Antares Pharma (ATRS) 10-Q 2019 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2019

Commission File Number 1-32302

ANTARES PHARMA, INC.

A Delaware Corporation (State or Other Jurisdiction of Incorporation) 41-1350192 (I.R.S. Employer Identification No.)

100 Princeton South, Suite 300,Ewing,NJ	08628
(Address of PrincipalExecutiveOffices)	(ZipCode)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ATRS	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non–accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

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

As of October 31, 2019, the registrant had 163,226,089 shares of common stock, $0.01 par value per share, outstanding.

ANTARES PHARMA, INC.

INDEX

			PAGE
PART I.		FINANCIAL INFORMATION	3
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	3
		Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	4
		Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	5
		Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	6
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	8
		Notes to Consolidated Financial Statements (Unaudited)	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4.	Controls and Procedures	27
PART II.		OTHER INFORMATION	28
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3.	Default Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	29
	Item 6.	Exhibits	29
		SIGNATURES	30

2

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ANTARES PHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	September 30,			December 31,
	2019			2018
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	41,874		$	27,892
Accounts receivable		33,931			18,976
Inventories		16,503			11,350
Contract assets		6,199			10,442
Prepaid expenses and other current assets		1,429			2,648
Total current assets		99,936			71,308
Equipment, molds, furniture and fixtures, net		15,409			14,895
Operating lease right-of-use assets		5,462			—
Goodwill		1,095			1,095
Intangibles, net		508			831
Other assets		519			148
Total Assets	$	122,929		$	88,277
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	16,530		$	11,135
Accrued expenses and other liabilities		14,966			11,997
Long-term debt, current portion		—			3,043
Operating lease liabilities, current portion		975			—
Deferred revenue		1,412			1,018
Total current liabilities		33,883			27,193
Long-term debt		40,269			22,083
Operating lease liabilities, long-term		4,362			—
Total liabilities		78,514			49,276
Stockholders’ Equity:
Preferred Stock: $0.01 par; 3,000 shares authorized, none outstanding		—			—
Common Stock: $0.01 par; 300,000 shares authorized; 163,204 and     159,721 issued and outstanding at September 30, 2019 and    December 31, 2018, respectively		1,632			1,597
Additional paid-in capital		326,895			314,907
Accumulated deficit		(283,406	)		(276,800	)
Accumulated other comprehensive loss		(706	)		(703	)
		44,415			39,001
Total Liabilities and Stockholders’ Equity	$	122,929		$	88,277

See accompanying notes to consolidated financial statements.

3

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue:
Product sales	$	24,687		$	11,597		$	63,607		$	33,641
Licensing and development revenue		1,211			2,554			4,365			5,624
Royalties		8,408			3,717			18,053			5,468
Total revenue		34,306			17,868			86,025			44,733
Cost of revenue:
Cost of product sales		12,510			6,982			33,791			20,195
Cost of development revenue		552			307			2,658			1,240
Total cost of revenue		13,062			7,289			36,449			21,435
Gross profit		21,244			10,579			49,576			23,298
Operating expenses:
Research and development		2,863			3,191			7,744			9,321
Selling, general and administrative		16,385			8,747			46,407			24,866
Total operating expenses		19,248			11,938			54,151			34,187
Operating income (loss)		1,996			(1,359	)		(4,575	)		(10,889	)
Interest expense		(1,097	)		(674	)		(2,470	)		(1,959	)
Other income		144			97			323			199
Net income (loss)	$	1,043		$	(1,936	)	$	(6,722	)	$	(12,649	)
Net income (loss) per common share, basic and diluted	$	0.01		$	(0.01	)	$	(0.04	)	$	(0.08	)
Weighted average common shares outstanding:
Basic		163,119			157,471			162,109			157,076
Diluted		168,503			157,471			162,109			157,076

See accompanying notes to consolidated financial statements.

4

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net income (loss)	$	1,043		$	(1,936	)	$	(6,722	)	$	(12,649	)
Foreign currency translation adjustment		(2	)		(2	)		(3	)		(2	)
Comprehensive income (loss)	$	1,041		$	(1,938	)	$	(6,725	)	$	(12,651	)

See accompanying notes to consolidated financial statements.

5

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(UNAUDITED)

	Common Stock										Accumulated
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
June 30, 2019		163,053	$	1,630	$	325,075		$	(284,449	)	$	(704	)	$	41,552
Common stock issued under equity    compensation plan, net of    shares withheld for taxes		9		1		(14	)		—			—			(13	)
Exercise of options		142		1		189			—			—			190
Share-based compensation		—		—		1,645			—			—			1,645
Net income		—		—		—			1,043			—			1,043
Other comprehensive loss		—		—		—			—			(2	)		(2	)
September 30, 2019		163,204	$	1,632	$	326,895		$	(283,406	)	$	(706	)	$	44,415
	Common Stock										Accumulated
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
December 31, 2018		159,721	$	1,597	$	314,907		$	(276,800	)	$	(703	)	$	39,001
Issuance of common stock,    net of offering costs		2,307		23		7,758			—			—			7,781
Common stock issued under equity    compensation plan, net of    shares withheld for taxes		664		7		(1,084	)		—			—			(1,077	)
Exercise of options		512		5		669			—			—			674
Share-based compensation		—		—		4,645			—			—			4,645
Cumulative effect of change in    accounting principle		—		—		—			116			—			116
Net loss		—		—		—			(6,722	)		—			(6,722	)
Other comprehensive income loss		—		—		—			—			(3	)		(3	)
September 30, 2019		163,204	$	1,632	$	326,895		$	(283,406	)	$	(706	)	$	44,415

See accompanying notes to consolidated financial statements.

6

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Cont.)

(in thousands)

(UNAUDITED)

	Common Stock										Accumulated
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
June 30, 2018		157,437	$	1,574	$	304,770		$	(280,998	)	$	(700	)	$	24,646
Common stock issued under equity    compensation plan, net of    shares withheld for taxes		9		1		(14	)		—			—			(13	)
Exercise of options		75		—		74			—			—			74
Share-based compensation		—		—		1,605			—			—			1,605
Net loss		—		—		—			(1,936	)		—			(1,936	)
Other comprehensive loss		—		—		—						(2	)		(2	)
September 30, 2018		157,521	$	1,575	$	306,435		$	(282,934	)	$	(702	)	$	24,374
	Common Stock										Accumulated
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Other Comprehensive Loss			Total Stockholders’ Equity
December 31, 2017		156,675	$	1,567	$	302,965		$	(270,285	)	$	(700	)	$	33,547
Common stock issued under equity    compensation plan, net of    shares withheld for taxes		462		4		(547	)		—			—			(543	)
Exercise of options		384		4		362			—			—			366
Share-based compensation		—		—		3,655			—			—			3,655
Net loss		—		—		—			(12,649	)		—			(12,649	)
Other comprehensive loss		—		—		—						(2	)		(2	)
September 30, 2018		157,521	$	1,575	$	306,435		$	(282,934	)	$	(702	)	$	24,374

See accompanying notes to consolidated financial statements.

