ATRS Antares Pharma Inc

The following “risk factors” contain important information about us and our business and should be read in their entirety.   Additional risks and uncertainties not known to us or that we now believe to be not material could also impair our business. If any of the following risks actually occur, our business, results of operations and financial condition could suffer significantly. As a result, the market price of our common stock could decline and you could lose all of your investment.  In this Section, the terms the “Company,” “we”, “our” and “us” refer to Antares Pharma, Inc.

Risks Related to Our Operations

We have incurred significant losses to date, and there is no guarantee that we will ever achieve or sustain profitability.

We incurred net losses of $2.0 million, $6.5 million and $16.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, we had an accumulated deficit at December 31, 2019 of $278.8 million. The costs for research and development of our products, product candidates and drug delivery technologies, along with marketing and selling expenses and general and administrative expenses, have been the principal causes of our losses. Although we have reported net earnings and earnings per share in recent quarters, there is no guarantee we will continue to post quarterly profitable results of operations or achieve profitability on an annual basis. We may not ever achieve sustained profitability, and as a result your investment could be harmed.

We may need additional capital in the future in order to continue our operations.

At December 31, 2019, we had cash, cash equivalents and short-term investments of $45.7 million.  We believe the combination of our current cash and projected product sales, product development fees, license revenues, milestone payments and royalties should provide us with sufficient funds to meet our obligations and support operations through at least the first quarter of 2021.  However, we have not historically generated, and do not currently generate, enough revenue or operating cash flow to support our operations. We have historically funded our operations primarily by raising capital through equity and debt financing arrangements and may need to do so in the future. We reported net losses of $2.0 million, $6.5 million and $16.7 million, and negative cash flows from operations for each of the years ended December 31, 2019, 2018 and 2017, respectively. To the extent additional financing is needed, the failure to raise necessary cash may require the Company to defer or delay spending for research and development or cause us to curtail other controllable costs and discretionary spending.

We have funded our operations with proceeds from borrowings under a long-term debt financing arrangement.  On June 6, 2017 we entered into a loan and security agreement with Hercules Capital, Inc. for a term loan of up to $35.0 million, under which we initially borrowed $25.0 million. On June 26, 2019, we entered into an amendment of the loan agreement, which increased the aggregate principle amount available under the term loan from $35.0 million to $50.0 million. Upon signing of the amendment, an additional $15.0 million was funded to us, resulting in total principle balance outstanding under the loan of $40.0 million. Payments under the loan are interest only until the first principal payment is due on August 1, 2021. The loan is secured by substantially all of the Company’s assets, excluding intellectual property, and matures on July 1, 2022, which may be extended to July 1, 2024 contingent upon satisfaction of a certain loan extension milestone.

We have also funded operations with proceeds from sales of our common stock through an “at the market” offering (the “ATM”). During 2018 and 2019, we sold a total of 4.4 million shares under the ATM, representing gross proceeds of approximately $15.6 million to us. The ATM facility was terminated effective July 6, 2019.

If we are unable to obtain financing when needed, or if the amount of such financing is not sufficient, it may be necessary for us to take significant cost saving measures or generate funding in ways that may negatively affect our business in the future.  To reduce expenses, we may be forced to make personnel reductions or curtail or discontinue development programs.  To generate funds, it may be necessary to monetize future royalty streams, sell intellectual property, divest of technology platforms or liquidate assets. However, there is no assurance that, if required, we will be able to generate sufficient funds or reduce spending to provide the required liquidity.

Long-term capital requirements will depend on numerous factors, including, but not limited to, the status of collaborative arrangements, the progress of research and development programs and the receipt of revenues from sales of products. Our ability to achieve and/or sustain profitable operations depends on a number of factors, many of which are beyond our control. These factors include, but are not limited to, the following:

32

We have significant outstanding indebtedness under a loan and security agreement.  If we do not have sufficient cash available to repay the outstanding indebtedness as it becomes due, or if an event of default were to occur providing Hercules Capital, Inc. the right to accelerate the outstanding balance of the loan and to take possession of some or all of our collateral securing the loan, either situation could have a materially adverse effect on our business.

We have entered into a loan and security agreement, referred to herein as the Hercules Loan Agreement, with Hercules Capital, Inc., for a term loan of up to $50.0 million, under which we have borrowed a total of $40.0 million.  Proceeds from the loan have been and will be used for working capital and general corporate purposes. The term loan accrues interest at a calculated prime-based variable rate with a maximum interest rate of 9.50% and requires the payment of an additional end of term charge equal to 4.25% on the first $25.0 million and 3.95% on all other advances under the loan. The Hercules Loan Agreement requires payments of interest only until the first principal payment is due on August 1, 2021. The loan is secured by substantially all of the Company’s assets, excluding intellectual property, and will mature on July 1, 2022, unless extended to July 1, 2024 contingent upon satisfaction of a certain loan extension milestone

The Hercules Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties, including financial reporting obligations and limitations on dividends, indebtedness, liens, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. Our business may be adversely affected by the restrictions on our ability to operate our business. The Hercules Loan Agreement also contains other customary provisions, non-disclosure obligations, as well as indemnification rights for the benefit of the lenders. Upon the occurrence of an event of default and following any applicable cure periods, if any, a default interest rate of an additional 4.00% may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Hercules Loan Agreement.        

Additionally, we may be required to repay the outstanding indebtedness plus penalties immediately under the term loan if an event of default occurs under the Hercules Loan Agreement.  Under the Hercules Loan Agreement, an event of default will occur if, among other things, we fail to make payments as required under the Hercules Loan Agreement, we breach or default in the performance of any covenant or secured obligation under the Hercules Loan Agreement, a circumstance occurs that would reasonably be expected to have a material adverse effect on the Company, we become unable to pay our debts as they come due or are otherwise insolvent, we or our assets become subject to certain legal proceedings such as bankruptcy proceedings, a cross default to other indebtedness obligations of the Company in excess of $500,000, or a stop order is issued with respect to our common stock.

33

We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Hercules could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the loan for its benefit, which collateral includes all of our property other than our intellectual property. Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.

We have limited sales and marketing experience and limited experience working with payers on coverage issues, and we can provide no assurances of continued success in commercialization of our products.

The launch and successful commercialization of a new product requires substantial dedication of financial and other resources and include steps related to manufacturing, logistics, sales and marketing, and establishing insurance coverage and reimbursement.  We launched OTREXUP^® in February 2014, and XYOSTED^® in November 2018. Although we have hired and expect to continue to hire highly qualified personnel with specialized expertise, as a company, we have limited experience commercializing pharmaceutical products on our own. In order to commercialize our products, we have built and expect to continue to build our sales, marketing, distribution, managed care and trade, managerial and other non-technical capabilities and have made and expect to continue to make arrangements with third parties to perform these services when needed.

If we are unable to successfully implement our sales and marketing plans and obtain adequate third party coverage and drive adoption by patients and physicians of our products through our sales, marketing and commercialization efforts, then we may not be able to generate sustainable revenue growth from product sales which will have a material adverse effect on our business and future product opportunities.

Similarly, we may not be successful in maintaining the necessary commercial infrastructure, including sales representatives, managed care and medical affairs. Developing and enhancing our commercial capabilities to market our products has been and will continue to be expensive and time-consuming. As we continue to develop, maintain and grow these capabilities, we will have to compete with other pharmaceutical companies to recruit, hire, train and retain sales and marketing personnel. If we have underestimated the necessary sales and marketing capabilities or have not established the necessary infrastructure to support successful commercialization, or if our efforts to do so take more time and expense than anticipated, our ability to market and sell our drug products may be adversely affected.

There is no guarantee that patients and healthcare providers will adopt our or our partners’ products, and that we and our partners will be able to receive adequate payer coverage and reimbursement.  

There is no guarantee that patients and healthcare providers will adopt any newly approved products, or that insurers will provide adequate coverage and reimbursement, or will not disadvantage our products through imposition of prior authorization, step therapy, high co-payments, or similar formulary management techniques.  Any labeled limitations on the use of a product or warnings could discourage adoption of the product by patients, healthcare providers, and insurers.

Moreover, we and our partners may experience a delay in receiving coverage and reimbursement for any new products or may not receive adequate levels of coverage or reimbursement at all. By way of example, while we have obtained significant payer coverage for our testosterone replacement treatment product, XYOSTED^®, there is no assurance we will maintain coverage with payers or at the same coverage level with existing payers in future periods. The process for obtaining payer coverage is time consuming and uncertain. If the time to obtain coverage is lengthy, or if we are unable to obtain or maintain adequate coverage or if the rebates we negotiate are higher than anticipated, it may negatively impact our revenue from product sales.  

Additionally, if patients and healthcare providers do not adopt any new product, or if insurers restrict patient access or disadvantage our or our partners’ products in their formularies or otherwise do not provide adequate coverage and reimbursement, we and our partners may not be able to generate sustainable revenue growth from product sales and royalties which will have a material adverse effect on our business and future product opportunities.

Product labeling restrictions and warnings may also discourage payers from providing adequate levels of coverage and reimbursement. We and our partners, accordingly, may need to take steps to assist patients to afford our products, such as offering bridge programs, free-trial, discounts, rebates and co-pay coupon programs. These programs, however, may not ultimately be successful.

34

New information concerning our or our partners’ products learned through required post-approval studies and product use may also result in changes to our or our partners’ products.  Should any of these events occur, they could have a material and adverse effect on our operations and business.

Any post-approval requirements, including phase IV studies and Risk Evaluation and Mitigation Strategies, or REMS, may also require the dedication of substantial time and resources.  By example, as a post-marketing requirement for XYOSTED^®, the FDA has asked us to conduct a label comprehension study that assesses patients’ understanding of key risk messages in the Medication Guide for XYOSTED^® and a study of testosterone replacement therapy in pediatric males ages 14 years and older for conditions associated with a deficiency or absence of endogenous testosterone. The label comprehension study findings may result in revisions to the Medication Guide to optimize patients’ understanding of important risks of XYOSTED^® and potentially other label restrictions or changes.  Additionally, the outcome of any post-approval studies, including the pediatric study, is uncertain and may not result in an expanded label indication or could result in additional labeling requirements or other post-approval restrictions or regulatory actions. The label comprehension study was completed and submitted to the FDA in December 2019. The pediatric study must be completed by the end of 2026, and the conduct of this study will require dedication of funds and resources.

Additionally, use of our or our partners’ products by patients and in phase IV and post-marketing studies may result in the discovery of new information concerning the products.  By example, the products may be found to be less effective than initially demonstrated, or new, more severe, or more frequent adverse events or side effects may be reported.  This may result in regulatory or other actions, including, product liability actions, enforcement actions, distribution and manufacturing restrictions, changes to product labeling and promotional materials, the imposition of post-market requirements, such as REMS or additional phase IV studies, withdrawal of marketing application approvals, withdrawal of the product from the market, refusal to approve new marketing applications or supplements, product recalls, clinical holds and suspension of clinical studies, safety alerts, dear healthcare provider letters, adverse publicity, and reimbursement and insurance coverage consequences, among others.  Should any of these events occur, they could have a material and adverse effect on our operations and business.

By way of example, in October 2019, AMAG announced that the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee met to better understand and interpret the PROLONG (Progestin’s Role in Optimizing Neonatal Gestation) confirmatory clinical trial for Makena^® (hydroxyprogesterone caproate) injection. The PROLONG trial was conducted as a post-market study requirement under the 2011 Makena^® accelerated approval.  Nine advisory committee members voted to recommend that the FDA pursue withdrawal of approval for Makena^® and seven committee members voted to leave the product on the market under accelerated approval and require a new confirmatory trial.  The advisory committee's recommendation, while not binding, will be considered by the FDA in making its decision. We do not yet know what FDA’s decision will be, however, if FDA decides to withdraw Makena from the market, our business may be materially harmed.  Moreover, even if FDA determines that Makena^® may remain on the market, Makena^® sales may decrease or AMAG may decrease the resources that it dedicates to the manufacture, supply, commercialization, and distribution of Makena^®.  Finally, if FDA requires that AMAG conduct a new confirmatory study, AMAG may not be able to successfully conduct such study, which could ultimately result in FDA withdrawal of the Makena^® approval.  

