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.
 
For the quarterly period ended March 31,June 30, 2011
 
Commission File Number 1-32302
 
ANTARES PHARMA, INC.
 
 
  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 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 o Accelerated filer x   Non –accelerated filer o   Smaller reporting company o
   (do not check if a smaller 
        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 May 5,August 3, 2011 was 88,187,014.103,261,724.


 



 
 
 

ANTANARESTARES PHARMA, INC.

INDEX



    PAGE
     
PART I.  FINANCIAL INFORMATION 
     
 Item 1. Financial Statements 
     
   
Consolidated Balance Sheets, as of March 31,June 30, 2011 (Unaudited) and December 31, 2010
3
     
   
Consolidated Statements of Operations (Unaudited) for the three months and six months ended March 31,June 30, 2011 and 2010
4
     
   
Consolidated Statements of Cash Flows (Unaudited) for the threesix months ended March 31,June 30, 2011 and 2010
5
     
   
Notes to Consolidated Financial Statements (Unaudited)
6
     
 Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1112
     
 Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
1618
     
 Item 4. 
Controls and Procedures
1718
     
     
PART II.  OTHER INFORMATION 
     
 Item 1A. 
Risk Factors
1820
     
 Item 6. 
Exhibits
1820
     
   
SIGNATURES
1921
     

 
2

Table of Contents
 
PART I – FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

ANTARESANTARES PHARMA, INC.
CONSOLIDATED BALANCE SHEETS


 March 31,  December 31,  June 30, December 31, 
 2011  2010  2011 2010 
 (Unaudited)     (Unaudited)   
Assets           
Current Assets:           
Cash and cash equivalents $13,066,373  $9,847,813  $33,327,248 $9,847,813 
Accounts receivable 1,606,796  1,245,560  1,301,296 1,245,560 
Inventories 335,026  272,463  422,185 272,463 
Deferred costs 655,481  915,689  1,077,838 915,689 
Prepaid expenses and other current assets  254,738   193,985   217,571  193,985 
Total current assets 15,918,414  12,475,510  36,346,138 12,475,510 
           
Equipment, molds, furniture and fixtures, net 406,748  327,535  463,340 327,535 
Patent rights, net 838,746  803,426  943,466 803,426 
Goodwill 1,095,355  1,095,355  1,095,355 1,095,355 
Deferred costs -  408,250  - 408,250 
Other assets  31,309   31,226   31,750  31,226 
Total Assets $18,290,572  $15,141,302  $38,880,049 $15,141,302 
           
Liabilities and Stockholders’ Equity           
Current Liabilities:           
Accounts payable $1,972,744  $1,773,259  $2,285,439 $1,773,259 
Accrued expenses and other liabilities 673,233  1,818,769  1,140,667 1,818,769 
Deferred revenue  3,841,278   3,080,062   3,250,516  3,080,062 
Total current liabilities 6,487,255  6,672,090  6,676,622 6,672,090 
           
Deferred revenue – long term  1,013,760   1,842,594   869,195  1,842,594 
Total liabilities  7,501,015   8,514,684   7,545,817  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;           
87,803,938 and 84,157,865 issued and outstanding at      
March 31, 2011 and December 31, 2010, respectively 878,039  841,579 
103,061,099 and 84,157,865 issued and outstanding at     
June 30, 2011 and December 31, 2010, respectively 1,030,611 841,579 
Additional paid-in capital 148,833,707  143,318,671  170,745,678 143,318,671 
Accumulated deficit (138,354,428) (136,973,795) (139,908,525) (136,973,795)
Accumulated other comprehensive loss  (567,761)  (559,837)  (533,532)  (559,837)
  10,789,557   6,626,618   31,334,232  6,626,618 
Total Liabilities and Stockholders’ Equity $18,290,572  $15,141,302  $38,880,049 $15,141,302 



See accompanying notes to consolidated financial statements.

