Bioject Medical (BJCT) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2010

OR

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

For the transition period from            to            

Commission file number 000-15360

BIOJECT MEDICAL TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Oregon	93-1099680
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20245 SW 95th Avenue Tualatin, Oregon	97062
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (503) 692-8001

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ¨    No  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock without par value	18,308,830
(Class)	(Outstanding at November 12, 2010)

BIOJECT MEDICAL TECHNOLOGIES INC.

FORM 10-Q

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – September 30, 2010 and December 31, 2009 (unaudited)	2
	Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2010 and 2009 (unaudited)	3
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2010 and 2009 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 4.	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 1A.	Risk Factors	13
Item 6.	Exhibits	20
Signatures		21

1

PART I - FINANCIAL INFORMATION

Item  1. Financial Statements

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2010			2009
ASSETS
Current assets:
Cash	$	284,519		$	1,146,318
Accounts receivable, net of allowance for doubtful accounts of $5,149 and $5,149		590,365			899,311
Inventories		983,169			867,676
Other current assets		41,086			20,951
Total current assets		1,899,139			2,934,256
Property and equipment, net of accumulated depreciation of $7,674,932 and $7,343,888		742,781			1,070,088
Other assets, net		1,294,074			1,251,838
Total assets	$	3,935,994		$	5,256,182
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	—		$	124,758
Accounts payable		997,998			949,963
Accrued payroll		172,631			163,512
Derivative liabilities		—			32,451
Other accrued liabilities		661,676			690,663
Deferred revenue		234,103			276,272
Total current liabilities		2,066,408			2,237,619
Long-term liabilities:
Deferred revenue		1,180,068			1,222,427
Other long-term liabilities		351,148			348,161
Commitments
Shareholders’ equity:
Preferred stock, no par value, 10,000,000 shares authorized:
Series D Convertible - 2,086,957 shares issued and outstanding at September 30, 2010 and December 31, 2009, liquidation preference of $1.15 per share		1,878,768			1,878,768
Series E Convertible - 3,308,392 shares issued and outstanding at September 30, 2010 and December 31, 2009, liquidation preference of $1.37 per share		5,478,466			5,478,466
Series F Convertible - 8,314 shares issued and outstanding at September 30, 2010 and December 31, 2009, liquidation preference of $75 per share		723,025			720,018
Series G Convertible - 92,448 shares issued and outstanding at September 30, 2010 and December 31, 2009, liquidation preference of $13 per share		1,275,464			1,205,034
Common stock, no par value, 100,000,000 shares authorized; 18,308,830 shares issued and outstanding at September 30, 2010 and 17,729,111 at December 31, 2009		114,676,837			114,355,059
Accumulated deficit		(123,694,190	)		(122,189,370	)
Total shareholders’ equity		338,370			1,447,975
Total liabilities and shareholders’ equity	$	3,935,994		$	5,256,182

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenue:
Net sales of products	$	1,428,335		$	1,430,149		$	3,559,925		$	4,839,350
Licensing and technology fees		91,332			104,415			304,661			356,063
		1,519,667			1,534,564			3,864,586			5,195,413
Operating expenses:
Manufacturing		1,049,145			1,000,751			2,666,262			3,122,245
Research and development		264,886			309,211			1,010,186			1,080,929
Selling, general and administrative		536,567			434,661			1,619,862			1,485,698
Total operating expenses		1,850,598			1,744,623			5,296,310			5,688,872
Operating loss		(330,931	)		(210,059	)		(1,431,724	)		(493,459	)
Interest income		428			2,389			3,690			8,481
Interest expense		(2,909	)		(47,080	)		(35,800	)		(149,015	)
Change in fair value of derivative liabilities		766			80,543			32,451			(65,440	)
		(1,715	)		35,852			341			(205,974	)
Net loss		(332,646	)		(174,207	)		(1,431,383	)		(699,433	)
Preferred stock dividend		(24,106	)		(12,471	)		(73,437	)		(37,413	)
Net loss allocable to common shareholders	$	(356,752	)	$	(186,678	)	$	(1,504,820	)	$	(736,846	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.04	)
Shares used in per share calculations		17,863,473			17,157,743			17,790,112			16,922,523

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(1,431,383	)	$	(699,433	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Compensation expense related to fair value of stock-based awards		291,756			243,636
Stock contributed to 401(k) Plan		30,022			49,493
Depreciation and amortization		405,048			513,881
Other non-cash interest expense		25,242			113,540
Change in fair value of derivative instruments		(32,451	)		65,440
Change in deferred revenue		(84,528	)		(120,879	)
Change in deferred rent		7,620			76,722
Changes in operating assets and liabilities:
Accounts receivable, net		308,946			(68,399	)
Inventories		(115,493	)		66,781
Other current assets		(20,135	)		38,402
Accounts payable		48,035			(124,713	)
Accrued payroll		9,119			(128,313	)
Other accrued liabilities		(28,987	)		147,228
Net cash provided by (used in) operating activities		(587,189	)		173,386
Cash flows from investing activities:
Capital expenditures		(3,737	)		(17,602	)
Other assets		(116,240	)		(123,830	)
Net cash used in investing activities		(119,977	)		(141,432	)
Cash flows from financing activities:
Principal payments made on short and long-term debt		(150,000	)		(495,000	)
Payments made on capital lease obligations		(4,633	)		(11,405	)
Net cash used in financing activities		(154,633	)		(506,405	)
Decrease in cash		(861,799	)		(474,451	)
Cash:
Beginning of period		1,146,318			1,351,894
End of period	$	284,519		$	877,443
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,937		$	29,806
Supplemental non-cash information:
Preferred stock dividend to be settled in Series F or Series G preferred stock	$	73,437		$	37,413

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Going Concern

The financial information included herein for the three and nine-month periods ended September 30, 2010 and 2009 is unaudited; however, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2009 is derived from Bioject Medical Technologies Inc.’s 2009 Annual Report on Form 10-K for the year ended December 31, 2009. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2009 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Due to our limited amount of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm for the year ended December 31, 2009 expressed substantial doubt about our ability to continue as a going concern.