7

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

	Nine Months Ended
	September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(6,722	)	$	(12,649	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		4,645			3,655
Depreciation and amortization		1,916			1,808
Other		279			193
Changes in operating assets and liabilities:
Accounts receivable		(14,957	)		(3,606	)
Inventories		(5,153	)		(2,000	)
Contract assets		1,743			230
Prepaid expenses and other assets		847			517
Accounts payable		4,669			1,518
Accrued expenses and other liabilities		2,854			2,157
Deferred revenue		394			(1,983	)
Net cash used in operating activities		(9,485	)		(10,160	)
Cash flows from investing activities:
Proceeds from sale of assets		2,500			7,500
Purchases of equipment, molds, furniture and fixtures		(1,274	)		(526	)
Additions to patent rights		—			(40	)
Proceeds from maturities of investment securities		—			5,000
Net cash provided by investing activities		1,226			11,934
Cash flows from financing activities:
Proceeds from issuance of long-term debt		15,000			—
Payment of debt issuance costs		(136	)		—
Proceeds from issuance of common stock, net		7,781			—
Proceeds from exercise of stock options		674			366
Taxes paid related to net share settlement of equity awards		(1,077	)		(543	)
Net cash provided by (used in) financing activities		22,242			(177	)
Effect of exchange rate changes on cash		(1	)		1
Net increase in cash and cash equivalents		13,982			1,598
Cash and cash equivalents:
Beginning of period		27,892			26,562
End of period	$	41,874		$	28,160
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,073		$	1,752
Supplemental disclosure of non-cash investing activities:
Purchases of equipment, molds, furniture and fixtures recorded in accounts payable    and accrued expenses	$	881		$	56

See accompanying notes to consolidated financial statements.

8

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

1. Description of Business

Antares Pharma, Inc. (“Antares” or the “Company”) is a combination drug device company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  The Company develops and commercializes, for itself or with partners, novel therapeutic products using its advanced drug delivery technology to enhance existing drug compounds and delivery methods. The Company’s intramuscular and subcutaneous injection technology platforms include the VIBEX^® and VIBEX^® QuickShot^® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers and disposable multi-dose pen injectors. The Company has a portfolio of proprietary and partnered commercial products and ongoing product development programs in various stages of development. The Company has formed significant strategic alliances with Teva Pharmaceutical Industries, Ltd. (“Teva”), AMAG Pharmaceuticals, Inc. (“AMAG”) and Pfizer Inc. (“Pfizer”).

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

The Company also markets and sells its proprietary product OTREXUP^® (methotrexate) injection in the U.S., which is indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis.  

Through its commercialization partner Teva, the Company sells Sumatriptan Injection USP, indicated in the U.S. for the acute treatment of migraine and cluster headache in adults.  

In collaboration with AMAG, the Company developed a subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena^® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement. The Makena^® subcutaneous auto injector drug-device combination product, which is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered at least one preterm baby in the past, was approved by the FDA in February 2018 and launched for commercial sale by AMAG in the first quarter of 2018. The Company is the exclusive supplier of the devices and final assembled and packaged commercial product to AMAG.

Through a license, development and supply agreement with Teva, Antares developed and is the exclusive supplier of the device for Teva’s Epinephrine Injection USP, which is indicated for emergency treatment of severe allergic reactions in adults and certain pediatric patients. The product was approved by the FDA in August 2018 and launched for commercial sale in late fourth quarter of 2018.

The Company is also developing two multi-dose pen injector products in collaboration with Teva, a combination drug device rescue pen in collaboration with Pfizer, and has other ongoing internal research and development programs.

2. Basis of Presentation and Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. for interim financial information and with the instructions to Form 10-Q and Article 10 of the Securities and Exchange Commission's Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.  Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

9

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

Revisions of Prior Period Financial Statements

During the preparation of the consolidated financial statements for the year ended December 31, 2018, management revised the presentation of certain regulatory fees between research and development expenses and selling, general and administrative expenses. As a result, the Company also made revisions to its prior period interim consolidated statements of operations as follows:

	Three months ended		Nine months ended
	September 30,		September 30,
	2018		2018
Research and development, as reported	$	3,611	$	10,581
Research and development, as revised		3,191		9,321
Selling, general and administrative, as reported		8,327		23,606
Selling, general and administrative, as revised		8,747		24,866

These revisions had no impact on the Company’s total operating expenses or net loss. The revisions also had no impact on the consolidated balance sheets or the consolidated statements of comprehensive income (loss), stockholders’ equity or cash flows. Management evaluated the materiality of the revisions from a quantitative and qualitative perspective and concluded that the revisions are immaterial to the consolidated financial statements.

Accounting Pronouncements Recently Adopted

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02 Leases (“Topic 842”) effective January 1, 2019, electing the package of practical expedients and applying the transition provisions as of the effective date. Reporting periods beginning on or after January 1, 2019 are presented under Topic 842, while prior period amounts, as reported under previous GAAP, were not adjusted. As of December 31, 2018, the Company had non-cancellable operating leases for its corporate headquarters facility in Ewing, New Jersey, and its office, research and development facility in Plymouth, Minnesota, a suburb of Minneapolis, which were not required to be recorded on the balance sheet. As a result of the adoption of Topic 842, the Company recognized approximately $1.0 million in right-of-use assets and lease liabilities in connection with its existing operating leases. The adoption of Topic 842 on January 1, 2019 did not have a significant impact on the Company’s consolidated results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

In 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including tradereceivables. This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts, and is intended to provide financial statement users with more decision-useful information about the expected credit losses. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019. The Company has historically had little to no credit losses on financial instruments and is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

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

In 2018, the FASB issued new guidance to clarify the interaction between Collaborative Arrangements and Revenue from Contracts with Customers standards. The guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for under revenue guidance, adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard, and clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. The guidance is effective for annual reporting

10

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Certain components of the Company’s products are provided by a limited number of vendors, and the Company’s production, assembly, warehousing and distribution operations are outsourced to third-parties where substantially all of the Company’s inventory is located.  Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on the Company’s operations.  The Company provides a reserve for potentially excess, dated or obsolete inventories based on an analysis of inventory on hand compared to forecasts of future sales, which was $1,074, and $847 at September 30, 2019 and December 31, 2018, respectively.  Inventories consist of the following:

	September 30,		December 31,
	2019		2018
Inventories:
Raw material	$	325	$	26
Work in process		8,467		7,622
Finished goods		7,711		3,702
	$	16,503	$	11,350

Equipment, Molds, Furniture, and Fixtures

Equipment, molds, furniture, and fixtures are stated at cost, net of accumulated depreciation, and are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years. As of September 30, 2019 and December 31, 2018, the Company’s equipment, molds, furniture and fixtures totaled $15,409 and $14,895, respectively, which is presented net of accumulated depreciation of $9,163 and $7,570 as of September 30, 2019 and December 31, 2018, respectively.

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right-of-use asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments. Certain of the Company’s lease arrangements contain renewal options that have not been included in the determination of the lease term, as they are not reasonably certain of exercise. For contracts that contain lease and non-lease components, the Company accounts for both components as a single lease component. Variable lease payments are expensed as incurred.

Revenue Recognition

The Company generates revenue from proprietary and partnered product sales, license and development activities and royalty arrangements. Revenue is recognized when or as the Company transfers control of the promised goods or services to its customers at the transaction price, which is the amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services.

At inception of each contract, the Company identifies the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determines the transaction price including any variable consideration, allocates the transaction price to the distinct performance obligations and determines whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company reassesses its reserves for variable consideration at each

11

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

reporting date and makes adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.

The Company has elected to recognize the cost for freight and shipping activities as fulfilment cost. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying goods are transferred to the customer. The related shipping and freight charges incurred by the Company are included in cost of revenue.

Proprietary Product Sales

The Company sells its proprietary products XYOSTED^® and OTREXUP^® primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs.

The determination of certain of these reserves and sales allowances require management to make a number of judgements and estimates to reflect the Company’s best estimate of the transaction price and the amount of consideration to which it believes it is ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and expected utilization rates, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. Reserves for prompt payment discounts are recorded as a reduction in accounts receivable. Reserves for returns, rebates and chargebacks, distributor fees and customer co-pay support programs are included within current liabilities in the consolidated balance sheets.