 
3

ANTANTARES ARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
 For the Three Months Ended March 31,  
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
 
 2011   2010  2011 2010 2011 2010 
Revenue:                
Product sales $1,405,126   $1,326,052  $2,218,536 $1,151,978 $3,623,662 $2,478,030 
Development revenue 1,056,460   805,247  716,258 497,195 1,772,718 1,302,442 
Licensing revenue 366,237   836,073  118,789 1,043,845 485,026 1,879,918 
Royalties  741,724    396,714   489,290  357,969  1,231,014  754,683 
Total revenue 3,569,547   3,364,086   3,542,873  3,050,987  7,112,420  6,415,073 
                
Cost of revenue:                
Cost of product sales 711,797   656,460  1,001,610 592,365 1,713,407 1,248,825 
Cost of development revenue  741,044    658,519   391,679  403,596  1,132,723  1,062,115 
Total cost of revenue  1,452,841    1,314,979   1,393,289  995,961  2,846,130  2,310,940 
Gross profit  2,116,706    2,049,107   2,149,584  2,055,026  4,266,290  4,104,133 
                
Operating expenses:                
Research and development 1,749,336   2,085,825  1,946,331 2,242,788 3,695,667 4,328,613 
Sales, marketing and business development 288,794   330,521  523,073 241,278 811,867 571,799 
General and administrative  1,490,106    1,217,632   1,276,575  1,121,957  2,766,681  2,339,589 
  3,528,236    3,633,978   3,745,979  3,606,023  7,274,215  7,240,001 
                
Operating loss  (1,411,530)   (1,584,871)  (1,596,395)  (1,550,997)  (3,007,925)  (3,135,868)
                
Other income (expense) 30,897   (24,072) 42,298 (1,257) 73,195 (25,329)
                      
Net loss $(1,380,633)  $ (1,608,943) $(1,554,097) $(1,552,254) $(2,934,730) $(3,161,197)
                
Basic and diluted net loss per common share $(0.02)  $ (0.02) $(0.02) $ (0.02) $(0.03) $(0.04)
                
Basic and diluted weighted average common shares outstanding  85,719,683    82,265,477   95,157,098  82,912,179  90,464,458  82,592,824 





See accompanying notes to consolidated financial statements.

 
4







ANTANARESTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 

 For the Three Months Ended March 31,  For the Six Months Ended June 30, 
 2011   2010  2011 2010 
Cash flows from operating activities:            
Net loss $ (1,380,633)  $ (1,608,943) $ (2,934,730) $ (3,161,197)
Adjustments to reconcile net loss to net cash used in operating activities:            
Depreciation and amortization 40,530   44,238  76,878 88,708 
Gain on sale of equipment, molds, furniture and fixtures (30,000) (14,980)
Stock-based compensation expense 471,646   332,617  909,227 565,705 
Changes in operating assets and liabilities:            
Accounts receivable (364,789)  (202,438) (59,229) 801,466 
Inventories (62,563)  17,013  (149,722) (61,688)
Prepaid expenses and other current assets (60,686)  21,217  (21,321) 55,687 
Deferred costs 668,458   114,566  246,101 324,607 
Accounts payable 200,033   140,963  509,966 (702,299)
Accrued expenses and other current liabilities (1,147,120)  (90,666) (777,867) (28,422)
Deferred revenue  (72,182)   (1,151,766)  (827,879)  (1,689,494)
Net cash used in operating activities  (1,707,306)   (2,383,199)  (3,058,576)  (3,821,907)
            
Cash flows from investing activities:            
Purchases of equipment, molds, furniture and fixtures (97,910)  (11,277) (171,745) (40,434)
Additions to patent rights  (46,554)   (22,743) (113,320) (47,136)
Proceeds from sales of equipment, molds, furniture and fixtures
  30,000  14,980 
Net cash used in investing activities  (144,464)   (34,020)  (255,065)  (72,590)
            
Cash flows from financing activities:            
Proceeds from exercise of stock options and warrants  5,079,851    412,817  5,518,700 1,692,826 
Proceeds from sale of common stock
  21,280,849  - 
Net cash provided by financing activities  5,079,851    412,817   26,799,549  1,692,826 
            
Effect of exchange rate changes on cash and cash equivalents  (9,521)   (8,722)  (6,473)  85,323 
            
Net increase (decrease) in cash and cash equivalents 3,218,560   (2,013,124) 23,479,435 (2,116,348)
Cash and cash equivalents:            
Beginning of period  9,847,813    13,559,088   9,847,813  13,559,088 
End of period $13,066,373   $11,545,964  $33,327,248 $11,442,740 
            









See accompanying notes to consolidated financial statements

 
5

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

1.DescriptonDescription 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.

 
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 products 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.