If we or our partners are unable to achieve and maintain adequate levels of coverage and reimbursement for our or our partners’ products or any of our or our partners’ future products for which we or our partners receive regulatory approval, their commercial success may be severely hindered.

Successful sales of our products, such as XYOSTED^® and OTREXUP^®, depend on the availability of adequate coverage and reimbursement from third-party payers. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payers to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payers is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverage is approved, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

In addition, the market for our products will depend significantly on access to third-party payers' drug formularies or lists of medications for which third-party payers provide coverage and reimbursement. Health plans often use tiered formularies that prefer one branded product in a therapeutic class over another through different patient co-payment amounts and disadvantaging some products through techniques such as step therapy and prior authorization. Many states use formularies and preferred drug lists to obtain supplemental Medicaid rebates in excess of those required for Medicaid coverage.  The industry competition to be included in such formularies and not disadvantaged often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payers may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or another alternative is available. Additionally, certain third-party payers restrict or block access to

35

patients for new products until a clinical review has occurred or clinical evidence is provided to support the benefits for covered patients. These restrictions may be imposed for months or longer and some third-party payers may refuse to add new products to their formularies or otherwise restrict patient access. To ensure sales, manufacturers often must provide multiple discounts on the same drug in the chain of distribution to the health care provider and the payer.  Further, manufacturers are required to assume responsibility for Medicare Part D prescription costs for innovator drugs and biologics and authorized generics while the beneficiary is in the coverage gap.  Increasingly, payers are looking for metrics and performance-based pricing to justify increased cost of therapeutic advancements.  Even if coverage is obtained, the net realization from price concessions may negatively impact our profitability.  Government health programs also impose inflation penalties which may have adverse consequences if we increase prices in the future.

Our partnered products encounter similar issues in obtaining reimbursement from third-party payers. While we are unable to control the reimbursement rate or discounts contracted with third-party payers by our partners, these rates ultimately affect our profit sharing on Sumatriptan Injection USP and royalties on products such as Teva’s epinephrine auto injector and the Makena^® Subcutaneous Auto-Injector.

Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the U.S., no uniform policy of coverage and reimbursement for drug products exists among third-party payers. Therefore, coverage and reimbursement for drug products can differ significantly from payer to payer.

Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the U.S. and in international markets. Third-party coverage and reimbursement for XYOSTED^®, OTREXUP^® or any of our other products or product candidates for which we may receive regulatory approval may not be available or adequate in either the U.S. or international markets, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

The sale of XYOSTED^® and OTREXUP^® requires significant resources, and if we do not achieve the sales expected, we may lose the substantial investment we have made in these products.

We have and expect to continue to devote substantial resources to establish and maintain a sales and marketing capability for XYOSTED^® and OTREXUP^®. If we are unsuccessful in our commercialization efforts and do not achieve the sales levels that we expect, we may be unable to recover the large investment we have made in research, development, manufacturing, inventory and marketing efforts, and our business and financial condition could be materially adversely affected.

We rely on third parties to perform many necessary services for XYOSTED^® and OTREXUP^®, including services related to the distribution, invoicing, rebates and contract administration, storage and transportation of our products.

We have retained third-party service providers to perform a variety of functions related to the sale and distribution of our products, key aspects of which are out of our direct control. For example, we rely on Cardinal to provide key services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable management, sample administration and call center management, and, as a result, most of our finished goods inventory is stored at a single warehouse maintained by the service provider. We place substantial reliance on this provider as well as other third-party providers that perform services for us, including entrusting our inventories of products to their care and handling. We also rely on third parties to administer our drug price reporting and rebate payments and contracting obligations under federal programs. Despite our reliance on third parties, we are responsible for compliance with the applicable legal and program requirements.  By example, in certain states, we are required to hold licenses to distribute our products in the state and must comply with the associated state laws.  Moreover, if these third-party service providers fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired. In addition, we utilize third parties to perform various other services for us relating to regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If our employees or any third-party service providers fail to comply with applicable laws and regulations, we and/or they may face regulatory or False Claims Act enforcement actions. Moreover, if the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market our products could be jeopardized or we and/or they could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.

36

Our employees, independent contractors, consultants, commercial partners, manufacturers, principal investigators, or CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, independent contractors, consultants, commercial partners, manufacturers, investigators, or contract research organizations (“CROs”) could include intentional, reckless, negligent, or unintentional failures to comply with FDA regulations, comply with applicable fraud and abuse laws, provide accurate information to the FDA, properly calculate pricing information required by federal programs, comply with federal procurement rules or contract terms, report financial information or data accurately or disclose unauthorized activities to us. This misconduct could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter this type of misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Moreover, it is possible for a whistleblower to pursue a False Claims Act (“FCA”) case against us based on the actions or inactions of these third parties even if the government considers the claim unmeritorious and declines to intervene, which could require us to incur costs defending against such a claim. Further, due to the risk that a judgment in an FCA case could result in exclusion from federal health programs or debarment from government contracts, whistleblower cases often result in large settlements. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, and results of operations, including the imposition of significant fines or other sanctions.

We rely on third parties to manufacture our and our partners’ products. If we do not develop and maintain relationships with manufacturers and/or assemblers of our and our partners’ drug/device products or product candidates, or if such third parties are unable to manufacture or supply product, or assemble and package the final products, we may be unable to successfully manufacture, assemble, package and sell our and our partners’ products, which could have a material adverse effect on our business.

We do not currently possess the facilities to manufacture commercial quantities of our or our partners’ drug/device combination products or components, including XYOSTED^®, OTREXUP^®, VIBEX^® Sumatriptan Injection USP, epinephrine auto-injector devices, Makena^® auto injectors or any other of our or our partners’ products or product candidates.   We also do not possess the facilities to manufacture clinical supplies of any product candidates or components.  We must contract with third parties and/or our partners to produce products, components, and product candidates and to assemble and package products and components according to specifications and government regulations. The future development and delivery of our and our partners’ products and product candidates depends on the capability, timely, profitable and competitive performance of these third parties and/or our partners.  There is also no assurance that such third parties and/or our partners will be willing to manufacture, assemble or sell the drug/device products or components. A limited number of manufacturers exist that are capable of manufacturing our and our partners’ products, components, and product candidates. We and our partners may fail to contract with the necessary third parties or we and our partners may contract with third parties on terms that may not be favorable to us.  

Our and our partners’ contract manufacturers must comply with all applicable manufacturing requirements, including cGMPs for drug products and QSRs for medical devices.  Before approving any marketing application, FDA will inspect the product manufacturing facilities. We and/or our partners must obtain FDA approval for a product’s or product candidate’s manufacturing process and facilities to receive product marketing approval, which we and/or our partners may never obtain or may not be able to maintain. Moreover, following product approval, FDA regularly also inspects drug and device manufacturers to ensure continued compliance with FDA’s requirements and requires reporting certain manufacturing and quality issues.  If we or our partners are not able to obtain or maintain this approval and regulatory compliance, we and/or they would not be able to receive product approval, and commercialize and/or sell the applicable products.  Moreover, should any manufacturer fail to comply with the applicable regulatory requirements, we, our partners, and/or the manufacturer may face regulatory consequences, including enforcement actions and/or product recalls.  Additionally, use of third-party contract manufacturers exposes us to risks in the manufacturer's business such as their potential inability to perform from a technical, operational or financial standpoint. Failure by a contract manufacturer to supply product, could have a material adverse effect on our ability to generate revenue and profit.

In addition, contract manufacturers may utilize their own technology, technology developed by us, technology developed by our partners, or technology acquired or licensed from third parties. When contract manufacturers develop proprietary process technology, our reliance on such contract manufacturers is increased.  Technology transfer from the original contract manufacturer may be required. Any such technology transfer may also require transfer of requisite data for regulatory purposes, including information contained in a proprietary drug or device master file held by a contract manufacturer. We and/or our partners would be dependent on the contract manufacturer for the maintenance and right of reference to the drug or device master file.  If the contract manufacturer fails to maintain a drug or device master file or withdraws our or our partners’ right of reference, we and/or our partners may no longer be able to manufacture, develop, market, and sell our or our partners’ products or product candidates.  FDA approval of the new manufacturer and manufacturing site, as well as certain changes to the manufacturing process, would also be required in the event a contract manufacturer is no longer available to us.  We may also be required to gather data and conduct studies and analyses to support the use of a new manufacturer or manufacturing process.

37

We rely on multiple commercial supply arrangements with third-party manufacturers for, including, without limitation:

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including:

We and our partners depend on these third-party manufacturers to comply with cGMPs/QSRs enforced by the FDA and other regulatory requirements and to deliver materials on a timely basis.  To the extent that a contract manufacturer cannot deliver adequate quantities of clinical supplies that meet the applicable quality standards, our or our partners’ product development efforts may be delayed.  To the extent that a contract manufacturer cannot deliver adequate quantities of commercial products that meet the applicable quality standards, our or our partners’ commercialization efforts would be inhibited and as a result our revenue and profit may be adversely impacted.  In addition, because regulatory approval to manufacture a drug is site-specific, the FDA and other regulatory authorities will repeatedly inspect our and our partners’ current and future third-party manufacturers’ facilities for compliance with cGMPs/QSRs.  If we, our partners, or third-party manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may issue warning letters or suspend or withdraw our regulatory approval for approved or in-market products, refuse to approve any marketing applications, or refuse to allow future or current development of product candidates, among other things.  Departures from the applicable quality standards can also necessitate product recalls.  Our third-party manufacturers may also fail to pass the audits by our or our partners’ internal quality and regulatory group.  Any of these actions could delay or prevent our development of products, delay or prevent the submission of these products for regulatory approval, delay or prevent marketing approval, or result in insufficient product or product candidate quantity to support commercial demand or development.  We may also be required to replace manufacturers, which would be time consuming and expensive, and we may not be able to reach favorable agreements with or FDA approval for alternative manufacturers.  As a result, our business, financial condition and results of operations could be seriously harmed. See additional risk factors associated with manufacturing in the section “Risks Related to Regulatory Matters.”

In addition, we may consider entering into additional manufacturing arrangements with manufacturers or may need to change manufacturers. In each case, we will incur significant costs in obtaining the regulatory approvals, conducting any necessary studies, and taking the other steps necessary to begin commercial or clinical supply production by these manufacturers.

We depend on Teva to manufacture the drug and finished packaged product and to distribute and commercialize the epinephrine auto-injector in the U.S.

We have entered into a license, development and supply agreement with Teva, pursuant to which we developed and are the exclusive supplier of the device for an epinephrine auto injector product marketed by Teva in the U.S.

There is no guarantee that our partnership with Teva will be successful.  Teva controls the manufacture and supply of the drug, epinephrine, and the final assembly of the devices and packaging of the finished product, and has complete control over the commercialization and sale of the epinephrine auto injector product. If, at any time, Teva ceases to manufacture and supply the epinephrine drug or fails to produce sufficient supplies of the drug, Teva will be unable to produce a finished product and we may be unable to sell our auto injectors for this product to Teva resulting in less revenue for us.

38

In addition, if Teva is unable to complete the final assembly and packaging of the finished epinephrine auto injector product, we may receive less revenue than desired or expected.   If Teva is unable to produce sufficient supplies of the drug or finished epinephrine auto injector product in accordance with the applicable manufacturing requirements or otherwise fails to comply with applicable regulatory requirements, Teva may be subject to regulatory enforcement action, which could impact its ability to produce, market, commercialize, sell, and distribute the finished drug product, and in turn, our revenue. We rely on Teva to commercialize and distribute the product, including determining the price and payer coverage. If Teva is unsuccessful in commercializing the product, the resulting revenue may be lower than expected.  Additionally, Teva controls the business strategy, manufacturing and distribution decisions concerning the epinephrine auto injector product.  Such decisions by Teva may be beyond our control and may impact the success of the epinephrine auto injector product. As a result, we may receive less revenue than desired or expected. Further, Teva is subject to potential competition regarding other generic versions of the epinephrine auto injector product, and such additional competition could result in receiving less revenue than expected.