Partnered Product Sales

The Company is party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which the Company produces and is the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as follows:

The Company is the exclusive supplier of the Makena^® subcutaneous auto injector product to AMAG. Because the product is custom manufactured for AMAG with no alternative use and the Company has a contractual right to payment for performance completed to date, control is continuously transferred to the customer as product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced.  The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no price protection or right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, if any.  For example, the Company sells Sumatriptan Injection USP to Teva at cost and is entitled to receive 50 percent of the net profits from commercial sales made by Teva, payable to the Company within 45 days after the end of the quarter in which the commercial sales are made. The Company recognizes revenue, including the estimated variable consideration it expects to receive for contract margin on future commercial sales, upon shipment of the goods to Teva.  The estimated variable consideration is recognized at an amount the Company believes is not subject to significant reversal based on historical experience, and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

Licensing and Development Revenue

The Company has entered into several license, development and supply arrangements with pharmaceutical partners under which the Company grants a license to its device technology and know-how and provides research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, the Company identifies each of the promised goods and services within the contract and the distinct performance obligations at inception, and allocates

12

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus margin.

If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, the Company recognized revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer. Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and the Company has a present right to payment.

The Company’s typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. The Company records a liability for cash received in advance of performance, which is presented within deferred revenue on the consolidated balance sheet and recognized as revenue when the associated performance obligations have been satisfied. The Company recognized $575 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2018 and satisfied during the nine months ended September 30, 2019.

License fees and milestones received in exchange for the grant of a license to the Company’s functional intellectual property such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is not generally distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events, are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.

Royalties

The Company earns royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digit to low double digit and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur.  The royalties are generally reported and payable to the Company within 45 to 60 days of the end of the period in which the commercial sales are made.  The Company bases its estimates of royalties earned on actual sales information from its partners when available or estimated prescription sales from external sources and estimated net selling price. If actual royalties received are different than amounts estimated, the Company would adjust the royalty revenue in the period in which the adjustment becomes known.

Remaining Performance Obligations

Remaining performance obligations represents the allocation of transaction price of firm orders and development contract deliverables for which work has not been completed or orders fulfilled, and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity.  As of September 30, 2019, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $9.1 million. The Company expects to recognize revenue on the remaining performance obligations over the next three years.

3. Leases

As of January 1, 2019, the Company had operating leases for its corporate headquarters in Ewing, New Jersey and its research and development facilities in Plymouth, Minnesota. In connection with the adoption of Topic 842 on January 1, 2019, the Company recognized approximately $1.0 million in right-of-use assets and lease liabilities. During the first quarter of 2019, the Company also entered into a master operating lease arrangement for a fleet of vehicles for use by its sales force.  

In May 2019, the Company amended its existing lease of the Company’s corporate headquarters to extend the lease term for an additional two years. The lease extension period commences on November 1, 2019 and expires on October 31, 2021.

On July 1, 2019, the Company entered into a new operating lease for approximately 75,000 square feet of office, laboratory, manufacturing and warehousing space in Minnetonka, Minnesota. The initial lease term is 12.5 years and the Company may renew the lease, at its option, for one additional renewal period of three years. The landlord delivered possession of the premises

13

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

to the Company on July 1, 2019 and payment of rent will commence on January 1, 2020.  The lease provides for the payment of fixed base rent and additional rent for operating expenses, insurance premiums and taxes. The Company is performing the build-out of the premises at the Company’s cost with an allowance for tenant improvement to be reimbursed by the landlord up to $1.2 million.

Operating lease costs were $520 and $1,025 for the three and nine months ended September 30, 2019, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $337 and $1,053 for the three and nine months ended September 30, 2019. During the nine months ended September 30, 2019, operating lease ROU assets obtained in exchange for operating lease obligations were $5,208. As of September 30, 2019, the weighted average discount rate was approximately 9% and the weighted average remaining lease term was 7.8 years.

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

2019	$	258
2020		663
2021		1,097
2022		631
2023		638
Thereafter		5,583
Total remaining lease payments		8,870
Less:  Interest		(3,533	)
Total lease liabilities	$	5,337

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

2019	$	566
2020		233
2021		238
2022		60
2023		—
Thereafter		—
Total future minimum lease payments	$	1,097

4. Long-Term Debt

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

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

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

14

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

As of September 30, 2019 and December 31, 2018, the carrying value of the Term Loan was $40,269 and $25,126, respectively, which consisted of the principal amounts outstanding and the End of Term Charge accrual, less unamortized debt issuance costs that are being amortized/accrued to interest expense over the term of the Term Loan using the effective interest method. Future principal payments under the Term Loan, excluding the contractual End of Term Charges, are due in the following periods:

2019	$	—
2020		—
2021		16,179
2022		23,821
	$	40,000

5. Stockholders’ Equity

In August 2017, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company could offer and sell, from time to time and at its sole discretion, shares of its common stock having an aggregate offering price of up to $30.0 million through Cowen as the Company’s sales agent and/or as principal. Cowen was permitted to sell the common stock through any method deemed an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended (the “ATM Facility”).

On June 26, 2019, the Company delivered written notice to Cowen that it was terminating its Sales Agreement effective July 6, 2019, and accordingly the ATM Facility is no longer available for use. During the nine months ended September 30, 2019, the Company sold 2.3 million shares of common stock under the ATM Facility. The sale of common stock resulted in aggregate gross proceeds of $8.1 million, less sales commission and payment of offering costs, resulting in net offering proceeds to the Company of $7.8 million.

6. Share-Based Compensation

The Company has an Equity Compensation Plan (the “Plan”), which was amended and restated pursuant to stockholder approval on June 13, 2019 in order to increase the number of shares available for issuance under the Plan, extend the term of the Plan and modify certain provisions. The Plan allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan.  The maximum number of shares authorized for issuance under the Plan is 40.2 million and the maximum number of shares of stock that may be granted to any one employee for qualified performance-based compensation during a calendar year is four million shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the dates of grant.  The term of each option is ten years and the options typically vest over a three-year period with a minimum vesting period of one year.  As of September 30, 2019, the Plan had approximately 7.5 million shares available for grant. Stock option exercises are satisfied through the issuance of new shares.

The Company’s Board of Directors (the “Board”) has also approved a long-term incentive program (“LTIP”), pursuant to which the Company’s senior executives have been awarded stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) with targeted values based on values granted to similarly situated senior executives in the Company’s peer group. The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in annual installments over three years, and are granted on the same standard terms and conditions as other stock options granted pursuant to the Plan. The RSU awards made to senior executives vest and convert into shares of the Company’s stock in three equal annual installments.  The PSU awards vest and convert into shares of the Company’s common stock based on the Company’s attainment of certain performance goals as established by the Board over a performance period, which is typically three years. A portion of the compensation provided to non-employee members of the Board is awarded in the form of stock options and RSUs, which vest in full one year from the date of grant and are otherwise granted on the same standard terms and conditions as other awards granted under the Plan.

15

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

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

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value
Outstanding at December 31, 2018		14,079		$	2.19
Granted		2,380			2.93
Exercised		(512	)		1.32
Cancelled/Forfeited		(110	)		2.16
Outstanding at September 30, 2019		15,837			2.33		6.5	$	16,472
Exercisable at September 30, 2019		11,736		$	2.15		5.5	$	14,368

The weighted average grant date fair value per share for options granted during the nine months ended September 30, 2019 and 2018 was $1.50 and $1.44, respectively, which was estimated using the Black-Scholes option pricing model based on the assumptions noted in the table below.  Expected volatilities are based on the historical volatility of the Company’s stock price.  The weighted average expected life is based on both historical and anticipated employee behavior.

