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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, 2021

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ________ to ________

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 April 30, 2021, the registrant had 168,798,266 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

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (Unaudited)

 

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 (Unaudited)

 

5

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (Unaudited)

 

6

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited)

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

 

 

 

 

 

Item 2.

 

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

 

16

 

 

 

 

 

 

 

 

 

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.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(UNAUDITED)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,652

 

 

$

53,137

 

Accounts receivable

 

 

42,940

 

 

 

42,221

 

Inventories

 

 

19,614

 

 

 

18,216

 

Contract assets

 

 

10,960

 

 

 

8,140

 

Prepaid expenses and other current assets

 

 

4,352

 

 

 

4,877

 

Total current assets

 

 

133,518

 

 

 

126,591

 

Deferred tax assets, net

 

 

46,392

 

 

 

46,982

 

Property and equipment, net

 

 

24,276

 

 

 

24,020

 

Operating lease right-of-use assets

 

 

4,285

 

 

 

4,621

 

Intangibles, net

 

 

7,488

 

 

 

7,693

 

Other assets

 

 

2,498

 

 

 

2,624

 

Total Assets

 

$

218,457

 

 

$

212,531

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

16,764

 

 

$

16,194

 

Accrued expenses and other liabilities

 

 

26,373

 

 

 

25,635

 

Long-term debt, current portion

 

 

26,260

 

 

 

16,230

 

Operating lease liabilities, current portion

 

 

1,177

 

 

 

1,203

 

Deferred revenue

 

 

1,570

 

 

 

3,943

 

Total current liabilities

 

 

72,144

 

 

 

63,205

 

Long-term debt

 

 

14,765

 

 

 

24,669

 

Operating lease liabilities, long-term

 

 

4,597

 

 

 

4,816

 

Other long-term liabilities

 

 

726

 

 

 

726

 

Total liabilities

 

 

92,232

 

 

 

93,416

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common Stock: $0.01 par; 300,000 shares authorized; 168,798 and

    166,836 issued and outstanding at March 31, 2021 and

   December 31, 2020, respectively

 

 

1,688

 

 

 

1,668

 

Additional paid-in capital

 

 

344,063

 

 

 

340,756

 

Accumulated deficit

 

 

(218,833

)

 

 

(222,626

)

Accumulated other comprehensive loss

 

 

(693

)

 

 

(683

)

 

 

 

126,225

 

 

 

119,115

 

Total Liabilities and Stockholders’ Equity

 

$

218,457

 

 

$

212,531

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

Product sales

 

$

29,135

 

 

$

27,097

 

Licensing and development revenue

 

 

4,984

 

 

 

1,755

 

Royalties

 

 

7,964

 

 

 

4,227

 

Total revenue

 

 

42,083

 

 

 

33,079

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of product sales

 

 

12,498

 

 

 

14,014

 

Cost of development revenue

 

 

3,947

 

 

 

1,033

 

Research and development

 

 

2,640

 

 

 

2,981

 

Selling, general and administrative

 

 

17,607

 

 

 

16,422

 

Total operating expenses

 

 

36,692

 

 

 

34,450

 

Operating income (loss)

 

 

5,391

 

 

 

(1,371

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(962

)

 

 

(1,061

)

Other, net

 

 

(46

)

 

 

76

 

Total other expense, net

 

 

(1,008

)

 

 

(985

)

Net income (loss) before income taxes

 

 

4,383

 

 

 

(2,356

)

Income tax expense

 

 

(590

)

 

 

 

Net income (loss)

 

$

3,793

 

 

$

(2,356

)

Net income (loss) per common share, basic

 

$

0.02

 

 

$

(0.01

)

Net income (loss) per common share, diluted

 

$

0.02

 

 

$

(0.01

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

167,822

 

 

 

165,429

 

Diluted

 

 

174,908

 

 

 

165,429

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$

3,793

 

 

$

(2,356

)

Foreign currency translation adjustment

 

 

(10

)

 

 

2

 

Comprehensive income (loss)

 

$

3,783

 

 

$

(2,354

)

 

See accompanying notes to condensed consolidated financial statements.

