UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C.  20549
______________
 
FORM 10-Q
______________
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2010
For the quarterly period ended March 31, 2011
 
Commission File Number 1-32302
 
ANTARES PHARMA, INC.
 
 A Delaware Corporation     IRS Employer Identification No. 41-1350192
                                                                                        A Delaware Corporation                                                                                                IRS Employer Identification No. 41-1350192
250 Phillips Blvd, Suite 290
Ewing, New Jersey 08618

(609) 359-3020

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No  [  ]o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,Website, 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 [  ]o  No [  ]o

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

Large accelerated filer [  ]           Accelerated filer [  ]            Non –accelerated filer x             Smaller reporting company [  ]
 
 Large accelerated filer o Accelerated filer x Non –accelerated filer o Smaller reporting company o
(do not check if a smaller
        reporting company)
 reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [  ]o    No   x

The number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of November 09, 2010,May 5, 2011 was 83,777,551.88,187,014.





 
 

 

ANTARESANTARES PHARMA, INC.

INDEX



    PAGE
     
PART I.  FINANCIAL INFORMATION 
     
 Item 1. Financial Statements (Unaudited) 
     
   3
     
   4
     
   5
     
   6
     
 Item 2. 1211
     
 Item 3. 1916
     
 Item 4. 2017
     
     
PART II.  OTHER INFORMATION 
     
 Item 1A. 2118
     
 Item 6. 2118
     
   2219
     
 
 
 
PART I – FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS.STATEMENTS

ANTARESANTARES PHARMA, INC.
CONSOLIDATED BALANCE SHEETS


 September 30, December 31,  March 31,  December 31, 
 2010 2009  2011  2010 
 (Unaudited)    (Unaudited)    
Assets           
Current Assets:           
Cash and cash equivalents $10,227,084 $13,559,088  $13,066,373  $9,847,813 
Accounts receivable 823,543 1,542,272  1,606,796  1,245,560 
Inventories 286,957 329,553  335,026  272,463 
Deferred costs 621,200 963,053  655,481  915,689 
Prepaid expenses and other current assets  84,678  155,255   254,738   193,985 
Total current assets 12,043,462 16,549,221  15,918,414  12,475,510 
           
Equipment, molds, furniture and fixtures, net 312,933 317,310  406,748  327,535 
Patent rights, net 776,208 742,399  838,746  803,426 
Goodwill 1,095,355 1,095,355  1,095,355  1,095,355 
Deferred costs 408,250 408,250  -  408,250 
Other assets  31,077  30,838   31,309   31,226 
Total Assets $14,667,285 $19,143,373  $18,290,572  $15,141,302 
           
Liabilities and Stockholders’ Equity           
Current Liabilities:           
Accounts payable $1,578,602 $1,882,158  $1,972,744  $1,773,259 
Accrued expenses and other liabilities 1,248,700 1,048,619  673,233  1,818,769 
Deferred revenue  2,947,856  5,311,516   3,841,278   3,080,062 
Total current liabilities 5,775,158 8,242,293  6,487,255  6,672,090 
           
Deferred revenue – long term  1,889,756  2,050,550   1,013,760   1,842,594 
Total liabilities  7,664,914  10,292,843   7,501,015   8,514,684 
           
Stockholders’ Equity:           
Preferred Stock: $0.01 par, authorized 3,000,000 shares, none outstanding - -  -  - 
Common Stock: $0.01 par; authorized 150,000,000 shares;           
83,777,551 and 81,799,541 issued and outstanding at     
September 30, 2010 and December 31, 2009, respectively 837,778 817,995 
87,803,938 and 84,157,865 issued and outstanding at      
March 31, 2011 and December 31, 2010, respectively 878,039  841,579 
Additional paid-in capital 142,495,953 139,614,459  148,833,707  143,318,671 
Accumulated deficit (135,675,194) (130,882,597) (138,354,428) (136,973,795)
Accumulated other comprehensive loss  (656,166)  (699,327)  (567,761)  (559,837)
  7,002,371  8,850,530   10,789,557   6,626,618 
Total Liabilities and Stockholders’ Equity $14,667,285 $19,143,373  $18,290,572  $15,141,302 



See accompanying notes to consolidated financial statements.
 
 
 
ANTARESANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

  
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2010 2009 2010 2009  2011   2010 
Revenue:                
Product sales $1,654,215 $923,155 $4,132,245 $2,915,526  $1,405,126   $1,326,052 
Development revenue 401,723 293,899 1,704,165 1,362,632  1,056,460   805,247 
Licensing revenue 582,817 360,776 2,462,735 1,166,362  366,237   836,073 
Royalties  483,305  76,953  1,237,988  284,899   741,724    396,714 
Total revenue  3,122,060  1,654,783  9,537,133  5,729,419  3,569,547   3,364,086 
                
Cost of revenue:                
Cost of product sales 798,532 510,234 2,047,357 1,478,281  711,797   656,460 
Cost of development and licensing revenue  280,982  246,121  1,343,097  1,066,410 
Cost of development revenue  741,044    658,519 
Total cost of revenue  1,079,514  756,355  3,390,454  2,544,691   1,452,841    1,314,979 
Gross profit  2,042,546  898,428  6,146,679  3,184,728   2,116,706    2,049,107 
                
Operating expenses:                
Research and development 2,332,712 2,004,921 6,661,325 5,956,989  1,749,336   2,085,825 
Sales, marketing and business development 204,750 173,797 776,549 726,177  288,794   330,521 
General and administrative  1,170,041  1,262,554  3,509,630  3,715,519   1,490,106    1,217,632 
  3,707,503  3,441,272  10,947,504  10,398,685   3,528,236    3,633,978 
                
Operating loss  (1,664,957)  (2,542,844)  (4,800,825)  (7,213,957)  (1,411,530)   (1,584,871)
                
Other income (expense):         
Interest income 12,430 951 21,327 25,973 
Interest expense (942) (270,157) (3,420) (629,947)
Foreign exchange gains (losses) 22,012 (5,532) (13,491) (33,703)
Other, net  57  (6,802)  3,812  (32,518)
  33,557  (281,540)  8,228  (670,195)
Other income (expense) 30,897   (24,072)
                  
Net loss $(1,631,400) $(2,824,384) $(4,792,597) $(7,884,152) $(1,380,633)  $ (1,608,943)
                
Basic and diluted net loss per common share $(0.02) $ (0.04) $(0.06) $ (0.11) $(0.02)  $ (0.02)
                
Basic and diluted weighted average common
shares outstanding
  83,615,043  75,870,525  82,937,306  70,702,423   85,719,683    82,265,477 







See accompanying notes to consolidated financial statements.
 
