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:  001-15281





REPROS
THERAPEUTICS INC.


(Exact
Name of Registrant as Specified in its Charter)





Delaware
              (State or other jurisdiction of
              incorporation or
              organization)
            2408 Timberloch Place, Suite B-7
              The Woodlands, Texas 77380
              (Address of principal executive offices
              and zip code)
            76-0233274
              (IRS Employer
              Identification No.)(281) 719-3400
              (Registrant's telephone number,
              including area code)




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.    YesxNo ̈





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 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 smaller reporting company.  See definition of "accelerated
filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act. (Check one):





Large
accelerated filer  ̈  Accelerated
filer  ̈  Non-accelerated
filer  ̈   Smaller
reporting company   x





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





As of November 4, 2010, there were
outstanding 8,930,057 sharesof Common Stock, par
value $.001 per share, of the Registrant.







REPROS
THERAPEUTICS INC.


(A
development stage company)




For the
Quarter Ended September 30, 2010




INDEX




PageFACTORS
      AFFECTING FORWARD-LOOKING STATEMENTS
                              
                              3PART
      I.  FINANCIAL INFORMATIONItem
      1. Financial Statements (unaudited)
                              
                              4Unaudited
      Condensed Consolidated Balance Sheets as of September 30, 2010 and
      December 31, 2009
                              
                              5Unaudited
      Condensed Consolidated Statements of Operations for the three months and
      nine months ended September 30, 2010 and 2009 and from Inception (August
      20, 1987) through September 30, 2010
                              
                              6Unaudited
      Condensed Consolidated Statements of Stockholders' Equity for the nine
      months ended September 30, 2010
                              
                              7Unaudited
      Condensed Consolidated Statements of Cash Flows for the nine months ended
      September 30, 2010 and 2009 and from Inception (August 20, 1987) through
      September 30, 2010
                              
                              8Notes
      to Unaudited Condensed Consolidated Financial Statements
                              
                              9Item
      2.      Management's Discussion and Analysis
      of Financial Condition and Results of Operations
                              
                              14Item
      3.      Quantitative and Qualitative
      Disclosures About Market Risk
                              
                              26Item
      4.      Controls and
    Procedures
                              
                              26PART
      II.  OTHER INFORMATIONItem
      1.      Legal Proceedings
                              
                              27Item
      1A.   Risk Factors
                              
                              28Item
      2.      Unregistered Sales of Equity
      Securities and Use of Proceeds
                              
                              28Item
      3.      Defaults Upon Senior
      Securities
                              
                              28Item
      4.      (Removed and
    Reserved)
                              
                              28Item
      5.      Other Information
                              
                              28Item
      6.      Exhibits
                              
                              28SIGNATURES
                              
                              30




2


FACTORS
AFFECTING FORWARD-LOOKING STATEMENTS





This
quarterly report on Form 10-Q includes "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.  The words
"may," "anticipate," "believe," "expect," "estimate," "project," "suggest,"
"intend" and similar expressions are intended to identify forward-looking
statements.  Such statements are subject to certain risks,
uncertainties and assumptions.  Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, expected,
estimated, projected, suggested or intended.  These risks and
uncertainties include risks associated with the Company's ability to continue as
a going concern and to continue to be able to raise additional capital on
acceptable terms or at all; its ability to successfully defend itself in the
class action lawsuits filed against it; its ability to  maintain its
listing on the Nasdaq Capital Market; the success of the clinical trials for
Proellex®and
Androxal® and thereestablishment of safe dosing in clinical trials for Proellex®; having available
funding for the continued development of Proellex®and Androxal®;uncertainty
related to the Company's ability to obtain approval of the Company's products by
the Food and Drug Administration, or FDA, and regulatory bodies in other
jurisdictions; uncertainty relating to the Company's patent portfolio and
license rights to such patents; and other risks and uncertainties described in
the Company's filings with the Securities and Exchange
Commission.  For additional discussion of such risks, uncertainties
and assumptions, see "Part I. Financial Information - Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" included elsewhere in this quarterly report on
Form 10-Q and “Item 1A. Risk Factors” to Part I of Form 10-K for the fiscal year
ended December 31, 2009.


3


PART
I.  FINANCIAL INFORMATION




Item
1.   Financial Statements




The
following unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Rule 10 of Regulation S-X.  Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements.  In the opinion of management, all adjustments
(which include only normal recurring adjustments) considered necessary for a
fair statement of the interim periods presented have been
included.  The year-end balance sheet data was derived from audited
financial statements, but does not include all the disclosures required by
accounting principles generally accepted in the United States of
America.  Operating results for the three month and nine month periods
ended September 30, 2010 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2010.  For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2009.


4




REPROS
THERAPEUTICS INC. AND SUBSIDIARY
 (A
development stage company)


CONDENSED
CONSOLIDATED BALANCE SHEETS


(unaudited
and in thousands except share and per share amounts)





September 30,
                
                
                December 31,2010
                
                
                2009ASSETSCurrent
      AssetsCash
      and cash equivalents
                
                $
                4,216
                
                
                $
                1,886Prepaid
      expenses and other current assets
                
                
                211
                
                
                
                177Total
      current assets
                
                
                4,427
                
                
                
                2,063Fixed assets,net
                
                
                9
                
                
                
                12Other assets,
      net
                
                
                1,131
                
                
                
                885Total
      assets
                
                $
                5,567
                
                
                $
                2,960LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                
                $
                1,172
                
                
                $
                2,043Accrued
      expenses
                
                
                182
                
                
                
                355Total
      current liabilities
                
                
                1,354
                
                
                
                2,398Commitments
      and contingencies (note 5)Stockholders'
      EquityUndesignated
      Preferred Stock, $.001 par value, 5,000,000 shares authorized, none issued
      and outstanding
                
                
                -
                
                
                
                -Common
      Stock, $.001 par value, 75,000,000 shares authorized, 9,042,407 and
      6,496,999 shares issued, respectively and 8,930,057 and 6,384,649 shares
      outstanding, respectively
                
                
                9
                
                
                
                6Additional
      paid-in capital
                
                
                183,644
                
                
                
                176,412Cost
      of treasury stock, 112,350 shares
                
                
                (1,380
                )
                
                
                (1,380
                )Deficit
      accumulated during the development stage
                
                
                (178,060
                )
                
                
                (174,476
                )Total
      stockholders' equity
                
                
                4,213
                
                
                
                562Total
      liabilities and stockholders' equity
                
                $
                5,567
                
                
                $
                2,960





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


5


REPROS
THERAPEUTICS INC. AND SUBSIDIARY
 (A
development stage company)


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited
and in thousands except per share amounts)




From Inception(August 20, 1987)throughThree Months Ended September 30,
                      
                      
                      Nine Months Ended September 30,
                      
                      
                      September 30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      2010RevenuesLicensing
      fees
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      28,755Product
      royalties
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      627Research
      and development grants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,219Interest
      income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4
                      
                      
                      
                      16,297Gain
      on disposal of fixed assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      102Other
      Income
                      
                      
                      85
                      
                      
                      
                      -
                      
                      
                      
                      138
                      
                      
                      
                      -
                      
                      
                      
                      720Total
      revenues and other income
                      
                      
                      85
                      
                      
                      
                      -
                      
                      
                      
                      138
                      
                      
                      
                      4
                      
                      
                      
                      47,720ExpensesResearch
      and development
                      
                      
                      736
                      
                      
                      
                      8,282
                      
                      
                      
                      1,950
                      
                      
                      
                      21,765
                      
                      
                      
                      172,280General
      and administrative
                      
                      
                      533
                      
                      
                      
                      1,962
                      
                      
                      
                      1,772
                      
                      
                      
                      4,126
                      
                      
                      
                      43,769Interest
      expense and amortization of intangibles
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      388Total
      expenses
                      
                      
                      1,269
                      
                      
                      
                      10,244
                      
                      
                      
                      3,722
                      
                      
                      
                      25,891
                      
                      
                      
                      216,437Loss
      from continuing operations
                      
                      
                      (1,184
                      )
                      
                      
                      (10,244
                      )
                      
                      
                      (3,584
                      )
                      
                      
                      (25,887
                      )
                      
                      
                      (168,717
                      )Loss
      from discontinued operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,828
                      )Gain
      on disposal of discontinued operation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      939Net
      loss before cumulative effect of change in accounting
      principle
                      
                      
                      (1,184
                      )
                      
                      
                      (10,244
                      )
                      
                      
                      (3,584
                      )
                      
                      
                      (25,887
                      )
                      
                      
                      (169,606
                      )Cumulative
      effect of change in accounting principle
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (8,454
                      )Net
      loss
                      
                      $
                      (1,184
                      )
                      
                      $
                      (10,244
                      )
                      
                      $
                      (3,584
                      )
                      
                      $
                      (25,887
                      )
                      
                      $
                      (178,060
                      )Loss
      per share - basic and diluted:
                      
                      $
                      (0.13
                      )
                      
                      $
                      (2.64
                      )
                      
                      $
                      (0.46
                      )
                      
                      $
                      (6.77
                      )Weighted
      average shares used in loss per share calculation:Basic
                      
                      
                      8,875
                      
                      
                      
                      3,876
                      
                      
                      
                      7,763
                      
                      
                      
                      3,821Diluted
                      
                      
                      8,875
                      
                      
                      
                      3,876
                      
                      
                      
                      7,763
                      
                      
                      
                      3,821





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




6


REPROS
THERAPEUTICS INC. AND SUBSIDIARY
 (A
development stage company)


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(unaudited
and in thousands except share and per share amounts)





DeficitAccumulatedAdditional
                  
                  
                  
                  
                  
                  
                  
                  
                  During the
                  
                  
                  TotalCommon Stock
                  
                  
                  Paid-in
                  
                  
                  Treasury Stock
                  
                  
                  Development
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Stage
                  
                  
                  EquityBalance
      at December 31, 2009
                  
                  
                  6,496,999
                  
                  
                  $
                  6
                  
                  
                  $
                  176,412
                  
                  
                  
                  112,350
                  
                  
                  $
                  (1,380
                  )
                  
                  $
                  (174,476
                  )
                  
                  $
                  562Stock
      based option compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  471
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  471Issuance
      of 96,836 shares of common stock at $2.88 to $4.40 per share, as
      settlement with trade creditors
                  
                  
                  96,836
                  
                  
                  
                  -
                  
                  
                  
