Liquidity and management's plans

3 Months Ended

Mar. 31, 2014

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 worldwide license and development agreement with Meda regarding ONSOLIS^® and revenue generated as a result of its January 2012 agreement with Endo regarding its BEMA^® Buprenorphine product candidate. The Company intends to finance its research and development, commercialization and working capital needs from existing cash, royalty revenue, new sources of debt and equity 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 new financing and operating sources during the three months ended March 31, 2014 consisted of:

•

approximately $58.2 million in net proceeds from certain institutional investors related to a definitive securities purchase agreement (see note 9);

•

approximately $3.9 million in net proceeds utilizing a universal shelf registration (see note 9);

•

approximately $11.2 million in contract revenue under the Endo agreement (see note 4);

•

approximately $8.5 million in research and development reimbursements under the Endo agreement;

•

approximately $0.3 million in net royalties under the Meda agreements;

•

approximately $2.6 million from the exercise of stock options; and

•

approximately $2.6 million from the exercise of warrants.

Significant new financing and operating sources during the year ended December 31, 2013 consisted of:

•

approximately $19.8 million in net proceeds from a secured loan facility from MidCap Financial SBIC, LP, as agent and lender (“MidCap”) (see note 7);

•

approximately $2.8 million in research and development reimbursements under the Endo agreement;

•

approximately $1.8 million in net royalties under the Meda agreements;

•

approximately $0.3 million in contract revenue from licensing and supply agreement (see note 6); and

•

approximately $0.4 million from the exercise of stock options and warrants.

In April 2014, a warrant holder exercised 283,871 shares of common stock underlying a warrant for proceeds to the Company of $1.4 million.

At March 31, 2014, the Company had cash and cash equivalents of approximately $88.2 million. The Company generated $0.6 million of cash from operations during the three months ended March 31, 2014. As of March 31, 2014, the Company had stockholders’ equity of $64.6 million, versus deficit of $(0.8) million at December 31, 2013. The Company’s existing cash, together with other expected cash inflows from other milestones and royalties, are anticipated to be sufficient to fully fund the Company’s operations through the second quarter of 2015.

Additional capital may be required to support commercialization activities for BUNAVAIL™, the 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), the clinical development of Clonidine Topical Gel for painful diabetic neuropathy, the reformulation project for and anticipated commercial relaunch of ONSOLIS^® and for general working capital. Based on product development timelines and agreements with our 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. There can be no assurance that additional funding, when and if required, will be available at commercially available terms, if at all.

- Definition

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

+ References+ Details