##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    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: 001-34637
 Anthera Pharmaceuticals, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    20-1852016(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 25801 Industrial Boulevard, Suite BHayward, California
    
    94545(Address of Principal Executive Offices)
    
    (Zip Code)
 (510) 856-5600  (Registrants Telephone Number, Including Area Code)
 
 þ o
 . o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
 .




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##### 



ANTHERA PHARMACEUTICALS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2010
 INDEX
 PagePart I  Financial InformationItem 1. Financial Statements (unaudited)
    
    
    3Condensed Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    3Condensed Statements of Operations for the Three Months Ended March 31, 2010 and 2009 and
for the period from September 9, 2004 (Date of Inception) to March 31, 2010
    
    
    4Condensed Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 and
cumulative period from September 9, 2004 (Date of Inception) to March 31, 2010
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4T. Controls and Procedures
    
    
    24Part II  Other InformationItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3. Defaults Upon Senior Securities
    
    
    44Item 4. (Removed and Reserved)
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    44SignaturesEX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ANTHERA PHARMACEUTICALS, INC
(A Development Stage Company)
 
 CONDENSED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    56,661,609
    
    
    $
    3,803,384Prepaid expenses and other current assets
    
    
    359,252
    
    
    
    19,825Total current assets
    
    
    57,020,861
    
    
    
    3,823,209Property and equipmentnet
    
    
    15,470
    
    
    
    12,994Deferred financing cost
    
    
    
    
    
    
    1,922,183Other assets
    
    
    
    
    
    
    130,403TOTAL
    
    $
    57,036,331
    
    
    $
    5,888,789LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    3,329,651
    
    
    $
    3,145,706Accrued clinical study
    
    
    322,698
    
    
    
    565,034Accrued liabilities
    
    
    472,952
    
    
    
    767,663Accrued payroll and related costs
    
    
    179,156
    
    
    
    153,235Warrant and derivative liabilities
    
    
    
    
    
    
    406,130Convertible promissory notes
    
    
    
    
    
    
    13,129,877Total current liabilities
    
    
    4,304,457
    
    
    
    18,167,645Total liabilities
    
    
    4,304,457
    
    
    
    18,167,645Commitments and Contingencies (Note 7)Stockholders equity (deficit)Preferred stock, $0.001 par value, 5,000,000 and
11,948,557 shares authorized, 0 and 8,146,308 shares
issued and outstanding as of March 31, 2010 and
December 31, 2009, respectively; (aggregate
liquidation value of $0 and $52,597,692 as of March
31, 2010 and December 31, 2009, respectively)
    
    
    
    
    
    
    8,146Common stock, $0.001 par value, 95,000,000 and
18,443,341 shares authorized; 21,589,588 and
1,566,199 shares issued and outstanding as of March
31, 2010 and December 31, 2009, respectively
    
    
    21,589
    
    
    
    1,566Additional paid-in capital
    
    
    129,044,029
    
    
    
    52,941,384Deficit accumulated the during the development stage
    
    
    (76,333,744
    )
    
    
    (65,229,952
    )Total stockholders equity (deficit)
    
    
    52,731,874
    
    
    
    (12,278,856
    )TOTAL
    
    $
    57,036,331
    
    
    $
    5,888,789
  3




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##### Table of Contents



ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
 CumulativePeriodfromSeptember 9,2004(Date ofInception)toThree Months Ended March 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010OPERATING EXPENSES:Research and development
    
    $
    5,241,814
    
    
    $
    2,914,766
    
    
    $
    56,565,795General and administrative
    
    
    1,224,110
    
    
    
    846,243
    
    
    
    11,141,677Total operating expenses
    
    
    6,465,924
    
    
    
    3,761,009
    
    
    
    67,707,472LOSS FROM OPERATIONS
    
    
    (6,465,924
    )
    
    
    (3,761,009
    )
    
    
    (67,707,472
    )OTHER EXPENSE:Interest and other income
    
    
    3,301
    
    
    
    13,046
    
    
    
    1,023,061Interest and other expense
    
    
    (4,641,169
    )
    
    
    (37,397
    )
    
    
    (5,340,789
    )Beneficial conversion features
    
    
    
    
    