 
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®, 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.  In July 2011, the Company entered into a licensing agreement with Watson Pharmaceuticals, Inc. (“Watson”) under which Watson will commercialize Anturol®, once approved.  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 operatingtwo facilities in the U.S.  and Switzerland.  The U.S. operationParenteral Products division located in Minneapolis, Minnesota directs the manufacturing and marketing of 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,Ewing, New Jersey, where pharmaceutical products are developed utilizing both the Company’s transdermal systems.systems and drug/device combination products.  The Company’s corporate offices are also 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 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

6 

ended December 31, 2010.  Operating results for the threesix months ended March 31,June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
6

3.Stockholders' Equity
 
Common Stock

In May 2011, the Company received gross proceeds of $23,000,000 from the sale of shares of its common stock in a public offering.  The Company sold a total of 14,375,000 shares of common stock at a price of $1.60 per share.

 Warrant and stock option exercises in the first threesix months of 2011 and 2010 resulted in proceeds of $5,079,851$5,518,700 and $412,817,$1,692,826, respectively, and in the issuance of 3,424,6344,188,383 and 570,5001,531,101 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 they vest in varying periods.  In May 2011, the shareholders approved an amendment to the Plan to increase the maximum number of shares authorized for issuance by 2,000,000 to 13,500,000 from 11,500,000.  As of March 31,June 30, 2011, the Plan had 1,137,5062,117,880 shares available for grant.  The number of shares available for grant does not take into consideration potential stock awards that could result in the issuance of shares of common stock if certain performance conditions are met, discussed under “Stock Awards” below.  Stock option exercises are satisfied through the issuance of new shares.

A summary of stock option activity under the Plan as of March 31,June 30, 2011, and the changes during the threesix 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, 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
  
 
 
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  799,614   1.65       
Exercised  (528,736)  1.24       
Cancelled  (69,550)  3.96       
Outstanding at June 30, 2011  7,859,204   1.20   7.1   8,227,425 
Exercisable at June 30, 2011  5,771,353   1.13   6.4   6,469,500 

During the first threesix months of 2011 and 2010 the Company granted options to purchase a total of 75,000799,614 and 200,000552,487 shares of its common stock, respectively.  The options were granted at weighted average exercise prices of $1.58$1.65 and $1.30$1.49 in 2011 and 2010, respectively,respectively.  All options were granted at exercise prices which equaled the fair value of the Company’s common stock on the dates of the grants.
7

Total recognized compensation expense for stock options was approximately $230,000$466,000 and $274,000$446,100 for the first threesix months of 2011 and 2010, respectively.  As of March 31,June 30, 2011, there was approximately $930,000$1,246,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately two years.

The per share weighted average fair value of options granted during the first threesix months of 2011 and 2010 were estimated as $0.82$0.84 and $0.70$0.79 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.

 March 31,  June 30, 
 2011  2010  2011  2010 
Risk-free interest rate 2.2% 2.5% 1.9% 2.2%
Annualized volatility 59.0% 61.0% 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 quartersix months 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 800,000 warrants with an exercise price of $0.80 were exercised under a cashless provision resulting in the issuance of 417,513 shares of common stock.   3,502,016 warrants with an exercise price of $1.50 expired unexercised.  Warrants to purchase a total of 10,940,90910,140,909 shares of common stock were outstanding at March 31,June 30, 2011.  The weighted average exercise price of the warrants was $1.60.$1.66.

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

Stock Awards

The employment agreements or performance stock bonus agreements with the Chief Executive Officer, Chief Financial Officer and othercertain members of executive management include stock-based incentives under which the executives could be awarded shares of the Company’s common stock upon the occurrence of various triggering events.  As of March 31,June 30, 2011, potential future awards under these agreements totaled approximately 425,000 shares of common stock.  There were 72,727 and 22,72745,454 shares awarded under these agreements in the first threesix months of 2011 and 2010, 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 136,267221,267 and 170,768 shares of common stock were granted as stock awards in the first quarterssix months of 2011 and 2010, respectively.  As of March 31,June 30, 2011, a total of 181,604192,114 shares granted in prior periods were unvested.  Expense is recognized on a straight line basis over the vesting period and is based on the fair value of the stock on the grant date.  The fair value of 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 $241,000$420,000 and $52,000$103,000 in the first quarterssix months of 2011 and 2010, respectively.  The weighted average fair value of the shares granted in 2011 and 2010 was $1.58$1.63 and $1.30 per share, respectively.