We have historically suffered recurring operating losses and negative cash flows from operations. As of September 30, 2010, we had an accumulated deficit of $123.7 million with total shareholders’ equity of $0.3 million. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, assuming that we will continue as a going concern.

At September 30, 2010, we had a cash balance of $0.3 million and we had a working capital deficit of $0.2 million.

In March 2010, we repaid the remaining $150,000 of debt we had outstanding and, as of September 30, 2010, we did not have any short or long-term debt outstanding.

We continue to monitor our cash and have previously taken measures to reduce our expenditure rate, including temporary salary reductions and rent deferrals. In addition, we delayed capital and maintenance expenditures. However, if we do not enter into one or more licensing, development and supply agreements with sufficient up-front payments or increase sales to current customers or markets during the fourth quarter of 2010, we will need to do one or more of the following to raise additional resources, or reduce our cash requirements:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

While management is committed to working on a number of strategic options and alternatives intended to keep us as a going concern, there is no assurance that we will be successful.

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Note 2. Inventories

Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Inventories, net of valuation reserves of $570,000 and $622,000 at September 30, 2010 and December 31, 2009, respectively, consisted of the following:

	September 30, 2010		December 31, 2009
Raw materials and components	$	580,283	$	496,208
Work in process		46,183		132,537
Finished goods		356,703		238,931
	$	983,169	$	867,676

Note 3. Net Loss Per Common Share

The following common stock equivalents were excluded from the diluted loss per share calculations, as their effect would have been antidilutive:

	Three and Nine Months Ended September 30,
	2010		2009
Stock options, restricted stock units and warrants		4,212,173		3,213,974
Convertible preferred stock		15,471,626		6,226,749
Series E Payment-in-kind dividends		550,516		550,516
Series F Payment-in-kind dividends		133,263		111,996
Series G Payment-in-kind dividends		566,382		—
$1.25 million convertible debt		—		350,000
$600,000 convertible debt		—		800,000
Accrued interest on $600,000 convertible debt		—		115,024
Total		20,933,960		11,368,259

Note 4. Product Sales and Concentrations

Product sales to customers accounting for 10% or more of our total product sales were as follows:

	Three Months Ended September 30,						Nine Months  Ended September 30,
	2010			2009			2010			2009
Merial		57	%		24	%		42	%		30	%
Serono		16	%		15	%		22	%		30	%
Ferring		12	%		22	%		23	%		19	%
Middlesex County, New Jersey public health			*		12	%			*			*

* Less than 10%.

At September 30, 2010, accounts receivable from Merial, Serono and Ferring represented 77%, 16% and 4%, respectively, of the accounts receivable balance. No other customers accounted for 10% or more of our accounts receivable as of September 30, 2010.

Note 5. Fair Value Measurements

As of September 30, 2010, we did not have any financial asset or liabilities that were valued at fair value on a recurring basis.

Certain of our previous convertible debt and equity agreements included derivative liabilities. These instruments were recorded at fair value and were marked to market each period using the Black-Scholes valuation model.

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Following are the disclosures related to our previously-existing financial liabilities:

	Warrants issued in connection with March 2006 $1.5 million bridge loan(1)			$1.25 million convertible debt conversion feature(2)
Fair value at December 31, 2009	$	(30,039	)	$	(2,412	)
Change in fair value		30,039			2,412
Fair value at September 30, 2010	$	—		$	—

(1) The warrants issued in connection with the March 2006 $1.5 million bridge loan expired in September 2010 and, accordingly, there is no value attributable to the warrants at September 30, 2010.

(2) The $1.25 million convertible debt was paid off during the first quarter of 2010 and, accordingly, there is no value attributable to the conversion feature at September 30, 2010.

Note 6. Other Accrued Liabilities

Included in other accrued liabilities was $628,000 and $618,000 at September 30, 2010 and December 31, 2009, respectively, related to prepaid inventory and credits for Serono.

Note 7. Amendments to 1992 Stock Incentive Plan

At our Annual Meeting of Shareholders, which was held June 10, 2010, our shareholders approved amendments to our 1992 Stock Incentive Plan (the “Plan”) to:

• increase the number of shares reserved for issuance thereunder by 1,500,000 shares to a total of 5,400,000 shares; and

• to extend the expiration date of the Plan from June 30, 2010 to June 9, 2020.

Note 8. Stock-Based Awards

On April 23, 2010, we granted options exercisable for a total of 600,000 shares of our common stock at an exercise price of $0.30 per share, the fair market value on the date of grant, to certain employees and executive officers. The options vested 50% immediately and will vest as to an additional 25% on each of the first and second anniversaries of the grant date. The fair value of the options granted, as determined utilizing the Black-Scholes valuation methodology, was approximately $170,000, $108,000 of which will be recognized in 2010.

On June 10, 2010, we granted options exercisable for a total of 1.38 million shares of our common stock at an exercise price of $0.15 per share, the fair market value on the date of grant, to certain employees, executive officers and members of our Board of Directors. The options vest as to 25% of the total on each of the first through fourth anniversaries of the grant date. The fair value of the options granted, as determined utilizing the Black-Scholes valuation methodology, was approximately $197,000, $27,000 of which will be recognized in 2010.

Also on June 10, 2010, we granted 400,000 restricted stock units (“RSUs”) to Mr. Makar, our President and Chief Executive Officer pursuant to his employment agreement with respect to his performance in 2008 and 2009. The RSUs vested immediately as to 50% of the shares and will vest as to an additional 25% of the shares on each of the first and second anniversaries of the grant date. This vesting schedule is accelerated as compared to the terms of Mr. Makar’s employment agreement in lieu of any cash bonus for 2008 or 2009. The RSUs had a fair value of $60,000, $37,500 of which will be recognized in 2010.