 
 
4


ANTARESANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 For the Nine Months Ended September 30,  For the Three Months Ended March 31, 
 2010 2009  2011   2010 
Cash flows from operating activities:            
Net loss $ (4,792,597) $ (7,884,152) $ (1,380,633)  $ (1,608,943)
Adjustments to reconcile net loss to net cash used in
operating activities:
            
Depreciation and amortization 137,492 175,706  40,530   44,238 
Gain on sale of equipment, molds, furniture and fixtures (14,980) - 
Stock-based compensation expense 889,188 884,379  471,646   332,617 
Amortization of debt discount and issuance costs - 206,519 
Changes in operating assets and liabilities:            
Accounts receivable 626,165 823,715  (364,789)  (202,438)
Inventories 42,596 (144,792) (62,563)  17,013 
Prepaid expenses and other current assets 68,687 40,274  (60,686)  21,217 
Deferred costs 348,335 178,399  668,458   114,566 
Accounts payable (292,715) (196,124) 200,033   140,963 
Accrued expenses and other current liabilities 173,559 366,448  (1,147,120)  (90,666)
Deferred revenue  (2,511,529)  2,534,619   (72,182)   (1,151,766)
Net cash used in operating activities  (5,325,799)  (3,015,009)  (1,707,306)   (2,383,199)
            
Cash flows from investing activities:            
Purchases of equipment, molds, furniture and fixtures (61,621) (1,081) (97,910)  (11,277)
Additions to patent rights (82,196) (117,903)  (46,554)   (22,743)
Proceeds from sales of equipment, molds, furniture and fixtures
  14,980  - 
Net cash used in investing activities  (128,837)  (118,984)  (144,464)   (34,020)
            
Cash flows from financing activities:            
Proceeds from exercise of stock options and warrants 2,035,480 95,322   5,079,851    412,817 
Proceeds from sale of common stock - 10,527,650 
Principal payments on long-term debt  -  (5,014,390)
Net cash provided by financing activities  2,035,480  5,608,582   5,079,851    412,817 
            
Effect of exchange rate changes on cash and cash equivalents  87,152  (14,596)  (9,521)   (8,722)
            
Net increase (decrease) in cash and cash equivalents (3,332,004) 2,459,993  3,218,560   (2,013,124)
Cash and cash equivalents:            
Beginning of period  13,559,088  13,096,298   9,847,813    13,559,088 
End of period $10,227,084 $15,556,291  $13,066,373   $11,545,964 
            





See accompanying notes to consolidated financial statements
 

 
 
5


ANTARESANTARES PHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 

1.Descripton of Business
Antares Pharma, Inc. (the “Company” or “Antares”) is an emerging pharma company that focuses on self-injection pharmaceutical products and technologies and topical gel-based products.  The Company’s subcutaneous and intramuscular injection technology platforms include Vibex™ disposable pressure-assisted auto injectors, Vision™ reusable needle-free injectors, and disposable multi-use pen injectors.  Pharmaceutical and biotechnology companies are viewed as the Company’s primary customers.

1.Description
In the injector area, the Company has licensed its reusable needle-free injection device for use with human growth hormone (“hGH”) to Teva Pharmaceutical Industries, Ltd. (“Teva”), Ferring Pharmaceuticals BV (“Ferring”) and JCR Pharmaceuticals Co., Ltd. (“JCR”), with Teva and Ferring being the Company’s two primary customers.  The Company’s needle-free injection device is used by Teva with the Tjet® injector system to administer their Tev-Tropin® brand hGH marketed in the U.S. and the Company’s needle-free injection device is used by Ferring with their 4mg and 10mg hGH formulations marketed as Zomajet® 2 Vision and Zomajet® Vision X, respectively, in Europe and Asia.  The Company has also licensed both disposable auto and pen injection devices to Teva for use in certain fields and territories and is engaged in product development activities for Teva utilizing these devices.  The Company is currently developing commercial tooling and automation equipment for Teva related to a fixed, single-dose, disposable injector product containing epinephrine using the Company’s Vibex™ auto injector platform.  In addition to development of Businessproducts with partners, in the first quarter of 2011, the Company initiated a clinical study evaluating its proprietary Vibex™ MTX methotrexate injection system being developed for the treatment of rheumatoid arthritis.  The Company also continues to support existing customers of its reusable needle-free devices for the administration of insulin in the U.S. market through distributors.

Antares Pharma, Inc. (the “Company” or “Antares”) is an emerging pharma company that focuses on self-injection pharmaceutical products and technologies and topical gel-based products. The Company’s subcutaneous and intramuscular injection technology platforms include Vibex™ disposable pressure-assisted auto injectors, Vision™ reusable needle-free injectors and disposable multi-use pen injectors.  Pharmaceutical and biotechnology companies are viewed as the Company’s primary customers.

In the injector area, the Company has licensed its reusable needle-free injection device for use with human growth hormone (“hGH”) to Teva Pharmaceutical Industries, Ltd. (“Teva”), Ferring Pharmaceuticals BV (“Ferring”) and JCR Pharmaceuticals Co., Ltd. (“JCR”).  In August 2009, the Company announced that Teva launched its Tjet
In the gel-based area, the Company received notice from the U.S. Food and Drug Administration (“FDA”) in April 2011 of the FDA’s acceptance for filing for review of a New Drug Application (“NDA”) for Anturol® injector system, which uses the Company’s needle-free device to administer Teva’s Tev-Tropin® brand hGH.  The Company has also licensed both disposable auto and pen injection devices to Teva for use in certain fields and territories.  In 2009, the Company receiv ed a payment of $4,076,375 from Teva for tooling and for an advance for the design, development and purchase of additional tooling and automation equipment, all of which is related to a fixed, single-dose, disposable injector product containing epinephrine using the Company’s Vibex™ auto injector platform.  In addition, the Company continues to support existing customers of its reusable needle-free devices for the administration of insulin in the U.S. market through distributors., an oxybutynin ATD™ gel for the treatment of overactive bladder (“OAB”).  The NDA submission was supported by a Phase 3 clinical trial conducted by the Company.  The Company also has a partnership with BioSante Pharmaceuticals, Inc. (“BioSante”) that includes LibiGel® (transdermal testosterone gel) in Phase 3 clinical development for the treatment of female sexual dysfunction (“FSD”), and Elestrin® (estradiol gel) currently marketed in the U.S. for the treatment of moderate-to-severe vasomotor symptoms associated with menopause.

In the gel-based area, in the third quarter
The Company has operating facilities in the U.S. and Switzerland.  The U.S. operation directs the manufacturing and marketing of 2010 the Company completed a successful pivotal Phase 3 trial for its lead product candidate, Anturol®, an oxybutynin ATD™ gel for the treatment of overactive bladder (“OAB”), for which the Company expects to file a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) in 2010.  The Company also has a partnership with BioSante Pharmaceuticals, Inc. (“BioSante”) that includes LibiGel® (transdermal testosterone gel) in Phase 3 clinical development for the treatment of female sexual dysfunction (“FSD”), and Elestrin® (estradiol gel) currently marketed in the U.S. for the treatment of moderate-to-severe vasomotor symptoms associated with menopause.

The Company has operating facilities in the U.S. and Switzerland.  The U.S. operation manufactures and markets the Company’s reusable needle-free injection devices and related disposables, and develops its disposable pressure-assisted auto injector and pen injector systems. These operations, including all development and some U.S. administrative activities, are located in Minneapolis, Minnesota.  The Company’s Pharma division is located both in the U.S. and in Muttenz, Switzerland, where pharmaceutical products are developed utilizing the Company’s transdermal systems.  The Company’s corporate offices are located in Ewing, New Jersey.

2.Basis of Presentation

 The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of the Securities and Exchange Commission's Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United
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States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The accompanying consolidated financial statements and notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.2010.  Operating results for the three and nine-month periodsmonths ended September 30, 2010March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.
2011.
6


3.Stockholders’Stockholders' Equity

Common Stock

 Warrant and stock option exercises in the first ninethree months of 20102011 and 20092010 resulted in proceeds of $2,035,480$5,079,851 and $95,322,$412,817, respectively, and in the issuance of 1,804,8843,424,634 and 137,916570,500 shares of common stock, respectively.

 
Stock Options and Warrants

The Company records compensation expense associated with share based awards granted to employees at the fair value of the award on the date of grant.  The expense is recognized over the period during which an employee is required to provide services in exchange for the award.

