0001564590-19-015362.txt : 20190502 0001564590-19-015362.hdr.sgml : 20190502 20190502162843 ACCESSION NUMBER: 0001564590-19-015362 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 46 CONFORMED PERIOD OF REPORT: 20190331 FILED AS OF DATE: 20190502 DATE AS OF CHANGE: 20190502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTARES PHARMA, INC. CENTRAL INDEX KEY: 0001016169 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 411350192 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32302 FILM NUMBER: 19792338 BUSINESS ADDRESS: STREET 1: 100 PRINCETON SOUTH STREET 2: SUITE 300 CITY: EWING STATE: NJ ZIP: 08628 BUSINESS PHONE: 609-359-3020 MAIL ADDRESS: STREET 1: 100 PRINCETON SOUTH STREET 2: SUITE 300 CITY: EWING STATE: NJ ZIP: 08628 FORMER COMPANY: FORMER CONFORMED NAME: ANTARES PHARMA INC DATE OF NAME CHANGE: 20060120 FORMER COMPANY: FORMER CONFORMED NAME: ANTARES PHARMA INC DATE OF NAME CHANGE: 20020520 FORMER COMPANY: FORMER CONFORMED NAME: ANTARES PHARMA INC /MN/ DATE OF NAME CHANGE: 20010604 10-Q 1 atrs-10q_20190331.htm 10-Q atrs-10q_20190331.htm

 

 

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, 2019

Commission File Number 1-32302

 

ANTARES PHARMA, INC.

 

 

A Delaware Corporation

 

IRS Employer Identification No. 41-1350192

100 Princeton South, Suite 300

Ewing, New Jersey 08628

(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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non–accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

  

Emerging growth company

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of April 30, 2019 was 162,619,811.

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

ATRS

 

NASDAQ

 

 

 

 

 


 

ANTARES PHARMA, INC.

INDEX

 

 

 

 

 

 

 

PAGE

 

 

 

 

 

 

 

PART I.

 

 

 

FINANCIAL INFORMATION

 

3

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets, as of March 31, 2019 (Unaudited) and December 31, 2018

 

3

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2019 and 2018 (Unaudited)

 

5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2019 and 2018 (Unaudited)

 

6

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (Unaudited)

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

23

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

PART II.

 

 

 

OTHER INFORMATION

 

24

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

 

 

 

 

 

 

 

 

 

Item 3.

 

Default Upon Senior Securities

 

24

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

24

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

24

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

25

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

26

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

ANTARES PHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,238

 

 

$

27,892

 

Accounts receivable

 

 

29,772

 

 

 

18,976

 

Inventories

 

 

13,378

 

 

 

11,350

 

Contract assets

 

 

9,445

 

 

 

10,442

 

Prepaid expenses and other current assets

 

 

3,657

 

 

 

2,648

 

Total current assets

 

 

79,490

 

 

 

71,308

 

Equipment, molds, furniture and fixtures, net

 

 

15,100

 

 

 

14,895

 

Right-of-use assets

 

 

1,910

 

 

 

 

Intangibles, net

 

 

688

 

 

 

831

 

Goodwill

 

 

1,095

 

 

 

1,095

 

Other assets

 

 

502

 

 

 

148

 

Total Assets

 

$

98,785

 

 

$

88,277

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

15,622

 

 

$

11,135

 

Accrued expenses and other liabilities

 

 

11,844

 

 

 

11,997

 

Long-term debt, current portion

 

 

4,933

 

 

 

3,043

 

Lease liabilities, current portion

 

 

866

 

 

 

 

Deferred revenue

 

 

1,537

 

 

 

1,018

 

Total current liabilities

 

 

34,802

 

 

 

27,193

 

Long-term debt

 

 

20,260

 

 

 

22,083

 

Lease liabilities, long-term

 

 

1,055

 

 

 

 

Total liabilities

 

 

56,117

 

 

 

49,276

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common Stock: $0.01 par; 300,000 shares authorized; 162,528 and

    159,721 issued and outstanding at March 31, 2019 and

   December 31, 2018, respectively

 

 

1,625

 

 

 

1,597

 

Additional paid-in capital

 

 

323,972

 

 

 

314,907

 

Accumulated deficit

 

 

(282,223

)

 

 

(276,800

)

Accumulated other comprehensive loss

 

 

(706

)

 

 

(703

)

 

 

 

42,668

 

 

 

39,001

 

Total Liabilities and Stockholders’ Equity

 

$

98,785

 

 

$

88,277

 

 

See accompanying notes to consolidated financial statements.