Stock-based compensation was recognized in our consolidated statements of operations as follows:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
	2010		2009		2010		2009
Manufacturing	$	5,711	$	5,302	$	37,784	$	22,746
Research and development		8,060		14,130		38,855		54,671
Selling, general and administrative		53,427		36,754		215,117		166,219
	$	67,198	$	56,186	$	291,756	$	243,636

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Note 9. Recent Accounting Guidance Not Yet Adopted

ASU 2010-17

In April 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-17, “Revenue Recognition – Milestone Method,” which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. The amendments in ASU 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. While we are still analyzing the provisions of ASU 2010-17, we believe that our current practices are consistent with the guidance in ASU 2010-17 and, accordingly, we do not expect the adoption of the provisions of ASU 2010-17 to have any effect on our financial position, results of operations or cash flows.

ASU 2010-06

ASU 2010-06, “Improving Disclosures about Fair Value Measurements,” requires new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into or out of Level 1 and Level 2 fair-value classifications. It also requires information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair-value assets and liabilities. These disclosures are required for fiscal years beginning on or after December 15, 2009. The ASU also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs and valuation techniques, which are required to be implemented in fiscal years beginning on or after December 15, 2010. Since the requirements of this ASU only relate to disclosure, the adoption of the guidance will not have any effect on our financial position, results of operations or cash flows.

Note 10. Subsequent Event

In November 2010, we received notification that we had been awarded a $244,000 grant pursuant to Section 48D of the Internal Revenue Code for Qualifying Therapeutic Discovery Projects. We received the $244,000 in November 2010. The award was in support of our development efforts regarding our dose sparing needle-free injection delivery systems.

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning cash requirements. Such forward looking statements (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates” or “intends,” or stating that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved) involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, without limitation, the risk that we may not enter into anticipated licensing, development or supply agreements, the risk that we may not achieve the milestones necessary for us to receive payments under our future development agreements, the risk that our products will not be accepted by the market, the risk that we will be unable to meet production demands as a result of supply or other factors, the risk that we will be unable to obtain needed debt or equity financing on satisfactory terms, or at all, risks related to the general economic environment and uncertainties in the financial markets, uncertainties related to our dependence on the continued performance of strategic partners and technology and uncertainties related to the time required for us or our strategic partners to complete research and development and obtain necessary clinical data and government clearances. See also Part II, Item 1A, Risk Factors.

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Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. We assume no obligation to update forward-looking statements if conditions or management’s estimates or opinions should change, even if new information becomes available or other events occur in the future.

OVERVIEW

We are an innovative developer and manufacturer of needle-free injection therapy systems (“NFITS”).

Our NFITS work by forcing liquid medication at high speed through a tiny orifice held against the skin. This creates a fine stream of high-pressure medication that penetrates the skin, depositing the medication in the tissue beneath. By bundling customized needle-free delivery systems with partners’ injectable medications and vaccines, we can enhance demand for these products in the healthcare provider and end-user markets.

In January 2010, we established a strategic alliance with MPI Research, a leading pre-clinical research organization with experience in the development of injectable therapeutics. The strategic alliance creates a preferred partnership relationship, which allows us to gain access to a range of capabilities and resources needed for us to explore drug+device opportunities, including access to pharmacologic, analytical, safety and other preclinical testing resources available at MPI Research. The strategic alliance offers MPI Research the opportunity to provide our needle-free technology as an alternate delivery option to current drug/biologic manufacturers who may be interested in seeking a more highly competitive and differentiable drug+device brand.

In March 2010, we met the final milestone in our license, development and supply agreement with Merial for their new state-of-the-art spring-powered device for feline leukemia and canine melanoma vaccinations for companion animals and we initiated the first product shipments of the new device to Merial at the end of the first quarter of 2010.

While revenues for the first three quarters of 2010 were lower than the same time period last year, we are undertaking actions related to both revenue and cash management in an attempt to improve our results. Such actions include the hiring of a new National Sales Manager who is focusing on increasing sales of our devices to the military and public health sectors. We are also exploring new options for funding of technologies to support the needs of the developing world and are targeting potential federally funded programs that would use our device technology in order to deliver new benefits for emergency preparedness and biodefense.

Also in March 2010, we repaid the remaining $150,000 of debt we had outstanding and, at September 30, 2010, we did not have any short or long-term debt outstanding.

We do not expect to report net income in 2010.

GOING CONCERN AND CASH REQUIREMENTS FOR THE NEXT TWELVE-MONTH PERIOD

See Note 1 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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CONTRACTUAL PAYMENT OBLIGATIONS

A summary of our contractual commitments and obligations as of September 30, 2010 was as follows:

	Payments Due By Period
Contractual Obligation	Total		Remainder of 2010		2011 and 2012		2013 and 2014		2015 and beyond
Operating leases and deferred rent(1)	$	1,817,702	$	102,919	$	936,991	$	777,792	$	—
Capital leases		9,560		3,187		6,373		—		—
Purchase order commitments(2)		416,208		416,208		—		—		—
	$	2,243,470	$	522,314	$	943,364	$	777,792	$	—

(1) Operating leases and deferred rent includes $117,000 of deferred rent due beginning January 2011, or sooner if certain events occur.

(2) Purchase order commitments generally relate to future raw material inventory purchases, research and development projects and other operating expenses.