Long Term Incentive Program

On May 17, 2011, the Board of Directors of the Company approved a new long term incentive program for the benefit of its executive officers.  Pursuant to the long term incentive program, the Company’s executive officers were awarded stock options and performance stock units with a value targeted at the median level of the Company’s peer group as disclosed in its 2011 definitive proxy statement.  Two thirds of that value for each officer is delivered in the form of stock options and one third of that value is delivered in the form
8
of performance stock units.  A total of 317,000 options were granted on May 17, 2011 under this program.  The stock options (i) have a ten-year term, (ii) have an exercise price equal to the closing price of the Company’s common stock, as reported on AMEX, on the date of grant ($1.66), (iii) vest in quarterly installments over three years, and (iv) were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan. The performance stock unit awards made to the executive officers will be vested and convert into actual shares of the Company’s common stock based on the Company’s attainment of certain performance goals measured over the three-year period beginning January 1, 2011 and ending December 31, 2013 and the executive officer’s continued employment with the Company through that period.  Each performance criterion has levels of achievement designated as threshold; target and maximum with 50% of the performance stock units vesting if the threshold level is achieved; 100% of the of the performance stock units vesting if the target level is achieved and 150% of the performance stock units vesting if the maximum level is achieved.  A total of 182,000 performance stock units were awarded at the target level.  In the event that the actual performance level achieved does not meet threshold performance (i.e., less than 50%) for an applicable performance measure, then no performance stock units will be earned and vested for that performance measure.  Threshold level performance may be achieved for one performance measure and not another based on the Company’s actual performance during the three year performance period.

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 their effect was anti-dilutive totaled 18,421,73518,000,113 and 26,228,39325,404,379 at March 31,June 30, 2011 and 2010, 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
June 30,
  
Six Months Ended
June 30,
 
  2011  2010  2011  2010 
Net loss $ (1,554,097) $ (1,552,254) $ (2,934,730) $ (3,161,197)
Basic and diluted weighted average common shares outstanding  95,157,098   82,912,179   90,464,458   82,592,824 
Basic and diluted net loss per common share $ (0.02) $ (0.02) $ (0.03) $ (0.04)
8

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:
 
   
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
  
June 30,
2011
  
December 31,
2010
 
United States of America $38,240,964  $14,353,760 
Switzerland  639,085   787,542 
  $38,880,049  $15,141,302 


9
Revenues by customer location are summarized as follows:
 
   
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
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
  2011  2010  2011  2010 
United States of America $1,574,070  $1,546,161  $3,813,453  $3,246,336 
Europe  1,797,142   1,408,261   3,030,903   2,955,195 
Other  171,661   96,565   268,064   213,542 
  $3,542,873  $3,050,987  $7,112,420  $6,415,073 

 Significant customers comprising 10% or more of total revenue are as follows:
 
   
For the Three Months Ended
March 31,
   2011 2010
 Teva $2,132,841 $1,328,038
 Ferring  1,233,762  1,526,937
  
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
  2011 2010 2011 2010 
Ferring $1,773,561  $1,389,163  $3,007,323  $2,916,101 
Teva  1,441,227   1,335,267   3,574,068   2,663,305 

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)
  
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
  2011 2010 2011 2010 
Net loss $(1,554,097) $(1,552,254) $(2,934,730) $(3,161,197)
Change in cumulative
translation adjustment
  34,229   67,095   26,305   85,138 
Comprehensive loss $(1,519,868) $(1,485,159) $(2,908,425) $(3,076,059)

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
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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 threesix months ended March 31,June 30, 2011, the accounting change due toresulting from the material modification resulted in recognition of development and
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licensing revenue previously deferred of $304,600 and $274,444,$295,555, respectively, and recognition of costs previously deferred of $408,250.

