A.P. Pharma is a specialty pharmaceutical company focused on the development of ethical (prescription) pharmaceuticals utilizing its proprietary polymer-based drug delivery systems. The Company's primary focus is the development and commercialization of its bioerodible injectable and implantable systems under the trade name Biochronomer(TM). Initial targeted areas of application for the Company's drug delivery technology include pain management, inflammation, oncology and ophthalmology applications. A.p. Pharma Inc. has a market cap of $29.81 million; its shares were traded at around $0.95 with and P/S ratio of 80.78.
Highlight of Business Operations:Contract revenue, which is derived from work performed under collaborative research and development arrangements, was $1.1 million, $0.1 million, $1.1 million and $0.3 million for the three months ended September 30, 2009 and 2008 and the nine months ended September 30, 2009 and 2008, respectively. Contract revenues for the three and nine months ended September 30, 2009 include $1,000,000 of revenue recognized on termination of our agreement with RHEI (see Note 9 Significant Agreements to our financial statements). The amount of contract revenue varies from period to period depending on the level of activity requested of us by our collaborators. In September 2009, we entered into an agreement with Merial for a long-acting pain management product for cats and dogs. As a result of this agreement, we anticipate contract revenues over the near term to increase.
Our revenue has been derived principally from contract revenue. In January 2006, we completed the sale of our rights to royalties on sales of Retin-A Micro® and Carac® for up to $30 million. We received proceeds of $25 million upon the closing of the transaction and received a $2.5 million milestone payment in June 2007. We may receive up to an additional $2.5 million based on the satisfaction of certain predetermined milestones. As a result of this transaction, there were no royalties for the nine months ended September 30, 2009 or 2008. We will not record additional royalty revenue on sales of Retin-A Micro® and Carac® in future periods.
Research and development expense for the three months ended September 30, 2009 decreased to $1.4 million from $5.1 million for the three months ended September 30, 2008. Research and development expense for the nine months ended September 30, 2009 decreased to $6.4 million from $16.7 million for the nine months ended September 30, 2008. The decreases in research and development expenses for the three and nine months ended September 30, 2009 as compared with comparable periods in 2008 are primarily due to decreased expenditures related to APF530, largely as a result of the completion of our Phase III trial and related costs for APF530. Additionally, in late 2008 we placed our other product candidates on hold to focus our financial and managerial resources on APF 530. As a result, we had reductions in force in November 2008 and May 2009, resulting in lower payroll and related expenses. Research and development expense is expected to increase as a result of pre-commercialization activities.
General and administrative expense decreased for the three months ended September 30, 2009 to $0.9 million from $1.3 million for the three months ended September 30, 2008. General and administrative expense decreased to $2.9 million for the nine months ended September 30, 2009 as compared with $3.2 million for the comparable period of 2008. General and administrative expense decreased primarily as a result of decreases in professional fees, outside services and other general and administrative expenses as a result of cost containment measures. Changes in the rate of general and administrative expenses for the remaining quarters of 2009 will depend primarily on the achievement of corporate goals and stock-based compensation and/or retention efforts.
Net interest income was $0.0 million, $0.1 million, $0.0 million, and $0.5 million for the three months ended September 30, 2009 and 2008 and the nine months ended September 30, 2009 and 2008, respectively. The decrease was primarily due to lower average balances of cash, cash equivalents and marketable securities, as a result of operating losses and lower interest rates. In response to the current world-wide financial situation, we have invested most of our available cash equivalents in a lower risk money market fund containing U.S. Government-backed or collateralized overnight securities.
Our common stock is now listed on The NASDAQ Capital Market. The listing standards of The NASDAQ Capital Market require that a company maintain stockholders equity of at least $2.5 million. While our financing in October 2009 (see Note 10) results in proceeds to us of approximately $8.1 million, we are awaiting acknowledgement by The NASDAQ Stock Market, or NASDAQ, that we meet the $2.5 million stockholders equity requirement for continued listing on The NASDAQ Capital Market. Separately, as announced on September 21, 2009, we received notice from NASDAQ that we did not satisfy the $1.00 minimum bid price requirement, and that we have been granted through March 15, 2010 to regain compliance with the minimum bid price requirement. If we are not in compliance with the minimum bid price requirement by that date, we will be entitled to a second 180-calendar day grace period, through September 13, 2010, to evidence compliance with the minimum bid price requirement so long as we satisfy all criteria for initial listing on The Nasdaq Capital Market (except for bid price) as of March 15, 2010.
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