                  370
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  370Issuance
      of 2,448,572 shares of common stock at a weighted average share price of
      $2.77, net of offering costs of $381
                  
                  
                  2,448,572
                  
                  
                  
                  3
                  
                  
                  
                  6,391
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,394Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,584
                  )
                  
                  
                  (3,584
                  )Balance
      at September 30, 2010
                  
                  
                  9,042,407
                  
                  
                  $
                  9
                  
                  
                  $
                  183,644
                  
                  
                  
                  112,350
                  
                  
                  $
                  (1,380
                  )
                  
                  $
                  (178,060
                  )
                  
                  $
                  4,213





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




7


REPROS
THERAPEUTICS INC. AND SUBSIDIARY
 (A
development stage company)


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited
and in thousands)





From Inception(August 20, 1987)throughNine Months Ended September 30,
                  
                  
                  September 30,2010
                  
                  
                  2009
                  
                  
                  2010Cash
      Flows from Operating ActivitiesNet
      loss
                  
                  $
                  (3,584
                  )
                  
                  $
                  (25,887
                  )
                  
                  
                  (178,060
                  )Gain
      on disposal of discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (939
                  )Gain
      on disposal of fixed assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (102
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Noncash
      financing costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  316Noncash
      inventory impairment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,417Noncash
      patent impairment
                  
                  
                  -
                  
                  
                  
                  989
                  
                  
                  
                  2,614Noncash
      other income
                  
                  
                  (138
                  )
                  
                  
                  -
                  
                  
                  
                  (685
                  )Noncash
      decrease in accounts payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,308
                  )Depreciation
      and amortization
                  
                  
                  60
                  
                  
                  
                  51
                  
                  
                  
                  4,014Noncash
      stock-based compensation
                  
                  
                  471
                  
                  
                  
                  1,110
                  
                  
                  
                  7,112Common
      stock issued for agreement not to compete
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  200Series
      B Preferred Stock issued for consulting services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18Changes
      in operating assets and liabilities
                    (net
      effects of purchase of businesses in 1988 and 1994):Increase
      in receivables
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (199
                  )Increase
      in inventory
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,447
                  )(Increase)
      decrease in prepaid expenses and other current assets
                  
                  
                  (34
                  )
                  
                  
                  1,114
                  
                  
                  
                  91Increase
      (decrease) in accounts payable and accrued expenses
                  
                  
                  (536
                  )
                  
                  
                  5,246
                  
                  
                  
                  9,502Net
      cash used in operating activities
                  
                  
                  (3,761
                  )
                  
                  
                  (17,377
                  )
                  
                  
                  (157,456
                  )Cash
      Flows from Investing ActivitiesChange
      in trading marketable securities
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (191
                  )Capital
      expenditures
                  
                  
                  (6
                  )
                  
                  
                  -
                  
                  
                  
                  (2,377
                  )Purchase
      of technology rights and other assets
                  
                  
                  (297
                  )
                  
                  
                  (424
                  )
                  
                  
                  (4,569
                  )Proceeds
      from sale of PP&E
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  225Cash
      acquired in purchase of FTI
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3Proceeds
      from sale of subsidiary, less $12,345 for operating losses during 1990
      phase-out period
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  138Proceeds
      from sale of the assets of FTI
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,250Increase
      in net assets held for disposal
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (213
                  )Net
      cash used in investing activities
                  
                  
                  (303
                  )
                  
                  
                  (424
                  )
                  
                  
                  (4,734
                  )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net of offering costs
                  
                  
                  6,394
                  
                  
                  
                  869
                  
                  
                  
                  162,399Exercise
      of stock options
                  
                  
                  -
                  
                  
                  
                  9
                  
                  
                  
                  372Proceeds
      from a shareholder transaction
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  327Proceeds
      from issuance of preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  23,688Purchase
      of treasury stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (21,487
                  )Proceeds
      from issuance of notes payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,839Principal
      payments on notes payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,732
                  )Net
      cash provided by financing activities
                  
                  
                  6,394
                  
                  
                  
                  878
                  
                  
                  
                  166,406Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  2,330
                  
                  
                  
                  (16,923
                  )
                  
                  
                  4,216Cash
      and cash equivalents at beginning of period
                  
                  
                  1,886
                  
                  
                  
                  19,470
                  
                  
                  
                  -Cash
      and cash equivalents at end of period
                  
                  $
                  4,216
                  
                  
                  $
                  2,547
                  
                  
                  $
                  4,216





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


8


REPROS
THERAPEUTICS INC. AND SUBSIDIARY


(A
development stage company)





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(Unaudited)




NOTE
1 — Organization, Operations and Liquidity




Repros Therapeutics Inc. ("the
Company", "Repros," or "we," "us" or "our"), was organized on August 20,
1987.We are a development stage
biopharmaceutical company focused on the development of oral small molecule
drugs for major unmet medical needs that treat male and female reproductive
disorders.




Our
portfolio of products includes:




Androxal®




·
              As
      a treatment for men of reproductive age with low testosterone levels that
      spares fertility, unlike testosterone replacement therapy;
    and


·
            As
      a treatment for type 2 diabetes





Proellex®




·
            As
      a treatment of symptoms associated with uterine fibroids and
      endometriosis, subject to the current FDA partial clinical hold on the
      Proellex® clinical trials; however, the FDA has allowed us to run a single
      study to explore both safety and signals of efficacy in an escalating dose
      fashion. The new study will test 5 different doses of Proellex® (1, 3, 6,
      9 and 12mg) with 1mg being the first dose
  tested.





As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately
$4.2 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. The amount of cash on hand is not
sufficient to fund the (i) escalating dose study for Proellex® permitted by the
FDA, (ii) Phase 2B and upcoming Phase 3 hypogonadism trials for Androxal®,
(iii)  type 2 diabetes trial for Androxal®, (iv) preclinical assessment of
vaginal delivery of Proellex® and (v) second generation Proellex®
molecules. Based on these current and planned clinical trials, we will need
to raise additional capital no later than the first quarter of 2011. We
continue to explore potential additional financing and capital raising
alternatives to provide additional funds to enable us to continue to develop our
two product candidates through completion of clinical trials; however, there can
be no assurance that we will be successful in raising any such additional funds
on a timely basis or at all. Significant additional funding will be
required for us to continue development of either of our product candidates.
Additionally, as discussed in Note 5, we have various pending legal proceedings
that could adversely impact us. The foregoing and other matters raise
substantial doubt about our ability to continue as a going concern.




On
October 14, 2010, the Company effected a one-for-four reverse stock split of its
common stock. The split-adjusted shares of the Company’s common stock began
trading on the Nasdaq Capital Market on October 15, 2010. The one-for-four
reverse stock split converted all shares of the Company’s common stock issued
and outstanding, plus all outstanding stock options and the number of shares of
common stock available for issuance under the Company’s approved stock
plans. The number of authorized shares of common stock was not affected by
the reverse split. The reverse split enabled the Company to meet the
continued listing rules of the Nasdaq Capital Market as evidenced by the
Compliance Letter received from Nasdaq on October 29, 2010. All share and per
share amounts have been retroactively adjusted to reflect the reverse stock
split for all periods presented.




9




We also
continue to maintain our patent portfolio of our phentolamine-based products for
the treatment of sexual dysfunction and in order to create value from these
assets in various ways which includes product out-licensing.




NOTE 2 — Patents
and Patent Applications




As of
September 30, 2010, the Company had approximately $1.1 million in capitalized
patent and patent application costs reflected on its balance sheet. This
entire amount relates to patent and patent application costs for
Androxal®.




Should
the Company not continue development of Androxal® or should the Company not
continue as a going concern, the remaining capitalized patent and patent
application costs may not be recoverable, which would result in charges to
operating results in future periods.




NOTE 3 — Accrued
Expenses




Accrued
expenses consist of the following (in thousands):




September 30, 2010
                  
                  
                  December 31, 2009Personnel
      related costs
                  
                  $
                  103
                  
                  
                  $
                  181Other
                  
                  
                  69
                  
                  
                  
                  159Patent
      costs
                  
                  
                  10
                  
                  
                  
                  15Total
                  
                  $
                  182
                  
                  
                  $
                  355




NOTE
4 — Loss Per Share




Basic
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted loss per
share is computed using the average share price for the period and applying the
treasury stock method to potentially dilutive outstanding options. In all
applicable periods, all potential common stock equivalents were antidilutive
and, accordingly, were not included in the computation of diluted loss per
share. Additionally, on October 14, 2010, the Company effected a one-for-four
reverse stock split of its common stock. The split-adjusted shares of the
Company’s common stock began trading on the Nasdaq Capital Market on October 15,
2010. All share and per share amounts have been retroactively adjusted to
reflect the reverse stock split for all periods presented.




The
following table presents information necessary to calculate loss per share for
the three month and nine month periods ended September 30, 2010 and
2009 (in thousands, except per share amounts):




Three Months Ended Sept. 30,
                  
                  
                  Nine Months Ended Sept. 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Net
      Loss
                  
                  $
                  (1,184
                  )
                  
                  $
                  (10,244
                  )
                  
                  $
                  (3,584
                  )
                  
                  $
                  (25,887
                  )Average
      common shares outstanding
                  
                  
                  8,875
                  
                  
                  
                  3,876
                  
                  
                  
                  7,763
                  
                  
                  
                  3,821Basic
      and diluted loss per share
                  
                  $
                  (0.13
                  )
                  
                  $
                  (2.64
                  )
                  
                  $
                  (0.46
                  )
                  
                  $
                  (6.77
                  )




Other
potential common stock of 538,582 and 552,402 common shares underlying stock
options for the periods ended September 30, 2010 and 2009, respectively, were
excluded from the above calculation of diluted loss per share because they were
not dilutive.




10




NOTE 5—Commitments and Contingencies




Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications. Foreign coverage of
therapeutic uses of our Androxal® product candidate includes 40 issued foreign
patents and 75 foreign pending patent applications. The issued patents and
pending applications relate to methods for treating certain conditions including
the treatment of testosterone deficiency in men, the treatment of metabolic
syndrome and conditions associated therewith, and the treatment of infertility
in hypogonadal men. Androxal® (the trans-isomer of clomiphene) is purified
from clomiphene citrate. A third party individual holds two issued patents
related to the use of an anti-estrogen such as clomiphene citrate and others for
use in the treatment of androgen deficiency and disorders related
thereto. In our prior filings with the SEC, we have described our request
to the U.S. Patent and Trademark Office, or PTO, for re-examination of one of
these patents based on prior art. The third party amended the claims in the
re-examination proceedings, which led the PTO to determine that the amended
claims are patentable in view of those publications under consideration and a
re-examination certificate was issued. However, we believe that the amended
claims are invalid based on additional prior art publications, and we filed a
second request for re-examination by the PTO in light of a number of these
additional publications and other publications cited by the PTO. The
request was granted and all of the claims were finally rejected by the PTO in
the re-examination. The patent holder appealed the rejections to the PTO
Board of Patent Appeals and Interferences (“the Board”) which affirmed the
rejection of all of the claims.  The patent holder subsequently filed
a request for rehearing, which led the Board to reverse the rejections of
several dependent claims in view of those publications under
consideration. The patent holder has filed a Notice of Appeal to the
Federal Circuit contesting the rejections maintained by the Board. We also
believe that the second of these two patents is invalid in view of published
prior art not considered by the PTO. Nevertheless, there is no assurance
that either patent will ultimately be found invalid over the prior art. If such
patents are not invalidated by the PTO we may be required to obtain a license
from the holder of such patents in order to develop Androxal® further or
attempts may be made to undertake further legal action to invalidate such
patents. If such licenses were not available on acceptable terms, or at
all, we may not be able to successfully commercialize or out-license
Androxal®.




On August
7, 2009, R.M. Berry filed a putative class action lawsuit naming the Company,
Joseph Podolski, Paul Lammers, and Louis Ploth, Jr. as
defendants.  The lawsuit is pending in the United States District
Court for the Southern District of Texas, Houston Division.  The
lawsuit, styled R.M. Berry, on Behalf of Himself and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr., alleges that the defendants made certain misleading statements
related to the Company’s Proellex® drug.  Among other claims, the
lawsuit contends that the defendants misrepresented the side effects of the drug
related to liver function, and the risk that these side effects could cause a
suspension of clinical trials of Proellex®. The lawsuit seeks to establish a
class of shareholders allegedly harmed by the misleading statements, and asserts
causes of action under the Securities Exchange Act of 1934.  On August
14, 2009, a lawsuit making similar allegations and naming the same defendants
was also filed in the United States District Court for the Southern District of
Texas.  This suit is styled Josephine Medina, Individually and On
Behalf of all Others Similarly Situated v. Repros Therapeutics, Inc., Joseph
Podolski, Paul Lammers, and Louis Ploth, Jr.  On September 25, 2009, a
lawsuit also making allegations similar to those in the Berry action, and naming
the same defendants, was filed in the United States District Court for the
Southern District of Texas.  That lawsuit is styled Shane Simpson,
Paul Frank and Clayton Scobie, on Behalf of Themselves and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr.    The lawsuits have now been consolidated, and lead
plaintiffs appointed. On January 27, 2010, the lead plaintiffs filed a
Consolidated Class Action Complaint styled In re Repros Therapeutics, Inc.
Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG). The lawsuit
names Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis Ploth,
Jr. as defendants. The allegations in the Consolidated Class Action
Complaint are substantially the same as those contained in the prior complaints,
and focus on the claim that the defendants deliberately withheld information
concerning the negative side-effects of Proellex® related to liver
function. Plaintiffs seek to establish a class action for all persons who
“purchased or otherwise acquired Repros common stock between July 1, 2009, and
August 2, 2009.” No discovery has yet occurred in the matter. Defendants
filed a motion to dismiss the Consolidated Class Action Complaint on March 15,
2010. Briefing has been completed on that motion, but the court has not yet
ruled on it. An estimate of the possible loss or range of losses in
connection with the lawsuits cannot be made at this time.




11




On March
1, 2010, we were served with a lawsuit where we were named as a co-defendant
along with one of our clinical regulatory service providers (“CRO”) relating to
the Proellex® clinical trial study.  The lawsuit was filed in the
State of Tennessee, 30th Judicial District Chancery Court at Memphis by an
investigator and claims that the CRO did not pay it amounts owing to it relating
to the Proellex® study.  We did not engage the investigator and
under our agreement with the CRO, we believe the CRO is responsible for any
such costs or damages regarding such lawsuit.  Pursuant to a
Settlement Agreement and Mutual Release entered into in October 2009, such CRO,
on behalf of itself and its agents, released us from all claims which could be
asserted by them against us.  We believe such release covers the
claims set forth in this lawsuit. The CRO failed to respond to the lawsuit,
and a default judgment was entered against it in the amount of
$172,901.29. We intend to vigorously defend any and all claims asserted by
the investigator. An estimate of the possible costs or expenses to defend
ourselves in this matter or risk of exposure under the litigation cannot be made
at this time.




NOTE
6 — Other Recent Events, Including Subsequent Events




Between
November 30, 2009 and March 31, 2010, we entered into settlement agreements and
mutual releases (the “Prior Settlement Agreements”) with certain of our
creditors, pursuant to which we issued an aggregate of 352,459 shares of common
stock and paid an aggregate of $140,572 in cash as payment in full for our
then-outstanding liabilities to such creditors.   On April 8, 2010, we
entered into an additional settlement agreement and mutual release (together
with the Prior Settlement Agreements, the “Settlement Agreements”) with a
creditor, pursuant to which we issued 34,885 shares of common stock (together
with the shares issued under the Prior Settlement Agreements, the “Settlement
Shares”) and paid $8,721 in cash as payment in full for our then-outstanding
liability to such creditor. The Settlement Shares were issued by the Company
pursuant to Section 4(2) and /or Rule 506 of Regulation D promulgated under the
Securities Act of 1933, as amended. Pursuant to the Settlement Agreements, we
filed a registration statement to register the Settlement Shares on June 9,
2010, which was declared effective by the SEC on June 25, 2010, and we agreed to
use our best efforts to maintain such registration statement until all such
Settlement Shares registered thereunder to such creditors have been sold or for
a period of one year, whichever comes first.




In
addition to the Settlement Agreements, we settled with several of our creditors
during the second and third quarter of 2010, in an amount less than our
then-outstanding liabilities to such creditors. These settlements resulted in
recognition of $85,000 and $138,000 in other income for the three and nine month
periods ended September 30, 2010, respectively, on the Condensed Consolidated
Statement of Operations.




On
February 12, 2010, we entered into an Equity Distribution Agreement (the “Equity
Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”),
pursuant to which we may issue and sell from time to time through Ladenburg, as
sales agent and/or principal, shares of our common stock having an aggregate
offering price of up to $10 million (the “ATM Shares”). Ladenburg is not
required to sell on our behalf any specific number or dollar amount of the ATM
Shares, but Ladenburg, upon acceptance of written instructions from us, agreed
to use its commercially reasonable efforts consistent with its customary trading
and sales practices, to sell the ATM Shares up to the amount specified, and
otherwise in accordance with the terms of a placement notice delivered to
Ladenburg. We have no obligation to sell any ATM Shares under the Equity
Distribution Agreement, and may at any time suspend sales under the Equity
Distribution Agreement, provided that such suspension shall not affect either
party’s obligations with respect to the ATM Shares sold prior to the receipt of
notice of such suspension. Ladenburg receives a commission of 4% of the gross
sales price of all ATM Shares sold through it under the Equity Distribution
Agreement. The ATM Shares are issued pursuant to our shelf registration
statement on Form S-3, as amended (File No. 333-163648). Between July 1,
2010 and September 30, 2010, we have sold an aggregate of 277,164 ATM Shares at
a weighted average share price of $1.51, for proceeds of approximately $401,000,
net of expenses. Cumulative through September 30, 2010, we have sold 2,448,572
ATM Shares at a weighted average share price of $2.77, for proceeds of
approximately $6.4 million, net of expenses. Pursuant to General Instruction
I.B.6. of Form S-3, we may not sell more than one-third of the aggregate market
value of our common stock held by non-affiliates during a period of 12 calendar
months immediately prior to, and including, the date of such sale of such common
stock. Due to this limitation, we announced on August 3, 2010 that we have
suspended this ATM offering of Company securities.




12




On
November 1, 2010, we were notified by The Department of the Treasury that our
application submitted requesting certification for qualified investment in a
qualifying therapeutic discovery project under section 48D of the Internal
Revenue Code was accepted. As a result, we have been awarded a grant in the
amount of $244,479. It is anticipated that proceeds from this grant will be
received late in November 2010.




On
November 8, 2010, we had a Type B meeting with the FDA. In that meeting the FDA
recommended that we conduct a Phase 2B study in men with secondary hypogonadism
but naïve to testosterone treatment before moving into Phase 3.  The
FDA opined further that such a Phase 2B study would provide for a more solid
data base for design of Phase 3 studies and eventual approval of such studies
under a Special Protocol Assessment (“SPA”). The FDA did note “the Division
agrees in general with the outline of your program for the development of
enclomiphene” (Androxal®).




13


Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations




The
following discussion contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that involve risk and uncertainties. Any statements contained in this
quarterly report that are not statements of historical fact may be
forward-looking statements. When we use the words "may," "anticipates,"
"believes," "plans," "expects" and similar expressions, we are identifying
forward-looking statements. Forward-looking statements involve risks and
uncertainties which may cause our actual results, performance or achievements to
be materially different from those expressed or implied by forward-looking
statements. The following discussion of financial condition should be read in
conjunction with the accompanying consolidated financial statements and related
notes.




Repros
Therapeutics Inc.




Repros
Therapeutics Inc. ("the Company", "RPRX," “Repros”, or "we," "us" or "our") was
organized on August 20, 1987.  We are a development stage
biopharmaceutical company focused on the development of new drugs to treat
hormonal and reproductive system disorders.




We are
developing Androxal®, an oral therapy that normalizes testicular function, for
the treatment of low testosterone due to secondary hypogonadism. Secondary
hypogonadism is most commonly associated with aging and the Company believes it
is the most common cause of low testosterone in men. It is estimated that 13
million men in the U.S. experience low levels of testosterone. In 2009, for the
first time, sales of testosterone preparations for the treatment of low
testosterone exceeded $1 billion worldwide and first tier pharmaceutical
companies entered the low testosterone marketplace as evidenced by the
acquisition of Solvay Pharmaceuticals and the subsequent active marketing of its
Androgel® product by Abbott Laboratories. Eli Lilly and Company also entered
into a licensing agreement for a late stage topical testosterone
treatment.




The
Company believes Androxal® is highly differentiated from currently marketed
testosterone treatments or those treatments in late stage development. Androxal®
is the only oral therapy for treating low testosterone which
is approaching Phase 3 studies. The Company had a Type B meeting with
the FDA on November 8, 2010 to discuss protocols for such Phase 3
studies. In the meeting, the FDA recommended that a Phase 2B study in men
with secondary hypogonadism but naïve to testosterone treatment be conducted
before moving into Phase 3. The
Company is also currently conducting a Phase 2 study of the use of Androxal® in
the treatment of type 2 diabetes in hypogonadal men. Retrospective analysis of
completed Androxal® studies showed that Androxal® improved fasting plasma
glucose levels in men with type 2 diabetes. Hypogonadism and type 2 diabetes are
comorbid conditions in a significant number of men. This improvement was not
seen in similar subjects using a topical testosterone or placebo. The Company
believes this effect is directly related to Androxal®’s ability to normalize the
hypothalamic-pituitary-testes pathway and organ function.




We are
also developing Proellex®, an orally administered selective blocker of the
progesterone receptor in women, for the treatment of uterine fibroids and
endometriosis. Uterine fibroids and endometriosis affect millions of women of
reproductive age in the U.S. Repros was conducting large Phase 3 studies for
Proellex® in uterine fibroids based on significant success in Phase 2 studies
and was preparing to move to Phase 3 trials in endometriosis; however, during
the third quarter of 2009, liver toxicity associated with the high dose of
Proellex® in such studies became apparent. At such time, the Proellex® program
was placed on full clinical hold by the FDA. Recently the FDA upgraded the full
hold to a partial hold to allow Repros to conduct a low dose oral study of
Proellex® after the Company completed an analysis of the incidence and severity
of the liver toxicity observed at the higher doses of the drug. All women that
experienced liver toxicity and returned for follow-up visits returned to normal
after dosing was stopped with no overnight hospitalization necessary. The
Company has commenced the low dose study to determine both signals of efficacy
and safety for low oral doses of the drug. In addition to the low dose study,
the Company has commenced two related preclinical programs: vaginal delivery of
Proellex® to avoid first pass liver effects and second generation molecules that
do not possess the structures Repros believes resulted in the liver toxicity
observed.


14





Repros
believes both of its product candidates have exhibited strong efficacy results
in every study completed to date and the studies presently underway or scheduled
to start shortly will place both programs on a clear late stage clinical
development path and a solid position for licensing.





As of
September 30, 2010, we had accumulated losses of $178.1million, approximately
$4.2million in
cash and cash equivalents, and our accounts payable and accrued expenses were
approximately $1.4 million.  The amount of cash on hand is not sufficient
to fund each of the clinical trials currently planned for our two drug
candidates, Proellex® and Androxal®.  Based on these planned clinical
trials, we will need to raise additional capital no later than the first quarter
of 2011.  We continue to explore potential additional financing
alternatives that would provide sufficient funds to enable us to continue to
develop our two product candidates through completion of the outlined clinical
trials; however, there can be no assurance that we will be successful in raising
any such additional funds on a timely basis or at all.  Significant
additional capital will be required for us to complete development of either of
our product candidates. The foregoing and other matters raise substantial
doubt about our ability to continue as a going concern.





Androxal®





Product
Overview





Our
primary product candidate, Androxal®, is a single isomer of clomiphene citrate
and is an orally active proprietary small molecule compound. We are
developing Androxal® for men of reproductive age with low testosterone levels.
Unlike testosterone replacement, Androxal® does not induce an infertile state
while being treated for low testosterone. In addition, we are performing an
investigation of Androxal® as a potential treatment for type 2
diabetes.





Testosterone
is an important male hormone. Testosterone deficiency in men is linked to
several negative physical and mental conditions, including loss of muscle tone,
reduced sexual desire, and deterioration of memory and certain other cognitive
functions. Testosterone production normally decreases as men age, sometimes
leading to testosterone deficiency. According to the Urology Channel,
recent estimates show that approximately 13 million men in the United States
experience testosterone deficiency. The leading therapy is AndroGel®, a
commercially available testosterone replacement cream marketed by Abbott
Laboratories for the treatment of low testosterone, which we believe has had and
continues to have significant sales in North America.





Based on
our own clinical trial screening data, we believe over 70% of men that have low
testosterone suffer from secondary hypogonadism, caused by failure of the
pituitary to provide appropriate hormone signaling to the testes, which we
believe causes testosterone levels to drop to the point where pituitary
secretions fall under the influence of estrogen. In this state, we also
believe that estrogen further suppresses the testicular stimulation from the
pituitary. These men are readily distinguished from those that have primary
testicular failure via assessment of the levels of secretions of pituitary
hormones (i.e., men with primary testicular failure experience elevated
secretions of pituitary hormones). Secondary hypogonadism is not relegated
only to older men although the condition becomes more prevalent as men
age.





Confounding
this condition further, men with secondary hypogonadism often have both low
testosterone and exhibit other metabolic changes such as obesity and type 2
diabetes, among other signs.  Our clinical trial data suggests that
Androxal® modifies the endocrinologic profile in terms of both hormones and
certain metabolic measures.   Retrospective analysis of completed
Androxal® studies showed that Androxal® improved fasting plasma glucose levels
in men with type 2 diabetics. Hypogonadism and type 2 diabetes are comorbid
conditions in a significant number of men. This improvement was not seen in
similar subjects using a topical testosterone or placebo. The Company believes
this effect is directly related to Androxal®’s ability to normalize the
hypothalamic-pituitary-testes pathway and organ function.


15





We
believe Androxal® may have advantages over current therapies for the treatment
of low testosterone due to secondary hypogonadism because it is designed as an
oral therapy that acts centrally to restore testicular function and hence normal
testosterone in the body, as compared to currently approved products that
simply replace diminished testosterone either through injections, nasal spray or
the application of a gel or cream containing testosterone over a percentage of
body area. We believe Androxal® will be superior to the existing
administration of exogenous testosterone products used to normalize testosterone
as only Androxal® has the property of restoring both LH (luteinizing hormone)
and FSH (follicle stimulating hormone) levels. LH and FSH are the pituitary
hormones that stimulate testicular testosterone and sperm production,
respectively.





Androxal®
is considered a new chemical entity by the FDA which means that the compound
will be required to undergo the full regulatory approval process. We must
still meet additional clinical requirements including pre-clinical, Phase 1,
Phase 2, pivotal Phase 3 trials and long-term Open Label Safety Studies as well
as other requirements. Although Androxal® is considered a new chemical
entity for purposes of requirements for approval, it is closely related
chemically to the drug, Clomid®, which is approved for use in women to treat
certain infertility disorders. The FDA has indicated that testicular
tumors, gynecomastia and adverse ophthalmologic events, which have been reported
in males taking Clomid®, are potential risks that should be included in informed
consent forms for our Androxal® clinical trials. We do not believe that
Androxal® will present with the same adverse events given its reduced half-life
in the human body as compared to Clomid®. In our preclinical studies and
our clinical trials to date, we have observed no evidence of any of these events
except for certain ophthalmologic events in our preclinical dog study at doses
significantly higher than those administered in the clinical
trials.





All
clinical trial results are subject to review by the FDA, and the FDA may
disagree with our conclusions about safety and efficacy. We caution that
the results discussed herein are based on data from non-pivotal trials and that
our future Phase 2 trials, pivotal Phase 3 and long-term Open Label Safety Trial
data may not agree with these results which will be based upon significantly
larger and more diverse patient populations treated for longer periods of
time.





Fertility Sparing Treatment for
SecondaryHypogonadism





On
August 9, 2010, we announced that the FDA has notified us that they will allow
us to conduct two Phase 3 trials for Androxal® in men with low testosterone
subject to protocol review by the FDA. On
November 8, 2010, we had a Type B meeting with the FDA to discuss protocols for
such Phase 3 studies.  In the meeting, the FDA recommended that a
Phase 2B study in men with secondary hypogonadism but naïve to testosterone
treatment be conducted before moving into Phase 3.  The FDA further
opined that such a Phase 2B study would provide for a more solid data base for
design of Phase 3 studies and eventual approval of such studies under an SPA. During
the second quarter of 2008, we initiated a 24-patient Phase 2b proof-of-concept
clinical trial (ZA-201) for a new indication in which we monitored the effects
of Androxal® on male fertility and testicular function in patients being treated
for low testosterone as compared to Testim®, a popular marketed topical
testosterone medication. On October 6, 2009 we announced that Androxal® was
able to maintain sperm counts in men being treated for their low testosterone
levels. Testim® resulted in suppressed sperm levels while men were being treated
with that topical gel.




Given
that there is currently an acceptable treatment regimen for men with low
testosterone, there is significant uncertainty as to whether or not an
additional approach such as Androxal® would be approved by the FDA or accepted
in the market. Even if we reach an agreement with the FDA regarding trial
design and number of subjects required for the safety data base is resolved, we
do not believe that a new drug application (“NDA”) can be submitted at any time
before 2013.


16





Type
2 Diabetes





Our
findings from a retrospective review of the clinical data from our
200 patient non-pivotal Phase 2 clinical trial (ZA-003) showed that
Androxal® therapy resulted in a significant reduction in mean fasting plasma
glucose levels in men with glucose levels >104 mg/dL, an outcome not seen in
the placebo or AndroGel® arms of this study.  Based on these results, in
April 2008, we submitted a White Paper to the Division of Reproductive and
Urology Products. The data we believe demonstrated that in subjects with a
serum glucose of greater than or equal to 105mg/dL, there was a statistically
significant reduction in fasting serum glucose and a higher response rate to
treatment in the Androxal® group than the placebo or Androgel® groups. In
November 2008, after the FDA reviewed this paper we received guidance from them
suggesting that we open a new IND with the Division of Metabolic and Endocrine
Products, or DMEP, for the investigation of Androxal® as a potential treatment
for type 2 diabetes in mellitus. In December 2009, we submitted a new IND
to DMEP for the investigation of Androxal® for such purpose. On February 1,
2010, we received confirmation from the DMEP that our new IND was accepted and,
as a result, we have initiated our Phase 2 trial. The Company believes it
has sufficient cash to complete an interim analysis of the study around the end
of the first quarter of 2011; however, completion of such study is subject to
additional funding which, as discussed previously, is uncertain.





Proellex®





Product
Overview





Proellex®,
our product candidate for female reproductive health, is a new chemical entity
that acts as a selective blocker of the progesterone receptor and is being
developed for the treatment of symptoms associated with uterine fibroids and
endometriosis. There is currently no FDA-approved orally administered drug for
the long-term treatment of uterine fibroids or endometriosis. The National
Uterine Fibroids Foundation estimates that 80% of all women in the U.S. have
uterine fibroids, and one in four of these women have symptoms severe enough to
require treatment. According to the Endometriosis Association, endometriosis
affects 5.5 million women in the U.S. and Canada and millions more
worldwide.




The
current standards of care for uterine fibroids and endometriosis include surgery
and treatment with drugs. The most effective drugs on the market are
goanadotropin releasing hormone agonists (GnRHa) such as Lupron®. GnRHa’s induce
a low estrogen, menopausal-like state and promote bone loss and are not
recommended for use for more than six months.




All
Proellex® studies completed to date exhibited strong efficacy signals for both
uterine fibroids and endometriosis. Up until the summer of 2009, all side
effects exhibited in the studies were considered manageable and the benefit of
Proellex® far outweighed the risk. Unfortunately, in Phase 3 efficacy and larger
Phase 3 safety studies in diverse populations, a small but alarming number of
subjects exhibited serious adverse effects associated with elevated liver
enzymes. As a result of such findings, the FDA placed Proellex® on full clinical
hold until certain questions could be answered by the Company. Included in these
questions were determination of the fate of women that exhibited elevated liver
enzymes after dosing was stopped and an assessment of the conditions that led to
the observed adverse effects. Fortunately, all women that experienced elevated
liver enzymes and returned for follow-up visits returned to baseline conditions
with no overnight hospitalization necessary. A comprehensive analysis of all the
subjects that experienced such serious adverse effects determined that only
those subjects that were exposed to the 50mg dose of the drug for any period of
time exhibited such outcome. Based on these findings, the Company petitioned the
FDA to lift the full clinical hold to allow it to conduct a low dose study to
demonstrate both safety and signals of efficacy in doses up to 12mg administered
per day. The FDA upgraded the full clinical hold to a partial hold to allow the
low dose study to be conducted. The Company has since commenced the low dose
study to determine both signals of efficacy and safety for low oral doses of the
drug. In addition, the Company has undertaken two related initiatives presently
at the pre-clinical stage. The first is the exploration of vaginal delivery as
an alternative administrative route to bypass first-pass liver effects and
reduce systemic exposure. The second is to begin screening of second generation
molecules that do not possess the specific structures the Company believes
induced the liver toxicity exhibited at higher doses of
Proellex®.


17





Low
Dose Study





As a
result of the liver toxicity exhibited by Proellex® in our previous Phase 2
and 3 clinical trials studying endometriosis and uterine fibroids, respectively,
all ongoing clinical trial activities have been put on partial hold by the
FDA. Pursuant to the terms of such partial clinical hold, the FDA has
allowed us to run a single study under the new partial clinical hold status. The
new low dose study is designed to explore both safety and signals of efficacy in
an escalating dose fashion. The new study will test 5 different doses of
Proellex® (1, 3, 6, 9 and 12 mg) with 1 mg being the first dose tested. Each
dose will be compared to placebo with weekly assessments of liver function
during both the placebo and drug period. Higher doses will not be studied until
we are confident that it is safe to proceed to the next dose and have reported
the safety findings to the FDA. Subjects will be dosed with the active drug for
10 weeks, which will allow for adequate time to determine the impact of a given
dose on trends in liver function. Each dose will be tested in up to 12 different
subjects and assessment of pharmacokinetic parameters will be obtained at the
start of dosing and the end of the dosing period to determine overall and
maximum drug exposure for a given dose. We will also monitor changes in
menstrual bleeding patterns and ovulation as well as changes in endometrial
thickness. The FDA requires that an independent Drug Safety Monitoring Board be
established and that the informed consent clearly state the liver toxicity
previously experienced with Proellex®.





In a 120
patient study of Proellex® as a treatment of uterine fibroids conducted in the
United States (roughly 40 subjects per arm), both a 12.5 and 25 mg dose of
Proellex® were compared to placebo. In this study each of the 12.5 and 25 mg
doses achieved highly statistically significant results when compared to placebo
when menstrual bleeding was assessed (p< 0.0001). The two doses also achieved
highly statistically significant improvement in quality of life measures using
the Uterine Fibroid Symptom Quality of Life questionnaire developed and
validated by Georgetown University and used in the development of device like
treatments of uterine fibroids such as uterine artery embolization. There was no
statistical difference in efficacy measures between the two doses. Importantly,
in the Phase II US trial a significant percentage of women stopped menstruating.
Over 80% of women on both the 12.5 and 25 mg doses exhibited no menses during
the three month trial, whereas all women on placebo exhibited at least one
menses. We believe that the evaluation of ovulation and menstrual bleeding
patterns in the low dose trial will provide strong evidence for efficacy
warranting further development.





We have
manufactured the initial 1 mg dose of Proellex® capsules and have recently begun
dosing subjects.  We believe we can complete the trial within approximately
18 months after first dose. Presuming a safe and effective dose is identified
and the FDA is in agreement, we anticipate that we will be able to proceed with
large efficacy trials for both uterine fibroids and endometriosis, subject to
available funds, or outlicense of the product to a major pharmaceutical
company.




Vaginal
Administration




We are
assessing vaginal administration of Proellex® to avoid first pass liver effects
and achieve higher reproductive tract concentrations of the drug while
minimizing systemic exposure. Initial in vivo animal studies look promising and
should a subsequent animal study confirm efficacy signals at substantially lower
doses than oral administration we intend to open a new Investigational New Drug
Application (“IND”) for both uterine fibroids and endometriosis. We believe this
new IND will be able to leverage the experience we have gained with the oral
dose and after a single Phase I/II study we will be able to move to Phase III.
We plan on completing our preclinical proof-of-concept work around the end of
2010 and submit a new IND if warranted.


18




Second
Generation Compound





We
believe we understand the cause of the liver toxicity observed at high doses in
the Proellex® studies. Our hypothesis is that liver adverse events are
associated with a specific part of the chemical structure of Proellex®. To that
end we have synthesized new, but related molecules that are devoid of the
specific toxicity causing structure and initial preclinical screening has begun.
If we are successful in identifying such a molecule, we believe we will be able
to achieve high oral doses and systemic exposure opening the path to aggressive
anti progestin therapy for conditions such as breast cancer. We hope to have
completed our screen of the new molecules during the third quarter of 2011,
subject to additional funding.





Other
Products





We
continue limited out-licensing efforts for our phentolamine-based product
candidates, including VASOMAX®, which had previously been approved for marketing
in several countries in Latin America for the treatment of male erectile
dysfunction under the brand name, Z-Max. VASOMAX® is currently on partial
clinical hold in the U.S.





Business
Strategy





We plan
to focus our clinical program on the (i) new escalating dose study for Proellex®
permitted by the FDA, (ii) Phase 2B and upcoming Phase 3 fertility trials for
Androxal®, (iii)  type 2 diabetes trial for Androxal®, (iv) preclinical
assessment of vaginal delivery of Proellex® and (v) second generation Proellex®
molecules.  Based on our currently available funds and outstanding
obligations, we will need to raise additional funds no later than the first
quarter 2011 in order to continue development ourselves of such product
candidates.  We will continue to explore corporate partnering opportunities
for assistance in the clinical development funding and commercialization of our
products, as appropriate; however, there can be no assurance that an acceptable
corporate partnering opportunity will be successfully completed.





Risks
Affecting Us





Our
business is subject to numerous risks as discussed more fully in “Item 1A. Risk
Factors" in our annual report on Form 10-K for the year ended December 31, 2009
and the section entitled “Risk Factors” in this quarterly report.  We
are investigating a variety of sources for raising capital. No assurance
can be given that we will be successful in obtaining financing on acceptable
terms or at all.  We anticipate that if we are able to secure
financing, that such financing will result in significant dilution of the
ownership interests of our current stockholders and may provide certain rights
to the new investors senior to the rights of our current stockholders, including
but not limited to voting rights and rights to proceeds in the event of a sale
or liquidation of the Company.  In the event that we are unable to
obtain adequate financing to meet our future needs, we will pursue other
options, including but not limited to, reductions of expenses, sale of the
Company, sale or license of a portion or all of our assets or the liquidation of
the Company.





In
addition, we have not received regulatory approval for any of our product
candidates, have not successfully earned any significant commercial revenues
from any of our product candidates and may never launch either of our product
candidates.  If we do not successfully commercialize any of our
product candidates, we will be unable to achieve our business
objectives.  In addition, the reported results of our clinical trials
completed to date may not be indicative of results that will be achieved in
later-stage clinical trials involving larger and more diverse patient
populations.  As of September 30, 2010, we had accumulated losses of
$178.1 million, approximately $4.2 million in cash and cash equivalents, and our
accounts payable and accrued expenses were approximately $1.4
million.   The amount of cash on hand is not sufficient to fund each
of the clinical trials currently planned or in process for our two drug
candidates, Proellex® and Androxal®. Based on these current or planned clinical
trials, we will need to raise additional capital no later than the first quarter
of 2011. The foregoing and other matters raise substantial doubt about our
ability to continue as a going concern and we expect to continue to incur
significant losses over the next several years, and we may never become
profitable.  Our financial statements do not include any adjustments
that might result from the outcome of these uncertainties.


19


Corporate
Information





We were
organized as a Delaware corporation in August 1987.  Our principal
executive offices are located at 2408 Timberloch Place, Suite B-7, The
Woodlands, Texas, 77380, and our telephone number is (281) 719-3400. We maintain
an internet website at www.reprosrx.com.  The information on our
website or any other website is not incorporated by reference into this
quarterly report and does not constitute a part of this quarterly report. Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K and all amendments to such reports are made available free of charge
through the Investor Relations section of our website as soon as reasonably
practicable after they have been filed or furnished with the Securities and
Exchange Commission.





Recent
Developments





On
October 14, 2010, the Company effected a one-for-four reverse stock split of its
common stock.  The split-adjusted shares of the Company’s common stock
began trading on the Nasdaq Capital Market on October 15, 2010.  The
one-for-four reverse stock split converted all shares of the Company’s common
stock issued and outstanding, plus all outstanding stock options and the number
of shares of common stock available for issuance under the Company’s approved
stock plans.  The number of authorized shares of common stock was not
affected by the reverse split.  The reverse split enabled the Company
to meet the continued listing rules of the Nasdaq Capital Market as evidenced by
the Compliance Letter received from Nasdaq on October 29,
2010.   All share and per share amounts have been retroactively
adjusted to reflect the reverse stock split for all periods
presented.




General




We have
experienced negative cash flows from operations since inception and have funded
our activities to date primarily from equity financings and corporate
collaborations.  Based on our current and planned clinical trials, we
will need to raise additional capital no later than the first quarter of 2011 in
order to continue our development activities. It is possible that our current
and planned clinical trial activities will be more costly and take longer than
we anticipate; accordingly, there can be no assurance that additional capital
will not be necessary prior to the time anticipated. We believe that we will
secure sufficient capital to continue our ongoing and planned clinical programs
assuming that the results of our current or planned clinical trials with
Androxal® and Proellex®
are favorable.  If the results of these trials are unfavorable, there
can be no assurance that the Company will be successful in obtaining additional
capital in amounts sufficient to continue to fund its operations, which outcome
would have a material adverse effect on the Company. The uncertainties relating
to the foregoing matters raise substantial doubt about our ability to continue
as a going concern. Our financial statements do not include any adjustments that
might result from the outcome of these uncertainties.




We have 6
full time employees.  We utilize the services of contract research
organizations, contract manufacturers and various consultants to assist us in
performing clinical and regulatory services for the clinical development of our
products.  The current salary reduction program we adopted during 2009
and which we revised in May 2010 to 25% of salary, other than the CEO who is at
50%, could have a negative impact on our ability to retain our
employees.  We are substantially dependent on our various contract
groups to adequately perform the activities required to obtain regulatory
approval of our products.




We have
accumulated net operating losses through September 30, 2010 and the value of the
tax asset associated with these accumulated net operating losses can be
substantially diminished in value due to various tax regulations, including
change in control provisions in the tax code.   The Company’s
public offerings completed on February 5, 2007, October 2, 2008, September 11,
2009, October 13, 2009, the sale and issuance of the ATM Shares and the issuance
of unregistered shares as part of the settlement agreements we have entered into
with certain of our creditors since October of 2009 may have created a change of
ownership for Federal Income tax purposes.  The Company has not
undertaken a study to determine if this has occurred.  A change in
ownership for Federal Income tax purposes may result in a limitation on the use
of net operating loss and tax credit carryforwards in future
periods.


20


Losses
have resulted principally from costs incurred in conducting clinical trials for
our product candidates, in research and development activities related to
efforts to develop our products and from the associated administrative costs
required to support those efforts.  There can be no assurance that we
will be able to successfully complete the transition from a development stage
company to the successful introduction of commercially viable
products.  Our ability to achieve profitability will depend on, among
other things, successfully completing the clinical development of our products
in a reasonable time frame and at a reasonable cost, obtaining regulatory
approvals, establishing marketing, sales and manufacturing capabilities or
collaborative arrangements with others that possess such capabilities, and, if
applicable, our partners' ability to realize value from our research and
development programs through the commercialization of those products and raise
sufficient funds to finance our activities.  There can be no assurance
that we will be able to achieve profitability.




Critical
Accounting Policies and the Use of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the condensed consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.




Capitalized
Patent and Patent Application Costs




We
capitalize the cost associated with building our patent library for
Androxal®.  As of September 30, 2010, other assets consist of
capitalized patent and patent application costs in the amount of $1.1
million.  Patent costs, which include legal and application costs
related to the patent portfolio, are being amortized over 20 years, or the
lesser of the legal or the estimated economic life of the
patent.  Amortization of patent costs was $21,000 and $13,000 for the
three month periods ended September, 30, 2010 and 2009, respectively, and was
$50,000 and $39,000 for the nine month periods ended September 30, 2010 and
2009, respectively.  The entire $1.1 million in capitalized patents
and patent applications relates to Androxal®.




We review
capitalized patent and patent application costs for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.  An impairment exists when estimated undiscounted
cash flows expected to result from the patent are less than its carrying
amount.  The impairment loss recognized represents the excess of the
patent cost as compared to its estimated fair value.  We believe that
our remaining capitalized patent and patent application costs are not impaired
as of September 30, 2010.




Should
the Company not continue development of Androxal® or should the Company not
continue as a going concern, capitalized patent and patent application costs may
not be recoverable, which would result in a charge to operating results in
future periods.




Accrued
Expenses




We
estimate accrued expenses as part of our process of preparing financial
statements. Examples of areas in which subjective judgments may be required
include costs associated with services provided by contract organizations for
clinical trials, preclinical development and manufacturing of clinical
materials.  We accrue for costs incurred as the services are being
provided by monitoring the status of the trials or services provided and the
invoices received from our external service providers.  In the case of
clinical trials, a portion of the estimated cost normally relates to the
projected cost to treat a patient in our trials, and we recognize this cost over
the estimated term of the study based on the number of patients enrolled in the
trial on an ongoing basis, beginning with patient enrollment.  As
actual costs become known to us, we adjust our accruals.  To date, our
estimates have not differed significantly from the actual costs
incurred.  Based on our current and planned clinical trials for
Androxal® and Proellex® and our current financial condition, further development
of our product candidates is dependent on our ability to raise additional
capital. As a result, we anticipate that our estimated accruals for
clinical services will be significantly reduced in future
periods.  However, subsequent changes in estimates may result in a
material change in our accruals, which could also materially affect our balance
sheet and results of operations.




21


R&D
Expense




Research
and development, or R&D, expenses include salaries and related employee
expenses, contracted regulatory affairs activities, insurance coverage for
clinical trials and prior product sales, contracted research and consulting
fees, facility costs, amortization of capitalized patent costs and internal
research and development supplies.  We expense research and
development costs in the period they are incurred.  These costs
consist of direct and indirect costs associated with specific projects as well
as fees paid to various entities that perform research on our
behalf.




Share-Based
Compensation




We had
two stock-based compensation plans at September 30, 2010, the 2000 Non-Employee
Directors' Stock Option Plan, or 2000 Director Plan, and the 2004 Stock Option
Plan, or 2004 Plan.  Accounting for stock based compensation generally
requires the recognition of the cost of employee services for share-based
compensation based on the grant date fair value of the equity or liability
instruments issued.  We use the Black-Scholes option pricing model to
estimate the fair value of our stock options.  Expected volatility is
determined using historical volatilities based on historical stock prices for a
period equal to the expected term.  The expected volatility assumption
is adjusted if future volatility is expected to vary from historical
experience.  The expected term of options represents the period of
time that options granted are expected to be outstanding and falls between the
options' vesting and contractual expiration dates.  The risk-free
interest rate is based on the yield at the date of grant of a zero-coupon U.S.
Treasury bond whose maturity period equals the option's expected
term.




Income
Taxes




Our
losses from inception to date have resulted principally from costs incurred in
conducting clinical trials and in research and development activities related to
efforts to develop our products and from the associated administrative costs
required to support those efforts.  We have recorded a deferred tax
asset for our net operating losses (“NOL”); however, as the Company has incurred
losses since inception, and since there is no certainty of future profits, a
valuation allowance has been provided in full on our deferred tax assets in the
accompanying consolidated financial statements.  If the Company has an
opportunity to use this NOL to off-set tax liabilities in the future, the use of
this asset would be restricted based on Internal Revenue Service, state and
local NOL use guidelines.  The Company’s public offerings completed on
February 5, 2007, October 2, 2008, September 11, 2009, October 13, 2009, the
sale and issuance of the ATM Shares and the issuance of unregistered shares as
part of the settlement agreements we entered into with certain of our creditors
since October of 2009 may have created a change of ownership for Federal Income
tax purposes.  The Company has not undertaken a study to determine if
this has occurred.  A change in ownership for Federal Income tax
purposes may result in a limitation on the use of net operating loss and tax
credit carryforwards in future periods.




Results
of Operations




Comparison
of the three-month and nine-month periods ended September 30, 2010 and
2009




Revenues
and Other Income




Total
revenues and other income increased to $85,000 for the three month period ended
September 30, 2010 as compared to zero for the same period in the prior and
increased to $138,000 for the nine month period ended September 30, 2010 as
compared to $4,000 for the same period in the prior year.  The
increase for the three and nine month periods ended September 30, 2010 was
primarily due to an increase of $85,000 and $138,000, respectively, in non-cash
other income related to debt relief from settlements with certain vendors in the
second and third quarters of 2010.




22


Research
and Development Expenses




Research
and development, or R&D, expenses include contracted services relating to
our clinical product development activities which include preclinical studies,
clinical trials, regulatory affairs and bulk manufacturing scale-up activities
and bulk active ingredient purchases for preclinical and clinical trials
primarily relating to our two products in clinical development, which are
Androxal® and Proellex®.  Research and development expenses also
include internal operating expenses relating to our general research and
development activities.  R&D expenses decreased 91% or
approximately $7.5 million to $736,000 for the three month period ended
September 30, 2010 as compared to $8.3 million for the same period in the prior
year.  Our primary R&D expenses for the three month periods ended
September 30, 2010 and 2009 are shown in the following table (in
thousands):




Research and Development
                    
                    Three-months
                      ended
                      September 30, 2010
                    
                    
                    Three-months
                      ended
                      September 30, 2009
                    
                    
                    Variance
                    
                    
                    Change
                      (%)Operating
      and occupancy
                    
                    $
                    152
                    
                    
                    $
                    1,551
                    
                    
                    $
                    (1,399
                    )
                    
                    
                    (90
                    )%Payroll
      and benefits
                    
                    
                    159
                    
                    
                    
                    344
                    
                    
                    
                    (185
                    )
                    
                    
                    (54
                    )%Androxal®
      clinical development
                    
                    
                    163
                    
                    
                    
                    64
                    
                    
                    
                    99
                    
                    
                    
                    153
                    %Proellex®
      clinical development
                    
                    
                    262
                    
                    
                    
                    6,323
                    
                    
                    
                    (6,061
                    )
                    
                    
                    (99
                    )%Total
                    
                    $
                    736
                    
                    
                    $
                    8,282
                    
                    
                    $
                    (7,546
                    )
                    
                    
                    (91
                    )%





R&D
expenses decreased 91% or approximately $19.8 million to $1.9 million for the
nine month period ended September 30, 2010 as compared to $21.8 million for the
same period in the prior year.  Our primary R&D expenses for the
nine month periods ended September 30, 2010 and 2009 are shown in the following
table (in thousands):




Research and Development
                    
                    Nine-months
                      ended
                      September 30, 2010
                    
                    
                    Nine-months
                      ended
                      September 30, 2009
                    
                    
                    Variance
                    
                    
                    Change
                      (%)Operating
      and occupancy
                    
                    $
                    508
                    
                    
                    $
                    2,026
                    
                    
                    $
                    (1,518
                    )
                    
                    
                    (75
                    )%Payroll
      and benefits
                    
                    
                    421
                    
                    
                    
                    1,170
                    
                    
                    
                    (749
                    )
                    
                    
                    (64
                    )%Androxal®
      clinical development
                    
                    
                    177
                    
                    
                    
                    775
                    
                    
                    
                    (598
                    )
                    
                    
                    (77
                    )%Proellex®
      clinical development
                    
                    
                    844
                    
                    
                    
                    17,794
                    
                    
                    
                    (16,950
                    )
                    
                    
                    (95
                    )%Total
                    
                    $
                    1,950
                    
                    
                    $
                    21,765
                    
                    
                    $
                    (19,815
                    )
                    
                    
                    (91
                    )%




The
decrease in R&D expenses is primarily due to the decreased clinical
development expenses related to Proellex® as a result of the discontinuation of
all clinical trials in August 2009 due to the FDA’s clinical hold on
Proellex®.  R&D expenses were further decreased by the decreased
clinical development expenses related to Androxal® due to the completion of a
Phase 2b proof-of-concept clinical trial in 2009.   Additionally,
payroll and benefits expenses decreased due to reduced headcount and the salary
reduction program put in place in August 2009 and revised in May
2010.




To date
through September 30, 2010 we have incurred approximately $14.5 million for the
development of Androxal® and approximately $56.0 million for the development of
Proellex®.  These accumulated costs exclude any internal operating
expenses.  We have received confirmation from the Division of
Metabolic and Endocrine Products (“DMEP”) that our new IND was accepted for the
investigation of Androxal® as a potential treatment for type 2
diabetes.  As a result, we have initiated a Phase 2
trial.  In addition, we are developing Androxal® as a treatment for
men of reproductive age with low testosterone.  The FDA has recently
notified us that they will allow us to conduct two Phase 3 trials for Androxal®
in men of reproductive age with low testosterone subject to protocol review by
the FDA. We had a Type B meeting on November 8, 2010 to review our Phase 3
protocols with the FDA. In the meeting, the FDA recommended that a Phase 2B
study in men with secondary hypogonadism but naïve to testosterone treatment be
conducted before moving into Phase 3. Prior to the clinical hold on further
Proellex® development in August 2009, we were developing Proellex® for three
indications which included a pre-surgical treatment of anemia associated with
uterine fibroids, a chronic treatment of symptoms associated with uterine
fibroids and as a chronic treatment of symptoms associated with
endometriosis.  In June 2010, the FDA notified us that the full
clinical hold on Proellex® had been revised to a partial clinical hold to allow
us to run a single study to explore both safety and signals of efficacy in an
escalating dose fashion.


23




General
and Administrative Expenses




General
and administrative expenses, or G&A, decreased 73% to approximately $533,000
for the three month period ended September 30, 2010 as compared to $2.0 million
for the same period in the prior year.  Our primary G&A expenses
for the three month period ended September 30, 2010 and 2009 are shown in the
following table (in thousands):




GeneralandAdministrative
                  
                  Three-months
                    ended
                    September30,2010
                  
                  
                  Three-months
                    ended
                    September30,2009
                  
                  
                  Variance
                  
                  
                  Change
                    (%)Payroll
      and benefits
                  
                  $
                  155
                  
                  
                  $
                  767
                  
                  
                  $
                  (612
                  )
                  
                  
                  (80
                  )%Operating
      and occupancy
                  
                  
                  378
                  
                  
                  
                  1,195
                  
                  
                  
                  (817
                  )
                  
                  
                  (68
                  )%Total
                  
                  $
                  533
                  
                  
                  $
                  1,962
                  
                  
                  $
                  (1,429
                  )
                  
                  
                  (73
                  )%




G&A
payroll and benefits expenses include salaries, bonuses, relocation expense,
severance costs, non-cash stock option compensation expense and fringe
benefits.  Included in payroll and benefits expense is a charge for
non-cash stock option expense of $79,000 for the three month period ended
September 30, 2010 as compared to $266,000 for the same period in the prior
year.  Additionally, salaries for the three month period ended
September 30, 2010 were $68,000 as compared to $307,000 for the same period in
the prior year.  The decrease in salaries is primarily due to a
decrease in headcount and the salary reduction program put in place in August
2009 and revised in May 2010.




G&A
operating and occupancy expenses, which include expenses to operate as a public
company, decreased 68% to $378,000 for the three month period ended September
30, 2010 as compared to $1.2 million for the same period in the prior
year.  The decrease is primarily due to a decrease in professional
services.




G&A
expenses decreased 57% to approximately $1.8 million for the nine month period
ended September 30, 2010 as compared to $4.1 million for the same period in the
prior year.  Our primary G&A expenses for the nine month period
ended September 30, 2010 and 2009 are shown in the following table (in
thousands):




General and Administrative
                  
                  Nine-months
                    ended
                    September 30, 2010
                  
                  
                  Nine-months
                    ended
                    September 30, 2009
                  
                  
                  Variance
                  
                  
                  Change
                    (%)Payroll
      and benefits
                  
                  $
                  460
                  
                  
                  $
                  1,862
                  
                  
                  $
                  (1,402
                  )
                  
                  
                  (75
                  )%Operating
      and occupancy
                  
                  
                  1,312
                  
                  
                  
                  2,264
                  
                  
                  
                  (952
                  )
                  
                  
                  (42
                  )%Total
                  
                  $
                  1,772
                  
                  
                  $
                  4,126
                  
                  
                  $
                  (2,354
                  )
                  
                  
                  (57
                  )%




Included
in payroll and benefits expense is a charge for non-cash stock option expense of
$230,000 for the nine month period ended September 30, 2010 as compared to
$711,000 for the same period in the prior year.  Additionally,
salaries for the nine month period ended September 30, 2010 were $197,000 as
compared to $870,000 for the same period in the prior year.  The
decrease in salaries is primarily due to a decrease in headcount and the salary
reduction program put in place in August 2009 and revised in May
2010.




24


G&A
operating and occupancy expenses decreased 42% to $1.3 million for the nine
month period ended September 30, 2010 as compared to $2.3 million for the same
period in the prior year.  The decrease is primarily due to a decrease
in professional services and consulting expenses.




Off-Balance
Sheet Arrangements




As of
September 30, 2010, the only off-balance sheet arrangement we have is the
operating lease relating to our facility.




Liquidity
and Capital Resources




Since our
inception, we have financed our operations primarily with proceeds from private
placements and public offerings of equity securities and with funds received
under collaborative agreements.




On
February 12, 2010, we entered into an Equity Distribution Agreement (the “Equity
Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”),
pursuant to which we may issue and sell from time to time through Ladenburg, as
sales agent and/or principal, shares of our common stock having an aggregate
offering price of up to $10 million (the “ATM
Shares”).  Ladenburg is not required to sell on our behalf any
specific number or dollar amount of the ATM Shares, but Ladenburg, upon
acceptance of written instructions from us, agreed to use its commercially
reasonable efforts consistent with its customary trading and sales practices, to
sell the ATM Shares up to the amount specified, and otherwise in accordance with
the terms of a placement notice delivered to Ladenburg. We have no obligation to
sell any ATM Shares under the Equity Distribution Agreement, and may at any time
suspend sales under the Equity Distribution Agreement, provided that such
suspension shall not affect either party’s obligations with respect to the ATM
Shares sold prior to the receipt of notice of such
suspension.  Ladenburg receives a commission of 4% of the gross sales
price of all ATM Shares sold through it under the Equity Distribution Agreement.
The ATM Shares are issued pursuant to our shelf registration statement on Form
S-3, as amended (File No. 333-163648).  Between July 1, 2010 and
September 30, 2010, we have sold an aggregate of 277,164 ATM Shares at a
weighted average share price of $1.51,for proceeds of approximately $401,000, net of
expenses.  Cumulative through September 30, 2010, we have sold
2,448,572 ATM Shares at a weighted average share price of $2.77,for proceeds of approximately $6.4 million, net of
expenses.  Pursuant to General Instruction I.B.6. of Form S-3, we may
not sell more than one-third of the aggregate market value of our common stock
held by non-affiliates during a period of 12 calendar months immediately prior
to, and including, the date of such sale of such common stock.  Due to
this limitation, we announced on August 3, 2010 that we have suspended this ATM
offering of Company securities.





Our
primary use of cash to date has been in operating activities to fund research
and development, including preclinical studies and clinical trials, and general
and administrative expenses.  We had cash and cash equivalents of
approximately $4.2 million as of September 30, 2010 as compared to $1.9 million
as of December 31, 2009.  All cash and cash equivalents as of
September 30, 2010 and December 31, 2009 were held in an account backed by U.S.
government securities.




Net cash
of approximately $3.8 million and $17.4 million was used in operating activities
during the nine month period ended September 30, 2010 and 2009,
respectively.  The major use of cash for operating activities through
the third quarter of 2010 was to fund our operations and pay down our accounts
payable and accrued expenses.  Cash used in investing activities
through the third quarter of 2010 was approximately $303,000 primarily for
capitalized patent and patent application costs for Androxal®.  Cash
provided by financing activities through the third quarter of 2010 was
approximately $6.4
million due to the 2,448,572 ATM Shares sold at a weighted average share price
of $2.77.




25


We have
experienced negative cash flows from operations since inception.  We
will require substantial funds for research and development, including
preclinical studies and clinical trials of our product candidates, and to
commence sales and marketing efforts if appropriate, if the FDA or other
regulatory approvals are obtained.  Based on our current and planned
clinical activities, we will need to raise additional capital no later than the
first quarter of 2011 under our Equity Distribution Agreement with Ladenburg, to
the extent allowed, or seek additional funding in the public or private capital
markets through corporate collaborations or other financing vehicles in order to
continue our development activities. There can be no assurance that any such
funding will be available to us on favorable terms or at all. If we are
successful in obtaining additional financing, the terms of such financing may
have the effect of diluting or adversely affecting the holdings or the rights of
holders of our common stock. It is possible that our clinical trial
activities will be more costly and take longer than we anticipate; accordingly,
there can be no assurance that additional capital will not be necessary prior to
the time anticipated.  Our capital requirements will depend on many
factors, which are discussed in detail in “Item 1A. Risk Factors” to Part I of
Form 10-K for the fiscal year ended December 31, 2009. Additionally, as
discussed in Note 5, there is a third party individual patent holder that claims
priority over our patent application for Androxal®.  The uncertainties
relating to the foregoing matters raise substantial doubt about our ability to
continue as a going concern.




Our
results of operations may vary significantly from quarter to quarter and year to
year, and depend on, among other factors, our ability to raise additional
capital on acceptable terms or at all, on our ability to be successful in our
clinical trials, the regulatory approval process in the United States and other
foreign jurisdictions and the ability to complete new licenses and product
development agreements.  The timing of our revenues may not match the
timing of our associated product development expenses.  To date,
research and development expenses have usually exceeded revenue in any
particular period and/or fiscal year.




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk




Interest Rate Risk.We had
cash and cash equivalents of approximately $4.2 million at September 30, 2010
which is held in an account backed by U.S. government
securities.  Although this cash account is subject to fluctuations in
interest rates and market conditions, no significant gain or loss on this
account is expected to be recognized in earnings.  We do not invest in
derivative securities.




Item
4.  Controls and Procedures




Disclosure
Controls and Procedures




Based on
their evaluation as of the end of the period covered by this Quarterly Report on
Form 10-Q, our Chief Executive Officer and Chief Accounting Officer have
concluded that our disclosure controls and procedures (as defined in Rule
13a-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), were effective as of September 30, 2010.




Changes
in Internal Control over Financial Reporting




In
connection with the evaluation described above, we identified no change in
internal control over financial reporting that occurred during the quarter ended
September 30, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




26


PART
II - OTHER INFORMATION





Item
1.  Legal Proceedings




On August
7, 2009, R.M. Berry filed a putative class action lawsuit naming the Company,
Joseph Podolski, Paul Lammers, and Louis Ploth, Jr. as
defendants.  The lawsuit is pending in the United States District
Court for the Southern District of Texas, Houston Division.  The
lawsuit, styled R.M. Berry, on Behalf of Himself and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr., alleges that the defendants made certain misleading statements
related to the Company’s Proellex® drug.  Among other claims, the
lawsuit contends that the defendants misrepresented the side effects of the drug
related to liver function, and the risk that these side effects could cause a
suspension of clinical trials of Proellex®. The lawsuit seeks to establish a
class of shareholders allegedly harmed by the misleading statements, and asserts
causes of action under the Securities Exchange Act of 1934.  On August
14, 2009, a lawsuit making similar allegations and naming the same defendants
was also filed in the United States District Court for the Southern District of
Texas.  This suit is styled Josephine Medina, Individually and On
Behalf of all Others Similarly Situated v. Repros Therapeutics, Inc., Joseph
Podolski, Paul Lammers, and Louis Ploth, Jr.  On September 25, 2009, a
lawsuit also making allegations similar to those in the Berry action, and naming
the same defendants, was filed in the United States District Court for the
Southern District of Texas.  That lawsuit is styled Shane Simpson,
Paul Frank and Clayton Scobie, on Behalf of Themselves and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr.    The lawsuits have now been consolidated, and lead
plaintiffs appointed.  On January 27, 2010, the lead plaintiffs filed
a Consolidated Class Action Complaint styled In re Repros Therapeutics, Inc.
Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG).  The
lawsuit names Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and
Louis Ploth, Jr. as defendants.  The allegations in the Consolidated
Class Action Complaint are substantially the same as those contained in the
prior complaints, and focus on the claim that the defendants deliberately
withheld information concerning the negative side-effects of Proellex® related
to liver function.  Plaintiffs seek to establish a class action for
all persons who “purchased or otherwise acquired Repros common stock between
July 1, 2009, and August 2, 2009.”  No discovery has yet occurred in
the matter.  Defendants filed a motion to dismiss the Consolidated
Class Action Complaint on March 15, 2010.  Briefing has been completed
on that motion, but the court has not yet ruled on it.    An
estimate of the possible loss or range of losses in connection with the lawsuits
cannot be made at this time.




On March
1, 2010, we were served with a lawsuit where we were named as a co-defendant
along with one of our clinical regulatory service providers (“CRO”) relating to
the Proellex® clinical trial study.  The lawsuit was filed in the
State of Tennessee, 30th Judicial District Chancery Court at Memphis by an
investigator and claims that the CRO did not pay it amounts owing to it relating
to the Proellex® study.  We did not engage the investigator and
under our agreement with the CRO, we believe the CRO is responsible for any
such costs or damages regarding such lawsuit.  Pursuant to a
Settlement Agreement and Mutual Release entered into in October 2009, such CRO,
on behalf of itself and its agents, released us from all claims which could be
asserted by them against us.  We believe such release covers the
claims set forth in this lawsuit.  The CRO failed to respond to the
lawsuit, and a default judgment was entered against it in the amount of
$172,901.29.  We intend to vigorously defend any and all claims
asserted by the investigator.  An estimate of the possible costs or
expenses to defend ourselves in this matter or risk of exposure under the
litigation cannot be made at this time.


27





Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications.  Foreign
coverage of therapeutic uses of our Androxal® product candidate includes 40
issued foreign patents and 75 foreign pending patent
applications.  The issued patents and pending applications relate to
methods for treating certain conditions including the treatment of testosterone
deficiency in men, the treatment of metabolic syndrome and conditions associated
therewith, and the treatment of infertility in hypogonadal
men.  Androxal® (the trans-isomer of clomiphene) is purified from
clomiphene citrate.  A third party individual holds two issued patents
related to the use of an anti-estrogen such as clomiphene citrate and others for
use in the treatment of androgen deficiency and disorders related
thereto.  In our prior filings with the SEC, we have described our
request to the U.S. Patent and Trademark Office, or PTO, for re-examination of
one of these patents based on prior art.  The third party amended the
claims in the re-examination proceedings, which led the PTO to determine that
the amended claims are patentable in view of those publications under
consideration and a re-examination certificate was issued.  However,
we believe that the amended claims are invalid based on additional prior art
publications, and we filed a second request for re-examination by the PTO in
light of a number of these additional publications and other publications cited
by the PTO.  The request was granted and all of the claims were
finally rejected by the PTO in the re-examination.  The patent holder
appealed the rejections to the PTO Board of Patent Appeals and Interferences
(“the Board”) which affirmed the rejection of all of the
claims.  The patent holder subsequently filed a request for rehearing,
which led the Board to reverse the rejections of several dependent claims in
view of those publications under consideration.  The patent holder has
filed a Notice of Appeal to the Federal Circuit contesting the rejections
maintained by the Board.  We also believe that the second of these two
patents is invalid in view of published prior art not considered by the
PTO.  Nevertheless, there is no assurance that either patent will
ultimately be found invalid over the prior art. If such patents are not
invalidated by the PTO we may be required to obtain a license from the holder of
such patents in order to develop Androxal® further or attempts may be made to
undertake further legal action to invalidate such patents.  If such
licenses were not available on acceptable terms, or at all, we may not be able
to successfully commercialize or out-license Androxal®.




Item
1A. Risk Factors




There
were no material changes from the risk factors previously disclosed in the
registrant’s Form 10-K for the fiscal year ended December 31, 2009 in response
to “Item 1A. Risk Factors” to Part I of Form 10-K.




Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.




None




Item
3.  Defaults Upon Senior Securities.




None




Item
4. (Removed and Reserved).




Item
5.  Other Information




None




Item
6.   Exhibits




3.1(a)
            Restated
      Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to
      the Company's Registration Statement on Form SB-2 (No. 33-57728-FW), as
      amended ("Registration
Statement")).


3.1(b)
            Certificate
      of Amendment to the Company's Restated Certificate of Incorporation, dated
      as of May 2, 2006 (incorporated by reference to Exhibit 3.1 to the
      Company's Current Report on Form 8-K as filed with the Securities and
      Exchange Commission (the "Commission") on May 2,
  2006).


3.1(c)
            Certificate
      of Amendment to the Company's Restated Certificate of Incorporation, as
      amended, dated as of December 16, 2008 (incorporated by reference to
      Exhibit 3.1(d) to the Company's Current Report on Form 8-K as filed with
      the Commission on December 23,
2008).


3.1(d)
            Certificate
      of Designation of Series One Junior Participating Preferred Stock dated
      September 2, 1999 (incorporated by reference to Exhibit A to Exhibit 4.1
      to the Company's Registration Statement on Form 8-A as filed with the
      Commission on September 3, 1999).


3.1(e)
            Certificate
      of Amendment to Restated Certificate of Incorporation, dated as of
      November 18, 2009. Exhibit 3.1(e) to the Company’s Current Report on
      Form 8-K dated November 19, 2009 is incorporated herein by
      reference.


3.1(f)
            Certificate
      of Amendment to Restated Certificate of Incorporation, dated October 14,
      2010. Exhibit 3.1(f) to the Company’s Current Report on Form 8-K
      dated October 14, 2010 is incorporated herein by
  reference.


28


3.2
            Restated
      Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the
      Registration Statement).


4.7
            Sixth
      Amendment to Rights Agreement, dated September 9, 2010, between the
      Company and Computershare Trust Company, N.A. Exhibit 4.7 to the Company’s
      Current Report on form 8-K dated September 9, 2010 is incorporated herein
      by reference.


10.1*
            Second
      Amendment to Lease, effective as of July 1, 2010, between the Company and
      Columbia Texas 2408 Timberloch Industrial,
L.P.


31.1*
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive
  Officer).


31.2*
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002 (Chief Accounting
  Officer).


32.1*
            Certification
      furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive
      Officer).


32.2*
            Certification
      furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Accounting
      Officer).


*  
          Filed
herewith.


29


SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




REPROS
      THERAPEUTICS INC.Date:  November
      10, 2010By:
                    /s/ Joseph S. PodolskiJoseph
      S. PodolskiChief
      Executive Officer and Director(Principal
      Executive Officer)Date:  November
      10, 2010By:
                    /s/ Katherine A.
AndersonKatherine
      A. AndersonChief
      Accounting Officer(Principal
      Financial
Officer)


30