8.           New Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2010-06 (ASU 2010-06)("ASU 2010-06"), Fair Value Measurements and Disclosures (Topic 820), “Improving Disclosures about Fair Value Measurements.”  ASU 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 interim 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 after December 15, 2010.  The adoption of ASU 2010-06 did not have an impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued authoritative 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 recent guidance discusses the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. The guidance is effective for fiscal years and interim periods within those years beginning on or after June 15, 2010, with early adoption permitted.  This guidance was effective for us on January 1, 2011.  Adoption of this guidance has not had a material impact on the Company’s consolidated financial statements

9.           Subsequent Event

On July 11, 2011, the Company announced with Watson Pharmaceuticals, Inc. (“Watson”) an exclusive licensing agreement for Watson to commercialize the Company’s topical oxybutynin gel product, Anturol®, in the U.S. and Canada.  A New Drug Application for Anturol® is currently under review by the Food and Drug Administration ("FDA"). The FDA has assigned a Prescription Drug User Fee Act ("PDUFA") date of December 8, 2011.

Under terms of the agreement, Watson will make milestone payments based on the achievement of regulatory approval and certain sales levels, and will also be responsible for certain manufacturing start-up activities. Upon launch of the product, the Company will receive escalating royalties based on product sales in the U.S. and Canada.

 
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ItemItem 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, regulatory or competitive environments, our intellectual property and product development.  In particular, these forward-looking statements include, among others, statements about:

·  the impact of new accounting pronouncements;

·  
our expectations regarding the product development manufacturing and partneringmanufacturing 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 the year ending December 31, 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.conditions; and

·  the impact of new accounting pronouncements.

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

·  delays in product introduction and marketing or interruptions in supply;
 
·  
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 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
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·  our inability to effectively market our services or obtain and maintain arrangements with our customers, partners and manufacturers.

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In addition, you should refer to the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2010 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, with Teva and Ferring being our two primary customers.  Teva uses our needle-free injection device with the Tjet® injector system to administer Teva’s Tev-Tropin® brand 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 and we are engaged in product development activities for Teva utilizing these devices.  We are currently developing commercial tooling and automation equipment for Teva related to a fixed, single-dose, disposable injector product 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 received 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 overactive bladder (OAB)("OAB").  The NDA submission was supported by a Phase 3 clinical trial.  In July 2011, we entered into a licensing agreement with Watson Pharmaceuticals, Inc. (“Watson”) under which Watson will commercialize Anturol®, once approved.  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.S. for the treatment of moderate-to-severe vasomotor symptoms associated with menopause.

We have operatingtwo facilities in the U.S.  and Switzerland.  Our U.S. operationParenteral Products division located in Minneapolis, Minnesota directs the manufacturing and marketing 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,Ewing, New Jersey, where pharmaceutical products are developed utilizing both our transdermal systems.systems and drug/device combination products.  Our corporate offices are also located in Ewing, New Jersey.
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We incurred a net loss of $1,380,633$2,934,730 for the three-monthsix-month period ended March 31,June 30, 2011 and have accumulated aggregate net losses from the inception of business through March 31,June 30, 2011 of $138,354,428.$139,908,525.  At March 31,June 30, 2011 we had a cash
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balance of $13,066,373.$33,327,248.  We believe that the combination of our current cash and cash equivalents balance, our projected product sales, product development revenue, license revenues, milestone payments and royalties will provide us with sufficient funds to support operations for at least the next 1224 months.

Results of Operations

Three and Six Months Ended March 31,June 30, 2011 and 2010

Revenues

Total revenuerevenues for the three monthsand six-month periods ended March 31,June 30, 2011 was $3,569,547were $3,542,873 and $7,112,420, respectively, compared to $3,364,086revenues for the same prior-year periods of $3,050,987 and $6,415,073, respectively.  Product revenue was $2,218,536 and $3,623,662 in the same period of the prior year.  Product sales were $1,405,126three and $1,326,052six-month periods ended June 30, 2011, respectively, compared to $1,151,978 and $2,478,030, in the first quarters of 2011three and six-month periods ended June 30, 2010, respectively.  Product sales include sales of reusable needle-free injector devices and disposable components, and repairs.components. Our product sales are generated primarily from 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 uses our needle-free injector with the Tjet® injector system to administer their Tev-Tropin® brand hGH marketed in the U.S.   The increase in product sales was primarily due to an increase inProduct sales to Ferring.both Ferring and Teva increased in the three and six-month periods ended June 30, 2011 compared to the same periods of 2010.

Development revenue was $1,056,460$716,258 and $1,772,718 in the first quarter ofthree and six-month periods ended June 30, 2011, respectively, compared to $805,247$497,195 and $1,302,442 in the first quartersame periods of 2010.the prior year.  The revenue in the first quartersix months 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 quarterhalf of 2011, we recognized $304,600 of previously deferred development revenue in connection with an amendment, in the first quarter of 2011, to a license, development and supply 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 quarterhalf of 2010 was primarily due to auto injector development work for Teva.

