10-Q 1 atrs-10q_20190630.htm 10-Q atrs-10q_20190630.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 June 30, 2019

Commission File Number 1-32302

 

ANTARES PHARMA, INC.

 

 

A Delaware Corporation

(State or Other Jurisdiction of Incorporation)

 

41-1350192

(I.R.S. Employer Identification No.)

 

100 Princeton South, Suite 300, Ewing, NJ

 

08628

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (609) 359-3020

 

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, par value $0.01 per share

 

ATRS

 

NASDAQ

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  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

As of July 31, 2019, the registrant had 163,061,637 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

ANTARES PHARMA, INC.

INDEX

 

 

 

 

 

 

 

PAGE

 

 

 

 

 

 

 

PART I.

 

 

 

FINANCIAL INFORMATION

 

3

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31, 2018

 

3

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018 (Unaudited)

 

5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018 (Unaudited)

 

6

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 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

 

19

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

 

 

PART II.

 

 

 

OTHER INFORMATION

 

27

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

 

 

 

 

 

 

Item 3.

 

Default Upon Senior Securities

 

27

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

27

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

28

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

28

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

29

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

ANTARES PHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,171

 

 

$

27,892

 

Accounts receivable

 

 

24,629

 

 

 

18,976

 

Inventories

 

 

15,235

 

 

 

11,350

 

Contract assets

 

 

6,285

 

 

 

10,442

 

Prepaid expenses and other current assets

 

 

2,781

 

 

 

2,648

 

Total current assets

 

 

89,101

 

 

 

71,308

 

Equipment, molds, furniture and fixtures, net

 

 

14,994

 

 

 

14,895

 

Operating lease right-of-use assets

 

 

2,947

 

 

 

 

Goodwill

 

 

1,095

 

 

 

1,095

 

Intangibles, net

 

 

556

 

 

 

831

 

Other assets

 

 

519

 

 

 

148

 

Total Assets

 

$

109,212

 

 

$

88,277

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,699

 

 

$

11,135

 

Accrued expenses and other liabilities

 

 

12,571

 

 

 

11,997

 

Long-term debt, current portion

 

 

 

 

 

3,043

 

Lease liabilities, current portion

 

 

961

 

 

 

 

Deferred revenue

 

 

547

 

 

 

1,018

 

Total current liabilities

 

 

25,778

 

 

 

27,193

 

Long-term debt

 

 

40,143

 

 

 

22,083

 

Lease liabilities, long-term

 

 

1,739

 

 

 

 

Total liabilities

 

 

67,660

 

 

 

49,276

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common Stock: $0.01 par; 300,000 shares authorized; 163,053 and

    159,721 issued and outstanding at June 30, 2019 and

   December 31, 2018, respectively

 

 

1,630

 

 

 

1,597

 

Additional paid-in capital

 

 

325,075

 

 

 

314,907

 

Accumulated deficit

 

 

(284,449

)

 

 

(276,800

)

Accumulated other comprehensive loss

 

 

(704

)

 

 

(703

)

 

 

 

41,552

 

 

 

39,001

 

Total Liabilities and Stockholders’ Equity

 

$

109,212

 

 

$

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

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

20,620

 

 

$

11,095

 

 

$

38,920

 

 

$

22,044

 

Licensing and development revenue

 

 

2,239

 

 

 

1,785

 

 

 

3,154

 

 

 

3,070

 

Royalties

 

 

5,574

 

 

 

1,282

 

 

 

9,645

 

 

 

1,751

 

Total revenue

 

 

28,433

 

 

 

14,162

 

 

 

51,719

 

 

 

26,865

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

10,713

 

 

 

6,677

 

 

 

21,281

 

 

 

13,213

 

Cost of development revenue

 

 

1,728

 

 

 

283

 

 

 

2,106

 

 

 

933

 

Total cost of revenue

 

 

12,441

 

 

 

6,960

 

 

 

23,387

 

 

 

14,146

 

Gross profit

 

 

15,992

 

 

 

7,202

 

 

 

28,332

 

 

 

12,719

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,494

 

 

 

3,230

 

 

 

4,881

 

 

 

6,130

 

Selling, general and administrative

 

 