We depend on Teva to manufacture and supply the drug and to distribute and commercialize VIBEX^® Sumatriptan in the U.S.

We have entered into a license, supply and distribution agreement with Teva to distribute VIBEX^® Sumatriptan, an auto injector product containing sumatriptan for the treatment of migraines.  Under our arrangement, we will manufacture the auto injector and are responsible for final assembly and packaging of the final product and Teva will manufacture and supply the drug sumatriptan and distribute and commercialize the product in the U.S. Teva also has an option for rights in other territories.  

There is no guarantee that our partnership with Teva to distribute VIBEX^® Sumatriptan will be successful.  Teva controls the manufacture and supply of the drug, sumatriptan, which is necessary for the production of VIBEX^® Sumatriptan. If, at any time, Teva ceases to manufacture and supply us with sumatriptan or fails to produce sufficient supplies of the drug, we will be unable to produce a finished product or sell our auto injectors designed for this product to Teva.  In addition, if Teva is not able to produce sufficient supplies of the drug in accordance with cGMPs, we also will be unable to produce a finished product and we and/or Teva may be subject to regulatory enforcement action. We also rely on Teva to commercialize and distribute the product within the U.S. and if Teva is unsuccessful in commercializing the product, the resulting revenue may be lower than expected.  Moreover, because we hold the FDA approved application for this product, we are responsible for FDA regulatory compliance.  Should Teva fail to comply with the applicable regulatory requirements, they or we may be subject to regulatory enforcement action.  Any enforcement action could impact the ability to produce, market, commercialize, sell, and distribute the finished drug product, and in turn, our revenue. Additionally, we may disagree with Teva on certain business strategies or its manufacturing and distribution decisions.  Such decisions by Teva may be beyond our control and may impact the success of VIBEX^® Sumatriptan and we may receive less revenue than desired or expected. We have invested significant resources in the development of VIBEX^® Sumatriptan, and, if our partnership with Teva is not profitable or is terminated for any reason, we may not receive a return on our investment and may suffer significant losses.

We depend on AMAG to manufacture and supply the drug, distribute and commercialize a variation of our VIBEX^® QuickShot^® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena^®, and to maintain regulatory approval of the product.

We have entered into a license, development and supply agreement with AMAG to distribute a variation of our VIBEX^® QuickShot^® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena^®, the Makena^® Auto Injector. Makena^® was first approved by FDA via the accelerated approval pathway in 2011.  In 2018, FDA approved a supplemental application for the use of Makena^® with our VIBEX^® QuickShot^® subcutaneous auto injector.

There is no guarantee that our partnership with AMAG will be successful, that AMAG will be able to maintain approval for Makena^® or that AMAG will be able to successfully manufacture, supply, commercialize, and distribute the drug product.  By example, in October 2019, AMAG announced that the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee met to better understand and interpret the PROLONG (Progestin’s Role in Optimizing Neonatal Gestation) confirmatory clinical trial for Makena^® (hydroxyprogesterone caproate) injection. The PROLONG trial was conducted as a post-market study requirement under the 2011 Makena^® accelerated approval.  Nine advisory committee members voted to recommend that the FDA pursue withdrawal of approval for Makena^® and seven committee members voted to leave the product on the market under accelerated approval and require a new confirmatory trial. The advisory committee's recommendation, while not binding, will be considered by the FDA in making its decision. We do not yet know what FDA’s decision will be, however, if FDA decides to withdraw Makena^® from the market, our business may be materially harmed.  Moreover, even if FDA determines that Makena^® may remain on the market, Makena^® sales may decrease or AMAG may decrease the resources that it dedicates to the manufacture, supply, commercialization, and distribution of Makena^®.  Finally, if FDA requires that AMAG conduct a new confirmatory study, AMAG may not be able to successfully conduct such study, which could ultimately result in FDA withdrawal of the Makena^® approval.  

39

Additionally, AMAG controls the manufacture and supply of the drug, hydroxyprogesterone caproate, and has complete control over the launch and continuous commercialization and marketing of Makena^® Auto Injector worldwide. If, at any time, AMAG ceases to manufacture and supply us with hydroxyprogesterone caproate or fails to produce sufficient supplies of the drug, we will be unable to produce a finished product or sell our auto injectors for this product to AMAG.  In addition, if AMAG is unable to produce sufficient supplies of the drug in accordance with cGMPs or otherwise fails to comply with the applicable regulatory requirements, we also will be unable to produce a finished product and/or we and/or AMAG may be subject to regulatory enforcement action, which would impact the ability to produce, market, commercialize, sell, and distribute the finished drug product, and in turn, our revenue. We rely on AMAG to commercialize and distribute the product worldwide and if AMAG is unsuccessful in commercializing the product, the resulting revenue may be lower than expected.  Additionally, we may disagree with AMAG on certain business strategies or its manufacturing and distribution decisions.  Such decisions by AMAG may be beyond our control and may impact the success of the Makena^® Auto Injector and we may receive less revenue than desired or expected.

We and AMAG are subject to competition for generic versions of the intramuscular formulation of Makena^®, which is less costly for patients.  This competition could result in more patients utilizing the intramuscular formulation rather than the subcutaneous auto injector, thus resulting in us receiving potentially less revenue than expected.

We are dependent on numerous third parties in our supply chain for the commercial supply of our products and partners’ products most of which are currently single source suppliers, and if any of these single-source suppliers are not able to satisfy demand and alternative sources are not available, the manufacturing and distribution of our products and our partners’ products could be delayed and our business could be harmed.

The availability of our products for commercial sale depends upon our ability to procure the raw materials, components, packaging materials and finished products we need from third parties. We have entered into supply agreements with numerous third party suppliers, many of which are currently our single source for the materials necessary for certain of our products.  For example, we currently have the following single source suppliers in our supply chain for the commercial supply of XYOSTED^®, OTREXUP^®, Sumatriptan Injection USP, generic epinephrine injection devices and the Makena^® subcutaneous auto injector:

If any of these or other third parties are unable to supply its respective component for any reason, including due to violations of the FDA’s QSR or cGMP requirements, our or our partners’ ability to manufacture the finished product will be adversely affected and our ability to meet the distribution requirements for any product sales of such products and the resulting revenue therefrom will be negatively affected. We and our partners could also face enforcement actions or may need to engage in recalls due to issues with component suppliers. Accordingly, there can be no assurance that any failure in any part of our supply chain will not have a material adverse effect on our ability to generate revenue from our products which depend on third party suppliers, which in turn could have a material adverse effect on our business, results of operations and financial condition.

To mitigate some of the short-term risk of relying on single source suppliers, we intend to build a safety stock of component and/or of finished goods inventories.  However, there can be no assurance that these inventories will be adequate or that we will be able to maintain our desired level of safety stock.  Additionally, maintaining a high level of safety stock exposes us to additional risks such as excess and obsolete inventory if the sales volume of our products do not meet our forecasts.

40

If we do not develop and maintain relationships with manufacturers of our device products, or if any of our suppliers experience a failure in the manufacturing process, then we may be unable to successfully manufacture and sell our products or to meet our obligations to deliver to our customers and partners.

Manufacturing of our VIBEX^® auto injector devices for OTREXUP^®, Sumatriptan Injection USP and Epinephrine Auto Injectors, and the manufacturing of our Vibex^® QuickShot^® auto injector for Makena^® and XYOSTED^®, involves high volume production of numerous complex parts as well as assembly of those parts.  The manufacture of our device products must also comply with applicable regulatory requirements. To the extent that manufacturers do not comply with the applicable regulatory requirements, we, they, or our partners may be subject to regulatory enforcement action or may need to undertake recalls.

Our planned future device business may necessitate changes and additions to our contract manufacturing and assembly process or the use of a secondary manufacturer due to the anticipated larger scale of manufacturing in our business plan.  Our devices must be manufactured in compliance with regulatory requirements, in a timely manner and in sufficient quantities while maintaining quality and acceptable manufacturing costs.  In the course of these changes and additions to our manufacturing and production methods, we may encounter difficulties, including problems involving scale-up, yields, quality control and assurance, validation and qualification, product reliability, manufacturing costs, existing and new equipment and component supplies, any of which could result in significant delays in production. We may also need to obtain FDA approval for any such changes, which may not be granted.

We rely on Nypro, Phillips and ComDel to manufacture our auto injector devices.  Any failure by our contract manufacturers to successfully manufacture the pressure assisted auto injector device in commercial quantities, be in compliance with regulatory regulations, or pass the audits by our internal quality and regulatory group or pharmaceutical partner would have a negative impact on our future revenue expectations.

We use Sharp for final assembly and packaging of many of our and our partners’ products.  Any failure by Sharp to successfully perform final assembly and packaging of our or our partners’ products, or be in compliance with regulatory requirements, may result in product shipment delays and may have a negative impact on our product availability and future revenue expectations.

Our pharmaceutical partners retain the right to audit the quality systems of our manufacturing partner, and there can be no assurance that our manufacturers will be successful in these audits. Any of these failures would negatively impact our business, financial condition and results of operations.  We will also continue to outsource manufacturing of our future products to third parties.  Such products may be price sensitive and may be required to be manufactured in large quantities, and we have no assurance that this can be done.  Additionally, use of contract manufacturers exposes us to risks in the manufacturers’ business such as their potential inability to perform from a technical, operational or financial standpoint.

Certain of our technologies contain a number of customized components manufactured by various third parties.  Regulatory requirements applicable to manufacturing can make substitution of suppliers costly and time-consuming and may require regulatory approval. In the event that we could not obtain adequate quantities of these customized components from our suppliers, there can be no assurance that we would be able to access alternative sources of such components within a reasonable period of time, on acceptable terms or at all.  The unavailability of adequate quantities, the inability to develop alternative sources, a reduction or interruption in supply or a significant increase in the price of components could have a material adverse effect on our ability to manufacture and market our products. Moreover, to the extent that manufacturers do not comply with the applicable regulatory requirements, we, they, or our partners may be subject to regulatory enforcement action.

We may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label” use of drugs or medical devices, or otherwise promoted or marketed approved products in a manner that is inconsistent with FDA’s requirements.

In the U.S. and certain other jurisdictions, companies may not promote drugs or medical devices for “off-label” uses, that is, uses that are not described in the product’s labeling and that differ from those that were approved or cleared by the FDA or other foreign regulatory agencies. Under what is known as the “practice of medicine,” physicians and other healthcare practitioners may prescribe drug products and use medical devices for off-label or unapproved uses, and such uses are common across some medical specialties. Although the FDA does not regulate a physician’s choice of medications, treatments or product uses, the FFDCA and FDA regulations significantly restrict permissible communications on the subject of off-label uses of drug products and medical devices by pharmaceutical and medical device companies. The FDA, the Federal Trade Commission (“FTC”), the Office of the Inspector General of the Department of Health and Human Services (“HHS-OIG”), the Department of Justice (“DOJ”) and various state Attorneys General also actively enforce laws and regulations that prohibit the promotion of off-label uses. As the sponsor of FDA approved products, we and our partners will not only be responsible for the actions of the companies but also can be held liable for the actions of employees and contractors, requiring that all employees and contractors engaging in regulated functions, such as product promotion, be adequately trained and monitored, which requires time and monetary expenditures.

41

If the FDA determines that a company has improperly promoted a product “off label” or otherwise not in accordance with the agency’s promotional requirements, the FDA may issue a warning letter or seek other enforcement action to limit or restrict certain promotional activities or materials or seek to have product withdrawn from the market or seize product, among other enforcement requirements.  In addition, a company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil fines, criminal fines and penalties, civil damages and exclusion from federal funded healthcare programs such as Medicare and Medicaid and/or government contracting, consent decrees, corporate integrity agreements, as well as potential liability under the federal False Claims Act and applicable state false claims acts. Conduct giving rise to such liability could also form the basis for private civil litigation by third-party payers or other persons allegedly harmed by such conduct.