 

 

3


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

Product sales

 

$

18,300

 

 

$

10,949

 

Licensing and development revenue

 

 

915

 

 

 

1,285

 

Royalties

 

 

4,071

 

 

 

469

 

Total revenue

 

 

23,286

 

 

 

12,703

 

Cost of revenue:

 

 

 

 

 

 

 

 

Cost of product sales

 

 

10,568

 

 

 

6,536

 

Cost of development revenue

 

 

378

 

 

 

650

 

Total cost of revenue

 

 

10,946

 

 

 

7,186

 

Gross profit

 

 

12,340

 

 

 

5,517

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

2,387

 

 

 

2,900

 

Selling, general and administrative

 

 

14,935

 

 

 

8,236

 

Total operating expenses

 

 

17,322

 

 

 

11,136

 

Operating loss

 

 

(4,982

)

 

 

(5,619

)

Interest expense

 

 

(661

)

 

 

(631

)

Other income

 

 

104

 

 

 

57

 

Net loss

 

$

(5,539

)

 

$

(6,193

)

Basic and diluted net loss per common share

 

$

(0.03

)

 

$

(0.04

)

Basic and diluted weighted average common shares outstanding

 

 

160,446

 

 

 

156,724

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Net loss

 

$

(5,539

)

 

$

(6,193

)

Foreign currency translation adjustment

 

 

(3

)

 

 

10

 

Comprehensive loss

 

$

(5,542

)

 

$

(6,183

)

 

See accompanying notes to consolidated financial statements.

 


5


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(UNAUDITED)

 

 

 

Three Months Ended March 31, 2019

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

December 31, 2018

 

 

159,721

 

 

$

1,597

 

 

$

314,907

 

 

$

(276,800

)

 

$

(703

)

 

$

39,001

 

Issuance of common stock

 

 

2,307

 

 

 

23

 

 

 

7,762

 

 

 

 

 

 

 

 

 

7,785

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

288

 

 

 

3

 

 

 

(411

)

 

 

 

 

 

 

 

 

(408

)

Exercise of options

 

 

212

 

 

 

2

 

 

 

348

 

 

 

 

 

 

 

 

 

350

 

Share-based compensation

 

 

 

 

 

 

 

 

1,366

 

 

 

 

 

 

 

 

 

1,366

 

Cumulative effect of change in

   accounting principle

 

 

 

 

 

 

 

 

 

 

 

116

 

 

 

 

 

 

116

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,539

)

 

 

 

 

 

(5,539

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

March 31, 2019

 

 

162,528

 

 

$

1,625

 

 

$

323,972

 

 

$

(282,223

)

 

$

(706

)

 

$

42,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

December 31, 2017

 

 

156,675

 

 

$

1,567

 

 

$

302,965

 

 

$

(270,285

)

 

$

(700

)

 

$

33,547

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

114

 

 

 

1

 

 

 

(131

)

 

 

 

 

 

 

 

 

(130

)

Exercise of options

 

 

32

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

28

 

Share-based compensation

 

 

 

 

 

 

 

 

985

 

 

 

 

 

 

 

 

 

985

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,193

)

 

 

 

 

 

(6,193

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

10

 

March 31, 2018

 

 

156,821

 

 

$

1,568

 

 

$

303,847

 

 

$

(276,478

)

 

$

(690

)

 

$

28,247

 

 

See accompanying notes to consolidated financial statements.

 

6


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(5,539

)

 

$

(6,193

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,366

 

 

 

985

 

Depreciation and amortization

 

 

678

 

 

 

604

 

Other

 

 

67

 

 

 

63

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,799

)

 

 

(608

)

Inventories

 

 

(2,028

)

 

 

(655

)

Prepaid expenses and other assets

 

 

(1,364

)

 

 

250

 

Contract assets

 

 

997

 

 

 

73

 

Accounts payable

 

 

4,137

 

 

 

550

 

Accrued expenses and other current liabilities

 

 

(25

)

 

 

(99

)

Deferred revenue

 

 

520

 

 

 

(999

)

Net cash used in operating activities

 

 

(11,990

)

 

 

(6,029

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of assets

 

 

 

 

 

2,750

 

Purchases of equipment, molds, furniture and fixtures

 

 

(391

)

 

 

(61

)

Additions to patent rights

 

 

 

 

 

(10

)

Net cash (used in) provided by investing activities

 

 

(391

)

 

 

2,679

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

7,785

 

 

 

 

Proceeds from exercise of stock options

 

 

350

 

 

 

28

 

Taxes paid related to net share settlement of equity awards

 

 

(408

)

 

 

(130

)

Net cash provided by (used in) financing activities

 

 

7,727

 

 

 

(102

)

Effect of exchange rate changes on cash

 

 

 

 

 

1

 

Net decrease in cash and cash equivalents

 

 

(4,654

)

 

 

(3,451

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

27,892

 

 

 

26,562

 

End of period

 

$

23,238

 

 

$

23,111

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Purchases of equipment, molds, furniture and fixtures recorded in accounts payable

   and accrued expenses

 

$

399

 

 

$

173

 

Additions to patent rights recorded in accounts payable and accrued expenses

 

$

 

 

$

6

 

 

See accompanying notes to consolidated financial statements.

 

 

 

7


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

 

 

1.

Description of Business

Antares Pharma, Inc. (“Antares” or the “Company”) is a combination drug device company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  The Company develops and commercializes, for itself or with partners, novel therapeutic products using its advanced drug delivery technology to enhance existing drug compounds and delivery methods. The Company’s intramuscular and subcutaneous injection technology platforms include the VIBEX® and VIBEX® QuickShot® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers and disposable multi-dose pen injectors. The Company has a portfolio of proprietary and partnered commercial products and ongoing product development programs in various stages of development. The Company has formed significant strategic alliances with Teva Pharmaceutical Industries, Ltd. (“Teva”), AMAG Pharmaceuticals, Inc. (“AMAG”) and Pfizer Inc. (“Pfizer”.)

The Company developed and commercialized XYOSTEDTM (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, which was approved by the U.S. Food and Drug Administration (“FDA”) on September 28, 2018 and launched for commercial sale in November 2018. XYOSTEDTM is the only FDA-approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration.

The Company also markets and sells its proprietary product OTREXUP® (methotrexate) injection in the U.S., which is indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis, and was launched for commercial sale in February 2014.  

Through its commercialization partner Teva, the Company sells Sumatriptan Injection USP, indicated in the U.S. for the acute treatment of migraine and cluster headache in adults.  Sumatriptan Injection USP was launched for commercial sale in June 2016.  

In collaboration with AMAG, the Company developed a subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement.  In February 2018, the FDA approved AMAG’s supplemental New Drug Application (“sNDA”) for the Makena® subcutaneous auto injector drug-device combination product, which is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past. The Company is the exclusive supplier of the devices and final assembled and packaged commercial product. AMAG launched the product for commercial sale in the first quarter of 2018.

Through a license, development and supply agreement with Teva, Antares developed and is the exclusive supplier of the device for Teva’s Epinephrine Injection USP, which is indicated for emergency treatment of severe allergic reactions in adults and certain pediatric patients. The product was approved by the FDA in August 2018 and launched for commercial sale in late fourth quarter of 2018.

The Company is also developing two multi-dose pen injector products in collaboration with Teva, a combination drug device rescue pen in collaboration with Pfizer, and has other ongoing internal research and development programs.

 

 

2.

Basis of Presentation and Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. 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 U.S. 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 thereto should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

8


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

Revisions of Prior Period Financial Statements

During the preparation of the consolidated financial statements for the year ended December 31, 2018, management revised the presentation of certain regulatory fees between research and development expenses and selling, general and administrative expenses. As a result, the Company also made revisions to its prior period interim consolidated statements of operations as follows:

 

 

Three months ended

 

 

 

March 31,

 

 

 

2018

 

Research and development, as reported

 

$

3,320

 

Research and development, as revised

 

 

2,900

 

Selling, general and administrative, as reported

 

 

7,816

 

Selling, general and administrative, as revised

 

 

8,236

 

 

These revisions had no impact on the Company’s total operating expenses or net loss. The revisions also had no impact on the consolidated balance sheets or the consolidated statements of comprehensive loss, stockholders’ equity or cash flows. Management evaluated the materiality of the revisions from a quantitative and qualitative perspective and concluded that the revisions are immaterial to the consolidated financial statements.

Accounting Pronouncements Recently Adopted

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02 Leases (“Topic 842”) effective January 1, 2019, electing the package of practical expedients and applying the transition provisions as of the effective date. Reporting periods beginning on or after January 1, 2019 are presented under Topic 842, while prior period amounts, as reported under previous GAAP, were not adjusted. As a result of the adoption of Topic 842, the Company recognized approximately $1.0 million in right-of-use assets and lease liabilities in connection with its existing operating leases, with a cumulative effect adjustment of $0.1 million to accumulated deficit as of January 1, 2019. The adoption of Topic 842 on January 1, 2019 did not have a significant impact on the Company’s consolidated results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Certain components of the Company’s products are provided by a limited number of vendors, and the Company’s production, assembly, warehousing and distribution operations are outsourced to third-parties where substantially all of the Company’s inventory is located.  Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on the Company’s operations.  The Company provides a reserve for potentially excess, dated or obsolete inventories based on an analysis of inventory on hand compared to forecasts of future sales, which was $1,088 and $847 at March 31, 2019 and December 31, 2018, respectively.  Inventories consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Inventories:

 

 

 

 

 

 

 

 

Raw material

 

$

26

 

 

$

26

 

Work in process

 

 

7,713

 

 

 

7,622

 

Finished goods

 

 

5,639

 

 

 

3,702

 

 

 

$

13,378

 

 

$

11,350

 

9


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

Equipment, Molds, Furniture, and Fixtures

Equipment, molds, furniture, and fixtures are stated at cost, net of accumulated depreciation, and are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years. As of March 31, 2019 and December 31, 2018, the Company’s equipment, molds, furniture and fixtures totaled $15,100 and $14,895, respectively, which is presented net of accumulated depreciation of $8,106 and $7,570 as of March 31, 2019 and December 31, 2018, respectively.

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company leases its facilities under non-cancellable operating leases and, beginning in the first quarter of 2019, entered into a master lease arrangement for a fleet of vehicles for use by its sales force. All of the Company’s leasing arrangements are classified as operating leases with remaining lease terms of seven months to three years.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right-of-use asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments. Each of the Company’s lease arrangements contain renewal options that have not been included in the determination of the lease term, as they are not reasonably certain of exercise. For contracts that contain lease and non-lease components, the Company accounts for both components as a single lease component. Variable lease payments are expensed as incurred.

Operating lease costs were $175 for the three months ended March 31, 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $178 for the three months ended March 31, 2019. During the three months ended March 31, 2019, operating lease ROU assets obtained in exchange for operating lease obligations were $1,074. As of March 31, 2019, the weighted average discount rate was approximately 9.5% and the weighted average remaining lease term was 2.7 years. The following table summarizes the Company’s operating lease maturities as of March 31, 2019:

 

 

 

Amount

 

2019

 

$

797

 

2020

 

 

515

 

2021

 

 

549

 

2022

 

 

162

 

Total remaining lease payments

 

 

2,023

 

Less: imputed interest

 

 

(102

)

Total lease liabilities

 

$

1,921

 

Revenue Recognition

The Company generates revenue from proprietary and partnered product sales, license and development activities and royalty arrangements.  Revenue is recognized when or as the Company transfers control of the promised goods or services to its customers at the transaction price, which is the amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.

At inception of each contract, the Company identifies the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determines the transaction price including any variable consideration, allocates the transaction price to the distinct performance obligations and determines whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company reassesses its reserves for variable consideration at each reporting date and makes adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.

10


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

The Company has elected to recognize the cost for freight and shipping activities as fulfilment cost. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying goods are transferred to the customer. The related shipping and freight charges incurred by the Company are included in cost of revenue.

Proprietary Product Sales

The Company sells its proprietary products OTREXUP® and XYOSTEDTM primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs.

The determination of certain of these reserves and sales allowances require management to make a number of judgements and estimates to reflect the Company’s best estimate of the transaction price and the amount of consideration to which it believes it is ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and expected utilization rates, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. Reserves for prompt payment discounts are recorded as a reduction in accounts receivable. Reserves for returns, rebates and chargebacks, distributor fees and customer co-pay support programs are included within current liabilities in the consolidated balance sheets.

Partnered Product Sales

The Company is party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which the Company produces and is the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as follows:

The Company is the exclusive supplier of the Makena® subcutaneous auto injector product to AMAG. Because the product is custom manufactured for AMAG with no alternative use and the Company has a contractual right to payment for performance completed to date, control is continuously transferred to the customer as product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced.  The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no price protection or right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, if any.  For example, the Company sells Sumatriptan Injection USP to Teva at cost and is entitled to receive 50 percent of the net profits from commercial sales made by Teva, payable to the Company within 45 days after the end of the quarter in which the commercial sales are made. The Company recognizes revenue, including the estimated variable consideration it expects to receive for contract margin on future commercial sales, upon shipment of the goods to Teva.  The estimated variable consideration is recognized at an amount the Company believes is not subject to significant reversal based on historical experience, and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

Licensing and Development Revenue

The Company has entered into several license, development and supply arrangements with pharmaceutical partners under which the Company grants a license to its device technology and know-how and provides research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, the Company identifies each of the promised goods and services within the contract and the distinct performance obligations at inception, and allocates consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus margin.

11


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, the Company recognized revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer.  Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and the Company has a present right to payment.

The Company’s typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. The Company records a liability for cash received in advance of performance, which is presented within deferred revenue on the consolidated balance sheet and recognized as revenue when the associated performance obligations have been satisfied.

License fees and milestones received in exchange for the grant of a license to the Company’s functional intellectual property (“IP”) such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is not generally distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events, are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.

Royalties

The Company earns royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid single digit to low double digit and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur.  The royalties are generally reported and payable to the Company within 45 to 60 days of the end of the period in which the commercial sales are made.  The Company bases its estimates of royalties earned on actual sales information from its partners when available or estimated prescription sales from external sources and estimated net selling price. If actual royalties received are different than amounts estimated, the Company would adjust the royalty revenue in the period in which the adjustment becomes known.

Remaining Performance Obligations

Remaining performance obligations represents the allocation of transaction price of firm orders and development contract deliverables for which work has not been completed or orders fulfilled, and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity.  As of March 31, 2019, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $4.8 million. The Company expects to recognize revenue on the remaining performance obligations over the next 2.5 years.

 

3.

Stockholders’ Equity

The Company has a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company may offer and sell, from time to time and at its sole discretion, shares of its common stock having an aggregate offering price of up to $30.0 million through Cowen as the Company’s sales agent and/or as principal. Cowen may sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended (the “Offering”.) The Company pays a commission of 3.0% of the gross sales proceeds of any common stock sold through Cowen under the Sales Agreement.

During the three months ended March 31, 2019, the Company sold 2.3 million shares of common stock pursuant to the Offering and Sales Agreement. The sale of common stock resulted in aggregate gross proceeds of $8.1 million, less sales commission and payment of offering costs, resulting in net offering proceeds to the Company of $7.8 million. No sales of common stock were made in the period ended March 31, 2018. The net proceeds are intended to be used for general corporate purposes including, but not limited to, product commercialization, research and development projects, funding of clinical trials, capital expenditures and working capital.

12


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

4.

Share-Based Compensation

The Company’s 2008 Equity Compensation Plan, as amended and restated (the “Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards.  All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan.  The maximum number of shares authorized for issuance under the Plan is 32,200 and the maximum number of shares of stock that may be granted to any one employee for qualified performance-based compensation during a calendar year is 4,000 shares.  Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the dates of grant.  The term of each option is ten years and the options typically vest in quarterly installments over a three-year period with a minimum vesting period of one year.  As of March 31, 2019, the Plan had approximately 3,148 shares available for grant. Stock option exercises are satisfied through the issuance of new shares.

Stock Options

The following is a summary of stock option activity under the Plan as of and for the three months ended March 31, 2019:   

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Shares

 

 

Price

 

 

Term (Years)

 

 

Value

 

Outstanding at December 31, 2018

 

 

14,079

 

 

$

2.19

 

 

 

 

 

 

 

 

 

Granted

 

 

20

 

 

 

3.72

 

 

 

 

 

 

 

 

 

Exercised

 

 

(212

)

 

 

1.65

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

(30

)

 

 

2.95

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2019

 

 

13,857

 

 

 

2.20

 

 

 

6.4

 

 

$

12,048

 

Exercisable at March 31, 2019

 

 

11,025

 

 

$

2.09

 

 

 

5.8

 

 

$

10,853

 

 

During the three months ended March 31, 2019, stock option exercises resulted in cash proceeds to the Company of $350 and the issuance of 212 shares of common stock.  Stock option exercises resulted in proceeds of $28 and the issuance of 32 shares of common stock in the three months ended March 31, 2018. The Company recognized $908 and $661 of compensation expense related to stock options for the three months ended March 31, 2019 and 2018, respectively.

Long Term Incentive Program

The Company’s Board of Directors has approved a long-term incentive program (“LTIP”) for the benefit of the Company’s senior executives.  Pursuant to the LTIP, the Company’s senior executives have been awarded stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) with targeted values based on values granted to similarly situated senior executives in the Company’s peer group. The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in quarterly installments over three years, were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan and are included in the stock options table above. The RSUs vest in three equal annual installments.  The PSU awards made to senior executives vest and convert into shares of the Company’s common stock based on the Company’s attainment of certain performance goals as established by the Company’s Board of Directors over a performance period, which is typically three years.

13


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

The non-vested PSU awards and RSU awards granted under the long-term incentive program are summarized in the following table:

 

 

 

Performance Stock Units

 

 

Restricted Stock Units

 

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value

 

Outstanding at December 31, 2018

 

 

1,842

 

 

$

2.41

 

 

 

1,226

 

 

$

2.44

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Vested/settled

 

 

(415

)

 

 

1.18

 

 

 

 

 

 

 

Forfeited/expired

 

 

(178

)

 

 

1.12

 

 

 

 

 

 

 

Outstanding at March 31, 2019

 

 

1,249

 

 

$

3.01

 

 

 

1,226

 

 

$

2.44

 

 

In connection with PSU awards, the Company recognized compensation expense of $127 and $79 for the three months ended March 31, 2019 and 2018, respectively.  Compensation expense recognized in connection with RSU awards was $331 and $245 for the three months ended March 31, 2019 and 2018, respectively.

The LTIP awards that vested during the three months ended March 31, 2019 and 2018 were net-share settled such that the Company withheld shares with a value equivalent to the employees’ tax obligations for applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The Company withheld 127 and 59 shares during the three months ended March 31, 2019 and 2018, respectively, to satisfy tax obligations, which was determined based on the fair value of the shares on their vesting date equal to the Company’s closing stock price on such date. Total payments for the employees’ tax obligations to the taxing authorities were $408 and $130 for the three months ended March 31, 2019 and 2018, respectively, and are reflected as a cash outflow from financing activities within the consolidated statements of cash flows. Net-share settlements have the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued as a result of the vesting.

 

 

5.

Revenues, Significant Customers and Concentrations of Risk

The following table presents the Company’s revenue on a disaggregated basis by types of goods and services and major product lines:

 

 

 

Three months ended March 31,

 

 

 

2019

 

 

2018

 

Proprietary product sales

 

$

4,771

 

 

$

3,971

 

Partnered product sales

 

 

13,529

 

 

 

6,978

 

Total product revenue

 

 

18,300

 

 

 

10,949

 

Licensing and development revenue

 

 

915

 

 

 

1,285

 

Royalties

 

 

4,071

 

 

 

469

 

Total revenue

 

$

23,286

 

 

$

12,703

 

 

Revenues disaggregated by customer location are as follows: 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

United States of America

 

$

21,185

 

 

$

11,201

 

Europe

 

 

2,090

 

 

 

1,419

 

Other

 

 

11

 

 

 

83

 

 

 

$

23,286

 

 

$

12,703

 

 

14


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

Significant customers from which the Company derived 10% or more of its total revenue in any of the periods presented are as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Teva

 

$

10,611

 

 

$

4,167

 

AMAG

 

 

4,592

 

 

 

2,834

 

McKesson

 

 

1,247

 

 

 

1,843

 

AmerisourceBergen

 

 

1,581

 

 

 

1,423

 

Ferring

 

 

3,096

 

 

 

1,474

 

 

6.

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 other share-based awards excluded from dilutive loss per share because their effect was anti-dilutive totaled 16,332 and 14,481 at March 31, 2019 and 2018, respectively.

 

 

7.

Commitments and Contingencies

Pending Litigation

On October 23, 2017, Randy Smith filed a complaint in the District of New Jersey, captioned Randy Smith, Individually and on Behalf of All Others Similarly Situated v. Antares Pharma, Inc., Robert F. Apple and Fred M. Powell (“Smith”), Case No. 3:17-cv-08945-MAS-DEA, on behalf of a putative class of persons who purchased or otherwise acquired Antares securities between December 21, 2016 and October 12, 2017, inclusive, asserting claims for purported violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against Antares, Robert F. Apple and Fred M. Powell.  The Smith complaint contends that defendants made false and/or misleading statements and/or failed to disclose that: (i) Antares had provided insufficient data to the FDA in connection with the NDA for XYOSTEDTM; and (ii) accordingly, Antares had overstated the approval prospects for XYOSTEDTM.  On July 27, 2018, the court entered an order appointing Serghei Lungu as lead plaintiff, Pomerantz LLP as lead counsel, and Lite DePalma Greenberg, LLC as liaison counsel for plaintiff.  On August 3, 2018, the parties submitted a stipulation and proposed order, setting forth an agreed-upon schedule for responding to the complaint, which the court granted. Pursuant to that order, plaintiff filed a Consolidated Amended Class Action Complaint on October 9, 2018. On November 26, 2018, defendants filed a motion to dismiss. Plaintiff filed an opposition to the motion on January 10, 2019 and defendants filed a reply in support of their motion on February 25, 2019. The Company believes that the claims in the Smith action lack merit and intends to defend them vigorously.

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

15


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

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

 

16


 

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements in this report, including statements in the management’s discussion and analysis section set forth below, may be considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.  Forward-looking statements can be identified by the words “expect,” “estimate,” “plan”, “project,” “anticipate,” “should,” “intend,” “may,” “will,” “believe,” “continue” or other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and product development.  In particular, these forward-looking statements include, among others, statements about:

 

our expectations regarding the commercialization of XYOSTEDTM (testosterone enanthate) injection for testosterone replacement therapy, including marketing and reimbursement strategies, and future revenues related thereto;

 

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

 

our expectations regarding sales of Sumatriptan Injection USP to our partner, Teva Pharmaceutical Industries, Ltd. (“Teva”), and Teva’s ability to successfully distribute and sell Sumatriptan Injection USP;

 

our expectations regarding the ability of our partner, AMAG Pharmaceuticals, Inc. (“AMAG”), to continue to successfully commercialize the Makena® subcutaneous auto injector, and any future revenue related thereto;

 

our expectations regarding the ability of our partner, Teva, to successfully commercialize the generically equivalent version of Mylan’s EpiPen® (“generic epinephrine injection”), and any future revenue related thereto;

 

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

 

our plans to develop a rescue pen for an undisclosed drug with our partner Pfizer, Inc. (“Pfizer”) and our intention to enter into a separate supply agreement with Pfizer;

 

our expectations about the timing and successful completion of the sale of our worldwide rights, including the completion of outstanding purchase orders, for the ZOMAJET™ needle-free auto injector device product line to Ferring International Center S.A. (together with Ferring Pharmaceuticals Inc. and Ferring B.V. individually and collectively referred to as “Ferring”);

 

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

 

our expectations regarding trends in pharmaceutical drug delivery characteristics;

 

our anticipated continued reliance on contract manufacturers to manufacture our products;

 

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

 

our sales and marketing plans;

 

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

 

our expectations about our future revenues, including our ability to achieve the 2019 revenue guidance, cash flows and our ability to support our operations;

 

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

 

our expectations and estimates with regard to current accounting practices and the potential impact of new accounting pronouncements and tax legislation;

 

our expectations regarding our financial and operating results for the year ending December 31, 2019; and

 

other statements regarding matters that are not historical facts or statements of current condition.

Forward-looking statements are based on assumptions that we have made in light of our industry experience as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this report, you should understand that these statements are not guarantees of

17


 

performance results. Forward-looking statements involve known and unknown risks, uncertainties and assumptions, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.  While we believe that we have a reasonable basis for each forward-looking statement contained in this 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:

 

unsuccessful marketing and commercialization efforts by us or our partners;

 

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

 

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

 

the timing and results of our or our partners’ research projects or clinical trials of product candidates in development including projects with Teva and Pfizer;

 

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

 

our inability to generate continued growth in product, product development, licensing and royalties;

 

the lack of market acceptance of our and our partners’ products and future revenues from these products;

 

a decrease in business from our major customers and partners;

 

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

 

our inability to establish and maintain our sales and marketing capability, our inability to effectively market our services or obtain and maintain arrangements with our customers, payors, partners and manufacturers;

 

changes or delays in the regulatory review and approval process;

 

our inability to effectively protect our intellectual property;

 

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

 

our inability to attract and retain key personnel;

 

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

 

adverse economic and political conditions.

In addition, you should refer to the “Risk Factors” sections of this report and of our Annual Report on Form 10-K for the year ended December 31, 2018 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 thereto and other information contained in this report.

Company Overview

Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is a combination drug device company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  Our strategy is to identify new or existing approved drug formulations and apply our patented drug delivery technology to enhance the drug delivery methods.  We develop, manufacture and commercialize, for ourselves or with partners, novel therapeutic products using our advanced drug delivery systems that are designed to provide commercial or functional advantages, such as improved safety and efficacy,

18


 

reduced side effects, and enhanced patient comfort and adherence. Our intramuscular and subcutaneous injection technology platforms include the VIBEX® and VIBEX® QuickShot® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers as well as disposable multi-dose pen injectors. We have a portfolio of proprietary and partnered commercial products and ongoing product development programs in various stages of development.  We have formed significant strategic alliances and partnership arrangements with industry leading pharmaceutical companies including Teva, AMAG and Pfizer.  

We developed and commercialized XYOSTED™ (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, which was approved by the FDA on September 28, 2018 and launched for commercial sale in November 2018. XYOSTED™ is the only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration. In connection with the launch of XYOSTED™, we hired approximately 50 additional sales representatives and cross-trained the combined sales force to leverage our existing resources and enhance our commercial organization. Our sales representatives started detailing XYOSTED™ to physicians in the second half of December 2018.