15,087

 

 

 

7,883

 

 

 

30,022

 

 

 

16,119

 

Total operating expenses

 

 

17,581

 

 

 

11,113

 

 

 

34,903

 

 

 

22,249

 

Operating loss

 

 

(1,589

)

 

 

(3,911

)

 

 

(6,571

)

 

 

(9,530

)

Interest expense

 

 

(712

)

 

 

(654

)

 

 

(1,373

)

 

 

(1,285

)

Other income

 

 

75

 

 

 

45

 

 

 

179

 

 

 

102

 

Net loss

 

$

(2,226

)

 

$

(4,520

)

 

$

(7,765

)

 

$

(10,713

)

Basic and diluted net loss per common share

 

$

(0.01

)

 

$

(0.03

)

 

$

(0.05

)

 

$

(0.07

)

Basic and diluted weighted average common shares outstanding

 

 

162,734

 

 

 

157,024

 

 

 

161,596

 

 

 

156,875

 

 

See accompanying notes to consolidated financial statements.

4


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(2,226

)

 

$

(4,520

)

 

$

(7,765

)

 

$

(10,713

)

Foreign currency translation adjustment

 

 

2

 

 

 

(10

)

 

 

(1

)

 

 

 

Comprehensive loss

 

$

(2,224

)

 

$

(4,530

)

 

$

(7,766

)

 

$

(10,713

)

 

See accompanying notes to consolidated financial statements.

5


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(UNAUDITED)

 

 

 

For the three and six months ended June 30, 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,

   net of offering costs

 

 

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

 

Issuance of common stock,

   net of offering costs

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

366

 

 

 

4

 

 

 

(659

)

 

 

 

 

 

 

 

 

(655

)

Exercise of options

 

 

159

 

 

 

2

 

 

 

132

 

 

 

 

 

 

 

 

 

134

 

Share-based compensation

 

 

 

 

 

 

 

 

1,635

 

 

 

 

 

 

 

 

 

1,635

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,226

)

 

 

 

 

 

(2,226

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

June 30, 2019

 

 

163,053

 

 

$

1,630

 

 

$

325,075

 

 

$

(284,449

)

 

$

(704

)

 

$

41,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three and six months ended June 30, 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

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

339

 

 

 

3

 

 

 

(402

)

 

 

 

 

 

 

 

 

(399

)

Exercise of options

 

 

277

 

 

 

3

 

 

 

260

 

 

 

 

 

 

 

 

 

263

 

Share-based compensation

 

 

 

 

 

 

 

 

1,065

 

 

 

 

 

 

 

 

 

1,065

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,520

)

 

 

 

 

 

(4,520

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

June 30, 2018

 

 

157,437

 

 

$

1,574

 

 

$

304,770

 

 

$

(280,998

)

 

$

(700

)

 

$

24,646

 

 

See accompanying notes to consolidated financial statements.

6


 

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,765

)

 

$

(10,713

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

3,000

 

 

 

2,050

 

Depreciation and amortization

 

 

1,338

 

 

 

1,207

 

Other

 

 

154

 

 

 

126

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,654

)

 

 

(2,193

)

Inventories

 

 

(3,885

)

 

 

(1,405

)

Prepaid expenses and other assets

 

 

(506

)

 

 

408

 

Contract assets

 

 

1,657

 

 

 

94

 

Accounts payable

 

 

507

 

 

 

607

 

Accrued expenses and other liabilities

 

 

443

 

 

 

1,704

 

Deferred revenue

 

 

(471

)

 

 

(1,967

)

Net cash used in operating activities

 

 

(11,182

)

 

 

(10,082

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of assets

 

 

2,500

 

 

 

7,500

 

Purchases of equipment, molds, furniture and fixtures

 

 

(1,104

)

 

 

(336

)

Additions to patent rights

 

 

 

 

 

(19

)

Proceeds from maturities of investment securities

 

 

 

 

 

5,000

 

Net cash provided by investing activities

 

 

1,396

 

 

 

12,145

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

15,000

 

 

 

 

Payment of debt issuance costs

 

 

(136

)

 

 

 

Proceeds from issuance of common stock, net

 

 

7,781

 

 

 

 