    
    
    
    
    
    (4,308,544
    )Total other expense
    
    
    (4,637,868
    )
    
    
    (24,351
    )
    
    
    (8,626,272
    )NET LOSS
    
    $
    (11,103,792
    )
    
    $
    (3,785,360
    )
    
    $
    (76,333,744
    )Net loss per sharebasic and diluted
    
    $
    (0.83
    )
    
    $
    (2.57
    )Weighted-average number of shares
used in per share calculationbasic
and diluted
    
    
    13,344,231
    
    
    
    1,470,722
  4




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##### Table of Contents



ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
 September 9,2004(Date ofInception) toThree Months Ended March 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010CASH FLOW FROM OPERATING ACTIVITIES:Net loss
    
    $
    (11,103,792
    )
    
    $
    (3,785,360
    )
    
    $
    (76,333,744
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    3,270
    
    
    
    4,868
    
    
    
    75,598Amortization of discount on short-term investments
    
    
    
    
    
    
    
    
    
    
    (130,248
    )Realized loss on short-term investments
    
    
    
    
    
    
    (331
    )
    
    
    8,682Realized gain from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    (214
    )Stock-based compensation expenseemployees
    
    
    48,412
    
    
    
    43,478
    
    
    
    525,291Stock-based compensation expenseconsultants
    
    
    4,204
    
    
    
    1,153
    
    
    
    162,149Issuance of common stock for consulting service
    
    
    
    
    
    
    
    
    
    
    41,366Issuance of common and preferred stock for service and license fee
    
    
    3,500,000
    
    
    
    
    
    
    
    5,750,000Issuance of common and preferred stock in lieu of interest payment
    
    
    173,194
    
    
    
    
    
    
    
    640,493Beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    4,308,544Amortization of discount on convertible promissory notes
    
    
    540,993
    
    
    
    
    
    
    
    677,715Amortization of debt issuance cost
    
    
    227,955
    
    
    
    
    
    
    
    307,599Mark to market adjustment on warrant and derivative liability
    
    
    3,796,491
    
    
    
    
    
    
    
    3,795,776Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    (339,427
    )
    
    
    27,937
    
    
    
    (359,253
    )Accounts payable
    
    
    (103,890
    )
    
    
    576,912
    
    
    
    1,280,786Accrued clinical study
    
    
    (242,336
    )
    
    
    (157,641
    )
    
    
    322,698Accrued liabilities
    
    
    (34,662
    )
    
    
    62,639
    
    
    
    387,612Accrued payroll and related costs
    
    
    25,922
    
    
    
    29,469
    
    
    
    179,156License fee payable
    
    
    
    
    
    
    (500,000
    )
    
    
    Net cash used in operating activities
    
    
    (3,503,666
    )
    
    
    (3,696,876
    )
    
    
    (58,359,994
    )INVESTING ACTIVITIES:Property and equipment purchases
    
    
    (5,746
    )
    
    
    
    
    
    
    (91,253
    )Proceeds from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    400Purchase of short-term investments
    
    
    
    
    
    
    
    
    
    
    (14,800,564
    )Proceeds from sale of short-term investments
    
    
    
    
    
    
    
    
    
    
    14,922,132Net cash provided by (used in) investing activities
    
    
    (5,746
    )
    
    
    
    
    
    
    30,715FINANCING ACTIVITIES:Proceeds from issuance of convertible notes
    
    
    
    
    
    
    
    
    
    
    26,560,000Payment of debt issuance cost
    
    
    (2,572
    )
    
    
    
    
    
    
    (99,889
    )Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    32,210,278Payment of financing cost for initial public offering
    
    
    (850,416
    )
    
    
    
    
    
    
    (1,124,300
    )Proceeds from issuance of common stock
    
    
    57,202,972
    
    
    
    
    
    
    
    57,203,087Proceeds from exercise of stock options
    
    
    17,653
    
    
    
    
    
    
    
    241,712Net cash provided by financing activities
    
    
    56,367,637
    
    
    
    
    
    
    
    114,990,888NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    52,858,225
    
    
    
    (3,696,876
    )
    
    
    56,661,609CASH AND CASH EQUIVALENTSBeginning of period
    
    
    3,803,384
    
    
    