RESULTS OF OPERATIONS

The consolidated financial data for the three and nine-month periods ended September 30, 2010 and 2009 are presented in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenue:
Net sales of products	$	1,428,335		$	1,430,149		$	3,559,925		$	4,839,350
Licensing and technology fees		91,332			104,415			304,661			356,063
		1,519,667			1,534,564			3,864,586			5,195,413
Operating expenses:
Manufacturing		1,049,145			1,000,751			2,666,262			3,122,245
Research and development		264,886			309,211			1,010,186			1,080,929
Selling, general and administrative		536,567			434,661			1,619,862			1,485,698
Total operating expenses		1,850,598			1,744,623			5,296,310			5,688,872
Operating loss		(330,931	)		(210,059	)		(1,431,724	)		(493,459	)
Interest income		428			2,389			3,690			8,481
Interest expense		(2,909	)		(47,080	)		(35,800	)		(149,015	)
Change in fair value of derivative liabilities		766			80,543			32,451			(65,440	)
Net loss		(332,646	)		(174,207	)		(1,431,383	)		(699,433	)
Preferred stock dividend		(24,106	)		(12,471	)		(73,437	)		(37,413	)
Net loss allocable to common shareholders	$	(356,752	)	$	(186,678	)	$	(1,504,820	)	$	(736,846	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.04	)
Shares used in per share calculations		17,863,473			17,157,743			17,790,112			16,922,523

Revenue

Product sales were flat in the third quarter of 2010 compared to the third quarter of 2009 and decreased $1.3 million, or 26.4%, in the nine-month period ended September 30, 2010 compared to the same period of 2009. Product sales fluctuations were due primarily to the following:

• Sales to Serono increased from $213,000 to $227,000, or 6.1%, and decreased from $1.4 million to $0.8 million, or 46.3% in the three and nine-month periods ended September 30, 2010, respectively, compared to the same periods of 2009 due to reductions in their forecast in anticipation of the contract ending December 2010. We have firm orders through November 2010 and we do not expect Serono to continue purchasing from us after the contract expires;

• Sales to Merial increased from $346,000 to $821,000, or 137.4%, in the three-month period ended September 30, 2010 compared to the same period of 2009 and were flat at $1.5 million in each of the nine-month periods. The increase in the three-month period was primarily due to sales of the new spring-powered device, which were delayed from earlier quarters of 2010 due to delays in production ramp-up;

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• Decrease in sales to Ferring from $313,000 to $175,000, or 44.0%, and from $903,000 to $806,000, or 10.7% in the three and nine-month periods ended September 30, 2010 compared to the same period of 2009, due to timing of orders;

• Sales to the military increased from $133,000 to $151,000, or 13.5%, and decreased from $359,000 to $301,000, or 16%, in the three and nine-month period ended September 30, 2010, respectively, compared to the same periods of 2009;

• The completion of a grant project for the Centers for Disease Control, which resulted in $137,000 of revenue in the nine-month period ended September 30, 2009 and no revenue in 2010; and

• Sales of $325,000 of B2000 product to certain counties in New Jersey for use in their emergency preparedness programs in the three and nine-month periods ended September 30, 2009. There were no sales to these counties in 2010.

We currently have supply agreements or commitments with Serono, Merial, Ferring Pharmaceuticals and the U.S. federal government. Our agreement with Serono expires in December 2010.

License and technology fees recognized in accordance with our agreements were as follows:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
	2010		2009		2010		2009
Merial	$	44,052	$	40,990	$	130,114	$	120,244
Serono		20,142		16,963		54,414		83,968
Royalty fees		27,138		26,462		75,133		76,526
Other		—		20,000		45,000		75,325
	$	91,332	$	104,415	$	304,661	$	356,063

We currently have an active licensing and development agreement, which includes commercial product supply provisions, with Merial.

Manufacturing Expense

Manufacturing expense is made up of the cost of products sold and manufacturing overhead expense related to excess manufacturing capacity.

The $48,000, or 4.8%, increase in manufacturing expense in the three-month period ended September 30, 2010 compared to the same period of 2009 was primarily due unabsorbed overhead costs, partly offset by lower material costs. The $0.5 million, or 14.6%, decrease in manufacturing expense in the nine-month period ended September 30, 2010 compared to the same period of 2009 was primarily due to lower product sales.

Research and Development Expense

Research and development costs include labor, materials and costs associated with clinical studies incurred in the research and development of new products, such as dose sparing needle-free injectors, and modifications to existing products.

The $44,000, or 14.3%, decrease and the $71,000, or 6.5%, decrease in research and development expense in the three and nine-month periods ended September 30, 2010, respectively, compared to the same periods of 2009 were primarily due to the timing of expenses related to on-going projects.

Selling, General and Administrative Expense

Selling, general and administrative costs include labor, travel, outside services and overhead incurred in our sales, marketing, management and administrative support functions.

The $102,000, or 23.4%, increase and the $134,000, or 9.0%, increase, in selling, general and administrative expense in the three and nine-month periods ended September 30, 2010 compared to the same periods of 2009 were primarily due to the hiring of a National Sales Manager in March 2010 and related expenses, as well as a $17,000 and a $49,000 increase, respectively, in stock-based compensation expense primarily as a result of stock-based awards granted in the second quarter of 2010.

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Interest Expense

Interest expense included the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Contractual interest expense	$	3,000	$	23,000	$	11,000	$	71,000
Amortization of debt issuance costs		—		—		—		7,000
Accretion of $1.25 million convertible debt		—		24,000		25,000		71,000
	$	3,000	$	47,000	$	36,000	$	149,000

Change in Fair Value of Derivative Liability

As of September 30, 2010, we no longer have any derivative liabilities recorded on our balance sheet. See Note 5 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception in 1985, we have financed our operations, working capital needs and capital expenditures primarily from private placements of securities, the exercise of warrants, loans, proceeds received from our initial public offering in 1986, proceeds received from a public offering of common stock in 1993, licensing and technology revenues and revenues from sales of products.