5


 

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

December 31, 2020

 

 

166,836

 

 

$

1,668

 

 

$

340,756

 

 

$

(222,626

)

 

$

(683

)

 

$

119,115

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

417

 

 

 

4

 

 

 

(1,623

)

 

 

 

 

 

 

 

 

 

(1,619

)

Exercise of options

 

 

1,545

 

 

 

16

 

 

 

3,325

 

 

 

 

 

 

 

 

 

3,341

 

Share-based compensation

 

 

 

 

 

 

 

 

1,605

 

 

 

 

 

 

 

 

 

1,605

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3,793

 

 

 

 

 

 

3,793

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

March 31, 2021

 

 

168,798

 

 

$

1,688

 

 

$

344,063

 

 

$

(218,833

)

 

$

(693

)

 

$

126,225

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

December 31, 2019

 

 

165,221

 

 

$

1,652

 

 

$

332,377

 

 

$

(278,827

)

 

$

(702

)

 

 

54,500

 

Common stock issued under equity

   compensation plan, net of

   shares withheld for taxes

 

 

218

 

 

 

2

 

 

 

(599

)

 

 

 

 

 

 

 

 

(597

)

Exercise of options

 

 

121

 

 

 

2

 

 

 

269

 

 

 

 

 

 

 

 

 

271

 

Share-based compensation

 

 

 

 

 

 

 

 

1,978

 

 

 

 

 

 

 

 

 

1,978

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,356

)

 

 

 

 

 

(2,356

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

March 31, 2020

 

 

165,560

 

 

$

1,656

 

 

$

334,025

 

 

$

(281,183

)

 

$

(700

)

 

$

53,798

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

6


 

 

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

3,793

 

 

$

(2,356

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,605

 

 

 

1,978

 

Depreciation and amortization

 

 

894

 

 

 

570

 

Other

 

 

126

 

 

 

144

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(731

)

 

 

3,663

 

Inventories

 

 

(1,398

)

 

 

(1,309

)

Contract assets

 

 

(2,820

)

 

 

(1,694

)

Prepaid expenses and other assets

 

 

650

 

 

 

(154

)

Deferred taxes

 

 

590

 

 

 

 

Accounts payable

 

 

502

 

 

 

5,479

 

Accrued expenses and other liabilities

 

 

1,136

 

 

 

(1,051

)

Deferred revenue

 

 

(2,369

)

 

 

310

 

Net cash provided by operating activities

 

 

1,978

 

 

 

5,580

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,184

)

 

 

(641

)

Proceeds from maturities of investment securities

 

 

 

 

 

6,000

 

Net cash provided by (used in) investing activities

 

 

(1,184

)

 

 

5,359

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

3,341

 

 

 

271

 

Taxes paid related to net share settlement of equity awards

 

 

(1,619

)

 

 

(597

)

Net cash provided by (used in) financing activities

 

 

1,722

 

 

 

(326

)

Effect of exchange rate changes on cash

 

 

(1

)

 

 

 

Net increase in cash and cash equivalents

 

 

2,515

 

 

 

10,613

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

53,137

 

 

 

23,201

 

End of period

 

$

55,652

 

 

$

33,814

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

850

 

 

$

935

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment recorded in accounts payable

   and accrued expenses

 

$

1,779

 

 

$

1,131

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

7


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

 

 

 

1.

Description of Business

Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is a specialty pharmaceutical company focused primarily on the development and commercialization of pharmaceutical products and technologies in targeted therapeutic areas. 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, convenience, improved tolerability, and enhanced patient comfort and adherence. We also seek product opportunities that complement and leverage our commercial platform. 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 Pharmaceutical Industries, Ltd. (“Teva”), AMAG Pharmaceuticals, Inc. (“AMAG”), Pfizer Inc. (“Pfizer”) and Idorsia Pharmaceuticals Ltd (“Idorsia”).

