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, 2009





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
            
            2408
      Timberloch Place, Suite B-7
            
            76-0233274(State
      or other jurisdiction of
            
            The
      Woodlands, Texas 77380
            
            (IRS
      Employerincorporation
      or
            
            (Address
      of principal executive offices
            
            Identification
      No.)organization)
            
            and
      zip code)(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 x  Non-accelerated
filer  ̈   Smaller
reporting company    ̈





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 6, 2009, there were
outstanding 25,538,598 sharesof Common Stock, par
value $.001 per share, of the Registrant.





REPROS
THERAPEUTICS INC.


(A
development stage company)





For the
Quarter Ended September 30, 2009





INDEX





PageFACTORS
      AFFECTING FORWARD-LOOKING STATEMENTS
                
                
                3PART
      I.  FINANCIAL INFORMATIONItem
      1.     Financial Statements
(unaudited)
                
                
                4Unaudited
      Condensed Consolidated Balance Sheets as of September 30, 2009 and
      December 31, 2008
                
                
                5Unaudited
      Condensed Consolidated Statements of Operations for the three months and
      nine months ended September 30, 2009 and 2008 and from Inception (August
      20, 1987) through September 30, 2009
                
                
                6Unaudited
      Condensed Consolidated Statements of Stockholders' Equity for the nine
      months ended September 30, 2009
                
                
                7Unaudited
      Condensed Consolidated Statements of Cash Flows for the nine months ended
      September 30, 2009 and 2008 and from Inception (August 20, 1987) through
      September 30, 2009
                
                
                8Notes
      to Unaudited Condensed Consolidated Financial Statements
                
                
                9Item
      2.     Management's Discussion and Analysis of
      Financial Condition and Results of Operations
                
                
                17Item
      3.     Quantitative and Qualitative Disclosures About
      Market Risk
                
                
                34Item
      4.     Controls and Procedures
                
                
                34PART
      II.  OTHER INFORMATIONItem
      1.     Legal Proceedings
                
                
                35Item
      1A.  Risk Factors
                
                
                36Item
      4.     Submission of Matters to a Vote of
      Security Holders
                
                
                39Item
      5.     Other Information
                
                
                39Item
      6.     Exhibits
                
                
                39SIGNATURES
                
                
                41


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 immediately raise additional capital on acceptable terms
or at all; its ability to avoid bankruptcy; its ability to successfully defend
itself in the recently filed class action lawsuits; its ability
to  maintain its listing on any NASDAQ  Market; the removal
of the current clinical hold on further clinical trials for Proellex®by the Food and
Drug Administration, or FDA,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 FDA and regulatory bodies in other jurisdictions; whether a clear clinical
path for Androxal® can be realized; 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 "Item 1. Business" and "Item 1A. Risk Factors" and "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.


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.  Subsequent events have been evaluated through November 9,
2009, which is the date on which the financial statements were issued. 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, 2009 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2009.  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, 2008.


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
      31,2009
                    
                    
                    2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                    
                    $
                    2,547
                    
                    
                    $
                    19,470Prepaid
      expenses and other current assets
                    
                    
                    278
                    
                    
                    
                    1,392Total
      current assets
                    
                    
                    2,825
                    
                    
                    
                    20,862Fixed assets,net
                    
                    
                    16
                    
                    
                    
                    28Other assets,
      net
                    
                    
                    1,109
                    
                    
                    
                    1,713Total
      assets
                    
                    $
                    3,950
                    
                    
                    $
                    22,603LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                    
                    $
                    11,554
                    
                    
                    $
                    5,132Accrued
      expenses
                    
                    
                    681
                    
                    
                    
                    1,857Total
      current liabilities
                    
                    
                    12,235
                    
                    
                    
                    6,989Commitments
      and contingencies (note 5)Stockholders'
      EquityUndesignated
      Preferred Stock, $.001 par value, 5,000,000shares
      authorized, none issued and outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      Stock, $.001 par value, 30,000,000 sharesauthorized,
      18,614,439 and 17,111,939 shares issued, respectivelyand
      16,677,404 and 15,174,904 shares outstanding, respectively
                    
                    
                    19
                    
                    
                    
                    17Additional
      paid-in capital
                    
                    
                    170,773
                    
                    
                    
                    168,787Cost
      of treasury stock, 1,937,035 shares
                    
                    
                    (5,948
                    )
                    
                    
                    (5,948
                    )Deficit
      accumulated during the development stage
                    
                    
                    (173,129
                    )
                    
                    
                    (147,242
                    )Total
      stockholders' equity
                    
                    
                    (8,285
                    )
                    
                    
                    15,614Total
      liabilities and stockholders' equity
                    
                    $
                    3,950
                    
                    
                    $
                    22,603





The
accompanying notes are an integral part of these 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
      30,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009RevenuesLicensing
      fees
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    28,755Product
      royalties
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    627Research
      and development grants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,219Interest
      income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    45
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    405
                                    
                                    
                                    
                                    16,297Gain
      on disposal of fixed assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    102Other
      Income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    35Total
      revenues and other income
                                    
                                    
                                    -
                                    
                                    
                                    
                                    45
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    405
                                    
                                    
                                    
                                    47,035ExpensesResearch
      and development
                                    
                                    
                                    8,282
                                    
                                    
                                    
                                    5,874
                                    
                                    
                                    
                                    21,765
                                    
                                    
                                    
                                    17,514
                                    
                                    
                                    
                                    169,033General
      and administrative
                                    
                                    
                                    1,962
                                    
                                    
                                    
                                    750
                                    
                                    
                                    
                                    4,126
                                    
                                    
                                    
                                    2,236
                                    
                                    
                                    
                                    41,400Interest
      expense and amortizationof
      intangibles
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    388Total
      expenses
                                    
                                    
                                    10,244
                                    
                                    
                                    
                                    6,624
                                    
                                    
                                    
                                    25,891
                                    
                                    
                                    
                                    19,750
                                    
                                    
                                    
                                    210,821Loss
      from continuing operations
                                    
                                    
                                    (10,244
                                    )
                                    
                                    
                                    (6,579
                                    )
                                    
                                    
                                    (25,887
                                    )
                                    
                                    
                                    (19,345
                                    )
                                    
                                    
                                    (163,786
                                    )Loss
      from discontinued operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,828
                                    )Gain
      on disposal of discontinued operation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    939Net
      loss before cumulative effect ofchange
      in accounting principle
                                    
                                    
                                    (10,244
                                    )
                                    
                                    
                                    (6,579
                                    )
                                    
                                    
                                    (25,887
                                    )
                                    
                                    
                                    (19,345
                                    )
                                    
                                    
                                    (164,675
                                    )Cumulative
      effect of change in accountingprinciple
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (8,454
                                    )Net
      loss
                                    
                                    $
                                    (10,244
                                    )
                                    
                                    $
                                    (6,579
                                    )
                                    
                                    $
                                    (25,887
                                    )
                                    
                                    $
                                    (19,345
                                    )
                                    
                                    $
                                    (173,129
                                    )Loss
      per share - basic and diluted:
                                    
                                    $
                                    (0.66
                                    )
                                    
                                    $
                                    (0.51
                                    )
                                    
                                    $
                                    (1.69
                                    )
                                    
                                    $
                                    (1.51
                                    )Weighted
      average shares used in loss per share calculation:Basic
                                    
                                    
                                    15,503
                                    
                                    
                                    
                                    12,775
                                    
                                    
                                    
                                    15,286
                                    
                                    
                                    
                                    12,775Diluted
                                    
                                    
                                    15,503
                                    
                                    
                                    
                                    12,775
                                    
                                    
                                    
                                    15,286
                                    
                                    
                                    
                                    12,775





The
accompanying notes are an integral part of these 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, 2008
                              
                              
                              17,111,939
                              
                              
                              $
                              17
                              
                              
                              $
                              168,787
                              
                              
                              
                              1,937,035
                              
                              
                              $
                              (5,948
                              )
                              
                              $
                              (147,242
                              )
                              
                              $
                              15,614Exercise
      of stock option to purchase common stockfor cash @ $3.71 per
      share
                              
                              
                              2,500
                              
                              
                              
                              -
                              
                              
                              
                              9
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              9Issuance
      of 1,500,000 shares of common stock at $0.65 per shareSeptember
      11, 2009, net of offering costs of $106
                              
                              
                              1,500,000
                              
                              
                              
                              2
                              
                              
                              
                              867
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              869Stock
      based option compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,110
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,110Net
      loss
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (25,887
                              )
                              
                              
                              (25,887
                              )Balance
      at September 30, 2009
                              
                              
                              18,614,439
                              
                              
                              $
                              19
                              
                              
                              $
                              170,773
                              
                              
                              
                              1,937,035
                              
                              
                              $
                              (5,948
                              )
                              
                              $
                              (173,129
                              )
                              
                              $
                              (8,285
                              )





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
      30,2009
                                          
                                          
                                          2008
                                          
                                          
                                          2009Cash
      Flows from Operating ActivitiesNet
      loss
                                          
                                          $
                                          (25,887
                                          )
                                          
                                          $
                                          (19,345
                                          )
                                          
                                          
                                          (173,129
                                          )Gain
      on disposal of discontinued operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (939
                                          )Gain
      on disposal of fixed assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (102
                                          )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Noncash
      financing costs
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          316Noncash
      inventory impairment
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,417Noncash
      patent impairment/abandoment
                                          
                                          
                                          989
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,328Noncash
      decrease in accounts payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1,308
                                          )Depreciation
      and amortization
                                          
                                          
                                          51
                                          
                                          
                                          
                                          32
                                          
                                          
                                          
                                          3,933Noncash
      stock-based compensation
                                          
                                          
                                          1,110
                                          
                                          
                                          
                                          613
                                          
                                          
                                          
                                          6,467Common
      stock issued for agreement not tocompete
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          200Series
      B Preferred Stock issued for consultingservices
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          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
                                          )Decrease
      (increase) in prepaid expenses and othercurrent
      assets
                                          
                                          
                                          1,114
                                          
                                          
                                          
                                          (418
                                          )
                                          
                                          
                                          24Increase
      in accounts payable andaccrued
      expenses
                                          
                                          
                                          5,246
                                          
                                          
                                          
                                          2,675
                                          
                                          
                                          
                                          13,430Net
      cash used in operating activities
                                          
                                          
                                          (17,377
                                          )
                                          
                                          
                                          (16,443
                                          )
                                          
                                          
                                          (148,991
                                          )Cash
      Flows from Investing ActivitiesChange
      in trading marketable securities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,124
                                          
                                          
                                          
                                          (191
                                          )Capital
      expenditures
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (4
                                          )
                                          
                                          
                                          (2,371
                                          )Purchase
      of technology rights and other assets
                                          
                                          
                                          (424
                                          )
                                          
                                          
                                          (423
                                          )
                                          
                                          
                                          (4,194
                                          )Proceeds
      from sale of PP&E
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          225Cash
      acquired in purchase of FTI
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3Proceeds
      from sale of subsidiary, less$12,345
      for operating losses during1990
      phase-out period
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          138Proceeds
      from sale of the assets of FTI
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,250Increase
      in net assets held for disposal
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (213
                                          )Net
      cash provided by (used in) investing activities
                                          
                                          
                                          (424
                                          )
                                          
                                          
                                          23,697
                                          
                                          
                                          
                                          (4,353
                                          )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net ofoffering
      costs
                                          
                                          
                                          869
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          151,884Exercise
      of stock options
                                          
                                          
                                          9
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          372Proceeds
      from a shareholder transaction
                                          
                                          
                                          -
                                          
                                          
                                          
                                          327
                                          
                                          
                                          
                                          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
                                          
                                          
                                          878
                                          
                                          
                                          
                                          327
                                          
                                          
                                          
                                          155,891Net
      increase (decrease) in cash and cash equivalents
                                          
                                          
                                          (16,923
                                          )
                                          
                                          
                                          7,581
                                          
                                          
                                          
                                          2,547Cash
      and cash equivalents at beginning of period
                                          
                                          
                                          19,470
                                          
                                          
                                          
                                          1,779
                                          
                                          
                                          
                                          -Cash
      and cash equivalents at end of period
                                          
                                          $
                                          2,547
                                          
                                          
                                          $
                                          9,360
                                          
                                          
                                          $
                                          2,547





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


8


REPROS
THERAPEUTICS INC. AND SUBSIDIARY


(A
development stage company)





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(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:





·
            Proellex®,
      a new chemical entity that acts as a selective blocker of the progesterone
      receptor, is being developed, subject to the current FDA clinical hold on
      the Proellex® clinical trials, for the treatment of symptoms associated
      with uterine fibroids and
endometriosis.