	September 30,
	2019		2018
Risk-free interest rate	1.9%		2.8%
Annualized volatility	55.8%		53.7%
Weighted average expected life, in years		5.5		6.0
Expected dividend yield	0.0%		0.0%

The following is a summary of PSU and RSU award activity under the Plan as of and for the nine months ended September 30, 2019:

	Performance Stock Units					Restricted Stock Units
	Number of Shares			Weighted AverageGrant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018		1,842		$	2.41		1,226		$	2.44
Granted		593			2.99		789			2.92
Vested/settled		(415	)		1.18		(614	)		2.19
Forfeited/expired		(178	)		1.12		—			—
Outstanding at September 30, 2019		1,842		$	3.01		1,401		$	2.82

The PSUs granted to senior executives under the LTIP may be earned based upon the Company’s achievement of certain corporate development goals, net revenue goals and total shareholder return (“TSR”) relative to the Nasdaq Biotechnology Index over the performance period, which is generally a three-year period. Depending on the outcome of the performance goals, a recipient may ultimately earn a number of shares greater or less than the target number of shares granted, ranging from 0% to 150%. The fair value of the TSR PSUs are expensed over the performance period and determined using a Monte Carlo simulation. The grant date fair value of PSUs that are not tied to market-based performance are expensed over the remaining performance period when it becomes probable that the related goal will be achieved.

The LTIP awards that vested during the nine months ended September 30, 2019 and 2018 were net-share settled such that the Company withheld shares with a value equivalent to the employees’ tax obligations for applicable income and other employment taxes, and remitted cash to the appropriate taxing authorities. The Company withheld 365 and 211 shares during the nine months ended September 30, 2019 and 2018, respectively, to satisfy tax obligations, which was determined based on the fair value of the shares on their vesting date equal to the Company’s closing stock price on such date. The Company paid $1,077 and $543 during the nine months ended September 30, 2019 and 2018, respectively, to taxing authorities for the employees’ tax obligations, which is reflected as a cash outflow from financing activities within the consolidated statements of

16

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

cash flows. Net-share settlements have the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued as a result of the vesting.

In connection with Plan awards, the Company recognized share-based compensation expense for the three and nine months ended September 30, 2019 and 2018 as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Stock options	$	888	$	811	$	2,555	$	2,158
Restricted stock units		565		338		1,267		861
Performance stock units		192		456		823		636
Total share-based compensation expense	$	1,645	$	1,605	$	4,645	$	3,655

7. Revenues, Significant Customers and Concentrations of Risk

The following table presents the Company’s revenue on a disaggregated basis by types of goods and services and major product lines:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Proprietary product sales	$	11,458	$	4,094	$	25,213	$	11,820
Partnered product sales		13,229		7,503		38,394		21,821
Total product revenue		24,687		11,597		63,607		33,641
Licensing and development revenue		1,211		2,554		4,365		5,624
Royalties		8,408		3,717		18,053		5,468
Total revenue	$	34,306	$	17,868	$	86,025	$	44,733

Revenues disaggregated by customer location are as follows: 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States of America	$	33,684	$	16,027	$	82,411	$	39,448
Europe		566		1,830		3,444		5,044
Other		56		11		170		241
	$	34,306	$	17,868	$	86,025	$	44,733

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
Teva	41%	34%	43%	33%
AMAG	20%	30%	19%	27%
McKesson	<10%	<10%	<10%	11%
AmerisourceBergen	10%	11%	<10%	11%
Ferring	<10%	12%	<10%	13%

17

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

8. Sale of Assets

In October 2017, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Ferring International Center S.A. (together with Ferring Pharmaceuticals Inc. and Ferring B.V. individually and collectively referred to as “Ferring”) to sell the worldwide rights, including certain assets, related to the needle-free auto injector device product line for a total purchase price of $14.5 million. The purchase price was to be paid in four installments consisting of the following: a $2.0 million upfront payment, which was received upon entry into the Asset Purchase Agreement and the transfer of certain assets; a second installment of $2.75 million received upon delivery of certain documentation and satisfaction of certain conditions primarily related to product manufacturing; a third installment of $4.75 million received upon satisfaction of certain conditions, including further document transfer, the successful completion of a regulatory audit by a notified body, and a pilot manufacturing run under Ferring’s supervision; and a final installment of $5.0 million due upon Ferring’s receipt of the CE Mark needed to continue to commercialize the product in certain territories and the final transfer of certain product-related inventory, equipment and agreements to Ferring (the “Completion Date”).

On May 1, 2019, the Company and Ferring entered into the First Amendment of the Asset Purchase Agreement (the “First Amendment”) to extend the term of the agreement to the third anniversary, to provide for the manufacture and delivery of additional product by Antares to Ferring prior to the Completion Date, and to bifurcate the payment of the final installment of the purchase price such that $2.5 million was paid to the Company upon the First Amendment effective date, with the final remaining payment of $2.5 million to be paid at the Completion Date, which was received in October 2019.  

The Company previously recorded the gain on sale of assets as it was determined that, based on the satisfaction of certain conditions and the status of remaining closing requirements, it was probable that a significant reversal of the gain will not occur. The receipt of the $2.5 million in the nine months ended September 30, 2019 was recorded as a reduction in the related contract asset balance and a cash inflow from investing activities in the consolidated statement of cash flows.

9. Earnings Per Share

Basic earnings or loss per common share is computed by dividing the net income or loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed in a similar manner, except that the weighted average number of shares outstanding is increased to reflect the potential dilution from the exercise or conversion of securities into common stock. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if such instruments are dilutive in nature with respect to earnings per share. The dilutive effect of stock options and other equity-based awards included in the diluted weighted average common shares outstanding used in the computation of diluted earnings per share for the three months ended September 30, 2019 was 5,385. The potentially dilutive stock options and other share-based awards excluded from the calculation of loss per share for the nine months ended September 30, 2019 and the three and nine months ended September 30, 2018 because their effect was anti-dilutive totaled 19,080 and 17,386 at September 30, 2019 and 2018, respectively.

10. Commitments and Contingencies

Pending Litigation

From time to time, the Company may be involved in various legal matters generally incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, after discussion with legal counsel, management is not aware of any matters for which the likelihood of a loss is probable and reasonably estimable and which could have a material impact on its consolidated financial condition, liquidity, or results of operations.

On October 23, 2017, Randy Smith filed a complaint in the District of New Jersey, captioned Randy Smith, Individually and on Behalf of All Others Similarly Situated v. Antares Pharma, Inc., Robert F. Apple and Fred M. Powell (“Smith”), Case No. 3:17-cv-08945-MAS-DEA, on behalf of a putative class of persons who purchased or otherwise acquired Antares securities between December 21, 2016 and October 12, 2017, inclusive, asserting claims for purported violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against Antares, Robert F. Apple and Fred M. Powell.  The Smith complaint contends that defendants made false and/or misleading statements and/or failed to disclose that: (i) Antares had provided insufficient data to the FDA in connection with the NDA for XYOSTED^®; and (ii) accordingly, Antares had overstated the approval prospects for XYOSTED^®.  On July 27, 2018, the court entered an order appointing Serghei Lungu as lead plaintiff, Pomerantz LLP as lead counsel, and Lite DePalma Greenberg, LLC as liaison counsel for plaintiff.  On August 3, 2018, the parties submitted a stipulation and proposed order, setting forth an agreed-upon schedule for responding to the complaint, which

18

ANTARES PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(UNAUDITED)

the court granted. Pursuant to that order, plaintiff filed a Consolidated Amended Class Action Complaint on October 9, 2018. On November 26, 2018, defendants filed a motion to dismiss. Plaintiff filed an opposition to the motion on January 10, 2019 and defendants filed a reply in support of their motion on February 25, 2019. On July 2, 2019, the court dismissed the complaint in its entirety without prejudice. On July 29, 2019, plaintiff filed a Consolidated Second Amended Class Action Complaint against the same parties alleging substantially similar claims. On September 12, 2019, defendants filed a motion to dismiss the Consolidated Second Amended Class Action Complaint. Plaintiffs’ opposition was filed on October 28, 2019 and defendants’ reply in support of their motion is due November 27, 2019. The Company believes that the claims in the Smith action lack merit and intends to defend them vigorously.