Total cash at September 30, 2010 was $0.3 million compared to $1.1 million at December 31, 2009. We had a working capital deficit of $0.2 million at September 30, 2010 compared to working capital of $0.7 million at December 31, 2009. Our debt retirement costs were $150,000 in the first nine months of 2010 to pay off the remaining balance on our convertible loan, which was paid in March 2010. Following the repayment of this outstanding debt, we did not have any short or long-term debt outstanding. However, even with the sale of Series G Preferred shares and the related cash investment in December 2009, given our current cash balance, our March 2010 debt repayment and our current rate of cash usage, if no new licensing, development or supply agreements with significant up-front payments are entered into or there is no significant increase in product sales in the fourth quarter of 2010, we anticipate that we will be unable to continue operations beyond the fourth quarter of 2010, unless we obtain additional debt or equity financing.

The overall decrease in cash during the first nine months of 2010 resulted from $0.6 million of cash used in operating activities, $155,000 used for principal payments on debt and capital leases and $120,000 used for capital expenditures and patent activity.

Net accounts receivable decreased $0.3 million to $0.6 million at September 30, 2010 compared to $0.9 million at December 31, 2009. Receivables from three different customers accounted for a total of 97% of our accounts receivable balance at September 30, 2010, with individual accounts totaling 77%, 16% and 4%, respectively. For the customer representing 77% of our balance at September 30, 2010, none of the amounts due are related to equipment purchased on their behalf compared to $0.5 million at December 31, 2009. Of the accounts receivable due at September 30, 2010, $593,000 was collected prior to the filing of this Form 10-Q. Historically, we have not had collection problems related to our accounts receivable.

Inventories increased to $1.0 million at September 30, 2010 compared to $0.9 million at December 31, 2009, primarily as a result of increased purchases and production in the third quarter of 2010.

Capital expenditures totaled $4,000 in the first nine months of 2010. We anticipate spending up to a total of $25,000 or more in 2010 for production molds for current research and development projects.

Accounts payable increased $48,000 to $1.0 million at September 30, 2010, compared to $0.9 million at December 31, 2009, primarily due to increased inventory purchases as discussed above and the aging of accounts payable as we attempt to manage our cash usage rate, partially offset by the payment of $0.5 million of invoices related to capital purchases on behalf of the customer mentioned above.

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Other accrued liabilities at both September 30, 2010 and December 31, 2009 included $0.5 million of inventory credits that Serono could begin taking against current invoices or require repayment at any time.

Deferred revenue of $1.4 million at September 30, 2010 included $1.36 million received from Merial and $58,000 received from Serono.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We reaffirm the critical accounting policies and estimates as reported in our Form 10-K for the year ended December 31, 2009, which was filed with the Securities and Exchange Commission on March 30, 2010.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

RECENT ACCOUNTING GUIDANCE NOT YET ADOPTED

See Note 9 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our President and Chief Executive Officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President and Chief Executive Officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1A. RISK FACTORS

In addition to the other information contained in this Form 10-Q, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

We need to obtain funding in the fourth quarter of 2010 to continue operations. Sufficient funding may not be available to us and, if available, may be subject to conditions. The unavailability of funding could adversely affect our business and cause us to cease operations.At September 30,

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2010, cash was $0.3 million and we had a working capital deficit of $0.2 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate and delay capital and maintenance expenditures. However, even with the closing of the Series G Preferred Stock transaction in the fourth quarter of 2009, if we do not enter into one or more licensing development and supply agreements with sufficient up-front payments or increase sales to current customers or markets, we expect that we will need to do one or more of the following to provide additional resources during the fourth quarter of 2010:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

This situation could be exacerbated if Serono uses its inventory credits against invoices or requires repayment of those credits. In addition, our contract with Serono expires in December 2010 and we do not expect Serono to continue purchasing from us after that time. If we do not replace the sales represented by Serono, our financing situation may worsen. While management continues to work on a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful. Financing may not be available to us on acceptable terms or at all. If we are unable to obtain additional resources, our business could be adversely affected and we could be forced to cease operations.

We have a history of losses and may never be profitable. Since our formation in 1985, we have incurred significant annual operating losses and negative cash flow. At September 30, 2010, we had an accumulated deficit of $123.7 million and a net working capital deficit of $0.2 million. Due to our lack of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm dated March 30, 2010 expressed substantial doubt about our ability to continue as a going concern. We may never be profitable, which could have a negative effect on our stock price, our business and our ability to continue operations. Our revenues are derived from licensing and technology fees and from product sales. We sell our products to strategic partners, who market our products under their brand name, and to end-users such as public health clinics for vaccinations and the military for mass immunizations. We have not attained profitability at these sales levels. We may never be able to generate significant revenues or achieve profitability. Now, and in the future, we will require substantial additional financing. Such financing may not be available on terms acceptable to us, or at all, which would have a material adverse effect on our business. Any future equity financing could result in significant dilution to shareholders.

Our preferred stock has a liquidation preference and, as a result, if we are sold or liquidated, holders of common stock could receive nothing. We have outstanding shares of Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock. Under the terms of the preferred stock, if we are sold or liquidated, the holders of these shares would be entitled to receive approximately $9.7 million, at September 30, 2010, prior to any payments to the holders of common stock. Accordingly, if we are sold or liquidated, holders of common stock could receive nothing.

If our products are not accepted by the market, our business could fail. Our success will depend on market acceptance of our needle-free injection drug delivery systems and on market acceptance of other products under development. If our products do not achieve market acceptance, our business could fail. Currently, the dominant technology used for intramuscular and subcutaneous injections is the hollow-needle syringe, which has a cost per injection that is significantly lower than that of our products. Our products may be unable to compete successfully with needle-syringes.

We may be unable to enter into additional strategic corporate licensing and distribution agreements or maintain existing agreements, which could cause our business to suffer. A key component of our sales and marketing strategy is to enter into licensing and supply arrangements with leading pharmaceutical and biotechnology companies for whose products our technology provides either increased medical effectiveness or a higher degree of market acceptance. Historically, these agreements have taken a long time to finalize, and the current economic environment may extend that period even further. If we cannot enter into these agreements on terms favorable to us or at all, our business may suffer.