·
            Androxal®, a single isomer of
      clomiphene citrate, is being developed for men of reproductive age with
      low testosterone levels who want to maintain their fertility while being
      treated for low
testosterone.





As of
September 30, 2009, we had accumulated losses of $173.1 million, approximately
$2.5 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $12.2 million.  As a result of the October
29, 2009 settlement agreement with certain  of our creditors to issue
them shares of our common stock and cash as payment in full for our
then-outstanding liabilities with such creditors (as described below),
subsequent to September 30, 2009 we have reduced the amount of our accounts
payable and accrued expenses by approximately $8.9
million.  Notwithstanding, the amount of cash on hand is not
sufficient to continue to fund our ongoing clinical trials of Androxal®,
complete all necessary activities relating to the suspension of our clinical
trial program for Proellex®, and pay our accounts payable and accrued expenses
as well as our normal corporate overhead and expenses.




Effective
August 16, 2009, we adopted a 50% salary reduction program for all salaried
employees in an effort to reduce expenses while maintaining our current effort
without diminution.  Since then we have also reduced our employee
headcount to 5 full time employees as of November 9, 2009.




On
September 11, 2009, we completed a direct registered offering of 1.5 million
shares of our common stock at a purchase price of $0.65 per share for net
proceeds after expenses of approximately $869,000 pursuant to an effective shelf
registration statement.




On
October 13, 2009, we completed a direct registered offering of 3.5 million
shares of our common stock at a purchase price of $1.27 per share for net
proceeds after expenses of approximately $4.1 millionpursuant to an effective
shelf registration statement.


9


On
October 29, 2009, we entered into a MasterSettlement
Agreementand
Releases (the “Settlement Agreement”) with certain trade creditors,
pursuant to which we agreed to issue up to an aggregate of 5,503,843 shares of
our common stock, at $1.10 per share, and pay up to an aggregate of
approximately $2.85 million in cashto such
creditors as payment in full for our then-outstanding liabilitiesof approximately $8.9
million and for the release of the claims held by and the dismissal of the
litigation commenced by such creditors against the
Company.  Under the Settlement Agreement, we agreed to use our
best efforts to prepare and file a registration statement to register such
shares issued to the creditors, to use our best efforts to have such
registration statement declared effective as soon as possible, and to maintain
such registration statement until all such shares registered thereunder to the
creditors have been sold or for a period of one year, whichever comes
first.  We also agreed to refrain from (i) filing any other
registration statement for any primary public offering or other offering of our
equity securities prior to filing such registration statement with the
Securities and Exchange Commission and (ii) selling any shares for any primary
public offering or other offering of our equity securities during the ten
business days immediately following the effective date of such registration
statement, in order to provide such creditors an opportunity to sell their
shares issued under the Settlement Agreement.




Despite
the above-mentioned actions we have taken to raise capital and reduce our
liabilities, based on our existing and projected accounts payable and
commitments, we do not have sufficient cash to continue normal operations and
need to raise additional capital immediately in order to continue operations on
a normal basis.  In the event that we are unable to obtain adequate
financing to meet our immediate short term liquidity needs, we will pursue other
options, including but not limited to, additional reductions of expenses, sale
of the Company, sale or license of a portion or all of our assets, a bankruptcy
filing or the liquidation of the Company.




Our
capital requirements depend on numerous factors, including our ability to resume
our clinical trials should the current clinical trial hold on Proellex®by the FDA be
removed, and whether we determine to pursue all of the previous clinical
development plans for Proellex® andAndroxal®.  Our announcements regarding the liver toxicity in
our Proellex®clinical trials and the clinical hold imposed by the FDA, the receipt of
the NASDAQ letter regarding our failure to meet the current NASDAQ listing
requirements and shareholder lawsuits discussed below have significantly
depressed our stock price and severely impaired our ability to raise additional
capital funds to where it could be difficult or impossible for us to raise any
additional 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, such financing will result in significant dilution of the ownership
interests of the Company's current stockholders and may provide certain rights
to the new investors senior to the rights of its current stockholders, including
but not limited to voting rights and rights to proceeds in the event of a sale
or liquidation of the Company.




The
uncertainties relating to the foregoing matters raise substantial doubt about
Repros' ability to continue as a going concern.  Our financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.




Proellex® Clinical Hold





On August
6, 2009, we announced that the Company received verbal notice from the United
States Food and Drug Administration (FDA) during a teleconference with the
Division of Reproductive and Urologic Products that the Company's
Investigational New Drug Applications (INDs) for Proellex® had been placed on
clinical hold for safety reasons.  This action followed the Company's
voluntary decision to suspend dosing of all patients in its clinical trials of
Proellex® after discovering elevated liver enzymes in a number of patients
enrolled in the clinical trials.


10





The
Company and the FDA held a teleconference to discuss the safety of Proellex® and
the overall direction and scope of the Company's clinical trials of Proellex® on
September 23, 2009. During the meeting the Company updated the FDA with
information about the patients who experienced a “Serious Adverse Event”, (SAE),
and still had, as of that date, elevated liver enzymes.  The Company
reported that the available data indicated that the majority of the patients
that had experienced an SAE associated with elevated liver enzymes had returned
to normal levels. Those that had not yet returned to normal were trending
towards normal and the prognosis for a complete recovery was
good.  The FDA also outlined additional information the Company would
need to provide to the Agency in order to lift the clinical hold. One of the
most important requirements was that the Company provide data from its existing
clinical results that would suggest at what level of exposure liver enzyme
issues could be avoided. The Company intends to provide that information as soon
as possible but there can be no assurance that even if a safe level is suggested
that the FDA will lift the hold or that such low level will be efficacious in
treating the intended indications.





If the
FDA were to lift the clinical hold on Proellex® and if the FDA requires a lower
dosage of Proellex® to be used for future clinical trials, the Company would be
required to commence Phase 2 studies again with the required lower dosage,
thereby resulting in extensive additional costs and delays.





Deficiency
Letters from The NASDAQ Global Market




On August
7, 2009, the Company received a letter from The NASDAQ Stock Market advising
that the Company’s market value was below the minimum $50,000,000 requirement
for continued listing on the NASDAQ Global Market.  The Company was
provided 90 days, until November 5, 2009, to regain compliance, at which time we
have been advised that the Company’s securities will be delisted from such
market unless the market value of the Company’s securities listed on NASDAQ is
$50,000,000 or more for a minimum of 10 consecutive business
days.  The letter also recited that the Company’s total assets and
total revenue fell below certain required thresholds under related rules and
suggested that the Company consider applying for transfer of its securities to
the NASDAQ Capital Market, which has substantially lower listing
requirements.  On September 15, 2009, the Company received a second
letter from The NASDAQ Stock Market advising that, in addition to the
deficiencies previously disclosed on August 7, 2009, the Company’s market value
of publicly held shares was below the minimum $15,000,000 requirement for
continued listing on The NASDAQ Global Market by NASDAQ Listing Rule
5450(b)(2)(C) or 5450(b)(3)(C).  The Company is provided 90 days,
until December 14, 2009, to regain compliance, at which time we have been
advised that the Company’s securities will be delisted from such market unless
the Company’s market value of publicly held shares is $15,000,000 or more for a
minimum of 10 consecutive business days.  The Company is still
required to regain compliance with the maintenance requirements set forth in the
prior notice it received by November 5, 2009.  The letter also
suggested that the Company consider applying for transfer of its securities to
The NASDAQ Capital Market, which has substantially lower listing
requirements.




On
November 6, 2009, the Company received notification from NASDAQ that it has not
regained compliance with NASDAQ Listing Rules 5450(b)(2)(A) or 5450(b)(3)(A)
and, unless the Company appeals NASDAQ’s decision, its securities will be
delisted from the NASDAQ Global Market.  Repros intends to appeal
NASDAQ’s determination to delist its securities or, alternatively, to request to
have its securities moved to the NASDAQ Capital Market.  There can be
no assurance that either of these strategies will be
successful.




Shareholder
Class Action Lawsuits




See Note
5 for a complete description of recent class action lawsuits filed against the
Company and certain of its officers.


11




Possible
Bankruptcy Filing




If we are
unable to raise or generate sufficient capital to fully address the
uncertainties of our financial position, we may be unable to realize value from
our assets and discharge our liabilities in the normal course of business and we
may need to seek protection under the provisions of the U.S. Bankruptcy
Code.  In that event, we may seek to reorganize our business, or we or
a trustee appointed by the court may be required to liquidate our assets. If we
needed to liquidate our assets, we would likely realize significantly less from
them than the values at which they are carried on our financial statements. The
funds resulting from the liquidation of our assets would be used first to pay
the debt owed to any secured and unsecured creditors before any funds would be
available to our stockholders, and any shortfall in the proceeds would directly
reduce the amounts available for distribution, if any, to our creditors and to
our stockholders.




Effect
on National Institutes of Health (“NIH”) License for Proellex




On
October 28, 2009 the Company amended its exclusive license with the NIH dated
April 16, 1999.  This seventh amendment extends the time period by
which the Company is required to obtain certain financing and/or licensing
consideration.  In addition, the seventh amendment allows the
Company time to attempt to lift the clinical hold on Proellex® for purposes
of proceeding with a lower dose program.  If the clinical hold is lifted,
the Company must reach certain developmental milestones for such lower dose
program, such as commencing   Phase II and III
studies and obtaining U. S. FDA approval for treatment of uterine fibroids,
each by a specified date.  In the event the  FDA does not
approve Proellex® for further clinical trials, at a lower dosage, by a
certain date, the Company is required to identify a second generation
compound from those covered by the original Exclusive License Agreement, and the
Company must reach certain developmental milestones for such second generation
compound, such as completing Phases I, II and III studies of such second
generation compound, each by a specified date.  Even
though such amendment allows the Company additional time to reach such
benchmarks, there can be no assurance that the Company will be successful
in obtaining such financing, that the FDA will agree to allow the Company
to resume clinical trials at a lower dosage or that the Company will be
successful in identifying a second generation drug.  In addition, the
license may be terminated by the NIH immediately upon notice to the Company
following a filing of a petition in bankruptcy or a letter from the Company to
the NIH stating that it is insolvent.  In the event that any of the
conditions contained in the license agreement for termination by the NIH are
triggered, the Company's license agreement may be terminated and the Company
would lose its exclusive rights to Proellex®.  Any such termination of
the license agreement could have a material adverse effect on the Company's
financial position and results of operations, and in such event, the value of
the Company's common stock may be materially adversely affected.




Recent
Accounting Pronouncements




In
September 2006, FASB issued new accounting guidance which defines fair value,
established a framework for measuring fair value in generally accepted
accounting principles and expanded disclosures about fair value
measurements.  This guidance is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years.  In February 2008, the FASB deferred the
effective date of this new guidance for all nonfinancial assets and nonfinancial
liabilities to fiscal years beginning after November 15, 2008.  The
implementation of this guidance for financial assets and financial liabilities,
effective January 1, 2008, did not have a material impact on Repros'
consolidated financial position and results of operations.  The
implementation of this guidance for nonfinancial assets, effective January 1,
2009, and nonfinancial liabilities did not have a material impact on the
Company's consolidated financial position and results of
operations.


12


In May
2009, the FASB issued new accounting guidance on management's assessment of
subsequent events and incorporates this guidance into accounting
literature.  This guidance is effective prospectively for interim and
annual period ending after June 15, 2009.  The implementation of this
standard did not have a material impact on our consolidated financial position
and results of operations.  Subsequent events have been evaluated
through November 9, 2009, which is the date on which the financial statements
were issued.




NOTE  2  —  Patents
and Patent Applications




As of
September 30, 2009, the Company had approximately $1,109,000 in capitalized
patent and patent application costs reflected on its balance
sheet.  This entire amount relates to patent and patent application
costs for Androxal®.




Due to
the clinical hold on Proellex® and the uncertainty of future cash flows related
to the Proellex® patent applications, the Company recorded an impairment charge
of approximately $957,000 in the third quarter of 2009 related to these patent
applications.  Additionally, the Company concluded that it will no
longer seek to protect the specific matter covered in one Androxal® patent
application and recorded an impairment charge of approximately $32,000 to
abandon this patent application.  These charges were recorded in
Research and Development expenses on the consolidated statement of
operations.  The remaining capitalized patent and patent application
costs relating to Androxal® can continue to be used, outlicensed or sold to
third parties for at
leastan
amount management believes is sufficient to recover the carrying value of the
capitalized patent costs.




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, 2009
                  
                  
                  December
      31, 2008Research
      and development costs
                  
                  $
                  240
                  
                  
                  $
                  1,573Payroll
                  
                  
                  202
                  
                  
                  
                  123Patent
      costs
                  
                  
                  —
                  
                  
                  
                  81Other
                  
                  
                  239
                  
                  
                  
                  80Total
                  
                  $
                  681
                  
                  
                  $
                  1,857





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.




The
following table presents information necessary to calculate loss per share for
the three-month and nine-month periods ended September 30, 2009 and 2008 (in
thousands, except per share amounts):


13




Three Months Ended Sept.
30,
                
                
                Nine Months Ended Sept. 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      Loss
                
                $
                (10,244
                )
                
                $
                (6,579
                )
                
                $
                (25,887
                )
                
                $
                (19,345
                )Average
      common shares outstanding
                
                
                15,503
                
                
                
                12,775
                
                
                
                15,286
                
                
                
                12,775Basic
      and diluted loss per share
                
                $
                (0.66
                )
                
                $
                (0.51
                )
                
                $
                (1.69
                )
                
                $
                (1.51
                )




Other
potential common stock of 2,209,608 and 1,743,565 for the periods ended
September 30, 2009 and 2008, respectively, were excluded from the above
calculation of diluted loss per share because they were not
dilutive.




NOTE
5  —   CommitmentsandContingencies




On
October 29, 2009, we entered into a Master Settlement Agreement and Releases
(the “Settlement Agreement”) with certain trade creditors, pursuant to which we
agreed to issue up to an aggregate of 5,503,843 shares of our common
stock, at $1.10 per share, and pay up to an aggregate of approximately
$2.85 million in cash to such creditors as payment in full for our
then-outstanding liabilities of approximately $8.9 million and for the release
of the claims held by and the dismissal of the litigation commenced by such
creditors against the Company.  Under the Settlement Agreement, we
agreed to use our best efforts to prepare and file a registration statement to
register such shares issued to the creditors, to use our best efforts to have
such registration statement declared effective as soon as possible, and to
maintain such registration statement until all such shares registered thereunder
to the creditors have been sold or for a period of one year, whichever comes
first.  We also agreed to refrain from (i) filing any other
registration statement for any primary public offering or other offering of our
equity securities prior to filing such registration statement with the
Securities and Exchange Commission and (ii) selling any shares for any primary
public offering or other offering of our equity securities during the ten
business days immediately following the effective date of such registration
statement, in order to provide such creditors an opportunity to sell their
shares issued under the Settlement Agreement.




Repros'
Androxal® product candidate and its uses are covered in the United States by two
issued U.S. patents and seven pending patent applications.  Foreign
coverage of Repros' Androxal® product candidate includes 34 issued foreign
patents and 69 foreign pending patent applications.  The issued
patents and pending applications relate to methods and compositions 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, Repros believes that
the amended claims are invalid based on additional prior art publications, and
its request for re-examination by the PTO in light of a number of these
additional publications and other publications cited by the PTO, has been
granted.  All of the claims challenged by Repros have been finally
rejected in the re-examination and the patent holder has appealed the rejections
to the PTO Board of Patent Appeals and Interferences (“the Board”).  A
decision has been rendered by the Board affirming the rejection of all of the
claims.  The patent owner has filed a request for
rehearing.  If the Board maintains the rejections on rehearing or the
request for rehearing is denied, the Patentee will have the opportunity to
appeal the rejections to the United States Court of Appeals for the Federal
Circuit.  Repros also believes 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, Repros 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, Repros may not
be able to successfully commercialize or out-license Androxal®.


14




On
October 2, 2009, a vendor of the Company filed a lawsuit naming the Company as a
defendant.  The lawsuit claimed the Company owed it $294,718 in
accordance with the terms of its agreement with the Company.  To date,
no proceedings of any kind have occurred in the lawsuit.  The full
amount of this claim is accrued
as of September 30, 2009 and recorded in Research and Development expenses on
the consolidated statement of operations.  The Company has
retained counsel to assist it in defending these actions.




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 alleges that the defendants made certain
misleading statements related to the Company’s Proellex drug.  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.  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.  During the week of October 5, 2009, various
shareholders filed motions to consolidate the pending actions and to be
appointed as lead plaintiff.  The lawsuits have now been consolidated
but a lead plaintiff has not yet been appointed.  No ruling on these
motions has occurred.  Our bylaws require us to indemnify our officers
in certain proceedings, subject to certain limited
exceptions.    In addition, each of our directors has an
indemnification agreement with the Company providing for certain additional
indemnification benefits for such persons in the event of a
lawsuit.  As a result of the class action lawsuits, we are obligated
to pay for certain costs and expenses (including legal fees) of our officers and
directors and may be liable for substantial damages, costs and expenses if such
class action is successful.   Additionally, such class action
lawsuit is covered by the Company's director and officer insurance
policy.  In the event there is an adverse judgment against the Company
in such lawsuit, the Company's insurance coverage may not be adequate to cover
such judgment.




In December 2008, Repros committed to
the purchase of at least $3 million of the bulk active ingredient of Proellex®
which was to be produced under a new scaled-up amended manufacturing process by
Gedeon Richter.  Under this Purchase Request, as amended, the Company
paid $750,000 in the first quarter of 2009 and $750,000 in the second quarter of
2009.  As of June 30, 2009, $1.5 million was reflected under Prepaid
Expenses and Other Current Assets on the balance sheet.  Repros was
obligated to make two additional payments of $750,000 each for the final two
batches of Proellex® to be delivered in the third and fourth quarters of
2009.  As of September 4, 2009 this agreement was terminated and the
remaining two payments due to Gedeon Richter were
waived.  Additionally, Repros accepted the material produced through
this date and as a result expensed the $1.5 million prepaid asset to R&D
Expense.




NOTE
6  —   Other Recent Events




On September 16, 2009, the Company and
Louis Ploth, Jr. agreed that Mr. Ploth will no longer serve as Chief Financial
Officer of the Company.  Effective August 31, 2009, Mr. Ploth has
taken a leave of absence due to medical reasons through February 28,
2010.  Mr. Ploth will continue to be treated as an employee of the
Company until such date, at which time his employment with the Company will be
terminated.




On
October 29, 2009, Katherine Anderson was engaged as the Chief Accounting Officer
of the Company.




Effective October 29, 2009, Dr. Paul
Lammers, resigned his position of President.


15


Effective October 30, 2009 Repros
eliminated the position of Senior Vice President of Regulatory and Clinical
Affairs held by Dr. Andre van As.  The Company is obligated to pay Dr.
van As, under his employment contract, salary and benefits for six months;
Repros will record a charge in the fourth quarter for these severance cost, but
they will not be material to our results of operations.  Dr. Jean
Fourcroy, member of Repros’ Board of Directors and former Medical Office at the
FDA’s Division of Reproductive and Urological Products, has agreed to serve as
Company’s Chief Medical Officer on an as needed basis.


16


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”, or “we,” “us” or “our”), was organized as a
Delaware corporation 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 associated with male and female reproductive
disorders.  The clinical trials relating to Proellex® have been placed
on clinical hold by the FDA due to safety-related concerns resulting from
elevated liver enzymes in a number of patients enrolled in the clinical
trials.  Completion of our ongoing clinical trial activities relating
to our other product candidate, Androxal®, is subject to, among other things,
adequate cash being available.





As of
September 30, 2009, we had accumulated losses of $173.1 million, approximately
$2.5 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $12.2 million.  As a result of the October
29, 2009 settlement agreement with certain  of our creditors to issue
them shares of our common stock and cash as payment in full for our
then-outstanding liabilities with such creditors (as described below),
subsequent to September 30, 2009, we have reduced the amount of our accounts
payable and accrued expenses by approximately $8.9
million.    Notwithstanding, the amount of cash on hand is
not sufficient to continue to fund our ongoing clinical trials of Androxal®,
complete all necessary activities relating to the suspension of our clinical
trial program for Proellex®, and pay our accounts payable and accrued expenses
as well as our normal corporate overhead and expenses.





Effective
August 16, 2009, we adopted a 50% salary reduction program for all salaried
employees in an effort to reduce expenses while maintaining our current effort
without diminution.  Since then we have also reduced our employee
headcount to 5 full time employees as of November 9, 2009.





On
September 11, 2009, we completed a direct registered offering of 1.5 million
shares of our common stock at a purchase price of $0.65 per share for aggregate
proceeds after expenses of approximately $869,000.  On October 13,
2009, we completed a direct registered offering of 3.5 million shares of our
common stock at a purchase price of $1.27 per share for aggregate proceeds after
expenses of approximately $4.1 million.  Such registered direct
offerings resulted in an aggregate of approximately $5.0 million net proceeds to
us.




On
September 16, 2009, the Company and Louis Ploth, Jr. agreed that Mr. Ploth will
no longer serve as Chief Financial Officer of the Company.  Effective
August 31, 2009, Mr. Ploth has taken a leave of absence due to medical reasons
through February 28, 2010.  Mr. Ploth will continue to be treated as
an employee of the Company until such date, at which time his employment with
the Company will be terminated.




17




On
October 29, 2009, Katherine Anderson was engaged as the Chief Accounting Officer
of the Company.




Effective
October 29, 2009, Dr. Paul Lammers, resigned his position of
President.




On
October 29, 2009, we entered into a Master Settlement Agreement and Releases
(the “Settlement Agreement”) with certain trade creditors, pursuant to which we
agreed to issue up to an aggregate of 5,503,843 shares of our common stock,
at $1.10 per share and pay up to an aggregate of approximately $2.85
million in cash to such creditors as payment in full for our then-outstanding
liabilities of approximately $8.9 million and for the release of the claims held
by and the dismissal of the litigation commenced by such creditors against the
Company.   Under the Settlement Agreement, we agreed to use our
best efforts to prepare and file a registration statement to register such
shares issued to the creditors, to use our best efforts to have such
registration statement declared effective as soon as possible, and to maintain
such registration statement until all such shares registered thereunder to the
creditors have been sold or for a period of one year, whichever comes
first.  We also agreed to refrain from (i) filing any other
registration statement for any primary public offering or other offering of our
equity securities prior to filing such registration statement with the
Securities and Exchange Commission and (ii) selling any shares for any primary
public offering or other offering of our equity securities during the ten
business days immediately following the effective date of such registration
statement, in order to provide such creditors an opportunity to sell their
shares issued under the Settlement Agreement.




Effective
October 30, 2009 Repros eliminated the position of Senior Vice President of
Regulatory and Clinical Affairs held by Dr. Andre van As.  The Company
is obligated to pay Dr. van As, under his employment contract, salary and
benefits for six months.  Dr. Jean Fourcroy, a member of Repros’ Board
of Directors and former Medical Office at the FDA’s Division of Reproductive and
Urological Products, has agreed to serve as Company’s Chief Medical Officer on
an as needed basis.





Despite
the above-mentioned actions we have taken to raise capital and reduce our
liabilities, we continue to explore potential additional financing alternatives
that may allow us to maintain our current reduced level of operations; 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 continue development of either of our product
candidates.  Failure to raise sufficient funds in the immediate
short-term as described above will likely result in the filing of bankruptcy and
dissolution of the Company.





Proellex®
Clinical Hold




On August
6, 2009, we announced that the Company received verbal notice from the United
States Food and Drug Administration (FDA) during a teleconference with the
Division of Reproductive and Urologic Products that the Company's
Investigational New Drug Applications (INDs) for Proellex® had been placed on
clinical hold for safety reasons.  This action followed the Company's
voluntary decision to suspend dosing of all patients in its clinical trials of
Proellex® after discovering elevated liver enzymes in a number of patients
enrolled in the clinical trials.


18


The
Company and the FDA held a teleconference to discuss the safety of Proellex® and
the overall direction and scope of the Company's clinical trials of Proellex® on
September 23, 2009. During the meeting the Company updated the FDA with
information about the patients who experienced a “Serious Adverse Event” and
still had, as of that date, elevated liver enzymes.  The Company
reported that the available data indicated that the majority of the patients
that had experienced an SAE associated with elevated liver enzymes had returned
to normal levels. Those that had not yet returned to normal were trending
towards normal and the prognosis for a complete recovery was
good.  The FDA also outlined additional information the Company would
need to provide to the Agency in order to lift the clinical hold. One of the
most important requirements was that the Company provide data from its existing
clinical results that would suggest at what level of exposure liver enzyme
issues could be avoided. The Company intends to provide that information as soon
as possible but there can be no assurance that even if a safe level is suggested
that the FDA will lift the hold or that such low level will be efficacious in
treating the intended indications.




If the
FDA were to lift the clinical hold on Proellex® and if the FDA requires a lower
dosage of Proellex® to be used for future clinical trials, the Company would be
required to commence Phase 2 studies again with the required lower dosage,
thereby resulting in extensive additional costs and delays.




Deficiency
Letters from The NASDAQ Global Market




On August
7, 2009, the Company received a letter from The NASDAQ Stock Market advising
that the Company’s market value was below the minimum $50,000,000 requirement
for continued listing on the NASDAQ Global Market.  The Company is
provided 90 days, until November 5, 2009, to regain compliance, at which time we
have been advised that the Company’s securities will be delisted from such
market unless the market value of the Company’s securities listed on NASDAQ is
$50,000,000 or more for a minimum of 10 consecutive business
days.  The letter also recited that the Company’s total assets and
total revenue fell below certain required thresholds under related rules and
suggested that the Company consider applying for transfer of its securities to
the NASDAQ Capital Market, which has substantially lower listing
requirements.  On September 15, 2009, the Company received a second
letter from The NASDAQ Stock Market advising that, in addition to the
deficiencies previously disclosed on August 7, 2009, the Company’s market value
of publicly held shares was below the minimum $15,000,000 requirement for
continued listing on The NASDAQ Global Market by NASDAQ Listing Rule
5450(b)(2)(C) or 5450(b)(3)(C).  The Company is provided 90 days,
until December 14, 2009, to regain compliance, at which time we have been
advised that the Company’s securities will be delisted from such market unless
the Company’s market value of publicly held shares is $15,000,000 or more for a
minimum of 10 consecutive business days.  The Company is still
required to regain compliance with the maintenance requirements set forth in the
prior notice it received by November 5, 2009.  The letter also
suggested that the Company consider applying for transfer of its securities to
The NASDAQ Capital Market, which has substantially lower listing
requirements.




On
November 6, 2009, the Company received notification from NASDAQ that it has not
regained compliance with NASDAQ Listing Rules 5450(b)(2)(A) or 5450(b)(3)(A)
and, unless the Company appeals NASDAQ’s decision, its securities will be
delisted from the NASDAQ Global Market.  Repros intends to appeal
NASDAQ’s determination to delist its securities or, alternatively, to request to
have its securities moved to the NASDAQ Capital Market.  There can be
no assurance that either of these strategies will be
successful.




Shareholder
Class Action Lawsuits




See Item
1 to Part II of this Form 10-Q for a complete description of recent class action
lawsuits filed against the Company and certain of its
officers.


19


Possible
Bankruptcy Filing




If we are
unable to raise or generate sufficient capital to fully address the
uncertainties of our financial position, we may be unable to realize value from
our assets and discharge our liabilities in the normal course of business and we
may need to seek protection under the provisions of the U.S. Bankruptcy
Code.  In that event, we may seek to reorganize our business, or we or
a trustee appointed by the court may be required to liquidate our assets. If we
needed to liquidate our assets, we would likely realize significantly less from
them than the values at which they are carried on our financial statements. The
funds resulting from the liquidation of our assets would be used first to pay
the debt owed to any secured and unsecured creditors before any funds would be
available to our stockholders, and any shortfall in the proceeds would directly
reduce the amounts available for distribution, if any, to our creditors and to
our stockholders.




Effect
on National Institutes of Health (“NIH”) License for Proellex




On
October 28, 2009 the Company amended its exclusive license with the NIH dated
April 16, 1999.  This seventh amendment extends the time period by
which the Company is required to obtain certain financing and/or licensing
consideration.  In addition, the seventh amendment allows the
Company time to attempt to lift the clinical hold on Proellex® for purposes
of proceeding with a lower dose program.  If the clinical hold is lifted,
the Company must reach certain developmental milestones for such lower dose
program, such as commencing   Phase II and III
studies and obtaining U. S. FDA approval for treatment of uterine fibroids,
each by a specified date.  In the event the  FDA does not
approve Proellex® for further clinical trials, at a lower dosage, by a
certain date, the Company is required to identify a second generation
compound from those covered by the original Exclusive License Agreement, and the
Company must reach certain developmental milestones for such second generation
compound, such as completing Phases I, II and III studies of such second
generation compound, each by a specified date.  Even
though such amendment allows the Company additional time to reach such
benchmarks, there can be no assurance that the Company will be successful
in obtaining such financing, that the FDA will agree to allow the Company
to resume clinical trials at a lower dosage or that the Company will be
successful in identifying a second generation drug.  In addition, the
license may be terminated by the NIH immediately upon notice to the Company
following a filing of a petition in bankruptcy or a letter from the Company to
the NIH stating that it is insolvent.  In the event that any of the
conditions contained in the license agreement for termination by the NIH are
triggered, the Company's license agreement may be terminated and the Company
would lose its exclusive rights to Proellex®.  Any such termination of
the license agreement could have a material adverse effect on the Company's
financial position and results of operations, and in such event, the value of
the Company's common stock may be materially adversely affected.




Our
current product candidates consist of the following:





Androxal®
(male reproductive health)





We
believe our product candidate for male reproductive health, Androxal®, is a new
chemical entity. 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 who want to maintain their
fertility while being treated for their low testosterone condition. During the
second quarter of 2008, we initiated a Phase 2b proof-of-concept clinical trial
in which we are monitoring 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. We anticipate
submitting a request for a Type C meeting with the FDA in the fourth quarter of
2009 and holding a meeting with the FDA at a later date, provided that
sufficient funds can be raised to continue development of this product. 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.  At this time it is too early in the
clinical development process to estimate when or even if an NDA for
Androxal® will be
submitted for this indication.


20


In April
2008, we submitted a White Paper, based on the results from a previously
conducted non-pivotal Phase 2 clinical trial with Androxal® for the treatment of
testosterone deficiency due to secondary hypogonadism, to the FDA's Division of
Reproductive and Urology Products. The data demonstrated that in subjects with
serum glucose levels of greater than 105 mg/dL, there was a statistically
significant reduction in fasting serum glucose and a higher response rate in the
treatment group with Androxal® as compared with groups receiving either placebo
or Androgel®, the current standard of care for the treatment of testosterone
deficiency. In November 2008, after the FDA reviewed this paper we received
guidance 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. Provided that sufficient cash is available, we
plan to submit a new IND for this indication to the DMEP in the fourth quarter
of 2009. Should we raise adequate funds to continue our operations, we
anticipate conducting a Phase 2b proof-of-concept clinical trial with Androxal®
for glucose regulation after receiving additional feedback from the FDA. At this
time it is too early in the clinical development process to estimate when or
even if a NDA for Androxal® will be submitted for this indication. The plan to
develop Androxal® in this new indication replaces our previously announced plan
to develop Androxal® in men with adult-onset idiopathic hypogonadotrophic
hypogonadism, or AIHH, with concomitant plasma glucose and lipid elevations, all
of which are components of Metabolic Syndrome.




We were
previously developing Androxal® in the United States to treat testosterone
deficiency due to secondary hypogonadism by restoring normal testosterone
production in males with functional testes and diminished pituitary function, a
common condition in the aging male. After a Type "C" meeting held with the FDA
on October 15, 2007, we believed that there was no clear clinical path to
develop Androxal® for this indication in the U.S. Androxal® might be developed
outside of the U.S. for this indication if our future financial resources are
sufficient.




Proellex®
(female reproductive health)





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.  However, as a result of the recent liver toxicity
exhibited by Proellex®, all ongoing clinical trial activities have been put on
hold by the FDA.  There is currently no FDA-approved orally
administered drug treatment for the long-term treatment of uterine fibroids or
endometriosis.




Our
estimates regarding the timing of our Proellex® clinical development program are
completely on hold at this time in light of the FDA clinical hold and our recent
discontinuation of ongoing clinical trials. In addition, any future development
efforts are totally dependent on our ability to raise sufficient capital or find
an appropriate partner to proceed and on decisions by the FDA regarding the
current clinical hold on Proellex® clinical trials. If the FDA were to lift the
clinical hold on Proellex®, and if the FDA requires a lower dosage of Proellex®
to be used for future clinical trials, the Company would be required to commence
Phase 2 studies again with the required lower dosage, thereby resulting in
extensive additional costs and delays. The length of time required to complete
Phase 1, Phase 2 and Phase 3 clinical trials and long-term Open Label Safety
Trials may vary substantially according to factors relating to the particular
trial, such as the type and intended use of the drug candidate, the clinical,
trial design and the ability to enroll suitable patients. We have also, in the
past, had difficulty recruiting patients into our Proellex® clinical trials
primarily due to the various test procedures that are required, including
multiple endometrial biopsies. Recruiting patients would likely be even more
difficult due to the recent liver toxicity exhibited by
Proellex®.


21


Business Strategy




Our immediate short-term business
objective is to concentrate our remaining resources on ensuring the safety of
those patients recently discontinued from the suspended Proellex® studies.
Provided we are able to obtain sufficient funds to continue our business, we
plan to focus our clinical program on Androxal® to determine if a clear clinical
path can be realized with the FDA.




Should
the FDA permit the resumption of the Proellex® clinical trials, we will assess
whether there are sufficient funds available to continue development ourselves
of such product candidate or whether such program would be more appropriately
funded by a corporate partner.  Therefore, 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 a corporate partnering opportunity will be
found.




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, 2008 and the section entitled "Risk
Factors" in this quarterly report.  We are exploring various financing
alternatives to address our immediate short term liquidity needs. 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 immediate short term liquidity 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, a
bankruptcy filing or the liquidation of the Company.




In
addition, we have recently suspended dosing in the clinical trials of Proellex®,
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 cannot resume dosing in the clinical trials of
Proellex® or 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, 2009, we
had an accumulated deficit of approximately $173.1 million, accounts payable and
accrued expenses of approximately $12.2 million and cash and cash equivalents of
approximately $2.5 million.  As a result of the October 29,
2009 settlement agreement with certain  of our creditors to issue
them shares of our common stock and cash as payment in full for our
then-outstanding liabilities with such creditors (as described below), we have
reduced the amount of our accounts payable and accrued expenses by approximately
$8.9 million.  Notwithstanding, there is a 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.


22


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 SEC.




General




The
clinical development of pharmaceutical products is a complex undertaking, and
many products that begin the clinical development process do not obtain
regulatory approval.  The costs associated with our clinical trials
may be impacted by a number of internal and external factors, including the
recent clinical hold put on our clinical trials relating to Proellex® by the
FDA, the number and complexity of clinical trials necessary to obtain regulatory
approval, the number of eligible patients necessary to complete our clinical
trials and any difficulty in enrolling these patients, and the length of time to
complete our clinical trials.  Given the uncertainty of these
potential costs, we recognize that the total costs we will incur for the
clinical development of our product candidates may exceed our current
estimates.  Any failure by us to reestablish safe dosing in the
clinical trials of Proellex®, to obtain, or any delay in
obtaining, regulatory approvals could cause our research and development
expenditures to increase and, in turn, have a material adverse effect on our
results of operations.




As with
most biotechnology companies with drug candidates in development, the path to
marketing approval by the FDA, and comparable foreign agencies for each such
candidate, is long and uncertain. The regulatory process, both domestically and
abroad, is a multi-year process with no certainty when and if a drug candidate
will be approved for commercial use. The development path for a particular drug
candidate typically includes a variety of clinical trials. While we have a
general estimate of the timeframe for our clinical trials, the actual
anticipated completion dates for each of our drug candidates are uncertain. The
length of time for a clinical trial may vary substantially according to factors
relating to the particular clinical trial, such as the type and intended use of
the drug candidate, the clinical trial design and the ability to enroll suitable
patients.  A product may be put on clinical hold by the FDA in order
for them to assess the safety of the product, similar to that which has happened
with respect to Proellex®,with the result
that previous estimates for clinical trial completion and related NDA filings
get missed.  In addition, it may be necessary to undertake additional
unanticipated clinical trials during the development path, particularly with
respect to the recent findings relating to the increase in liver enzymes
observed in our Proellex®clinical
trials.  Alternatively, many products that are placed on clinical hold
by the FDA may never be released from such hold.




We will
not receive any revenue from commercial sales unless we, or a potential partner,
complete the clinical development process, obtain regulatory approval, and
successfully commercialize one or more of our product
candidates.  Similarly, we do not have a reasonable basis to predict
when or if material net cash inflows from the commercialization and sale of our
drug candidates will occur.  To date, we have not commercialized any
of our drug candidates to any material extent and in fact may never do
so.




Our
results of operations may vary significantly from quarter to quarter and year to
year, and depend on, among other factors, 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 generally exceeded revenue in any
particular period and/or fiscal year.




23


For a
discussion of the risks and uncertainties associated with the timing and costs
of completing the development and commercialization of the Company's drug
candidates, see the section titled "Item 1A.  Risk Factors" in this
quarterly report.




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 commitments associated with
suspending our clinical trials for Proellex® and other existing and projected
obligations and expenditures, we believe that we will have spent our remaining
cash and cash equivalents before the end of the first quarter of 2010 absent
additional financings, and we will need to raise additional capital immediately
in order to continue our development activities and operations.  In
the event that we are unable to obtain adequate financing to meet our immediate
short term liquidity needs, we will pursue other options, including but not
limited to, additional reductions of expenses, sale of the Company, sale or
license of a portion or all of our assets, a bankruptcy filing or the
liquidation of 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.




As stated
above, we have reduced our headcount to 5 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 50% salary
reduction program we adopted could have a negative impact on our ability to
retain our remaining 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, 2009 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, and the issuance of unregistered shares as part of the
October 29, 2009 Settlement Agreement 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.




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, among
other things, on 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, our 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 or that profitability, if achieved, can be sustained.




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.


24


Capitalized
Patent and Patent Application Costs




We
capitalize the cost associated with building our patent library for Proellex®
and Androxal®.  As of September 30, 2009, other assets consist of
capitalized patent and patent application costs in the amount of
$1,109,000.  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 $13,000 and $7,000 for the
three month period ended September 30, 2009 and 2008, respectively and was
$39,000 and $15,000 for the nine month period ended September 30, 2009 and 2008,
respectively.  The entire $1,109,000 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.




Due to
the clinical hold on Proellex® and the uncertainty of future cash flows related
to the Proellex patent applications, the Company recorded an impairment charge
of approximately $957,000 in the third quarter of 2009 related to these patent
applications.  Additionally, the Company concluded that it will no
longer seek to protect the specific matter covered in one Androxal patent
application and recorded an impairment charge of approximately $32,000 to
abandon this patent application.  These charges were recorded in
Research and Development expenses on the consolidated statement of
operations.  The remaining capitalized patent and patent application
costs relating to Androxal can continue to be used, outlicensed or sold to third
parties for at leastan
amount management believes is sufficient to recover the carrying value of the
capitalized patent costs.




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.  Since the clinical trials for Proellex have been put on
clinical hold by the FDA, we have focused our activities on closing down the
studies, and obtaining safety evaluations on all patients exiting the clinical
trials. While most of the costs to close out the studies have been invoiced to
us as of September 30, 2009, we continue to evaluate certain claims by a few
vendors as to the amounts due and we have accrued our best estimate for these
claims.  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.


25


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, 2009, 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, and the
issuance of unregistered shares as part of the October 29, 2009 Settlement
Agreement 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.




Recent
Accounting Pronouncements




In
September 2006, FASB issued new accounting guidance which defines fair value,
established a framework for measuring fair value in generally accepted
accounting principles and expanded disclosures about fair value
measurements.  This guidance is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years.  In February 2008, the FASB deferred the
effective date of this new guidance for all nonfinancial assets and nonfinancial
liabilities to fiscal years beginning after November 15, 2008.  The
implementation of this guidance for financial assets and financial liabilities,
effective January 1, 2008, did not have a material impact on Repros'
consolidated financial position and results of operations.  The
implementation of this guidance for nonfinancial assets, effective January 1,
2009, and nonfinancial liabilities did not have a material impact on the
Company's consolidated financial position and results of
operations.


26


In May
2009, the FASB issued new accounting guidance on management's assessment of
subsequent events and incorporates this guidance into accounting
literature.  This guidance is effective prospectively for interim and
annual period ending after June 15, 2009.  The implementation of this
standard did not have a material impact on our consolidated financial position
and results of operations.  Subsequent events have been evaluated
through November 9, 2009, which is the date on which the financial statements
were issued.




Results
of Operations




Comparison
of the three-month and nine-month periods ended September 30, 2009 and
2008




Revenues
and Other Income




Total
revenues and other income, which was comprised of interest income for the three
month and nine month periods ended September 30, 2009 and 2008, decreased 100%
to zero for the three month period ended September 30, 2009 as compared to
$45,000 for the same period in the prior year and decreased 99% to $4,000 for
the nine month period ended September 30, 2009 as compared to $405,000 for the
same period in the prior year.  The decrease for the three and nine
month periods ended September 30, 2009 was primarily due to lower combined cash,
cash equivalents and marketable securities balances and reduced interest rate
yields that have occurred as we moved our cash investments solely into a money
market mutual fund.




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 increased 41% or
approximately $2.4 million to $8.3 million for the three month period ended
September 30, 2009 as compared to $5.9 million for the same period in the prior
year.  Our primary R&D expenses for the three month periods ended
September 30, 2009 and 2008 are shown in the following table (in
thousands):




Research and Development
                          
                          Three-months
                            Sept. 30, 2009
                          
                          
                          Three-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Androxal®
      clinical development
                          
                          $
                          64
                          
                          
                          $
                          315
                          
                          
                          $
                          (251
                          )
                          
                          
                          (80
                          )%Proellex®
      clinical development
                          
                          
                          6,323
                          
                          
                          
                          4,943
                          
                          
                          
                          1,380
                          
                          
                          
                          28
                          %Payroll
      and benefits
                          
                          
                          344
                          
                          
                          
                          320
                          
                          
                          
                          24
                          
                          
                          
                          8
                          %Operating
      and occupancy
                          
                          
                          1,551
                          
                          
                          
                          296
                          
                          
                          
                          1,255
                          
                          
                          
                          424
                          %Total
                          
                          $
                          8,282
                          
                          
                          $
                          5,874
                          
                          
                          $
                          2,408
                          
                          
                          
                          41
                          %





R&D
expenses increased 24% or approximately $4.3 million to $21.8 million for the
nine month period ended September 30, 2009 as compared to $17.5 million for the
same period in the prior year.  Our primary R&D expenses for the
nine month periods ended September 30, 2009 and 2008 are shown in the following
table (in thousands):


27





Research and Development
                          
                          Nine-months
                            Sept. 30, 2009
                          
                          
                          Nine-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Androxal®
      clinical development
                          
                          $
                          775
                          
                          
                          $
                          2,392
                          
                          
                          $
                          (1,617
                          )
                          
                          
                          (68
                          )%Proellex®
      clinical development
                          
                          
                          17,794
                          
                          
                          
                          13,299
                          
                          
                          
                          4,495
                          
                          
                          
                          34
                          %Payroll
      and benefits
                          
                          
                          1,170
                          
                          
                          
                          804
                          
                          
                          
                          366
                          
                          
                          
                          46
                          %Operating
      and occupancy
                          
                          
                          2,026
                          
                          
                          
                          1,019
                          
                          
                          
                          1,007
                          
                          
                          
                          99
                          %Total
                          
                          $
                          21,765
                          
                          
                          $
                          17,514
                          
                          
                          $
                          4,251
                          
                          
                          
                          24
                          %




To date through September 30, 2009 we
have incurred approximately $54.5 million for the development of Proellex® and
approximately $14.4 million for the development of Androxal®.  These
accumulated costs exclude any internal operating expenses.  Before the
recent clinical hold on further Proellex® development 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.  We are currently developing Androxal®
as a treatment for men with low testosterone that want to maintain their
fertility.  In addition, we are exploring the feasibility of
developing Androxal® as a treatment for type 2 diabetes.  Prior to
2008, we were developing Androxal® as a treatment for men with low testosterone
due to secondary hypogonadism.




Androxal®




Androxal®
clinical development expenses decreased 80% or approximately $251,000 to $64,000
for the three month period ended September 30, 2009 as compared to $315,000 for
the same period in the prior year.  The decrease in Androxal® clinical
development expenses is shown in the following table (in
thousands):




Androxal® Clinical
                            Development
                          
                          Three-months
                            Sept. 30, 2009
                          
                          
                          Three-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Clinical
      trials
                          
                          $
                          28
                          
                          
                          $
                          191
                          
                          
                          $
                          (163
                          )
                          
                          
                          (85
                          )%Preclinical
      studies
                          
                          
                          —
                          
                          
                          
                          95
                          
                          
                          
                          (95
                          )
                          
                          
                          (100
                          )%Formulation
      and dosage
                          
                          
                          8
                          
                          
                          
                          29
                          
                          
                          
                          (21
                          )
                          
                          
                          (72
                          )%Other
                          
                          
                          28
                          
                          
                          
                          —
                          
                          
                          
                          28
                          
                          
                          
                          100
                          %Total
                          
                          $
                          64
                          
                          
                          $
                          315
                          
                          
                          $
                          (251
                          )
                          
                          
                          (80
                          )%





Androxal®
clinical development expenses decreased 68% or approximately $1.6 million to
$775,000 for the nine month period ended September 30, 2009 as compared to $2.4
million for the same period in the prior year.  The decrease in
Androxal® clinical development expenses is shown in the following table (in
thousands):




Androxal® Clinical
                            Development
                          
                          Nine-months
                            Sept. 30, 2009
                          
                          
                          Nine-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Clinical
      trials
                          
                          $
                          384
                          
                          
                          $
                          1,101
                          
                          
                          $
                          (717
                          )
                          
                          
                          (65
                          )%Preclinical
      studies
                          
                          
                          282
                          
                          
                          
                          1,119
                          
                          
                          
                          (837
                          )
                          
                          
                          (75
                          )%Formulation
      and dosage
                          
                          
                          19
                          
                          
                          
                          154
                          
                          
                          
                          (135
                          )
                          
                          
                          (88
                          )%Other
                          
                          
                          90
                          
                          
                          
                          18
                          
                          
                          
                          72
                          
                          
                          
                          400
                          %Total
                          
                          $
                          775
                          
                          
                          $
                          2,392
                          
                          
                          $
                          (1,617
                          )
                          
                          
                          (68
                          )%


28


Prior to
2008 we were developing Androxal® as a treatment for testosterone deficiency due
to secondary hypogonadism by restoring normal testosterone production in males
with functional testes.  As a result of a Type "C" meeting held with
the Food and Drug Administration, or FDA, on October 15, 2007, we discontinued
clinical efforts for that indication.  During 2008 we initiated a
clinical development program with Androxal® as a treatment for men being treated
for low testosterone that want to maintain their fertility.




Clinical
trial expenses during the three and nine month periods ended September 30, 2009
primarily reflect a Phase 2b proof-of-concept clinical
trial.  Clinical trial expenses during the three and nine month
periods ended September 30, 2008 primarily reflect a long-term Open Label Safety
study.  Preclinical study expenses for both three and nine month
periods ended September 30, 2009 and 2008 reflect animal safety activities
required by the FDA to file a NDA.




Proellex®




Proellex®
clinical development expenses increased 28% or approximately $1.4 million to
$6.3 million for the three month period ended September 30, 2009 as compared to
$4.9 million for the same period in the prior year.  The increase in
Proellex® clinical development expenses is shown in the following table (in
thousands):





Proellex® Clinical
                            Development
                          
                          Three-months
                            Sept. 30, 2009
                          
                          
                          Three-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Clinical
      trials
                          
                          $
                          4,379
                          
                          
                          $
                          4,322
                          
                          
                          $
                          57
                          
                          
                          
                          1
                          %Preclinical
      studies
                          
                          
                          40
                          
                          
                          
                          238
                          
                          
                          
                          (198
                          )
                          
                          
                          (83
                          )%Formulation
      and dosage
                          
                          
                          1,650
                          
                          
                          
                          327
                          
                          
                          
                          1,323
                          
                          
                          
                          405
                          %Other
                          
                          
                          254
                          
                          
                          
                          56
                          
                          
                          
                          198
                          
                          
                          
                          354
                          %Total
                          
                          $
                          6,323
                          
                          
                          $
                          4,943
                          
                          
                          $
                          1,380
                          
                          
                          
                          28
                          %





Proellex®
clinical development expenses increased 34% or approximately $4.5 million to
$17.8 million for the nine month period ended September 30, 2009 as compared to
$13.3 million for the same period in the prior year.  The increase in
Proellex® clinical development expenses is shown in the following table (in
thousands):





Proellex® Clinical
                            Development
                          
                          Nine-months
                            Sept. 30, 2009
                          
                          
                          Nine-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Clinical
      trials
                          
                          $
                          14,522
                          
                          
                          $
                          10,823
                          
                          
                          $
                          3,699
                          
                          
                          
                          34
                          %Preclinical
      studies
                          
                          
                          486
                          
                          
                          
                          1,519
                          
                          
                          
                          (1,033
                          )
                          
                          
                          (68
                          )%Formulation
      and dosage
                          
                          
                          2,117
                          
                          
                          
                          731
                          
                          
                          
                          1,386
                          
                          
                          
                          190
                          %Other
                          
                          
                          669
                          
                          
                          
                          226
                          
                          
                          
                          443
                          
                          
                          
                          196
                          %Total
                          
                          $
                          17,794
                          
                          
                          $
                          13,299
                          
                          
                          $
                          4,495
                          
                          
                          
                          34
                          %




Prior to
2008 we were developing Proellex® for two indications which included a chronic
treatment of symptoms associated with uterine fibroids and
endometriosis.  During the first quarter of 2008 we filed an IND with
Proellex® for a new indication as a short course pre-surgical treatment of
anemia associated with uterine fibroids. On August 3, 2009, we suspended all
ongoing clinical trials of Proellex® pending resolution of certain safety issues
relating to such trials as described more fully above.  Proellex®
clinical expenses for the three and nine month periods ended September 30, 2009
include Phase 1, Phase 2, Phase 3 and long-term Open Label Safety study
activities and costs to close out all clinical trials of
Proellex®.


29


Preclinical
study expenses reflect animal safety activities required by the FDA to file a
NDA.  Formulation and dosage expenses reflect activities associated
with the bulk scale-up and purchase of active drug to conduct clinical trials
and to meet any potential future NDA submission requirements.




Formulation
and dosage expenses for the three and nine month periods ended September 30,
2009 includes a charge for $1.5 million previously reflected in Prepaid Expense
and Other Current Assets in conjunction with our commitment to purchase the bulk
active ingredient of Proellex® from Gedeon Richter under a new scaled-up amended
manufacturing process.  As of September 4, 2009 this agreement was
terminated and Repros accepted the material produced through this date and as a
result expensed the $1.5 million prepaid asset to R&D Expense.




Payroll
and Benefits




R&D
payroll and benefit expenses include salaries, non-cash stock option
compensation expense and fringe benefits which increased 8% or approximately
$24,000 to $344,000 for the three month period ended September 30, 2009 as
compared to $320,000 for the same period in the prior year.  This
increase is primarily due to an increase in non-cash stock option compensation
of $24,000. Included in payroll and benefit expense is a charge for non-cash
stock option expense of $141,000 for the three month period ended September 30,
2009 as compared to $117,000 for the same period in the prior year.




R&D
payroll and benefit expenses increased 46% or approximately $366,000 to $1.2
million for the nine month period ended September 30, 2009 as compared to
$804,000 for the same period in the prior year.  This increase is
primarily due to an increase in headcount and an increase in non-cash stock
option compensation of $164,000. Included in payroll and benefit expense is a
charge for non-cash stock option expense of $431,000 for the nine month period
ended September 30, 2009 as compared to $267,000 for the same period in the
prior year.




Operating
and Occupancy




R&D
operating and occupancy increased 424% or approximately $1.3 million to
approximately $1.6 million for the three month period ended September 30, 2009
as compared to $296,000 for the same period in the prior year.  Due to
the clinical hold on Proellex® and the uncertainty of future cash flows related
to the Proellex patent applications, the Company recorded an impairment charge
of approximately $957,000 in the third quarter of 2009 related to these patent
applications.  Additionally, the Company concluded that it will no
longer seek to protect the specific matter covered in one Androxal patent
application and recorded an impairment charge of approximately $32,000 to
abandon this patent application.




R&D
operating and occupancy increased 99% or approximately $1.0 million to
approximately $2.0 million for the nine month period ended September 30, 2009 as
compared to $1.0 million for the same period in the prior year.  Due
to the clinical hold on Proellex® and the uncertainty of future cash flows
related to the Proellex patent applications, the Company recorded an impairment
charge of approximately $957,000 in the third quarter of 2009 related to these
patent applications.  Additionally, the Company concluded that it will
no longer seek to protect the specific matter covered in one Androxal patent
application and recorded an impairment charge of approximately $32,000 to
abandon this patent application.




General
and Administrative Expenses




General
and administrative expenses, or G&A, increased 162% to approximately $2.0
million for the three month period ended September 30, 2009 as compared to
$750,000 for the same period in the prior year.  Our primary G&A
expenses for the three month period ended September 30, 2009 and 2008 are shown
in the following table (in thousands):


30


General and
                                  Administrative
                                
                                Three-months
                                  Sept. 30, 2009
                                
                                
                                Three-months
                                  Sept. 30, 2008
                                
                                
                                Variance
                                
                                
                                Change
                                  (%)Payroll
      and benefits
                                
                                $
                                767
                                
                                
                                $
                                318
                                
                                
                                $
                                449
                                
                                
                                
                                141
                                %Operating
      and occupancy
                                
                                
                                1,195
                                
                                
                                
                                432
                                
                                
                                
                                763
                                
                                
                                
                                177
                                %Total
                                
                                $
                                1,962
                                
                                
                                $
                                750
                                
                                
                                $
                                1,212
                                
                                
                                
                                162
                                %




G&A
payroll and benefit expense include salaries, bonuses, relocation expense,
severance costs, non-cash stock option compensation expense and fringe
benefits.  Included in payroll and benefit expense is a charge for
non-cash stock option expense of $266,000 for the three month period ended
September 30, 2009 as compared to $105,000 for the same period in the prior
year.  Additionally, salaries for the three month period ended
September 30, 2009 were $307,000 as compared to $193,000 for the same period in
the prior year.  The increase in salaries is primarily due to an
increase in headcount, partially offset by a 50% salary reduction for all
salaried employees effective August 16, 2009.




G&A
operating and occupancy expenses, which include expenses to operate as a public
company, increased 177% or approximately $763,000 to $1.2 million for the three
month period ended September 30, 2009 as compared to $432,000 for the same
period in the prior year.  The increase is primarily due to an
increase in legal services of $737,000.




General
and administrative expenses, or G&A, increased 85% to approximately $4.1
million for the nine month period ended September 30, 2009 as compared to $2.2
million for the same period in the prior year.  Our primary G&A
expenses for the nine month period ended September 30, 2009 and 2008 are shown
in the following table (in thousands):




General and
                            Administrative
                          
                          Nine-months
                            Sept. 30, 2009
                          
                          
                          Nine-months
                            Sept. 30, 2008
                          
                          
                          Variance
                          
                          
                          Change
                            (%)Payroll
      and benefits
                          
                          $
                          1,862
                          
                          
                          $
                          1,001
                          
                          
                          $
                          861
                          
                          
                          
                          86
                          %Operating
      and occupancy
                          
                          
                          2,264
                          
                          
                          
                          1,235
                          
                          
                          
                          1,029
                          
                          
                          
                          83
                          %Total
                          
                          $
                          4,126
                          
                          
                          $
                          2,236
                          
                          
                          $
                          1,890
                          
                          
                          
                          85
                          %




G&A
payroll and benefit expense include salaries, bonuses, relocation expense,
severance costs, non-cash stock option compensation expense and fringe
benefits.  Included in payroll and benefit expense is a charge for
non-cash stock option expense of $711,000 for the nine month period ended
September 30, 2009 as compared to $346,000 for the same period in the prior
year.  Additionally, salaries for the nine month period ended
September 30, 2009 were $870,000 as compared to $577,000 for the same period in
the prior year.  The increase in salaries is primarily due to an
increase in headcount, partially offset by a 50% salary reduction for all
salaried employees effective August 16, 2009.




G&A
operating and occupancy expenses, which include expenses to operate as a public
company, increased 83% or approximately $1.0 million to $2.3 million for the
nine month period ended September 30, 2009 as compared to $1.2 million for the
same period in the prior year.  The increase is primarily due to an
increase in legal and consulting services of $932,000.


31


Off-Balance
Sheet Arrangements




As of
September 30, 2009, 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.  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 existing and projected accounts payable and
commitments, we believe we do not have sufficient cash to continue normal
operations and need to raise additional capital immediately in order to continue
operations on a normal basis.  In the event that we are unable to
obtain adequate financing to meet our immediate short term liquidity needs, we
will pursue other options, including but not limited to, additional reductions
of expenses, sale of the Company, sale or license of a portion or all of our
assets, a bankruptcy filing or the liquidation of the Company.




On
October 2, 2008, we completed a direct registered offering of 2.4 million shares
of our common stock at a purchase price of $6.50 per share for net proceeds
after expenses of approximately $15.6 million pursuant to an effective shelf
registration statement.




On
September 11, 2009, we completed a direct registered offering of 1.5 million
shares of our common stock at a purchase price of $0.65 per share for net
proceeds after expenses of approximately $869,000 pursuant to an effective shelf
registration statement.




On
October 13, 2009, we completed a direct registered offering of 3.5 million
shares of our common stock at a purchase price of $1.27 per share for net
proceeds after expenses of approximately $4.1 millionpursuant to an effective
shelf registration statement.




On
October 29, 2009, we entered into a Master Settlement Agreement and Releases
(the “Settlement Agreement”) with certain trade creditors, pursuant to which we
agreed to issue up to an aggregate of 5,503,843 shares of our common stock,
at $1.10 per share, and pay up to an aggregate of approximately $2.85
million in cash to such creditors as payment in full for our then-outstanding
liabilities of approximately $8.9 million and for the release of the claims held
by and the dismissal of the litigation commenced by such creditors against the
Company.  Under the Settlement Agreement, we agreed to use our best
efforts to prepare and file a registration statement to register such shares
issued to the creditors, to use our best efforts to have such registration
statement declared effective as soon as possible, and to maintain such
registration statement until all such shares registered thereunder to the
creditors have been sold or for a period of one year, whichever comes
first.  We also agreed to refrain from (i) filing any other
registration statement for any primary public offering or other offering of our
equity securities prior to filing such registration statement with the
Securities and Exchange Commission and (ii) selling any shares for any primary
public offering or other offering of our equity securities during the ten
business days immediately following the effective date of such registration
statement, in order to provide such creditors an opportunity to sell their
shares issued under the Settlement Agreement.  Notwithstanding, the
amount of cash on hand is not sufficient to continue to fund our ongoing
clinical trials of Androxal®, complete all necessary activities relating to the
suspension of our clinical trial program for Proellex®, and pay our accounts
payable and accrued expenses as well as our normal corporate overhead and
expenses.


32


In order
to facilitate raising additional capital, we filed a definitive proxy statement
on October 16, 2009, relating to a special meeting of our stockholders to be
held on November 17, 2009 to approve an amendment to the Restated Certificate of
Incorporation, as amended, to increase the number of authorized shares of our
common stock from 30 million to 75 million.  No assurances can be
given that the amendment will be approved by the stockholders or, if approved,
that we will be able to successfully raise additional capital on acceptable
terms or at all.




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 $2.5 million as of September 30, 2009 as compared to $19.5 million
as of December 31, 2008.




Net cash
of approximately $17.4 million and $16.4 million was used in operating
activities during the nine month period ended September 30, 2009 and 2008,
respectively.  The major use of cash for operating activities during
the third quarter of 2009 was to fund our clinical development programs and
associated administrative costs, partially offset by an increase in our accounts
payable and accrued expenses.




Our
capital requirements will depend on many factors, including: the costs
associated with the suspension of dosing in our clinical trials relating to
Proellex® and the potential costs to reestablish the dosing in such clinical
trials should the FDA’s clinical hold be lifted; the costs and timing of seeking
regulatory approvals of our products; our ability to successfully defend ourself
in the recently filed class action lawsuits; our ability to realize a clear
clinical path for Androxal®; the problems, delays, expenses and complications
frequently encountered by development stage companies; the progress of our
preclinical and clinical activities; the costs associated with any future
collaborative research, manufacturing, marketing or other funding arrangements;
our ability to obtain regulatory approvals; the success of our potential future
sales and marketing programs; the cost of filing, prosecuting and defending and
enforcing any patent claims and other intellectual property rights; changes in
economic, regulatory or competitive conditions of our planned business; and
additional costs associated with being a publicly-traded company. To satisfy our
capital requirements, we are exploring ways to immediately raise additional
funds.  Our announcements regarding the liver toxicity in our
Proellex®clinical trials have significantly depressed our stock price and, these
announcements, along with the clinical hold imposed by the FDA, receipt of the
NASDAQ letter regarding our failure to meet the current NASDAQ listing
requirements and recent announcement of the class action lawsuits have severely
impaired our ability to raise additional capital funds or to outlicense the
technology to where it could be difficult or impossible for us to raise any
additional capital.  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, we anticipate 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.  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.




Our
results of operations may vary significantly from quarter to quarter and year to
year, and depend, among other factors, on 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 generally exceeded revenue in any
particular period and/or fiscal year.


33


Item
3.  Quantitative and Qualitative Disclosures About Market
Risk




Interest Rate Risk.We had
cash and cash equivalents of approximately $2.5 million at September 30, 2009
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, 2009.




Changes
in Internal Control over Financial Reporting




In
connection with the evaluation described above, we identified no material change
in internal control over financial reporting that occurred during the quarter
ended September 30, 2009 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.


34


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.   During the week of October 5, 2009, various
shareholders filed motions to consolidate the pending actions and to be
appointed as lead plaintiff.  The lawsuits have now been consolidated
but a lead plaintiff has not yet been appointed.  No ruling on these
motions has occurred.  An estimate of the possible loss or range of
losses in connection with the lawsuits cannot be made at this
time.  The Company has retained counsel to assist it in defending
these actions.




On August
10, 2009, a vendor of the Company filed a lawsuit naming the Company as a
defendant.  The lawsuit claimed the Company owed it $147,000 in
accordance with the terms of its agreement with the Company.   On
August 20, 2009, another vendor of the Company filed a lawsuit naming the
Company as a defendant.  The lawsuit claimed the Company owed it
$443,600 in accordance with the terms of its agreement with the
Company.   On October 29, 2009, the Company entered into a Master
Settlement Agreement and Releases with certain trade creditors, pursuant to
which we agreed to issue up to an aggregate of 5,503,843 shares of our common
stock, at $1.10 per share, and pay up to an aggregate of approximately $2.85
million in cash to such creditors as payment in full for our then outstanding
liabilities and for the release of these claims held by and the dismissal of the
litigation commenced by these creditors against the Company as described
above.




On
October 2, 2009, a vendor of the Company filed a lawsuit naming the Company as a
defendant.  The lawsuit claimed the Company owed it $294,718 in
accordance with the terms of its agreement with the Company.  To date,
no proceedings of any kind have occurred in the lawsuit, and an estimate of the
possible loss or range of loss in connection with the lawsuit cannot be
made.  The Company has retained counsel to assist it in defending
these actions.




Repros'
Androxal® product candidate and its uses are covered in the United States by two
issued U.S. patents and seven pending patent applications.  Foreign
coverage of Repros' Androxal® product candidate includes 34 issued foreign
patents and 69 foreign pending patent applications.  The issued
patents and pending applications relate to methods and compositions 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, Repros believes that
the amended claims are invalid based on additional prior art publications, and
its request for re-examination by the PTO in light of a number of these
additional publications and other publications cited by the PTO, has been
granted.  All of the claims challenged by Repros have been finally
rejected in the re-examination and the patent holder has appealed the rejections
to the PTO Board of Patent Appeals and Interferences (“the Board”).  A
decision has been rendered by the Board affirming the rejection of all of the
claims.  The patent owner has filed a request for
rehearing.  If the Board maintains the rejections on rehearing or the
request for rehearing is denied, the Patentee will have the opportunity to
appeal the rejections to the United States Court of Appeals for the Federal
Circuit.  Repros also believes 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, Repros 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, Repros may not
be able to successfully commercialize or out-license Androxal®.




35


Item
1A. Risk Factors




Other
than the additional risk factors included below, 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, 2008 in response to “Item 1A. Risk Factors” to
Part I of Form 10-K.




Our
ability to continue as a going concern requires that we raise additional funds
immediately, without which we will need to cease our business operations and
begin bankruptcy or liquidation proceedings.




Our
ability to continue as a going concern is dependent upon our ability to obtain
immediate financing, our ability to control our operating expenses and our
ability to achieve a level of revenues adequate to support our capital and
operating requirements. In particular, we are exploring various financing
alternatives to address our immediate short term liquidity needs. 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. The current FDA clinical hold of our clinical
trials for Proellex® will make it more difficult for us to obtain additional
financing. In addition, the recently filed class action lawsuits will make our
ability to raise funds even more difficult. As described above, we expect to
continue to incur significant losses for the foreseeable future, and we may
never achieve or sustain profitability. In the event that we are unable to
obtain adequate financing to meet our immediate short term liquidity needs, we
will need to cease our business operations and begin bankruptcy or liquidation
proceedings.




We
may need to seek protection under the provisions of the U.S. Bankruptcy Code,
and in that event, it is unlikely that stockholders would receive any value for
their shares.




We have
not generated any significant revenues to date, and we have incurred losses in
each year since our inception. As of September 30, 2009, we had approximately
$2.5 million in cash and cash equivalents and our accounts payable and accrued
expenses were approximately $12.2 million.  As a result of the October
29, 2009 settlement agreement with certain of our creditors to issue them shares
of our common stock, at $1.10 per share, and cash as payment in full for our
then-outstanding liabilities with such creditors (as described below), we have
reduced the amount of our accounts payable and accrued expenses by approximately
$8.9 million subsequent to September 30, 2009.  Despite such actions,
the  amount of cash on hand is not sufficient to continue to fund our
ongoing clinical trials of Androxal®, complete all
necessary activities relating to the suspension of our clinical trial program
for Proellex®, pay our accounts payable and accrued expenses as well as our
normal corporate overhead and expenses. We cannot assure you that any actions
that we take would raise or generate sufficient capital to fully address the
uncertainties of our financial position.  As a result, we may be
unable to realize value from our assets and discharge our liabilities in the
normal course of business and we may need to seek protection under the
provisions of the U.S. Bankruptcy Code.  In that event, we may seek to
reorganize our business, or we or a trustee appointed by the court may be
required to liquidate our assets. In either of these events, whether the
stockholders receive any value for their shares is highly uncertain. If we
needed to liquidate our assets, we would likely realize significantly less from
them than the values at which they are carried on our financial statements. The
funds resulting from the liquidation of our assets would be used first to pay
off the debt owed to any secured and unsecured creditors before any funds would
be available to pay our stockholders, and any shortfall in the proceeds would
directly reduce the amounts available for distribution, if any, to our creditors
and to our stockholders. In the event we were required to liquidate under the
federal bankruptcy laws, it is highly unlikely that stockholders would receive
any value for their shares.


36




Although
we recently amended our exclusive license agreement with the National Institutes
of Health, failure to meet our agreed upon milestones could result in a loss of
our rights to Proellex®.




On
October 28, 2009 the Company amended its exclusive license with the NIH dated
April 16, 1999.  This seventh amendment extends the time period by
which the Company is required to obtain certain financing and/or licensing
consideration.  In addition, the seventh amendment allows the
Company time to attempt to lift the clinical hold on Proellex® for purposes
of proceeding with a lower dose program.  If the clinical hold is lifted,
the Company must reach certain developmental milestones for such lower dose
program, such as commencing   Phase II and III
studies and obtaining U. S. FDA approval for treatment of uterine fibroids,
each by a specified date.  In the event the  FDA does not
approve Proellex® for further clinical trials, at a lower dosage, by a
certain date, the Company is required to identify a second generation
compound from those covered by the original Exclusive License Agreement, and the
Company must reach certain developmental milestones for such second generation
compound, such as completing Phases I, II and III studies of such second
generation compound, each by a specified date.  Even
though such amendment allows the Company additional time to reach such
benchmarks, there can be no assurance that the Company will be successful
in obtaining such financing, that the FDA will agree to allow the Company
to resume clinical trials at a lower dosage or that the Company will be
successful in identifying a second generation drug.  In addition, the
license may be terminated by the NIH immediately upon notice to the Company
following a filing of a petition in bankruptcy or a letter from the Company to
the NIH stating that it is insolvent.  In the event that any of the
conditions contained in the license agreement for termination by the NIH are
triggered, the Company's license agreement may be terminated and the Company
would lose its exclusive rights to Proellex®.  Any such termination of
the license agreement could have a material adverse effect on the Company's
financial position and results of operations, and in such event, the value of
the Company's common stock may be materially adversely affected.




We
have identified a dose-related increase in liver enzymes in Proellex® clinical
trial patients, leading to the suspension of Proellex® studies and the FDA's
notice of clinical hold on all Proellex® clinical trials.




In our
clinical trials program for Proellex®, we identified a dose-related increase in
liver enzymes in a limited number of patients that resulted in our decision to
suspend all clinical trials relating to Proellex®.  In August 2009,
the FDA placed all Proellex® clinical studies on hold.  There can be
no assurance whether and when the FDA will remove the clinical hold; whether
Proellex® can be further developed, financed or commercialized in a timely
manner without significant additional studies or patient data or significant
expense; and whether any future development will be sufficient to support
product approval.  If we are unable to resolve the FDA's concerns, we
will not be able to proceed further to obtain regulatory approval for
Proellex®.


37


We have no clear clinical path for
Androxal® at
this time.




We are
developing Androxal® for men of reproductive age with low testosterone levels
who want to maintain their fertility while being treated for their low
testosterone condition. During the second quarter of 2008, we initiated a Phase
2b proof-of-concept clinical trial in which we are monitoring 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. Given that there is already 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.  At this time it is too early in the
clinical development process to estimate when or even if an NDA for Androxal®
will be submitted for this indication.




We
are  currently not in compliance with NASDAQ rules for continued
listing on the NASDAQ Global Market and are at risk of being delisted, which may
subject us to the SEC’s penny stock rules and decrease the liquidity of our
common stock.





On August
7, 2009, we received notice from The NASDAQ Stock Market that the market value
of our listed securities has been below the minimum $50,000,000 requirement for
continued inclusion by NASDAQ Listing Rule 5450(b)(2)(A).  We have
been provided until November 5, 2009 to regain compliance.  If we do
not demonstrate compliance by such date, we have been advised that our
securities will be delisted from The NASDAQ Global Market.   The
Company intends to appeal any decision to delist its
securities through NASDAQ's appeal process and to concurrently request to
have the Company's securities moved to the NASDAQ Capital Market should the
Company not be successful in such appeal. However, there is no
assurance that the Company's securities will continue to be traded on any of the
NASDAQ trading markets as a result of this strategy.





On
September 15, 2009, we received a second letter from The NASDAQ Stock Market
advising that, in addition to the deficiencies previously disclosed on August 7,
2009, the Company’s market value of publicly held shares was below the minimum
$15,000,000 requirement for continued listing on The NASDAQ Global Market by
NASDAQ Listing Rule 5450(b)(2)(C) or 5450(b)(3)(C).  We have been
provided until December 14, 2009 to regain compliance, at which time we have
been advised that the Company’s securities will be delisted from such market
unless the Company’s market value of publicly held shares is $15,000,000 or more
for a minimum of 10 consecutive business days.  The Company is still
required to regain compliance with the maintenance requirements set forth in the
prior notice it received by November 5, 2009.  The letter also
suggested that the Company consider applying for transfer of its securities to
The NASDAQ Capital Market, which has substantially lower listing
requirements.




On
November 6, 2009, the Company received notification from NASDAQ that it has not
regained compliance with NASDAQ Listing Rules 5450(b)(2)(A) or 5450(b)(3)(A)
and, unless the Company appeals NASDAQ’s decision, its securities will be
delisted from the NASDAQ Global Market.  Repros intends to appeal
NASDAQ’s determination to delist its securities or, alternatively, to request to
have its securities moved to the NASDAQ Capital Market.  There can be
no assurance that either of these strategies will be
successful.




If we are
delisted from The NASDAQ Global Market, and are unsuccessful in moving to The
NASDAQ Capital Market, our common stock may be traded over-the-counter on the
OTC Bulletin Board or in the “pink sheets.”  These alternative
markets, however, are generally considered to be less efficient than The NASDAQ
Global Market.  Many over-the-counter stocks trade less frequently and
in smaller volumes than securities traded on the NASDAQ markets, which would
likely have a material adverse effect on the liquidity of our common
stock.





If our
common stock is delisted from The NASDAQ Global Market, there may be a limited
market for our stock, trading in our stock may become more difficult and our
share price could decrease even further.  In addition, if our common
stock is delisted, our ability to raise additional capital may be
impaired.





In
addition, our common stock may become subject to penny stock
rules.  The SEC generally defines “penny stock” as an equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions.  We are not currently subject to the penny stock rules
because our common stock qualifies for an exception to the SEC’s penny stock
rules for companies that have an equity security that is quoted on The NASDAQ
Stock Market.  However, if we were delisted, our common stock would
become subject to the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell our common stock.  If our
common stock were considered penny stock, the ability of broker-dealers to sell
our common stock and the ability of our stockholders to sell their shares in the
secondary market would be limited and, as a result, the market liquidity for our
common stock would be adversely affected.  We cannot assure that
trading in our securities will not be subject to these or other regulations in
the future.


38


The
Company and certain of its officers and directors were named as a party in
several class action lawsuits which could result in a material adverse affect on
our business and financial condition.





The
Company and certain of its officers were named as parties in several shareholder
class action lawsuits alleging, among other things, that the Company and such
officers violated certain provisions of the Securities Exchange Act of 1934 by
issuing materially false and misleading press releases regarding the results of
clinical trials for its drug Proellex.  Our bylaws require us to
indemnify our officers in certain proceedings, subject to certain limited
exceptions. In addition, each of our directors has an indemnification agreement
with the Company providing for certain additional indemnification benefits for
such persons in the event of a lawsuit.  As a result of the class
action lawsuits, we are obligated to pay for certain costs and expenses of our
officers and directors and may be liable for substantial damages, costs and
expenses if such class action is successful.  Such litigation could
also divert the attention of our management and our resources in general from
day-to-day operations.  Further, it is possible that additional claims
beyond those that have already been filed will be brought by the current
plaintiffs or by others in an effort to seek monetary relief from
us.





Additionally,
such class action lawsuits are covered by the Company's director and officer
insurance policy.  In the event there are adverse judgments against
the Company in such lawsuits, the Company's insurance coverage may not be
adequate to cover such judgments and the Company's cash position may not be
sufficient to satisfy such judgment. Such adverse judgments could have a
material and adverse affect on the Company.





Item
4.  Submission of Matters to a Vote of Security Holders




None





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).
  39
  3.2
                  
                  Restated
      Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the
      Registration Statement).10.1
                  
                  Sixth
      Amendment to PHS Patent License Agreement, as amended, dated July 7, 2009
      between the Company and certain agencies of the United States Public
      Health Service within the Department of Health and Human Services
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K as filed with the Commission on July 10, 2009).
    *10.2
                  
                  Securities
      Purchase Agreement between Repros Therapeutics Inc. and Enable Growth
      Partners LP dated September 8, 2009 (incorporated by reference to Exhibit
      10.1 to the Company’s Current Report on Form 8-K as filed with the
      Commission on September 10, 2009).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).*
                  
                  Portions
      omitted pursuant to a request for confidential treatment under Rule 24b-2
      of the Securities Exchange Act of 1934, as amended.**
                  
                  Filed
      herewith.


40




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
      9, 2009By:
              /s/ Joseph S. PodolskiJoseph
      S. PodolskiChief
      Executive Officer and Director(Principal
      Executive Officer)Date:  November
      9, 2009By:
              /s/ Katherine A.
AndersonKatherine
      A. AndersonChief
      Accounting Officer(Principal
      Accounting Officer)




41