On January 12, 2018, a stockholder of the Company filed a derivative civil action, captioned Chiru Mackert, derivatively on behalf of Antares Pharma, Inc., v. Robert F. Apple, et al., in the Superior Court of New Jersey Chancery Division, Mercer County (Case No. C-000011-18).  On January 17, 2018, another stockholder filed a derivative action in the same court, captioned Vikram Rao, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (Case No. C-000004-18). Both complaints name Robert F. Apple, Fred M. Powell, Thomas J. Garrity, Jacques Gonella, Anton Gueth, Leonard S. Jacob, Marvin Samson and Robert P. Roche, Jr. as defendants, and the Company as nominal defendant, and they assert claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets arising from the same facts underlying the Smith securities class action.  The plaintiffs seek damages, corporate governance and internal procedure reforms and improvements, restitution, reasonable attorneys’ fees, experts’ fees, costs, and expenses. The parties have filed a stipulation consolidating the two actions and staying the proceedings pending the court’s decision on defendants’ motion to dismiss the Smith action.

On January 17, 2018, a stockholder of the Company filed a derivative civil action, captioned Robert Clark, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Clark”) (Case No. 3:18-cv-00703-MAS-DEA), against Robert F. Apple, Thomas J. Garrity, Jacques Gonella, Leonard S. Jacob, Marvin Samson, Anton G. Gueth and Robert P. Roche, Jr. as defendants, and Company as a nominal defendant.  The action was filed in the U.S. District Court for the District of New Jersey and asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and a violation of Section 14(a) of the Securities Exchange Act of 1934.  This complaint relates to the same facts underlying the Smith securities class action and the other derivative actions.  The plaintiff in Clark seeks damages, corporate governance and internal procedure reforms and improvements, reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses.   The parties have filed a stipulation staying the action pending the court’s decision on defendants’ motion to dismiss the Smith action.

19

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements in this report, including statements in the management’s discussion and analysis section set forth below, may be considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.  Forward-looking statements can be identified by the words “expect,” “estimate,” “plan”, “project,” “anticipate,” “should,” “intend,” “may,” “will,” “believe,” “continue” or other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and product development.  In particular, these forward-looking statements include, among others, statements about:

• our expectations regarding the commercialization and sales of XYOSTED^® (testosterone enanthate) injection for testosterone replacement therapy, including marketing and reimbursement strategies, and future revenues related thereto;

• our expectations regarding continued sales of OTREXUP^® (methotrexate) injection;

• our expectations regarding sales of Sumatriptan Injection USP to our partner, Teva Pharmaceutical Industries, Ltd. (“Teva”), and Teva’s ability to successfully distribute and sell Sumatriptan Injection USP;

• our expectations regarding whether the FDA will pursue the withdrawal of approval for the Makena^® subcutaneous auto injector marketed by our partner AMAG Pharmaceuticals, Inc. (“AMAG”), the ability of AMAG to continue to successfully commercialize the Makena^® subcutaneous auto injector, and any future revenue related to the sale of Makena^® subcutaneous auto injector;

• our expectations regarding the ability of our partner, Teva, to continue to successfully commercialize the generically equivalent version of Mylan’s EpiPen^® (“generic epinephrine injection”), and any future revenue related thereto;

• our expectations regarding continued product development with Teva of the teriparatide disposable pen injector and exenatide disposable pen injector, and Teva’s ability to obtain FDA approval and AB-rating for each of those products;

• our plans to develop a rescue pen for an undisclosed drug with our partner Pfizer Inc. (“Pfizer”) and our intention to enter into a separate supply agreement with Pfizer;

• our expectations about our research and development projects, including but not limited to ATRS-1701 and ectopic pregnancy projects, the timing and results of clinical trials, and our anticipated continued reliance on third parties in conducting studies, trials and other research and development activities;

• our expectations about the timing and outcome of pending or potential claims and litigation, including without limitation, the pending securities class action and derivative actions;

• trends in the managed market payor environment;

• our anticipated continued reliance on contract manufacturers to manufacture our products;

• our anticipated continued reliance on third parties to provide certain services for our products including logistics, warehousing, distribution, invoicing, contract administration and chargeback processing;

• our sales and marketing plans;

• our expectations about our future revenues, including our ability to achieve the 2019 revised revenue guidance, cash flows and our ability to support our operations;

• our estimates and expectations regarding the sufficiency of our cash resources, anticipated capital requirements and our need for and ability to obtain additional financing;

• our expectations and estimates with regard to current accounting practices and the potential impact of new accounting pronouncements and tax legislation;

• our expectations regarding our financial and operating results for the year ending December 31, 2019; and

• other statements regarding matters that are not historical facts or statements of current condition.

20

Forward-looking statements are based on assumptions that we have made in light of our industry experience as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this report, you should understand that these statements are not guarantees of performance results. Forward-looking statements involve known and unknown risks, uncertainties and assumptions, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.  While we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and projections of the future about which we cannot be certain.  Many factors may affect our ability to achieve our objectives, including:

• unsuccessful marketing and commercialization efforts by us or our partners;

• interruptions in supply or an inability to adequately manage third party contract manufacturers to meet customer supply requirements;

• our inability to obtain or maintain adequate third-party payer coverage of marketed products;

• the timing and results of our or our partners’ research projects or clinical trials of product candidates in development including projects with Teva and Pfizer;

• actions by the FDA or other regulatory agencies with respect to our products or product candidates of our partners;

• our inability to generate or sustain continued growth in revenue from product sales and royalties;

• the lack of market acceptance of our and our partners’ products and future revenues from these products;

• a decrease in business from our major customers and partners;

• our inability to compete successfully against new and existing competitors or to leverage our research and development capabilities or our marketing capabilities;

• our inability to establish and maintain our sales and marketing capability, our inability to effectively market our services or obtain and maintain arrangements with our customers, payors, partners and manufacturers;

• changes or delays in the regulatory review and approval process;

• our inability to effectively protect our intellectual property;

• costs associated with litigation and the outcome of such litigation;

• our inability to attract and retain key personnel;

• our inability to obtain additional financing, reduce expenses or generate funds when necessary; and

• adverse economic and political conditions.

In addition, you should refer to the “Risk Factors” sections of this report and of our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of other factors that may cause our actual results to differ materially from those described by our forward-looking statements.  As a result of these factors, we cannot assure you that the forward-looking statements contained in this report will prove to be accurate and, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.

We encourage readers of this report to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance.  Forward-looking statements speak only as of the date they are made.  We do not intend to update publicly any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events except as required by law.  In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, if at all.

The following discussion and analysis, the purpose of which is to provide investors and others with information that we believe to be necessary for an understanding of our financial condition, changes in financial condition and results of operations, should be read in conjunction with the financial statements, notes thereto and other information contained in this report.