Proceeds from exercise of stock options

 

 

484

 

 

 

291

 

Taxes paid related to net share settlement of equity awards

 

 

(1,063

)

 

 

(135

)

Net cash provided by financing activities

 

 

22,066

 

 

 

156

 

Effect of exchange rate changes on cash

 

 

(1

)

 

 

1

 

Net increase in cash and cash equivalents

 

 

12,279

 

 

 

2,220

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

27,892

 

 

 

26,562

 

End of period

 

$

40,171

 

 

$

28,782

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,201

 

 

$

1,148

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

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

   and accrued expenses

 

$

106

 

 

$

34

 

Additions to patent rights recorded in accounts payable and accrued expenses

 

$

 

 

$

12

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Tax withholding on net settled equity awards included in accrued liabilities

 

$

 

 

$

392

 

 

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 markets and sells its proprietary product XYOSTED® (testosterone enanthate) injection, which is indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone. XYOSTED® was approved by the U.S. Food and Drug Administration (“FDA”) on September 28, 2018 and launched for commercial sale in November 2018.

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.  

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.  

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 and six months ended June 30, 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

 

 

Six months ended

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2018

 

 

2018

 

 

Research and development, as reported

 

$

3,650

 

 

$

6,970

 

 

Research and development, as revised

 

 

3,230

 

 

 

6,130

 

 

Selling, general and administrative, as reported

 

 

7,463

 

 

 

15,279

 

 

Selling, general and administrative, as revised

 

 

7,883

 

 

 

16,119

 

 

 

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 of December 31, 2018, the Company had non-cancellable operating leases for its corporate headquarters facility in Ewing, New Jersey, and its office, research and development facility in Plymouth, Minnesota, a suburb of Minneapolis, which were not required to be recorded on the balance sheet. 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. 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 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.

In 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This standard will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those fiscal years. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In 2018, the FASB issued new guidance to clarify the interaction between Collaborative Arrangements and Revenue from Contracts with Customers standards. The guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for under revenue guidance, adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard, and clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

9


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

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 $1,200 and $847 at June 30, 2019 and December 31, 2018, respectively.  Inventories consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Inventories:

 

 

 

 

 

 

 

 

Raw material

 

$

344

 

 

$

26

 

Work in process

 

 

7,700

 

 

 

7,622

 

Finished goods

 

 

7,191

 

 

 

3,702

 

 

 

$

15,235

 

 

$

11,350

 

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 June 30, 2019 and December 31, 2018, the Company’s equipment, molds, furniture and fixtures totaled $14,994 and $14,895, respectively, which is presented net of accumulated depreciation of $8,633 and $7,570 as of June 30, 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 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. Certain 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.

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 XYOSTED® 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. The Company recognized $505 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2018 and satisfied during the six months ended June 30, 2019.

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 June 30, 2019, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $9.9 million. The Company expects to recognize revenue on the remaining performance obligations over the next three years.

 

3.

Leases

The Company leases its facilities under non-cancellable operating leases. In May 2019, the Company amended its existing lease of the Company’s corporate headquarters in Ewing, New Jersey to extend the lease term for an additional two years. The lease extension period commences on November 1, 2019 and expires on October 31, 2021. In the first quarter of 2019, the Company also entered into a master lease arrangement for a fleet of vehicles for use by its sales force.  

As of June 30, 2019, all of the Company’s leasing arrangements are classified as operating leases. Operating lease costs were $330 and $505 for the three and six months ended June 30, 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $538  and $716 for the three and six months ended June 30, 2019. During the six months ended June 30, 2019, operating lease ROU assets obtained in exchange for operating lease obligations were $2,377, including the impact of the lease amendment for the corporate headquarters. As of June 30, 2019, the weighted average discount rate was approximately 9.5% and the weighted average remaining lease term was 2.7 years.