The Company’s 2008 Equity Compensation Plan (the “Plan”) allows for the grants of options, restricted stock, stock units, stock appreciation rights and/or performance awards to officers, directors, consultants and employees.  Under the Plan, the maximum number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares.  Options to purchase shares of common stock are granted at exercise prices not less than 100% of the fair market value on the dates of grant.  The term of the options range from three to eleven years and the optionsthey vest in varying periods.  In May 2010, the shareholders approved an amendment to the Plan to increase the maximum number of shares authorized for issuance by 1,500,000 from 10,000,000 to 11,500,000. & #160;As of September 30, 2010,March 31, 2011, the Plan had 1,886,5221,137,506 shares available for grant.  The number of shares available for grant does not take into consideration potential stock awards that could result in the issuance of shares of common stock if certain performance conditions are met, as discussed under “Stock Awards” below.  Stock option exercises are satisfied through the issuance of new shares.

A summary of stock option activity under the Plan as of September 30, 2010,March 31, 2011, and the changes during the nine-month periodthree months then ended is as follows:   

  
 
 
Number of
 Shares
  
Weighted
Average
Exercise
 Price ($)
  
Weighted
Average
Remaining
Contractual
Term (Years)
  
 
Aggregate
Intrinsic
Value ($)
 
Outstanding at December 31, 2009  8,339,684   1.13       
Granted  647,487   1.49       
Exercised  (1,334,434)  1.00       
Cancelled  (252,100)  2.07       
Outstanding at September 30, 2010  7,400,637   1.15   7.0   3,080,000 
Exercisable at September 30, 2010  5,535,719   1.22   6.5   2,140,000 
   
 
 
 
Number of
 Shares
  
 
Weighted
Average
Exercise
 Price ($)
  
Weighted
Average
Remaining
Contractual
Term (Years)
  
 
 
Aggregate
Intrinsic
Value ($)
 Outstanding at December 31, 2010 7,657,876  1.18      
 Granted 75,000  1.58      
 Exercised (182,500) 1.19      
 Cancelled (69,550) 3.96      
 Outstanding at March 31, 2011 7,480,826  1.16  7.0  5,129,000
 Exercisable at March 31, 2011 5,698,510  1.15  6.5  4,026,000
7


During the first ninethree months of 2011 and 2010 the Company granted options to purchase a total of 647,48775,000 and 200,000 shares of its common stock, at exercise prices ranging from $1.30 to $1.60.  During the first nine months of 2009, the Company granted options to purchase a total of 491,927 shares of its common stock at exercise prices ranging from $0.47 to $0.95.  Allrespectively.  The options were granted at exercise prices of $1.58 and $1.30 in 2011 and 2010, respectively, which equaled the fair value of the Company’s common stock on the dates of the grants.

Total recognized compensation expense for stock options was approximately $202,000$230,000 and $648,000$274,000 for the first three months of 2011 and nine-month periods ended September 30, 2010, respectively, and $222,000 and $688,000 for the three and nine-month periods ended September 30, 2009, respectively.  As of September 30, 2010,March 31, 2011, there was approximately $875,000$930,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately 1.6two years.

The per share weighted average fair value of options granted during the first ninethree months of 20102011 and 20092010 were estimated as $0.79$0.82 and $0.39, respectively,$0.70 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
7

the Company’s stock price.  The weighted average expected life is based on both historical and anticipated employee behavior.

September 30,  March 31, 
 2010 2009  2011  2010 
Risk-free interest rate 2.1% 1.9% 2.2% 2.5%
Annualized volatility 61.0% 88.0% 59.0% 61.0%
Weighted average expected life, in years 5.0 5.0  5.0  5.0 
Expected dividend yield 0.0% 0.0% 0.0% 0.0%

In the first quarter of 2011, 3,242,134 warrants with an exercise price of $1.50 were exercised resulting in proceeds to the Company of $4,863,201, and 3,502,016 warrants with an exercise price of $1.50 expired unexercised.  Warrants to purchase a total of 17,824,95910,940,909 shares of common stock were outstanding at September 30, 2010.March 31, 2011.  The weighted average exercise price of the warrants was $1.56.$1.60.

The weighted average exercise price of the stock options and warrants outstanding at September 30,March 31, 2011 and 2010 was $1.42 and 2009 was $1.44, and $1.46, respectively.

Stock Awards

The employment agreements or performance stock bonus agreements with the Chief Executive Officer, Chief Financial Officer and other members of executive management include stock-based incentives under which the executives could be awarded up to approximately 1,530,000 shares of the Company’s common stock upon the occurrence of various triggering events.  OfAs of March 31, 2011, potential future awards under these agreements totaled approximately 425,000 shares 45,454of common stock.  There were 72,727 and 22,727 shares awarded under these agreements in 2010the first three months of 2011 and 180,681 were awarded prior to 2010.  Compensation expense recorded in connection with awards considered probable of achievement was approximately $13,300 and $31,500 for the three and nine-month periods ended September 30, 2010, respectively, and approximately $106,000 and $122,000 for the three and nine-month periods ended September 30, 2009, respectively.

At times, the Company grants shares of its common stock to members of management and other employees in lieu of cash bonus awards or in recognition of special achievements.   A total of 478,268136,267 and 170,768 shares of common stock have beenwere granted as stock awards to employeesin the first quarters of the Company,2011 and 2010, respectively.  As of which 213,268 were granted in 2010.  The majorityMarch 31, 2011, a total of the stock awards vest over a three-year period, although 67,500181,604 shares granted in 2010 vested immediately.  A total of 239,104 of the shares granted are unvested as of September 30, 2010.prior periods were unvested.  Expense is recognized on a straight-linestraight line basis over the vesting period and is based on the fair value of the stock on the
8

grant date.  The fair value of each stock award is determined based on the number of shares granted and the market price of the Company’s common stock on the date of grant.  Expense recognized in connection with these awards was approximately $97,000$241,000 and $182,000 for$52,000 in the threefirst quarters of 2011 and nine-month periods ended September 30, 2010, respectively, and $33,000 and $58,000 for the three and nine-month periods ended September 30, 2009, respectively.  The weighted average fair value of the shares granted in 2011 and 2010 was $1.34$1.58 and $1.30 per share.

In addition to the shares granted to employees, in the first nine months of 2010 and 2009 a total of 29,063 and 33,019 shares of common stock, respectively, were granted to certain directors in lieu of cash as part of annual compensation. Expense is recognized on a straight-line basis over the vesting period and is based on the fair value of the stock on the grant date.  Expense recognized in connection with shares granted to directors was approximately $11,600 and $27,600 for the three and nine-month periods ended September 30, 2010, respectively, and $4,400 and $16,300 for the three and nine-month periods ended September 30, 2009,share, respectively.

4.4.            Net Loss Per Share

Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted loss per common share reflects the potential dilution from the exercise or conversion of securities into common stock.  Potentially dilutive stock options and warrants excluded from dilutive loss per share because of their effect was anti-dilutive totaled 25,225,59618,421,735 and 26,204,25026,228,393 at September 30,March 31, 2011 and 2010, and 2009, respectively.  The table below discloses the basic and diluted loss per common share.