Licensing revenue was $366,237$118,789 and $485,026 in the first quarter ofthree and six-month periods ended June 30, 2011, respectively, compared to $836,073$1,043,845 and $1,879,918 in the first quartersame periods of 2010.  The licensing revenue in the first quarterthree and six-month periods ended June 30, 2011 included recognition of 2011revenue previously deferred in connection with license agreements with Teva, Ferring and BioSante, but in the six-month period licensing revenue was primarily due to $274,444$295,555 of revenue previously deferred that was recognized as a result of the amended license, development and supply agreement with Teva for a disposable pen injector, as discussed in Note 7 to the consolidated financial statements.  The 2010 licensing revenue was primarily due to recognition of revenue deferred in 2009 under an exclusive license agreement with Ferring, in addition to milestone payments received from Teva in connection with an existing license agreement with BioSante.the second quarter of 2010 and BioSante in the first quarter of 2010.

Royalty revenue was $741,724$489,290 and $1,231,014 in the first quarter ofthree and six-month periods ended June 30, 2011, respectively, compared to $396,714$357,969 and $754,683 in the first quarter of 2010.same prior-year periods.  The increase wasincreases were primarily due to royalties received from Ferring in connection with an increase in device sales and Teva in connection with an increase in sales of their hGH Tev-Tropin®.

Cost of Revenues and Gross Margins

The cost of product sales are primarilyis related to our reusable needle free injection devices and disposable components.  For the three-month periodthree and six-month periods ended March 31,June 30, 2011, cost of product sales was $711,797$1,001,610 and $1,713,407, respectively, compared to $656,460$592,365 and $1,248,825 for the same periodperiods of the prior year.  GrossProduct gross margins were 55% and 49% and 50% in three monthsthree-month periods ended March 31,June 30, 2011 and 2010, respectively, and were 53% and 50% for the six-month periods ended June 30, 2011 and 2010, respectively.  The product gross margin increase of 6% in the quarter was primarily due to approximately 4% from a significant increase in sales volume in 2011 compared to 2010 while fixed overhead expenses in each respective period were relatively unchanged, in addition to
14
approximately 2% from selling price increases.   The gross margin increase to 53% in the first six months of 2011 compared to 50% in the first six months of 2010 was primarily due to selling price increases.

The cost of development revenue consists primarily of direct external costs, some of which may have been previously incurred and deferred.  Cost of development revenue was $741,044$391,679 and $658,519$1,132,723 for the first quarters ofthree and six-month periods ended June 30, 2011, respectively, compared to $403,596 and 2010, respectively.$1,062,115 for the same prior-year periods.  In the first quarterhalf of 2011, $408,250 was recognized as a result of the amended license, development and supply agreement with Teva for a disposable pen injector, as discussed in Note 7 to the consolidated financial statements.  The remaining development costs in the first quarterhalf of 2011 were due to auto injector and pen injector development work for Teva.  The development costs in the first quarterhalf 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.   Research and development expenses were $1,749,336$1,946,331 and $2,085,825$3,695,667 in the three monthsand six-month periods ended March 31,June 30, 2011, respectively, compared to $2,242,788 and 2010, respectively.$4,328,613 in the same periods of the prior year.  The decrease in the first quarter ofthree and six-month periods ended June 30, 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 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 the first quarter ofthree and six-month periods ended June 30, 2011 from over 75% in the first quartersame periods of 2010.  Partially offsetting this decrease was an increase in expenses related to the initiationdevelopment of a clinical study evaluating our proprietary Vibex™ MTX autoinjector for delivery of methotrexate for the treatment of rheumatoid arthritis, along with an increase in personnel costs due to employee additions.

Sales, Marketing and Business Development

Sales, marketing and business development expenses totaled $288,794$523,073 and $330,521$811,867 for the three monthsand six-month periods ended March 31,June 30, 2011, and 2010, respectively.  The decrease in 2011respectively, compared to 2010 was$241,278 and $571,799 in the same prior-year periods.  The increases in each period were primarily due to increases in legal costs in connection with potential partner agreements and professional fees related to decreasesmarket research, along with increases in professional and legal fees.payroll related expenses, much of which was noncash stock compensation expense.

General and Administrative

General and administrative expenses totaled $1,490,106$1,276,575 and $1,217,632$2,766,681 in the three monthsand six-month periods ended March 31,June 30, 2011, respectively, compared to $1,121,957 and 2010, respectively.$2,339,589 in the same periods of the prior year. The increase wasincreases in each period were primarily due to increases in patent related expenses professional fees and payroll related expenses, primarily noncash stock compensation expenses.expense.

Other Income (Expense)

In the first quarter of 2011 we reported net otherOther income of $30,897was $42,298 and $73,195 in the first quarter of 2010 we reported netthree and six-month periods ended June 30, 2011, respectively, compared to other expense of $24,072.$1,257 and $25,329 in the same periods of the prior year.  The change waschanges in the periods were primarily due to recognition ofchanges in foreign exchange gains and losses and increases in interest income in 2011 compared to foreign exchange losses in 2010.

Liquidity and Capital Resources

At March 31,June 30, 2011, we had cash and cash equivalents of $13,066,373.$33,327,248.  In May 2011, we received gross proceeds of $23,000,000 from the sale of shares of our common stock in a public offering.  We sold a total of 14,375,000 shares of common stock at a price of $1.60 per share.  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 1224 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
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Cash Flows

Net Cash Used in Operating Activities

Net cash used in operating activities was $1,707,306$3,058,576 and $2,383,199$3,821,907 for the threesix months ended March 31,June 30, 2011 and 2010, respectively.  The decrease in cash used in operating activities in the first quartersix months of 2011 compared to 2010 was primarily due to a decrease in the net loss along with an increase in noncash expenses, both from stock based compensation expense and from costs incurred and deferred in previous periods that were recognized as expense in the current period.



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expenses.

Net Cash Used in Investing Activities

Net cash used in investing activities was $144,464$255,065 in the first threesix months of 2011 compared to $34,020$72,590 in the first threesix months of 2010.  Cash used for purchases of equipment, molds, furniture and fixtures was $97,910$171,745 in 2011 compared to $11,277$40,434 in 2010 and additions to patent rights was $46,554$113,320 in 2011 compared to $22,743$47,136 in 2010.

Net Cash Provided by Financing Activities

Net cash provided by financing activities in the first threesix months of 2011 and 2010 was $5,079,851$26,799,549 and $412,817, respectively, which$1,692,826, respectively.  The increase in 2011 was primarily due to net proceeds of $21,280,849 received in May 2011 from the sale of 14,375,000 shares of our common stock at $1.60 per share in a public offering.   In addition, we received proceeds of $5,518,700 in the first six months of 2011 from the exercise of stock3,242,134 warrants with an exercise price of $1.50 resulting in proceeds of $4,863,201 and 528,736 options and warrants.resulting in proceeds of $655,499.  In the first quarterhalf of 2011, 3,242,1342010, 276,250 warrants with an exercise price of $1.50 were exercised resulting in proceeds of $4,863,201$414,375 and 182,5001,254,851 options were exercised resulting in proceeds of $216,650.  In the first quarter of 2010, 570,500 options were exercised resulting in proceeds of $412,817.$1,278,451.

 
Research and Development Programs

Our current research and development activities are primarily related to Anturol®, Vibex™ MTX and device development projects.

Anturol®.  We received 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 was completed in the fourth quarter of 2010.  There is no assurance that the FDA will ultimately approve Anturol®, and without FDA approval we cannot market or sell, Anturol® cannot be marketed or sold 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®.  With Patheon, we have completed limited commercial scale up activities associated with Anturol® manufacturing.

As of March 31,June 30, 2011, we have incurred total external costs of approximately $18,120,000$18,450,000 in connection with our Anturol® research and development, of which approximately $340,000$670,000 was incurred in 2011.

We intend to seekIn July 2011, we entered into a marketing partner to commercially launchlicense agreement with Watson under which Watson will commercialize Anturol® if approved, once approved.