Moreover, in addition to the regulatory restrictions on off-label promotion, there are other FDA restrictions on and requirements concerning product promotion and advertising, such as requirements that such communications be truthful and non-misleading and adequately supported.  FDA also has requirements concerning the distribution of drug samples.  In the event that the regulatory restrictions on off-label promotion, the FDA’s regulations and judicial case law allow companies to engage in some forms of truthful, non-misleading, and non-promotional scientific speech concerning the off-label uses of their products. We have endeavored to establish and implement extensive compliance programs in order to instruct employees on complying with the relevant advertising and promotion legal requirements. Nonetheless, the FDA, HHS-OIG, the DOJ and/or the state Attorneys General, and other regulators may take the position that we are not in compliance with promotional, advertising, and marketing requirements, and, if such non-compliance is proven, we may be subject to significant liability, including administrative, civil and criminal penalties and fines, in addition to regulatory enforcement actions.

The failure of any of our third-party licensees to develop, obtain regulatory approvals for, market, distribute and sell their products as planned may result in us not meeting revenue and profit targets.

We partner with pharmaceutical companies, such as Teva, to develop, obtain regulatory approvals for, manufacture and sell our products and technologies along with their products. We are substantially dependent on these partners to perform their obligations under our agreements with them, in accordance with all applicable regulatory requirements.  If one or more of these pharmaceutical company partners fail to pursue the development or marketing of, fail to perform their contractual obligations in accordance with all regulatory requirements, or are unable to receive marketing approval for our and our partners’ products as planned, our revenues and profits may not reach expectations or may decline. While we have agreements with our partners, we do not have any direct control over their activities. For instance, we may not be able to control the timing and other aspects of the development of products because pharmaceutical company partners may have priorities that differ from ours.  Therefore, commercialization of products under development may be delayed unexpectedly.  The success of the marketing organizations of our pharmaceutical company partners, as well as the level of priority assigned to the marketing of the products by these entities, which may differ from our priorities, will determine the success of the products incorporating our technologies.  Competition in this market could also force us or our partners to reduce the prices of our technologies below currently planned levels, which could adversely affect our revenues and future profitability.

For example, we are currently working with Teva on four products: VIBEX^® with epinephrine, VIBEX^® with sumatriptan, and two pen products with exenatide and teriparatide.  While VIBEX^® with sumatriptan and epinephrine received FDA approval, there is no assurance that development of the other two products will continue or that they will ultimately receive FDA approval in a timely manner or at all, or if FDA approved, they will be a significant revenue source for us.

We currently depend on a limited number of customers for the majority of our revenue, and the loss of any one of these customers could substantially reduce our revenue and impact our liquidity.

For the year ended December 31, 2019, we derived approximately 41% of our revenue from Teva and 20% from AMAG.  In addition, we derived a significant portion of our product sales revenue from wholesale distributors, including AmerisourceBergen, which accounted for approximately 10% of total revenues in 2019. The loss of any of these significant customers or partners or reduction in our business activities could cause our revenues to decrease significantly and increase our continuing losses from operations.  If we do not broaden our customer base, we will continue to depend on these few customers for the majority of our revenues. Additionally, if we are unable to negotiate favorable business terms with these customers in the future, our revenues and gross profits may be insufficient to allow us to achieve and/or sustain profitability or continue operations.

None of our significant license or collaboration agreements are perpetual in nature.  Each has a specified termination date and may be terminated in advance of the termination date or renewal date by either party under different circumstances, for example a breach by us.

42

Most of our total revenues are generated from a small number of products.

We generate product sales from a limited number of individual products.  If we or our partners are unable to continue to market any one or a number of those products, such as XYOSTED^®, OTREXUP^® or our partnered device products, such as the generic Epinephrine Injection USP, Sumatriptan Injection USP and the Makena^® subcutaneous auto injector, then our total revenues, results of operations and cash flows could be materially adversely affected.  For example, if any of the products were to lose market share as the result of the entry of new competitors, or if the selling prices of any of these products were to decline significantly, there would be a direct negative impact on our reported revenues.

We have become more commercially oriented by further developing our own products and less dependent on our pharmaceutical partners, and we may not have sufficient resources to fully execute our plan.

We must make choices as to the drugs that we develop on our own. We may not make the correct choice of drug or technologies when combined with a drug, which may not be accepted by the marketplace as we expected or at all.  FDA approval processes for drugs and drugs with devices may be longer in time and/or more costly and/or require more extended clinical evaluation than anticipated.  Funds required to bring our own products to market may be more than anticipated or may not be available at all.  We have limited experience in bringing such products to market; therefore, we may experience difficulties in execution of development of internal product candidates.

If medical doctors do not prescribe our products or our partners’ products, or the medical profession, including clinics or other institutional providers, or patients do not accept our products or our partners’ products, or group purchasing organizations or other similar buying groups do not offer our products to their members, or pharmacy benefit managers, health plans, health maintenance organizations, or other managed care organizations do not cover our products or disadvantage them on their formularies, our ability to grow or maintain our revenues will be limited.

Our business is dependent on market acceptance of our products and those of our partners by physicians, the medical community, the medical profession, including clinics and other institutional providers, patients, group purchasing organizations and other similar buying groups, pharmacy benefit managers, health plans, health maintenance organizations, and other managed care organizations. Medical doctors’ willingness to prescribe, and patients’ willingness to accept, our products and those of our partners depend on many factors, including:

Even though we have received regulatory approval for XYOSTED^®, OTREXUP^® and other products, and even if we receive regulatory approval and satisfy the above criteria for any of our product candidates, physicians may not prescribe, clinics and other providers may not purchase, and patients may not accept, our products if we do not promote our products effectively. Factors that could affect our success in marketing our products include:

43

If any of our products or product candidates or those of our partners fails to achieve market acceptance, we may not be able to market and sell the products successfully, which would limit our ability to generate revenue and could harm our business.

The failure of our licensees to perform under any of our existing licensing agreements or the failure to enter into new licensing agreements could substantially affect our revenue.

One of our business strategies is to enter into license agreements with pharmaceutical companies covering the development, manufacture, use and marketing of our drug delivery devices with specific drug therapies. Under these arrangements, the partners typically assist us in the development of the product and sponsor the collection of the appropriate data for submission for regulatory approval of the use of the drug delivery device with the licensed drug therapy.  Our licensees may also be responsible for distribution and marketing of the product or technologies for these therapies either worldwide or in specific territories.  We are currently a party to a number of such agreements, all of which are currently in varying stages of development. We may not be able to meet future milestones established in our agreements (such milestones generally being structured around satisfactory completion of certain phases of clinical development, regulatory approvals and commercialization of our product) and thus, would not receive the fees expected from such arrangements, related future royalties or product sales.  Moreover, there can be no assurance that we will be successful in executing additional collaborative agreements or that existing or future agreements will result in increased sales of our drug delivery technologies or products. In such event, our business, results of operations and financial condition could be adversely affected, and our revenues and gross profits may be insufficient to allow us to achieve and/or sustain profitability.  As a result of our collaborative agreements, we are dependent upon the development, data collection and marketing efforts of our licensees.  The amount and timing of resources such licensees devote to these efforts are not within our control, and such licensees could make material decisions regarding these efforts that could adversely affect our future financial condition and results of operations.  In addition, factors that adversely impact the introduction and level of sales of any drug or drug device covered by such licensing arrangements, including competition within the pharmaceutical and medical device industries, the timing of regulatory or other approvals and intellectual property litigation, may also negatively affect sales of our drug delivery technology. Moreover, our partners and licensees will be subject to many of the same regulatory risks as we are.  To the extent that they are not able to comply with the applicable regulatory requirements, or are not able to obtain or maintain regulatory product approvals, we and they may be subject to regulatory enforcement action, their performance of their obligations under their contracts with us may be inhibited, and we may not be able to realize the benefit of the relationship.

We are relying on partners such as Teva, AMAG, Pfizer and Idorsia for future milestone, sales and royalty revenue.  Our partners may fail to obtain FDA or foreign approvals of a product with our technologies or may be unsuccessful in commercializing a product.  Significant delays in anticipated launches of these products in development may occur.  While we assist our partners in some cases in obtaining regulatory approvals and advancing new products, we depend on these partners and cannot control their decision-making or progress in achieving such goals. Any potential loss of anticipated future revenue could have an adverse effect on our business and the value of your investment.

Timing and results of clinical trials to demonstrate the safety and efficacy of products as well as the FDA’s approval of products are uncertain.

Drug development is an inherently risky and uncertain process.  Before obtaining regulatory approvals for the sale of any new product candidates, we and our partners must demonstrate through preclinical studies and clinical trials that the product is safe and effective for each intended use. Preclinical and clinical studies may fail at any stage to demonstrate the safety and effectiveness of a product or may not be completed on schedule or at all. Likewise, we and our partners may not be able to demonstrate through clinical trials that a product candidate’s therapeutic benefits outweigh its risks. Even promising results from preclinical and early clinical studies do not always accurately predict results in later, large scale trials. A failure to demonstrate safety and efficacy could or would result in the failure to obtain regulatory approvals.

The rate of patient enrollment sometimes delays completion of clinical studies for a number of reasons. For example, there is substantial competition to enroll patients in clinical trials and such competition has delayed clinical development of our products in the past. For example, patients may not enroll in clinical trials at the rate expected, a greater number of patients may be required than initially anticipated, or patients may drop out after enrolling or be lost to follow-up in the trials or during the trials. Delays in planned patient enrollment can result in increased development costs and delays in regulatory approval. In addition, we rely on collaboration partners that may control or make changes in trial protocol and design enhancements, or encounter clinical trial compliance-related issues, which may also delay clinical trials. Product supplies may be delayed or be insufficient to treat the patients participating in the clinical trials, or manufacturers or suppliers may not meet the requirements of the FDA or foreign regulatory authorities, such as those

44

relating to cGMP and QSRs. We and our partners may also experience delays in obtaining, or we and our partners may not obtain, required initial and continuing approval of our clinical trials from institutional review boards, the FDA, or other applicable regulatory authorities. We cannot assure you that we or our partners will not experience delays or undesired results in these or any other clinical trials.  For example, the FDA may issue a CRL in response to one of our or our partners’ marketing applications.  If a CRL is issued for any of our or our partners’ product candidates, we or our partner will be delayed in marketing that product candidate, we or our partner may need to conduct additional clinical trials and collect additional data and information, including manufacturing information, make revisions to manufacturing processes, and the FDA could convene an advisory committee to obtain expert advice on issues that resulted in the CRL being issued.  Clinical trials may also be suspended, placed on hold, or terminated by us, institutional review boards, the FDA, or other applicable regulatory authorities for a number of reasons, including failure to comply with the applicable regulatory requirements, including GCPs, and issues involving subject safety.

We cannot assure you that the FDA or foreign regulatory agencies will approve, clear for marketing or certify any products developed by us or our partners, on a timely basis, if at all for any number of reasons.  For example, the FDA or foreign regulatory authorities may disagree with our or our partners’ conduct of the studies or study design, may find manufacturers or manufacturing procedures to be inadequate, may find that product candidates are not safe and effective or that they present unacceptable adverse events or risks, or may find that studies were not conducted in accordance with the applicable regulatory requirements.  Moreover, if granted, such approvals may be subject to certain limits or other costly and burdensome requirements.  Such limits and requirements may include warnings, including black box warnings, limitations on the indicated use, including the applicable population, contraindications, Risk Evaluation and Mitigation Strategies, and post-approval studies and/or monitoring. The FDA or foreign regulatory authorities may not agree with the assessment by us or our clinical partners of the clinical data or they may interpret it differently. Such regulatory authorities may require additional or expanded clinical trials. Any limitation on use imposed by the FDA or foreign regulatory agencies or delay in or failure to obtain FDA approvals or clearances of products developed by us and our partners would adversely affect the marketing of these products and our ability to generate product revenue, which would adversely affect our financial condition and results of operations.