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Company Overview

Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is a combination drug device company focused primarily on the development and commercialization of self-administered parenteral pharmaceutical products and technologies.  Our strategy is to identify new or existing approved drug formulations and apply our patented drug delivery technology to enhance the drug delivery methods.  We develop, manufacture and commercialize, for ourselves or with partners, novel therapeutic products using our advanced drug delivery systems that are designed to provide commercial or functional advantages, such as improved safety and efficacy, reduced side effects, and enhanced patient comfort and adherence. Our intramuscular and subcutaneous injection technology platforms include the VIBEX^® and VIBEX^® QuickShot^® pressure-assisted auto injector systems suitable for branded and generic injectable drugs in unit dose containers as well as disposable multi-dose pen injectors. We have a portfolio of proprietary and partnered commercial products and ongoing product development programs in various stages of development.  We have formed significant strategic alliances and partnership arrangements with industry leading pharmaceutical companies including Teva, AMAG and Pfizer.  

We market and sell XYOSTED^® (testosterone enanthate) injection in the U.S., indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone. XYOSTED^® is the only FDA approved subcutaneous testosterone enanthate product for once-weekly, at-home self-administration. XYOSTED^® was approved by the FDA on September 28, 2018, and launched for commercial sale in November 2018. In connection with the launch of XYOSTED^®, we hired approximately 50 additional sales representatives and cross-trained our combined sales force to leverage our existing resources and enhance our commercial organization.

We also market and sell our proprietary product OTREXUP^® (methotrexate) injection, which is a subcutaneous methotrexate injection for once weekly self-administration with an easy-to-use, single dose, disposable auto injector, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis.

Through our commercialization partner Teva, we sell Sumatriptan Injection USP indicated in the U.S. for the acute treatment of migraine and cluster headache in adults. We received FDA approval of our Abbreviated New Drug Application (“ANDA”) for 4 mg/0.5 mL and 6 mg/0.5 mL single-dose prefilled syringe auto-injectors, a generic equivalent to Imitrex^® STATdose Pen^®.  Sumatriptan Injection USP was the Company’s first ANDA approval of a complex generic and second product approved using the VIBEX^® auto injector platform.

We developed and supply a variation of our VIBEX^® QuickShot^® subcutaneous auto injector for use with AMAG’s progestin hormone drug Makena^® (hydroxyprogesterone caproate injection) under an exclusive license and development agreement. The Makena^® subcutaneous auto injector drug-device combination product is a ready-to-administer treatment indicated to help reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered one preterm baby in the past, which was approved by the FDA in February 2018. We are the exclusive supplier of the devices and the final assembled and packaged commercial product, which was launched in the U.S. for commercial sale by AMAG in March 2018, and we receive royalties on AMAG’s net sales of the product.

In collaboration with Teva, we developed a version of our VIBEX^® auto injector for use in a generic epinephrine auto injector product that was approved by the FDA in August 2018 and commercially launched in limited quantities in late fourth quarter of 2018.  Teva’s Epinephrine Injection USP is indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients and was approved as a generic drug product with an AB rating, meaning that it is therapeutically equivalent to Mylan, Inc.’s branded products EpiPen^® and EpiPen Jr^® and therefore, subject to state law, substitutable at the pharmacy. We are the exclusive supplier of the device and Teva is responsible for commercialization and distribution of the finished product, for which we also receive royalties on Teva’s net sales.

We are also collaborating with Teva on a multi-dose pen for a generic form of BYETTA^® (exenatide injection) for the treatment of type 2 diabetes, and another multi-dose pen for a generic form of Forteo^® (teriparatide [rDNA origin] injection) for the treatment of osteoporosis. Teva continues to work through the regulatory process with the FDA for exenatide and teriparatide using the ANDA pathway.

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In August 2018, we entered into a collaboration agreement with Pfizer to develop a combination drug device rescue pen. This rescue pen will utilize the Antares QuickShot^® auto injector and an undisclosed Pfizer drug. We will develop the product and Pfizer will be responsible for obtaining FDA approval of the combination product. We intend to enter into a separate supply agreement with Pfizer pursuant to which we will provide fully packaged commercial ready finished product to Pfizer and Pfizer will then be responsible for commercializing the product in the U.S., pending FDA approval, for which the Company will receive royalties on net sales.

We are committed to advancing our internal research and development programs and continue to invest in the development of our proprietary product pipeline. Our research and development efforts are focused primarily on leveraging our existing product and technology platforms by broadening their applications for use in other drug device combination products, as well as exploring new pharmaceutical products, technologies and drug delivery methods.

We have historically manufactured and sold reusable, needle-free injection devices, marketed primarily through Ferring Pharmaceuticals, Inc. and JCR Pharmaceuticals CO., Ltd. for use with human growth hormone. In October 2017, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Ferring International Center S.A. (together with Ferring Pharmaceuticals Inc. and Ferring B.V. individually and collectively referred to as “Ferring”) to sell the worldwide rights, including certain assets related to the needle-free auto injector device product line for $14.5 million (the “Ferring Transaction”). The purchase price was to be paid in four installments consisting of: a $2.0 million upfront payment, which was received upon entry into the Asset Purchase Agreement and the transfer of certain assets; a second installment of $2.75 million received upon delivery of certain documentation and satisfaction of certain conditions primarily related to product manufacturing; a third installment of $4.75 million received upon satisfaction of certain conditions including further document transfer, the successful completion of a regulatory audit by a notified body, and a pilot manufacturing run under Ferring’s supervision; and a final installment of $5.0 million due upon the completion date.

The Asset Purchase Agreement was amended in May 2019 in order to extend the term of the agreement, provide for the manufacture and delivery of additional product by Antares to Ferring prior to the completion date, and to bifurcate the payment of the final installment of the purchase price such that $2.5 million was paid to the Company upon the effective date of the First Amendment, with the final remaining $2.5 million to be paid at the completion date, which was received in October 2019. With the completion of this transaction, Antares will no longer manufacture and sell any needle-free devices or components.

Results of Operations

During the three and nine months ended September 30, 2019, we continued to generate significant growth in our product sales and total revenue, and to invest in our commercial infrastructure and research and development activities. We reported net income of $1.0 million for the three months ended September 30, 2019 as compared to a net loss of $1.9 million for the three months ended September 30, 2018. For the nine months ended September 30, 2019 and 2018, we incurred net losses of $6.7 million and $12.7 million, respectively. We reported net income per share of $0.01 and net loss per share of $0.04 for the three and nine months ended September 30, 2019, respectively, as compared to net losses per share of $0.01 and $0.08 for the three and nine months ended September 30, 2018, respectively. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.  The following is an analysis and discussion of our operations for the three and nine months ended September 30, 2019 as compared to the same periods in 2018.

Revenues

We generate revenue from proprietary and partnered product sales, license and development activities and royalty arrangements.  Total revenue for the three months ended September 30, 2019 and 2018 was $34.3 million and $17.9 million, respectively, representing an increase in total revenue of 92% on a comparative basis. Total revenue for the nine months ended September 30, 2019 and 2018 was $86.0 million and $44.7 million, respectively, also representing an increase of 92%. The following table provides details about the components of our revenue (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Proprietary product sales	$	11,458	$	4,094	$	25,213	$	11,820
Partnered product sales		13,229		7,503		38,394		21,821
Total product revenue		24,687		11,597		63,607		33,641
Licensing and development revenue		1,211		2,554		4,365		5,624
Royalties		8,408		3,717		18,053		5,468
Total revenue	$	34,306	$	17,868	$	86,025	$	44,733

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Product Revenue

Revenue from product sales was $24.7 million and $11.6 million for the three months ended September 30, 2019 and 2018, respectively, an increase of 113% on a period over period basis. For the nine months ended September 30, 2019 and 2018, we generated revenue from product sales of $63.6 million and $33.6 million, respectively, representing an increase of 89%. The increases in product revenue were driven primarily by sales of recently approved products, both proprietary and partnered, as discussed below.

Sales of our proprietary products XYOSTED^® and OTREXUP^®, which are presented net of estimated product returns and sales allowances, generated revenue of $11.5 million and $25.2 million for the three and nine months ended September 30, 2019, respectively, as compared to $4.1 million and $11.8 million for the three and nine months ended September 30, 2018, respectively. The increase in proprietary product sales for the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018 were principally attributable to sales of XYOSTED^®, which was launched for commercial sale in late 2018.  

We manufacture and sell devices, components and fully assembled and packaged product to our partners Teva, AMAG and Ferring. Partnered product sales were $13.2 million and $7.5 million for the three months ended September 30, 2019 and 2018, respectively, and $38.4 million and $21.8 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in sales of partnered products for the three and nine months ended September 30, 2019 as compared to the same period in 2018 is principally attributable to sales of auto injector devices to Teva for use with their generic Epinephrine Injection USP.  

Licensing and development revenue

Licensing and development revenue includes license fees received from partners for the right to use our intellectual property and amounts earned in joint development arrangements with partners under which we perform joint development activities or develop new products on their behalf. Licensing and development revenue was $1.2 million and $2.6 million for the three months ended September 30, 2019 and 2018, respectively, and $4.4 million and $5.6 million for the nine months ended September 30, 2019 and 2018, respectively. The net decreases in licensing and development revenue recognized for the three and nine months ended September 30, 2019 as compared to 2018 was a result of the $2.0 million milestone received from Teva in 2018 in connection with the FDA’s approval of Teva’s Epinephrine Injection USP, offset by increases in development revenue from the ongoing development programs with Pfizer and Teva.

Royalties

Royalty revenue was $8.4 million and $3.7 million for the three months ended September 30, 2019 and 2018, respectively, and $18.1 million versus $5.5 million for the nine months ended September 30, 2019 and 2018, respectively. The significant increases in royalty revenue were primarily attributable to royalties received from Teva on their net sales of Epinephrine Injection USP, which was launched in late 2018, and royalties received from AMAG on their net sales of the Makena^® subcutaneous auto injector.

Cost of Revenue and Gross Profit

The following table summarizes our total revenue, cost of revenue and gross profit (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total revenue	$	34,306		$	17,868		$	86,025		$	44,733
Total cost of revenue		13,062			7,289			36,449			21,435
Gross profit	$	21,244		$	10,579		$	49,576		$	23,298
Gross profit percentage		62	%		59	%		58	%		52	%

Fluctuations in our gross profit and gross profit percentage are driven by our overall revenue mix. Our gross profit was $21.2 million and $10.6 million for the three months ended September 30, 2019 and 2018, respectively, and $49.6 million and $23.3 million for the nine months ended September 30, 2019 and 2018, respectively.  The increase in our gross profit and gross profit percentage was primarily attributable to the significant increases in our royalty revenue, which has no associated incremental cost, and increases in our proprietary product sales. Other variations in cost of revenue and gross profit were attributable to our development activities, which fluctuate depending on the mix of development projects in progress and stages of completion in each period.

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Research and Development Expenses

Research and development expenses consist of external costs for clinical studies and analysis activities, design work and prototype development, FDA application fees, personnel costs and other general operating expenses associated with our research and development activities.  Research and development expenses were $2.9 million and $3.2 million for the three months ended September 30, 2019 and 2018, respectively and $7.7 million and $9.3 million for the nine months ended September 30, 2019 and 2018, respectively.  The decrease in research and development costs on a comparative basis was primarily due to higher spending associated with XYOSTED^® prior to its approval in 2018.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $16.4 million and $8.7 million for three months ended September 30, 2019 and 2018, respectively, and $46.4 million and $24.9 million for the nine months ended September 30, 2019 and 2018, respectively.  The significant increases in selling, general and administrative expenses were principally attributable to incremental sales and marketing costs incurred in connection with the recent launch of XYOSTED^®, including the increase in compensation and benefits expense associated with approximately 50 additional sales representatives hired in late 2018.

Liquidity and Capital Resources

At September 30, 2019, we had cash and cash equivalents of $41.9 million. Our principal liquidity needs are to fund our product manufacturing, research and development activities and other operating expenses. We have not historically generated, and do not currently expect to generate, enough revenue or operating cash flow to support or grow our operations. Our primary sources of liquidity have been proceeds from equity offerings and debt issuance. We believe that the combination of our current cash and cash equivalents, projected product sales, development revenue milestones and royalties will provide us with sufficient funds to meet our obligations and support operations through at least the next twelve months from the date of this report.

Long-term Debt Financing

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

On June 26, 2019, we entered into a First Amendment (the “Amendment”) to 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 (“Tranche II”) was funded to us, resulting in total principle balance outstanding under the loan of $40.0 million. We may, but are not obligated to, request one or more additional advances of at least $5.0 million, not to exceed $10.0 million in the aggregate (“Tranche III”), between January 1, 2020 and September 15, 2020. The Amendment extended the interest-only payment period of the Term Loan to August 1, 2021, which may be further extended to August 1, 2022 if we achieve a certain loan extension milestone. The loan maturity date of the Term Loan remains July 1, 2022, but may be extended to July 1, 2024 contingent upon satisfaction of a certain loan extension milestone.

At the Market Common Stock Offering Program

In August 2017, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) under which we could offer and sell, from time to time and at our sole discretion, shares of our common stock having an aggregate offering price of up to $30.0 million through Cowen as the sales agent and/or as principal. Cowen was permitted to sell the common stock through any method deemed an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended (the “ATM Facility”).

There were no sales of common stock made pursuant to the ATM Facility during the three months ended September 30, 2019. For the nine months ended September 30, 2019, we sold 2.3 million shares of common stock under the ATM Facility. The sale of common stock resulted in aggregate gross proceeds of $8.1 million, less sales commission and payment of offering costs, resulting in net offering proceeds to the Company of $7.8 million.

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

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Net Cash Flows from Operating Activities

Operating cash inflows are generated primarily from product sales, license and development fees and royalties.  Operating cash outflows consist principally of expenditures for manufacturing costs, personnel costs, general and administrative expenses, research and development activities, and sales and marketing costs. Fluctuations in cash used in operating activities are primarily a result of the timing of cash receipts and disbursements. Net cash used in operating activities was $9.5 million for the nine months ended September 30, 2019 and $10.2 million for the nine months ended September 30, 2018.  The decrease in the net cash used in operating activities was primarily a result of our lower net loss in 2019 as compared to 2018 and other changes in operating assets and liabilities due to timing of cash receipts and cash payments.  

Net Cash Flows from Investing Activities

Net cash provided by investing activities was $1.2 million for the nine months ended September 30, 2019 as compared to $11.9 million for the nine months ended September 30, 2018.  The net cash provided by investing activities for the nine months ended September 30, 2019 included the receipt of $2.5 million in connection with the Ferring Transaction offset by capital expenditures of $1.3 million. The net cash inflow for the nine months ended September 30, 2018 included the receipt of $7.5 million in connection with the Ferring Transaction and $5.0 million in proceeds from investment maturities, offset by payments for capital expenditures and patent acquisition costs.