Our marketed proprietary products include:

 

XYOSTED® (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, and is the first and only subcutaneous testosterone enanthate product for once-weekly, at-home self-administration to be approved by the U.S. Food and Drug Administration (“FDA”);

 

OTREXUP® (methotrexate) injection, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis; and

 

NOCDURNA® (desmopressin acetate), marketed in the U.S. for the treatment of nocturia due to nocturnal polyuria (NP) in adults who awaken at least two times per night to urinate.

The Company is also party to various partnered product development and supply arrangements:

 

We developed and are the exclusive supplier of devices for Teva’s Epinephrine Injection USP products, the generic equivalent of EpiPen® and EpiPen® Jr., indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients;

 

Through our commercialization partner Teva, we sell Sumatriptan Injection USP, a generic equivalent to the Imitrex® STATdose Pen®, indicated in the U.S. for the acute treatment of migraine headaches and cluster headache in adults;

 

In collaboration with AMAG, we developed a subcutaneous auto injector and are the exclusive supplier of devices and the final assembled and packaged commercial product of AMAG’s Makena® (hydroxyprogesterone caproate injection) subcutaneous auto injector, 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 at least one preterm baby in the past; and

 

We developed and are the exclusive supplier of devices for Teva’s generic equivalent of Forsteo® (Teriparatide Injection) which is approved and currently sold by Teva in various countries outside the United States.

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, a combination drug device product with Idorsia, and advancing other internal research and development programs.

 

 

2.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed 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 condensed 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, 2020.  Operating results

8


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Beginning as of and for the year ended December 31, 2020, the cost of product sales and the cost of development revenue are being classified under the heading Operating expenses in the accompanying consolidated statement of operations, and the corresponding prior period amounts have been reclassified to conform to this presentation. The reclassifications have no impact on the Company’s operating income (loss) or net income (loss) as previously reported.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits at commercial banks and highly liquid investments with an original maturity of three months or less. Cash equivalents, consisting of investments in money market funds, are remeasured and reported at fair value each reporting period, in accordance with ASC Topic 820, Fair Value Measurements (“ASC 820”) based on quoted market prices, which is a Level 1 input within the three-level valuation hierarchy for disclosure of fair value measurements, and totaled $36,137 and $36,133 as of March 31, 2021 and December 31, 2020, respectively.

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.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives as follows:

 

 

Useful Life

Computer equipment and software

 

3-5 Years

Furniture, fixtures and office equipment

 

5-7 years

Production molds, tooling and equipment

 

3-10 years

Leasehold improvements

 

Lesser of useful life or lease term

Expenditures, including interest costs, for assets under construction that are not yet ready for their intended use are capitalized and will be depreciated based on the above guidelines when placed in service.

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.

9


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

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 product sales.

Proprietary Product Sales

The Company sells its proprietary commercial products 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 right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, such as volume-based pricing arrangements or profit sharing arrangements, if any.  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.

10


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, the Company recognizes 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 contract 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 $2,408 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2020 and satisfied during the three months ended March 31, 2021.

License fees and milestones received in exchange for the grant of a license to the Company’s functional intellectual property 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, 2021, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $14,748. The Company expects to recognize revenue on the remaining performance obligations over the next three years.

3.

Inventories

Inventories consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Raw material

 

$

325

 

 

$

325

 

Work in process

 

 

8,385

 

 

 

7,120

 

Finished goods

 

 

10,904

 

 

 

10,771

 

 

 

$

19,614

 

 

$

18,216

 

 

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 $659 and $619 at March 31, 2021 and December 31, 2020, respectively.

11


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

4.

Property and Equipment

The Company’s property and equipment consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Production molds, tooling and equipment

 

$

20,424

 

 

$

20,260

 

Leasehold improvements

 

 

6,689

 

 

 

6,298

 

Furniture, fixtures and office equipment

 

 

880

 

 

 

865

 

Computer equipment and software

 

 

942

 

 

 

756

 

Construction and tooling in process

 

 

6,402

 

 

 

6,214

 

Less: accumulated depreciation

 

 

(11,061

)

 

 

(10,373

)

 

 

$

24,276

 

 

$

24,020

 

 

5.

