Liquidity and management's plans

3 Months Ended

Mar. 31, 2013

Liquidity and management's plans [Abstract]

Liquidity and management's plans

2. Liquidity and management’s plans:

Since inception, the Company has financed its operations principally from the sale of equity securities, proceeds from short-term borrowings or convertible notes, funded research arrangements and revenue generated as a result of its agreements with Meda AB (“Meda”) regarding ONSOLIS ^® and Endo Health Solutions, Inc. (“Endo”) regarding its BEMA ^® Buprenorphine product. The Company intends to finance its research and development and commercialization efforts and its working capital needs from existing cash, royalty revenue, new sources of financing, existing and new licensing and commercial partnership agreements and, potentially, through the exercise of outstanding Common Stock options and warrants to purchase Common Stock.

Significant financing sources during the year ended December 31, 2012 consisted of:

• approximately $45 million in upfront and milestone payments from the Endo license agreement (see note 4);

• approximately $38.4 million in net proceeds from a registered direct offering of Common Stock and newly designated Series A Non-Voting Convertible Preferred Stock, par value $.001 per share (the “Series A Preferred”) in November 2012;

• approximately $2.1 million from the exercise of stock options; and

• approximately $0.9 million from the exercise of Common Stock warrants.

At March 31, 2013, the Company had cash and cash equivalents of approximately $49.7 million. The Company used $13.5 million of cash from operations during the three months ended March 31, 2013. As of March 31, 2013, the Company had stockholders’ equity of $39.7 million, versus $49.8 million at December 31, 2012. The Company’s existing cash, together with other expected cash inflows from other milestones and royalties, are anticipated by management to be sufficient to fully fund the Company’s operations through the first quarter of 2014 at the planned level. Certain planned expenditures are discretionary and could be deferred if the Company is required to do so to fund critical operations.

Accordingly, additional capital will likely be required to support commercialization efforts for ONSOLIS^®, clinical development programs for BEMA ^® Buprenorphine (the scale of which is being governed in large part by the requirements of the Company’s agreement with Endo), planned development of BEMA ^® Buprenorphine/Naloxone (known as BUNAVAIL ^TM), planned development of the Company’s Clonidine Topical Gel produced for painful diabetic neuropathy (acquired by license in March 2013) and general working capital. Based on product development timelines and agreements with the Company’s development partners, the ability to scale up or reduce personnel and associated costs are factors considered throughout the product development life cycle. Available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding.

In addition, the worldwide financial and credit crisis that began in 2008 and has fluctuated to the present time has strained investor liquidity and contracted credit markets. During the three months ending March 31, 2013, the financial and credit crisis did not directly nor materially impact the Company. However, if this environment continues, fluctuates or worsens, it may make the future cost of raising funds through the debt or equity markets more expensive or make those markets unavailable at a time when the Company requires additional financial investment. If the Company is unable to attract additional funds it may adversely affect its ability to achieve development and commercialization goals, which could have a material and adverse effect on the business, results of operations and financial condition.