12


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

The following table summarizes the Company’s operating lease maturities as of June 30, 2019:

 

2019

 

$

526

 

2020

 

 

1,061

 

2021

 

 

1,042

 

2022

 

 

230

 

Total remaining lease payments

 

 

2,859

 

Less: interest accreted

 

 

(159

)

Total lease liabilities

 

$

2,700

 

 

Under the prior leasing standard, future minimum payments under non-cancellable operating leases as of December 31, 2018 were as follows:

 

2019

 

$

566

 

2020

 

 

233

 

2021

 

 

238

 

2022

 

 

60

 

2023

 

 

 

Thereafter

 

 

 

Total future minimum lease payments

 

$

1,097

 

 

4.

Long-Term Debt

In June 2017, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc., for a term loan of up to $35.0 million (the “Term Loan”), under which the Company initially borrowed $25.0 million (“Tranche I”.) The amortizing Term Loan is secured by substantially all of the Company’s assets, excluding intellectual property, accrues interest at a prime-based variable rate with a maximum of 9.5%, provided for payments of interest-only until August 1, 2019 and matures on July 1, 2022.

On June 26, 2019, the Company entered into a First Amendment (the “Amendment”) to the Loan Agreement, which increased the aggregate principal amount available under the Term Loan from $35.0 million to $50.0 million. Upon signing of the Amendment, an additional $15.0 million (“Tranche II”) was funded to the Company. The Company may, but is not obligated to, request one or more additional advances of at least $5.0 million, not to exceed $10.0 million in the aggregate (“Tranche III”). The Company’s option to request additional advances is available between January 1, 2020 and September 15, 2020. The Amendment extended the interest-only payment period of the Term Loan to August 1, 2021, which may be further extended to August 1, 2022 if the Company achieves a certain loan extension milestone. The Term Loan maturity date remains July 1, 2022, but may be extended to July 1, 2024 contingent upon satisfaction of a certain loan extension milestone.

The Company is required to pay an end of term fee (“End of Term Charge”) equal to 4.25% of Tranche I and 3.95% of the borrowings under Tranche II and Tranche III, payable upon the earlier of July 1, 2022 or repayment of the loan.

As of June 30, 2019 and December 31, 2018, the carrying value of the Term Loan was $40,143 and $25,126, respectively, which consisted of the principal amounts outstanding and the End of Term Charge accrual, less unamortized debt issuance costs that are being amortized/accrued to interest expense over the term of the Term Loan using the effective interest method. Future principal payments under the Term Loan, excluding the contractual End of Term Charges, are due in the following periods:

 

2019

 

$

 

2020

 

 

 

2021

 

 

16,179

 

2022

 

 

23,821

 

 

 

$

40,000

 

 

13


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

5.

Stockholders’ Equity

In August 2017, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company could 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 was permitted to sell the common stock through any method deemed an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended (the “ATM Facility”).

During the three months ended June 30, 2019, the Company made no sales of its common stock under the ATM Facility. For the six months ended June 30, 2019, the Company sold 2.3 million shares of common stock under the ATM Facility. 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.

On June 26, 2019, the Company delivered written notice to Cowen that it was terminating its Sales Agreement effective July 6, 2019. With the provision of such notice, the ATM Facility is no longer available for use. The Company sold a total of 4.4 million shares in connection with the ATM Facility, representing gross proceeds of approximately $15.6 million to the Company.

6.

Share-Based Compensation

The Company has an Equity Compensation Plan (the “Plan”), which was amended and restated pursuant to stockholder approval on June 13, 2019 in order to increase the number of shares available for issuance under the Plan, extend the term of the Plan and modify certain provisions. 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 40.2 million 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 four million 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 over a three-year period with a minimum vesting period of one year.  As of June 30, 2019, the Plan had approximately 7.5 million shares available for grant. Stock option exercises are satisfied through the issuance of new shares.

The Company’s Board of Directors has also approved a long-term incentive program (“LTIP”), pursuant to which 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 annual installments over three years, and are granted on the same standard terms and conditions as other stock options granted pursuant to the Plan. The RSU awards made to senior executives vest and convert into shares of the Company’s stock in three equal annual installments.  The PSU awards 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.

A portion of the compensation provided to non-employee members of the Company’s Board of Directors is awarded in the form of stock options and RSUs, which vest in full one year from the date of grant and are otherwise granted on the same standard terms and conditions as other awards granted under the Plan.

14


ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

 

The following is a summary of stock option activity under the Plan as of and for the six months ended June 30, 2019: