Anthera Pharmaceuticals Inc. Reports Operating Results (10-Q)

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May 14, 2010
Anthera Pharmaceuticals Inc. (ANTH, Financial) filed Quarterly Report for the period ended 2010-03-31.

Anthera Pharmaceuticals Inc. has a market cap of $151.1 million; its shares were traded at around $7 .

Highlight of Business Operations:

On February 26, 2010, our Registration Statement on Form S-1 was declared effective by the SEC for our IPO, pursuant to which we sold 6,000,000 shares of our common stock at a public offering price of $7.00 per share. We received gross proceeds of approximately $42 million from this transaction, before underwriting discounts and commissions. Concurrent with the closing of the IPO, we received an aggregate of $17.1 million from the issuance of 2,598,780 shares of our common stock to certain of our investors pursuant to a common stock purchase agreement. On April 6, 2010, pursuant to the terms and conditions of the underwriting agreement, the underwriters of our IPO exercised their over-allotment option and purchased 604,492 shares of common stock at our public offering price of $7.00 per share, less the underwriting discount and commissions, resulting in gross proceeds of approximately $4.2 million.

Effective January 1, 2006, we adopted the provisions of FASB ASC 718, Compensation Stock Compensation, using the modified prospective method. Compensation costs related to all equity instruments granted after January 1, 2006 are recognized at the grant-date fair value of the awards. Additionally, we are required to include an estimate of the number of awards that will be forfeited in calculating compensation costs, which are recognized over the requisite service period of the awards on a straight-line basis. We estimate the fair value of our share-based payment awards on the date of grant using an option-pricing model. We recognized employee stock-based compensation expense of $74,861 in 2007, $143,406 in 2008, and $253,964 in 2009, respectively. As of March 31, 2010, we had $535,015 in total unrecognized compensation cost related to non-vested employee stock-based compensation arrangements, which we expect to recognize over a weighted-average period of approximately 2.16 years. The intrinsic value of all outstanding vested and non-vested stock-based compensation arrangements, based on the closing price of $6.99 per share, is $7.9 million, based on 1,318,272 shares of our common stock issuable upon exercise of stock-based compensation arrangements outstanding at March 31, 2010 at a weighted-average exercise price of $1.03 per share.

Research and Development Expenses. Research and development expenses were $5.2 million for the three months ended March 31, 2010, compared with $2.9 million for the three months ended March 31, 2009. The $2.3 million increase in our research and development expenses was primarily attributable to the recognition of a $3.5 million non-cash charge related to milestone payments recorded in connection with the initiation of our Phase 3 clinical study of A-002 VISTA-16 (Vascular Inflammation Suppression to Treat Acute Coronary Syndrome 16 Weeks), which were paid through the issuance of 531,914 shares of common stock; offset by a decrease of $1 million in clinical trial expense due to the completion of Antheras Phase 2b clinical study of A-002 FRANCIS (Fewer Recurrent Acute Coronary Events with Near-term Cardiovascular Inflammation Suppression) in acute coronary syndrome patients with high levels of inflammation and dislipidemia.

Net cash used in operating activities was approximately $3.5 million. The net loss is higher than cash used in operating activities by $7.6 million. The primary drivers for the difference are adjustments for non-cash charges such as stock-based compensation of approximately $52,616, amortization of note discount and debt issuance cost of approximately $0.8 million, issuance of $3.5 million worth of common stock in lieu of cash milestone payments due to Eli Lilly and Shionogi & Co., Ltd., the conversion of $0.3 million of accrued interest into shares of common stock upon conversion of the 2009 Notes, mark to market adjustments relating to warrant and derivative liability of $3.8 million, and a decrease in operating assets and liabilities of approximately 0.9 million.

Net cash used in operating activities was approximately $3.7 million. The net loss is higher than cash used in operating activities by $0.1 million. The primary drivers for the difference are adjustments for non-cash charges such as stock-based compensation of $44,631, an increase in current operating assets and liabilities of $0.5 million, offset by a decrease in license fee payable of $0.5 million due to payment made during the quarter.

We are a development stage company with only five years of operating history. We have focused primarily on developing our three product candidates, varespladib methyl (A-002), A-623 and varespladib sodium (A-001). We have financed our operations exclusively through private placements of preferred stock and convertible debt and we have incurred losses in each year since our inception in September 2004. Our net losses were approximately $15,000 in 2004, $540,000 in 2005, $8.7 million in 2006, $25.7 million in 2007, $18.1 million in 2008, $12.2 million in 2009 and $11.2 million for the three months ended March 31, 2010. As of March 31, 2010, we had an accumulated deficit of approximately $76.3 million. Substantially all of our losses resulted from costs incurred in connection with our product development programs and from general and administrative costs associated with our operations.

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