Before obtaining regulatory approvals for certain generic products, we and our partners must conduct limited clinical or other trials to show comparability to the branded products. A failure to obtain satisfactory results in these trials would prevent us from obtaining required regulatory approvals.

An increase in the number of competitors targeting generic and 505(b)(2) ANDA opportunities and seeking U.S. market exclusivity may adversely affect our revenues and profits.

Our ability to achieve continued growth and profitability through sales of pharmaceuticals is dependent on our and our partners’ continued success in challenging patents, developing non-infringing products or developing products with increased complexity to provide opportunities with U.S. market exclusivity or limited competition. There is substantial competition in the pharmaceutical industry.  We and our partners will face competition from generic drug products, drug products that are similar to our or our partners’ products, drug products containing the same active ingredient as our or our partners’ products, and drug products for the same indication as our or our partners’ products.

Our or our partners’ products may be eligible for periods of regulatory exclusivity, as described elsewhere in this annual report.  This exclusivity, however, may not adequately protect our or our partners’ products from competition.  For instance, the FDA’s five-year NCE exclusivity and three-year new clinical investigation exclusivity would not prevent the FDA from making an approval of a competing full NDA effective.  The three-year exclusivity is also limited, as it only protects the change presented in the application.  If any periods of exclusivity that we or our partners may have do not adequately protect the applicable product or if we or they do not receive anticipated periods of regulatory exclusivity, we or they may be subject to ANDA and/or 505(b)(2) competition sooner than we anticipate.

To the extent that we or our partner succeed in being the first to market a generic version of a product, and particularly if we or our partner receives a 180-day period of exclusivity in the U.S. market, as a result of being the first applicant to submit a substantially complete ANDA with a paragraph IV certification and successfully launch the product as provided under the Hatch-Waxman Act, our and our partners’ sales, profits and profitability can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of an equivalent product. Even after the exclusivity period ends, there is often continuing benefit for a time from having the first generic product in the market.

45

Similarly, to the extent we or our partners are able to receive exclusivity for our products, our or their sales, profits, and profitability can be positively impacted.  However, we or they may not be granted the periods of regulatory exclusivity or granted exclusivities and other protections may not adequately protect the products from competition.  For example, exclusivity does not prevent physicians from prescribing a similar product even if it is not approved for the same indication. We or our partners may also be subject to increased generic competition sooner than anticipated as FDA, Congress, and the Administration have taken steps to facilitate the approval of generic products and increase competition in the prescription drug market.  By example, in 2019 the FDA introduced a proposed rule and draft guidance to facilitate drug importation. Congress also passed a bill requiring sponsors of NDA approved products to provide sufficient quantities of drug product on commercially reasonable market-based terms to entities developing generic and similar drug products. This bill also included provisions on shared and individual REMS for generic drug products. New legislative and regulatory efforts could ultimately have an adverse impact on our business and results of operation.

Further, regardless of any granted exclusivities, we or our partners may face competition from products that are not otherwise blocked by our or our partners’ patents or exclusivities.  By example, in 2019, the FDA approved Clarus Therapeutic, Inc.’s product, Jatenzo^®, an oral testosterone undecanoate capsule for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone.  The introduction of Jatenzo^®, which was launched for commercial sale in February 2020, and other oral or competing testosterone products may materially impact our sales of XYOSTED^®.  Moreover, we or our partners may face competition from other products intended for the same use and/or that otherwise contain the same active ingredients, which may be less expensive than our or our partners’ products.  Any increase or changes in the competitive landscape for our or our partners’ products may impact product sales and the amount that can be charged for a given product.

Additionally, the number of generic manufacturers targeting significant new generic opportunities with Hatch-Waxman exclusivity, or which are complex to develop, continues to increase. Additionally, many of the smaller generic manufacturers have increased their capabilities, level of sophistication and development resources in recent years. Other companies may also be developing drugs using the 505(b)(2) pathway that are substantially similar to our products and/or product candidates. The failure to successfully develop and commercialize highly complex products could adversely affect our sales and profitability. For instance, to the extent that another company receives a period of regulatory exclusivity, the FDA may not make our application effective during that company’s exclusivity period.  This would delay our and our partners’ marketing of products and may prevent us or them from establishing a sufficient market share for our product.  Similarly, should another company obtain FDA approval for a pharmaceutically equivalent product to one of our product candidates, we may no longer be able to use the 505(b)(2) pathway.  In that case, it is the FDA’s policy that the appropriate submission would be an ANDA. We may, however, not be able to immediately submit an ANDA or have an ANDA approval made effective, as we could be blocked by others’ periods of patent and regulatory exclusivity protection.

The 180-day market exclusivity period is generally triggered by commercial marketing of the generic product or an authorized generic drug product. However, the exclusivity period can be forfeited by our failure to obtain tentative approval of our product or to launch a product within a specified statutory period. The Hatch-Waxman Act also contains other forfeiture provisions that may deprive the first “Paragraph IV” filer of exclusivity if certain conditions are met, some of which may be outside our control. Accordingly, we may face the risk that any granted exclusivity period is triggered or forfeited before we are able to commercialize a product and therefore may not be able to exploit a given exclusivity period for specific products.

We face intense competition from companies that have greater resources and capabilities.

Many of our competitors are larger and have substantially longer experience in the development and marketing of innovative and specialty consumer-oriented products. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development and marketing of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or noncompetitive before we can recover the expenses incurred in connection with their development. In addition, for these product categories we must demonstrate to physicians, patients and third-party payers the benefits of our products relative to competing products that are often more familiar or otherwise better established. If competitors introduce new products or new variations on their existing products, our marketed products, even those protected by patents, may be replaced in the marketplace, we may never be able to establish a sufficient market share or we may be required to lower our prices. Moreover, to the extent that competitors are able to receive FDA approval for and launch their competing products before us or our partners, they may develop a larger market share.

In addition, our specialty pharmaceuticals business requires much greater use of a direct sales force than does our generic business. Our ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel. Competition for qualified sales personnel is intense. We may also need to enter into co-promotion, contract sales force or other such arrangements with third parties, for example, where our own direct sales force is not large enough or sufficiently well-aligned to achieve maximum penetration in the market. Any failure to attract or retain qualified sales personnel or to enter into third-party arrangements on favorable terms could prevent us from successfully maintaining current sales levels or commercializing new innovative and specialty products.

46

Continued consolidation in the pharmaceutical industry, and particularly in the generic pharmaceutical industry, could impact our existing partnerships, products and product candidates  

There are a limited number of companies with sufficient scale and commercial reach to effectively market many of our products. Recent trends in the pharmaceutical industry suggest additional market consolidation, further concentrating financial, technical and market strength and resources and increasing competitive pressure in the industry.  For example, in 2016 Teva completed its acquisition of the generic business of Allergan (formerly Actavis). We are presently working with Teva on four products, VIBEX^® with epinephrine, Sumatriptan Injection USP, a pen product with exenatide, and a pen product with teriparatide.  Acquisitions and integrations are time and resource intensive and Teva’s attention and resources could be diverted to other acquisition or integration related activities or opportunities, which could potentially delay or negatively impact the success of some of our products with Teva.  For other products, increased consolidation could lead to more intense competition and pricing pressure which could have a result in a substantial decrease in our revenues and harm our operating results.  Consolidation may also lead to changes in personnel at our partners, potentially impacting the composition of our relationship teams at these partners and leading to material delays in the development and marketing of our products.

Although we have applied for, and/or have received, several patents and trademarks, we may be unable to protect our intellectual property, which would negatively affect our ability to compete.

Our success depends, in part, on our ability to obtain and enforce patents for our products and device technologies and to preserve our trade secrets and other proprietary information.  If we cannot do so, our competitors may exploit our innovations and deprive us of the ability to realize revenues and profits from our developments.

We currently hold numerous patents and have numerous patent applications pending in the U.S. and other countries.  Our current patents may not be valid or enforceable and may not protect us against competitors that challenge our patents, obtain their own patents that may have an adverse effect on our ability to conduct business, or are able to otherwise circumvent our patents.  Additionally, our products and technologies are complex and one patent may not be sufficient to protect our products where a series of patents may be needed.  Further, we may not have the necessary financial resources to enforce or defend our patents or patent applications. Even issued patents may later be modified or declared invalid by the U.S. Patent and Trademark Office by analogous foreign offices or in legal proceedings. In addition, any patent applications we may have made or may make relating to inventions for our actual or potential products and technologies may not result in patents being issued or may result in patents that provide insufficient or incomplete coverage for our inventions.

To protect our trade secrets and proprietary technologies and processes, we rely, in part, on confidentiality agreements with employees, consultants and advisors.  These agreements may not provide adequate protection for our trade secrets and other proprietary information in the event of any unauthorized use or disclosure, or if others lawfully and independently develop the same or similar information.

We may seek to protect our patent rights by asserting an allegation of infringement against third parties. For instance, for any products approved via the NDA pathway, we will be required to submit certain patent information for inclusion in FDA’s Orange Book.  There is no guarantee, however, that we will be able to obtain patents that may be included in the Orange Book.  Moreover, the rules for submitting patents to the Orange Book are detailed and complex. To the extent that we do not include a patent in the Orange Book, we would not be able to avail ourselves of the protections provided in the Hatch Waxman Act, including the possibility of a 30-month stay.  To the extent that we include a patent in the Orange Book that should not be included, we could also face legal action.

If third parties identify our products as reference listed drugs in any ANDA or 505(b)(2) applications, they will be required to provide patent certifications in their applications for our listed patents, and notifications to us.  In the event such third parties make paragraph IV certifications, we would be entitled to file a patent infringement lawsuit, and if that is accomplished within 45 days after receiving the notification, it would trigger a 30-month stay against FDA making the approval of the third party’s application effective.  Patent litigation is costly and time consuming and the outcome is uncertain.  There is no assurance of success with any patent litigation.  Depending on the ultimate outcome of the litigation it may have an adverse effect on results of operations and our market penetration. We may also determine that it is not in our business interest to file a patent infringement lawsuit in response to a paragraph IV certification.

47

Others may bring infringement claims against us, which could be time-consuming and expensive to defend and the outcomes uncertain.

Third parties may claim that the manufacture, use or sale of our drug delivery technologies infringe their patent rights.  As with any litigation where claims may be asserted, we may have to seek licenses, defend infringement actions or challenge the validity of those patents in the patent office or the courts.  If these are not resolved favorably, we may not be able to continue to develop and commercialize our product candidates.  Even if we were able to obtain rights to a third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors potential access to the same intellectual property.  If we are found liable for infringement or are not able to have these patents declared invalid or unenforceable, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the manufacture, use or sale of products or methods of drug delivery covered by patents of others.  Any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations.  We may not have identified, or be able to identify in the future, U.S. or foreign patents that pose a risk of potential infringement claims.  Ultimately, we may be unable to commercialize some of our product candidates as a result of patent infringement claims, which could potentially harm our business.

Additionally, we are developing and may develop other products in the future for ourselves and/or our partners using the ANDA and/or 505(b)(2) pathways.  Our partners may also do the same. There can be no assurance that those products will not be subject to litigation, which could delay or prohibit the launch of those potential products.  We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our partners’ products and/or product candidates and/or proprietary technologies infringe their intellectual property rights, including litigation resulting from filing under Paragraph IV of the Hatch-Waxman Act. These lawsuits could claim that there are existing patent rights for such drug and this type of litigation can be costly and could adversely affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents. Moreover, regardless of whether we and/or our partners are ultimately successful in defending a patent infringement suit, we and/or they may be significantly delayed by a 30 month stay in the event we and/or they make a paragraph IV certification.

Product liability and product recalls could harm our business.