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In prior years, several agreements have been canceled by our partners prior to completion. These agreements were canceled for various reasons, including, but not limited to, costs related to obtaining regulatory approval, unsuccessful pre-clinical studies, changes in drug development and changes in business development strategies. These agreements resulted in significant short-term revenue. However, none of these agreements developed into the long-term revenue stream anticipated by our strategic partnering strategy.

We may be unable to enter into future licensing or supply agreements with major pharmaceutical or biotechnology companies. Even if we enter into these agreements, they may not result in sustainable long-term revenues which, when combined with revenues from product sales, could be sufficient for us to operate profitably.

Our new drug+device strategy is currently suspended and is subject to a number of risks and uncertainties and, as a result, we may not be successful in implementing the strategy.In 2007, we announced a new component of our business strategy pursuant to which we plan to attempt to secure rights to injectable medications to sell in combination with our products under our own brand. Successfully implementing this strategy is subject to a number of risks. We may not be successful in securing rights to medications we are interested in combining with our products. Even if successful in securing rights, these products would be subject to FDA approval, and it will be our responsibility to obtain such approval. This approval may not be obtained or may take a significant period of time to obtain. In addition, there is a risk that our device will not work for the new drug indication. We may also need to raise additional funds to finance this new strategy, and there is no assurance such funds will be available to us on acceptable terms or at all. We do not have experience manufacturing or marketing to end-users drug+device combinations. In addition, these new products may not be accepted by the market. Further, due to our current liquidity situation, we have temporarily suspended implementation of this strategy. Accordingly, there is no assurance that our new strategy will be successfully implemented, and failure to successfully implement the strategy could negatively affect our business.

We have amended our lease agreement for rent deferrals and, if we default under our lease agreement in the future, our landlord could terminate our lease, which would adversely affect our business.In November 2008, we negotiated a $15,000 rent deferral for each of November 2008, December 2008 and January 2009 and, in March 2009, we entered into an agreement pursuant to which we deferred $12,000 of rent for each of February, March and April 2009. On July 8, 2009, we entered into another amendment to our lease agreement, effective June 30, 2009, pursuant to which we deferred $12,000 of rent for each of May and June 2009. Absent certain triggering events causing the deferred rent to be due sooner, we will be required to start repaying the deferred rent in January 2011, when it is to be repaid in twelve equal installments, plus accrued interest. If we are unable to make the payments under the lease when due, including the deferred rent payments, or are unable to negotiate additional rent deferrals, our landlord could declare an event of default and terminate our lease, which would have a material adverse effect on our business.

We must retain qualified personnel in a competitive marketplace, or we may not be able to grow our business.Our success depends upon the personal efforts and abilities of our senior management. We may be unable to retain our key employees, namely our management team, or to attract, assimilate or retain other highly qualified employees. We have implemented workforce and salary reductions, and there remains substantial competition for highly skilled employees. Our key employees are not bound by agreements that could prevent them from terminating their employment at any time. If we fail to attract and retain key employees, our business could be harmed.

We depend on a few significant customers.Our top three customers accounted for 87% of our total product sales in the first nine months of 2010. Our supply agreement with one of these customers, Serono, expires in December 2010 and we do not expect Serono to continue purchasing from us after

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that time. If we do not replace the sales represented by Serono, our business will be negatively affected. In addition, if any of these customers delays, reduces or ceases ordering our products or services, whether as a result of the expiration of a supply agreement or otherwise, our business would be negatively affected.

Our common stock is listed on the Over-the-Counter Bulletin Board, which may impair the price at which our common stock trades, the liquidity of the market for our common stock and our ability to obtain additional funding.The Over-the-Counter Bulletin Board is an electronic quotation service maintained by the Financial Industry Regulatory Authority. Our stock, like most stock listed on this service, has very limited trading volume. As a consequence, the ability of a stockholder to sell our common stock, the price obtainable for our common stock and our ability to obtain additional funding may be materially impaired.

We have limited manufacturing experience, and may be unable to produce our products at the unit costs necessary for the products to be competitive in the market, which could cause our financial condition to suffer. We have limited experience manufacturing our products in commercially viable quantities. We have increased our production capacity for the Biojector^® 2000 system, the ZetaJet™ and the Vitajet^® product lines through automation of, and changes in, production methods, in order to achieve savings through higher volumes of production. If we are unable to achieve these savings, our results of operations and financial condition could suffer. The current cost per injection of the Biojector^® 2000 system, ZetaJet™ and Vitajet^® product lines is substantially higher than that of traditional needle-syringes, our principal competition. In order to reduce costs, a key element of our business strategy has been to reduce the overall manufacturing cost through automating production and packaging. There can be no assurance that we will achieve sales and manufacturing volumes necessary to realize cost savings from volume production at levels necessary to result in significant unit manufacturing cost reductions. Failure to do so will continue to make competing with needle-syringes on the basis of cost very difficult and will adversely affect our financial condition and results of operations. We may be unable to successfully manufacture devices at a unit cost that will allow the product to be sold profitably. Failure to do so would adversely affect our financial condition and results of operations.

We are subject to extensive government regulation and must continue to comply with these regulations or our business could suffer.Our products and manufacturing operations are subject to extensive government regulation in both the U.S. and abroad. If we cannot comply with these regulations, we may be unable to distribute our products, which could cause our business to suffer or fail. In the U.S., the development, manufacture, marketing and promotion of medical devices are regulated by the Food and Drug Administration (“FDA”) under the Federal Food, Drug, and Cosmetic Act (“FFDCA”). The FFDCA provides that new pre-market notifications under Section 510(k) of the FFDCA are required to be filed when, among other things, there is a major change or modification in the intended use of a device or a change or modification to a legally marketed device that could significantly affect its safety or effectiveness. A device manufacturer is expected to make the initial determination as to whether the change to its device or its intended use is of a kind that would necessitate the filing of a new 510(k) notification. The FDA may not concur with our determination that our current and future products can be qualified by means of a 510(k) submission or that a new 510(k) notification is not required for such products.

