs in obtaining those regulatory approvals.

Because our and our partners’ products and product candidates are considered to be drug/device combination products, the approval and the post-approval requirements that we and they are required to comply with will be more complex.

Our

Most of our and our partners’ products and product candidates are considered to be drug/device combination products by the FDA, consisting of a drug product and a drug delivery device. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary jurisdiction over its pre-market review and regulation based on a determination of the product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our and our partners’ products and product candidates, the primary mode of action is attributable to the drug component of the product,products, which means that the Center of Drug Evaluation and Research (CDER) has primary jurisdiction over its pre-marketthe products’ premarket development and review. These products and product candidates will be and have been subject to the FDA drug
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approval process and will not require a separate FDA clearance or approval for the device component. Even though these products and product candidates will not require a separate FDA clearance or approval, both the drug and device centers within the FDA will review the marketing application for safety, the efficacy of both the drug and device component, including the design and reliability of the injector, and a number of other different areas, such as to ensure that the drug labeling adequately discloses all relevant information and risks, and to confirm that the instructions for use are subjectaccurate and easy to use. 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 requirements may extend the time necessary for the approval of drug-device combinations. In the case of combination product candidates for which we or our partners are seeking approval via the ANDA pathway, it is also possible that the agency may decide that the unique nature of combination products leads it to question the claims of bioequivalence and/or same labeling, resulting in the need to refile the application under Section 505(b)(2). This may result in delays in product approval and may cause us or our partners to incur additional costs associated with testing, including clinical trials. Approval via the 505(b)(2) pathway may also result in additional selling expenses and a decrease in market acceptance due to the druglack of substitutability by pharmacies or formularies. In addition, approval process,under the 505(b)(2) or ANDA regulatory pathway is not a guarantee of an exclusive position for the approved product in the marketplace.
Further, although precedent and guidance exist for the approval of such combination products, there is no assurance that the FDA will not change what it requires or how it reviews submissions. Changes in review processes or the requirement for the study of combination products could delay anticipated launch dates or be cost prohibitive. Such delay or failure to launch these products or devices could adversely affect our revenues and future profitability. If our or our partners’ combination product candidates are approved, we, our partners, and any of our respective contractors will be required to comply with FDA regulatory requirements related to both drugs and devices. For instance, drug/device combination products must comply with both the drug cGMPs and device QSRs. Depending on whether the drug and device components are at the same facility, however, FDA’sthe FDA regulations providesprovide a streamlined method to comply with both sets of requirements. The FDA has specifically promulgated guidance on injectors, which discuss FDA’s requirements with respect to marketing application and post-market injector design controls and reliability analyses. Additionally, drug/device combination products will be subject to additional FDA and constituent part partner reporting requirements.  The development of drug/device combination products will also be more complex because the sponsor of the product application will need to demonstrate the safety and efficacy of both the drug and device components of the product. These requirements will require additional effort and monetary expenditure to ensure that our and our partners’ products and product candidates.

NDAs submitted under Section 505(b)(2) and ANDAs subjects us to the risk that we may be subject to a patent infringement lawsuit or regulatory actions that would delay or prevent the review or approval of our product candidate.

Applicants submitting NDAs under Section 505(b)(2) of the FFDCA and ANDA applicants must provide a patent certification with their applications. One such certification is known as a Paragraph IV certification, which certifies that any patents listed in the FDA’s Orange Book are invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the product that is the subject of the application.  Under the Hatch‑Waxman Act, the holder of patents or the reference listed drug applications that the new application references may file a patent infringement lawsuit following a Paragraph IV certification, triggering a 30‑month stay. In such a case, the FDA may not make the application approval effective until the earlier of 30 months from the receipt of the notice of the Paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent is favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. Accordingly, we may invest a significant amount of time and expense in the development of one or more product candidates only to be subject to significant delay and patent litigation before such product candidates may be commercialized, if at all.

In addition, a 505(b)(2) or ANDA application approval will not be made effective until any existing non‑patent exclusivity have expired or, if possible, are carved out from the label.

We and our partners are subject to ongoing obligations and continued regulatory review, which may result in significant additional expense for our and their approved and unapproved products. Failure to comply with these obligations could result in regulatory and/or legal consequences.

Our and our partners’ products and product candidates are subject to extensive and rigorous government regulation by the FDA and other foreign regulatory agencies, including requirements related to research, development, pre-clinical and clinical testing before and after product approval, manufacture, safety, effectiveness, record keeping,recordkeeping, reporting, labeling, packaging, storage, distribution, safety , deviation, and other reporting, approval, facility registration and product listing, the payment of user fees, advertising, marketing, promotion, sale, distribution, sampling, and import and export of pharmaceutical and medical device products. Because our and our partners’ products and product candidates are drug/device combination products, we and they will have to comply with more regulatory requirements that would otherwise be required for products that are not combination products. Failure to comply with FDA and other applicable regulatory requirements may, either before or after product approval, subject us to administrative or judicially


imposed sanctions. Moreover, were we or our partners to seek regulatory approval for additional indications or uses of any products that we or they may have already received marketing approval for, we or they would be subject to the risks of product development, including the failure to obtain regulatory approval. The applicable FDA, HHS and other governmental policies, laws, and regulations may also change, and additional governmentlaws, policies, and regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates or products, or that could impose additional regulatory obligations on us.

By example, we

The FDA and foreign regulatory agencies will continue to monitor products after approval for continued safety, efficacy, and compliance. We, our partners, and our partnersindependent contractors will also must comply with FDA’s promotional requirements, including FDA’s prohibition on the promotion of products for unapproved uses.  Promotional communications may receive significant attention and scrutiny from not onlybe subject to periodic unannounced inspections by the FDA but also the Department of Justice, Department of Healthto monitor and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public.

In addition, laterensure compliance with regulatory requirements. Later discovery of previously unknown adverse events or that the drug is less effective than previously thought or other problems with our products, manufacturers, or manufacturing processes, or failure to comply with regulatory requirements both before and after approval, may yield various results, including warning letters, untitled letters, cyber letters, manufacturing and distribution restrictions, changes to product labeling, post-marketing study or other requirements such as REMS, refusal to approve marketing applications or supplements, withdrawal of marketing application approvals, removal of the product from the market, labeling or promotional material modifications, product recalls, market withdrawals, field corrections, clinical holds and suspensions of clinical studies, fines, penalties, disgorgement, corporate integrity agreements, consent decrees, seizure, injunctions, prohibition on importing and exporting, dear healthcare provider letters, adverse publicity, FDA debarment, debarment from government contractsprocurement programs or

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refusal of orders under existing contracts, and exclusion from federal healthcare programs, among other consequences. Any of these events could have other material and adverse effects on our operations and business.

We

For certain of our products, we and our independent contractors, distributors, prescribers, and dispensers are required to comply with regulatory requirements related to controlled substances for XYOSTED™, which will require the expenditure of additional time and will incur additional expenses to maintain compliance.

XYOSTED™ is a drug/device combination product in which the drug product is testosterone.  Testosterone is a Schedule III

Certain of our products are controlled substance.  Accordingly,substances and accordingly, we, and our contractors, distributors, prescribers, and dispensers must comply with Federal controlled substances laws and regulations, enforced by the United StatesU.S. Drug Enforcement Administration (“DEA”), as well as state controlledstate-controlled substances laws and regulations enforced by state authorities. These requirements include, but are not limited to, registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, and other requirements. These requirements are enforced by the DEA through periodic inspections.

To continue to engage inNot only must continuous controlled substance activities, we, and our contractors, distributors, prescribers, and dispensers must maintain controlled substance registrations.  To the extent that we and our contractors, distributors, prescribers, and dispensers cannot obtain or maintain the necessary controlled substance registrations, we and these other third parties would notregistration be able to continue engaging in controlled substance operations.  This would prevent the commercialization of XYOSTED™ or would require that we find alternative contractors, which would take additional time and expenses, also delaying the commercialization of XYOSTED™.   Moreover, even if we, and our contractors, distributors, prescribers, and dispensers are able to obtain and maintain the necessary controlled substance registrations,maintained, but compliance with the applicable controlled substance requirements will require significant efforts and expenditures, which could also inhibit the successful commercialization of XYOSTED™.commercialization. If we and our contractors, distributors, prescribers, and dispensers do not comply with the applicable controlled substance requirements, we or they may be subject to administrative, civil or criminal enforcement, including civil penalties, refusals to renew necessary registrations, revocation of registrations, criminal proceedings, or consent decrees.

Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payers in connection with our current and future business activities are and will continue to be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, marketing expenditure tracking and disclosure (or “sunshine”) laws, government price reporting, and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, contractual damages, reputational harm, diminished profits and future earnings.

Our business operations and activities may be directly, or indirectly, subject to various federal, state and local fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims ActFCA and similar laws in some state and foreign markets. These laws may impact, among other things, our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by the federal government, state governments and foreign jurisdictions in which we conduct our business. The laws in the U.S. that may affect our ability to operate include, but are not limited to:

•

the federal Anti-Kickback Statute (“AKS”), which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, the referral of an individual for the furnishing or arranging for the


furnishing of any item or service, or the purchase, lease, order, arrangement for, or recommendation of the purchase, lease, or order of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs, except for activities protected by narrowly-drawn statutory and regulatory safe harbors. Remuneration alleged to induce prescribing practices, reimbursement or recommendations may be subject to scrutiny if it does not qualify for a safe harbor.   The AKS has been interpreted to apply to arrangements between pharmaceutical manufacturers and prescribers, purchasers, formulary managers, and beneficiaries.  Actual knowledge of the statute or specific intent to violate it is not needed to establish liability, and a violation of the AKS may be grounds for a government or whistleblower claim under the federal civil False Claims Act;

the civil federal False Claims Act, which imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; conspiring to defraud the government by getting a false or fraudulent claim paid or approved by the government; or knowingly making, using or causing to be made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. The FCA authorizes imposition of treble damages and a civil penalty for each false claim submitted;

the criminal federal False Claims Act, which imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious or fraudulent;

the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent For violations after November 2, 2015, the penalty has increased  from a minimum of $5,500 to $10,781, and a maximum of $11,000 to $21,563;

•

the Veterans Health Care Act (“VHCA”) of 1992 that requires manufacturers of “covered drugs” toenter into a Master Agreement and Federal Supply Schedule contract with the Department of Veterans Affairs through which their covered drugs must be offered for sale at a mandatory ceiling price to certain federal agencies, including but not limited to, the Department of Veterans Affairs, on the Federal Supply Schedule, which requires compliance with applicable federal procurement laws and regulations and subjects manufacturers to contractual remedies as well as administrative, civil and criminal sanctions. The VHCA also requires manufacturers to enter into pricing agreements with the Department of Health and Human Services to charge no more than a different ceiling price to covered entities participating in the 340B drug discount program, and failure to provide the mandatory discount may subject the manufacturer to specific civil monetary penalties;

the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payer (e.g., public or private), knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services  relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans and healthcare clearinghouses as well as their respective business associates that perform services for them that involve individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization, including mandatory contractual terms as well as directly applicable privacy and security standards and requirements;

the federal Physician Payment Sunshine Act, created under the PPACA, and its implementing regulations requires manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members, with data collection and reporting to CMS required by 90th day of each calendar year;

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;


•

federal government price reporting laws, changed by the PPACA to, among other things, increase the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program and offer such rebates to additional populations, that require us to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on our marketed drugs. Participation in these programs and compliance with the applicable requirements may subject us to potentially significant discounts on our products, increased infrastructure costs and potentially limit our ability to offer certain marketplace discounts and failure to report accurate pricing information exposes us to federal False Claims Act liability;

the Foreign Corrupt Practices Act, a U.S. law which regulates certain financial relationships with foreign government officials (which could include, for example, certain medical professionals);

state law equivalents of each of thefurther discussed above federal laws, such as anti-kickback, false claims, consumer protection and unfair competition laws which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payers, including commercial insurers; state transparency laws requiring manufacturers to report pricing information; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers; state laws that require drug manufacturers to file reports with states regarding marketing  information, such as the tracking and reporting of gifts, compensations and other remuneration and items of value provided to healthcare professionals and entities (compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships, which could potentially have a negative effect on our business and/or increase enforcement scrutiny of our activities); and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, with differing effects; and

the Drug Supply Chain Security Act of 2013 imposes obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing, and will be implemented over a 10-year period.  Among the requirements“Government Regulation” section of this legislation, manufacturers are required to provide certain information regarding the drug products to individuals and entities to which product ownership is transferred, will be required to label drug product with a product identifier, and are required to keep certain records regarding the drug product.  The transfer of information to subsequent product owners by manufacturers is required to be done electronically.  Manufacturers are also required to verify that purchasers of the manufacturers' products are appropriately licensed.  Further, manufactures have drug product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death. Similar requirements are also imposed on other trading partners in the supply chain.

Form 10-K.

Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict, and these changes could have a material adverse effect on our business and financial condition.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together “the Healthcare Reform Act”), expanded healthcare coverage within the United States, primarily through the establishment of state exchanges and expansion of the Medicaid program. This law substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that are expected to impact our business and operations, in some cases in ways we cannot currently predict. Changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, benefits for patients within a coverage gap in the Medicare Part D prescription drug program (commonly known as the “donut hole”), rules regarding prescription drug benefits under the health insurance exchanges, changes to the Medicare Drug Rebate program, expansion of the Public Health Service’s 340B drug pricing discount program, fraud and abuse and enforcement. These changes will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

Some states have elected not to expand their Medicaid programs by raising the income limit to 133% of the federal poverty level, as is permitted under the Healthcare Reform Act. For each state that does not choose to expand its Medicaid program, there may be fewer insured patients overall, which could impact our sales, business and financial condition. Where Medicaid patients receive insurance coverage under any of the new options made available through the Healthcare Reform Act, particularly where Medicaid patients are enrolled in managed care plans, manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, a decision that could impact manufacturer revenues.


Moreover, legislative changes to the Healthcare Reform Act remain possible. Recently, the law’s individual health insurance mandate was repealed and manufacturers’ responsibility for the cost of prescriptions in the Medicare Part D donut hole has increased. We expect that the Healthcare Reform Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures at the federal and state level that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of our existing products or to successfully commercialize our product candidates, if approved. In addition to the Healthcare Reform Act, there will continue to be proposals by legislators at both the federal and state levels, regulators and third party payors to keep healthcare costs down while expanding individual healthcare benefits.  For example, CaliforniaCMS recently enactedfinalized (and subsequently rescinded) a law providing transparency into drug price increases which imposes new reporting requirements on manufacturers, and CMS reduced therule establishing a pricing model for Medicare Part B reimbursement rate for drugs purchased by hospitals underbased on the 340B program.

average price among other industrialized countries. This type of regulatory development, including if extended to other federal healthcare programs, could have a significant impact on our business.

To help patients afford certain of our product OTREXUP®,products, we offer discount, rebate, and co-pay coupon programs. Co-pay coupon programs have received some negative publicity related to their use to promote branded pharmaceutical products over other less costly alternatives. CMS recently has issued a regulation imposing additional obligations on manufacturers in order to continue excluding such programs from government pricing calculations to avoid payment of increased Medicaid rebates. In recent years, other pharmaceutical manufacturers have been named in class action lawsuits challenging the legality of their co-pay programs under a variety of federal and state laws. In addition, at least one insurer has directed its network pharmacies to no longer accept co-pay coupons for certain specialty drugs the insurerinsurers identified. Our co-pay coupon programs could become the target of similar lawsuits or insurer actions. It is possible that the outcome of litigation against other manufacturers, changes in insurer policies regarding co-pay coupons, and/or the introduction and enactment of new legislation or regulatory action could restrict or otherwise negatively affect these programs.

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We are dependent on third parties to decide to utilizeuse our and our partners’ products and to make them readily available at the point of care throughout their networks of pharmacies.

In addition to extensive internal efforts, the successful commercialization of our and our partners’ products require many third parties, over whomwhich we have no control, to decide to utilizeuse them, and to make them readily available at the point of care throughout their networks of pharmacies. These third parties include HMOs, long term care facilities, and pharmacy benefit managers, or PBMs, which use pharmacy and therapeutics committees, commonly referred to as P&T committees, to make purchasing and reimbursement decisions. Generally, before an HMO or long‑term care facility will acquire a product for its own pharmacies, or a PBM will pay retail network pharmacies on behalf of its health plans, the product must be approved for addition to that organization’s list of approved drugs, or formulary list, by the organization’s P&T committee. An institutional P&T committee typically governs all matters pertaining to the use of medications within the institution, including review of medication formulary data and recommendations for the appropriate use of drugs within the institution to the medical staff. PBM P&T committees develop the criteria for plan beneficiaries to access prescription medication, including such cost control measures as step therapy and prior authorization. The frequency of P&T committee meetings varies considerably, and P&T committees often require additional information to aid in their decision‑making process, so we may experience substantial delays in obtaining formulary approvals. Additionally, P&T committees may be concerned that the cost of acquiring a product for use in their institutions or reimbursing retail pharmacies (including any discounts or rebates we offer) outweighs clinical benefits and will resist efforts to add the product to the formulary, or implement restrictions on the usage of the drug in order to control costs. We cannot guarantee that we and/or our partners will be successful in getting the approvals we need from enoughsufficient P&T committees quickly enough to maintain and grow sales of our or our partners’ products.

Our products or product candidates may be subject to restrictive marketing and distribution requirements, which if applied to our product candidates would restrict their use and harm our ability to generate profits.

Some of the currently approved testosterone products are subject to a REMS program. REMS programs may require medication guides, special communication plans to healthcare professionals, or elements to assure safe use, such as restricted distribution methods, distribution only to certain medical professionals, training for medical professionals prescribing, patient registries, or other risk minimization tools. The FDA may determine that XYOSTED™ or other products or product candidates require a REMS program. We cannot predict whether REMS will be required as part of the FDA’s approval of our product candidates or whether such REMS would be required following approval, and, if required, what those requirements might be. Any limitations on approval or marketing could restrict the commercial prospects of our products.

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, including its labels and labeling, the Office of Prescription Drug Promotion (“OPDP”), the FDA’s marketing surveillance department within the Center for Drug Evaluation and Research, will oversee and regulate marketing claims asserted by us and our pharmaceutical company partners. We and our partners may only make claims that are within the FDA approved label for the approved product.  FDA may not include all information in the approved label that is necessary for successful marketing.  If we or a pharmaceutical company partner fails to use acceptable marketing claims we may be subject to enforcement actions.


Changes in product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late‑stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes may also require additional testing, FDA notification, or FDA approval. This could delay completion of clinical trials; require the conduct of bridging clinical trials or studies, or the repetition of one or more clinical trials; increase clinical trial costs; delay approval of our product candidates; and jeopardize our business prospects.

Risks Related to our Common Stock

The market price of our common stock has been, and may continue to be volatile and fluctuate significantly, which could result in substantial losses for investors.

The trading price for our common stock has been, and we expect it to continue to be, volatile. The price at which our common stock trades depends upon a number of factors, including our historical and anticipated operating results, our financial situation, clinical trial results, announcements of technological innovations or new products by us, our partners or our competitors, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general market and economic conditions. Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations, business or prospect.  Amongprospects.
We are at risk of securities class action and similar litigation.
In the factors that may causepast, securities class action litigation has often been brought against a company following a decline in the market price of our common stock to fluctuate are the risks described in this “Risk Factors” section and other factors, including:

fluctuations in our operating results or the operating results of our competitors;

variance in our financial performance from the expectations of investors;

•

our ability to address the deficiencies identified in the CRLits securities. This risk is especially relevant for XYOSTEDTM and ultimately receive product approval;

changes in the estimation of the future size and growth rate of our markets;

changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results;

failure of our products to achieve or maintain market acceptance or commercial success;

conditions and trends in the markets we serve;

changes in general economic, industry and market conditions;

success of competitive products and services;

changes in market valuations or earnings of our competitors;

changes in our pricing policies or the pricing policies of our competitors;

announcements of significant new products, contracts, acquisitions or strategic alliances by us or our competitors;  

changes in legislation or regulatory policies, practices or actions;

the commencement or outcome of litigation involving our company, our general industry or both;

recruitment or departure of key personnel;

changes in our capital structure, such as future issuances of securities or the incurrence of debt;

actual or expected sales of our common stock by our stockholders; and

the trading volume of our common stock.

In addition, the stock markets, in general, the NASDAQ Capital Market and the market for specialtybecause pharmaceutical companies have experienced significant stock price volatility in particular, may experience a loss of investor confidence. Such loss of investor confidence may result in extreme price and volume fluctuations in our common stock that are unrelated or disproportionate to the operating performance of our business, financial condition or results of operations. These broad market and industry factors may materially harm the market price of our common stock and expose us to securities class action or derivative litigation.recent years. For example, on October 23, 2017, Randy Smith filed a complaint in the District of New Jersey, on behalf of a putative class of persons who purchased or otherwise acquired Antares securities against


Antares, us, Robert F. Apple and Fred M. Powell. In addition, in January 2018, three stockholders filed separate derivative actions, one in the District of New Jersey and two in theSuperior Court of New Jersey Chancery Division, Mercer County, purportedly on our behalf, against certain directors and officers, as well as the companyCompany as a nominal defendant. There can be no assurance that we will ultimately prevail in these legal proceedings. Even if we are successful and ultimately prevail, litigation could be costly to defend and divert management’s attention and resources, which could further materially harm our financial condition and results of operations.

Future conversions or exercises by holders of options could dilute

Our ability to use our common stock.

As of March 1, 2018,net operating loss carryforwards and certain other tax attributes may be limited.

If we had options outstanding that are exercisable, at exercise prices ranging from $0.47 to $4.54 per share, for an aggregate of approximately 8,500,000 shares of our common stock. Purchasers of our common stock could therefore experience dilution of their investment upon exercise of the above options.

Sales of our common stock by our officers and directors may lower the market price of our common stock.

As of March 1, 2018, our officers and directors beneficially owned an aggregate of approximately 19,000,000 shares (or approximately 12%) 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.

We do not expect to pay dividendsgenerate sufficient net taxable income in the foreseeable future.

We intendfuture, our ability to retain any earnings in the foreseeable future foruse our continued growth and, thus, do not expectnet operating loss carryforwards to declare or pay any cash dividends in the foreseeable future.

Our failureoffset U.S. federal taxable income may be subject to meet the continued listing requirements of the NASDAQ Capital Marketlimitations, which could potentially result in a delisting of our common stock.

If we failincreased future tax liability to satisfy the continued listing requirements of the NASDAQ Capital Market, such as the requirement that we maintain a minimum bid price of at least $1.00 per share, NASDAQ may take steps to de-list our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to seek to take actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock or prevent our common stock from dropping below the NASDAQ minimum bid price requirement in the future.

us.

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.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

Item 2.

ITEM 2.    PROPERTIES

Our properties consist of leased office, laboratory, warehouse and manufacturing facilities. We currently lease approximately 13,700 square feet of office spaceour corporate headquarters located in Ewing, New Jersey, for our corporate headquarters facility.  This lease will terminate in October 2019.

We currently lease approximately 18,000 square feetprimarily consisting of office laboratory and manufacturing space in Plymouth, a suburb of Minneapolis, Minnesota. This lease will terminate in March 2022.

space. We also lease a small amountbuilding in Minnetonka, Minnesota consisting of office, spacelaboratory, manufacturing and warehousing space. We believe our current facilities are sufficient for our existing needs and to support future anticipated business growth.

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Additional information related to lease obligations is included in Muttenz, Switzerland.  Item 7 of Part II of this Annual Report on Form 10-K.
ITEM 3.    LEGAL PROCEEDINGS
The leaseinformation set forth under “Note 16. Commitments and Contingencies – Pending Litigation” to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K is month-to-monthincorporated herein by reference.
Although the results of actual, pending or threatened legal proceedings and requireslitigation cannot be predicted with certainty, we do not believe that there is a three month notice prior to termination.


Item 3.

LEGAL PROCEEDINGS

On October 23, 2017, Randy Smith filedreasonable possibility that the final outcome of these matters will have a complaint in the District of New Jersey, captioned Randy Smith, Individually andmaterial adverse effect on Behalf of All Others Similarly Situated v. Antares Pharma, Inc., Robert F. Apple and Fred M. Powell (“Smith”), Case No. 3:17-cv-08945-MAS-DEA, on behalf of a putative class of persons who purchasedour business or otherwise acquired Antares securities between December 21, 2016 and October 12, 2017, inclusive, asserting claims for purported violations of Sections 10(b) and 20(a)financial results. Regardless of the Securities Exchange Actfinal outcome, litigation could have an adverse impact on us because of 1934 against Antares, Robert F. Appledefense or settlement costs, diversion of management resources, harm to our reputation and Fred M. Powell.  The Smith complaint contends that defendants made false and/or misleading statements and/or failed to disclose that: (i) Antares had provided insufficient data to the FDA in connection with the NDA for XYOSTEDTM;brand, and (ii) accordingly, Antares had overstated the approval prospects for XYOSTEDTM.  The Company believes that the claims in the Smith action lack merit and intends to defend them vigorously.

On January 12, 2018, a stockholder of our Company filed a derivative civil action, captioned Chiru Mackert, derivatively on behalf of Antares Pharma, Inc., v. Robert F. Apple, et al. (“Mackert”), in the Superior Court of New Jersey Chancery Division, Mercer County (Case No. C-000011-18).  On January 17, 2018, another stockholder filed a derivative action in the same court, captioned Vikram Rao, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Rao”) (Case No. C-000004-18). Both complaints name Robert F. Apple, Fred M. Powell, Thomas J. Garrity, Jacques Gonella, Anton Gueth, Leonard S. Jacob, Marvin Samson and Robert P. Roche, Jr. as defendants, and the Company as nominal defendant, and they assert claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets arising from the same facts underlying the securities class action.  The plaintiffs seek damages, corporate governance and internal procedure reforms and improvements, restitution, reasonable attorneys’ fees, experts’ fees, costs, and expenses. The parties have filed a stipulation consolidating the two actions and staying the proceedings pending the court’s decision on defendants’ anticipated motion to dismiss the securities action. 

On January 17, 2018, a stockholder of our Company filed a derivative civil action, captioned Robert Clark, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Clark”) (Case No. 3:18-cv-00703-MAS-DEA), against Robert F. Apple, Thomas J. Garrity, Jacques Gonella, Leonard S. Jacob, Marvin Samson, Anton G. Gueth and Robert P. Roche, Jr. as defendants, and Company as a nominal defendant.  The action was filed in the U.S. District Court for the District of New Jersey and asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and a violation of Section 14(a) of the Securities Exchange Act of 1934.  This complaint relates to the same facts underlying the securities class action and the other derivative actions.  The plaintiff in Clark seeks damages, corporate governance and internal procedure reforms and improvements, reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses.   The parties have filed a stipulation staying the action pending the court’s decision on defendants’ anticipated motion to dismiss the Smith action.

factors.

Item 4.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.


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PART II

Item 5.

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 NASDAQ Capital Market under the trading symbol “ATRS”.  The following table sets forth the per share high and low closing sales prices of our common stock for each quarterly period during the two most recent fiscal years.

 

 

High

 

 

Low

 

2017:

 

 

 

 

 

 

 

 

First Quarter

 

$

2.84

 

 

$

1.94

 

Second Quarter

 

$

3.23

 

 

$

2.43

 

Third Quarter

 

$

3.29

 

 

$

2.87

 

Fourth Quarter

 

$

3.96

 

 

$

1.63

 

2016:

 

 

 

 

 

 

 

 

First Quarter

 

$

1.23

 

 

$

0.71

 

Second Quarter

 

$

1.17

 

 

$

0.81

 

Third Quarter

 

$

1.77

 

 

$

0.99

 

Fourth Quarter

 

$

2.38

 

 

$

1.50

 

Common Shareholders

As of March 1, 2018,February 28, 2022, we had 7169 shareholders of record of our common stock and approximately 19,19121,825 shareholders in street name.

For information Information on securities authorized for issuance under our equity compensation plans see “Item 12—Security Ownershipcan be found in Item 12 of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Part III of this Annual Report on Form 10-K.

Dividends

We have not paid or declared any cash dividends on our common stock during the past ten years. Weyears and have no intention of paying cash dividends on our common stock in the foreseeable future on our common stock.

future.

Performance Graph

The graph below provides an indication of cumulative total stockholder returns (“Total Return”) for the Companyour common stock as compared with the NASDAQ Composite Index and the NASDAQ Biotechnology Stock Index, the Amex Composite Index, the NYSE Arca Biotechnology Index (formerly Amex Biotechnology Index) and the NYSE Arca Pharmaceutical Index weighted by market value at each measurement point.  Our common stock began trading on the NASDAQ Capital Market on June 15, 2012 and prior to that time was traded on NYSE Amex.  For this reason, we are comparing Total Returns for the Company to indexes from both NASDAQ and NYSE Amex.Index. The graph covers the period beginning December 31, 2012,2016 through December 31, 2017.2021. The graph assumes $100 was invested at market close on December 31, 2016 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Stock Index the Amex Composite Index, the NYSE Arca Biotechnology Index and the NYSE Arca Pharmaceutical Index on December 31, 2012 (based upon the closing pricethat all dividends were reinvested. The graph is not necessarily indicative of each). Total Return assumes reinvestmentfuture investment performance.
atrs-20211231_g2.jpg
December 31,
(in actual dollars)201620172018201920202021
Antares Pharma, Inc.$100.00 $85.41$116.74$201.72$171.24$153.22
NASDAQ Composite Index100.00 128.24123.26166.68239.42290.63
NASDAQ Biotechnology Index100.00 121.06109.77136.56171.64170.55
55
Table of dividends.

 

 

December 31,

 

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

Antares Pharma, Inc.

 

$

100.00

 

 

$

117.32

 

 

$

67.45

 

 

$

31.76

 

 

$

61.15

 

 

$

52.23

 

NASDAQ Composite Index

 

 

100.00

 

 

 

138.32

 

 

 

156.85

 

 

 

165.84

 

 

 

178.28

 

 

 

228.63

 

NASDAQ Biotechnology Index

 

 

100.00

 

 

 

165.61

 

 

 

222.08

 

 

 

247.44

 

 

 

193.79

 

 

 

234.60

 

Amex Composite Index

 

 

100.00

 

 

 

102.99

 

 

 

103.76

 

 

 

91.23

 

 

 

97.98

 

 

 

112.98

 

NYSE Arca Biotechnology Index

 

 

100.00

 

 

 

150.64

 

 

 

222.30

 

 

 

246.53

 

 

 

198.77

 

 

 

272.92

 

NYSE Arca Pharmaceutical Index

 

 

100.00

 

 

 

126.65

 

 

 

144.16

 

 

 

146.50

 

 

 

130.30

 

 

 

147.45

 

Contents


Item 6.

SELECTED FINANCIAL DATA

Recent Sales of Unregistered Securities

The following table summarizes certain selected financial data. The selected financial data

None.
Issuer Purchases of Equity Securities
None.
ITEM 6.    [RESERVED]
ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is derived from, and is qualified by referencedesigned to provide a reader of our audited consolidated financial statements aswith a narrative from the perspective of management on our financial condition, results of operations, liquidity and for the years ended December 31, 2017, 2016, 2015, 2014,certain other factors that may affect our future results. Our MD&A is presented in five sections.
•Company Overview
•Results of Operations
•Liquidity and 2013Capital Resources
•Critical Accounting Policies and Use of Estimates
•Off-Balance Sheet Arrangements
Our MD&A should be read in conjunction with those statements (amounts expressed in thousands, except per share amounts). 

 

 

At December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,562

 

 

$

27,715

 

 

$

32,899

 

 

$

34,029

 

 

$

39,067

 

Investments

 

 

4,993

 

 

 

—

 

 

 

15,012

 

 

 

6,002

 

 

 

30,022

 

Total assets

 

 

74,338

 

 

 

66,325

 

 

 

84,562

 

 

 

68,773

 

 

 

88,932

 

Accumulated deficit

 

 

(270,285

)

 

 

(253,445

)

 

 

(229,106

)

 

 

(208,447

)

 

 

(173,296

)

Total stockholders’ equity

 

 

33,547

 

 

 

45,218

 

 

 

67,042

 

 

 

41,196

 

 

 

70,714

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

41,695

 

 

$

40,318

 

 

$

27,533

 

 

$

13,196

 

 

$

10,958

 

Development revenue

 

 

10,095

 

 

 

10,235

 

 

 

8,892

 

 

 

7,246

 

 

 

4,139

 

Licensing fees

 

 

1,076

 

 

 

166

 

 

 

7,242

 

 

 

3,709

 

 

 

849

 

Royalties

 

 

1,649

 

 

 

1,503

 

 

 

1,991

 

 

 

2,351

 

 

 

4,672

 

Total revenues

 

 

54,515

 

 

 

52,222

 

 

 

45,658

 

 

 

26,502

 

 

 

20,618

 

Cost of product sales

 

 

22,317

 

 

 

23,909

 

 

 

12,925

 

 

 

9,360

 

 

 

6,990

 

Cost of development revenue

 

 

5,149

 

 

 

4,908

 

 

 

6,533

 

 

 

1,877

 

 

 

2,207

 

Gross profit

 

 

27,049

 

 

 

23,405

 

 

 

26,200

 

 

 

15,265

 

 

 

11,421

 

Research and development

 

 

13,147

 

 

 

21,127

 

 

 

19,732

 

 

 

18,638

 

 

 

15,263

 

Selling, general and administrative

 

 

30,353

 

 

 

26,395

 

 

 

26,931

 

 

 

31,740

 

 

 

17,008

 

Total operating expenses

 

 

43,500

 

 

 

47,522

 

 

 

46,662

 

 

 

50,378

 

 

 

32,271

 

Operating loss

 

 

(16,451

)

 

 

(24,117

)

 

 

(20,462

)

 

 

(35,113

)

 

 

(20,850

)

Other income (expense)

 

 

(292

)

 

 

(122

)

 

 

(22

)

 

 

(14

)

 

 

43

 

Net loss before income taxes

 

 

(16,743

)

 

 

(24,239

)

 

 

(20,484

)

 

 

(35,127

)

 

 

(20,807

)

Income tax provision (benefit)

 

 

—

 

 

 

100

 

 

 

175

 

 

 

25

 

 

 

(300

)

Net loss

 

$

(16,743

)

 

$

(24,339

)

 

$

(20,659

)

 

$

(35,152

)

 

$

(20,507

)

Net loss per common share (1) (2)

 

$

(0.11

)

 

$

(0.16

)

 

$

(0.14

)

 

$

(0.27

)

 

$

(0.16

)

Weighted average common shares outstanding

 

 

156,054

 

 

 

154,992

 

 

 

146,594

 

 

 

130,550

 

 

 

126,897

 

(1)

Basic and diluted loss per share amounts are identical as the effect of potential common shares is anti-dilutive.

(2)

We have not paid any dividends on our common stock since inception.


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 and related footnotes included elsewhere in Item 8 of Part II of this annual report.Annual Report on Form 10-K and risk factors identified in Item 1A of Part I of this Annual Report on Form 10-K. Some of the statements in the following discussionincluded below are considered forward-looking statements. See the discussion aboutregarding forward-looking statements preceding Item 1. (“Business”).

Overview

Company and Product Overview

Antares Pharma, Inc. (“Antares,1 of Part I of this Annual Report on Form 10-K.

The terms “Antares,” “we,” “our,” “us” or the “Company”) in this Annual Report on Form 10-K, unless the context otherwise requires, refer to Antares Pharma, Inc. and its wholly owned subsidiaries.
Company Overview
Antares Pharma, Inc. is a specialty pharmaceutical company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  Our strategy is to identify new or existing approved drug formulations and apply our drug delivery technology to enhance the drug compounds and delivery methods.technologies that address patient needs in targeted therapeutic areas. We develop, manufacture and commercialize, for ourselves or with partners, novel therapeutic products using our advanced drug delivery systems that are designed to improveprovide commercial or functional advantages such as improved safety and efficacy, reduce side effects,convenience, improved tolerability, and enhanceenhanced patient comfort and adherence. Our subcutaneous injection technology platforms include the VIBEX®We also seek product opportunities that complement and VIBEX® QuickShot® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers as well as disposable multi-dose pen injectors.leverage our commercial platform. We have a portfolio of proprietary and partnered commercial products and severalongoing product candidatesdevelopment programs in advancedvarious stages of development. We have formed significant strategic alliances and partnership arrangements with several different industry leading pharmaceutical companies including Teva and AMAG.

companies.

We market and sell in the U.S. our proprietary product XYOSTED® (testosterone enanthate) injection indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone. XYOSTED® is the only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration.
In December 2021, we sold certain assets used in the operation of the OTREXUP® product under an asset purchase agreement with Otter for $44.0 million, subject to finalization of changes in closing inventory to be transferred, with $18.0 million received at closing and an additional $26.0 million to be paid in installments over a one-year period. Prior to the asset sale, we marketed and sold OTREXUP® (methotrexate) injection, which is the first FDA-approveda subcutaneous methotrexate injection for once weekly self-administration with an easy-to-use, single dose, disposable auto injector, indicated for adults withwith severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis. Topsoriasis, as a proprietary product in the U.S. In conjunction with the asset sale, we entered into a supply agreement with Otter to manufacture the VIBEX® auto-injection system device at cost plus mark-up. Otter is responsible for manufacturing, formulation and testing of methotrexate and the corresponding prefilled syringe for assembly with the device manufactured by us, along with the commercialization and distribution of OTREXUP® going forward. We also entered into a license agreement with Otter granting them a worldwide, exclusive, royalty-free, fully paid-up, irrevocable, transferable license with the right to sublicense to certain patents relating to the OTREXUP® product that may relate to other products we produce.
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In October 2020, we entered into an exclusive license agreement (the “NOCDURNA® License Agreement”) with Ferring for the marketed product NOCDURNA® (desmopressin acetate) in the United States, which is indicated for the treatment of nocturia due to nocturnal polyuria (“NP”) in adults who awaken at least two times per night to urinate. We began detailing NOCDURNA® with a soft launch in the fourth quarter of 2020 and are currently executing a reintroduction of the product through a comprehensive re-launch strategy to increase awareness and demand.
In October 2021, we entered into an exclusive license agreement (the “TLANDO® License Agreement”) with Lipocine for the product TLANDO® (testosterone undecanoate) in the U.S., a twice-daily oral formulation of testosterone for testosterone replacement therapy indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males. TLANDO® was granted tentative approval from the FDA in December 2020 and will be eligible for final approval and marketing in the U.S. upon expiration of the exclusivity period previously granted to Clarus for JATENZO® on March 27, 2022. On February 3, 2022, we announced the FDA’s acceptance of our NDA resubmission for TLANDO® with a target action date we have receivedset for March 28, 2022. We continue to prepare for the launch of TLANDO® in 2022 pending final FDA approval after the expiration of JATENZO®’s exclusivity period. Under the terms of the TLANDO® License Agreement, we paid Lipocine an upfront payment of $11.0 million. Lipocine is eligible for dosage strengthsadditional milestone payments up to $10.0 million and tiered royalty and commercial milestones based on net sales of 7.5 mg, 10 mg, 12.5 mg, 15 mg, 17.5 mg, 20 mg, 22.5 mgTLANDO® in the U.S. We will be responsible for the manufacturing and 25 mgcommercialization of OTREXUPTLANDO®.

The TLANDO® License Agreement also grants us the option to license and develop LPCN 1111 (TLANDO XR) in the U.S., a potential once daily oral testosterone product containing testosterone tridecanoate in development for the treatment of hypogonadism in adult males. If elected, upon exercise of the option, we will be required to pay an additional $4.0 million in license fees in two installments and will be responsible for additional development and commercial milestone payments as well as tiered royalties on net sales of TLANDO XR in the U.S. In addition, we will be responsible for completing the development program including the conduct of a Phase 3 clinical trial and applying for regulatory approval in the U.S.
In collaboration with Teva, we developed a version of our VIBEX® auto injector for use in a generic epinephrine auto injector product that was approved by the FDA. Teva’s Epinephrine Injection USP is indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients and was approved as a generic drug product with an AB rating, meaning that it is therapeutically equivalent to the branded products EpiPen® and EpiPen Jr® and therefore, subject to state law, substitutable at the pharmacy. We are the exclusive supplier of the device and Teva is responsible for commercialization and distribution of the finished product, for which we also receive royalties on Teva’s net sales.
Through our commercialization partner Teva, we sell Sumatriptan Injection USP indicated in the U.S. for the acute treatment of migraine and cluster headache in adults.
We received FDA approvalare the exclusive supplier of our Abbreviated New Drug Application (“ANDA”) for 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilled syringe auto-injectors, a generic equivalent to Imitrex® STATdose Pen®.  Sumatriptan Injection USP is the Company’s first ANDA approval of a complex generic and second product approved using the VIBEX® auto injector platform.

We developed and supplydevice, a variation of our VIBEX® QuickShot® subcutaneous auto injector developed by us, for use with AMAG’sthe progestin hormone drug Makena® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement.  On February 14, 2018, the FDA approved AMAG’s supplemental New Drug Application (“sNDA”) for the Makena® subcutaneous auto injector drug-device combination product, which is a ready-to-administer treatment, indicated to help reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past. AMAG is preparing for a launch As the exclusive supplier, we perform final assembly and expectspackaging of the Makena® subcutaneous auto injector to be available in the second half of March 2018. We have commenced manufacturing and supply of devices and commercial product in anticipationand receive royalties on Covis’ net sales of the launch.

We also make reusable, needle-free injection devicesproduct. In October 2020, following an FDA advisory committee meeting, Covis in November 2020, received notice that administer injectable drugs, which are currently marketed primarily through Ferring and JCR Pharmaceuticals CO., Ltd., for use with human growth hormone. However, on October 10, 2017, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Ferring (the “Ferring Transaction”)the FDA is proposing to sell the worldwide rights, including certain assets, relatedwithdraw approval of Makena® (hydroxyprogesterone caproate injection). Covis formally requested a public hearing in response to the needle-free auto injector device product line for a total purchase price of $14.5 million.  

The purchase price isFDA's proposal to be paid in four installments consisting of the following: a $2.0 million upfront payment received upon entry into the Asset Purchase Agreementwithdraw its approval and the transfer of certain assets; a second installment of $2.75 million received upon delivery of certain documentation and satisfaction of certain conditions primarily relatedhas stated that it remains committed to the needle-free product manufacturing, which occurred in February 2018; a third installment of $4.75 million payable to us upon satisfaction of certain conditions, including further document transfer, the successful completion of a regulatory audit by a notified body, and a pilot manufacturing run under Ferring’s supervision; and a final installment of $5.0 million upon Ferring’s receipt of the CE Mark needed to continue to commercialize the needle-free product in certain territories and the final transfer of certain product-related inventory, equipment and agreements to Ferring (the “Completion Date”), which is expected to occur by the end of 2018.

We will continue to manufacture and supply needle-free devices until the Completion Date and will receive payment for devices and a royalty on net product sales in accordance with the existing license and supply agreements.


Overview of Clinical and Regulatory Developments

We are developing XYOSTED™ for testosterone replacement therapy and submitted a 505(b)(2) NDA with the FDA in December 2016. We conducted a multi-center, phase III clinical study (“QST-13-003”) evaluating the efficacy and safety of testosterone enanthate administered once-weekly by subcutaneous injection using the QuickShot® auto injector in testosterone deficient adult males with a documented diagnosis of hypogonadism. The study evaluated the pharmacokinetics of testosterone relative to the endpoints required by the FDA for all testosterone products, and the results showed that the primary endpoint was achieved.  We conducted a supplemental safety and pharmacokinetic study (“QST-15-005”), which included a screening phase, a treatment titration phase and a treatment phase for evaluation of safety and tolerability assessments, including vital signs, laboratory assessments, adverse events and injection site assessments.  The results of these two studies formed the clinical basis of our NDA submission for XYOSTED™.

On October 11, 2017, we received a letter from the FDA stating that, as part of its ongoing review of the NDA, the FDA has identified deficiencies that preclude the continuation of the discussion of labeling and postmarketing requirements/commitments.  On October 20, 2017, we received a Complete Response Letter (“CRL”) from the FDA regarding our NDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. Based on findings in our clinical studies, the FDA stated its concern that XYOSTEDTM could cause a clinically meaningful increase in blood pressure.  In addition, the CRL raised concern regarding the occurrence of depression and suicidality.  On February 21, 2018, we metworking with the FDA to discussmaintain patient access to Makena® as a potential path forward for submission of a responsetreatment option to the CRL for XYOSTEDTM. We intend to provide further information following the receipt of the official meeting minutes from the FDA, which is typically within 30 days of the meeting date.

reduce pre-term birth.

We are collaboratingalso developing with Teva on a VIBEX® auto injector pen containing epinephrine used for the treatment of severe allergic reactions (anaphylaxis).  Teva submitted an amendment to the VIBEX® epinephrine pen ANDA in December 2014 and received a CRL from the FDA in February 2016 in which, according to Teva, the FDA identified certain major deficiencies.  Teva has disclosed that they submitted a response to this CRL.  We continue to work with Teva toward a potential approval of the epinephrine auto injector pen ANDA.

Our other combination product development projects in collaboration with Teva include a multi-dose pen for a generic form of BYETTAForteo® (exenatide (teriparatide rDNA origin injection) for the treatment of diabetes,osteoporosis, and were developing another multi-dose pen for a generic form of ForteoBYETTA® (teriparatide [rDNA origin] (exenatide injection) for the treatment of osteoporosis.type 2 diabetes. On February 25, 2022, Teva notified us that it was terminating the exenatide program and related agreement due to a lack of commercial viability. The termination is effective August 23, 2022. Teva continues to work through the U.S. regulatory process with the FDA for exenatide and teriparatide using the ANDA pathway. In 2020, Teva launched Teriparatide Injection (“teriparatide”), the generic version of Eli Lilly’s branded product Forsteo® featuring the Antares multi-dose pen used platform in several countries outside the U.S. We are responsible for the manufacturing and Eli Lillysupply of the multi-dose pen utilized in Teva’s generic teriparatide product under an exclusive development, license and Company (“Lilly”) settledsupply agreement with Teva, the scope of which is worldwide.

In August 2018, we entered into a development agreement with Pfizer to develop a combination drug device rescue pen. This rescue pen will utilize the Antares QuickShot® auto injector and an undisclosed Pfizer drug. In 2021, we continued to work on this development program, and we expect to continue development of this product candidate.
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In November 2019, we entered into a global agreement with Idorsia to develop a novel, drug-device product containing selatogrel. The new chemical entity selatogrel is being developed for the treatment of a suspected AMI in adult patients with a history of AMI. Idorsia will pay for the development of the combination product and will be responsible for applying for and obtaining global regulatory approvals for the product. The parties intend to enter into a separate commercial license and supply agreement pursuant to which we will provide fully assembled and labelled product to Idorsia at cost plus mark-up. Idorsia will then be responsible for global commercialization of the product, pending FDA or foreign approval. We will be entitled to receive royalties on net sales of the commercial product.
In June 2021, Idorsia announced it had initiated its Phase 3 registration study to evaluate the efficacy and safety of self-administered subcutaneous selatogrel. The study will enroll approximately 14,000 patients who are at high risk of recurrent AMI, at approximately 250 sites in approximately 30 countries.
We are also committed to advancing our internal research and development programs and continue to invest in the development of our proprietary product pipeline. Our research and development efforts are focused primarily on leveraging our existing product and technology platforms by broadening their Paragraph IV patent litigationapplications for use in other drug device combination products, as well as exploring new pharmaceutical products, technologies and drug delivery methods.
We have initiated development of a proprietary drug device combination product for the urology oncology market, identified as ATRS-1901, and have conducted formulation development work and non-clinical studies to help advance this program. In 2020, we received a response from the FDA regarding our pre-IND (Investigational New Drug) submission.
We have identified a program to develop a proprietary drug device combination product for the endocrinology market, an adrenal crisis pen, identified as ATRS-1902. The development program supports a proposed indication for the treatment of acute adrenal insufficiency, known as adrenal crisis, in adults and adolescents, using a novel proprietary auto-injector platform to deliver a liquid stable formulation of hydrocortisone. We conducted initial formulation work and developed a working prototype of a new device to support this program. We received a response from the FDA regarding our pre-IND submission and believe we have determined the regulatory and clinical path forward.
In July 2021, the FDA accepted our IND for ATRS-1902 enabling us to initiate our Phase 1 clinical study. In January 2022, we announced the positive results from the Phase 1 clinical study and were granted Fast Track designation by the FDA. The positive results support the advancement of our ATRS-1902 development program to a pivotal clinical study for the treatment of acute adrenal insufficiency, known as adrenal crisis, in adults and adolescents, using our Vai™ novel proprietary rescue pen platform to deliver a liquid stable formulation of hydrocortisone. We anticipate starting this pivotal clinical study in the second quarter of 2022 and expect to submit a 505(b)(2) NDA with the FDA by the end of 2022 pending the success of the pivotal clinical study.
We have initiated development of a proprietary drug device combination product utilizing our rescue pen technology for a rare immunology disorder, identified as ATRS-1903. Formulation development work has been conducted and we anticipate progressing this towards initial clinical testing to evaluate PK and tolerability in human subjects.
COVID-19
In December 2019, a novel strain of coronavirus (COVID-19) emerged in China, and has since spread worldwide, including every state in the U.S. On March 11, 2020, the World Health Organization declared the outbreak a Pandemic and on March 13, 2020, the U.S. declared a national emergency with respect to the outbreak. The Pandemic has impacted global economic activity and lead to disruptions in supply chain, labor shortages, business closures, travel restrictions and other health, safety and social distancing requirements.
We have taken several measures to actively manage and help minimize the impact of the ongoing Pandemic on our business. We have implemented safety measures and protocols to protect the health and safety of our employees and comply with governmental and public health guidelines while working to ensure the sustainability of our business operations and continuity of product supply. We continue to monitor the situation, including COVID-19 variants, and potential effects on our business, suppliers, partners and workforce.
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We have implemented a hybrid work environment with the ability to shift remote as necessary to limit the number of individuals in our facilities to those necessary for essential functions such as research, development, manufacturing and supply. While our field-based team has resumed in-person interaction with fewer restrictions, we believe we are also well-positioned with our virtual capabilities to continue to engage healthcare professionals and patients through the ongoing Pandemic and beyond. Although, we have not experienced significant delays or disruption in our development programs or significant demand reductions for our partnered products due to the Pandemic, we continue monitor the situation, including COVID-19 variants, for potential effects on our or our partners’ clinical trials or delays or disruptions in activities with the FDA.
Although, we have taken measures to help minimize the potential impact of the Pandemic on our business, given the fluidity of the Pandemic and other macroeconomic factors, we are unable to estimate the impact the Pandemic has had on our operations or cash flows as of the date of this filing. We also believe there continues to be uncertainty around the timing and duration of any potential future disruptions due to the COVID-19 variants and the magnitude of any potential impact. As a result, we are unable to estimate the potential impact on future operations or cash flows as of the date of this filing. For more information on these risks see “Part I — Item 1A. Risk Factors — We face uncertainty and risks related to Teva’s ANDA for teriparatide, the termsoutbreak of the novel coronavirus disease, COVID-19, which have not been disclosed. Teva also successfully completed a decentralized procedure registration process in 17 countries in Europe for teriparatide,could significantly disrupt our operations and is awaiting patent clearance in the EU prior to launch.

Critical Accounting Policiesmay materially and Useadversely impact our business and financial conditions.”

Results of Estimates

Operations

The following is a discussion and analysis of our financial results, cash flows, and liquidity and capital resources for the years ended December 31, 2021 and 2020. A discussion of operations and financial condition is based upon our consolidated financial statements, which have been preparedchanges in accordance with U.S. generally accepted accounting principles (“GAAP”.) The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances.  Actual results could differ from our estimates, and significant variances could materially impact our financial conditionresults, cash flow comparison and resultsliquidity and capital resources for the years ended December 31, 2020 and 2019 has been omitted from this Form 10-K but may be found in Item 7 of operations.

Our significant accounting policies are more fully described in the notes toPart II of our consolidated financial statements included in this Annual Report on Form 10-K.  We believe the following accounting policies to be the most critical to understanding our results of operations and financial condition because they require the most subjective and complex judgments.  

Revenue Recognition

We generate revenue from the sale of products, research and development projects, license fees and royalties.  Revenue is recognized when all of the following criteria are met: persuasive evidence of the arrangement exists; delivery has occurred and we have no remaining obligations; the fee is fixed or determinable; and collectability is reasonably assured.

We enter into contracts with customers and partners that often contain multiple elements such as licensing, development, manufacturing and commercialization components.  These arrangements are often complex and we may receive various types of consideration, including: up-front fees, reimbursements for research and development services, milestone payments, payments on product shipments, margin sharing arrangements, license fees and royalties.


In assessing our revenue arrangements, we must identify each deliverable and evaluate whether or not each deliverable has stand-alone value to our customer. Based on this evaluation, deliverables are separated into units of accounting and contract consideration is allocated to each unit of accounting in the arrangement at the inception of the contract based on the relative selling price of each of the deliverables.  The preferred hierarchy for establishing the stand alone selling price of a deliverable is vendor specific objective evidence (VSOE), or third-party evidence (TPE) if VSOE is not available.  However, management must often make its best estimate of the standalone selling price when neither VSOE nor TPE is available.  The estimate of selling price is established considering multiple factors including, but not limited to, historical pricing on similar contracts.

Our contracts with customers often include refundable or non-refundable cash payments we receive in the form of upfront or milestone payments.  Revenue may not be immediately recognizable due to the nature, term and future deliverables of the respective arrangement, and certain portions may be deferred over an extended period. Subsequent factors could affect the initial estimate of the effective terms of agreements and could either increase or decrease the amount and timing of the deferred revenue to be recognized.

Revenue Recognition - OTREXUP®

We sell OTREXUP® in packages of four pre-filled, single-dose disposable auto injectors to wholesale pharmaceutical distributors, our customers, subject to rights of return within a period beginning six months prior to, and ending 12 months following, product expiration. We began detailing OTREXUP® to health care professionals in February 2014.

Prior to the first quarter of 2017, we could not reliably estimate expected returns of OTREXUP® at the time of shipment given our limited sales history of the product. Accordingly, the recognition of revenue was deferred on product shipments until the rights of return no longer existed, which occurred at the earlier of the time that OTREXUP® units were dispensed through patient prescriptions or expiration of the right of return of the product. Patient prescriptions dispensed were estimated using third-party market prescription data.

In the first quarter of 2017, we determined we had developed sufficient historical information to reasonably estimate future returns of OTREXUP® and began recognizing revenue upon delivery to distributors, net of estimated returns. Accordingly, we recognized $1.3 million in revenue for product shipped to distributors in previous periods but not previously recognized as revenue at the time of shipment, net of the returns allowance established during the first quarter of 2017. We also recognized $0.3 million of related product costs in the first quarter of 2017.  The net impact of these changes resulted in a reduction in net loss of $1.0 million, or less than $0.01 per share,10-K for the year ended December 31, 2017.

Product Sales Allowances

2020, filed with the SEC on March 2, 2021.

Revenue, Net
We recognizegenerate revenue from proprietary and partnered product sales, allowances as a reduction of product sales in the same period the related revenue is recognized. Product sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of our agreements with customerslicense and third-party payersdevelopment activities and the levels of inventory within the distribution channels that may result in future rebates or discounts taken. In certain cases, such as patient support programs, we recognize the cost of patient discounts as a reduction of revenue based on estimated utilization. If actual future results vary, we may need to adjust these estimates, which could have an effect on product revenue in the period of adjustment. Our product sales allowances include:

Wholesaler Distribution Fees. We pay distribution fees to certain wholesale distributors based on contractually determined rates. We accrue the fee on shipment to the respective wholesale distributors and recognize the fee as a reduction of revenue in the same period the related revenue is recognized.

Prompt Pay Discounts. We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. We account for cash discounts by reducing accounts receivable by the prompt pay discount amount and recognize the discount as a reduction of revenue in the same period the related revenue is recognized.

Chargebacks. We provide discounts primarily to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs and various organizations under Medicaid contracts and regulations. These entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back the difference between the current wholesale acquisition cost and the price the entity paid for the product. We estimate and accrue chargebacks based on estimated wholesaler inventory levels, current contract prices and historical chargeback activity. Chargebacks are recognized as a reduction of revenue in the same period the related revenue is recognized.


Rebates. We participate in certain rebate programs, which provide discounted prescriptions to qualified insured patients.  Under these rebate programs, we pay a rebate to the third-party administrator of the program, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. We estimate and accrue for these rebates based on current contract prices, historical and estimated future percentages of product sold to qualified patients.  Rebates are recognized as a reduction of revenue in the same period the related revenue is recognized.

Patient Discount Programs. We offer discount card programs to patients for OTREXUP® in which patients receive discounts on their prescriptions. We utilize a contract service provider to process and pay claims to patients for actual coupon usage.  We make estimates of actual coupon usage based on previous experience and recognize the discount as a reduction of revenue in the same period the related revenue is recognized.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. We value inventory using the first-in, first-out method, assuming full absorption of direct and indirect manufacturing costs and normal capacity utilization of our internal manufacturing operations. Inventory valuation is based on our judgment of probable future commercial use or sale and net realizable value. We continually evaluate and provide reserves for inventory on hand that is in excess of expected future demand. These reserves are based on estimates of forecasted product demand and the likelihood of consumption in the normal course of business, considering the expiration dates of the inventories on hand, planned production volumes and lead times required for restocking of customer inventories. Although we make every effort to ensure that our forecasts and assessments are reasonable, changes to these assumptions are possible. In such cases, our estimates may prove inaccurate and result in an understatement or overstatement of the reserves required to fairly state such inventories.