    7,895,113
    
    
    
    CASH AND CASH EQUIVALENTSEnd of period
    
    $
    56,661,609
    
    
    $
    4,198,237
    
    
    $
    56,661,609SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOWINFORMATION:Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    15,229Taxes paid
    
    $
    10,136
    
    
    $
    999
    
    
    $
    39,723NONCASH INVESTMENT AND FINANCING ACTIVITIES:Conversion of convertible promissory notes and accrued interest into
common stock, Series A-2 convertible preferred stock and Series B-2
convertible preferred stock
    
    $
    13,709,918
    
    
    $
    
    
    
    $
    27,200,493Beneficial conversion feature
    
    $
    
    
    
    $
    
    
    
    $
    4,308,544Accrued and deferred debt issuance costs
    
    $
    97,552
    
    
    $
    
    
    
    $
    207,711Unamortized
debt discount charged to equity in conjunction with conversion of promissory notes into common stock
    
    $
    185,833
    
    
    $
    
    
    
    $
    185,833Reclassification of warrant and derivative liabilities to additional paid-in capital
    
    $
    406,130
    
    
    $
    
    
    
    $
    406,130IPO issuance
costs charged to  equity
    
    $
    3,021,966
    
    
    $
    
    
    
    $
    3,021,966Accrued and deferred financing costs
    
    $
    884,952
    
    
    $
    
    
    
    $
    1,897,666
  5




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##### Table of Contents



ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (UNAUDITED)
 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
 2 2
   2. BASIS OF PRESENTATION
   3. RECENT ACCOUNTING PRONOUNCEMENTS
 Derivatives and Hedging
 6




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Generally Accepted Accounting Principles
  4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  Cash and Cash Equivalents
  Concentration of Credit Risk
  Property and EquipmentNet
  Deferred Financing Cost
 Other Assets and Deferred Costs
 Long-Lived Assets
 Property, Plant, and Equipment
 7




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Fair Value of Financial Instruments
 Fair Value Measurements and Disclosures
   Level 1
 Level 2
 Level 3
     Stock-Based Compensation
 Compensation 
Stock Compensation
  8




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Expected Term
 Expected Volatility
 Expected Dividend
 Risk-Free Interest Rate
 Estimated Forfeitures
 Equity
 Research and Development
  Research and Development
   Income Taxes
 Income Taxes
  9




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Segments
  5. NET LOSS PER SHARE
 Earnings Per Share
  Three Months Ended March 312010
    
    
    2009Net loss per shareNumeratorNet loss
    
    $
    (11,103,792
    )
    
    $
    (3,785,360
    )DenominatorWeighted-average common shares outstanding
    
    
    13,357,149
    
    
    
    1,616,534Less: Weighted-average shares subject to repurchase
    
    
    (12,918
    )
    
    
    (145,812
    )Denominator for basic and diluted net loss per share
    
    
    13,344,231
    
    
    
    1,470,722Basic and diluted net loss per share
    
    $
    (0.83
    )
    
    $
    (2.57
    )
  Three Months Ended March 312010
    
    
    2009Options to purchase common stock
    
    
    1,102,614
    
    
    
    523,749Common stock subject to repurchase
    
    
    12,918
    
    
    
    145,812Warrants to purchase common stock
    
    
    493,268
    
    
    
    194,474Convertible preferred stock
    
    
    
    
    
    
    8,146,308Total
    
    
    1,608,800
    
    
    
    9,010,343
 6. DEFERRED FINANCING COST
  7. COMMITMENTS AND CONTINGENCIES
 2 2
 10




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##### Table of Contents



8. CONVERTIBLE PROMISSORY NOTES AND EQUITY FINANCING
  11




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##### Table of Contents



9. STOCKHOLDERS EQUITY
 Preferred Stock
   Common Stock
  Reverse Stock Split
  Warrants
   12




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##### Table of Contents



March 31,
    
    
    December 31,
    
    
    September 30,2010
    
    
    2009
    
    
    2009Expected Volatility
    
    
    94
    %
    
    
    78
    %
    
    
    78
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    2.28
    %
    
    
    2.34
    %
    
    
    2.38
    %Expected Term (years)
    