  
Three Months Ended
March 31,
 
  2011  2010 
 Net loss$ (1,380,633) $ (1,608,943)
 Basic and diluted weighted average common shares outstanding 85,719,683   82,265,477 
 Basic and diluted net loss per common share$ (0.02) $ (0.02)
 
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2010  2009  2010  2009 
Net loss applicable to common shares $ (1,631,400) $ (2,824,384) $ (4,792,597) $ (7,884,152)
Basic and diluted weighted average
common shares outstanding
  83,615,043   75,870,525   82,937,306   70,702,423 
Basic and diluted net loss per
common share
 $ (0.02) $ (0.04) $ (0.06) $ (0.11)
 
5.Industry Segment and Operations by Geographic Areas
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5.             Industry Segment and Operations by Geographic Areas

The Company has one operating segment, drug delivery, which includes the development of drug delivery transdermal products and drug delivery injection devices and supplies.

The geographic distributions of the Company’s identifiable assets and revenues are summarized in the following tables:

The Company has total assets located in two countries as follows:
 
  
September 30,
2010
  
December 31,
2009
 
United States of America $14,123,229  $17,384,011 
Switzerland  544,056   1,759,362 
  $14,667,285  $19,143,373 
   
March 31,
2011
 
December 31,
2010
 United States of America $17,720,962 $14,353,760
 Switzerland  569,610  787,542
   $18,290,572 $15,141,302
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Revenues by customer location are summarized as follows:
 
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2010  2009  2010  2009 
United States of America $1,500,552  $1,091,268  $4,746,888  $3,148,668 
Europe  1,557,820   519,142   4,513,015   2,475,080 
Other  63,688   44,373   277,230   105,671 
  $3,122,060  $1,654,783  $9,537,133  $5,729,419 
   
For the Three Months Ended
March 31,
   2011 2010
 United States of America $2,239,383 $1,700,175
 Europe  1,233,761  1,546,934
 Other  96,403  116,977
   $3,569,547 $3,364,086

 Significant customers comprising 10% or more of total revenue wereare as follows:
 
  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
  2010 2009 2010 2009 
Ferring $1,557,819  $497,943  $4,473,920  $2,075,717 
Teva  1,290,478   776,373   3,953,783   2,024,105 
Population Council  65,987   207,553   150,347   642,243 
   
For the Three Months Ended
March 31,
   2011 2010
 Teva $2,132,841 $1,328,038
 Ferring  1,233,762  1,526,937

6.            Comprehensive Loss
 
6.Comprehensive Loss
   
Three Months Ended
March 31,
 
   2011  2010 
 Net loss $ (1,380,633) $ (1,608,943)
 Change in cumulative translation adjustment  (7,924)  18,043 
 Comprehensive loss $ (1,388,557) $ (1,590,900)

7.            Revenue Recognition

In January of 2011, the Company amended the license, development and supply agreement with Teva originally entered into in December of 2007 under which the Company will develop and supply a disposable pen injector for use with two undisclosed patient-administered pharmaceutical products.  Under the original agreement, an upfront payment, development milestones, and royalties on Teva’s product sales, as well as a purchase price for each device sold were to be received by the Company under certain circumstances.   Based on an analysis under accounting literature applicable at the time of the agreement, the entire arrangement was considered a single unit of accounting.  Therefore, payments received and development costs incurred were deferred and were to be recognized from the start of manufacturing
 
  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
  2010 2009 2010 2009 
Net loss $(1,631,400) $(2,824,384) $(4,792,597) $(7,884,152)
Change in cumulative translation adjustment  (41,977)  (3,061)  43,161   62,054 
Comprehensive loss $(1,673,377) $(2,827,445) $(4,749,436) $(7,822,098)
9

 
7.Revenue Recognition Change
through the end of the initial contract period.  Changes to the original agreement as a result of the amendment included the following:  (i) Teva will pay for future device development activities, (ii) Teva will pay for and own all commercial tooling developed and produced under the agreement, and (iii) certain potential milestone payments were eliminated.  The Company has determined that the changes to the agreement as a result of the amendment are a material modification to the agreement.  Because the agreement was materially modified, the accounting was re-evaluated under the applicable current revenue recognition accounting standards.  The re-evaluation resulted in the agreement being separated into multiple units of accounting and resulted in changes to both the method of revenue recognition and the period over which revenue will be recognized.  The provisions of the current standards are to be applied as if they were applicable from inception of the agreement.  Under the new accounting, the original license fee received will be recognized as revenue over the development period, the development milestone payments previously received were recognized as revenue immediately and revenue during the manufacturing period will be recognized as devices are sold and royalties are earned.  For the three months ended March 31, 2011, the accounting change due to the material modification resulted in recognition of development and licensing revenue previously deferred of $304,600 and $274,444, respectively, and recognition of costs previously deferred of $408,250.

8.           New Accounting Pronouncements

In January 2010, the third quarter of 2009, the Company elected early adoption of Financial Accounting Standards Board (“FASB”)issued Accounting Standards Update (“ASU”) 2009-13, “Revenue Arrangements with Multiple Deliverables”.2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820), “Improving Disclosures about Fair Value Measurements.”  ASU 2009-13, which amended FASB ASC 605-25, “Multiple-Element Arrangements,”2010-06 requires new disclosures about significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for such transfers and in the reconciliation for Level 3 fair value measurements to disclose separately information about purchases, sales, issuances and settlements.  ASU 2010-06 is effective for arrangements entered into or materially modifiedinterim and annual reporting periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances and settlements in the reconciliation for Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning on or after JuneDecember 15, 2010, but allows for early adoption.  ASU 2009-13 requires a vendor to allocate revenue to each unit of accounting in arrangements involving multiple deliverables.  It changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when vendor specific objective evidence or third party evidence of selling price is not available.  As a result of2010.  The adoption of ASU 2009-13, deferred revenues and deferred costs associated with one License, Development and Supply Agreement with Teva will be recognized as revenues and expenses earlier than would otherwise2010-06 did not have occurred.  Adoption of ASU 2009-13 had noan impact on the accounting for any of the Company’s other revenue arrangements containing multiple deliverables.  Revenues and expenses generated in connection with future multiple element arrangements will be accounted for under ASU 2009-13 and will likely often be recognized over shorter periods than would have occurred prior to adoption of this standard, which could produce results that are materially different from results that would have occurred under the previously applied accounting standards.consolidated financial statements.

 
 
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The Company elected to adopt ASU 2009-13 on a prospective basis, with retrospective application to January 1, 2009.  The Company recorded the impact of adoption in the financial results for the three-months ended September 30, 2009.  This accounting standard should have been applied retrospectively to the beginning of the year and the impact of adoption included in the first quarter financial results.  The third quarter 2009 financial results have been revised to reflect this immaterial correction.  The result of this correction is a decrease to total revenues in the third quarter of 2009 of $386,389, an increase to gross profit of $69,450, and a decrease to net loss applicable to common shares of $69,450.  This correction did not affect year-to-date total revenues, gross profit and ne t loss applicable to common shares, and did not affect quarter and year-to-date net loss per common share.

The table below reconciles the amounts for the three months ended September 30, 2009 as previously reported to the amounts as reported in the consolidated statement of operations after applying the immaterial correction.