Results of Operations

We are a growing, revenue generating company focused on the development and commercialization of complex drug device combination products.  We posted consecutive year-over-year increases in our revenue for the years ended December 31, 2017, 2016 and 2015, respectively.  We reported a net loss of $0.11 per share for the year ended December 31, 2017 as compared to $0.16 per share and $0.14 per share for the years ended December 31, 2016 and 2015, respectively.  The following is a discussion of our results of operations on a comparative basis for the years ended December 31, 2017, 2016 and 2015.

Revenues

Total revenues for the year ended December 31, 2017 grew to $54.5 million, as compared to $52.2 million for the year ended December 31, 2016, an increase of $2.3 million or 4% on a year-over-year basis. Total revenue for the year ended December 31, 2016 increased by $6.6 million or 14% as compared to $45.7 million for the year ended December 31, 2015.royalty arrangements. The following table provides details about the components and drivers of our overall revenue (in thousands):

growth:

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

OTREXUP®

 

$

17,946

 

 

$

15,145

 

 

$

13,250

 

Sumatriptan Injection USP

 

 

13,474

 

 

 

9,104

 

 

 

—

 

Auto injector and pen injector devices

 

 

5,353

 

 

 

10,609

 

 

 

10,080

 

Needle-free injector devices and components

 

 

4,922

 

 

 

5,460

 

 

 

4,203

 

Total product sales

 

 

41,695

 

 

 

40,318

 

 

 

27,533

 

Development revenue

 

 

10,095

 

 

 

10,235

 

 

 

8,892

 

Licensing revenue

 

 

1,076

 

 

 

166

 

 

 

7,242

 

Royalties

 

 

1,649

 

 

 

1,503

 

 

 

1,991

 

Total revenue

 

$

54,515

 

 

$

52,222

 

 

$

45,658

 

Years Ended December 31,Increased / (Decreased)
(in thousands)20212020$%
Proprietary product sales, net$80,016 $62,878 $17,138 27.3 %
Partnered product sales46,651 50,956 (4,305)(8.4)%
Total product revenue, net126,667 113,834 12,833 11.3 %
Licensing and development revenue19,623 14,466 5,157 35.6 %
Royalties37,692 21,299 16,393 77.0 %
Total revenue, net$183,982 $149,599 $34,383 23.0 %

Product Revenue, Net
Net revenue from product sales increased 11.3% primarily due to increased sales of our proprietary products XYOSTED® and NOCDURNA® and partnered sales of OTREXUP®

We have achieved to Otter subsequent to sale of the product line, partially offset by a relatively steadyreduction in sumatriptan sales to Teva and sales of Makena® subcutaneous auto-injectors to Covis.

Sales of our proprietary products are presented net of estimated product returns and sales allowances. The OTREXUP® product line was sold to Otter in December 2021 with a supply agreement executed simultaneously; therefore, all revenue generated prior to the date of sale is included in proprietary product sales and all revenue generated subsequent to the date of sale is included in partnered products sales.The increase in propriety product sales of 27.3% was primarily attributable to continued growth rate in prescriptions and sales of OTREXUPXYOSTED® since our launch in 2014.  For the years ended December 31, 2017 and 2016, we recognized $17.9 million and $15.1 million, respectively, related to the sale of OTREXUP®, representing an increase of 18% on a year-over-year basis. This increase in OTREXUP® revenue was primarily driven by an increase in shipments to distributors and an underlying growth in prescriptions dispensed, which we believe is attributable to our enhanced marketing programs that specifically target physicians prescribing auto injectors and patient-focused adherence tactics. A portion of the increase was the result of a change in our estimation and recognition method, as discussed in our “Critical Accounting


Policies” above.  Prior to the first quarter of 2017, due to our limited sales and returns history, revenue was initially deferred upon shipment to distributors and recognized based on estimated prescriptions dispensed or expiration of customer rights of return. In the first quarter of 2017, we determined we had developed sufficient historical information to reasonably estimate future returns of OTREXUP® and began recognizing revenue upon delivery to distributors, net of estimated returns. Accordingly, we recognized an additional $1.3 million in OTREXUP® revenue in the year ended December 31, 2017, for amounts that were previously deferred.

For the year ended December 31, 2016, we recognized $15.1 million in OTREXUP® sales as compared to $13.3 million for the year ended December 31, 2015, representing a 14% increase. We believe the increase was primarily attributable to the expansion of our sales force in 2015 and an increase in prescriber education and acceptance.

Sumatriptan Injection USP

We sell, through our commercialization partner Teva, Sumatriptan Injection USP indicated in the U.S. for the acute treatment of migraine and cluster headache in adults.  Under a license and supply agreement, we produce the devices and assemble final product for shipment to Teva, and Teva is responsible for commercial distribution and sale of the product.  We are compensated at cost upon shipment of product to Teva, and receive 50 percent of the net profits from subsequent commercial sales made by Teva.

Sumatriptan Injection USP was launched for commercial sale in June 2016. We recognized $13.5 million2018, and $9.1 million for the years ended December 31, 2017 and 2016, respectively.  Sumatriptan sales for the year ended December 31, 2016 included pre-launch shipments of product to Teva in 2016 in anticipation of and preparation for the June 2016 launch. The increase in revenue in 2017 compared to 2016 is attributable to continued product shipments to Teva and profit margin received from post-launch commercial sales.

Auto injector and pen injector devices

Product sales of auto injectorNOCDURNA®, which we in-licensed and pen injector devices generated $5.4 million, $10.6 million and $10.1 millionbegan detailing in revenues for the years ended December 31, 2017, 2016 and 2015, respectively.  The decrease in revenue from auto injector and pen injector sales for the year ended December 31, 2017 as compared to 2016 was primarily due tofourth quarter of 2020, partially offset by a reduction in pre-launch shipmentssales of auto injector devices soldOTREXUP® due to Teva for use with their generic epinephrine product, which is under FDA review.  We sold $2.9 million, $8.9 million and $9.9 million in epinephrine auto injector devices to Teva in the years ended December 31, 2017, 2016 and 2015, respectively, in anticipation of a potential approval and launch. We continue to work with Teva toward a regulatory approval of this product.

The 2017 and 2016 revenue also included $2.5 million and $1.7 million, respectively, of pre-commercial device sales to AMAG.  AMAG’s sNDA for the Makena® subcutaneous auto injector was approved by the FDA on February 14, 2018, and AMAG expects to launch the product in the second half of March 2018.

Needle-free injector devices and components

Our revenue from reusable needle-free injector devices and disposable components was $4.9 million, $5.5 million and $4.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.  These revenues were generated primarily from sales to Ferring. On October 10, 2017, we announced the sale of the worldwide rights related to the ZOMAJET™ needle-free device product line to Ferring,Otter in December 2021. We attribute this growth to successful marketing and expectlaunch strategies, achieving and maintaining targeted reimbursement coverage, and our ability to leverage our virtual sales capabilities to support the transactioncontinued growth despite any potential softening or impact due to be completed by the endglobal Pandemic in 2021 and 2020.

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Table of 2018.  During the transfer and completion period, we will continue toContents
We also manufacture and supply needle-freesell devices, until the Completion Datecomponents and will receive payment for devicesfully assembled packaged product to our partners Teva, Covis and Otter. Partnered product sales decreased by 8.4% due to a decrease in sumatriptan sales to Teva, lower production and sales volumes of Makena® to Covis and a royalty on net product salesdecrease in accordance with the existing license and supply agreements.

Development Revenue

Developmentshipments of epinephrine auto injectors to Teva, partially offset by revenue was $10.1 million, $10.2 million and $8.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.  

For the year ended December 31, 2017, a majority of our development revenue was generated from AMAG in connection with the commercialproduction of OTREXUP® for Otter and higher teriparatide sales to Teva.

Licensing and Development Revenue
Licensing and development and readiness activities for the Makena® QuickShot® auto injector, which was approved by the FDA on February 14, 2018.   We also performed significant development activities for AMAG in 2016, including engineering, design, testing and final assembly readiness related to the Makena® auto injector and devices used in clinical trials.  For the years ended December 31, 2017 and 2016, development revenue also included amounts from Teva for the ongoing development of the epinephrine auto injector and the exenatide and teriparatide pen injectors, and the development revenue recognized for the year ended December 31, 2015 was principally attributable to development activities with Teva for the epinephrine auto injector.


Licensing Revenue

Licensing revenues represent amountsinclude license fees received from partners for the right to use certainour intellectual property.  Generally, the up-front or milestone payments received fromproperty and amounts earned in joint development arrangements with partners under which we perform development activities or develop new products on their behalf. Fluctuations in our licensing arrangementsand development revenue are initially deferredgenerally attributable to the development timelines of our various partnered development projects, the timing of which is often controlled by our partner, and recognized over the license period or upontiming of achievement of certain milestones.

Licensing and development revenue was $1.1 million, $0.2 million,increased 35.6% primarily as a result of incremental development and $7.2 millionmaintenance activities with Teva to support replacement of molds and tooling related to the commercial production of the epinephrine auto injector and continuing development activities under other ongoing partnered development projects, partially offset by a decline in development activities with Pfizer.
Royalties
Royalties are earned in connection with licenses granted to our partners under license and development arrangements. Royalties are generally based upon a percentage of our partners’ net sales of the partnered product. Royalty revenue increased 77.0% primarily due to an increase in royalties from Teva on its net sales of generic EpiPens®.
Cost of Revenue
The following table summarizes our cost of product sales and development revenue:
Years Ended December 31,Increased / (Decreased)
(in thousands)20212020$%
Cost of product sales$54,418 $53,960 $458 0.8 %
Cost of development revenue13,863 9,140 4,723 51.7 %
Total cost of revenue$68,281 $63,100 $5,181 8.2 %
% of revenue37.1 %42.2 %
Fluctuations in cost of product sales is generally a function of the product revenue mix. Proprietary products generally have a lower cost of sales as a percentage of revenue than partnered product sales. The year-over-year increase in cost of development revenue is attributable to and relatively consistent with the growth in development revenue from partnered development activities.
Research and Development Expenses
Research and development (“R&D”) expenses consist of external costs for clinical studies and analysis activities, formulation development, engineering design work and prototype development, FDA application fees, personnel costs and other general operating expenses associated with our research and development activities.
Years Ended December 31,Increased / (Decreased)
(in thousands)20212020$%
Research and development$14,502 $10,121 $4,381 43.3 %
R&D expenses increased 43.3% primarily due to our ongoing internal development programs including ATRS-1902 and ATRS-1901, along with higher employee compensation expense. Overall, R&D expense fluctuates based on phases of development and timing of clinical studies, including internal and external development costs incurred. As discussed above, we further advanced our ATRS-1902 development program with positive result from a Phase 1 clinical study for adrenal crisis rescue in January 2022 and were granted Fast Track designation by the years ended December 31, 2017, 2016FDA. The results support the advancement of our ATRS-1902 development program to a pivotal clinical study which we anticipate starting in the second quarter of 2022.
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Table of Contents
Selling, General and 2015, respectively.  

Administrative

Years Ended December 31,Increased / (Decreased)
(in thousands)20212020$%
Selling, general and administrative$73,857 $62,759 $11,098 17.7 %
Selling, general and administrative expenses increased 17.7% primarily due to higher sales and marketing costs associated with the relaunch of NOCDURNA®, which we in-licensed and began detailing in the fourth quarter of 2020. The increase is also attributable to higher sales and marketing costs associated with XYOSTED®, which were down in licensing revenue recognized2020 due to the Pandemic as the various restrictions and limitations imposed during the Pandemic led to decreased spending that has returned to pre-Pandemic levels, along with higher employee compensation. General and administrative expenses also increased primarily driven by higher professional service fees, facility costs, insurance expense and employee compensation costs to support the continued growth of the business.
Gain on Sale
In December 2021, we sold certain assets used in the operation of the OTREXUP® product to Otter for $44.0 million, subject to finalization of changes in closing inventory to be transferred, with $18.0 million received at closing and an additional $26.0 million to be paid in installments over a one-year period. The gain on sale of assets of $38.6 million represents the purchase price adjusted for estimated changes in closing inventory to be transferred less net book value of the assets sold and direct transaction costs.
Income Tax Expense (Benefit)
Years Ended December 31,Increased / (Decreased)
(in thousands)20212020$%
Income tax provision (benefit)$15,982 $(46,280)$62,262 134.5 %
Effective tax rate25.7 %(466.5)%
Income tax expense recorded for the year ended December 31, 2017 as compared to 20162021 was driven by the generation of income before income taxes of $62.3 million, resulting in an effective tax rate of 25.7%. The effective tax rate is primarily driven by the federal and state tax rates, along with discrete income tax items for compensation expense. For the year ended December 31, 2020, we recorded an income tax benefit of $46.3 million on pre-tax income of $9.9 million primarily due to the recognitionrelease of $1.0 million in license fees for Sumatriptan Injection USPour valuation allowance on our deferred tax assets which favorably impacted our effective tax rate. As of December 31, 2020, we concluded that, were previously received from Tevaas a result of generating pre-tax earnings, utilization of net operating loss carryovers and initiallyfuture projected pre-tax earnings, it is more likely than not that its deferred duetaxes are realizable and may be utilized to potential contractual refund rights under certain circumstances.  Duringoffset future tax liabilities. Excluding the second quarterrelease of 2017,our valuation allowance on our deferred tax assets, the License, Supply and Distribution Agreement with Teva for Sumatriptan Injection USP was amended such that the refund provisions relating to the licensing fee was removed.  Accordingly, we recognized the deferred revenue in income, as the license had been delivered and there were no remaining obligations related to the license granted.

The decline in licensing revenueeffective tax rate for the year ended December 31, 2016 as compared to 2015 was primarily due to revenue recognized in connection with2020 would have been higher than the termination of our license and promotion agreement with LEO Pharma in June 2015.  We had a license and promotion agreement with LEO Pharma, which began in November of 2013, for certain commercialization rights related to our OTREXUP® product.  The upfront and milestone payments received from LEO totaled $10.0 million and were being recognized into revenue over a 35-month period.  Effective June 23, 2015, our agreement with LEO Pharma was terminated and, as a result, we recognized the remaining unamortized balance of the deferred revenue resulting in total revenue of $6.0 million recognized in 2015 under this arrangement. In addition, we recognized a $1.0 million milestone payment from Ferring in 2015, which was earned under the terms of a licensing agreement and triggered by Ferring filing a NDA related to our patents and licensed technology.

Royalties

Royalty revenue was $1.6 million, $1.5 million and $2.0 million for the years ended December 31, 2017, 2016, and 2015, respectively.  We currently receive royalties from Ferring related to needle-free injector device sales and sales of ZOMACTON™ in the U.S.  However, as discussed above, on October 10, 2017, we announced the sale of the worldwide rights related to the ZOMAJET™ needle-free device product line and expect the transaction to be completed by the end of 2018.  During the transfer and completion period, we will continue to manufacture and supply needle-free devices until the Completion Date and will receive payment for devices and a royalty on net product sales in accordance with the existing license and supply agreements.

We also receive royalties on commercial sales of two gel-based products, Elestrin® and Gelnique®, under licensing arrangements.  Elestrin® is a registered trademark of Meda Pharma, a Mylan Company, and Gelnique® is distributed by Allergan USA, Inc.  

Cost of Revenues and Gross Profit

The following table summarizes our total cost of revenue and gross profit (in thousands):

 

 

2017

 

 

2016

 

 

2015

 

Total revenue

 

$

54,515

 

 

$

52,222

 

 

$

45,658

 

Total cost of revenue

 

 

27,466

 

 

 

28,817

 

 

 

19,458

 

Gross profit

 

$

27,049

 

 

$

23,405

 

 

$

26,200

 

Gross profit percentage

 

 

50

%

 

 

45

%

 

 

57

%

Our gross profit was $27.0 millioneffective tax rate for the year ended December 31, 2017 as compared to $23.4 million and $26.2 million for the years ended December 31, 2016 and 2015, respectively.

The increase in our gross profit for the year ended December 31, 2017 as compared to 2016 was primarily attributable to the recognition of $1.0 million in licensing revenue previously deferred, for which there was no associated costs, the recognition of $1.3 million in previously deferred revenue related to OTREXUP® sales, and other changes in our product revenue and cost of sales, discussed in more detail below. The decrease in our gross profit in 2016 compared to 2015 is primarily attributable to the additional licensing revenues recognized in 2015, including the $6.0 million from the LEO agreement and $1.0 million milestone from Ferring, both of which had no associated costs.


Other variations in revenue, cost of revenue and gross profit are attributable to our overall product sales mix and stage of development activities in a given period, which fluctuate depending on the mix of development projects in progress and stages of completion. The following table summarizes the revenue, cost of sales and gross margin associated with our product sales (in thousands):

 

 

2017

 

 

2016

 

 

2015

 

Product sales

 

$

41,695

 

 

$

40,318

 

 

$

27,533

 

Cost of product sales

 

 

22,317

 

 

 

23,909

 

 

 

12,925

 

Product gross margin

 

$

19,378

 

 

$

16,409

 

 

$

14,608

 

Gross margin percentage

 

 

46

%

 

 

41

%

 

 

53

%

The cost of product sales includes product acquisition costs from third-party manufacturers and internal manufacturing overhead expenses. The increase in product gross margin for the year ended December 31, 2017 as compared to 2016 was the result of an increase in sales of OTREXUP®, which is sold at a higher gross margin than our other products.  The decrease in product gross margin for the year ended December 31, 2016 compared to 2015 is primarily attributable to $9.1 million in sales of Sumatriptan Injection USP sold to Teva initially at cost in 2016, subject to a profit sharing arrangement for which no margin was recognized until commercial sales were made by Teva in following periods.  

The cost of development revenue consists primarily of direct external costs, some of which may have been previously incurred and deferred. Development gross profits can vary from period to period depending on the mix of development projects and activities in progress and the stages of completion in each period.  Cost of development revenue was $5.1 million, $4.9 million and $6.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.  The cost of development revenue recognized in each of the years presented was related to revenue recognized under the Teva auto injector and pen injector programs, with the addition of development activities related to the Makena® auto injector with AMAG in 2016, which comprised the majority of development revenue, cost of sales and gross margin in 2017.  The cost of development revenue for the year ended December 31, 2015 was primarily attributed to development activities completed with Teva related to their epinephrine auto injector product that continues to be under review with the FDA.

Operating Expenses

Research and Development

Research and development expenses consist of external costs for studies and analysis activities, design work and prototype development, FDA fees, and internal salaries and overhead costs and were $13.1 million, $21.1 million and $19.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.  

The decrease in research and development costs for the year ended December 31, 2017 as compared to 2016 was2021 primarily due to the impact of permanent tax items on a decrease in external clinicallower income before income taxes.

Net Income and development costs related to XYOSTEDTM. We completed clinical trials and submitted our NDA for XYOSTEDTM to the FDA in the fourth quarterEarnings Per Common Share
Years Ended December 31,Increased / (Decreased)
(in thousands, except per share amounts)20212020$%
Net income$46,289 $56,201 $(9,912)(17.6)%
Earnings per common share
Basic$0.27 $0.34 $(0.07)(20.6)%
Diluted$0.26 $0.33 $(0.07)(21.2)%
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Table of 2016. On October 20, 2017, we received a CRL from the FDA regarding our NDA for XYOSTEDTM.  See further discussion of our research and development activities related to XYOSTEDTM in the “Research and Development Programs” section in Part 1. Item 1. “Business”.

The increase in research and development costs in 2016 as compared to 2015 was principally attributable to the $2.0 million FDA fee paid in connection with our NDA submission for XYOSTED™ in December 2016.  In each of the years ended December 31, 2017, 2016 and 2015, approximately half of our research and development expenses were driven by external expenses incurred in connection with the development of XYOSTED™ for testosterone replacement therapy.

Selling, General and Administrative

Selling, general and administrative expenses were $30.4 million, $26.4 million and $26.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The increase in selling, general and administrative expenses for the year ended December 31, 2017 as compared to 2016 was principally attributable to the incremental sales and marketing costs associated with our preparation for a potential launch of XYOSTEDTM.  However, on October 20, 2017, we received a CRL from the FDA regarding our NDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its current form. On February 21, 2018, we met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTEDTM.  

Contents

Our selling, general and administrative expenses decreased in 2016 as compared to 2015 primarily as a result of a reduction in legal fees related to litigation settled in 2015 and a reduction in certain personnel costs in connection with the CEO and CFO transitions.  The decrease was partially offset by additional sales and marketing costs related primarily to the OTREXUP® sales force and our on-going marketing efforts.

Liquidity and Capital Resources

At

As of December 31, 20172021 we had cash and cash equivalents and short-term investments totaling $31.6of $65.9 million. We believe that the combination of our current cash and investments,cash equivalents, along with our projected product sales, development revenue milestones and royalties will provide us with sufficient funds to meet our obligations, including debt maturities, and support operations through at least the first quarter of 2019.  However, we2023. We reported net losses of $16.7 million, $24.3 millionincome and $20.7 million, and negativepositive cash flows from operations for each of the years ended December 31, 2017, 20162021 and 2015, respectively.2020. We had an accumulated deficit atas of December 31, 20172021 of $270.3$176.3 million. We havePrior to 2020, we had not historically generated and do not currently generate, enough revenue or operating cash flow to support our operations and continue to operate primarily by raising capital. Our primary sources of liquidity continue to be proceeds fromfunded our operations through equity offerings and debt issuance.

If additional capital is needed to support our operations or growth in the future, we may need to raise additional funds through financings,financing, such as thedrawing our current credit facility, issuance of additional debt, equity or notes convertible into our common stock. However, we may be unable to obtain such financing, or obtain it on favorable terms, in which case 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.

Long-Term

Long-term Debt Financing

On June 6, 2017,

As of December 31, 2020, we entered intowere party to a loan and security agreement, as amended, with Hercules Capital, Inc. (the “Term Loan”). The amortizing Term Loan was secured by substantially all of our assets, excluding intellectual property, and accrued interest at a prime-based variable rate with a maximum of 9.5%, which was 8.5% in 2021. In 2021, we made principal prepayments of $20.0 million and paid a 1.0% prepayment fee. On November 1, 2021, we extinguished the Loan Agreement with Hercules Capital, Inc. and repaid the outstanding $20.0 million principal on the Term Loan, along with a 1.0% prepayment fee and the end of term charge of $1.7 million. All remaining unamortized debt issuance costs associated with the Term Loan were immediately amortized to interest expense.
On November 1, 2021, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent for a term loanthe lenders, for credit facilities in an aggregate principal amount of up to $35.0$40.0 million with a maturity date of November 1, 2024. The Credit Agreement consists of a $20.0 million term loan facility (the “Term Loan”Loan Facility”) and a $20.0 million revolving credit facility (the “Revolving Credit Facility”), (collectively the proceeds of“Credit Facilities”), which are to be used for working capital and general corporate purposes.secured by substantially all of our assets. The first advance of $25.0 millionTerm Loan Facility was funded upon execution of the Credit Agreement with the proceeds used to repay our $20.0 million Term Loan Agreementwith Hercules Capital, Inc. and to pay fees and expenses incurred in connection with the early repayment.
Total interest-bearing debt as of December 31, 2021 was $20.0 million and we had $20.0 million of unused borrowing capacity on June 6, 2017. Underour Revolving Credit Facility, which is expected to be used for ongoing working capital requirements and other general corporate purposes as needed. Commitment fees are payable on the termsunused portion of the Loan Agreement, we may, but are not obligated to, request one or more additional advances ofRevolving Credit Facility at least $5.0 million not to exceed $10.0 millionrates between 0.30% and 0.45% based on our Consolidated Total Leverage Ratio, as defined in the aggregate, subject to the Company achieving certain corporate milestones and satisfying customary conditions. The corporate milestones must be achieved, and the option to request additional advances must be exercised, prior to September 30, 2018, which is currently unlikely to occur.Credit Agreement, remeasured quarterly. Payments under the Term Loan Facility are due in consecutive quarterly installments on the last business day of each of March, June, September and December, commencing on March 31, 2022. At our election, interest accrues at LIBOR plus the applicable margin ranging from 2.25% to 3.00%, which varies based on our Consolidated Total Leverage Ratio. The new Credit Facilities, which replaced the previous Term Loan, are expected to provide approximately $1.2 million in annual interest expense savings based on an interest rate of approximately 2.60% (one-month LIBOR rate plus the applicable margin of 2.50%) as of December 31, 2021.
Under the Credit Agreement, we are interest only until the first principalsubject to customary affirmative and negative covenants, including, among others, restrictions on our ability to incur debt; create liens; make investments; merge, consolidate or dispose of assets or subsidiaries; enter into transactions with affiliates; modify accounting practices, our year end and organizational documents; pledge assets; revise nature of business; perform sale leasebacks; and enter into any restrictive agreements and customary events of default (including payment is due on August 1, 2019, provided that the interest only period may be extended to February 1, 2020 if certain corporate milestones are achieved.defaults, covenant defaults, change of control defaults and bankruptcy defaults). The LoanCredit Agreement also requires uscontains financial covenants, including the ratio of consolidated total indebtedness to pay a fee equal to 4.25% of the total original principal amount of all term loan advancesconsolidated earnings before income, taxes, depreciation and amortization (“End of Term Charge”Consolidated EBITDA”) (“Consolidated Total Leverage Ratio”), which is due upon repayment of the Term Loan at either maturity or earlier repayment.

At the Market Common Stock Offering Program

On August 11, 2017, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which we may offer and sell, from time to time at our sole discretion, shares of common stock having an aggregate offering price of up to $30.0 million through Cowen as our sales agent and/or principal. Cowen may sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415the Credit Agreement” and the ratio of consolidated senior secured indebtedness to Consolidated EBITDA (“Consolidated Senior Secured Leverage Ratio”), as well as the Securities Actratio of 1933,Adjusted EBITDA to consolidated fixed charges (“Consolidated Fixed Charge Coverage Ratio”), as amended. We will pay Cowen a commission of 3.0% ofdefined in the gross sales proceeds of any common stock sold through Cowen under the SalesCredit Agreement. We are not obligatedThese covenants restrict our ability to make any salespurchase outstanding shares of our common stock understock. As of December 31, 2021, we were in compliance with all affirmative, negative and financial covenants.

See Note 8 to the Sales Agreement and asConsolidated Financial Statements included in Item 8 of the datePart II of this report we have not sold any common stock pursuant to the Sales Agreement.

Net Annual Report on Form 10-K for additional information on our financing arrangements.

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Table of Contents
Cash Flows from Flow Comparisons
The following table summarizes our cash flows:
Years Ended December 31,
(in thousands)20212020
Total cash provided by (used in):
Operating activities$36,619 $21,320 
Investing activities(3,852)8,167 
Financing activities(19,990)447 
Effect of exchange rate changes on cash(1)2 
Increase (decrease) in cash and cash equivalents12,776 29,936 
Cash and cash equivalents, beginning of period53,137 23,201 
Cash and cash equivalents, end of period$65,913 $53,137 
Operating Activities

Operating cash inflows are generated primarily from net product sales, license and development fees and royalties. Operating cash outflows consist principally of expenditures for manufacturing costs, personnel costs, general and administrative expenses, research and development projects including clinical studies,activities, and sales and marketing costs. Fluctuations in cash from operating activities generalare primarily a result of the timing of cash receipts and administrative costs and payment of interest on borrowings. Netdisbursements.
The change in the net cash used infrom operating activities was $23.1 million, $15.2 million and $28.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.  Net operating cash used in operations isprimarily a functionresult of the net losses incurred of $16.7 million, $24.3 million and $20.7 million for the years ended December 31, 2017, 2016 and 2015, respectively, adjusted by noncash expenses and changes in operating assets and liabilities. Our reconciliation of net loss to operating cash flow is significantly affected by the timing of operating expenditures and cash receipts.  

The increase in our net cash used in operating activities for the year ended December 31, 2017 in comparison to 2016 was primarily driven by our inventory build, an increase in accounts receivableincome, excluding non-cash activity, and decrease in deferred revenue, and other changes in operating assets and liabilities due to timing of cash receipts and cash payments.  Cash used in operating activities for the year ended December


31, 2016 as compared to 2015 decreased primarily due to a growth in accounts payable,disbursements, principally driven by depletion of inventory and an increase in deferred revenue, and a reduction in prepaid expenses,accrued liabilities, partially offset by an increase in accounts receivable and a decrease in accrued expenses.

Net Cash Flows from deferred revenue.