Vibex™ MTX.  We are developing Vibex™ MTX auto injector for delivery of methotrexate for treatment of rheumatoid arthritis.  In the first quarter of 2011, we initiated a clinical study evaluating our proprietary Vibex™ MTX methotrexate injection system.  The clinical study evaluated several dose strengths of methotrexate delivered with our Vibex™ autoinjector versus conventional needle and syringe administration by the FDA.  To date,a healthcare professional.  In 2010, we have not entered into an agreement with a marketing partner.Uman Pharma under which both companies will invest jointly to develop
16
and commercialize Vibex™ MTX.  We will lead the clinical development program and FDA regulatory submissions, and will retain rights to commercialize the Vibex™ MTX product outside of Canada.  Uman Pharma will perform formulation development and manufacturing activities to support the registration of Vibex™ MTX and supply methotrexate in prefilled syringes to us for the U.S. market.  Uman Pharma received an exclusive license to commercialize the Vibex™ MTX product in Canada. The companies intend to work together to commercialize the Vibex™ MTX product in other territories.  As of June 30, 2011, we have incurred external costs of approximately $1,800,000 in connection with our Vibex™ MTX development program, of which approximately $1,250,000 was incurred in 2011.  We expect spending on this program to be approximately $2,000,000 in 2011.

Device Development Projects.  We are also 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 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 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.  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.  We will lead the
15
clinical development program and FDA regulatory submissions, and will retain rights to commercialize the Vibex™ MTX product outside of Canada.  Uman Pharma will perform formulation development and manufacturing activities to support the registration of Vibex™ MTX and supply methotrexate in prefilled syringes to us for the U.S. market.  Uman Pharma received an exclusive license to commercialize the Vibex™ MTX product in Canada. The companies intend to work together to commercialize the Vibex™ MTX product in other territories.

As of March 31,June 30, 2011, we have incurred total external costs of approximately $7,000,000 in connection with research and development activities associated with our auto and pen injectors, of which approximately $600,000$1,100,000 was incurred in 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 March 31,June 30, 2011, approximately $4,500,000$5,300,000 of the total costs of $7,000,000 was initially deferred, of which approximately $3,800,000$4,300,000 has been recognized as cost of sales and $650,000$1,000,000 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 2011, but the timing and extent of near-term future development will be dependent on certain decisions made by Teva.  Although development 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 assurance that there ever will be commercial sales or future milestone payments under these agreements.

Other research and development costs.  In addition to the Anturol® project, our Vibex™ MTX project and the Teva related device development projects, and our Vibex™ 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 $900,000$1,800,000 for the quartersix months ended March 31,June 30, 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, 2010.  We have made no changes to these policies during the three-monthsix-month period ended March 31,June 30, 2011.
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Recently Issued Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), “Presentation of Comprehensive Income.”  Under ASU 2011-05 an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.  ASU 2011-05 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011.  Because ASU 2011-05 impacts presentation only, it will have no effect on our consolidated financial statements or on our financial condition.

In May 2011, the FASB issued updated accounting guidance related to fair value measurements and disclosures that result in common fair value measurements and disclosures between Generally Accepted Accounting Principles and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, while other amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2011. The new guidance is to be adopted prospectively and early adoption is not permitted.  We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

ItemItem 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure is foreign exchange rate fluctuations of the Swiss Franc to the U.S. dollar as the financial position and operating results of our subsidiaries in Switzerland are translated into U.S. dollars for consolidation. Our exposure to foreign exchange rate fluctuations also arises from transferring funds to our Swiss subsidiaries in Swiss Francs.  In addition, we have exposure to exchange rate fluctuations between the Euro and the U.S. dollar in connection with thea 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 forunder which certain products reducing the exchange rate risk.sold to Ferring and royalties are denominated in Euros.  Most of our product sales, including a portion of our product sales to Ferring, and our development and licensing fees and royalties 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 three-monthsix-month period ended March 31,June 30, 2011 was not material.

ItemItem 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’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.


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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-effective control system, misstatements due to error or fraud may occur and not be detected.


 
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PART II - OTHER INFORMATION

Itemtem 1A.         RISK 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, 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.
 
ItItem 6.
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 report to be signed on its behalf by the undersigned thereunto duly authorized.


ANTARES PHARMA, INC.

   
August 8, 2011   ANTARES PHARMA, INC.
May 9, 2011/s//s/ Paul K. Wotton
  Dr. Paul K. Wotton
  President and Chief Executive Officer
   
   
May 9,August 8, 2011 /s/  /s/ Robert F. Apple
  Robert F. Apple
  
Executive Vice President and Chief Financial Officer
 



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