Future changes to manufacturing procedures could require that we file a new 510(k) notification. Also, future products, product enhancements or changes, or changes in product use may require clearance under Section 510(k), or they may require FDA pre-market approval (“PMA”) or other regulatory clearances. PMAs and regulatory clearances other than 510(k) clearance generally involve more extensive prefiling testing than a 510(k) clearance and a longer FDA review process. It is current FDA policy that pre-filled syringes are evaluated by the FDA by submitting a Request for Designation (“RFD”) to the Office of Combination Products (“OCP”). The pharmaceutical or biotechnology company with which we partner is responsible for the submission to the OCP, although we will have this responsibility with respect to drug+device combinations produced by us under our new strategy. A pre-filled syringe meets the FDA’s definition of a combination product, or a product comprised of two or more regulated components, i.e. drug/device. The OCP will assign a center with primary jurisdiction for a combination product (CDER, CDRH) to ensure the timely and effective pre-market review of the product. Depending on the circumstances, drug and combination drug/device regulation can be much more extensive and time consuming than device regulation.

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FDA regulatory processes are time consuming and expensive. Product applications submitted by us may not be cleared or approved by the FDA. In addition, our products must be manufactured in compliance with Good Manufacturing Practices, as specified in regulations under the FFDCA. The FDA has broad discretion in enforcing the FFDCA, and noncompliance with the FFDCA could result in a variety of regulatory actions ranging from product detentions, device alerts or field corrections, to mandatory recalls, seizures, injunctive actions and civil or criminal penalties. If we were to have a recall of our product in the field, it could negatively affect our results of operations, financial position and cash flows. Our facility was subject to a routine surveillance audit by the FDA in September 2010. No adverse findings were noted during the audit.

Sales of our products, including the Iject® pre-filled syringe, are dependent on regulatory approval being obtained for the product’s use with a given drug to treat a specific condition. It is the responsibility of the strategic partner producing the drug to obtain this approval. The failure of a partner to obtain regulatory approval or to comply with government regulations after approval has been received could harm our business. In order for a strategic partner to sell our devices for delivery of its drug to treat a specific condition, the partner must first obtain government approval. This process is subject to extensive government regulation both in the U.S. and abroad. As a result, sales of our products, including the Iject^® product, to any strategic partner are dependent on that partner’s ability to obtain regulatory approval. Accordingly, delay or failure of a partner to obtain that approval could cause our financial results to suffer. In addition, if a partner fails to comply with governmental regulations after initial regulatory approval has been obtained, sales to that partner may cease, which could cause our financial results to suffer.

If we cannot meet international product standards, we will be unable to distribute our products outside of the United States, which could cause our business to suffer.Distribution of our products in countries other than the U.S. may be subject to regulation in those countries. Failure to satisfy these regulations would impact our ability to sell our products in these countries and could cause our business to suffer.

We have received the following certifications from Underwriters Laboratories (“UL”) that our products and quality systems meet the applicable requirements, which allows us to label our products with the CE Mark and sell them in the European Community and non-European Community countries.

Certificate	Issue Date	Date Renewed
ISO 13485:2003 and CMDCAS	February 2006	January 2009
EC Certificate – Needle-free Injection Systems and Accessories (Biojector® 2000, cool.click®, ZetaJet™)	March 2007	January 2010
EC Certificate – Vial Adapters and Reconstitution Kits	March 2007	January 2009

If we are unable to continue to meet the standards of ISO 13485 or CE Mark certification, it could have a material adverse effect on our business and cause our financial results to suffer.

If the healthcare industry limits coverage or reimbursement levels, the acceptance of our products could suffer.The price of our products exceeds the price of needle-syringe combinations and, if coverage or reimbursement levels are reduced, market acceptance of our products could be harmed. The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of healthcare facilities. During the past several years, the healthcare industry has been subject to increased government regulation of reimbursement rates and capital expenditures. Among other things, third party payers are increasingly attempting to contain or reduce healthcare costs by limiting both coverage and levels of reimbursement for healthcare products and procedures. Because the price of the Biojector^® 2000 system exceeds the price of a needle-syringe, cost control policies of third party payers, including government agencies, may adversely affect acceptance and use of the Biojector^® 2000 system. In addition, on March 23, 2010 the Patient Protection and Affordable Care Act was signed into law and, commencing in 2013, the legislation imposes a 2.3% excise tax on sales of medical devices, which may negatively affect our business.

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We depend on outside suppliers for manufacturing.Our current manufacturing processes for the Biojector^® 2000 and ZetaJet™ jet injector and disposable syringes as well as manufacturing processes to produce our modified Vitajets^® consist primarily of assembling component parts supplied by outside suppliers. Some of these components are currently obtained from single sources, with some components requiring significant production lead times. In the past, we have experienced delays in the delivery of certain components and are currently experiencing such delays. These current delays, or any delays or interruptions we may experience in the future, including suppliers suspending or ceasing operations, could have a material adverse effect on our financial condition and results of operations.

Manufacturing difficulties could delay product shipments to customers.Delays in receiving approval for the manufacture of customers’ products or delays related to internal manufacturing difficulties could delay the timing of shipments to customers and negatively affect our results of operations, financial position and cash flows.

If we are unable to manage our growth, our results of operations could suffer.If our products achieve market acceptance or if we are successful in entering into significant product supply agreements with major pharmaceutical or biotechnology companies or vaccine companies, we expect to experience rapid growth. Such growth would require expanded customer service and support, increased personnel, expanded operational and financial systems, and implementing new and expanded control procedures. We may be unable to attract sufficient qualified personnel or successfully manage expanded operations. As we expand, we may periodically experience constraints that would adversely affect our ability to satisfy customer demand in a timely fashion. Failure to manage growth effectively could adversely affect our financial condition and results of operations.