The development, manufacture, testing, marketing and sale of pharmaceutical products and medical devices are associated with significant risks of product liability claims or recalls. Side effects or adverse events known or reported to be associated with, or manufacturing defects in, the products sold by us could exacerbate a patient’s condition or could result in serious injury or impairments or even death. This could result in product liability claims and/or recalls of one or more of our products. To the extent that a product fails to conform to its specifications or comply with the applicable laws or regulations, we or our partners may be required to or may decide to voluntarily recall the product even if there is no immediate potential harm to a patient.  

Product liability claims may be brought by individuals seeking relief for themselves, or by groups seeking to represent a class of injured patients. Further, third party payers, either individually or as a putative class, may bring actions seeking to recover monies spent on one of our products. While we have not had to defend against any product liability claims to date, as sales of our products increase, we may have product liability claims made against us. The risk of product liability claims may also increase if a company receives a warning letter from a regulatory or other enforcement agency. We cannot predict the frequency, outcome or cost to defend any such claims.

Product liability insurance coverage is expensive, can be difficult to obtain and may not be available in the future on acceptable terms, or at all. Our product liability insurance may not cover all of the future liabilities we might incur in connection with the development, manufacture or sale of our products. In addition, we may not continue to be able to obtain insurance on satisfactory terms or in adequate amounts.

A successful claim or claims brought against us in excess of available insurance coverage could subject us to significant liabilities and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Such claims could also harm our reputation and the reputation of our products, adversely affecting our ability to market our products successfully. Product liability claims can also result in regulatory consequences, including, but not limited to investigations and regulatory enforcement actions, as well as recalls, revocation of approvals, or labeling, marketing or promotional restrictions or changes.  In addition, defending a product liability lawsuit is expensive and can divert the attention of key employees from operating our business. Such claims can also impact our ability to initiate or complete clinical trials.

Product recalls may be issued at our discretion or at the discretion of our partners, suppliers, government agencies and other entities that have regulatory authority for pharmaceutical and medical device sales. Any recall of our products or products or their components that we supply to our partners could materially adversely affect our business by rendering us unable to sell that product or product component for some time and by adversely affecting our reputation.  In addition to the potential loss of revenue from the sale of our proprietary products, if we are unable to sell product to our partners, our potential revenue and royalty payments from our partners may be reduced or eliminated until we can re-supply product.  Recalls are costly and take time and effort to administer.  Even if a recall initially only relates to a single product, product batch, or a portion of a batch, recalls may later be expanded to additional

48

products or batches or we or our partners may incur additional costs and need to dedicate additional efforts to investigate and rule out the potential for additional impacted products or batches.  Moreover, if any of our partners recall a product due to an issue with a product or component that we supplied, they may claim that we are responsible for such issue and may seek to recover the costs related to such recall or be entitled to certain contractual remedies from us, Recalls may further result in decreased demand for our or our partners’ products, could cause our partners or distributors to return products to us for which we may be required to provide refunds or replacement products, or could result in product shortages.  Recalls may also require regulatory reporting and prompt regulators to conduct additional inspections of our or our partners’ or contractors’ facilities, which could result in findings of noncompliance and regulatory enforcement actions.  A recall could also result in product liability claims by individuals and third party payers. In addition, product liability claims or other safety issues could result in an investigation of the safety or efficacy of our products, our manufacturing processes and facilities, or our marketing programs conducted by the FDA, the European Medicines Agency (“EMA”) or the authorities of the EU member states. Such investigations could also potentially lead to a recall of our products or more serious enforcement actions, limitations on the indications for which they may be used, or suspension, variation, or withdrawal of approval. Any such regulatory action by the FDA, the EMA or the competent authorities of the EU member states could lead to product liability lawsuits as well.

If we do not have adequate insurance for product liability or clinical trial claims, then we may be subject to significant expenses relating to these claims.

Our business entails the risk of product liability and clinical trial claims. Although we have not experienced any material claims to date, any such claims could have a material adverse impact on our business.  Insurance coverage is expensive and may be difficult to obtain and may not be available in the future on acceptable terms, or at all.  We maintain product and clinical trial liability insurance and evaluate our insurance requirements on an ongoing basis.  If we are subject to a product liability claim, our product liability insurance may not reimburse us, or may not be sufficient to reimburse us, for any expenses or losses that may have been suffered.  A successful product liability claim against us, if not covered by, or if in excess of our product liability insurance, may require us to make significant compensation payments, which would be reflected as expenses on our statement of operations.  Adverse claim experience for our products or licensed technologies or medical device, pharmaceutical or insurance industry trends may make it difficult for us to obtain product liability insurance or we may be forced to pay very high premiums, and there can be no assurance that insurance coverage will continue to be available on commercially reasonable terms or at all.  Additionally, if the coverage limits of the product liability insurance are not adequate, a claim brought against us, whether covered by insurance or not, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that the we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we do not prevail, we could be required to pay substantial damages and could lose rights to important intellectual property. Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

If we are unable to retain our key personnel, and continue to attract additional professional staff, we may be unable to maintain or expand our business.

Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors will remain highly dependent, in large part, upon our ability to attract and retain qualified scientific, technical and commercial personnel. The loss of key scientific, technical and commercial personnel or the failure to recruit additional key scientific, technical and commercial personnel could have a material adverse effect on our business. While we have employment agreements with our key executives, we cannot assure you that we will succeed in retaining personnel or their services under existing agreements. There is intense competition for qualified personnel in the areas of our activities, and we cannot assure you that we will be able to continue to attract and retain the qualified personnel necessary for the development of our business.

We depend on information technology and computer systems to operate our business, and any failures or interruptions in our internal computer systems, including a data breach or cybersecurity incident, could have a negative impact on our business.

Despite the implementation of security measures, our internal computer systems and those of our current and any future partners, contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, attacks by computer hackers, natural disasters, terrorism, war and telecommunication and electrical failures. Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of our confidential or otherwise protected information, corruption of data.  While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur

49

and cause interruptions in our operations, it could result in a material disruption of our manufacturing activities, development programs and our business operations. For example, the loss of manufacturing records or clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential, protected health or proprietary information, we could incur liability or damage to our reputation, and the further commercialization and development of our products and product candidates could be delayed.

Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients or other business partners may be exposed to unauthorized persons or to the public. There can be no assurance that our efforts, or the efforts of our partners and vendors, will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches

If we make any acquisitions, we will incur a variety of costs and might never successfully integrate the acquired product or business into ours.

We might attempt to acquire products or businesses that we believe are a strategic complement to our business model. We might encounter operating difficulties and expenditures relating to integrating an acquired product or business.  These acquisitions might require significant management attention that would otherwise be available for ongoing development of our business.  In addition, we might never realize the anticipated benefits of any acquisition. We might also make dilutive issuances of equity securities, incur debt or experience a decrease in cash available for our operations, or incur contingent liabilities and/or amortization expenses relating to goodwill and other intangible assets, in connection with future acquisitions.

Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable laws and regulations and we have incurred and will continue to incur costs relating to compliance with applicable laws and regulations.

As a pharmaceutical technology company, we are subject to a large body of legal and regulatory requirements. In addition, as a publicly-traded company we are subject to significant regulations, including the Sarbanes-Oxley Act of 2002 (“SOX”). We cannot assure you that we are or will be in compliance with all potentially applicable laws and regulations. Failure to comply with all potentially applicable laws and regulations could lead to the imposition of fines, cause the value of our common stock to decline, and impede our ability to raise capital or list our securities on certain securities exchanges. New rules could make it more difficult or costlier for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our committees and as executive officers. We cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs to comply with these rules and regulations.

We may fail to maintain effective internal controls over external financial reporting or such controls may fail or be circumvented.

SOX requires us to report on our internal controls over financial reporting, and our business and financial results could be adversely affected if we, or our independent registered public accounting firm, determine that these controls are not effective. In addition, any failure or circumvention of our internal controls and procedures or failure to comply with regulations concerning controls and procedures could have a material effect on our business, results of operation and financial condition. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our committees and as executive officers.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

50

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

We face risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt our operations and may materially and adversely affect our business and financial conditions.

Our business could be adversely impacted by the effects of the coronavirus or other epidemics.  In December 2019, a novel strain of the Coronavirus (COVID-19) emerged in China and the virus has now spread to several other countries, including the U.S., and infections have been reported globally.  The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak.  In particular, the continued spread of the coronavirus globally could materially and adversely impact our operations including without limitation, our manufacturing and supply chain, sales and marketing efforts, clinical trial operations, travel,  employee health and availability which may have a material and adverse affect on our business, financial condition and results of operations.  While we presently do not source any of our drug API, pre-filled syringes or finished goods from China, our supply chain is worldwide and accordingly could be subject to disruption in the future.  In addition, a significant outbreak of coronavirus could result in widespread global health crisis that could adversely affect global economies and financial markets resulting in an economic downturn that could affect the demand for our products and future revenue and operating results.  

Risks Related to Regulatory Matters

Our and our partners’ product candidates are subject to the inherent risk of product development, in that they may not receive regulatory marketing approval on a timely basis or at all.  If we or our partners fail to obtain, or have delays in obtaining, regulatory approvals for any product candidates, our business, financial condition and results of operations may be materially adversely affected.

We and our partners are not permitted to market any product candidates in the U.S. unless and until we or they obtain regulatory approval from the FDA. To market the product in the U.S., we or our partners must submit to the FDA and obtain FDA approval of a marketing application.  We and our partners have historically used FDA’s 505(b)(2) NDA and ANDA pathways.  A 505(b)(2) NDA must be supported by extensive clinical and preclinical data, as well as extensive information regarding chemistry, manufacturing and controls, or CMC, to demonstrate the safety and effectiveness of the applicable product candidate.  An ANDA must be supported by studies demonstrating that the product candidate is bioequivalent to the reference listed drug, as well as extensive information regarding CMC. Recently, we entered into a global agreement with Idorsia for the development of selatogrel in combination with one of our delivery devices.  As an NCE, this product candidate would require a full NDA.  For products for which our partners already hold approved drug applications, our partners would need to obtain FDA approval of supplemental applications before they could market our device with their drug product.  The number and types of preclinical studies and clinical trials that will be required varies depending on the product candidate, the approval pathway, the disease or condition that the product candidate is designed to target and the regulations applicable to any particular product candidate.

To conduct our and our partners’ clinical and preclinical studies, we and they rely on third parties, including Contract Research Organizations and clinical trial sites to carry out the studies in accordance with the written protocol, instructions, our and our partners’ agreements with them, and the applicable regulatory requirements.  There is no guarantee that we or our partners will be able to negotiate agreements with these third parties on acceptable terms, on a timely basis, or at all.  To the extent that these third parties do not carry out their responsibilities, as is required, or to the extent that we, our partners, or such third parties terminate the applicable agreements, we or our partners may need to replace them, which may take significant time, effort, and expense.  Additionally, we or our partners may be subject to regulatory enforcement action for such third parties’, our, or our partners’ actions and FDA or foreign regulatory authorities may find that the study data generated cannot form the basis for approval of a marketing application, requiring that we or our partners conduct additional preclinical and clinical studies.  Moreover, investigators and CROs may be subject to conflicts of interest that compromise or appear to compromise the resulting data.  Such third-parties may also have relationships with other entities that they may prioritize over the conduct of our or our partners’ studies.

Despite the time and expense associated with preclinical and clinical studies, failure can occur at any stage, and we or our partners could encounter problems that cause us or they to repeat or perform additional preclinical studies, CMC studies or clinical

51

trials. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including, failure to receive FDA or IRB authorization to begin a trial, negative or inconclusive results, slow or insufficient subject enrollment, failure to obtain adequate clinical supply of product candidates, and failure by us, our partners, CROs, and clinical trial sites to follow the applicable regulatory requirements, including GCPs. We or our partners may also not have sufficient funding to conduct or complete a clinical trial or pay the substantial FDA application user fees.  The FDA and similar foreign authorities could also delay, limit or deny approval of a product candidate for many reasons, including because they:

Significant delays also could shorten any periods during which we or our partners may have the exclusive right to commercialize our product candidates allow competitors to bring products to market before we do.  