    
    4.50
    
    
    
    5.00
    
    
    
    5.00
   Embedded Derivative
  13




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##### Table of Contents



10. STOCK OPTIONS
 Option Plan
   Early Exercise of Employee Options
  14




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Weighted-AverageUnvested Shares
    
    Shares
    
    
    Grant Price(unaudited)Balance as of December 31, 2007
    
    
    289,824
    
    
    $
    0.24Early exercise of options
    
    
    59,191
    
    
    $
    0.62Vested
    
    
    (168,386
    )
    
    $
    0.22Repurchases
    
    
    (18,983
    )
    
    $
    0.26Balance as of December 31, 2008
    
    
    161,646
    
    
    $
    0.34Early exercise of options
    
    
    4,381
    
    
    $
    1.51Vested
    
    
    (96,603
    )
    
    $
    0.35Balance as of December 31, 2009
    
    
    69,424
    
    
    $
    0.45Early exercise of options
    
    
    
    
    
    
    Vested
    
    
    (20,006
    )
    
    $
    0.33Repurchases
    
    
    (6,267
    )
    
    $
    0.26Balance as of March 31, 2010
    
    
    43,151
    
    
    $
    0.53
 15




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Weighted-Weighted-
    
    
    AverageShares
    
    
    
    
    
    
    Average
    
    
    RemainingAvailable for
    
    
    Number of
    
    
    Exercise
    
    
    ContractualGrant
    
    
    Options
    
    
    Price
    
    
    Life in Years(unaudited)Balance at September 9, 2004 (Date of Inception)Shares authorized
    
    
    248,247
    
    
    
    Options granted
    
    
    (187,202
    )
    
    
    187,202
    
    
    $
    0.14Options exercised
    
    
    
    
    
    
    (33,292
    )
    
    $
    0.14Balance at December 31, 2005
    
    
    61,045
    
    
    
    153,910
    
    
    $
    0.14
    
    
    
    8.42Shares authorized
    
    
    1,285,047
    
    
    
    Options granted
    
    
    (65,998
    )
    
    
    65,998
    
    
    $
    0.14Options exercised
    
    
    
    
    
    
    (125,581
    )
    
    $
    0.14Balance at December 31, 2006
    
    
    1,280,094
    
    
    
    94,327
    
    
    $
    0.14
    
    
    
    6.89Shares authorized
    
    
    292,056
    
    
    
    Options granted
    
    
    (1,339,655
    )
    
    
    1,339,655
    
    
    $
    0.26Options exercised
    
    
    
    
    
    
    (493,605
    )
    
    $
    0.25Options cancelled
    
    
    92,642
    
    
    
    (92,642
    )
    
    $
    0.24Balance at December 31, 2007
    
    
    325,137
    
    
    
    847,735
    
    
    $
    0.26
    
    
    
    8.08Shares authorized
    
    
    350,467
    
    
    
    Options granted
    
    
    (327,973
    )
    
    
    327,973
    
    
    $
    1.34Options exercised
    
    
    
    
    
    
    (179,886
    )
    
    $
    0.38Options cancelled
    
    
    38,697
    
    
    
    (38,697
    )
    
    $
    0.42Repurchase
    
    
    18,983
    
    
    
    
    
    
    $
    0.26Balance at December 31, 2008
    
    
    405,311
    
    
    
    957,125
    
    
    $
    0.60
    
    
    
    8.28Options granted
    
    
    (405,358
    )
    
    
    405,358
    
    
    $
    1.69Options exercised
    
    
    
    
    
    
    (19,089
    )
    
    $
    0.80Options cancelled
    
    
    19,618
    
    
    
    (19,618
    )
    
    $
    0.92Balance as of December 31, 2009
    
    
    19,571
    
    
    
    1,323,776
    
    
    $
    0.92
    
    
    
    7.94Shares authorized under the 2010 Plan
    
    
    233,644
    
    
    
    Options granted
    
    
    (25,000
    )
    
    
    25,000
    
    
    $
    6.99Options exercised
    
    
    
    
    
    
    (20,672
    )
    
    $
    0.85Options cancelled
    
    
    9,832
    
    
    
    (9,832
    )
    
    $
    1.50Repurchase
    
    
    6,267
    
    
    
    
    
    
    $
    0.26Balance as of March 31, 2010
    
    
    244,314
    
    
    
    1,318,272
    
    
    $
    1.03
    
    
    
    7.74Ending Vested as of March 31, 2010
    
    
    
    
    
    
    1,001,276
    
    
    $
    0.80
    
    
    
    7.50Ending Vested and Expected to Vest as of March 31, 2010
    
    
    
    
    
    
    1,318,272
    
    
    $
    1.03
    
    
    
    7.74
 Stock-Based Compensation Expense
  Period fromSeptember 9,2004(Date ofInception)Three Months Ended March 31,
    
    
    to March 31,2010
    
    
    2009
    
    
    2010Research and development
    
    $
    16,027
    
    
    $
    14,472
    
    
    $
    210,029General and administrative
    
    
    32,385
    
    
    
    29,006
    
    
    
    315,262Total stock-based compensation
    
    $
    48,412
    
    
    $
    43,478
    
    
    $
    525,291
  16




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##### Table of Contents



Period fromSeptember 9,2004 (Date ofThree Months Ended March 31,
    
    
    Inception) to2010
    
    
    2009
    
    
    March 31, 2010(unaudited)Expected Volatility
    
    
    89
    %
    
    
    74
    %
    
    
    80
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    3.02
    %
    
    
    2.09
    %
    
    
    3.95
    %Expected Term (years)
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
  Nonemployee Stock-Based Compensation
   Period fromSeptember 9,2004 (Date ofThree Months Ended March 31,
    
    
    Inception) to2010
    
    2009
    
    
    March 31, 2010(unaudited)Expected Volatility
    
    
    98
    %
    
    
    98
    %
    
    
    98
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    3.29
    %
    
    
    2.85
    %
    
    
    3.68
    %Expected Term (years)
    
    
    8.11
    
    
    
    8.56
    
    
    
    9.67
  11. RELATED PARTY TRANSACTIONS
  12. SUBSEQUENT EVENT
  17




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, a amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act), which are subject to the safe harbor created by
those sections. Forward-looking statements are based on our managements beliefs and assumptions
and on information currently available to our management. All statements other than statements of
historical factors are forward-looking statements for purposes of theses provisions. In some
cases you can identify forward-looking statements by terms such as may, will, should,
could, would, expect, plan, anticipate, believe, estimate, project, predict, and
potential, and similar expressions intended to identify forward-looking statements. Such
forward-looking statements are subject to risks, uncertainties and other important factors that
could cause actual results and the timing of certain events to differ materially from future
results expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those identified below, and those
discussed in the section titled Risk Factors in this report. Furthermore, such forward-looking
statements speak only as of the date of this report. Except as required by law, we undertake no
obligation to update any forward-looking statements to reflect events or circumstances after the
date of such statements.
 Overview
 2, 2. 2
   Revenue
  Research and Development Expenses
  18




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For the PeriodSeptember 9,2004 (Date ofInception)Three Months Ended March 31,
    
    
    to March 31,2010
    
    
    2009
    
    
    2010(unaudited)Allocated costs:A-001
    
    $
    91,729
    
    
    $
    82,109
    
    
    $
    6,611,775A-002
    
    
    4,252,849
    (1)
    
    
    2,187,250
    
    
    
    32,113,493A-623
    
    
    304,950
    
    
    
    5,573
    
    
    
    6,448,367
    (2)Unallocated costs
    
    
    592,286
    
    
    
    639,834
    
    
    
    11,392,160Total development
    
    $
    5,241,814
    
    
    $
    2,914,766
    
    
    $
    56,565,795
 
 (1)
    
    Includes milestone payments of $3.5 million pursuant to amendments to the license agreements
with each of Eli Lilly and Shionogi & Co. Ltd.(2)
    
    Includes a one-time license initiation fee of $6.0 million pursuant to a license agreement
with Amgen.   
    