Investing Activities

Net cash used in investing activities for the year ended December 31, 20172021 was $4.3attributable to the purchase of TLANDO® intangible product rights for $11.3 million, as compared tocapital expenditures of $6.7 million, an additional NOCDURNA® intangible product rights contractual payment of $2.5 million and investment security purchases of $1.2 million, partially offset by net proceeds of $17.8 from the sale of the OTREXUP® product line. Net cash provided by investing activities of $10.0 million for the year ended December 31, 20162020 was attributable to $22.5 million proceeds from maturities of short-term investments, partially offset by capital expenditures of $9.6 million primarily for our manufacturing facility and netthe purchase of NOCDURNA® intangible product rights for $5.0 million.
Financing Activities
Net cash used in investingfinancing activities of $15.7 million in 2015.  The changes are primarily attributable to timing of purchases and maturities of investment securities as well as timing and amount of capital expenditures. Capital expenditures were primarily for XYOSTED™ and Sumatriptan Injection USP commercial molds and assembly equipment.

For the year ended December 31, 2017, net cash flows used in investing activities2021 consisted of cash outflows$40.0 million in principal payments on the extinguishment of $10.0our Term Loan with Hercules Capital, Inc., $2.8 million paid to taxing authorities in connection with net-share settled share-based awards for which we withheld shares equivalent to the value of the employee’s tax obligation for the purchaseapplicable income and other employment taxes, $2.1 million in prepayment fees and an end of investmentsterm charge on our Term Loan and $1.3$0.3 million for capital expenditures and additions to patent rights,in debt issuance costs, partially offset by cash inflows of $5.0 million from investment maturities and $1.9 million in proceeds, net of transaction costs, from the sale of certain assets in connection with the Ferring Transaction.  

In 2016, capital expenditures and additions to patent rights of $5.0 million were offset by proceeds from investment maturities of $15.0 million.  In 2015, capital expenditures and additions to patent rights were $6.7 million and purchases of investments, net of proceeds from investment maturities, were $9.0 million.

Net Cash Flows from Financing Activities

Net cash provided by financing activities was $26.3 million, $17,000 and $42.8 million for the years ended December 31, 2017, 2016 and 2015, respectively.  

In 2017, we received $25.0$20.0 million in proceeds from the issuance of long-term debtour new Term Loan Facility with Wells Fargo and incurred $0.3$5.2 million in debt issuance costs.  We alsoproceeds received from exercises of stock options. Net cash proceeds ofprovided by financing activities for the year ended December 31, 2020 included $1.8 million in proceeds from the exercise of stock options, and remitted $0.2partially offset by $1.4 million paid to taxing authorities in connection with net-share settled stock-based awards for which we withheld shares equivalent to the value of the employees’ minimum statutorytax obligation for the applicable income and other employment taxes.

In 2016, the net cash provided by financing activities was limited to cash proceeds from stock option exercises partially offset by cash remitted to taxing authorities in connection with net-share settled awards.  In 2015, we completed an underwritten offering

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Table of 23,000,000 sharesContents
Contractual Obligations
As of our common stock at a price to the public of $2.00 per share. We received net proceeds of $42.9 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us.  

Contractual Obligations

The following table presentsDecember 31, 2021, our contractual obligations andare as follows:

Payments Due by Period
(in thousands)TotalLess than
1 year		1 - 3
years		3 - 5
years		More than
5 years
Long-term debt obligations 1
$20,000 $1,500 $18,500 $— $— 
Interest payable on long-term debt 2
1,350 512 838 — — 
Unused revolving line of credit fee 3
201 71 130 — — 
Operating lease obligations 4
8,012 1,334 1,731 1,354 3,593 
Purchase commitments 5
31,312 31,312 — — — 
Total$60,875 $34,729 $21,199 $1,354 $3,593 
1    Long-term debt includes principal installment payments on our Term Loan. Refer to Note 8 to the related payments, includingConsolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding our financing arrangements.
2    Calculated using the variable interest due by periodrate as of December 31, 2017 (in thousands):

2021 based on LIBOR plus required spread on our Term Loan. Refer to Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding our financing arrangements.

 

 

Payments Due by Period

 

 

 

 

 

 

 

Less than

 

 

1 - 3

 

 

3 - 5

 

 

More than

 

 

 

Total

 

 

1 year

 

 

years

 

 

years

 

 

5 years

 

Long-Term Debt Obligations

 

$

33,358

 

 

$

2,279

 

 

$

14,840

 

 

$

16,239

 

 

$

—

 

Operating Lease Obligations

 

 

1,720

 

 

 

623

 

 

 

799

 

 

 

298

 

 

 

—

 

Total

 

$

35,078

 

 

$

2,902

 

 

$

15,639

 

 

$

16,537

 

 

$

—

 

3    Calculated using the commitment fee rate as of December 31, 2021 based on our consolidated total leverage ratio assuming the entire revolving line of credit remains undrawn for the duration of the agreement. Refer to Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding our financing arrangements.

4    Operating leases are primarily for office space, as well as vehicles and equipment. Refer to Note 5 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional lease information.
5    Purchase commitments include open purchase orders with suppliers and inventory to be purchased in accordance with the TLANDO® exclusive license agreement entered into with Lipocine in October 2021. Refer to Note 6 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information on the agreement.
Off Balance Sheet Arrangements

We do

As of December 31, 2021, we did not have any off-balance sheet arrangements, other than operating leases, including any arrangements with any structured finance, special purpose or variable interest entities.

Research

Critical Accounting Policies and Development Programs

Use of Estimates

The preceding discussion and analysis of our results of operations and financial condition is based upon our Consolidated Financial Statements. Our researchConsolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require us to make estimates and assumptions in certain circumstances that, giving due consideration to materiality, affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures as of the date of the financial statements. We regularly review our estimates and assumptions, which are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates, and significant variances could materially impact our financial condition and results of operations under different assumptions or conditions.
We believe that of our significant accounting policies, the following are particularly important to the portrayal of our results of operations and financial position and is subject to an inherent degree of uncertainty as it may require the application of a higher level of subjectivity and judgment by us. Our significant accounting policies are fully described in Note 2 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.
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Table of Contents
Revenue Recognition (Variable Consideration)
We generate revenue from proprietary and partnered product sales, license and development activities are integral to our operations.  For a complete discussionand royalty arrangements. Revenue is recognized when or as we transfer control of our current complex combination drug device development programs and other device development projects see the “Research and Development” section in Part I, Item I. “Business” of this annual report on Form 10-K.


Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard creates a five-step modelour customers in an amount that requires a companyreflects the consideration to identify customerwhich we expect to be entitled to in exchange for those goods or services.

We enter into contracts with partners that often contain multiple elements such as licensing, development, manufacturing and commercialization components. These arrangements are often complex, and we may receive various types of consideration over the life of the arrangement, including: up-front fees, reimbursements for research and development services, milestone payments, payments on product shipments, margin sharing arrangements, license fees and royalties.
In assessing our revenue arrangements, we must identify the separate performance obligations,contract, determine the transaction price including an estimation of any variable consideration we expect to receive in connection with the contract, identify the promises of goods or services to the customer and each distinct performance obligation, allocate the transaction price to each of the separate performance obligations, and recognize revenue when or as eachthe performance obligation isobligations are satisfied. ApplyingEach of these steps in the standardrevenue recognition process requires management to exercisemake judgements and/or estimates. The most significant judgment when considering the terms of the contracts and all relevant facts and circumstances.  This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contract balances and remaining performance obligations, significant judgments made in determining the timing of satisfaction of performance obligations (over time or at a point in time),judgements and estimates madeinvolve the determination of variable consideration to be included in determining the transaction price, such as the estimation of product returns and amounts allocated to performance obligations.  

We have reviewed allsales allowances in connection with the sale of our major contractsproprietary products.

Variable consideration is recognized at an amount we believe is not subject to significant reversal and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed. For example, we must estimate future product returns and sales allowances at the time of sales to distributors. The expected value is determined based on unit sales data, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel, contractual terms with customers and adopted thethird-party payers, historical and expected utilization rates, and any new or anticipated changes in programs or regulations. We believe this provides a reasonable basis for recognizing revenue, recognition standard effective January 1, 2018 utilizing the modified retrospective method of adoption.  The adoption of ASU No. 2014-09 did not have a material impact on our consolidated financial statements. Nohowever, actual results could differ from estimates and significant changes to business processes or systems have been necessary.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This new standard requires entities to recognize on its balance sheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods and early adoption is permitted. We are currently evaluating thein estimates could impact our results of ASU 2016-02operations in our consolidated financial statements and currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), which provides guidance on determining which changes to terms and conditions of share-based awards require an entity to apply modification accounting under Topic 718. This new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The adoption of ASU 2017-09 is not expected to have a significant impact on our consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”).  The amendments clarify that an entity should identify each distinct nonfinancial asset or in-substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. ASU 2017-05 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annualfuture periods.  We are currently evaluating the potential impact, if any, on our consolidated financial statements upon the adoption of ASU 2017-05 and expect to adopt the standard effective January 1, 2018.

Item 7A.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure is

Foreign Currency Exchange Risk
We are exposed to 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.dollar for some of our transactions. We do not currently use derivative financial instruments to hedge against exchange rate risk. The effect of foreign exchange rate fluctuations on our financial results for the yearsyear ended December 31, 2017, 2016, and 20152021 was not material.

In addition, a hypothetical 10% appreciation or depreciation in foreign currencies against the U.S. dollar, assuming all other variables are held constant, would not have a material impact on our financial position or operating results for the year ended December 31, 2021.

Interest Rate Risk
We also have limited exposureare directly exposed to changes in market risk dueinterest rates on our long-term debt as our secured floating rate credit facility requires interest payments to interest income sensitivity, whichbe calculated at a floating rate tied in part to LIBOR or, if LIBOR is affected byno longer available, at a replacement rate as defined within the Credit Facility Agreement. As a result, changes in the general level of U.S. interest rates, particularly because a significant portion of our investments are in debt securities issued by the U.S. government and institutional money market funds. The primary objective of our investment activities is to preserve principal. To minimize market risk, we have in the past and, to the extent possible, will continue in the future, to hold debt securities to maturity at which time the debt security will be redeemed at its stated or face value. Due to the nature of our marketable securities, we believe that we are not exposed to any material marketfloating interest rate risk related tocan affect our investment portfolio.

We may be exposed tooperating results and liquidity. As of December 31, 2021, we had floating interest rate risk and interest rate fluctuations asdebt of $20.0 million outstanding carrying a result of our long-term debt financing we obtained on June 6, 2017.  Our Term Loan, with a current outstanding principal of $25.0 million accrues interest at a calculated prime-based variable rate with a maximumfloating interest rate of 9.50%approximately 2.60% (one-month LIBOR rate plus the applicable margin of 2.50%). The calculated prime-based variable rate was 8.75% at December 31, 2017.  AnA hypothetical increase to the maximumof 1 percentage point in floating interest rate, of 9.50%assuming principal payments in accordance with the Credit Facility Agreement and all other variables held constant, would result in additional incremental$0.2 million increase in future annual interest expenseexpense.

65
Table of $187,500.


Contents

Item 8.

FINANCIAL STATEMENTSITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ANTARES PHARMA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


74

67

76

69

77

70

78

71

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2017, 20162021, 2020 and 2015

2019

79

72

80

73

81

74



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Report of Independent RegisteredRegistered Public Accounting Firm

To the Stockholders and Board of Directors

Antares Pharma, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Antares Pharma, Inc. and subsidiaries (the Company) as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss,income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017,2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) 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.


67

Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Government and insurance plan rebate reserves
As discussed in Note 2 to the consolidated financial statements, the Company records estimated reserves for rebates and chargebacks, which includes government and insurance plan rebate reserves. As of December 31, 2021, the reserve for rebates and chargebacks was $13,301 thousand. The estimated reserves for government and insurance plan rebates are recorded as a reduction to product revenue in the same period that the related revenue is recognized and the reserves are included within current liabilities in the consolidated balance sheets. The government and insurance plan rebate reserves are estimated based on unit sales data, contractual terms with third-party payers, historical and estimated future percentages of rebates incurred on sales, historical and estimated future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates to be paid, and levels of inventory in the distribution channel.
We identified the evaluation of certain government and insurance plan rebate reserves as a critical audit matter. Subjective and challenging auditor judgment was required to evaluate the estimated future percentages of rebates incurred on sales for government plan rebates and the estimated future insurance plan billings for insurance plan rebates due to the unpredictability of those future amounts and the length of time between when the sale occurred and when the rebates are paid to the administrator of the programs.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s government and insurance plan rebate reserves processes. This included controls related to management’s process to develop the estimated future percentages of rebates incurred on sales and the estimated future insurance plan billings. We tested the historical rebates incurred on sales and insurance plan billings, which are used in the determination of estimated future percentages of rebates incurred on sales and insurance plan billings respectively, by comparing samples of the historical rebates incurred on sales and insurance plan billings to underlying invoices and evidence of the cash disbursement. For both government and insurance plan rebate reserves, we assessed management’s estimate by evaluating the consistency of the inputs with the trend of actual historical percentages of rebates incurred on sales and insurance plan billings. For the insurance plan rebate reserve, we evaluated management’s estimate by comparing insurance plan billings received after period end to the estimated insurance plan billings recorded at year-end. For the government plan rebate reserve, we performed sensitivity analyses over the estimated future percentages of rebates incurred on sales using historical information to assess the impact of changes in those assumptions on management’s estimate. We evaluated the Company’s ability to estimate government and insurance plan rebate reserves accurately by comparing actual amounts paid for the related rebates to historical estimates.
/s/ KPMG LLP

We have served as the Company’s auditor since 1995

1995.

Minneapolis, Minnesota

March 13, 2018

3, 2022


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ANTARES PHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,562

 

 

$

27,715

 

Short-term investments

 

 

4,993

 

 

 

—

 

Accounts receivable

 

 

11,878

 

 

 

9,073

 

Inventories

 

 

9,275

 

 

 

5,327

 

Deferred costs

 

 

505

 

 

 

1,773

 

Prepaid expenses and other current assets

 

 

2,323

 

 

 

1,376

 

Total current assets

 

 

55,536

 

 

 

45,264

 

Equipment, molds, furniture and fixtures, net

 

 

16,158

 

 

 

17,867

 

Patent rights, net

 

 

1,401

 

 

 

2,045

 

Goodwill

 

 

1,095

 

 

 

1,095

 

Other assets

 

 

148

 

 

 

54

 

Total Assets

 

$

74,338

 

 

$

66,325

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,957

 

 

$

7,885

 

Accrued expenses and other liabilities

 

 

6,982

 

 

 

5,873

 

Deferred revenue

 

 

2,794

 

 

 

6,149

 

Total current liabilities

 

 

15,733

 

 

 

19,907

 

Long-term debt

 

 

24,858

 

 

 

—

 

Deferred revenue – long term

 

 

200

 

 

 

1,200

 

Total liabilities

 

 

40,791

 

 

 

21,107

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred Stock:  $0.01 par, authorized 3,000,000 shares, none outstanding

 

 

—

 

 

 

—

 

Common Stock:  $0.01 par; authorized 300,000,000 shares; 156,674,504 and

   155,167,677 issued and outstanding  at December 31, 2017 and 2016, respectively

 

 

1,567

 

 

 

1,552

 

Additional paid-in capital

 

 

302,965

 

 

 

297,826

 

Accumulated deficit

 

 

(270,285

)

 

 

(253,445

)

Accumulated other comprehensive loss

 

 

(700

)

 

 

(715

)

 

 

 

33,547

 

 

 

45,218

 

Total Liabilities and Stockholders’ Equity

 

$

74,338

 

 

$

66,325

 


See

December 31, 2021December 31, 2020
Assets
Current assets
Cash and cash equivalents$65,913 $53,137 
Short-term investments1,245 — 
Accounts receivable, net56,697 42,221 
Other receivables26,311 — 
Inventories, net11,544 18,216 
Contract assets8,030 8,140 
Prepaid expenses and other current assets4,532 4,877 
Total current assets174,272 126,591 
Deferred tax assets, net33,043 46,982 
Property and equipment, net26,015 24,020 
Operating lease right-of-use assets3,774 4,621 
Intangibles, net17,879 7,693 
Goodwill1,095 1,095 
Other long-term assets1,427 1,529 
Total assets$257,505 $212,531 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$17,056 $16,194 
Accrued expenses and other liabilities35,043 25,635 
Current maturities of long-term debt, net1,500 16,230 
Operating lease liabilities, current904 1,203 
Deferred revenue4,427 3,943 
Total current liabilities58,930 63,205 
Long-term debt, less current maturities18,241 24,669 
Operating lease liabilities, long-term4,576 4,816 
Other long-term liabilities— 726 
Total liabilities81,747 93,416 
Commitments and contingencies (Note 16)00
Stockholders’ Equity
Preferred Stock: $0.01 par; 3,000 shares authorized, none outstanding— — 
Common Stock: $0.01 par; 300,000 shares authorized; 170,072 and 166,836 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively1,701 1,668 
Additional paid-in capital351,079 340,756 
Accumulated deficit(176,337)(222,626)
Accumulated other comprehensive loss(685)(683)
Total stockholders’ equity175,758 119,115 
Total liabilities and stockholders’ equity$257,505 $212,531 
The accompanying notesNotes to Consolidated Financial Statements are an integral part of these consolidated financial statements.



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Table of Contents
ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

41,695

 

 

$

40,318

 

 

$

27,533

 

Development revenue

 

 

10,095

 

 

 

10,235

 

 

 

8,892

 

Licensing revenue

 

 

1,076

 

 

 

166

 

 

 

7,242

 

Royalties

 

 

1,649

 

 

 

1,503

 

 

 

1,991

 

Total revenue

 

 

54,515

 

 

 

52,222

 

 

 

45,658

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

22,317

 

 

 

23,909

 

 

 

12,925

 

Cost of development revenue

 

 

5,149

 

 

 

4,908

 

 

 

6,533

 

Total cost of revenue

 

 

27,466

 

 

 

28,817

 

 

 

19,458

 

Gross profit

 

 

27,049

 

 

 

23,405

 

 

 

26,200

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,147

 

 

 

21,127

 

 

 

19,731

 

Selling, general and administrative

 

 

30,353

 

 

 

26,395

 

 

 

26,931

 

Total operating expenses

 

 

43,500

 

 

 

47,522

 

 

 

46,662

 

Operating loss

 

 

(16,451

)

 

 

(24,117

)

 

 

(20,462

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of assets

 

 

860

 

 

 

—

 

 

 

—

 

Interest expense

 

 

(1,423

)

 

 

—

 

 

 

—

 

Other, net

 

 

271

 

 

 

(122

)

 

 

(22

)

Total other expense

 

 

(292

)

 

 

(122

)

 

 

(22

)

Net loss before income taxes

 

 

(16,743

)

 

 

(24,239

)

 

 

(20,484

)

Income tax provision

 

 

—

 

 

 

100

 

 

 

175

 

Net loss

 

$

(16,743

)

 

$

(24,339

)

 

$

(20,659

)

Basic and diluted net loss per common share

 

$

(0.11

)

 

$

(0.16

)

 

$

(0.14

)

Basic and diluted weighted average common shares outstanding

 

 

156,054,094

 

 

 

154,992,124

 

 

 

146,594,079

 


See

Years Ended December 31,
202120202019
Revenue
Product sales, net$126,667 $113,834 $92,103 
Licensing and development revenue19,623 14,466 7,529 
Royalties37,692 21,299 24,232 
Total revenue, net183,982 149,599 123,864 
Operating expenses
Cost of product sales54,418 53,960 46,267 
Cost of development revenue13,863 9,140 4,208 
Research and development14,502 10,121 10,624 
Selling, general and administrative73,857 62,759 61,773 
Total operating expenses156,640 135,980 122,872 
Gain on sale of assets38,591 — — 
Operating income65,933 13,619 992 
Other income (expense)
Interest expense(3,611)(3,787)(3,549)
Other income (expense), net(51)89 530 
Total other expense, net(3,662)(3,698)(3,019)
Income (loss) before income taxes62,271 9,921 (2,027)
Income tax provision (benefit)15,982 (46,280)— 
Net income (loss)$46,289 $56,201 $(2,027)
Earnings (loss) per common share
Basic$0.27 $0.34 $(0.01)
Diluted$0.26 $0.33 $(0.01)
Weighted average common shares outstanding
Basic169,226 166,066 162,574 
Diluted174,733 170,155 162,574 
The accompanying notesNotes to consolidated financial statements.

Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.


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ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

INCOME (LOSS)

(in thousands)

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net loss

 

$

(16,743

)

 

$

(24,339

)

 

$

(20,659

)

Foreign currency translation adjustment

 

 

15

 

 

 

(23

)

 

 

14

 

Comprehensive loss

 

$

(16,728

)

 

$

(24,362

)

 

$

(20,645

)


See

Years Ended December 31,
202120202019
Net income (loss)$46,289 $56,201 $(2,027)
Foreign currency translation adjustment(2)19 1 
Comprehensive income (loss)$46,287 $56,220 $(2,026)
The accompanying notesNotes to consolidated financial statements.

Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.


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Table of Contents
ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2015, 2016 and 2017

(in thousands, except shares)

thousands)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

of

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

December 31, 2014

 

 

131,743,365

 

 

$

1,317

 

 

$

249,032

 

 

$

(208,447

)

 

$

(706

)

 

$

41,196

 

Issuance of common stock

 

 

23,000,000

 

 

 

230

 

 

 

42,620

 

 

 

—

 

 

 

—

 

 

 

42,850

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

85,147

 

 

 

1

 

 

 

(50

)

 

 

—

 

 

 

—

 

 

 

(49

)

Exercise of warrants and options

 

 

20,000

 

 

 

—

 

 

 

31

 

 

 

—

 

 

 

—

 

 

 

31

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

3,659

 

 

 

—

 

 

 

—

 

 

 

3,659

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(20,659

)

 

 

—

 

 

 

(20,659

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14

 

 

 

14

 

December 31, 2015

 

 

154,848,512

 

 

 

1,548

 

 

 

295,292

 

 

 

(229,106

)

 

 

(692

)

 

 

67,042

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

216,389

 

 

 

2

 

 

 

(86

)

 

 

—

 

 

 

—

 

 

 

(84

)

Exercise of options

 

 

102,776

 

 

 

1

 

 

 

100

 

 

 

—

 

 

 

—

 

 

 

101

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

2,520

 

 

 

—

 

 

 

—

 

 

 

2,520

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(24,339

)

 

 

—

 

 

 

(24,339

)

Other comprehensive loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23

)

 

 

(23

)

December 31, 2016

 

 

155,167,677

 

 

 

1,552

 

 

 

297,826

 

 

 

(253,445

)

 

 

(715

)

 

 

45,218

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

195,534

 

 

 

2

 

 

 

(251

)

 

 

—

 

 

 

—

 

 

 

(249

)

Exercise of options

 

 

1,311,293

 

 

 

13

 

 

 

1,803

 

 

 

—

 

 

 

—

 

 

 

1,816

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

3,490

 

 

 

—

 

 

 

—

 

 

 

3,490

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(16,743

)

 

 

—

 

 

 

(16,743

)

Cumulative effect of change in

   accounting principle

 

 

—

 

 

 

—

 

 

 

97

 

 

 

(97

)

 

 

—

 

 

 

—

 

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15

 

 

 

15

 

December 31, 2017

 

 

156,674,504

 

 

$

1,567

 

 

$

302,965

 

 

$

(270,285

)

 

$

(700

)

 

$

33,547

 


See

Common Stock
Number
of
Shares		AmountAdditional
Paid-In
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Income (Loss)		Total
Stockholders’
Equity
Balance, December 31, 2018159,721 $1,597 $314,907 $(276,800)$(703)$39,001 
Issuance of common stock2,307 23 7,758 — — 7,781 
Common stock issued under equity compensation plan, net of shares withheld for taxes664 7 (1,138)— — (1,131)
Exercise of options2,529 25 4,380 — — 4,405 
Share-based compensation— — 6,470 — — 6,470 
Net loss— — — (2,027)— (2,027)
Other comprehensive income— — — —1 1 
Balance, December 31, 2019165,221 1,652 332,377 (278,827)(702)54,500 
Common stock issued under equity compensation plan, net of shares withheld for taxes676 7 (1,374)— — (1,367)
Exercise of options939 9 1,805 — — 1,814 
Share-based compensation— — 7,948 — — 7,948 
Net income— — — 56,201 — 56,201 
Other comprehensive income— — — — 19 19 
Balance, December 31, 2020166,836 1,668 340,756 (222,626)(683)119,115 
Common stock issued under equity compensation plan, net of shares withheld for taxes942 10 (2,851)— — (2,841)
Exercise of options2,294 23 5,159 — — 5,182 
Share-based compensation— — 8,015 — — 8,015 
Net income— — — 46,289 — 46,289 
Other comprehensive loss— — — — (2)(2)
Balance, December 31, 2021170,072 $1,701 $351,079 $(176,337)$(685)$175,758 
The accompanying notesNotes to consolidated financial statements.

Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.


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ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,743

)

 

$

(24,339

)

 

 

 

$

(20,659

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

3,490

 

 

 

2,520

 

 

 

 

 

3,659

 

Depreciation and amortization

 

 

2,104

 

 

 

1,861

 

 

 

 

 

1,570

 

Gain on sale of assets

 

 

(860

)

 

 

—

 

 

 

 

 

—

 

Loss on disposal of equipment

 

 

22

 

 

 

262

 

 

 

 

 

167

 

Write-off of capitalized patent costs

 

 

46

 

 

 

—

 

 

 

 

 

31

 

Increase in inventory reserve

 

 

356

 

 

 

748

 

 

 

 

 

700

 

Accretion of interest expense

 

 

119

 

 

 

—

 

 

 

 

 

—

 

Amortization of debt issuance costs

 

 

33

 

 

 

—

 

 

 

 

 

—

 

Amortization of premiums and discounts on investment securities

 

 

(33

)

 

 

12

 

 

 

 

 

10

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,798

)

 

 

(1,138

)

 

 

 

 

(4,423

)

Inventories

 

 

(4,304

)

 

 

(351

)

 

 

 

 

(564

)

Prepaid expenses and other current assets

 

 

(942

)

 

 

1,922

 

 

 

 

 

(934

)

Deferred costs

 

 

1,268

 

 

 

(574

)

 

 

 

 

715

 

Other assets

 

 

(94

)

 

 

100

 

 

 

 

 

148

 

Accounts payable

 

 

(1,522

)

 

 

2,859

 

 

 

 

 

(3,495

)

Accrued expenses and other liabilities

 

 

1,122

 

 

 

(582

)

 

 

 

 

906

 

Deferred revenue

 

 

(4,358

)

 

 

1,505

 

 

 

 

 

(6,030

)

Net cash used in operating activities

 

 

(23,094

)

 

 

(15,195

)

 

 

 

 

(28,199

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of equipment, molds, furniture and fixtures

 

 

(1,167

)

 

 

(4,880

)

 

 

 

 

(5,643

)

Additions to patent rights

 

 

(101

)

 

 

(127

)

 

 

 

 

(1,043

)

Proceeds from sale of assets, net of transaction costs

 

 

1,901

 

 

 

—

 

 

 

 

 

—

 

Proceeds from maturities of investment securities

 

 

5,000

 

 

 

15,000

 

 

 

 

 

6,000

 

Purchases of investment securities

 

 

(9,964

)

 

 

—

 

 

 

 

 

(15,038

)

Net cash provided by (used in) investing activities

 

 

(4,331

)

 

 

9,993

 

 

 

 

 

(15,724

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

25,000

 

 

 

—

 

 

 

 

 

—

 

Payment of debt issuance costs

 

 

(294

)

 

 

—

 

 

 

 

 

—

 

Proceeds from issuance of common stock, net

 

 

—

 

 

 

—

 

 

 

 

 

42,851

 

Proceeds from exercise of stock options

 

 

1,816

 

 

 

101

 

 

 

 

 

31

 

Taxes paid related to net share settlement of equity awards

 

 

(249

)

 

 

(84

)

 

 

 

 

(88

)

Net cash provided by financing activities

 

 

26,273

 

 

 

17

 

 

 

 

 

42,794

 

Effect of exchange rate changes on cash

 

 

(1

)

 

 

1

 

 

 

 

 

(1

)

Net decrease in cash and cash equivalents

 

 

(1,153

)

 

 

(5,184

)

 

 

 

 

(1,130

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

27,715

 

 

 

32,899

 

 

 

 

 

34,029

 

End of year

 

$

26,562

 

 

$

27,715

 

 

 

 

$

32,899

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of equipment, molds, furniture and fixtures recorded in

   accounts payable and accrued expenses

 

$

40

 

 

$

424

 

 

 

 

$

641

 

Additions to patent rights recorded in accounts payable and accrued

   expenses

 

$

10

 

 

$

45

 

 

 

 

$

21

 

Years Ended December 31,
202120202019
Cash Flows from Operating Activities
Net income (loss)$46,289 $56,201 $(2,027)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred taxes13,939 (47,203)(371)
Stock-based compensation8,015 7,948 6,470 
Depreciation and amortization3,901 2,627 2,557 
Non-cash interest expense648 504 405 
Increase in inventory reserve152 511 325 
Gain on sale of assets(38,591)— — 
Other671 42 12 
Changes in operating assets and liabilities:
Accounts receivable(14,476)(7,128)(16,095)
Inventories, net2,748 (2,728)(4,975)
Contract assets110 53 (2,793)
Prepaid expenses and other current assets(1,056)(1,460)(655)
Accounts payable2,189 2,594 926 
Accrued expenses and other liabilities11,596 7,157 4,888 
Deferred revenue484 2,202 718 
Net cash provided by (used in) operating activities36,619 21,320 (10,615)
Cash Flows from Investing Activities
Purchases of property and equipment(6,617)(9,615)(2,350)
Proceeds from sale of assets, net of transaction costs17,825 282 5,000 
Purchase of intangibles, including transaction costs(13,815)(5,000)— 
Purchases of investment securities(1,245)— (22,645)
Proceeds from maturities of investment securities— 22,500 — 
Net cash provided by (used in) investing activities(3,852)8,167 (19,995)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt20,000 — 15,000 
Principal payments of long-term debt(40,000)— — 
Prepayment fees and end of term charge on long-term debt(2,055)— — 
Payment of debt issuance costs for long-term debt(276)— (136)
Proceeds from issuance of common stock, net— — 7,781 
Proceeds from exercise of stock options5,182 1,814 4,405 
Taxes paid related to net share settlement of equity awards(2,841)(1,367)(1,131)
Net cash provided by (used in) financing activities(19,990)447 25,919 
Effect of exchange rate changes on cash and cash equivalents(1)2 — 
Cash and cash equivalents
Net increase (decrease) during the period12,776 29,936 (4,691)
Beginning of period53,137 23,201 27,892 
End of period$65,913 $53,137 $23,201 
Supplemental disclosure of cash flow information
Cash paid for interest$2,736 $3,538 $3,025 
Cash paid for income taxes$1,783 $90 $— 
Supplemental disclosure of non-cash investing activities
Purchases of property and equipment recorded in accounts payable and accrued expenses$259 $2,017 $970 
Purchase of intangible assets included in accrued liabilities$— $2,500 $— 
Gain on sale of assets recognized in excess of cash received$20,766 $— $— 

See

The accompanying notesNotes to consolidated financial statements.

80

Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
73


Table of Contents
ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

1.

Description of Business



Note 1.    Description of Business
Antares Pharma, Inc. (“Antares”Antares,” “we,” “our,” “us” or the “Company”) is a specialty pharmaceutical company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  The Company developstechnologies in targeted therapeutic areas. We develop, manufacture and manufactures,commercialize, for itselfourselves or with partners, novel therapeutic products using itsour advanced drug delivery technologysystems that are designed to enhance the existing drug compoundsprovide commercial or functional advantages, such as improved safety and delivery methods. The subcutaneous injection technology platforms include the VIBEX®efficacy, convenience, improved tolerability, and VIBEX® QuickShot® pressure-assisted auto injector systems suitable for brandedenhanced patient comfort and generic injectable drugs in unit dose containersadherence. We also seek product opportunities that complement and disposable multi-dose pen injectors. The Company hasleverage our commercial platform. We have a portfolio of proprietary and partnered products, including approved commercial products and several partneredongoing product candidatesdevelopment programs in advancedvarious stages of development. The Company hasWe have formed significant strategic alliancespartnership arrangements with Teva Pharmaceutical Industries, Ltd. (“Teva”)several different industry leading pharmaceutical companies.
Our marketed proprietary products include:
•XYOSTED® (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, and AMAG Pharmaceuticals, Inc. (“AMAG”), and has multiple ongoing internal and partnered product development programs.

The Company markets and sells its proprietary product OTREXUP® (methotrexate) injection in the U.S.  OTREXUP® is the first and only subcutaneous methotrexatetestosterone enanthate product for once weeklyonce-weekly, at-home self-administration with an easy-to-use, single dose, disposable auto injectorto be approved by the FDA.  U.S. Food and Drug Administration (“FDA”);

•OTREXUP® is (methotrexate) injection, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis, which was sold to Otter Pharmaceuticals, LLC (a subsidiary of Assertio Holdings, Inc., together with Assertio Holdings, Inc., as guarantor, individually and was launchedcollectively referred to as “Otter”) in December 2021 as discussed in Note 12; and
•NOCDURNA® (desmopressin acetate), marketed in the U.S. for commercial salethe treatment of nocturia due to nocturnal polyuria (“NP”) in February 2014.  

adults who awaken at least two times per night to urinate.

We are also party to various partnered product development and supply arrangements:
•We developed and are the exclusive supplier of devices for Teva Pharmaceutical Industries, Ltd.’ (“Teva”) Epinephrine Injection USP products, the generic equivalent of EpiPen® and EpiPen® Jr., indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients;
•Through itsour commercialization partner Teva, the Company sellswe sell Sumatriptan Injection USP, indicateda generic equivalent to the Imitrex® STATdose Pen®, in the U.S. indicated for the acute treatment of migraine headaches and cluster headache in adults.  In December 2015, the Company received FDA approval for an Abbreviated New Drug Application (“ANDA”) for 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilled syringe auto-injectors, a generic equivalent to Imitrex® STATdose Pen®.  Sumatriptan Injection USP represents the Company’s first ANDA approval of a complex generic and second product approved using the VIBEX® auto injector platform, and was launched for commercial sale in June 2016.  

adults;

•In collaboration with AMAG the CompanyPharmaceuticals, Inc. (“AMAG”), acquired by Covis Group S.a.r.l. (“CG”) (collectively CG and AMAG are herein after referred to as “Covis”) in November 2020, we developed a subcutaneous auto injector for use with AMAG’s progestin hormone drugand are the exclusive supplier of devices and the final assembled and packaged commercial product of Makena® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement.  In February 2018, the FDA approved AMAG’s supplemental New Drug Application (“sNDA”) for the Makena® subcutaneous auto injector,drug-device combination product, which is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered at least one preterm baby in the past.The Company has commenced manufacturing
•We developed and supplyare the exclusive supplier of devices for Teva’s generic equivalent of Forsteo® (Teriparatide Injection) which is approved and commercialcurrently sold by Teva in various countries outside the U.S.
Additionally, we are developing other devices in collaboration with various pharmaceutical partners and advancing other internal research and development programs.
We also have a proprietary product, TLANDO® (testosterone undecanoate) is a twice-day oral formulation of testosterone for TRT indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in anticipationadult males, with tentative FDA approval.
74

Table of a potential launchContents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Note 2.    Summary of the product by AMAG.

The Company is developing XYOSTEDTM (testosterone enanthate) injection for testosterone replacement therapy, and submitted a 505(b)(2) New Drug Application (“NDA”) to the FDA in December 2016.  In October 2017, the Company received a Complete Response Letter (the “CRL”) from the FDA for XYOSTEDTM, which identified two deficiencies and indicated that the NDA cannot be approved in its present form. In February 2018, the Company met with the FDA to discuss a potential path forward for submission of a response to the CRL for XYOSTED™.

Significant Accounting Policies

2.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Antares Pharma, Inc. and its two2 wholly-owned foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformityaccordance with U.S. generally accepted accounting principles (“GAAP”) requires managementus to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities atas of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’sOur most significant accounting estimates relate to revenue recognition and variable consideration, inventory valuation, the carrying value of deferred tax assets and the valuation of equity instruments used in stock-based compensation, and determinationthe computation of the fair value and recoverability of long-lived assets including intangibles and goodwill.share-based compensation. Actual results could differ from these estimates.

81

estimates, and significant variances could materially impact our financial condition and results of operations.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform with the current year presentation. As of and for the year ended December 31, 2020, the cost of product sales and the cost of development revenue were classified under the heading Operating expenses in the Consolidated Statements of Operations, and the corresponding prior period amount was reclassified to conform to this presentation. The reclassifications had no impact on our operating income (loss), net income (loss) or cash flows as previously reported.
Accounting Pronouncements Recently Adopted
We adopted FASB ASU No. 2018-15, Customers’ Accounting for Implementation Costs Incurred in Cloud Computing Arrangement that is a Service Contract, effective January 1, 2020, which provides new guidance on a customer’s accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, entities apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. Adoption of this standard did not have a material impact on our financial condition, results of operations or disclosures.
We adopted FASB ASU No. 2018-18, Clarifying the Interaction Between Topic 808 and 606, effective January 1, 2020, which clarifies that certain transactions between collaborative arrangement participants should be accounted for under the revenue guidance, adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard, and clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. Adoption of this standard did not have a material impact on our financial condition, results of operations or disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted as December 31, 2021
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, followed by related amendments, which changes the accounting for credit losses on instruments measured at amortized cost by adding an impairment model that is based on expected losses rather than incurred losses. Any entity will recognize as an allowance its estimate of expected credit losses, which is believed to result in more timely recognition of such losses as the standard eliminates the probable initial recognition threshold. The new guidance is required to be adopted using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period of adoption. Adoption of the new guidance was originally required for annual periods beginning after December 15, 2019, including interim periods within the annual period.
75


Table of Contents
ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)


In October 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible for smaller reporting company classification. Determination of eligibility for deferral was a one-time assessment as of November 15, 2019 based on the entity’s most recent smaller reporting company eligibility determination as of the last business day of its most recently completed second quarter. Based on this determination, we qualified as a smaller reporting entity and was therefore eligible for the adoption deferral resulting in a new effective date of January 1, 2023. The impact on our financial condition, results of operations and disclosures is being evaluated but is not expected to be significant as we have historically had minimal credit losses on financial instruments.
In April 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides relief for companies preparing for discontinuation of interest rates such as LIBOR. The standard can be applied immediately through December 31, 2022. We have not yet evaluated the impact the adoption of this guidance may have on our financial condition, results of operations or disclosures.
Foreign Currency Translation

The majority of theour 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 theour foreign subsidiaries are denominated in Swiss Francs. Additionally, 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 haswe have determined that the Swiss Franc is the functional currency for itsour foreign subsidiaries. TheOur reporting currency for the Company is the United States Dollar (“USD”). The financial statements of the Company’sour foreign subsidiaries are translated into USD for consolidation purposes. All assets and liabilities are translated using period-end exchange rates and statementsrates. 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, comprising all of the accumulated other comprehensive income (loss). Sales to certain customers and purchases from certain vendors by the U.S. parent are in currencies other than the U.S. dollarUSD and are subject to foreign currency exchange rate fluctuations. Foreign currency transaction gains and losses are included in foreign exchange gain (loss)other income (expense) in the consolidated statementsConsolidated Statements of operations.

Operations.

Cash and Cash Equivalents

Cash consists ofand cash equivalents represent demand deposits at commercial banks. The Company also invests in cashbanks and highly liquid investments with an original maturity of three months or less. Cash equivalents, consisting of highly liquid investments in money market funds with original maturitiesand bank certificate of three months or less.

Investments

The Company’s investments consistdeposits, are remeasured and reported at fair value each reporting period based on quoted market prices, which is a Level 1 input within the three-level valuation hierarchy for disclosure of U.S. Treasury billsfair value measurements, and government agency notestotaled $26,889 and $36,133 as of December 31, 2021 and 2020, respectively.

Investments
From time to time, we also invest in bank certificates of deposit that are classified as held-to-maturity because the Company has theof our intent and ability to hold the securities to maturity. Investments with original maturities ofgreater than three months but less than one year or less are classified as short-term.short-term investments on the Consolidated Balance Sheets. The investment securities are carried at their amortized cost and the fair value is determined by quoted market prices.  At December 31, 2017, the Company’s short-term investments had aprices for identical or similar securities. The carrying value of $4,993, which approximated fair value. The Company held noour short-term investments as of December 31, 2016. 

2021 approximate fair value.

Fair Value Measurements
Financial assets and liabilities are required to be measured and reported at fair value each reporting period. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. When considering market participant assumptions in fair value measurement, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels.
•Level 1: Unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible to us at the measurement date.
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Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The hierarchy gives the highest priority to Level 1, as this level provides the most reliable measure of fair value, while given the lowest priority to Level 3.
Financial assets and liabilities that are not measured at fair value on a recurring basis include held-to-maturity investments and long-term debt as the carrying values of which approximate fair value. The estimated fair value of debt is based on Level 2 inputs, including our understanding of current market rates we could obtain for similar loans. The fair value of our cash and cash equivalents, accounts receivable, other receivables, contract assets, accounts payable and accrued liabilities approximate fair value due to their short-term nature.
We measure certain financial instruments at fair value on a nonrecurring basis. These assets primarily include goodwill and intangible assets, as well as property and equipment and right-of-use lease assets. These assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition or purchase. Periodically, these assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these assets were to become impaired, we would recognize an impairment loss equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. Fair value measurement of the reporting unit associated with our goodwill balance is estimated at least annually in the fourth quarter of each calendar year for purposes of impairment testing if a quantitative analysis is performed. Fair value measurements associated with our intangible assets, other long-lived assets and property and equipment are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors or other matters indicate that the carrying value may not be recoverable.
Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable represents amounts billed to customers and are stated at the amount the Company expectswe expect to collect. The Company considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness,Customer creditworthiness, past transaction history with the customer current economic industry trends, and changes in customer payment terms.  Atterms are factors considered when determining collectability of specific customer accounts. As of December 31, 2017, the Company’s2021, our trade accounts receivable balance was due primarily from Teva AMAG and distributors of OTREXUP®.major wholesale distributors. Each of these companies hascustomers have historically paid in a timely manner and been financially stable organizations.  Due to the nature of the accounts receivable balance, the Company believesdemonstrated creditworthiness. Accordingly, we believe the risk of doubtful accounts being uncollectible is minimal and had no significant allowances for doubtful accounts was established as of December 31, 20172021 or 2016.2020. If the financial condition of the Company’sour customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. The CompanyWe had no material write-offs to bad debt expense in 2017, 2016the years ended December 31, 2021, 2020 or 2015.

2019.

Royalties receivable from partners are included in accounts receivable and are typically payable to us within 45 to 60 days after the end of each quarter in which they were earned.
Inventories

Inventories are stated at the lower of cost or net realizable value. Cost isvalue with cost determined on a first-in, first-out basis. Certain components of the Company’sour products are provided by a limited number of vendors, and the Company’sour production, assembly, warehousing and assemblydistribution operations are outsourced to third-party suppliers where substantially all of the Company’sour inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on the Company’s operations. Inventory consists of the following:

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Raw material

 

$

118

 

 

$

143

 

Work in process

 

 

6,223

 

 

 

2,429

 

Finished goods

 

 

2,934

 

 

 

2,755

 

 

 

$

9,275

 

 

$

5,327

 

82

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except shareour operations and per share amounts)

The Company providesfinancial results.

We record reserves for potentially excess, dated or obsolete inventories based on estimates of forecasted product demand estimates and the likelihood of consumption in the normal course of business, considering the expiration dates of the inventories on hand, planned production volumes and lead times required for restocking of customer inventories. Although every effort is made to ensure that forecasts and assessments are reasonable, changes to these assumptions are possible. In such cases, estimates may prove inaccurate and result in an understatement or overstatement of the reserves required to fairly state such inventories. The Company’s reserve
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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Contract Assets
Contract assets are recognized when control of goods or services has transferred to the customer, and corresponding revenue is recognized on an over time basis but is not yet billable to the customer in accordance with the terms of the contract. Costs that have been incurred in connection with development services provided to partners for excess, dated or obsolete inventory was $510which the associated revenue has not yet been recognized are also recorded as contract assets and $900 attotaled $564 and $1,685 as of December 31, 20172021 and 2016,2020, respectively. In 2017, the Company wrote off inventory of $746
Property and increased the reserve for excess, dated or obsolete inventory by $356. In 2016, the Company wrote off $648 of inventoryEquipment
Property and increased the reserve for excess, dated or obsolete inventory by $748.

Equipment, Molds, Furniture, and Fixtures

Equipment, molds, furniture, and fixturesequipment are stated at cost and are depreciatedless accumulated depreciation. Depreciation is computed using the straight-line method over theiran asset’s estimated useful lives ranging from threelife as follows:

Useful Life
Computer equipment and software3-5 years
Furniture, fixtures and office equipment5-7 years
Production molds, tooling and equipment3-10 years
Leasehold improvementsLesser of useful life or lease term
Expenditures, including interest costs, for assets under construction and internal-use software that are not yet ready for their intended use are capitalized and will be depreciated based on the above guidelines when placed in service. Costs associated with repairs and maintenance activities are expensed as incurred.
Leases
We recognize right-of-use (“ROU”) assets and lease liabilities when we obtain the right to ten years.control the asset under a leasing arrangement with an initial term greater than twelve months. We evaluate the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognize the ROU asset and lease liability based on the present value of future minimum lease payments over the expected lease term. Our leases do not generally contain an implicit interest rate; therefore, we use the incremental borrowing rate we would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of our lease payments. The Company’s equipment, molds, furniture and fixtures consistedincremental borrowing rate is used in determining the present value of lease payments, unless an implicit rate is specified. Certain lease arrangements contain renewal options that have not been included in the determination of the following:

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Furniture, fixtures and office equipment

 

$

2,258

 

 

$

2,234

 

Production molds and equipment

 

 

15,322

 

 

 

10,582

 

Molds and tooling in process

 

 

4,023

 

 

 

10,150

 

Less accumulated depreciation

 

 

(5,445

)

 

 

(5,099

)

 

 

$

16,158

 

 

$

17,867

 

Depreciation expense was $1,536, $1,326lease term, as they are not reasonably certain of exercise. For contracts that contain lease and $1,034non-lease components, we account for the years ended December 31, 2017, 2016both components as a single lease component. Variable lease payments are expensed as incurred.

Intangible Assets
We capitalize and 2015, respectively. In 2017, the Company sold certain assets, including molds and equipment, to Ferring, the net book value of which was $933.

Patent Rights

The Company capitalizesinclude the costs of obtaining patentacquired product licenses and trademark rights when thereas intangible assets. These intangible assets with finite useful lives are projected future cash flows for marketed or partnered products associated with the patent. These capitalized costs are being amortizedpresented net of accumulated amortization. Amortization is computed on a straight-line basis over the shorter of the contractual or estimated economic life of the patent or the estimated useful life of the patent,underlying contract, which typically is over periods ranginggenerally ranges from five 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. The Company periodically reviews capitalized patent costs to identify any amounts to be charged to expense for patents that are no longer being pursued or for which there are no future revenues or cash flows anticipated.

The Company capitalizes external legal patent defense costs and costs for pursuing patent infringements when it determines that a successful outcome is probable and will lead to an increase in the value of the patent.  The capitalized costs are amortized over the remaining life of the related patent.  If changes in the anticipated outcome were to occur that reduce the likelihood of a successful outcome of the entire action to less than probable, the capitalized costs would be charged to expense in the period in which the change is determined.

The gross carrying amount and accumulated amortization of patents was $3,772 and $2,371, respectively at December 31, 2017, and $4,659 and $2,614, respectively, at December 31, 2016. Patent amortization expense for the years ended December 31, 2017, 2016 and 2015 was $568, $534 and $536, respectively, and is recorded in selling, general and administrative expenses in the consolidated statements of operations.  The Company’s estimated aggregate patent amortization expense for the next five years is $574, $327, $70, $57 and $47 in 2018, 2019, 2020, 2021 and 2022, respectively.  

In 2017, the Company sold certain assets, including patent rights, to Ferring.  The net book value of the patents sold was $108. In 2017 and 2015, the Company expensed $46 and $31, respectively of capitalized patent costs for abandoned patents or patents no longer connected with current products.  There was no write-off of patent costs in 2016.  

ten years.

Impairment of Long-Lived Assets and Intangibles

Intangible Assets

Long-lived assets and intangibles, including patent rights,intangible assets are reviewed for impairment whenever events or changes in circumstances such as market value, asset utilization, physical change, legal factors or other matters indicate that the carrying amountvalue of an asset or asset group may not be recoverable. Recoverability of assets to be held

83

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

and usedThe impairment test is measured bybased on a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated byfrom the use of the asset or asset group. This analysis can be very subjective; however, the Company utilizes the expected future undiscounted cash flows from signed licensegroup and distribution agreements and other contracts with customersits eventual disposition to substantiate the recoverability of its long-lived assets. If the sum of the undiscounted cash flows is less than the carrying value of the asset. If impairment is indicated, the asset the impairment to be recognized is measuredwritten down by the amount by which the carrying amountvalue of the assetsasset exceeds the related fair value of the assets. Assets to be disposedasset with the related impairment charge recognized within the Consolidated Statement of are reported at the lowerOperations. The determination of the carrying amount oran asset’s fair value less costsrequires management to sell.

make certain estimates and judgements.

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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Goodwill

Goodwill is evaluated for impairment annually atas of December 31, or more frequently if an event occurs or circumstances change such as market value, asset utilization, legal factors or other matters that indicate that the carrying value may not be recoverable. In performingEvaluating goodwill for impairment involves the annual impairment test, the Company comparesdetermination of the fair value of theeach reporting unit to the carrying amountin which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and would recognize an impairment charge to goodwill for the amountreviewed by which the carrying amount exceeds the reporting unit’s fair value.  

Atmanagement on a regular basis.

As of December 31, 20172021 and 2016, the Company had2020, we have goodwill with a carrying value of $1,095, attributable to itsour single reporting unit. Based on the results of its evaluations, the Companyour qualitative analysis, we determined that goodwill was not impaired, and no impairment losses wereloss was recognized in the years ended December 31, 2017, 2016,2021, 2020, and 2015, respectively.

Fair Value of Financial Instruments

The carrying value of certain of the Company’s financial instruments, including accounts receivable and accounts payable, approximate fair value due to the short-term nature of the instruments.  From time to time, the Company invests in U.S. Treasury bills or U.S. Treasury notes that are classified as held-to-maturity because the Company has the positive intent and ability to hold the securities to maturity. The investment securities are carried at amortized cost and fair value is determined by quoted market prices, which is a Level 1 fair value measurement.  At December 31, 2017, the fair value of the Company’s short-term investments approximated the carrying values and no short-term investments were held at December 31, 2016.  

2019, respectively.

Revenue Recognition

The Company recognizes

We generate revenue from the sale of products,proprietary and partnered product sales, license and development project milestones, license feesactivities and royalties.royalty arrangements. Revenue is recognized when allor as we transfer control of the following criteriapromised goods or services to the customer at the transaction price, which is the amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.
At inception of each contract, we identify the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determine the transaction price including any variable consideration, allocate the transaction price to the distinct performance obligations and determine whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We reassess our reserves for variable consideration at each reporting date and make adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.
We have elected to recognize the cost for freight and shipping activities as a fulfillment cost. Amounts billed to customers for shipping and handling are met: persuasive evidenceincluded as part of the arrangement exists; delivery has occurredtransaction price and we have no remaining obligations; the fee is fixed or determinable; and collectability is reasonably assured.

OTREXUP® Revenue Recognition

The Company began detailing OTREXUP® to health care professionals in February 2014. OTREXUP® is sold in packages of four pre-filled, single-dose disposable auto injectors to wholesale pharmaceutical distributors, its customers, subject to rights of return within a period beginning six months prior to, and ending 12 months following, product expiration.

Prior to the first quarter of 2017, the Company could not reliably estimate expected returns of OTREXUP® at the time of shipment given its limited sales and returns history of the product. Accordingly, the recognition of revenue was deferred on product shipments until the rights of return no longer existed, which occurred at the earlier of the time OTREXUP® units were dispensed through patient prescriptions or expiration of the right of return of the product. Patient prescriptions dispensed were estimated using third-party market prescription data.  

In the first quarter of 2017, the Company determined it had developed sufficient historical information to reasonably estimate potential returns of OTREXUP® and began recognizing revenue, net of estimated returns, upon delivery to the distributors. As a result, the Company recognized an additional $1,297 for product shipped to distributors in previous periods that was not previously recognized as revenue atwhen control of underlying goods are transferred to the time of shipment, net of the returns allowance establishedcustomer. The related shipping and freight charges incurred are included in the first quarter of 2017. The Company also recognized $254 of related product costs that had been previously deferred.  The net impact of these changes resulted in a reduction in net loss of $1,043, which was less than $0.01 per share, for the year ended December 31, 2017.

Product sales revenue for OTREXUP® is presented net of estimated returns and product sales allowances for wholesaler discounts, prompt pay discounts, chargebacks, rebates and patient discount programs, discussed below.

84

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Product Sales Allowances

The Company recognizes product sales allowances as a reductioncost of product sales in the same periodConsolidated Statements of Operations.

Proprietary Product Sales
We sell our proprietary commercial products primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the related revenuecustomer, which is recognized. Producttypically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs.
The determination of certain reserves and sales allowances requires us to make a number of judgements and estimates to reflect our best estimate of the transaction price and the amount of consideration to which we believe we would be ultimately entitled to receive. The expected value is determined based on amounts owed or to be claimed on the related sales. These estimates take into consideration theunit sales data, contractual terms of our agreements with customers and third-party payers, historical and estimated future percentage of rebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory withinin the distribution channels that may result in future rebates orchannel. Reserves for prompt payment discounts taken. In certain cases, such as patient support programs, the Company recognizes the cost of patient discountsare recorded as a reduction of revenue based on estimated utilization. If actual future results vary, it may be necessary to adjust these estimates, which could have an effect on product revenuein accounts receivable in the period of adjustment. Product sales allowances include:

Consolidated Balance Sheets. Reserves for returns, distributor fees, rebates and customer co-pay support programs are included within current liabilities in the Consolidated Balance Sheets.

Wholesaler Distribution Fees. – Distribution fees are paid to certain wholesale distributorswholesalers based on contractually determined rates. The Company accruesrates and units purchased. Since the fee on shipmentpaid to the respective wholesale distributors and recognizescustomer is not for a distinct good or service, the feeconsideration is recognized as a reduction of revenue the transaction price of the goods delivered. We accrue the estimated fee due at the time of sale based on the contracted price and adjust the accrual at each reporting period, if necessary, to reflect actual experience.
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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in the same period the related revenue is recognized.

thousands, except per share amounts)


Prompt Pay Discounts. The Company offersDiscounts – We offer cash discounts to itsour customers, generally 2% of the sales price, as an incentive for prompt payment. The Company accounts for cashBased on historical experience, customers take advantage of this discount and accordingly we accrue 100% of the cash discounts offered by reducing accounts receivable by the prompt pay discount amount and recognizesrecognizing the discount as a reduction of revenue in the same period the related revenuesales are made. The accrual is recognized.

reviewed at each reporting period and adjusted if actual experience differs from estimates.

Chargebacks. The Company provides – We provide discounts primarily to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs and various organizations under Medicaid contracts and regulations. These entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge us back to the Company the difference between the current wholesale acquisition cost and the price the entity paid for the product. The Company willWe estimate and accrue chargebacks based on estimated wholesaler inventory levels, current contract prices and historical chargeback activity. Chargebacks are recognized as a reduction of revenue in the same period the related revenue is recognized.

Rebates. The Company participates – We participate in certain government and insurance plan rebate programs, which provide discounted prescriptions to qualified insured patients. Under these rebate programs, the Company willwe pay a rebate to the third-party administratoradministrators of the program,programs. The rebate payments are generally twomade in periods subsequent to three months after the quarter in which prescriptions subject to the rebate are filled. The Company estimatesfilled, generally on a two- to three-month lag for insurance plan rebates and accruesthree- to six-month lag for government plan rebates. We estimate and accrue for these rebates based on current contract prices,unit sales data, contractual terms with third-party payers, historical and estimated future percentagespercentage of product soldrebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates to qualified patients.be paid, and levels of inventory in the distribution channel. Rebates are recognized as a reduction of revenue in the same period the related revenue is recognized.

Patient Discount Programs. The Company offersPrograms – We offer discount cardcards, co-pay coupons and free trial programs to patients for OTREXUP® in which patients receive discounts on theiroff-set the cost of prescriptions that are reimbursed by the Company. The Company estimatesto patients. We estimate the total amount that will be redeemed or used based on historical redemption experience and on levels of inventory in the distribution and retail channels, and recognizesrecognize the discount as a reduction of revenue in the same period the related revenue is recognized.

Sumatriptan Revenue Recognition

Under

Product Returns – Consistent with industry practice, we generally offer wholesalers and specialty distributors a limited right to return products, generally within six months prior to and 12 months following the product’s expiration date. Our proprietary products generally have expiration dates ranging from 24 to 33 months. Product returns are estimated and recorded at the time of sale based on historical return patterns. Actual returns are tracked by individual production lots and charged against reserves. Returns reserves may be adjusted, if necessary, if actual returns differ from historical estimates. We also monitor and take into consideration the amount of estimated product inventory in the distribution channel, product dating and any known or expected changes in the marketplace when establishing the estimated rate of returns.
Changes in reserves for product returns and sales allowances are as follows:
Rebates and
Chargebacks		Patient
Discount
Programs		ReturnsWholesaler
Distribution
Fees		Prompt
Payment
Discounts
Balance as of December 31, 2019$6,308 $845 $370 $1,683 $320 
Accruals and adjustments34,947 12,422 2,657 11,619 2,494 
Payments and other reserve reductions(34,068)(11,975)(2,569)(10,804)(2,378)
Balance as of December 31, 20207,187 1,292 458 2,498 436 
Accruals and adjustments52,243 15,629 4,163 15,683 3,423 
Payments and other reserve reductions(46,129)(13,971)(3,992)(14,498)(3,222)
Balance as of December 31, 2021$13,301 $2,950 $629 $3,683 $637 
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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Partnered Product Sales
We are party to several license, development, supply and distribution agreementarrangements with Teva for an auto-injector product containing sumatriptan,pharmaceutical partners, under which we produce and are the Company producesexclusive supplier of certain products, devices and assembles final product for shipment to Teva, and Tevaand/or components. Revenue is responsible for commercial distribution and salerecognized when or as control of the product.goods transfers to the customer as discussed below.
We are the exclusive supplier of the Makena® subcutaneous auto injector product to Covis and beginning in December 2021, OTREXUP®to Otter. Because these products are custom manufactured for each customer with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced. The Companyamount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is compensated,recorded as contract assets in the Consolidated Balance Sheets due to the short-term nature in which the amount is ultimately expected to be billed and recognizescollected from the customer.
All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, such as volume-based pricing arrangements or profit-sharing arrangements, if any. We recognize revenue, at cost for shipments of product delivered to Teva.  The Company is also entitledincluding the estimated variable consideration we expect to receive 50 percentfor contract margin on future commercial sales, upon shipment of the net profitsgoods to our partner. The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.
Licensing and Development Revenue
We have entered into several license, development and supply arrangements with pharmaceutical partners under which we grant a license to our device technology and know-how and provide research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, we identify each of the promised goods and services within the contract and the distinct performance obligations at inception and allocate consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus mark-up.
If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, we recognize revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer. Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and we have a present right to payment.
Our typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. We record a liability for cash received in advance of performance, which is presented within deferred revenue in the Consolidated Balance Sheets and recognized as revenue when the associated performance obligations have been satisfied. We recognized $3,889 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2020 and satisfied during the year ended December 31, 2021.
License fees and milestones received in exchange for the grant of a license to our functional intellectual property (“IP”) such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events, are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.
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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Royalties
We earn royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales made by Teva,of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to the Company withinus within 45 to 60 days afterof the end of the quarterperiod in which the commercial sales are made. 

Sumatriptan Injection USP was launched for commercial sale in June 2016.  Initially, given the limited access to sales data and the 45-day lag in reportingWe base our estimates of the profit split from Teva, management was not able to estimate the profit margin the Company expected to receive from commercial sales made by Teva at the time of sale.  Accordingly, prior to the third quarter of 2017, revenue from the profit sharing arrangement was recognized in the period following the commercial sales by Teva when amounts were reported and paid to the Company.  Beginning in the third quarter of 2017, management determined it had developed sufficient history and is now able to obtain additionalroyalties earned on actual sales information in order to reasonably estimatefrom our partners when available or estimated prescription sales from external sources and recognize revenue from the profit sharing arrangement when product is sold by Teva. The change in estimation and recognition had no material impact on the Company’s consolidated financial statements.

85

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Other Revenue Recognition

The Company sells reusable needle-free injectors and related disposable products to pharmaceutical partners. The 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 license and distribution agreements.

Revenue arrangements with multiple deliverables are divided into separate units of accounting if certain criteria are met, including whether the deliverable has stand-alone value to the customer, the customer has a general right of return relative to the delivered item and delivery or performance of the undelivered item is probable and substantially within the vendor’s control. Arrangement consideration is allocated at the inception of the arrangement to all deliverables on the basis of their relativeestimated net selling price. The selling price for each deliverable is determined using: (i) vendor-specific objective evidence of selling price (“VSOE”),  if it exists, (ii) third-party evidence of selling price (“TPE”) if VSOE does not exist, and (iii)If actual royalties received are different than amounts estimated, we would adjust the Company’s best estimate of the selling price if neither VSOE nor TPE exists. Revenue, excluding variable consideration, is recognized upon completion of deliverables based on the relative selling price of each deliverable that was assigned at inception of the arrangement.

Royaltyroyalty revenue is recognized in the period in which it is earned when the Companyadjustment becomes known.

Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders and development contract deliverables for which work has sufficient informationnot been completed or orders fulfilled, and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity. As of December 31, 2021, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $14,879. We expect to determine its quarterly royalty earnings to be received from partners.

recognize revenue on the remaining performance obligations over the next three years, with the majority being recognized in the next twelve months.

Share-Based Compensation

The Company utilizes share based

We use share-based compensation in the form of stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”). The Company recordsWe record compensation expense associated with share basedshare-based awards granted to employees at the fair value of the award on the date of grant. The Company uses theThe Black-Scholes option valuation model is used to determine the fair value of stock options. The fair values of RSU and PSU grants containing service or performance conditions are based on the market value of the Company’s Common Stockour common stock on the date of grant.grant. The fair value of PSUs containing a market condition are estimated using a Monte Carlo simulation. The value of the portion of the award that is ultimately expected to vest is expensed ratably over the requisite service period as compensation expense in the consolidated statementConsolidated Statements of operations.Operations. Forfeitures are recorded as incurred. Assumptions concerning the Company’sour stock price volatility and projected employee exercise behavior over the contractual life of the award can significantly impact the estimated fair value of an award.

Product Warranty

The Company provides a warranty on its reusable needle-free injector devices. The warranty period on a needle-free injector 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. The Company had $50 and $100 in warranty liability reserves as of December 31, 2017 and 2016, respectively.

stock option awards.

Research and Development

Research and development expenses include costs directly attributable to the conduct of research and development programs including personnel costs, materials and supplies associated with design work and prototype development, FDA filing fees and the cost of services provided by outside contractors such as expenses related to clinical trials. All costs associated with research and development activities 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

86

We account for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which applies to all tax positions related to income taxes. Tax benefits are recognized when it is more-likely-than-not that a tax position will be sustained upon examination by the authorities. Interest and penalties accrued related to uncertain tax benefits are recognized as a component of income tax expense in the Consolidated Statements of Operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”). This legislation makes broad and complex changes to the U.S. tax code. The U.S. Securities and Exchange Commission (“SEC”) staff issued guidance on accounting for the tax effects of TCJA under Staff Accounting Bulletin No. 118 (“SAB 118”). SAB 118 provides a one-year measurement period for companies to complete its accounting for the tax effects of TCJA. The Company calculated its best estimate of the impact of the TCJA based on its understanding of the TCJA and guidance available as of the filing date and recorded provisional amounts as of December 31, 2017. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the TCJA may require changes in these estimates. The final determination of the effects of the TCJA will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA. Any subsequent adjustment to the estimated amounts is not expected to be material to the financial statements.

Net Loss


Earnings (Loss) Per Common Share

Basic net lossearnings (loss) per common share is computed by dividing the net income or loss available(loss) applicable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net lossearnings (loss) per common share is computed in a similar to basic net loss per sharemanner, except that the weighted average number of shares outstanding areis increased to include additional sharesreflect the potential dilution from the assumed exercise or conversion 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 usedsecurities into common stock. Diluted earnings (loss) per common share contemplate a complete conversion to acquirecommon shares of all convertible instruments only if such instruments are dilutive in nature with respect to earnings (loss) per 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 excluded from dilutive loss per share were 14,761,442, 13,483,856 and 11,151,503 at December 31, 2017, 2016 and 2015, respectively.

Segment Information

share.

Segments
Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision makerChief Operating Decision Maker (“CODM”), our Chief Executive Officer, in deciding how to allocate resources and in assessingassess performance. The Company’s chief operating decision makerOur CODM currently evaluates the Company’sour operations as a whole from a number of different operational perspectives, including but not limited to, on a product-by-product, customer and partner basis. The Company derivesWe derive all significant revenues from self-administered parenteral pharmaceutical products and technologies,development services, and hashave a single reportable, operating segment of business. Accordingly, the Company does not report more than one segment; nevertheless, management periodically evaluates whether the Company continues to have one single reportable segment of business.

Going Concern

Management is

We are responsible for evaluating, and providing disclosure of uncertainties about, the Company’sour ability to continue as a going concern. As of December 31, 2017, the Company2021, we had cash and cash equivalents and short-term investments of $31,555.of $65,913. Based on management’sour evaluation, managementwe concluded there is no substantial doubt or uncertainty about the Company’sour ability to meet itsour obligations within one year from the date the financial statementsConsolidated Financial Statements were issued.

Accounting Pronouncements Recently Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Simplifying the Measurement of Inventory. The new standard changed the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The Company adopted this standard during the first quarter of 2017, and the adoption did not have an impact on the consolidated results of operations, cash flows or financial position

Note 3.    Inventories
Inventories consisted of the Company.

following:

December 31, 2021December 31, 2020
Raw materials$325 $325 
Work in process6,784 7,120 
Finished goods4,435 10,771 
Total inventories, net$11,544 $18,216 
A reserve is recorded for potentially excess, dated or obsolete inventory based on an analysis of inventory on hand compared to forecasted future sales, which was $214 and $619 as of December 31, 2021 and 2020, respectively. In March 2016,2021, we wrote off $359 of inventory and reduced the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The new standard involves several aspectsreserve for excess, dated or obsolete inventory by $46. In 2020, we wrote off $356 of inventory and increased the accountingreserve for share-based payment transactions, including the income tax consequences, classificationexcess, dated or obsolete inventory by $511.
83

Table of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted ASU 2016-09 effective January 1, 2017, and the adoption did not have a significant impact on the Company’s consolidated financial statements. As required under previous GAAP, the Company had estimated forfeitures in determining its periodic compensation costs related to share-based awards. Upon adoption of the new standard, the Company has elected to recognize forfeitures as they occur, and recorded a cumulative effect adjustment to accumulated deficit and additional paid-in capital of $97, the net of which had no impact on the Company’s consolidated results of operations, cash flows or financial position.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)


Note 4.    Property and Equipment
Property and equipment, net consisted of the following:
December 31, 2021December 31, 2020
Production molds, tooling and equipment$22,069 $20,260 
Leasehold improvements7,559 6,298 
Furniture, fixtures and office equipment907 865 
Computer equipment and software1,717 756 
Construction and tooling in process6,942 6,214 
Total property and equipment39,194 34,393 
Less: Accumulated depreciation(13,179)(10,373)
Total property and equipment, net$26,015 $24,020 
Depreciation expense was $2,864, $2,341 and $2,205 for the years ended December 31, 2021, 2020 and 2019, respectively. In January 2017,2021 and 2020, we disposed of certain property and equipment that was fully depreciated and no longer used. We capitalized $52 and $231 of interest costs associated with construction of property and equipment during the FASB issued ASU No. 2017-01, Business Combinations(Topic 805): Clarifyingyears ended December 31, 2021 and 2020, respectively.
Note 5.    Leases
We are party to non-cancellable operating leases for our corporate headquarters facilities in Ewing, New Jersey, and 2 facilities in the Definitionsuburbs of Minneapolis, Minnesota used for research and development, manufacturing and administrative functions. We have also entered into a Business (“ASU 2017-01”), which provides additional clarification to aid in determining whenmaster operating lease arrangement for a setfleet of assetsvehicles for use by our sales force and activities isother operating leases for various office and warehouse equipment. Our lease agreements do not a business, and whethercontain any material residual value guarantees, material bargain purchase options or material restrictive covenants. We have no material sublease arrangements with third parties or lease transactions should be accounted for as acquisitions (or disposals) of assets or as a business. The new standard is effective for all annual periods beginning after December 15, 2017. The Company elected to early adopt ASU 2017-01, as permitted under the standard, effectivewith related parties.
On November 1, 2021, January 1, 2017.2022 and March 1, 2022, we entered into two-month lease extensions on our operating lease for our corporate headquarters in Ewing, New Jersey. The implementation3 extensions set new lease expiration dates of December 31, 2021, February 28, 2022 and April 30, 2022, respectively, and maintained the same conditions as the original lease.
On July 1, 2019, we entered into an operating lease for approximately 75,000 square feet of office, laboratory, manufacturing and warehousing space in Minnetonka, Minnesota. The initial lease term is 12.5 years with an option to renew the lease for 1 additional renewal period of three years. The landlord delivered possession of the amended guidance did not have a material impactpremises to us on the Company's consolidated financial statements.

InJuly 1, 2019 and payment of rent commenced on January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This new standard eliminates Step 2 from the goodwill impairment test. ASU 2017-04 requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge1, 2020. The lease provides for the amount by whichpayment of fixed base rent and additional rent for operating expenses, insurance premiums and taxes. We are completing the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 still allows the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company early adopted this standard effective January 1, 2017 and applied the standard prospectively for its annual goodwill impairment tests.  The adoptionbuild-out of the standard did not have any impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contractspremises at our cost with Customers (“ASU No. 2014-09”).  This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expectsallowance for tenant improvement to be entitledreimbursed by the landlord up to $1,200.

The operating leases require payment of all executory costs such as maintenance and property taxes. Operating lease costs were $2,176, $2,174 and $1,391 for the years ended December 31, 2021, 2020 and 2019 respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $2,005, $1,884 and $1,401 and non-cash operating lease ROU assets obtained in exchange for those goods or services.  The standard creates a five-step model that requires a company to identify customer contracts, identify the separate performance obligations, determine the transaction price, allocate the transaction price to the separate performance obligations and recognize revenue when or as each performance obligation is satisfied.  This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contract balances and remaining performance obligations, significant judgments made in determining the timing of satisfaction of performance obligations (over time or at a point in time), and estimates made in determining the transaction price and amounts allocated to performance obligations.

The Company has reviewed all of its major contracts with customers and has adopted the new revenue recognition standard effective January 1, 2018 utilizing the modified retrospective method of adoption.  The adoption of ASU No. 2014-09 did not have a material impact on the Company’s consolidated financial statements. No significant changes to business processes or systems have been necessary.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This new standard requires entities to recognize on its balance sheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-02 on its consolidated financial statements and currently expects that most of its operating lease commitments will be subject toobligations were $850, $778 and $6,511 for the new standardyears ended December 31, 2021, 2020 and recognized as operating2019 respectively. As of and for the years ended December 31, 2021, 2020 and 2019 the weighted average discount rate was approximately 8.9%, 8.6% and 8.3% respectively, and the weighted average remaining lease liabilitiesterm was 8.3 years, 8.3 years and right-of-use assets in the statement8.4 years respectively.

84

Table of financial position upon adoption of ASU 2016-02.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), which provides guidance on determining which changes to terms and conditions of share-based awards require an entity to apply modification accounting under Topic 718. This new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The adoption of ASU 2017-09 is not expected to have a significant impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”).  The amendments clarify that an entity should identify each distinct nonfinancial asset or in-substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. ASU 2017-05 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods.  The Company is currently evaluating the potential impact, if any, on its consolidated financial statements upon the adoption of ASU 2017-05 and expects to adopt the standard effective January 1, 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

3.

Sale of Assets


In October 2017,

Future lease payments under non-cancelable leases for the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Ferring to sell the worldwide rights, including certainnext five years and thereafter as of December 31, 2021 are as follows:
Future Lease Payments
2022$1,334 
2023969 
2024762 
2025676 
2026678 
Thereafter3,593 
Total remaining lease payments8,012 
Less: Imputed interest(2,532)
Present value of lease liabilities$5,480 
As of December 31, 2021, we have no material additional operating leases that have not yet commenced.
Note 6.    Intangible Assets
Intangible assets are as follows:
December 31, 2021December 31, 2020
Useful Life
(in Years)		Gross Carrying AmountAccumulated AmortizationNet Book ValueGross Carrying AmountAccumulated AmortizationNet Book Value
TLANDO® product rights
10$11,315 $— $11,315 $— $— $— 
NOCDURNA® product rights
107,500 (937)6,563 7,500 (188)7,312 
Patents 1
5 - 101,048 (1,047)1 3,995 (3,614)381 
Total intangibles, net$19,863 $(1,984)$17,879 $11,495 $(3,802)$7,693 
1    Patents related to the ZOMAJET™ needle-free auto injector device product line for a total purchase priceOTREXUP® were sold as part of $14.5 million.  

The purchase price is to be paid in four installments consisting of the following: a $2.0 million upfront payment, which was received upon entry into the Asset Purchase Agreement andentered into with Otter in December 2021. See Note 12 for further discussion regarding the transfersale of certain assets; a second installment of $2.75 million received upon delivery of certain documentation and satisfaction of certain conditions primarily related to product manufacturing, which occurred in February 2018; a third installment of $4.75 million payable upon satisfaction of certain conditions, including further document transfer,assets.

In October 2021, we entered into an exclusive license agreement (the “TLANDO® License Agreement”) with Lipocine, Inc. (“Lipocine”) for the successful completion of a regulatory audit by a notified body, and a pilot manufacturing run under Ferring’s supervision; and a final installment of $5.0 million upon Ferring’s receipt of the CE Mark needed to continueright to commercialize the product TLANDO® (testosterone undecanoate) in certain territoriesthe U.S., a twice-daily oral formulation of testosterone for testosterone replacement therapy indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males. TLANDO® was granted tentative approval from the FDA in December 2020 and will be eligible for final approval and marketing in the U.S. upon expiration of the exclusivity period previously granted to Clarus for JATENZO® on March 27, 2022. Under the terms of the TLANDO® License Agreement, we paid Lipocine an upfront payment of $11,000 upon execution of agreement. Lipocine is eligible for additional milestone payments up to $10,000, minimum tiered royalty payments of $4,500 over the first three years after commercialization and commercial milestones potentially totaling up to $160,000 based on net sales of TLANDO® in the U.S. We are also obligated to purchase $2,002 of TLANDO® inventory from Lipocine of which $1,056 was purchased as of December 31, 2021. We accounted for the transaction as an asset purchase. Amortization of the product rights intangible asset, including direct transaction costs of $315, will commence and be included in selling, general and administrative expenses upon commercialization of TLANDO® once final transferapproval is obtained from the FDA after the exclusivity period previously granted to Clarus Therapeutics, Inc. (“Clarus”) for JATENZO® expires on March 27, 2022. The additional milestone and commercial milestone payments associated with TLANDO® are contingent on future events and will be accrued when they are both probable and estimable. Royalty payments will be accrued and included in costs of certain product-related inventory, equipmentproduct sales as incurred.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

In connection with the NOCDURNA® license and agreementscommercial supply agreement entered into with Ferring International Center S.A. and its affiliates (“Ferring”) in October 2020, we paid Ferring an upfront payment of $5,000 upon execution and an additional $2,500 in October 2021. Ferring is eligible for tiered royalties and additional commercial milestone payments potentially totaling up to Ferring (the “Completion Date”), which$17,500 based on net sales of NOCDURNA® in the U.S. We accounted for the transaction as an asset purchase. Amortization of the product rights intangible asset is expectedincluded in selling, general and administrative expenses. The royalty payments are accrued and included in the cost of product sales as incurred. The commercial milestones were determined to occur bybe contingent liabilities and will be accrued when they are both probable and estimable.
Amortization expense for the end of 2018.

For the yearyears ended December 31, 2017,2021, 2020 and 2019 was $1,037, $286 and $352, respectively, and is recorded in selling, general and administrative expenses in the Company recorded a gain on saleConsolidated Statements of assets upon receiptOperations. Estimated future aggregate amortization expense is as follows:

Estimated
Amortization
Expense
2022$1,600 
20231,882 
20241,882 
20251,882 
20261,882 
Thereafter8,751 
Total future amortization expense$17,879 
Future amortization amounts presented above are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors.
Note 7.    Accrued Expenses and Other Current Liabilities
Accrued expenses and other liabilities consisted of the non-refundable upfront payment from Ferring and transfer of certain manufacturing equipment and patents as follows:

following:

Proceeds from sale of assets

 

$

2,000

 

Less:

 

 

 

 

Net book value of molds and equipment transferred

 

 

933

 

Net book value of patents transferred

 

 

108

 

Payment of transaction costs

 

 

99

 

Gain on sale of assets

 

$

860

 

December 31, 2021December 31, 2020
Product returns and sales allowances$20,563 $11,435 
Accrued employee compensation and benefits5,648 4,555 
License fees payable— 2,500 
Other accrued expenses and liabilities8,832 7,145 
Total accrued expense and other liabilities$35,043 $25,635 

The Company will continue to manufacture and supply needle-free devices until the Completion Date and will receive payment for devices manufactured and supplied to its partners, and a royalty on net product sales, in accordance with the existing license and supply agreements.

4.

Long-Term Debt

In

Note 8.    Long-Term Debt
Term Loan
On June 6, 2017, the Companywe entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc., for a term loan of up to $35.0 million$35,000 (the “Term Loan”), under which we initially borrowed $25,000 (“Tranche I”), the proceeds of which are to bebeing used for working capital and general corporate purposes. The first advance of $25.0 million was funded upon execution of the Loan Agreement in June 2017. Under the terms of the Loan Agreement, the Company may, but is not obligated to, request one or more additional advances of at least $5.0 million not to exceed $10.0 million in the aggregate, subject to the Company achieving certain corporate milestones and satisfying customary conditions. The Company must achieve certain corporate milestones and exercise its option to request additional advances prior to September 30, 2018.

The Term Loan iswas secured by substantially all of the Company’sour assets, excluding intellectual property and will mature on July 1, 2022. The Term Loan accruesaccrued interest at a calculated prime-based variable rate with a maximum interest rate of 9.50%. AsThe interest rate in effect as of December 31, 2017, the interest rate2020 was 8.75%8.50%. Payments under the Loan Agreement are interest onlyloan were interest-only until the first principal payment is due onwas due.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

On June 26, 2019, we entered into a First Amendment (the “Amendment”) to the Loan Agreement, which increased the aggregate principal amount available under the Term Loan from $35,000 to $50,000 and extended the interest-only payment period of the Term Loan to August 1, 2019, provided that the2021. The interest only period maycould be further extended to August 1, 2022 if we achieved a certain loan extension milestone, requested such extension, and paid an extension fee equal to one half of 1 percent of the principal amount outstanding. Upon signing of the Amendment, an additional $15,000 (“Tranche II”) was funded to us. The Term Loan maturity date remained July 1, 2022; however, the Term Loan maturity date could be extended to FebruaryJuly 1, 2020 if2024 contingent upon satisfaction of a certain loan extension milestone. We were eligible, but not obligated, to request one or more additional advances of at least $5,000, not to exceed $10,000 in the Company achieves certain corporate milestones. The corporate milestones must be achieved, and theaggregate (“Tranche III”). Our option to request additional advances must be exercised, priorexpired on October 31, 2020.
We were required to September 30, 2018, which is currently unlikelypay an end of term fee (“End of Term Charge”) equal to occur.4.25% of Tranche I and 3.95% of the borrowings under Tranche II, payable upon the earlier of July 1, 2022 or repayment of the Term Loan. The Loan Agreement also requires the Company to pay a fee equal to 4.25% of the total original principal amount of all term loan advances (“End of Term Charge”), which is due upon repayment of the Term Loan at either maturity or earlier repayment, and imposesimposed a prepayment fee of 1.0% to 3.0% if any or all of the balance iswere prepaid prior to the maturity date.

As of December 31, 2017,2020, the carrying value of the Term Loan was $24,858,$40,899, which consisted of the $25,000 principal balance outstanding and the End of Term Charge accrual, of $119, less unamortized debt issuance costs of $261.  The Company incurred debt issuance costs that along with the End of Term Charge, are being amortized/accrued to interest expense over the term of the Term Loan using the effective interest method. The Companyfair value of our debt was estimated to approximate the carrying value based on our understanding of current market conditions and rates we could obtain for similar loans at that time.
In July 2021, having previously met the loan extension milestone, we requested that the interest-only period be extended to August 1, 2022 and the maturity date be extended to July 1, 2024 in accordance with the terms of the Amendment. The Lender granted the extension of the interest-only period and maturity date and waived the extension fee. In 2021, we made principal prepayments of $20,000 and paid $1,080a 1.0% prepayment fee.
On November 1, 2021, we extinguished the Loan Agreement with Hercules Capital, Inc. and repaid the outstanding $20,000 principal on the Term Loan, along with the 1.0% prepayment fee of $200 and the End of Term Charge of $1,655. All remaining unamortized debt issuance costs associated with the Term Loan were immediately amortized to interest expense.
Credit Facilities
On November 1, 2021, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent for the lenders, (“Administrative Agent”) for credit facilities in an aggregate principal amount of up to $40,000 with a maturity date of November 1, 2024. The Credit Agreement provides for a $20,000 term loan facility (the “Term Loan Facility”) and a $20,000 revolving credit facility, $5,000 of which is available for the issuance of letters of credit and $1,000 of which is available for Swingline loans (the “Revolving Credit Facility”), (collectively the “Credit Facilities”), which are secured by substantially all of our assets. The Term Loan Facility was funded upon execution of the Credit Agreement with the proceeds used to repay our $20,000 Term Loan with Hercules Capital, Inc. and to pay fees and expenses incurred in connection with the early repayment. The Revolving Credit Facility remains available for future use and can be drawn upon for ongoing working capital requirements and other general corporate purposes as needed.
As of December 31, 2021, we had $20,000 outstanding under our Term Loan Facility with a carrying value of $19,741 which consisted of the principal balance outstanding, less unamortized debt issuance costs that are being amortized/accrued to interest expense over the term of the Term Loan Facility using the effective interest rate method. The fair value of our debt is estimated to approximate the carrying value based on our understanding of current market conditions and rates we could obtain for similar loans.
As of December 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility, including no outstanding letters of credit drawn from the Revolving Credit Facility or Swingline loans. Commitment fees are payable on the unused portion of the Revolving Credit Facility at rates between 0.30% and 0.45% based on our Consolidated Total Leverage Ratio, as defined in the Credit Agreement and below, remeasured quarterly. For the year ended December 31, 2017.

89

2021, commitment fees incurred totaled $12.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)


As defined in the Credit Agreement governing the Term Loan Facility, principal payments of the outstanding term loans are due in consecutive quarterly installments on the last business day of each of March, June, September and December, commencing on March 31, 2022. The Credit Agreement also requires prepayment of the outstanding loans under the Term Loan Facility, subject to certain exceptions, with (a) 100% of the net cash proceeds of (i) any incurrence or issuance of certain debt, other than debt permitted under the Credit Agreement; (ii) issuance of equity other than that associated with employee compensation; and (iii) certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions. We may voluntarily prepay outstanding loans under the Term Facility at any time without premium or penalty. All obligations under the Term Facility are secured, subject to certain exceptions, by substantially all of our assets and the assets of our subsidiaries.
Borrowings made under the Credit Agreement bear interest at a rate per annum equal to either the Base Rate or LIBOR plus the Applicable Margin, as defined in the Credit Agreement. Swingline loans bear interest at a rate per annual equal to the Base Rate plus the Applicable Margin. The Applicable Margin is based on the Consolidated Total Leverage Ratio, as defined in the Credit Agreement and below, remeasured quarterly. Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1%. In the event of default, we no longer have the option to request LIBOR rate loans, Swingline Loans or Letters of Credit and all outstanding financial instruments will bear interest at a rate per annum of 2% in excess of the calculated interest rate.
We have the option to select either the Base Rate or LIBOR as the rate of interest for the Term Loan and Revolving Credit Facilities, along with an interest period of either 1-month, 3-months or 6-months. Upon cessation of LIBOR on June 30, 2023, an appropriate benchmark replacement will be determined pursuant to the terms of the Credit Agreement. We have not yet evaluated the impact the cessation of LIBOR will have on our financial condition and results of operations. As of December 31, 2021, the Applicable Margin was 1.50% for Base Rate loans and 2.50% for LIBOR loans with a 1-month LIBOR selected as the rate of interest for the Term Loan Facility. The weighted average interest rate on the Term Loan Facility outstanding balance during the year ended December 31, 2021 was approximately 2.59%.
Under the Credit Agreement, we are subject to customary affirmative and negative covenants, including, among others, restrictions on our ability to incur debt; create liens; make investments; merge, consolidate or dispose of assets or subsidiaries; enter into transactions with affiliates; modify accounting practices, our year end and organizational documents; pledge assets; revise nature of business; perform sale leasebacks; and enter into any restrictive agreements and customary events of default (including payment defaults, covenant defaults, change of control defaults and bankruptcy defaults). The Credit Agreement also contains financial covenants, including the ratio of consolidated total indebtedness to consolidated earnings before income, taxes, depreciation and amortization (“Consolidated EBITDA”) (“Consolidated Total Leverage Ratio”), as defined in the Credit Agreement” and the ratio of consolidated senior secured indebtedness to Consolidated EBITDA (“Consolidated Senior Secured Leverage Ratio”), as well as the ratio of Adjusted EBITDA to consolidated fixed charges (“Consolidated Fixed Charge Coverage Ratio”), as defined in the Credit Agreement. These covenants restrict our ability to purchase outstanding shares of our common stock. As of December 31, 2021, we were in compliance with all affirmative, negative and financial covenants.
Future principal payments under the term loan, including the End of Term Charge,Loan Facility are as follows:

2018

 

$

—

 

2019

 

 

3,065

 

2020

 

 

7,857

 

2021

 

 

8,610

 

2022

 

 

6,531

 

 

 

$

26,063

 

Future Principal Payments
2022$1,500 
20231,500 
202417,000 
Total future principal payments$20,000 

5.

Stockholders’ Equity

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Note 9.    Stockholders’ Equity
In August 2017, the Companywe entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company maywe could offer and sell, from time to time and at itsour sole discretion, shares of itsour common stock having an aggregate offering price of up to $30.0 million$30,000 through Cowen as the Company’sour sales agent and/or as principal. Cowen maycould sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended.amended (the “ATM Facility”). The Company willSales Agreement requires us to pay Cowen a commission of 3.0% of the gross sales proceeds of any common stock sold through Cowen under the Sales Agreement. The Company is not obligated to make any salesCowen.
During year ended December 31, 2019, we sold 2,307 shares of common stock under the Sales Agreement and no salesATM Facility, resulting in net offering proceeds of common stock were made pursuant$7,781. On June 26, 2019, the Company delivered written notice to Cowen that it was terminating the Sales Agreement ineffective July 6, 2019, and accordingly the period ended December 31, 2017.

On May 11, 2015, the Company completedATM Facility is no longer available for use.

Note 10.    Share-Based Compensation
We have an underwritten offering of 23,000,000 shares of its common stock at a price to the public of $2.00 per share. The Company received net proceeds of $42.9 million after deducting underwriting discounts, commissions and offering expenses paid by the Company. The Company has used the net proceeds from the offering for general corporate purposes including research and development activities.

6.

Share-Based Compensation

The Company’s 2008 Equity Compensation Plan (the “Plan”) was amended and restated pursuant to stockholder approval in June 2016 in order to increase the number of shares available for issuance under the Plan, extend the term of the Plan, impose a one-year minimum vesting requirement and provide for double trigger accelerated vesting for certain awards in the event of a change in control.  The Plan, which allows for grants in the form of incentive stock options, nonqualifiednon-qualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All ofThe Plan was amended and restated in June 2021 to increase the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan.  Under the Plan, the maximumtotal number of shares available for grant under the Plan by 10,000 shares. The cumulative number of shares that have been authorized for issuance under the Plan to date is 32,200,00050,200 shares and the maximum number of shares of stock that may be granted to any one participant during a calendar year is 4,000,0004,000 shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the datesdate of grant. The term of each option is 10ten years, and the options typically vest in quarterly installments over a three-year period.period with a minimum vesting period of one year. As of December 31, 2017,2021, the Plan had approximately 6,500,000366 shares available for grant. Stock option exercises, and the vesting of restricted stock and performance stock awards, are satisfied through the issuance of new shares.

90

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Stock Options

Stock option activity under the Plan as of and for the three years ended December 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Shares

 

 

Price ($)

 

 

Term (Years)

 

 

Value ($)

 

Outstanding at December 31, 2014

 

 

7,245,485

 

 

 

2.25

 

 

 

 

 

 

 

 

 

Granted/Issued

 

 

2,984,010

 

 

 

2.23

 

 

 

 

 

 

 

 

 

Exercised

 

 

(20,000

)

 

 

1.54

 

 

 

 

 

 

 

—

 

Cancelled/Forfeited

 

 

(728,998

)

 

 

2.92

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2015

 

 

9,480,497

 

 

 

2.19

 

 

 

 

 

 

 

 

 

Granted/Issued

 

 

4,029,500

 

 

 

1.14

 

 

 

 

 

 

 

 

 

Exercised

 

 

(142,493

)

 

 

1.23

 

 

 

 

 

 

 

122

 

Cancelled/Forfeited

 

 

(2,053,595

)

 

 

2.13

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2016

 

 

11,313,909

 

 

 

1.84

 

 

 

 

 

 

 

 

 

Granted/Issued

 

 

2,985,667

 

 

 

2.67

 

 

 

 

 

 

 

 

 

Exercised

 

 

(1,311,293

)

 

 

1.38

 

 

 

 

 

 

 

2,226

 

Cancelled/Forfeited

 

 

(839,455

)

 

 

2.68

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

 

12,148,828

 

 

 

2.04

 

 

 

7.1

 

 

 

4,206

 

Exercisable at December 31, 2017

 

 

8,443,947

 

 

 

1.99

 

 

 

6.3

 

 

 

3,201

 

Number of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term (Years)		Aggregate Intrinsic
Value
Outstanding as of December 31, 201814,079$2.19 
Granted2,4893.01 
Exercised(2,572)1.76 $6,477 
Cancelled / Forfeited(135)2.81 
Outstanding as of December 31, 201913,8612.41 6.731,713 
Granted3,3352.73 
Exercised(939)1.93 1,072 
Cancelled / Forfeited(736)2.83 
Outstanding as of December 31, 202015,5212.49 6.623,407 
Granted2,6604.37 
Exercised(2,307)2.27 5,052 
Cancelled / Forfeited(297)3.02 
Outstanding as of December 31, 202115,577 2.83 6.513,839 
Exercisable as of December 31, 202110,644 $2.46 5.4$12,028 

As of December 31, 2017, there was $3,793 of total unrecognized compensation costs related to nonvested outstanding stock options that are expected to be recognized over a weighted average period of approximately 1.9 years.

Stock option expense recognized in 2017, 2016 and 2015 was $2,378, $2,039 and $2,883, respectively.  

The per share weighted average fair value of options granted during 2017, 2016during 2021, 2020 and 20152019 was estimated as $1.37, $0.57$2.29, $1.42 and $1.13,$1.54, 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’sour stock. The weighted average expected life is based on both historical and anticipated employee behavior.

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Risk-free interest rate

 

 

1.8

%

 

 

1.3

%

 

 

1.3

%

Annualized volatility

 

 

53.3

%

 

 

51.7

%

 

 

53.5

%

Weighted average expected life, in years

 

 

6.0

 

 

 

6.0

 

 

 

6.0

 

Expected dividend yield

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

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ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

Years Ended December 31,
202120202019
Risk-free interest rate0.8 %0.4 %1.9 %
Annualized volatility59.3 %59.4 %55.7 %
Weighted average expected life (in years)5.45.55.5
Expected dividend yield0.0 %0.0 %0.0 %
Option exercises during 2017, 20162021, 2020 and 20152019 resulted in proceeds of $1,816, $101$5,182, $1,814 and $31,$4,405, respectively, and in the issuance of shares of common stock of 1,311,2932,294 in 2017, 102,7762021, 939 in 20162020 and 20,0002,529 in 2015.2019. In 2016,2021 and 2019, certain options were net exercised, whereby the Companywe withheld 39,71713 and 43 shares, respectively, the fair value of which was equivalent to the aggregate exercise price and tax withholding on the date of exercise.

Long Term Incentive Program

The Company’s

Our Board of Directors has approved a long termlong-term incentive program (“LTIP”) for the benefit of the Company’sour senior executives. Pursuant to the LTIP, the Company’sour senior executives are awarded stock options, restricted stock units (“RSU”) and performance stock units (“PSU”) with targeted values based on similar award structures granted by the Company’sour peer group. The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’sour common stock on the date of grant, vest in quarterly installments over three years, were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan and are included in the stock options table above. The RSUs generally vest in three3 equal annual installments, and the PSU awardsPSUs vest and convert into shares of the Company’sour common stock based on the Company’sour attainment of certain performance goals over a performance period, which is typically three years.
PSUs and RSUs granted under the LTIP are summarized as follows:
Performance Stock UnitsRestricted Stock Units
Number of
Shares
Weighted
Average Grant
Date Fair
Value
Number of
Shares
Weighted
Average Grant
Date Fair
Value
Outstanding as of December 31, 20181,842 $2.41 1,226 $2.44 
Granted593 2.99 7892.92 
Incremental shares earned59 1.25 — —
Vested / Settled(415)1.18 (614)2.19 
Forfeited / Expired(238)1.12 ——
Outstanding as of December 31, 20191,841 3.00 1,401 2.82 
Granted605 2.00 1,078 2.73 
Incremental shares earned77 3.10 — —
Vested / Settled(388)3.11 (785)2.80 
Forfeited / Expired(494)3.02 (127)2.83 
Outstanding as of December 31, 20201,641 2.61 1,567 2.77 
Granted243 5.55 769 4.42 
Incremental shares earned210 3.18 — — 
Vested / Settled(766)2.86 (832)2.76 
Outstanding as of December 31, 20211,328 $3.04 1,504 $3.62 
The outstanding balance of PSUs is stated at the target number of shares to five years.

91

be awarded upon attainment of certain performance goals. Depending on the outcome of the related performance goals, a recipient may ultimately earn a number of shares that is greater or less than the target number of units granted, ranging from 0% to 150%. The balance of PSUs outstanding as of December 31, 2021 included 308 units granted in 2019 with a performance period ended December 31, 2021 that were subsequently deemed to be achieved and approved for settlement in the first quarter of 2022 for a total of 304 shares.
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ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

The performance stock unit awards and restricted stock unit awards granted under the long term incentive program are summarized in the following table:

 

 

Performance Stock Units

 

 

Restricted Stock Units

 

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value ($)

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value ($)

 

Outstanding at December 31, 2014

 

 

463,542

 

 

 

3.08

 

 

 

231,124

 

 

 

3.07

 

Granted

 

 

664,391

 

 

 

2.09

 

 

 

664,391

 

 

 

2.18

 

Vested/settled

 

 

—

 

 

 

 

 

 

 

(112,285

)

 

 

2.92

 

Forfeited/expired

 

 

(171,755

)

 

 

2.69

 

 

 

(68,402

)

 

 

2.47

 

Outstanding at December 31, 2015

 

 

956,178

 

 

 

2.40

 

 

 

714,828

 

 

 

2.32

 

Granted

 

 

750,500

 

 

 

1.15

 

 

 

750,500

 

 

 

1.12

 

Vested/settled

 

 

(16,835

)

 

 

3.96

 

 

 

(264,001

)

 

 

2.41

 

Forfeited/expired

 

 

(342,554

)

 

 

2.17

 

 

 

(378,669

)

 

 

1.91

 

Outstanding at December 31, 2016

 

 

1,347,289

 

 

 

1.50

 

 

 

822,658

 

 

 

1.39

 

Granted

 

 

689,180

 

 

 

3.12

 

 

 

689,180

 

 

 

2.69

 

Vested/settled

 

 

—

 

 

 

 

 

 

 

(287,508

)

 

 

1.49

 

Forfeited/expired

 

 

(580,721

)

 

 

2.16

 

 

 

(67,464

)

 

 

1.70

 

Outstanding at December 31, 2017

 

 

1,455,748

 

 

 

2.20

 

 

 

1,156,866

 

 

 

2.12

 


In each of the years in the three-year period ended December 31, 2017,2021, the LTIP awards include PSUs that will be earned based on the Company’sour total shareholder return (“TSR”) as compared to the Nasdaq Biotechnology Index (“(“NBI”) at the end of the respective annual performance periods. Depending on the outcome of the performance goal, a recipient may ultimately earn a number of shares greater or less than their target number of shares granted, ranging from 0% to 150% of the PSUs granted. The fair values of the TSR PSUs granted were determined using a Monte Carlo simulation and utilizedused the following inputs and assumptions:

 

2017

Award

 

 

2016

Award

 

 

2015

Award

 

2021 Award2020 Award2019 Award

Closing stock price on grant date

 

$

2.66

 

 

$

1.12

 

 

$

2.18

 

Closing stock price on grant date$4.42 $2.73 $2.92 

Performance period starting price

 

$

2.17

 

 

$

1.29

 

 

$

2.52

 

Performance period starting price$3.70 $4.78 $3.01 

Term of award (in years)

 

 

2.57

 

 

 

2.58

 

 

 

2.59

 

Term of award (in years)2.562.552.55

Volatility

 

 

54.6

%

 

 

70.1

%

 

 

60.5

%

Volatility54.4 %57.5 %63.7 %

Risk-free interest rate

 

 

1.39

%

 

 

0.97

%

 

 

0.83

%

Risk-free interest rate0.23 %0.21 %1.79 %

Expected dividend yield

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

Expected dividend yield0.00 %0.00 %0.00 %

Fair value per TSR PSU

 

$

3.10

 

 

$

1.25

 

 

$

1.71

 

Fair value per TSR PSU$5.55 $2.00 $3.18 

The performance period starting price is measured as the average closing price over the last 20 trading days prior to the performance period start. The Monte Carlo simulation model also assumed correlations of returns of the pricesprices of the Company’sour common stock and the common stocks of the NBI companies and stock price volatilities of the NBI companies. The fair value of the target number of shares that can be earned under the TSR PSUs is being recognized as compensation expense over the term of the award.

In connection with PSU Other PSUs that are not market-based awards including both TSR based awards and awards with definedare expensed using the grant date fair value of shares expected to vest over the remaining performance goals consideredperiod when it becomes probable of achievement,that the Company recognized total compensation expense of $411, $68 and $250 in 2017, 2016 and 2015, respectively.  Compensation expense recognized in 2017, 2016 and 2015 in connection with the RSUs was $701, $413 and $526, respectively.

In 2017, 2016 and 2015, a portion of the related performance goal will be achieved.

LTIP awards wereare generally net-share settled such that the Company withheldwe withhold shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted theremit cash to the appropriate taxing authorities. The totalTotal shares withheld for net-settled awards were 97,586, 73,888626, 425 and 39,665409 in 2017, 20162021, 2020 and 2015,2019, respectively, and were based on the value of the shares on their vesting date as determined by the Company’sour closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $249, $84$2,841, $1,367 and $88$1,131 in 2017, 20162021, 2020 and 2015,

92

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

2019, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows. These net-share settlements reduced the number of shares that would have otherwise been issued as a result of the vestingvesting.

Members of our Board of Directors also receive grants of RSUs that vest one year from the date of grant. Certain Directors have elected to defer receipt of vested shares until retirement or separation from the Board of Directors, for which 30, 72 and did not represent an expenseno shares vested with deferral as of and for the years ended December 31, 2021, 2020 and 2019, respectively.
Share-based Compensation Expense
Compensation costs incurred in connection with share-based awards are as follows:
Years Ended December 31,
202120202019
Stock options$4,102 $3,709 $3,436 
Restricted stock units$2,620 2,239 1,830 
Performance stock units$1,293 2,000 1,204 
Total share-based compensation expense$8,015 $7,948 $6,470 
As of December 31, 2021, there was $6,838 of total unrecognized compensation costs related to the Company. 

7.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consistednon-vested stock option awards that are expected to be recognized over a weighted average period of the following:

approximately 1.95 years.

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Accrued expenses and other liabilities:

 

 

 

 

 

 

 

 

Accrued employee compensation and benefits

 

$

2,470

 

 

$

2,703

 

OTREXUP® product returns and sales allowances

 

 

2,140

 

 

 

1,484

 

Other liabilities

 

 

2,372

 

 

 

1,686

 

 

 

$

6,982

 

 

$

5,873

 

8.

Note 11.    Employee 401(k) Savings Plan

The Company sponsors

We sponsor a 401(k) defined contribution retirement savings plan that covers all U.S. employees who have met minimum age and service requirements.requirements subject to the provisions of the Employee Retirement Income Security Act. Under the plan, eligible employees may contribute up to 50%a portion of their annual compensation into the plan up to the IRS annual limits. The Company makes electivelimits on a pre-tax or after-
91

Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

tax basis. We have elected to make matching contributions to the plan allocated in proportion tobased on a percentage of employee contributions. For the years ended December 31, 2017, 2016The total amount contributed by us is determined by plan provisions for matching contributions, as well as at our discretion. Employer matching and 2015, the Company elected to makediscretionary contributions to the plan totaling $590, $519were $1,151, $1,097 and $392, respectively.

9.

Leases

The Company has non-cancellable operating leases for its corporate headquarters facility in Ewing, New Jersey, and its office, research and development facility in Plymouth, Minnesota, a suburb of Minneapolis.  The leases require payment of all executory costs such as maintenance and property taxes.  The company also leases office equipment under short-term operating leases.  Rent expense incurred$993 for the years ended December 31, 2017, 20162021, 2020 and 20152019, respectively.

Note 12.    Sale of Assets
In December 2021, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Otter Pharmaceuticals, LLC (a subsidiary of Assertio Holdings, Inc., together with Assertio Holdings, Inc., as guarantor, individually and collectively referred to as “Otter”) to sell certain worldwide assets used in the operation of the OTREXUP® product line for $44,021 of which we received a $18,000 at closing and will receive the remaining $26,021 in installments over a one-year period. As of December 31, 2021, we recorded an increase to the purchase price for estimated changes in closing inventory to be transferred. The Asset Purchase Agreement included the transfer of OTREXUP® patents, trademark and intellectual property, product finished goods and sample inventory, and certain other contracts associated with the OTREXUP® product line. Subject to the terms of the OTREXUP® Asset Purchase Agreement, we generally retained ownership (and related liabilities) of assets not solely related to the OTREXUP® product line. We also agreed via the execution of a separate supply agreement to continue to manufacture and supply OTREXUP® and sample products to Otter at cost plus mark-up. Further, we entered into a license agreement with Otter pursuant to which we granted Otter a worldwide, exclusive, fully paid-up license to certain patents relating to OTREXUP® that may relate to our other products.
We recorded the entire $38,591 gain on sale of assets in the Consolidated Statements of Operations for the year ended December 31, 2021 as all requirements of the agreement were determined to have been met and it was $656, $680probable that a significant reversal of the gain would not occur. The gain includes the purchase price of $44,021 adjusted for estimated changes in closing inventory to be transferred less the net book value of the assets sold and $672, respectively.  Future minimum lease payments under operating leases withdirect transaction costs. The remaining terms$26,311 purchase price to be received is classified as other receivables in excess of one yearthe Consolidated Balance Sheets as of December 31, 2017 were as follows:

 

 

Amount

 

2018

 

$

623

 

2019

 

 

566

 

2020

 

 

233

 

2021

 

 

238

 

2022

 

 

60

 

Thereafter

 

 

—

 

Total future minimum lease payments

 

$

1,720

 

10.

Income Taxes

On December 22, 2017, the President of the United States signed into law the Tax Cuts2021, and Jobs Act (the “TCJA”). This legislation makes broad and complex changes to the U.S. tax code, including, but not limited to, (i) reducing the U.S. federal statutory tax rate from a maximum of 35% to 21%; (ii) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (iii) changing rules related to uses and limitationswe recognized $17,825 of net operating loss carryforwards createdproceeds from the sale of assets in tax years beginning afterthe Statements of Cash Flows for the year ended December 31, 2017, (iv) limitations on the deductibility of interest expense and executive compensation; (v) creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed2021.

Note 13.    Income (“GILTI”); and (vi) the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, which requires a one-time U.S. tax liability on earnings which have not previously been repatriated to the U.S. (“transition tax”).

93

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

The Company calculated its best estimate of the impact of the TCJA based on its understanding of the TCJA and guidance available as of the filing date and recorded provisional amounts as of December 31, 2017. As a result of the corporate tax rate decreasing to 21%, the Company recorded a provisional estimate of a reduction to its deferred tax assets of $24,196 and a corresponding reduction to its valuation allowance. Because the Company’s foreign entities are in an accumulated earnings deficit, the Company estimates that there will be no one-time transition tax liability. The Company has not completed its accounting for the potential taxes imposed by BEAT, GILTI and executive compensation; however, the potential income tax impact, if any, will be recorded as a component of tax expense in the period incurred for tax year(s) beginning January 1, 2018 and forward.  U.S. Treasury regulations, administrative interpretations or court decisions interpreting the TCJA may require changes in our estimates. The final determination of the effects of the TCJA will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA. Any subsequent adjustment to the estimated amounts is not expected to be material to the financial statements.

The Company wasTaxes

We were subject to taxes in both the U.S. and Switzerland in each of the years in the three-year period ended December 31, 2017.  The Company incurred losses for both book2021, 2020 and tax purposes for the year ended December 31, 2017, and, accordingly, no income taxes were provided.

2019. Income (loss) before income taxes was derived from the following jurisdictions:

Years Ended December 31,

 

2017

 

 

2016

 

 

2015

 

202120202019

U.S.

 

$

(16,762

)

 

$

(24,229

)

 

$

(21,831

)

U.S.$62,626 $10,284 $(1,734)

Switzerland

 

 

19

 

 

 

(10

)

 

 

1,347

 

Switzerland(355)(363)(293)

 

$

(16,743

)

 

$

(24,239

)

 

$

(20,484

)

Total income (loss) before income taxesTotal income (loss) before income taxes$62,271 $9,921 $(2,027)

92

Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

The income tax provision (benefit) was comprised of:
Years Ended December 31,
202120202019
Current
Federal$— $— $— 
State2,041 700 —
Foreign2 2 —
Total current income tax provision (benefit)2,043 702 — 
Deferred
Federal11,918 (39,542)—
State2,021 (7,440)—
Foreign——— 
Total deferred income tax provision (benefit)13,939 (46,982)— 
Total income tax provision (benefit)$15,982 $(46,280)$— 
Effective tax rates differ from statutory income tax rates in the years ended December 31, 2017, 2016 and 2015 as follows:

Years Ended December 31,

 

2017

 

 

2016

 

 

2015

 

202120202019

Statutory income tax rate

 

 

(34.0

)%

 

 

(34.0

)%

 

 

(34.0

)%

Statutory income tax rate21.0 %21.0 %21.0 %

State income taxes

 

 

(6.1

)

 

 

(6.8

)

 

 

(5.7

)

State income taxes5.5 7.1 14.4 

Valuation allowance increase

 

 

(102.0

)

 

 

35.9

 

 

 

35.2

 

Effect of foreign operations

 

 

—

 

 

 

—

 

 

 

(1.3

)

Effect of foreign operations0.1 0.2 (1.0)
Changes in valuation allowanceChanges in valuation allowance(0.2)(516.5)(59.9)

Change in unused net operating loss and credit carryforwards

 

 

(4.0

)

 

 

3.7

 

 

 

2.8

 

Change in unused net operating loss and credit carryforwards— — 24.7 
Change in uncertain tax positionsChange in uncertain tax positions(0.1)21.4 — 
Research and development creditResearch and development credit(0.7)(6.0)— 
Stock-based compensationStock-based compensation(2.0)3.7 22.3 
162(m) limitation162(m) limitation2.1 1.9 (18.2)

Nondeductible items

 

 

1.6

 

 

 

1.6

 

 

 

3.9

 

Nondeductible items— 1.6 (1.8)

Impact of Tax Cuts and Jobs Act

 

 

144.5

 

 

 

—

 

 

 

—

 

Impact of Tax Cuts and Jobs Act— — (1.5)

 

 

0.0

%

 

 

0.4

%

 

 

0.9

%

OtherOther— (0.9)— 
Effective income tax rateEffective income tax rate25.7 %(466.5)%— %

Deferred tax assets (liabilities) as

93

Table of December 31, 2017 and 2016 consist of the following:

Contents

 

 

2017

 

 

2016

 

Gross deferred tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforward – U.S.

 

$

43,046

 

 

$

58,206

 

Net operating loss carryforward – Switzerland

 

 

67

 

 

 

65

 

Research and development tax credit carryforward

 

 

6,153

 

 

 

5,477

 

Deferred revenue

 

 

339

 

 

 

438

 

Stock-based compensation

 

 

1,882

 

 

 

2,678

 

Inventory reserve

 

 

140

 

 

 

364

 

Compensation accruals

 

 

662

 

 

 

996

 

Other

 

 

575

 

 

 

378

 

 

 

 

52,864

 

 

 

68,602

 

Gross deferred tax liabilities – depreciation and amortization

 

 

(826

)

 

 

(844

)

Less valuation allowance

 

 

(52,038

)

 

 

(67,758

)

Net deferred tax asset

 

$

—

 

 

$

—

 

94

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

The valuation allowance for deferred


Deferred tax assets as(liabilities) consist of December 31, 2017 and 2016 was $52,038 and $67,758, respectively.  The total valuation allowance decreased $15,720 for the year ended December 31, 2017 and increased $8,864 for the year ended December 31, 2016.

At both December 31, 2017 and 2016, the Company had deferred tax assets, net of valuation allowances, of zero.  following:

December 31, 2021December 31, 2020
Gross deferred tax assets
Net operating loss carryforward – U.S.$24,738 $36,071 
Net operating loss carryforward – Switzerland162 106 
Research and development tax credit carryforward5,836 5,418 
Deferred revenue14 219 
Stock-based compensation3,423 2,954 
Inventory reserve56159 
Compensation accruals1,426 1,304 
Product reserves5,235 2,820 
Operating lease liabilities1,436 1,546 
Amortization64 607 
Other188 145 
Total deferred tax assets42,578 51,349 
Deferred tax liabilities
Depreciation(1,753)(1,838)
Operating lease right-of-use asset(1,048)(1,303)
Installment sale(5,580)— 
Total deferred tax liabilities(8,381)(3,141)
Net deferred tax asset before valuation allowance34,197 48,208 
Less: Valuation allowance(1,154)(1,226)
Net deferred tax asset$33,043 $46,982 
In assessing the realizability of deferred tax assets, management consideredwe consider 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 temporary differences become deductible or in which net operating loss or tax credit carryforwards can be utilized.  Bothused. As of each reporting date, we consider new evidence, both positive and negative, evidence is considered in assessingthat could affect our view of the realizabilityfuture realization of deferred tax assets and determining whether or not to record a valuation allowance. After considering the evidence with respect to the U.S. deferred tax assets, management determined that asassets.
As of December 31, 2017,2021 and 2020, there is sufficient positive evidence to conclude that it continues to beis more likely than not that theour net U.S. deferred tax assets will not be realizedof $33,043 and has$46,982, respectively, are realizable as a result of generating pretax earnings, utilizing net operating loss carryovers and projecting pre-tax earnings. For the year ended December 31, 2020, we recorded a net valuation allowance against all U.S.release of $53,383 based on our reassessment of the amount of our deferred tax assets.

assets that are more likely than not to be realized. The Company hasvaluation allowances of $1,154 and $1,226 as of December 31, 2021 and 2020, respectively, relate to certain state and foreign carryovers for which projected income cannot support utilization.

We have a U.S. federal net operating loss carryforward atas of December 31, 20172021 of $176,069,$99,939, which, subject to limitations of Internal Revenue Code (“IRC”) Section 382, is available to reduce income taxes payable in future years. As of December 31, 2021, we have performed a full analysis of IRC Section 382 and concluded that net operating losses and credits will be able to be used without limitation. If not used, thisthe portion of the carryforward generated before 2018 will expire in the years 2033 through 2037, and the net operating loss carryforward generated in 2018 and any future years will carry forward indefinitely. Additionally, we have U.S. Research Credit carryforwards of $7,328 which will expire in years 20182022 through 2037.  Additionally, the Company has research credit carryforwards of $5,617. These credits expire in years 2018 through 2037.

Utilization of U.S. net operating losses and tax credits of the Company may be subject to annual limitations under IRC Sections 382 and 383, respectively.  The annual limitations,2041 if any,unused.

We also have not yet been determined.  When a review is performed and if any annual limitations are determined, then the gross deferred tax assets for the net operating losses and tax credits would be reduced with a reduction in the valuation allowance of a like amount.

The Company also has a Swiss net operating loss carryforward atas of December 31, 2017,2021, of $454,$1,130, which is available to reduce income taxes payable in future years. If not used, $428 of this carryforward will begin to expire in 2018.

As2023.

94

Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

A summary of changes to our liability for unrecognized tax benefits is as follows:
December 31, 2021December 31, 2020
Beginning liability for unrecognized tax benefits$2,127 $— 
Increase (decrease) due to tax positions related to prior years(70)2,067 
Increase due to tax positions related to the current year— 60 
Ending liability for unrecognized tax benefits$2,057 $2,127 
Included in the balance of unrecognized tax benefits as of December 31, 20172021 and 2016, there were no2020, are $2,057 and $2,127, respectively, that if recognized would impact the effective tax rate. There is 0 interest or penalties charged or accrued in relation to unrecognized tax benefits. Accordingly, a tabular reconciliation from beginning to ending periods is not provided.  The CompanyWe will 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.