Undesirable side effects caused by any product candidate that we or our partners develop, a lack of bioequivalence for ANDA product candidates, and/or an inability to demonstrate product candidate efficacy could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications or cause us or our partners to evaluate the future of our development programs. Undesirable side effects could also interrupt, delay, or halt clinical trials.  The regulatory review and approval process is lengthy, expensive and inherently uncertain.

By example, with regard to XYOSTED^®, we submitted a 505(b)(2) NDA to the FDA in December 2016, the NDA submission was accepted and assigned a PDUFA target date for completion of its review by October 20, 2017, and on October 20, 2017, we received a CRL from the FDA.  We provided a resubmission to the FDA in response to the CRL on March 29, 2018 and, on September 28, 2018, XYOSTED^® was approved by the FDA.  However, even if product candidates are approved, they may be subject to certain limits or other costly and burdensome requirements. For instance, the product candidates may be subject to limitations on the indicated uses for which the products may be marketed, distribution restrictions, or to other conditions of approval; may contain significant safety warnings, including boxed warnings, contraindications, and precautions; may not be approved with label statements necessary or desirable for successful commercialization; or may contain requirements for costly post‑market testing and surveillance or other requirements, including REMS, to monitor the safety or efficacy of the products.

Failure to obtain, or delays in obtaining, regulatory approvals may:

52

Moreover, the reference listed drugs for our or our partners’ product candidates will impact our or our partners’ ultimate product approvals.  By example, the labels for our or our partners’ product candidates, in the case of ANDA products will, and in the case of 505(b)(2) NDA products may include the same warnings, precautions, limitations, and other safety information as the reference listed drugs.  Any future actions or inquiries by the FDA with respect to the reference listed drug or changes to the reference listed drug’s label may require that we or our partners make changes to our labeling, change or abandon development programs that rely on such reference listed drugs, or, possibly, withdraw the product from the market.  Any of the foregoing may impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

We, or our licensees, may incur significant time and costs seeking approval for our products, which could delay the realization of revenue and, ultimately, decrease our revenues from such products.

The design, development, testing, manufacturing and marketing of pharmaceutical compounds and medical devices are subject to regulation by governmental authorities, including the FDA and comparable regulatory authorities in other countries.  The approval process is generally lengthy, expensive and subject to unanticipated delays.  We, alone or with our partners, have and may in the future pursue marketing approval for products from regulatory authorities in the U.S. and other countries for products developed internally and pursuant to our license agreements.  In the future we, or our partners, may need to seek approval for or submit FDA notifications regarding changes, including changes to manufacturing, manufacturers, and product labeling, to existing products or for newly developed products.  We or our partners may need to support these applications or notifications with certain data or information that would need to be collected or developed.  Moreover, FDA may ultimately not approve any such changes.  Our revenue and profit will depend, in part, on the successful introduction and marketing of some or all of such products by our partners or us.

Applicants for FDA approval often must submit extensive clinical data and supporting information to the FDA. Varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a drug product.  Changes in FDA approval policy during the development period, or changes in regulatory review for each submitted NDA also may cause delays or rejection of an approval.  Even if the FDA approves a product, the approval may limit the uses or “indications” for which a product may be marketed, or may require further studies.  The FDA also can withdraw product clearances and approvals for failure to comply with regulatory requirements or if unforeseen problems follow initial marketing.

Moreover, the regulatory path for approval of combination products may be subject to review by several centers within the FDA and although precedent and guidance exists for the requirements for such combination products, there is no assurance that the FDA will not change what it requires or how it reviews such submissions.  Human clinical testing may be required by the FDA in order to commercialize these products and devices and there can be no assurance that such trials will be successful. Such changes in review processes or the requirement for clinical studies could delay anticipated launch dates or be at a cost which makes launching the product or device cost prohibitive for ourselves or our partners. Such delay or failure to launch these products or devices could adversely affect our revenues and future profitability.

We and our partners’ product candidates may also be subject to additional regulatory review.  By example the product candidates will be reviewed by different offices within FDA to ensure that the drug labeling adequately discloses all relevant information and risks.  Additionally, the instructions for use for the product candidates will be reviewed for accuracy, ease of use and educational requirements.  These reviews could increase the time needed for review completion of a successful application and may require additional studies, such as usage studies, to establish the validity of the instructions.  Such reviews and requirement may extend the time necessary for the approval of drug-device combinations.  

Our business and product development may also be adversely affected by the result and timing of the FDA’s review of Teva’s ANDAs for its exenatide and teriparatide pen products as we cannot market or sell our injector for use with these drug products in the U.S. until they have been approved by the FDA. In other jurisdictions, we, and the pharmaceutical companies with whom we are developing technologies (both drugs and devices), must obtain required regulatory approvals from regulatory agencies and comply with extensive regulations regarding safety and quality.  If approvals to market the products are delayed, if we fail to receive these approvals, or if we lose previously received approvals, our revenues may not materialize or may decline.  We may not be able to obtain all necessary regulatory approvals. Additionally, clinical data that we generate or obtain from partners from FDA regulatory filings may not be sufficient for regulatory filings in other jurisdictions and we may be required to incur significant costs in obtaining those regulatory approvals.

53

The 505(b)(2) and 505(j) (ANDA) regulatory pathway for many of our potential products is uncertain and could result in unexpected costs and delays of approvals.

Many of our and our partners’ drug/device combination product candidates may be developed via the 505(b)(2) or the ANDA route. Both the 505(b)(2) and ANDA regulatory pathways are continually evolving and advice provided in the present is based on current standards, which may or may not be applicable when we or our partner potentially submit a NDA or ANDA. Based on evolving regulatory policies, we or our partners may not be able to use the 505(b)(2) or ANDA pathways in the future, requiring that we or they pursue the costlier and time consuming 505(b)(1) full NDA pathway. We or our partners may also face delays or impediments to the approval of any product candidates if a competitor files a citizen petition with FDA.

Moreover, any FDA intervening approvals of drug products that are the same or similar to our or our partners’ product candidates could impact our potential market position and prospects, as well as impact the approval of our or our partners’ product candidates.   By example, should FDA approve a product that is pharmaceutically equivalent to one of our or our partners’ 505(b)(2) NDA product candidates before we or they submit a marketing application, we or they would be required to change the marketing application to an ANDA application.  Similarly, should FDA approve a product that is more similar to any of our or our partners’ ANDA product candidates than the current reference listed drug, we or our partners may be required to change the reference listed drug for the ANDA.  Either of these scenarios could require additional development work, and clinical or preclinical studies.  FDA intervening approvals could also delay the timeframe within which we or our partners may submit product applications to FDA or within which FDA may make approvals of such applications effective, due to periods of patent protections and regulatory exclusivities for the newly approved product. Because the FDA cannot disclose whether such predicate product(s) is under development or has been submitted at any time during another company’s review cycle, we would not know whether there are any intervening products or applications until such product or application is approved.

Drug delivery systems such as injectors are reviewed by the FDA and may be legally marketed as a medical device or may be evaluated as part of the drug approval process.   Combination drug/device products raise unique scientific, technical and regulatory issues. The FDA has established the Office of Combination Products (“OCP”) to address the challenges associated with the review and regulation of combination products. The OCP assists in determining strategies for the approval of drug/delivery combinations and assuring agreement within the FDA on review responsibilities.  We or our partners may seek approval for a product including an injector and a generic pharmaceutical by filing an ANDA claiming bioequivalence and the same labeling as a comparable referenced product or as a filing under Section 505(b)(2) if there is an acceptable reference product.  We or our partners may also seek full NDAs or, for products that are already approved, our partners may seek to amend the approval to include the use of an injector through a supplemental NDA and for products that are considered to be new molecular entities, we or our partners may seek approval through a full NDA

In reviewing the ANDA filing, the agency may decide that the unique nature of combination products leads them to question the claims of bioequivalence and/or same labeling, resulting in our re-filing the application under Section 505(b)(2).  If such combination products require filing under Section 505(b)(2) we may incur delays in product approval and may incur additional costs associated with testing, including clinical trials.  The result of an approval for a combination product under Section 505(b)(2) may result in additional selling expenses and a decrease in market acceptance due to the lack of substitutability by pharmacies or formularies.  In addition, approval under the 505(b)(2) or ANDA regulatory pathway is not a guarantee of an exclusive position for the approved product in the marketplace.

Accordingly, these regulations and the FDA’s interpretation of them might impair our ability to obtain product approval in a reasonable time, or at all, or effectively market our products.

Because our and our partners’ products and product candidates are considered to be drug/device combination products, the approval and the post-approval requirements that we and they are required to comply with will be more complex.

Our and our partners’ products and product candidates are considered to be drug/device combination products by FDA, consisting of a drug product and a drug delivery device.  If marketed individually, each component would be subject to different regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary jurisdiction over its pre-market review and regulation based on a determination of the product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our and our partners’ products and product candidates, the primary mode of action is attributable to the drug component of the product, which means that the Center of Drug Evaluation and Research (CDER) has primary jurisdiction over its pre-market development and review.  These products and product candidates will be and have been subject to the FDA drug approval process, and will not require a separate FDA clearance or approval for the device component.  Even though these products and product candidates are subject to the drug approval process, we, our partners, and any of our respective contractors will be required to comply with FDA regulatory requirements related to both drugs and devices.  For instance, drug/device combination products must comply with both the drug cGMPs and device QSRs.  Depending on whether the drug and device components are at the same facility, however, FDA’s regulations provides a streamlined

54

method to comply with both sets of requirements.  Additionally, drug/device combination products will be subject to additional FDA and constituent part reporting requirements.  The development of drug/device combination products will also be more complex because the sponsor of the product application will need to demonstrate the safety and efficacy of both the drug and device components of the product.  These requirements will require additional effort and monetary expenditure to ensure that our and our partners’ products and product candidates.

NDAs submitted under Section 505(b)(2) and ANDAs subjects us to the risk that we may be subject to a patent infringement lawsuit or regulatory actions that would delay or prevent the review or approval of our product candidate.

Applicants submitting NDAs under Section 505(b)(2) of the FFDCA and ANDA applicants must provide a patent certification with their applications. One such certification is known as a Paragraph IV certification, which certifies that any patents listed in the FDA’s Orange Book are invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the product that is the subject of the application.  Under the Hatch‑Waxman Act, the holder of patents or the reference listed drug applications that the new application references may file a patent infringement lawsuit following a Paragraph IV certification, triggering a 30‑month stay. In such a case, the FDA may not make the application approval effective until the earlier of 30 months from the receipt of the notice of the Paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent is favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. Accordingly, we may invest a significant amount of time and expense in the development of one or more product candidates only to be subject to significant delay and patent litigation before such product candidates may be commercialized, if at all.

In addition, a 505(b)(2) or ANDA application approval will not be made effective until any existing non‑patent exclusivity have expired or, if possible, are carved out from the label.

We and our partners are subject to ongoing obligations and continued regulatory review, which may result in significant additional expense for our and their approved and unapproved products. Failure to comply with these obligations could result in regulatory and/or legal consequences.

Our and our partners’ products and product candidates are subject to extensive and rigorous government regulation by the FDA and other foreign regulatory agencies, including requirements related to research, development, pre-clinical and clinical testing before and after product approval, manufacture, safety, effectiveness, record keeping, reporting, labeling, packaging, storage, distribution, safety, deviation, and other reporting, approval, facility registration and product listing, the payment of user fees, advertising, marketing, promotion, sale, distribution, sampling, import and export of pharmaceutical and medical device products. Because our and our partners’ products and product candidates are drug/device combination products, we and they will have to comply with more regulatory requirements that would otherwise be required for products that are not combination products.  Failure to comply with FDA and other applicable regulatory requirements may, either before or after product approval, subject us to administrative or judicially imposed sanctions.  Moreover, were we or our partners to seek regulatory approval for additional indications or uses of any products that we or they may have already received marketing approval for, we or they would be subject to the risks of product development, including the failure to obtain regulatory approval.

The applicable governmental policies may also change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates or products, or that could impose additional regulatory obligations on us.  