Share-Based Compensation

The Company has an Equity Compensation Plan (the “Plan”), which 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. The Company also has 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”).

The following is a summary of stock option activity under the Plan as of and for the three months ended March 31, 2021:   

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Shares

 

 

Price

 

 

Term (Years)

 

 

Value

 

Outstanding at December 31, 2020

 

 

15,521

 

 

$

2.49

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(1,545

)

 

 

2.16

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

(15

)

 

 

3.17

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

13,961

 

 

 

2.53

 

 

 

6.6

 

 

$

22,212

 

Exercisable at March 31, 2021

 

 

9,431

 

 

$

2.39

 

 

 

5.5

 

 

$

16,293

 

 

The following is a summary of PSU and RSU award activity under the Plan as of and for the three months ended March 31, 2021:   

 

 

 

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, 2020

 

 

1,641

 

 

$

2.61

 

 

 

1,567

 

 

$

2.77

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Incremental shares earned

 

 

209

 

 

 

 

 

 

 

 

 

 

Vested/settled

 

 

(765

)

 

 

2.86

 

 

 

 

 

 

 

Forfeited/expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

1,085

 

 

$

2.61

 

 

 

1,567

 

 

$

2.77

 

 

The LTIP awards that vested during the three months ended March 31, 2021 and 2020 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 cash to the appropriate taxing authorities. The Company withheld 348 and 170 shares during the three months ended March 31, 2021 and 2020, respectively, to satisfy tax obligations, which was determined based on the

12


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

fair value of the shares on their vesting date equal to the Company’s closing stock price on such date. The Company paid $1,619 and $597 during the three months ended March 31, 2021 and 2020, respectively, to taxing authorities for the employees’ tax obligations, which is 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.

 

In connection with Plan awards, the Company recognized share-based compensation expense for the three months ended March 31, 2021 and 2020 as follows:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Stock options

 

$

887

 

 

$

882

 

Restricted stock units

 

 

566

 

 

 

557

 

Performance stock units

 

 

152

 

 

 

539

 

Total share-based compensation expense

 

$

1,605

 

 

$

1,978

 

 

 

6.

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,

 

 

 

2021

 

 

2020

 

Proprietary product sales

 

$

18,732

 

 

$

12,566

 

Partnered product sales

 

 

10,403

 

 

 

14,531

 

Total product revenue

 

 

29,135

 

 

 

27,097

 

Licensing and development revenue

 

 

4,984

 

 

 

1,755

 

Royalties

 

 

7,964

 

 

 

4,227

 

Total revenue

 

$

42,083

 

 

$

33,079

 

 

Revenues disaggregated by customer location are as follows: 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

United States of America

 

$

40,631

 

 

$

32,470

 

Europe

 

 

1,452

 

 

 

609

 

 

 

$

42,083

 

 

$

33,079

 

 

The following table identifies customers from which the Company derived 10% or more of its total revenue in any of the periods presented:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Teva

 

43%

 

 

42%

 

AMAG

 

<10%

 

 

16%

 

McKesson Corporation

 

13%

 

 

12%

 

AmerisourceBergen Corporation

 

13%

 

 

11%

 

Cardinal Health

 

11%

 

 

10%

 

 

13


ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

 

 

 

 

7.

Income Taxes

The Company’s gross unrecognized tax benefits as of March 31, 2021 was $2,127 and there were no material changes during the quarter then ended.  There are no interest or penalties accrued in relation to unrecognized tax benefits. The Company will classify any future interest and penalties as a component of income tax expense.  The Company is subject to federal and state examinations for the years 2017 and thereafter.

 

8.

Earnings per Share

Basic earnings or loss per common share is computed by dividing the net income or loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed in a similar manner, except that the weighted average number of shares outstanding is increased to reflect the potential dilution from the exercise or conversion of securities into common stock. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if such instruments are dilutive in nature with respect to earnings per share. The following table sets forth the computation for basic and diluted net earnings (loss) per share for the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Numerator

 

 

 

 

 

 

 

 

Numerator for basic and diluted earnings (loss) per share

 

$

3,793

 

 

$

(2,356