Net Cash Flows from Financing Activities

The net cash flow provided by financing activities was $22.2 million for the nine months ended September 30, 2019, and consisted of $15.0 million in new debt proceeds received in connection with the Amendment of our Term Loan, $7.8 million in net cash proceeds received from sales of our common stock through the ATM Facility, and $0.7 million proceeds from the exercise of stock options offset by $1.1 million paid to taxing authorities in connection with net-share settled stock-based awards for which we withheld shares equivalent to the value of the employees’ tax obligation for the applicable income and other employment taxes. Net cash used in financing activities for the nine months ended September 30, 2018 was $0.2 million, which included proceeds received in connection with the exercise of stock options offset by amounts paid to taxing authorities for net-share settled equity awards.  

Contractual Obligations

The following table presents our contractual obligations and the related payments, including interest, due by period as of September 30, 2019 (in thousands):

	Payments Due by Period
			Less than		1 - 3		3 - 5		More than
	Total		1 year		years		years		5 years
Long-Term Debt Obligations	$	50,844	$	3,863	$	46,981	$	-	$	—
Operating Lease Obligations		10,079		1,275		2,427		1,282		5,095
Total	$	60,923	$	5,138	$	49,408	$	1,282	$	5,095

Critical Accounting Policies and Use of Estimates

The preceding discussion and analysis of our results of operations and financial condition is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results could differ from our estimates, and significant variances could materially impact our financial condition and results of operations.

The accounting policies we believe to be most critical to understanding our results of operations and financial condition related to revenue recognition and inventory valuation, which are fully described in our Annual Report on Form 10-K for the year ended December 31, 2018.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, including any arrangements with any structured finance, special purpose or variable interest entities.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to foreign exchange rate fluctuations of the Swiss Franc to the U.S. dollar as the financial position and operating results of our subsidiaries in Switzerland are translated into U.S. dollars for consolidation. In addition, we have exposure to exchange rate fluctuations between the Euro and the U.S. dollar for some of our transactions. We do not currently use derivative financial instruments to hedge against exchange rate risk.  The effect of foreign exchange rate fluctuations on our financial results for the period ended September 30, 2019 was not material.

We may also be exposed to interest rate risk and interest rate fluctuations as a result of our long-term debt financing. Our loan, with a current outstanding principal balance of $40.0 million accrues interest at a calculated prime-based variable rate with a maximum interest rate of 9.50%, which was the rate in effect during the nine months ended September 30, 2019. A hypothetical increase or decrease in the interest rate of 1.0% would result in additional or lower incremental annual interest expense of $400,000.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  The evaluation was performed to determine whether the Company’s disclosure controls and procedures have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and is accumulated and communicated to management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report were effective.

Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

On October 23, 2017, Randy Smith filed a complaint in the District of New Jersey, captioned Randy Smith, Individually and on Behalf of All Others Similarly Situated v. Antares Pharma, Inc., Robert F. Apple and Fred M. Powell (“Smith”), Case No. 3:17-cv-08945-MAS-DEA, on behalf of a putative class of persons who purchased or otherwise acquired Antares securities between December 21, 2016 and October 12, 2017, inclusive, asserting claims for purported violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Antares, Robert F. Apple and Fred M. Powell.  The Smith complaint contends that defendants made false and/or misleading statements and/or failed to disclose that: (i) Antares had provided insufficient data to the FDA in connection with the NDA for XYOSTED^®; and (ii) accordingly, Antares had overstated the approval prospects for XYOSTED^®. On July 27, 2018, the court entered an order appointing Serghei Lungu as lead plaintiff, Pomerantz LLP as lead counsel, and Lite DePalma Greenberg, LLC as liaison counsel for plaintiff.  On August 3, 2018, the parties submitted a stipulation and proposed order, setting forth an agreed-upon schedule for responding to the complaint, which the court granted. Pursuant to that order, plaintiff filed a Consolidated Amended Class Action Complaint on October 9, 2018. On November 26, 2018, defendants filed a motion to dismiss. Plaintiff filed an opposition to the motion on January 10, 2019 and defendants filed a reply in support of their motion on February 25, 2019. On July 2, 2019, the court dismissed the complaint in its entirety without prejudice. On July 29, 2019, plaintiff filed a Consolidated Second Amended Class Action Complaint against the same parties alleging substantially similar claims. On September 12, 2019, defendants filed a motion to dismiss the Consolidated Second Amended Class Action Complaint. Plaintiffs’ opposition was filed on October 28, 2019 and defendants’ reply in support of their motion is due November 27, 2019. The Company believes that the claims in the Smith action lack merit and intends to defend them vigorously.

On January 12, 2018, a stockholder of our Company filed a derivative civil action, captioned Chiru Mackert, derivatively on behalf of Antares Pharma, Inc., v. Robert F. Apple, et al., in the Superior Court of New Jersey Chancery Division, Mercer County (Case No. C-000011-18).  On January 17, 2018, another stockholder filed a derivative action in the same court, captioned Vikram Rao, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (Case No. C-000004-18). Both complaints name Robert F. Apple, Fred M. Powell, Thomas J. Garrity, Jacques Gonella, Anton Gueth, Leonard S. Jacob, Marvin Samson and Robert P. Roche, Jr. as defendants, and the Company as nominal defendant, and they assert claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets arising from the same facts underlying the Smith securities class action.  The plaintiffs seek damages, corporate governance and internal procedure reforms and improvements, restitution, reasonable attorneys’ fees, experts’ fees, costs, and expenses.The parties have filed a stipulation consolidating the two actions and staying the proceedings pending the court’s decision on defendants’ motion to dismiss the Smith action. 

On January 17, 2018, a stockholder of our Company filed a derivative civil action, captioned Robert Clark, Derivatively on Behalf of Antares Pharma, Inc. v. Robert F. Apple, et al. (“Clark”) (Case No. 3:18-cv-00703-MAS-DEA), against Robert F. Apple, Thomas J. Garrity, Jacques Gonella, Leonard S. Jacob, Marvin Samson, Anton G. Gueth and Robert P. Roche, Jr. as defendants, and Company as a nominal defendant.  The action was filed in the U.S. District Court for the District of New Jersey and asserts claims for breach of fiduciary duties, unjust enrichment, abuse of control, waste of corporate assets, and a violation of Section 14(a) of the Securities Exchange Act of 1934.  This complaint relates to the same facts underlying the Smith securities class action and the other derivative actions.  The plaintiff in Clark seeks damages, corporate governance and internal procedure reforms and improvements, reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses.   The parties have filed a stipulation staying the action pending the court’s decision on defendants’ motion to dismiss the Smith action.

Item 1A. RISK FACTORS

In addition to the information contained in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K are not the only risks we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULT UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

(a) Exhibit Index

Exhibit No.	Description
31.1#	Certificate of the Chief Executive Officer of Antares Pharma, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2#	Certificate of the Chief Financial Officer of Antares Pharma, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1##	Certificate of the Chief Executive Officer of Antares Pharma, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2##	Certificate of the Chief Financial Officer of Antares Pharma, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS#	XBRL Instance Document
101.SCH#	XBRL Taxonomy Extension Schema Document
101.CAL#	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB#	XBRL Taxonomy Extension Label Linkbase Document
101.PRE#	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF#	XBRL Taxonomy Extension Definition Document

+ Indicates management contract or compensatory plan or arrangement.

#   Filed herewith.

## Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ANTARES PHARMA, INC.
November 5, 2019	/s/ Robert F. Apple
	Robert F. Apple
	President and Chief Executive Officer
	(Principal Executive Officer)
November 5, 2019	/s/ Fred M. Powell
	Fred M. Powell
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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