  Three Months Ended September 30, 2009 
  As Previously  Correction  As Reported 
  Reported  Adjustments  After Correction 
Development revenue $382,788  $88,889  $293,899 
Licensing revenue  658,276   297,500   360,776 
Total revenue  2,041,172   386,389   1,654,783 
Cost of development and licensing revenue  701,960   455,839   246,121 
Total cost of revenue  1,212,194   455,839   756,355 
Gross profit  828,978   69,450   898,428 
Operating loss  (2,612,294)  69,450   (2,542,844)
Net loss  (2,893,834)  69,450   (2,824,384)
Net loss per common share $(0.04)     $(0.04)

8.           New Accounting Pronouncements

In April 2010, the FASB issued ASU 2010-17, Revenue Recognition—Milestone Method (Topic 605), which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a study or achieving a specific result from the research or development efforts. The amendments in this ASU provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. ASU 2010-17 is effective for fiscal years and interim periods within those years beginning on or after June 15, 2010, with early adoption permitted.  This ASU is effective for the Company on January 1, 2011.  The Company is currently evaluating the impact, if any, ASU 2010-17 will have on the Company’s consolidated financial statements.
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Item 2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Management’s discussion and analysis of the significant changes in the consolidated results of operations, financial condition and cash flows of the Company is set forth below.  Certain statements in this report may be considered to be “forward-looking statements” as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995, such as statements that include the words “expect,” “estimate,” “project,” “anticipate,” “should,” “intend,” “probability,” “risk,” “target,” “objective” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, r egulatoryregulatory or competitive environments, our intellectual property and product development.  In particular, these forward-looking statements include, among others, statements about:

·  the impact of new accounting pronouncements;

·  
our expectations regarding the product development, manufacturing and partnering of Anturol®;

·  our expectations regarding continued product development with Teva;

·  our plans regarding potential manufacturing and marketing partners;

·  our future cash flow;

·  our expectations regarding a net loss for the year ending December 31, 2010;2011; and

·  our ability to raise additional financing, reduce expenses or generate funds in light of our current and projected level of operations and general economic conditions.

The words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.  Forward-looking statements involve known and unknown risks, uncertainties and achievements, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements.  While we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements a reare based on a combination of facts and factors currently known by us and projections of the future about which we cannot be certain.  Many factors may affect our ability to achieve our objectives, including:

·  delays in product introduction and marketing or interruptions in supply;
·  
our ability to partner Anturol®;

·  a decrease in business from our major customers and partners;

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

·  
our ability to partner Anturol®;

·  delays in product introduction and marketing or interruptions in supply;

·  a decrease in business from our major customers and partners;
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·  adverse economic and political conditions;

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

·  our inability to attract and retain key personnel;
·  adverse economic and political conditions; and
11


·  our inability to effectively market our services or obtain and maintain arrangements with our customers, partners and manufacturers.

In addition, you should refer to the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 20092010 for a discussion of other factors that may cause our actual results to differ materially from those described by our forward-looking statements.  As a result of these factors, we cannot assure you that the forward-looking statements contained in this report will prove to be accurate and, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.

We encourage readers of this report to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance.  Forward-looking statements speak only as of the date they are made.  We do not intend to update publicly any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events except as required by law.  In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, if at all.

The following discussion and analysis, the purpose of which is to provide investors and others with information that we believe to be necessary for an understanding of our financial condition, changes in financial condition and results of operations, should be read in conjunction with the financial statements, notes and other information contained in this report.

Overview

Antares Pharma, Inc. is an emerging pharma company that focuses on self-injection pharmaceutical products and technologies and topical gel-based products.  Our subcutaneous and intramuscular injection technology platforms include Vibex™ disposable pressure-assisted auto injectors, Vision™ reusable needle-free injectors, and disposable multi-use pen injectors.  We currently view pharmaceutical and biotechnology companies as our primary customers.

In the injector area, we have licensed our reusable needle-free injection device for use with hGH to Teva, Ferring and JCR.  In August 2009, we announced thatJCR, with Teva launched itsand Ferring being our two primary customers.  Teva uses our needle-free injection device with the Tjet® injector system which uses our needle-free device to administer Teva’s Tev-Tropin® brand hGH.hGH marketed in the U.S. and Ferring uses our needle-free injection device with their 4mg and 10mg hGH formulations marketed as Zomajet® 2 Vision and Zomajet® Vision X, respectively, in Europe and Asia.  We have also licensed both disposable auto and pen injection devices to Teva for use in certain fields and territories.  In 2009,territories and we received a payment of $4,076,375 fromare engaged in product development activities for Teva for tooling and for an advance for the design, development and purchase of additionalutilizing these devices.  We are currently developing commercial tooling and automation equipment all of which isfor Teva related to a fixed, single-dose, disposable injector prod uctproduct containing epinephrine using our Vibex™ auto injector platform.  In addition to development of products with partners, in the first quarter of 2011, we initiated a clinical study evaluating our proprietary Vibex™ MTX methotrexate injection system being developed for the treatment of rheumatoid arthritis.  We also continue to support existing customers of our reusable needle-free devices for the administration of insulin in the U.S. market through distributors.

In the gel-based area, we recently completed a successful pivotal Phase 3 trialreceived notice from the FDA in April 2011 of its acceptance for filing for review of our lead product candidate,NDA for Anturol®, an oxybutynin ATD™ gel for the treatment of OAB, for which we expect to file an
13

overactive bladder (OAB).  The NDA in 2010.  Spending on this program in the first nine months of 2010submission was approximately $3,800,000, and we expect spending in 2010 to be approximately $5,000,000.supported by a Phase 3 clinical trial.  We also have a partnership with BioSante that includes LibiGel® (transdermal testosterone gel) in Phase 3 clinical development for the treatment of FSD, and Elestrin® (estradiol gel) currently marketed in the U.SU.S. for the treatment of moderate-to-severe vasomotor symptoms associated with menopause.

We have operating facilities in the U.S. and Switzerland.  Our U.S. operation manufacturesdirects the manufacturing and marketsmarketing of our reusable needle-free injection devices and related disposables, and develops our disposable pressure-assisted auto injector and pen injector systems. These operations, including all development and some U.S. administrative activities, are located in Minneapolis, Minnesota.  Our Pharma division is located both in the U.S. and in Muttenz, Switzerland, where pharmaceutical products are developed utilizing our transdermal systems.  Our corporate offices are located in Ewing, New Jersey.

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We incurred a net loss of $4,792,597$1,380,633 for the nine-monththree-month period ended September 30, 2010 and we expect to report a net loss for the year ending DecemberMarch 31, 2010.  We have not historically generated sufficient revenue to provide the cash needed  to support our operations2011 and have continued to operate primarily by raising capital and incurring debt.  In order to better position ourselves to take advantageaccumulated aggregate net losses from the inception of potential growth opportunities and to fund future operations, during 2009,business through March 31, 2011 of $138,354,428.  At March 31, 2011 we raised additional capital and took steps to reduce our monthlyhad a cash obligations.balance of $13,066,373.  We believe that the combination of our current cash and cash equivalents balance, our recent reductions in our monthly cash outflows, our projected product sales, product development revenue, license revenues, milestone payments and roya ltiesroyalties will provide us with sufficient funds to support operations for at least the next 12 months.

Results of Operations

Three and Nine Months Ended September 30,March 31, 2011 and 2010 and 2009

Revenues

Total revenuesrevenue for the three and nine-month periodsmonths ended September 30, 2010 were $3,122,060 and $9,537,133,March 31, 2011 was $3,569,547 compared to revenues for$3,364,086 in the same prior-year periodsperiod of $1,654,783the prior year.  Product sales were $1,405,126 and $5,729,419.  Product revenue was $1,654,215 and $4,132,245$1,326,052 in the threefirst quarters of 2011 and nine-month periods ended September 30, 2010, respectively, compared to $923,155 and $2,915,526, in the three and nine-month periods ended September 30, 2009, respectively.  Our product revenue is generated fromProduct sales include sales of ourreusable needle-free injector devices and disposable components, and the increases wererepairs. Our product sales are generated primarily due to increases infrom sales to Ferring and Teva.  Ferring uses our needle-free injector with their 4mg and 10mg hGH formulations marketed as Zomajet® 2 Vision and Zomajet® Vision X, respectively, in Europe and Asia.  Teva launcheduses our needle-free injector with the Tjet® needle-free device withinjector system to administer their hGH Tev-Tropin® brand hGH marketed in the U.S.  The increase in August of 2009.  Development revenue increased in the three and nine-month periods to $401,723 and $1,704,165, respectively, in 2010 compared to $293,899 and $1,362,632 in the same periods of the prior year.  The increases wereproduct sales was primarily due to an increase in sales to Ferring.