The Company doesexpense. We do not anticipate that the total amount of unrecognized tax benefitsbenefits will change significantly in the nextnext twelve months. The Company isWe are subject to federal and state examinations for the years 20132017 and thereafter. There

Note 14.    Revenues, Significant Customers and Concentrations of Risk
We disaggregate our revenue by type of goods and services and customer location.
Years Ended December 31,
202120202019
Types of Goods and Services
Proprietary product sales, net$80,016 $62,878 $39,215 
Partnered product sales46,651 50,956 52,888 
Total product revenue, net126,667 113,834 92,103 
Licensing and development revenue19,623 14,466 7,529 
Royalties37,692 21,299 24,232 
Total revenue, net$183,982 $149,599 $123,864 
Customer Location
U.S.$178,290 $145,789 $120,231 
Europe5,692 3,810 3,463 
Other— — 170 
Total revenue, net$183,982 $149,599 $123,864 
Customers from which we derive 10% or more of our total revenue are no tax examinations currently in progress.

11.

Significant Customers and Concentrations of Risk

Revenues by customer geographic location are summarized as follows:

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States of America

 

$

48,924

 

 

$

45,531

 

 

$

39,229

 

Europe

 

 

5,061

 

 

 

6,117

 

 

 

6,026

 

Other

 

 

530

 

 

 

574

 

 

 

403

 

 

 

$

54,515

 

 

$

52,222

 

 

$

45,658

 

Years Ended December 31,
202120202019
Teva42%40%41%
McKesson 1
13%12%10%
AmerisourceBergen Corporation 1
12%12%<10%
Cardinal Health 1
11%11%<10%
Covis<10%<10%20%

1     Revenue from sales to distributors, net of estimated sales returns and allowances based on shipments.
95


Table of Contents
ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Significant customers


Note 15.    Earnings (Loss) per Share
Basic earnings (loss) per common share is computed by dividing net income applicable to common stockholders by the daily weighted-average number of common shares outstanding for the applicable period. Diluted earnings (loss) per common share is computed in a similar manner, except that the weighted average number of shares outstanding is increased to reflect the potential dilution from the exercise or conversion of securities into common stock. Diluted earnings (loss) per share contemplates a complete conversion to common shares of all convertible instruments only if such instruments are dilutive in nature with respect to earnings per common share. The following table sets forth the computation for basic and diluted earnings (loss) per common share:
Years Ended December 31,
202120202019
Net income (loss)$46,289 $56,201 $(2,027)
Weighted average common shares outstanding169,226 166,066 162,574 
Dilutive effects of stock options and share-based awards issuable under equity compensation plans5,507 4,089 —
Weighted average dilutive common shares outstanding174,733 170,155 162,574 
Earnings (loss) per common share
Basic$0.27 $0.34 $(0.01)
Diluted$0.26 $0.33 $(0.01)
Anti-dilutive common stock equivalents 1
2,224 7,092 17,103 
1     These common stock equivalents were outstanding for the period but were not included in the computation of diluted earnings (loss) per common share for those periods as their inclusion would have had an anti-dilutive effect.
Note 16.    Commitments and Contingencies
Contingent Considerations
In connection with the TLANDO® exclusive license agreement and asset purchase entered into with Lipocine in October 2021, we paid Lipocine and upfront payment of $11,000 upon execution of agreement. Lipocine is eligible for additional milestone payments up to $10,000, minimum tiered royalty payments of $4,500 over the first three years after commercialization has occurred and commercial milestones up to $160,000 based on net sales of TLANDO® in the U.S. The additional milestone and commercial milestone payments are contingent on future events and will be accrued when they are both probable and estimable. We also have the option to license and develop LPCN 1111 (TLANDO XR) for an additional $4,000 in license fees to be paid in 2 installments upon exercise of the option, if exercised. The option to license and develop LPCN 111 (TLANDO XR) will be accrued and expensed to research and development when and only if we decide to exercise our option. No decision had been made as of December 31, 2021 to exercise the option; therefore, no accrual was recorded.
In connection with the NOCDURNA® license agreement and asset purchase entered into with Ferring in October 2020, we paid Ferring an upfront payment of $5,000 upon execution and paid an additional $2,500 in October 2021. Ferring is eligible for additional commercial milestone payments potentially totaling up to $17,500 based on our net sales of NOCDURNA® in the U.S.
Pending Litigation
From time to time, we may be involved in various legal matters generally incidental to our business. Although the results of litigation and claims cannot be predicted with certainty, after discussion with legal counsel, we are not aware of any matters for which the Company derived 10%likelihood of a loss is probable and reasonably estimable and which could have a material impact on our consolidated financial condition, liquidity, or moreresults of its total revenue operations.
96

Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in any of the periods presented are as follows: 

thousands, except per share amounts)

 

 

For the Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Teva

 

$

20,949

 

 

$

24,941

 

 

$

17,715

 

AMAG

 

 

8,965

 

 

 

4,446

 

 

 

365

 

McKesson (1)

 

 

8,707

 

 

 

7,600

 

 

 

6,837

 

AmerisourceBergen(1)

 

 

6,098

 

 

 

4,903

 

 

 

4,527

 

Ferring

 

 

5,258

 

 

 

6,283

 

 

 

6,117

 

LEO Pharma

 

 

—

 

 

 

—

 

 

 

6,000

 


(1)

Revenue net of estimated sales returns and allowances based on OTREXUP® shipments to the distributor.

12.

Legal Proceedings

Pending Litigation

On October 23, 2017, Randy Smith filed a complaint in the District of New Jersey, captioned Randy Smith, Individually and on Behalf of All Others Similarly Situated v. Antares Pharma, Inc., Robert F. Apple and Fred M. Powell (“Smith”), Case No. 3:17-cv-08945-MAS-DEA,17-cv-8945-MAS-DEA, on behalf of a putative class of persons who purchased or otherwise acquired Antares securities between December 21, 2016 and October 12, 2017, inclusive, asserting claims for purported violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against Antares, Robert F. Apple and Fred M. Powell. The Smith complaint contends that defendants made false and/or misleading statements and/or failed to disclose that: (i) Antares had provided insufficient data to the FDA in connection with the NDA for XYOSTEDTM®; and (ii) accordingly, Antares had overstated the approval prospects for XYOSTEDTM®. On July 27, 2018, the court entered an order appointing Serghei Lungu as lead plaintiff, Pomerantz LLP as lead counsel, and Lite DePalma Greenberg, LLC as liaison counsel for plaintiff. On August 3, 2018, the parties submitted a stipulation and proposed order, setting forth an agreed-upon schedule for responding to the complaint, which the court granted. Pursuant to that order, plaintiff filed a Consolidated Amended Class Action Complaint on October 9, 2018. On November 26, 2018, defendants filed a motion to dismiss. Plaintiff filed an opposition to the motion on January 10, 2019 and defendants filed a reply in support of their motion on February 25, 2019. On July 2, 2019, the court dismissed the complaint in its entirety without prejudice. On July 29, 2019, plaintiff filed a Consolidated Second Amended Class Action Complaint against the same parties alleging substantially similar claims. On September 12, 2019, defendants filed a motion to dismiss the Consolidated Second Amended Class Action Complaint. Plaintiffs’ opposition was filed on October 28, 2019 and defendants’ reply in support of their motion was filed on November 27, 2019. On April 28, 2020, the court dismissed the Consolidated Second Amended Class Action Complaint in its entirety. The Company believescourt further ordered that plaintiff may file an amended complaint by May 29, 2020 and provide the court with a form of the amended complaint that indicates in what respect(s) it differs from the complaint which it proposes to amend. On May 29, 2020, plaintiff filed a Consolidated Third Amended Class Action Complaint and defendants filed a motion to dismiss on July 10, 2020. Briefing on defendants’ motion was complete on August 25, 2020. On February 26, 2021, the court granted defendants’ motion to dismiss with prejudice, and on March 29, 2021 the plaintiff filed a notice of appeal. On June 21, 2021, plaintiff-appellant filed his opening brief. Defendants-appellees’ response brief was filed on August 4, 2021 and plaintiff-appellant’s reply was filed on September 8, 2021. On January 25, 2022, the Third Circuit ruled in defendants’ favor affirming dismissal. If plaintiffs choose to appeal, they have ninety days to file a petition for writ of certiorari to the U.S. Supreme Court. We believe the claims in the Smith action lack merit and intendsintend to continue to defend them vigorously.

On January 12, 2018, a stockholder of the Company filed a derivative civil action, captioned Chiru Mackert, derivatively on behalf of Antares Pharma, Inc., v. Robert F. Apple, et al.(“Mackert”), in the Superior Court of New Jersey Chancery Division, Mercer County (Case No. C-000011-18)C-11-18). On January 17, 2018, another stockholder filed a derivative action in the same court, captioned Vikram Rao, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Rao”) (Case No. C-000004-18)C-4-18). Both complaints name Robert F. Apple, Fred M. Powell, Thomas J. Garrity, Jacques Gonella, Anton Gueth, Leonard S. Jacob, Marvin Samson and Robert P. Roche, Jr. as defendants, and the Company as nominal defendant, and they assert claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets arising from the same facts underlying the Smith securities class action. The plaintiffs seek damages, corporate governance and internal procedure reforms and improvements, restitution, reasonable attorneys’ fees, experts’ fees, costs, and expenses. The parties have filed a stipulation and order consolidating the two actions and staying the proceedings pending the court’s decision on defendants’ anticipated motion to dismiss the Smith action; the motion to dismiss in Smith was granted on February 26, 2021 and notice of appeal was filed on March 29, 2021. On January 25, 2022, the Third Circuit ruled in defendants’ favor affirming dismissal of the securities fraud class action.

If plaintiffs in the securities action choose to appeal, they have ninety days to file a petition for writ of certiorari to the U.S. Supreme Court.

97

Table of Contents
ANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)

On January 17, 2018, a stockholder of the Company filed a derivative civil action, captioned Robert Clark, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Clark”) (Case No. 3:18-cv-00703-MAS-DEA)18-cv-703-MAS-DEA), against Robert F. Apple, Thomas J. Garrity, Jacques Gonella, Leonard S. Jacob, Marvin Samson, Anton G. Gueth and Robert P. Roche, Jr. as defendants, and Company as a nominal defendant. The action was filed in the U.S. District Court for the District of New Jersey and asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and a violation of Section 14(a) of the Securities Exchange Act of 1934. This complaint relates to the same facts underlying the Smith securities class action and the other derivative actions. The plaintiff in Clark seeks damages, corporate governance and internal procedure reforms and improvements, reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses. The parties have filed a stipulation and order staying the action pending the court’s decision on defendants’ anticipated motion to dismiss the Smith action.

Patent Litigation Settlement

Medac Pharma, Inc. (“Medac Pharma”) announced that it submitted a NDA action; the motion to dismiss in Smith was granted on February 26, 2021 and notice of appeal was filed on March 29, 2021. After the expiration of all appeals related to the FDA for an auto-pen containing methotrexateSmith dismissal, the parties shall submit a proposed order regarding the derivative action. On January 25, 2022, the Third Circuit ruled in defendants’ favor affirming dismissal of the securities fraud class action. If plaintiffs in the first quartersecurities action choose to appeal, they have ninety days to file a petition for writ of 2014.  On February 28, 2014, the Company filed a complaint against Medac Pharma and medac GmbH, the parent company of Medac Pharma, (medac GmbH, together with Medac Pharma, “Medac”) incertiorari to the U.S. District Court for the DistrictSupreme Court.

98
Table of Delaware, alleging infringement of two of the Company’s patents for technology regarding an auto injector and an auto injector containing methotrexate.  On March 14, 2014, Antares filed a motion for preliminary injunction seeking to enjoin Medac from selling its methotrexate auto-pen product if and when such product is approved for sale in the United States, pending the final resolution of

96

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATEDContents

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

the litigation.  On April 18, 2014 an amended complaint was filed asserting four Antares patents, and the motion for preliminary injunction was updated.  On July 10, 2014, the District Court denied Antares’ motion for preliminary injunction. Antares filed an appeal of the denial of the motion for preliminary injunction with the U.S. Court of Appeals for the Federal Circuit, and in February 2015, that motion was denied.  

On March 7, 2014, Medac filed suit against Antares, LEO Pharma, Inc. and its parent company, LEO Pharma A/S (LEO Pharma, Inc. together with LEO Pharma A/S, the “LEO Entities”) in the U.S. District Court for the District of New Jersey, alleging that Antares and the LEO Entities infringe Medac Pharma’s U.S. Patent 8,664,231 (the “231 patent”) that was issued by the U.S. Patent and Trademark Office on March 4, 2014.  Under the terms of the promotion and license agreement between the Company and the LEO Entities, the Company agreed to indemnify the LEO Entities from claims that OTREXUP® infringes the intellectual property rights of any third party.  On July 1, 2014, Antares filed a petition with the Patent Trial and Appeal Board (the “PTAB”) of the U.S. Patent and Trademark Office seeking an inter partes review of the 231 patent, and in January 2015, the PTAB decided to institute review of the 231 patent.  Legal costs in connection with this suit and the inter partes review were expensed as incurred.

In April 2015, Antares, Medac and the LEO Entities entered into a settlement agreement pursuant to which all of the proceedings related to Antares’ and Medac’s respective patents mentioned above and the proceeding pending before the Technical Board of Appeal of the European Patent Office were dismissed.  The settlement agreement also provided for a royalty-free cross-license under the patents named in the proceedings and their families allowing the manufacture and sale of OTREXUP® (methotrexate) injection and RASUVO™ in and for the U.S.  

DISCLOSURE

13.

Quarterly Financial Data (unaudited)

None.

 

 

First

 

 

Second

 

 

Third

 

 

Fourth

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

12,007

 

 

$

13,416

 

 

$

15,052

 

 

$

14,040

 

Gross profit

 

 

5,788

 

 

 

7,800

 

 

 

6,529

 

 

 

6,932

 

Net loss

 

 

(4,736

)

 

 

(2,840

)

 

 

(5,453

)

 

 

(3,714

)

Net loss per common share (1)

 

 

(0.03

)

 

 

(0.02

)

 

 

(0.03

)

 

 

(0.02

)

Weighted average shares

 

 

155,215,040

 

 

 

155,926,149

 

 

 

156,400,702

 

 

 

156,654,843

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

12,319

 

 

$

12,228

 

 

$

13,479

 

 

$

14,196

 

Gross profit

 

 

5,543

 

 

 

4,910

 

 

 

5,445

 

 

 

7,507

 

Net loss

 

 

(7,656

)

 

 

(6,061

)

 

 

(6,121

)

 

 

(4,500

)

Net loss per common share (1)

 

 

(0.05

)

 

 

(0.04

)

 

 

(0.04

)

 

 

(0.03

)

Weighted average shares

 

 

154,858,079

 

 

 

154,936,096

 

 

 

155,060,811

 

 

 

155,111,435

 

(1)

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.


Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s

Our management evaluated, under the supervision and with the participation of the Company’sour Chief Executive Officer and Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon this evaluation, the Company’sour Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, the Company’s2021, our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

The Company’s

Our management 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, as amended). Under the supervision and with the participation of theour Chief Executive Officer and the Chief Financial Officer, the Companymanagement conducted an evaluation of the effectiveness of itsour internal control over financial reporting as of December 31, 2017.2021. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (2013).

The Company’s

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that:

(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the Company’s assets;

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and board of directors; and

(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the company’s assets;

(iii)

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.

(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and board of directors; and

(iii)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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on the Company’smanagement’s assessment using the COSO Internal Control-Integrated Framework (2013) criteria, management has concluded that its internal control over financial reporting was effective as of December 31, 20172021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.

The Company’s

KPMG LLP, an independent registered public accounting firm, KPMG LLP,has audited the effectiveness of our internal control over financial reporting as of December 31, 2021, and has issued an audit report on the Company’sour internal control over financial reporting, which appears in Item 8 of this Annual Report on Form 10-K.

Changes in internal control over financial reporting.

There was no change in the Company’sour internal control over financial reporting that occurred during the quarter ended December 31, 20172021 that has materially affected, or is reasonably likely to materially affect, the Company’sour internal control over financial reporting.

Item 9B.

ITEM 9B.    OTHER INFORMATION

None.


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Table of Contents
PART III

Item 10.

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 statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders 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 statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders 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 statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.

Information required by this item concerning our audit committee, the audit committee of the Company, the audit committeeas our financial expert of the Company and any material changes to the way in which security holders may recommend nominees to the Company’sour Board of Directors will be set forth under the caption “Corporate Governance” in our definitive proxy statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.

The Board of Directors adopted a Code of Business Conduct and Ethics applicable to all employees and directors, which is posted on our website at www.antarespharma.com that is applicable to all employees and directors.www.antarespharma.com. 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., 100 Princeton South, Suite 300, Ewing, NJ 08628, 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’sour chief executive officer, principal accounting officer or controller, or persons performing similar functions) the  Company intendswe intend to either post such amendments or waivers on itsour website or disclose such amendments or waivers pursuant to a Current Report on Form 8-K.

Item 11.

ITEM 11.    EXECUTIVE COMPENSATION

Information required by this item will be set forth under the caption “Executive Compensation” in our definitive proxy statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12.

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 “Security Ownership of Directors and Executive Officers” in our definitive proxy statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.

The following table provides information forabout our equity compensation plans as of December 31, 2017:

2021 (in thousands, except exercise price):

Plan Category

 

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)

 

Equity compensation plans approved by

   security holders

 

 

12,148,828

 

 

$

2.04

 

 

 

6,495,495

 

100

Table of Contents
Plan CategoryNumber 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)
Equity compensation plans approved by security holders15,577 $2.83366 
Equity compensation plans not approved by security holdersNoneNoneNone

Item 13.

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 statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2017 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

Information

The information required by this item will be set forth under the caption “Ratification of Selection of Independent Registered Public Accountants” in our definitive proxy statementDefinitive Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K for our 2018 annual meeting,2022 Annual Meeting of Stockholders and is incorporated herein by reference.


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Table of Contents
PART IV

Item 15.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this annual report:

(a)The following documents are filed as part of this Annual Report on Form 10-K:

(1)

Financial Statements - see Part II

(1)Financial Statements - see Item 8 of Part II in this Annual Report on Form 10-K.

(2)

Financial Statement Schedules

(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

(3)Item 601 Exhibits - see list of Exhibits below.

(b)    Exhibits
The following is a list of exhibits filed as part of, or incorporated by reference into, this annual reportAnnual Report on Form 10-K.

Exhibit

No.

Description

Exhibit
No.

Description

    3.1

3.1Certificate of Incorporation of Antares Pharma, Inc. (Filed(filed as exhibitExhibit 4.1 to Form S-3 on April 12, 2006 and incorporated herein by reference.)

reference).

3.2

    3.2

Certificate of Amendment to Certificate of Incorporation of Antares Pharma, Inc. (Filed(filed as exhibitExhibit 3.1 to Form 8-K on May 19, 2008 and incorporated herein by reference.)

reference).

3.3

    3.3

Amended and Restated By-laws of Antares Pharma, Inc. (Filed(filed as exhibitExhibit 3.1 to Form 8-K on May 15, 2007 and incorporated herein by reference.)

reference).

3.4

    3.4

Certificate of Amendment to Certificate of Incorporation of Antares Pharma, Inc. (Filed(filed as exhibitExhibit 3.1 to Form 8-K on May 28, 2013 and incorporated herein by reference.)

reference).

3.5

    3.5

Certificate of Amendment to Certificate of Incorporation of Antares Pharma, Inc. (Filed(filed as exhibitExhibit 10.3 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

reference).

4.1

    4.1

Form of Certificate of Common Stock (Filed(filed as exhibitExhibit 4.1 to Form S-1/A on August 15, 1996 and incorporated herein by reference.)

reference).

4.2

    4.2

Registration Rights Agreement with Permatec Holding AG dated January 31, 2001 (Filed(filed as Exhibit 10.2 to Form 10-K on April 16, 2001 and incorporated herein by reference.)

reference).

4.3

    4.3

Stock Purchase Agreement with Sicor Pharmaceuticals, Inc., dated November 23, 2005 (Filed(filed as exhibitExhibit 10.55 to Form 10-K on March 20, 2006 and incorporated herein by reference.)

reference).

4.4*

    4.4+

Antares Pharma, Inc. 2008 Equity Compensation Plan, as amended and restated, (Filedand approved by stockholders (filed as Exhibit 4.1 to the Company’s Form S-8 filed with the Commission on June 2, 2016July 23, 2019 and incorporated herein by reference.)

reference).

4.5

Description of Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.5 to Form 10-K on March 3, 2020 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(filed as an exhibitExhibit to Schedule 14A on December 28, 2000 and incorporated herein by reference.)

reference).

10.1

  10.1

Third Amendment of Stock Purchase Agreement, dated January 31, 2001 (Filed(filed as exhibitExhibit 10.1 to Form 10-K on April 16, 2001 and incorporated herein by reference.)

reference).
102
Table of Contents

Exhibit
No.

Description

  10.2*

License Agreement between Antares Pharma, Inc. and Ferring, dated January 22, 2003 (Filed as exhibit 10.47 to Form 8-K on February 20, 2003 and incorporated herein by reference.)

10.2

  10.3

Lease Agreement between Princeton South Investors, LLC and Antares Pharma, Inc., dated February 3, 2012 (Filed(filed as exhibitExhibit 10.21 to Form 10-K for the year ended December 31, 2011 and incorporated herein by reference.)

reference).

10.3

  10.4

First Amendment to Lease between Princeton South Investors, LLC and Antares Pharma, Inc., dated January 28, 2013. (Filed2013 (filed as Exhibit 10.22 to Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.)


Exhibit

No.

Description

reference).

10.4

  10.5

Second Amendment to Lease between Princeton South Investors, LLC and Antares Pharma, Inc., dated December 4, 2013. (Filed2013 (filed as Exhibit 10.22 to Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.)

reference)

10.5

Third Amendment to Lease between Princeton Office Center, LLC and Antares Pharma, Inc., dated May 7, 2019 (filed as Exhibit 10.1 to Form 10-Q on August 6, 2019 and incorporated herein by reference).

10.6

Lease Agreement between St. Paul Fire and Marine Insurance Company and Antares Pharma, Inc., dated December 20, 2013. (Filed2013 (filed as Exhibit 10.23 to Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.)

reference).

10.7

Lease Agreement by and between Antares Pharma, Inc. and Whitewater Properties I, LLC dated July 1, 2019 (filed as Exhibit 10.1 to Form 8-K on July 5, 2019 and incorporated herein by reference).

  10.7+

10.8*

Antares Pharma, Inc. Severance Plan, dated May 29, 2014. (Filed2014 (filed as Exhibit 10.4 to Form 10-Q on August 7, 2014 and incorporated herein by reference.)

reference).

10.9

  10.8+*

Form of Performance Stock Unit Grant. (Filed as Exhibit 10.5 to Form 10-Q on August 7, 2014 and incorporated herein by reference.)

  10.9

Form of Indemnification Agreement between Antares Pharma, Inc. and each of its directors and executive officers.  (Filedofficers (filed as Exhibit 10.110.9 to Form 10-Q10-K on August 10, 2015March 12, 2019 and incorporated herein by reference.)

reference).

10.10*

  10.10+

Form of Restricted Stock unit Grant Agreement delivered by Antares Pharma, Inc. to each of its grantees (Filed as Exhibit 10.3 to Form 10-Q on August 10, 2015 and incorporated herein by reference.)

  10.11

Loan and Security Agreement, dated as of June 6, 2017 by and among Antares Pharma, Inc. and Hercules Capital, Inc. and the several other banks and other financial institutions or entities from time to time party to the Loan Agreement (Filed as exhibit 10.1 to Form 8-K on June 7, 2017 and incorporated herein by reference.)

  10.12+

Antares Pharma, Inc. Annual Incentive Plan, effective December 2, 2015 (Filed(filed as Exhibit 99.1 to Form 8-K on December 8, 2015 and incorporated herein by reference.)

reference).

10.11*

  10.13+

Employment Agreement dated March 4, 2016 between Antares Pharma, Inc. and Robert F. Apple (Filed(filed as exhibitExhibit 10.1 to Form 10-Q on May 9, 2016 and incorporated herein by reference.)

reference).

10.12*

  10.14+

Amended and Restated Employment Agreement dated June 30, 2016 between Antares Pharma, Inc. and James Fickenscher (Filed as exhibit 10.1 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

  10.15+

Amended and Restated Employment Agreement dated June 30, 2016 between Antares Pharma, Inc. and Peter J. Graham (Filed(filed as exhibitExhibit 10.2 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

reference).

10.13*

  10.16+

Form of Nonqualified Stock Option Grant Agreement (Filed as exhibit 10.4 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

  10.17+

Form of Restricted Stock Unit Grant (Filed as exhibit 10.5 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

  10.18+

Form of Restricted Stock Grant Agreement (Filed as exhibit 10.6 to Form 10-Q on August 9, 2016 and incorporated herein by reference.)

  10.19+

Employment Agreement effective October 31, 2016 between Antares Pharma, Inc. and Fred M. Powell (Filed(filed as exhibitExhibit 10.1 to Form 10-Q on November 9, 2016 and incorporated herein by reference.)

reference).

10.14*

  23.1 #

10.15*

Form of Nonqualified Stock Option Grant Agreement (filed as exhibit 10.4 to Form 10-Q on August 6, 2019 and incorporated herein by reference).

10.16*Form of Restricted Stock Unit Grant Agreement (filed as Exhibit 10.5 to Form 10-Q on August 6, 2019 and incorporated herein by reference).
10.17*Form of Restricted Stock Grant Agreement (filed as Exhibit 10.6 to Form 10-Q on August 9, 2016 and incorporated herein by reference).
10.18*Form of Performance Stock Unit Grant Agreement (filed as Exhibit 10.6 to Form 10-Q on August 6, 2019 and incorporated herein by reference).
10.19*Form of Nonqualified Stock Option Grant Agreement (Non-Employee Director) (filed as Exhibit 10.7 to Form 10-Q on August 6, 2019 and incorporated herein by reference).
103
Table of Contents
Exhibit
No.		Description
10.20*Form of Restricted Stock Unit Grant Agreement (Non-Employee Director) (filed as Exhibit 10.8 to Form 10-Q on August 6, 2019 and incorporated herein by reference).
10.21*Antares Pharma, Inc. Equity Compensation Plan, as amended and restated, and approved by stockholders (filed as Exhibit 4.1 to Form S-8 filed June 24, 2021 and incorporated herein by reference).
10.22Credit Agreement, dated November 1, 2021, by and among Antares Pharma, Inc., Wells Fargo Bank, National Association, and the lenders from time to time party thereto (filed as Exhibit 10.1 to Form 8-K filed November 2, 2021 and incorporated herein by reference).
10.23
23.1

31.1

  31.1 #

31.2

  31.2 #

32.1

  32.1 ##

32.2

  32.2 ##

101.INS



101.INS #

XBRL Instance Document

(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) (filed herewith).

101.SCH

101.SCH#

Inline XBRL Taxonomy Extension Schema

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101.CAL

101.CAL#

Inline XBRL Taxonomy Extension Calculation Linkbase

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Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

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101.LAB

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Inline XBRL Taxonomy Extension Presentation Linkbase

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104

Cover Page Interactive Data File (the cover page interactive data does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) (filed herewith).

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*

Confidential portions of this document have been redacted and have been separately filed with the Securities and Exchange Commission.

+

IndicatesDenotes a management contract or compensatory plan or arrangement.

arrangement required to be filed as an exhibit pursuant to Item 15 of Part IV of this Annual Report on Form 10-K.

#

Filed herewith.

##

Furnished herewith.

ITEM 16.    FORM 10-K SUMMARY


None.

104
Table of ContentsSIGNATURES

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, on the 13th day of March 2018.

authorized.

ANTARES PHARMA, INC.

(Registrant)

Date:March 3, 2022/s/ Robert F. Apple

Robert F. Apple

President and Chief Executive Officer

(Principal 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 below by the following persons on behalf of the registrant and in the capacities indicatedand on March 13, 2018.

the dates indicated.

Signature

Title

Signature

Capacity		Date

/s/ Robert F. Apple

President and Chief Executive Officer, Director

March 3, 2022

Robert F. Apple

(Principal Executive Officer)

/s/ Fred M. Powell

Executive Vice President and Chief Financial Officer

March 3, 2022

Fred M. Powell

(Principal Financial and Accounting Officer)

/s/Leonard S. Jacob

Director, Chairman of the Board

March 3, 2022

Dr. Leonard S. Jacob

/s/Thomas J. Garrity

Director

March 3, 2022

Thomas J. Garrity

/s/Jacques Gonella

Peter S. Greenleaf

Director

March 3, 2022

Dr. Jacques Gonella

Peter S. Greenleaf

/s/Anton G. Gueth

Director

March 3, 2022

Anton G. Gueth

/s/Robert P. Roche, Jr.

Director

March 3, 2022

Robert P. Roche, Jr.

/s/Marvin Samson

Karen L. Smith

Director

March 3, 2022

Marvin Samson

Dr. Karen L. Smith

/s/ Carmen B. VolkartDirectorMarch 3, 2022
Carmen B. Volkart

103


105