We may be unable to compete in the medical equipment field, which could cause our business to fail.The medical equipment market is highly competitive and competition is likely to intensify. If we cannot compete, our business will fail. Our products compete primarily with traditional needle-syringes, “safety syringes” and also with other alternative drug delivery systems. In addition, manufacturers of needle-syringes, as well as other companies, may develop new products that compete directly or indirectly with our products. There can be no assurance that we will be able to compete successfully in this market. A variety of new technologies (for example, micro needles on dissolvable patches and transdermal patches) are being developed as alternatives to injection for drug delivery. While we do not believe such technologies have significantly affected the use of injection for drug delivery to date, there can be no assurance that they will not do so in the future. Many of our competitors have longer operating histories as well as substantially greater financial, technical, marketing and customer support resources.

We are dependent on a single technology, and if it cannot compete or find market acceptance, our business will suffer.Our strategy has been to focus our development and marketing efforts on our needle-free injection technology. Focus on this single technology leaves us vulnerable to competing products and alternative drug delivery systems. If our technology cannot find market acceptance or cannot compete against other technologies, business will suffer. We perceive that healthcare providers’ desire to minimize the use of the traditional needle-syringe has stimulated development of a variety of alternative drug delivery systems such as “safety syringes,” jet injection systems, nasal delivery systems and transdermal diffusion “patches.” In addition, pharmaceutical companies frequently attempt to develop drugs for oral delivery instead of injection. While we believe that for the foreseeable future there will continue to be a significant need for injections, alternative drug delivery methods may be developed which are preferable to injection.

We rely on patents and proprietary rights to protect our technology.We rely on a combination of trade secrets, confidentiality agreements and procedures and patents to protect our proprietary technologies. We have been granted a number of patents in the U.S. and several patents in other countries covering certain technology embodied in our current jet injection system and certain manufacturing processes. Additional patent applications are pending in the U.S. and certain foreign

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countries. The claims contained in any patent application may not be allowed, or any patent or our patents collectively may not provide adequate protection for our products and technology. In the absence of patent protection, we may be vulnerable to competitors who attempt to copy our products or gain access to our trade secrets and know-how. In addition, the laws of foreign countries may not protect our proprietary rights to this technology to the same extent as the laws of the U.S. We believe we have independently developed our technology and attempt to ensure that our products do not infringe the proprietary rights of others.

If a dispute arises concerning our technology, we could become involved in litigation that might involve substantial cost. Such litigation might also divert substantial management attention away from our operations and into efforts to enforce our patents, protect our trade secrets or know-how or determine the scope of the proprietary rights of others. If a proceeding resulted in adverse findings, we could be subject to significant liabilities to third parties. We might also be required to seek licenses from third parties in order to manufacture or sell our products. Our ability to manufacture and sell our products might also be adversely affected by other unforeseen factors relating to the proceeding or its outcome.

If our products fail or cause harm, we could be subject to substantial product liability, which could cause our business to suffer.Producers of medical devices may face substantial liability for damages in the event of product failure or if it is alleged the product caused harm. We currently maintain product liability insurance and, to date, have experienced one product liability claim. There can be no assurance, however, that we will not be subject to a number of such claims, that our product liability insurance would cover such claims, or that adequate insurance will continue to be available to us on acceptable terms in the future. Our business could be adversely affected by product liability claims or by the cost of insuring against such claims.

There are a large number of shares eligible for sale into the public market, which may reduce the price of our common stock.The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, or the perception that such sales could occur. We have a large number of shares of common stock outstanding and available for resale. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. There are also a large number of shares of common stock issuable upon conversion of our outstanding preferred stock and exercise of warrants. In addition, as of September 30, 2010, we had approximately 309,000 shares of common stock available for future issuance under our stock incentive plan. As of September 30, 2010, options to purchase approximately 2.3 million shares of common stock were outstanding and approximately 155,000 restricted stock units were outstanding and will be eligible for sale in the public market from time to time subject to vesting.

Our stock price may be highly volatile, which increases the risk of securities litigation.The market for our common stock and for the securities of other small market-capitalization companies has been highly volatile in recent years. This increases the risk of securities litigation relating to such volatility. We believe that factors such as quarter-to-quarter fluctuations in financial results, new product introductions by us or our competition, public announcements, changing regulatory environments, sales of common stock by certain existing shareholders, substantial product orders and announcement of licensing or product supply agreements with major pharmaceutical, biotechnology companies or vaccine companies could contribute to the volatility of the price of our common stock, causing it to fluctuate dramatically. General economic trends such as recessionary cycles and changing interest rates may also adversely affect the market price of our common stock.

Concentration of ownership could delay or prevent a change in control or otherwise influence or control most matters submitted to our shareholders.Certain funds affiliated with Life Sciences Opportunities Fund II (Institutional), L.P. (collectively, the “LOF Funds”) and its affiliates currently own shares of Series D Preferred Stock, Series E Preferred Stock, Series G Preferred Stock and warrants to purchase common stock representing in aggregate approximately 43.9% of our outstanding voting power (assuming exercise of the warrants). As a result, the LOF Funds and their affiliates have the potential to control matters submitted to a vote of shareholders, including a change of control transaction, which could prevent or delay such a transaction.

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ITEM 6. EXHIBITS

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

Exhibit No.	Description
3.1	2002 Restated Articles of Incorporation of Bioject Medical Technologies Inc., as amended. Incorporated by reference to Form 10-Q filed August 16, 2010
3.2	Second Amended and Restated Bylaws of Bioject Medical Technologies, Inc. Incorporated by reference to Form 8-K filed July 5, 2007.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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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.

Date: November 12, 2010	BIOJECT MEDICAL TECHNOLOGIES INC.
	(Registrant)
	/s/ RALPH MAKAR
	Ralph Makar
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ CHRISTINE M. FARRELL
	Christine M. Farrell
	Vice President of Finance
	(Principal Financial and Accounting Officer)

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