Development revenue was $1,056,460 in the first quarter of 2011 compared to $805,247 in the first quarter of 2010.   The revenue in the first quarter of 2011 was primarily due to auto injector and pen injector development work for Teva.  In addition, as discussed in Note 7 to the consolidated financial statements, in the first quarter of 2011 we recognized $304,600 of previously deferred development revenue in connection with an amendment to a License, Developmentlicense, development and Supply Agreementsupply agreement with Teva originally entered into in December of 2007 under which we will develop and supply a disposable pen injector for use with two undisclosed patient-administered pharmaceutical products.  The revenue in the first quarter of 2010 was primarily due to auto injector development work for Teva.

Licensing revenue was $366,237 in the first quarter of 2011 compared to $836,073 in the first quarter of 2010.  The licensing revenue in the first quarter of 2011 was primarily due to $274,444 of revenue previously deferred that was recognized as a result of the amended license, development and supply agreement with Teva for a product containing epinephrine utilizing our Vibex™ autodisposable pen injector, technology.  Licensingas discussed in Note 7 to the consolidated financial statements.  The 2010 licensing revenue also increased in the three and nine-month periods to $582,817 and $2,462,735, respectively, in 2010 from $360,776 and $1,166,362, respectively, in 2009.  The increases werewas primarily du edue to recognition of revenue deferred in 2009 under an Exclusive License Agreementexclusive license agreement with Ferring, along within addition to milestone payments received from Tevain connection with an existing license agreement with BioSante.

Royalty revenue was $741,724 in the secondfirst quarter of 2010 and BioSante2011 compared to $396,714 in the first quarter of 2010.  Royalty revenue increased in the three and nine-month periods to $483,305 and $1,237,988, respectively, in 2010 from $76,953 and $284,899 in the same prior-year periods,The increase was primarily due to royalties received from Teva in connection with sales of their hGH Tev-Tropin®.
14


Cost of Revenues and Gross Margins

The cost of product sales isare primarily related to our reusable needle free injectorinjection devices and disposable components.  For the three and nine-month periodsthree-month period ended September 30, 2010,March 31, 2011, cost of product sales was $798,532 and $2,047,357, respectively,$711,797 compared to $510,234 and $1,478,281$656,460 for the same periodsperiod of the prior year.  Product grossGross margins were 52%49% and 45%50% in three-month periodsthree months ended September 30,March 31, 2011 and 2010, and 2009, respectively, and were 50% and 49% for the nine-month periods ended September 30, 2010 and 2009, respectively.  The product gross margin increase of 7% in the quarter consisted of approximately 4% due to a significant increase in sales in 2010 compared to 2009 while fixed overhead expenses in each respective period were relatively unchanged, and approximately 3% due to a shift in the mix of products so ld.   The increase in the nine-month period was primarily due to an increase in sales while fixed overhead expenses remained relatively constant.

The cost of development revenue consists primarily of direct external costs, some of which may have been previously incurred and deferred, along with labor costs and an allocation of certain overhead expenses based on actual costs and time spent related to revenue generating development arrangements.deferred.  Cost of development revenue was $280,982$741,044 and $1,343,097$658,519 for the threefirst quarters of 2011 and nine-month periods ended September 30, 2010, respectively, compared to $246,121respectively.  In the first quarter of 2011, $408,250 was recognized as a result of the amended license, development and $1,066,410 for the same prior-year periods.  The increases in each period were due mainly to increases in development costs recognized related to a License, Development and Supply Agreementsupply agreement with Teva for a product containing epinephrine utilizing ourdisposable pen injector, as discussed in Note 7 to the consolidated financial statements.  The remaining development costs in the first quarter of 2011 were due to auto injector technology.and pen injector development work for Teva.  The development costs in the first quarter of 2010 were primarily due to auto injector development work for Teva.

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Research and Development

The majority of research and development expenses consist of external costs for studies and analysis activities, design work and prototype development.  Our most significant projects currently include the following:

·  
Anturol® oxybutynin gel for treatment of OAB;
·  Vibex™ autoinjector for delivery of epinephrine for emergency treatment of allergic reactions; and
·  Vibex MTX™ autoinjector for delivery of methotrexate for treatment of rheumatoid arthritis.

Although we are engaged in researchResearch and development activities involving eachexpenses were $1,749,336 and $2,085,825 in the three months ended March 31, 2011 and 2010, respectively.  The decrease in the first quarter of 2011 compared to the prior year was due primarily to a decrease in expenses following completion of the Phase III study of Anturol® and filing of our drug delivery platforms, over 75%NDA in the fourth quarter of 2010.  Expenses related to our transdermal gel products, primarily Anturol®, decreased to less than 30% of our total research and development expenses in each period were generatedthe first quarter of 2011 from over 75% in connection with projectsthe first quarter of 2010.  Partially offsetting this decrease was an increase in expenses related to transdermal gel products, primarily Anturol®.  Research and development expenses were $2,332,712 and $6,661,325 in the three and nine-month periods ended September 30, 2010, respectively, compared to $2,004,921 and $5,956,989 ininitiation of a clinical study evaluating our proprietary Vibex™ MTX autoinjector for delivery of methotrexate for the same periodstreatment of the prior year.  The increases in the third quarter and first nine months of 2010 compared to the same periods of 2009 were due primarily to our Vibex MTX™ development program,rheumatoid arthritis, along with increasesan increase in personnel costs due to the addition of two employees .  Since the Vibex™ epinephrine program is associated with a License, Development and Supply Agreement with Teva, the costs have been deferred and are recognized as cost of revenue when the related revenue is recognized.  Expenses incurred related to research and development activities in Switzerland decreased in the first nine months of 2010 compared to 2009 as a result of the Asset Purchase Agreement with Ferring at the end of 2009.employee additions.


15



Sales, Marketing and Business Development

Sales, marketing and business development expenses totaled $204,750$288,794 and $776,549$330,521 for the three months ended March 31, 2011 and nine-month periods ended September 30, 2010, respectively,respectively.  The decrease in 2011 compared to $173,7972010 was primarily related to decreases in professional and $726,177 in the same prior-year periods.  Decreases in consulting fees in 2010 were offset by increases in payroll expenses due to the addition of a senior level business development employee in January of this year.legal fees.

General and Administrative

General and administrative expenses totaled $1,170,041$1,490,106 and $3,509,630$1,217,632 in the three months ended March 31, 2011 and nine-month periods ended September 30, 2010, respectively, comparedrespectively.  The increase was primarily due to $1,262,554 and $3,715,519 in the same periods of the prior year. General and administrative expenses associated with the operations in Switzerland decreased significantly as a result of the transaction with Ferring at the end of 2009.  These decreases were partially offset by increases in payrollpatent related expenses, professional fees and noncash compensation expenses.

Other Income (Expense)

OtherIn the first quarter of 2011 we reported net other income was $33,557of $30,897 and $8,228 in the three and nine-month periods ended September 30,first quarter of 2010 respectively, compared towe reported net other expense of $281,540 and $670,195 in the same periods$24,072.  The change was primarily due to recognition of the prior year.  In 2010 other income consisted mainly of interest income and foreign exchange gains and losses.  In 2009 other expense resulted primarily from interest expense relatedin 2011 compared to our credit facility which was retiredforeign exchange losses in the third quarter of 2009.2010.

Liquidity and Capital Resources

We have not historically generated sufficient revenue to provide the cash needed to support our operations, and we have continued to operate primarily by raising capital and incurring debt.  In order to better position ourselves to take advantage of potential growth opportunities and to fund future operations, during 2009, we raised additional capital and took steps to reduce our monthly cash obligations.

In July 2009, we raised gross proceeds of $8,500,000 in a registered direct offering through the sale of shares of our common stock and warrants.  We sold a total of 10,625,000 units, each unit consisting of (i) one share of common stock and (ii) one warrant to purchase 0.4 of a share of common stock (or a total of 4,250,000 shares), at a purchase price of $0.80 per unit.  The warrants became exercisable six months after issuance at $1.00 per share and will expire five years from the date of issuance.

In September 2009, we raised gross proceeds of $3,000,000 through the sale of 2,727,273 units to certain institutional investors, each unit consisting of (i) one share of common stock and (ii) one warrant to purchase 0.4 of a share of common stock (or a total of 1,090,909 shares), at a purchase price of $1.10 per unit. The warrants became exercisable six months after issuance at $1.15 per share and will expire five years from the date of issuance.

The proceeds from the sale of common stock and warrants in September 2009 were used to pay off the remaining balance of our credit facility, reducing our monthly debt service requirements.  The credit facility had originated in 2007, when we received gross proceeds of $7,500,000 in two tranches of $5,000,000 and $2,500,000 to help fund working capital needs.  The per annum interest rate was 12.7% in the case of the first tranche and 11% in the case of the second tranche.  The maturity date (i) with
16

respect to the first tranche was forty-two months from February 2007 and (ii) with respect to the second tranche was thirty-six months from December 2007.

In the fourth quarter of 2009, we reduced our monthly overhead when we entered into an Asset Purchase Agreement with Ferring. Under this agreement, Ferring assumed responsibility for all of our facility and equipment lease obligations in connection with our operations in Switzerland, and the majority of our employees at that location were hired by Ferring effective January 1, 2010.  Subsequent to the Ferring agreement we entered into a month-to-month office lease agreement at a new Swiss location in a much smaller space at a significantly reduced monthly rate.

In the first nine months of 2010, we received proceeds of $2,035,480 in connection with exercises of options and warrants to purchase shares of our common stock, which resulted in the issuance of 1,804,884 shares of our common stock.

At September 30, 2010,March 31, 2011, we had cash and cash equivalents of $10,227,084.$13,066,373.  We believe that the combination of our current cash and cash equivalents balance and projected product sales, product development, license revenues, milestone payments and royalties will provide us with sufficient funds to support operations for at least the next 12 months.  Historically, we have not generated sufficient revenue to provide the cash needed to support our operations, and we have continued to operate primarily by raising capital.  We do not currently have any bank credit lines.  In the future, if we need additional financing and are unable to obtain such financing when needed, or obtain it on favorable terms, we may be required to curtail development of new products, limit expansion of operations or accept financing terms that are not as attractive as we may desire.

Cash Flows

Net Cash Used in Operating Activities

Net cash used in operating activities was $5,325,799$1,707,306 and $3,015,009$2,383,199 for the nine-month periodsthree months ended September 30,March 31, 2011 and 2010, and 2009, respectively.  AlthoughThe decrease in cash used in operating activities in the first quarter of 2011 compared to 2010 was primarily due to a decrease in the net loss decreased by $3,091,555 to $4,792,597 for the 2010 nine-month periodalong with an increase in noncash expenses, both from $7,884,152 for the 2009 nine-month period, the cash usedstock based compensation expense and from costs incurred and deferred in 2009 was less than the cash used in 2010 primarily due to receipt of deferred revenue of $4,076,375 from Tevaprevious periods that were recognized as expense in the third quartercurrent period.



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Net Cash Used in Investing Activities

Net cash used in investing activities was $128,837 and $118,984 for$144,464 in the nine-month periods ended September 30, 2010 and 2009, respectively.first three months of 2011 compared to $34,020 in the first three months of 2010.  Cash used for purchases of equipment, molds, furniture and fixtures was $61,621$97,910 in 20102011 compared to $1,081$11,277 in 20092010 and additions to patent rights were $82,196was $46,554 in 20102011 compared to $117,903$22,743 in 2009.  In the first nine months of 2010, we received proceeds of $14,980 from the sale of fully depreciated equipment that had been used at our Swiss location.2010.

Net Cash Provided by Financing Activities

In the first nine months of 2010, netNet cash provided by financing activities consistedin the first three months of 2011 and 2010 was $5,079,851 and $412,817, respectively, which was due to proceeds from the exercise of stock options and warrants of $2,035,480.warrants.  In the first nine monthsquarter of 2009, net cash provided by financing activities2011, 3,242,134 warrants with an exercise price of $5,608,582 consisted$1.50 were exercised resulting in proceeds of $4,863,201 and 182,500 options were exercised resulting in proceeds fromof $216,650.  In the salefirst quarter of common stock2010, 570,500 options were exercised resulting in proceeds of $10,527,650 and proceeds from exercise of warrants and stock options of $95,322 less principal payments on long-term debt of $5,014,390.  The principal payments on long-term debt included a final payment of $2,875,399 made in September 2009 when we used a portion of the proceeds from the sale of common stock and warrants to pay off the remaining balance of our credit facility.
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$412,817.
 
Research and Development Programs

Our current research and development activities are primarily related to Anturol® and device development projects.

Anturol®.  We are currently evaluatingreceived notice from the FDA in April 2011 of its acceptance for filing for review of our NDA for Anturol®, an oxybutynin ATD™ gel for the treatment of OAB.  In July 2010, we completed a Phase III pivotal trial designed to evaluate the efficacy of Anturol® when administered topically once daily for 12 weeks in patients predominantly with urge incontinence episodes. The randomized, double-blind, parallel, placebo-controlled, multi-center trial involved approximately 600 patients (200 per arm) using two dose strengths (selected from a Phase II clinical trial) versus a placebo.  In addition, an Open Label Extension study evaluating long term safety is ongoing and scheduled to be complete bywas completed in the fourth quarter of 2010.  We expect to file an NDA with the FDA in 2010.  There is no assurance that the FDA will accept our NDA when filed or that the FDA will ultimately approve Anturol®, and without FDA approval we cannot market or sell Anturol® in the U.S.

We have also incurred significant costs related to Anturol® manufacturing development.  We have contracted with Patheon, Inc. (“Patheon”), a manufacturing development company, to supply clinical and commercial quantities of Anturol® and to develop a commercial manufacturing process for Anturol®.  With Patheon, we have completed limited commercial scale up activities associated with Anturol® manufacturing.

As of September 30, 2010,March 31, 2011, we have incurred total external costs of approximately $16,700,000$18,120,000 in connection with our Anturol® research and development, of which approximately $3,800,000$340,000 was incurred in the first nine months of 2010.  We expect total expenses for Anturol® to be approximately $5,000,000 in 2010.  The additional costs relate to the Phase III study closeout costs, safety study costs, NDA compilation costs and manufacturing related costs.2011.

We intend to seek a marketing partner to help fund the development of Anturol® and to commercially launch Anturol® if approved by the FDA.  To date, we have not entered into an agreement with a marketing partner.

Device Development Projects.  We are engaged in research and development activities related to our Vibex™ disposable pressure-assisted auto injectors and our disposable pen injectors.  We have signed license agreements with Teva for our Vibex™ system for use with epinephrine and an undisclosed product and for our pen injector device for two undisclosed products.  We are also developing a Vibex MTX™ autoinjectorVibex™ MTX auto injector for delivery of methotrexate for treatment of rheumatoid arthritis.  Our pressure-assisted auto injectors are designed to deliver drugs by injection from single-dose prefilled syringes.  The auto injectors are in the advanced commercial stage of development.  The disposable pen injector device is designed to deliver drugs by injection through needles from multi-dose cartridges.  The disposable pen is in the early stage of development where devices are being evaluated in clinical studies.  Our development programs consist of the determination of the device design, development of prototype tooling, production of prototype devices for testing and clinical studies, performance of clinical studies, and development of commercial tooling and assembly.

In the secondfirst quarter of 2011, we initiated a clinical study evaluating our proprietary Vibex™ MTX methotrexate injection system being developed for the treatment of rheumatoid arthritis.  The clinical study will evaluate several dose strengths of methotrexate delivered with our proprietary Vibex™ autoinjector versus conventional needle and syringe administration by a healthcare professional.  In 2010, we entered into an agreement with Uman Pharma under which both companies will invest jointly to develop and commercialize Vibex MTX™.Vibex™ MTX.  We will lead the
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clinical development program and FDA regulatory submissions, and will retain rights to commercialize the Vibex MTX™Vibex™ MTX product outside of Canada.  Uman Pharma will perform formulation development and manufacturing activities to support the registration of Vibex MTX™Vibex™ MTX and supply methotrexate in prefilled syringes to us for the U.S. market.  Uman Pharma received an exclusive license to commercialize the
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Vibex MTX™ Vibex™ MTX product in Canada. The companies intend to work together to commercialize the Vibex MTX™Vibex™ MTX product in other territories.

As of September 30, 2010,March 31, 2011, we have incurred total external costs of approximately $5,900,000$7,000,000 in connection with research and development activities associated with our auto and pen injectors, of which approximately $1,500,000$600,000 was incurred in the first nine months of 2010.2011.  Of this amount, approximately $470,000 was incurred in connection with our Vibex™ MTX development program.  We expect spending on this program to be approximately $2,000,000 in 2011.  As of September 30, 2010,March 31, 2011, approximately $4,100,000$4,500,000 of the total costs of $5,900,000$7,000,000 was initially deferred, of which approximately $3,100,000$3,800,000 has been recognized as cost of sales and $1,000,000$650,000 remains deferred.  This remaining deferred balance will be recognized as cost of sales over the same period as the related deferred revenue will be recognized.

The development timelines of the auto and pen injectors related to the Teva products are controlled by Teva.  We expect development related to the Teva products to continue in 2010,2011, but the timing and extent of near-term future development will be dependent on certain decisions made by Teva.  In 2009, we received a payment from Teva in the amount of $4,076,375 in connection with an amendment to a License, Development and Supply Agreement signed in July 2006 related to a fixed, single-dose, disposable injector product containing epinephrine using our Vibex™ auto injector platform. Although this paymentdevelopment work payments and certain upfront and milestone payments have been received from Teva, there have been no commercial sales from the auto injector or pen injector programs, timelines have been extended and there can be no assur anceassurance that there ever will be commercial sales or future milestone payments under these agreements.

Other research and development costs.  In addition to the Anturol® project, the Teva related device development projects and our Vibex MTX™ developmentVibex™ MTX project, we incur direct costs in connection with other research and development projects related to our technologies and indirect costs that include salaries, administrative and other overhead costs of managing our research and development projects.  Total other research and development costs were approximately $2,200,000$900,000 for the nine monthsquarter ended September 30, 2010.March 31, 2011.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, including any arrangements with any structured finance, special purpose or variable interest entities.

Critical Accounting Policies

We have identified certain of our significant accounting policies that we consider particularly important to the portrayal of our results of operations and financial position and which may require the application of a higher level of judgment by management and, as a result, are subject to an inherent level of uncertainty.  These policies are characterized as “critical accounting policies” and address revenue recognition and valuation of long-lived and intangible assets and goodwill, as more fully described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2009.2010.  We have made no changes to these policies during the nine-monththree-month period ended September 30, 2010.March 31, 2011.

Item
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.RISK

Our primary market risk exposure is foreign exchange rate fluctuations of the Swiss Franc to the U.S. dollar as the financial position and operating results of our subsidiaries in Switzerland are translated into
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U.S. dollars for consolidation. Our exposure to foreign exchange rate fluctuations also arises from transferring funds to our Swiss subsidiaries in Swiss Francs. In addition, we have exposure to exchange rate fluctuations between the Euro and the U.S. dollar in connection with the licensing agreement entered into in January 2003 with Ferring, which established pricing in Euros for products sold under the supply agreement and for all royalties.  In March 2007, we amended the 2003 agreement with Ferring, establishing prices in U.S. dollars rather than Euros for certain products, reducing the exchange rate risk.  Most of our sales and licensing fees are denominated in U.S. dollars, thereby significantly mitigating the risk of exchange rate fluctuations on trade receivables. We do not currently use derivative financial instruments to hedge against exchange rate risk. Because exposure increases as intercompany balances grow, we will continue to evaluate the need to initiate hedging programs to mitigate the impact of foreign exchange rate
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fluctuations on intercompany balances.  The effect of foreign exchange rate fluctuations on our financial results for the nine-monththree-month period ended September 30, 2010March 31, 2011 was not material.

Item 4.    CONTROLS AND PROCEDURES.
Item 4.
CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  The evaluation was performed to determine whether the Company’s disclosure controls and procedures have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’ ;sCommission’s rules and is accumulated and communicated to management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are effective.

Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost - -effectivecost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
 
 
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PART II - OTHER INFORMATION

ItemItem 1A.         RISK FACTORS.FACTORS

In addition to the other information contained in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009,2010, which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K are not the only risks facing us.  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.

Item
Item 6.
EXHIBITS.EXHIBITS

(a)               Exhibit Index
 
Exhibit No. Description 
 10.1* Amended and Restated Employment Agreement, dated November 12, 2008, by and between Antares Pharma, Inc. and Dr. Paul K. Wotton.
 31.1  Certificate of the Chief Executive Officer of Antares Pharma, Inc. required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
   
 31.2  Certificate of the Chief Financial Officer of Antares Pharma, Inc. required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
   
 32.1  Certificate of the Chief Executive Officer of Antares Pharma, Inc. required by
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.
   
 32.2  Certificate of the Chief Financial Officer of Antares Pharma, Inc. required by
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.
 
* Indicates management contract or compensatory plan or arrangement.
 
 
 
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SIGNATURES
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Reportreport to be signed on its behalf by the undersigned thereunto duly authorized.



  ANTARES PHARMA, INC.
  
  
November 10, 2010May 9, 2011/s/ Paul K. Wotton
 Dr. Paul K. Wotton
 President and Chief Executive Officer
  
  
 November 10, 2010May 9, 2011/s/ Robert F. Apple 
Robert F. Apple
  Robert F. Apple
Executive Vice President and Chief Financial Officer





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