We market and sell our proprietary product OTREXUP® (methotrexate) injection, which is a subcutaneous methotrexate injection for once weekly self-administration with an easy-to-use, single dose, disposable auto injector, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis.

Through our commercialization partner Teva, we sell Sumatriptan Injection USP indicated in the U.S. for the acute treatment of migraine and cluster headache in adults.  We received FDA approval of our Abbreviated New Drug Application (“ANDA”) for 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilled syringe auto-injectors, a generic equivalent to Imitrex® STATdose Pen®.  Sumatriptan Injection USP is the Company’s first ANDA approval of a complex generic and second product approved using the VIBEX® auto injector platform.

We developed and supply a variation of our VIBEX® QuickShot® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement. The Makena® subcutaneous auto injector drug-device combination product is a ready-to-administer treatment indicated to help reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past, which was approved by the FDA in February 2018. We are the exclusive supplier of the devices and the final assembled and packaged commercial product, which was launched in the U.S. for commercial sale by AMAG in March 2018, and we receive royalties on AMAG’s net sales of the product.

In collaboration with Teva, we developed a version of our VIBEX® auto injector for use in a generic epinephrine auto injector product that was approved by the FDA in August 2018 and commercially launched in limited quantities in late fourth quarter of 2018.  Teva’s Epinephrine Injection USP is indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients and was approved as a generic drug product with an AB rating, meaning that it is therapeutically equivalent to Mylan, Inc.’s branded products EpiPen® and EpiPen Jr® and therefore, subject to state law, substitutable at the pharmacy. We are the exclusive supplier of the device and Teva is responsible for commercialization and distribution of the finished product, for which we also receive royalties on Teva’s net sales.

We are also collaborating with Teva on a multi-dose pen for a generic form of BYETTA® (exenatide injection) for the treatment of type 2 diabetes, and another multi-dose pen for a generic form of Forteo® (teriparatide [rDNA origin] injection) for the treatment of osteoporosis. Teva continues to work through the regulatory process with the FDA for exenatide and teriparatide using the ANDA pathway.  Teva and Eli Lilly and Company (“Lilly”) settled their Paragraph IV patent litigation related to Teva’s ANDA for teriparatide, the terms of which have not been disclosed. Teva also successfully completed a decentralized procedure registration process in 17 countries in Europe for teriparatide, and is awaiting patent clearance in the EU prior to launch.

In August 2018, we entered into a collaboration agreement with Pfizer to develop a combination drug device rescue pen. This rescue pen will utilize the Antares QuickShot® auto injector and an undisclosed Pfizer drug. We will develop the product and Pfizer will be responsible for obtaining FDA approval of the combination product. We intend to enter into a separate supply agreement with Pfizer pursuant to which we will provide fully packaged commercial ready finished product to Pfizer and Pfizer will then be responsible for commercializing the product in the U.S., pending FDA approval, for which the Company will receive royalties on net sales.

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

19


 

the final installment of $5.0 million is payable to us upon Ferring’s receipt of the CE Mark needed to continue to commercialize the needle-free product in certain territories and the final transfer of certain product-related inventory, equipment and agreements to Ferring (the “Completion Date”.)  We will continue to manufacture and supply needle-free devices and receive payment for devices and a royalty on net product sales in accordance with the existing license and supply agreements until the Completion Date, which we expect to occur in 2019.

Results of Operations

We reported net losses of $5.5 million and $6.2 million for the three months ended March 31, 2019 and 2018, respectively. Net loss per share was $0.03 for the three months ended March 31, 2019 as compared to $0.04 for the three months ended March 31, 2018.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.  The following is an analysis and discussion of our operations for the three months ended March 31, 2019 as compared to the same period in 2018.

Revenues

We generate revenue from proprietary and partnered product sales, license and development activities and royalty arrangements.  Total revenue for the three months ended March 31, 2019 and 2018 was $23.3 million and $12.7 million, respectively, representing an increase in total revenue of 83% on a comparative basis. The following table provides details about the components of our revenue (in thousands):

 

 

 

Three months ended March 31,

 

 

 

2019

 

 

2018

 

Proprietary product sales

 

$

4,771

 

 

$

3,971

 

Partnered product sales

 

 

13,529

 

 

 

6,978

 

Total product revenue

 

 

18,300

 

 

 

10,949

 

Licensing and development revenue

 

 

915

 

 

 

1,285