By example, we and our partners also must comply with FDA’s promotional requirements, including FDA’s prohibition on the promotion of products for unapproved uses.  Promotional communications may receive significant attention and scrutiny from not only the FDA but also the Department of Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public.

The FDA will continue to monitor the product after approval for continued safety, efficacy, and compliance.  We, our partners, and contractors will also be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with regulatory requirements. Later discovery of previously unknown adverse events or that the drug is less effective than previously thought or other problems with our products, manufacturers, or manufacturing processes, or failure to comply with regulatory requirements both before and after approval, may yield various results, including warning letters, untitled letters, cyber letters, manufacturing and distribution restrictions, changes to product labeling, post-marketing study or other requirements such as REMS, refusal to approve marketing applications or supplements, withdrawal of marketing application approvals, removal of the product from the market, labeling or promotional material modifications, product recalls, market withdrawals, field corrections, clinical holds and suspensions of clinical studies, fines, penalties, disgorgement, corporate integrity agreements, consent decrees, seizure, injunctions, prohibition on importing and exporting, dear healthcare provider letters, adverse publicity, FDA debarment, debarment from government contracts or refusal of orders under existing contracts, and exclusion from federal healthcare programs, among other consequences.  Any of these events could have other material and adverse effects on our operations and business.

55

We and our contractors, distributors, prescribers, and dispensers are required to comply with regulatory requirements related to controlled substances for XYOSTED^®, which will require the expenditure of additional time and will incur additional expenses to maintain compliance.  

XYOSTED^® is a drug/device combination product in which the drug product is testosterone.  Testosterone is a Schedule III controlled substance.  Accordingly, we, and our contractors, distributors, prescribers, and dispensers must comply with Federal controlled substances laws and regulations, enforced by the U.S. Drug Enforcement Administration (“DEA”), as well as state controlled substances laws and regulations enforced by state authorities.  These requirements include, but are not limited to, registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, and other requirements.  These requirements are enforced by DEA through periodic inspections.  

To continue to engage in controlled substance activities, we, and our contractors, distributors, prescribers, and dispensers must maintain controlled substance registrations.  To the extent that we and our contractors, distributors, prescribers, and dispensers cannot obtain or maintain the necessary controlled substance registrations, we and these other third parties would not be able to continue engaging in controlled substance operations.  This would prevent the continuing commercialization of XYOSTED^® or would require that we find alternative contractors, which would take additional time and expenses, also delaying or interrupting the commercialization of XYOSTED^®.   Moreover, even if we, and our contractors, distributors, prescribers, and dispensers are able to obtain and maintain the necessary controlled substance registrations, compliance with the applicable controlled substance requirements will require significant efforts and expenditures, which could also inhibit the successful commercialization of XYOSTED^®.  If we, and our contractors, distributors, prescribers, and dispensers do not comply with the applicable controlled substance requirements, we or they may be subject to administrative, civil or criminal enforcement, including civil penalties, refusals to renew necessary registrations, revocation of registrations, criminal proceedings, or consent decrees.

Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payers in connection with our current and future business activities are and will continue to be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, marketing expenditure tracking and disclosure (or “sunshine”) laws, government price reporting, and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, contractual damages, reputational harm, diminished profits and future earnings.

Our business operations and activities may be directly, or indirectly, subject to various federal, state and local fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act and similar laws in some state and foreign markets. These laws may impact, among other things, our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by the federal government, state governments and foreign jurisdictions in which we conduct our business. The laws in the U.S. that may affect our ability to operate include, but are not limited to:

56

57

Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict and these changes could have a material adverse effect on our business and financial condition.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together “the Healthcare Reform Act”), expanded healthcare coverage within the U.S., primarily through the establishment of state exchanges and expansion of the Medicaid program. This law substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that are expected to impact our business and operations, in some cases in ways we cannot currently predict. Changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, benefits for patients within a coverage gap in the Medicare Part D prescription drug program (commonly known as the “donut hole”), rules regarding prescription drug benefits under the health insurance exchanges, changes to the Medicare Drug Rebate program, expansion of the Public Health Service’s 340B drug pricing discount program, fraud and abuse and enforcement. These changes will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

Some states have elected not to expand their Medicaid programs by raising the income limit to 133% of the federal poverty level, as is permitted under the Healthcare Reform Act. For each state that does not choose to expand its Medicaid program, there may be fewer insured patients overall, which could impact our sales, business and financial condition. Where Medicaid patients receive insurance coverage under any of the new options made available through the Healthcare Reform Act, particularly where Medicaid patients are enrolled in managed care plans, manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, a decision that could impact manufacturer revenues.

Moreover, legislative changes to the Healthcare Reform Act remain possible. Recently, the law’s individual health insurance mandate was repealed and manufacturers’ responsibility for the cost of prescriptions in the Medicare Part D donut hole has increased.  We expect that the Healthcare Reform Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of our existing products or to successfully commercialize our product candidates, if approved.  In addition to the Healthcare Reform Act, there will continue to be proposals by legislators at both the federal and state levels, regulators and third party payors to keep healthcare costs down while expanding individual healthcare benefits.  For example, California recently enacted a law providing transparency into drug price increases which imposes new reporting requirements on manufacturers. CMS has also proposed reducing prices of products paid by Medicare Part B by basing their reimbursement rate on the average price among other industrialized countries.  This proposal, if adopted, could have a significant impact on our business.

To help patients afford our products XYOSTED^® and OTREXUP^®, we offer discount, rebate, and co-pay coupon programs.  Co-pay coupon programs have received some negative publicity related to their use to promote branded pharmaceutical products over other less costly alternatives. In recent years, other pharmaceutical manufacturers have been named in class action lawsuits challenging the legality of their co-pay programs under a variety of federal and state laws. In addition, at least one insurer has directed its network pharmacies to no longer accept co-pay coupons for certain specialty drugs the insurer identified. Our co-pay coupon programs could become the target of similar lawsuits or insurer actions. It is possible that the outcome of litigation against other manufacturers, changes in insurer policies regarding co-pay coupons, and/or the introduction and enactment of new legislation or regulatory action could restrict or otherwise negatively affect these programs.

58

We are dependent on third parties to decide to utilize our and our partners’ products to make them readily available at the point of care throughout their networks of pharmacies.

In addition to extensive internal efforts, the successful commercialization of our and our partners’ products require many third parties, over whom we have no control, to decide to utilize them, and to make them readily available at the point of care throughout their networks of pharmacies. These third parties include HMOs, long term care facilities, and pharmacy benefit managers, or PBMs, which use pharmacy and therapeutics committees, commonly referred to as P&T committees, to make purchasing and reimbursement decisions. Generally, before an HMO or long‑term care facility will acquire a product for its own pharmacies, or a PBM will pay retail network pharmacies on behalf of its health plans, the product must be approved for addition to that organization’s list of approved drugs, or formulary list, by the organization’s P&T committee. An institutional P&T committee typically governs all matters pertaining to the use of medications within the institution, including review of medication formulary data and recommendations for the appropriate use of drugs within the institution to the medical staff. PBM P&T committees develop the criteria for plan beneficiaries to access prescription medication, including such cost control measures as step therapy and prior authorization. The frequency of P&T committee meetings varies considerably, and P&T committees often require additional information to aid in their decision‑making process, so we may experience substantial delays in obtaining formulary approvals. Additionally, P&T committees may be concerned that the cost of acquiring a product for use in their institutions or reimbursing retail pharmacies (including any discounts or rebates we offer) outweighs clinical benefits and will resist efforts to add the product to the formulary, or implement restrictions on the usage of the drug in order to control costs. We cannot guarantee that we and/or our partners will be successful in getting the approvals we need from enough P&T committees quickly enough to maintain and grow sales of our or our partners’ products.

Our revenues may be limited if the marketing claims asserted about our products are not approved.

Once a drug product is approved by the FDA, including its labels and labeling, the Office of Prescription Drug Promotion (“OPDP”), the FDA’s marketing surveillance department within the Center for Drug Evaluation and Research, will oversee and regulate marketing claims asserted by us and our pharmaceutical company partners. We and our partners may only make claims that are consistent with the FDA approved label for the approved product.  FDA may not include all information in the approved label that is necessary for successful marketing.  If we or a pharmaceutical company partner fails to use acceptable marketing claims we may be subject to enforcement actions.

Changes in product candidate manufacturing, design or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late‑stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, design and formulation, are altered along the way in an effort to optimize processes and results. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes may also require additional testing, FDA notification, or FDA approval. This could delay completion of clinical trials; require the conduct of bridging clinical trials or studies, or the repetition of one or more clinical trials; increase clinical trial costs; delay approval of our product candidates; and jeopardize our business prospects.

Risks Related to our Common Stock

The market price of our common stock has been, and may continue to be volatile and fluctuate significantly, which could result in substantial losses for investors.

The trading price for our common stock has been, and we expect it to continue to be, volatile. The price at which our common stock trades depends upon a number of factors, including our historical and anticipated operating results, our financial situation, clinical trial results, announcements of technological innovations or new products by us, our partners or our competitors, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general market and economic conditions. Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations, business or prospect.  Among the factors that may cause the market price of our common stock to fluctuate are the risks described in this “Risk Factors” section and other factors, including:

59

In addition, the stock markets, in general, the NASDAQ Capital Market and the market for biotechnology companies in particular, may experience a loss of investor confidence. Such loss of investor confidence may result in extreme price and volume fluctuations in our common stock that are unrelated or disproportionate to the operating performance of our business, financial condition or results of operations. These broad market and industry factors may materially harm the market price of our common stock and expose us to securities class action or derivative litigation.

We are at risk of securities class action and similar litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. For example, on October 23, 2017, Randy Smith filed a complaint in the District of New Jersey on behalf of a putative class of persons who purchased or otherwise acquired Antares securities against Antares, Robert F. Apple and Fred M. Powell.  In addition, in January 2018, three stockholders filed separate derivative actions, one in the District of New Jersey and two in the Superior Court of New Jersey Chancery Division, Mercer County, purportedly on our behalf, against certain directors and officers, as well as the company as a nominal defendant. There can be no assurance that we will ultimately prevail in these legal proceedings. Even if we are successful and ultimately prevail, litigation could be costly to defend and divert management’s attention and resources, which could further materially harm our financial condition and results of operations.

Future conversions or exercises by holders of options could dilute our common stock.

As of December 31, 2019, we had stock options outstanding and exercisable with a weighted average exercise price of $2.22 per share, for an aggregate of approximately 10 million shares of our common stock. Purchasers of our common stock could therefore experience dilution of their investment when and if the above options are exercised.

Sales of our common stock by our officers and directors may lower the market price of our common stock.

As of December 31, 2019, our officers and directors beneficially owned an aggregate of approximately 9.1 million shares (or approximately 5.5% of our outstanding common stock, including stock options exercisable within 60 days. If our officers and directors, or other stockholders, sell a substantial amount of our common stock, it could cause the market price of our common stock to decrease.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In addition, we may experience ownership changes in the future as a result of subsequent

60

shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

We do not expect to pay dividends in the foreseeable future.

We intend to retain any earnings in the foreseeable future for our continued growth and, thus, do not expect to declare or pay any cash dividends in the foreseeable future.

Our failure to meet the continued listing requirements of the NASDAQ Capital Market could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of the NASDAQ Capital Market, such as the requirement that we maintain a minimum bid price of at least $1.00 per share, NASDAQ may take steps to de-list our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to seek to take actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock or prevent our common stock from dropping below the NASDAQ minimum bid price requirement in the future.

Anti-takeover effects of certain certificate of incorporation and bylaw provisions could discourage, delay or prevent a change in control.

Our certificate of incorporation authorizes our board of directors, without action of our stockholders, to designate and issue preferred stock in one or more series, with such rights, preferences and privileges as the board of directors shall determine.  In addition, our bylaws grant our board of directors the authority to adopt, amend or repeal all or any of our bylaws, subject to the power of the stockholders to change or repeal the bylaws.  In addition, our bylaws limit who may call meetings of our stockholders.