    the number of sites included in the studies;
    
    the length of time required to enroll suitable patient subjects;
    
    the number of patients that participate in the studies;
    
    the number of doses that patients receive;
    
    the drop-out or discontinuation rates of patients; and
    
    the duration of patient follow-up.
 19




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General and Administrative Expenses
  Critical Accounting Policies and Estimates
   Accrued Clinical Expenses
 As part of the process of preparing our financial statements, we are required to estimate our
accrued expenses. This process involves reviewing open contracts and purchase orders, communicating
with our applicable personnel to identify services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for the service when we
have not yet been invoiced or otherwise notified of actual cost. The majority of our service
providers invoice us monthly in arrears for services performed. We make estimates of our accrued
expenses as of each balance sheet date in our financial statements based on facts and circumstances
known to us at that time. We periodically confirm the accuracy of our estimates with the service
providers and make adjustments if necessary. Examples of estimated
accrued clinical expenses include:
 
    
    fees
paid to CROs in connection with clinical studies;
 20




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
    
    fees paid to investigative sites in connection with clinical studies;
    
    fees paid to contract manufacturers in connection with the production of clinical study
materials; and
    
    fees paid to vendors in connection with the preclinical development activities.
  Stock-Based Compensation
 Compensation  Stock
Compensation
  Results of Operations
 Comparison of the Three Months Ended March 31, 2010 and 2009
 Research and Development Expenses. V I S T A
 General and Administrative Expenses.
 21




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##### Table of Contents



Interest and Other Income.
 Interest and Other Expense.
 Liquidity and Capital Resources
  Cash Flows
 Three Months Ended March 31, 2010
     Three Months Ended March 31, 2009
    Contractual Obligations and Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsOperating lease obligations (1)
    
    $
    63,324
    
    
    $
    56,304
    
    
    $
    7,020
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Operating lease obligations reflect our obligation to make payments in
connection with a sublease that commenced in October 2008 and will
expire on September 30, 2010 for approximately 7,800 square feet of
office space and office equipment leases that commenced in October
2007 and will expire in June 2013. 22




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2
  Funding Requirements
  
    
    initiate the Phase 3 VISTA-16 study for A-002;
    
    continue clinical development of A-623;
    
    hire additional clinical, scientific and management personnel; and
    
    implement new operational, financial and management information systems.
  
    
    the progress of preclinical development and clinical studies of our product candidates;
    
    the time and costs involved in obtaining regulatory approvals;
    
    delays that may be caused by evolving requirements of regulatory agencies;
    
    the costs involved in filing and prosecuting patent applications and enforcing or
defending patent claims;
    
    our ability to establish, enforce and maintain selected strategic alliances; and
    
    the acquisition of technologies, product candidates and other business opportunities that
require financial commitments.
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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  24




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Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
 Investing in our common stock involves a high degree of risk. You should carefully consider
the risks described below and the other information in this Quarterly Report on Form 10-Q . If any
of such risks actually occur, our business, operating results or financial condition could be
adversely affected. In those cases, the trading price of our common stock could decline and you may
lose all or part of your investment.
 Risks Related to Our Financial Condition and Capital Requirements
 We have incurred significant losses since our inception and anticipate that we will incur continued
significant losses for the foreseeable future.
   We have never generated any revenue and may never be profitable.
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
    
    obtain favorable results for and advance the development of our lead product candidate,
A-002, for the treatment of acute coronary syndrome, including successfully launching and
completing the VISTA-16 study;
    
    obtain favorable results for and advance the development of our product candidate A-623,
for the treatment of B-cell mediated autoimmune diseases, including successfully launching
and completing a Phase 2b clinical study in patients with systemic lupus erythematosus
(lupus);
    
    obtain favorable results for and advance the development of our product candidate A-001,
for the prevention of acute chest syndrome associated with sickle cell disease, including
completing a multi-center Phase 2 clinical study;
    
    successfully execute our planned preclinical studies in animals and clinical studies in
human beings for our other product candidates;
    
    obtain regulatory approval for A-002, A-623, A-001 and our other product candidates;
    
    if regulatory approvals are obtained, begin the commercial manufacturing of our product
candidates with our third-party manufacturers;
    
    launch commercial sales and effectively market our product candidates, either
independently or in strategic collaborations with third parties; and
    
    achieve broad market acceptance of our product candidates in the medical community and
with third-party payors.
    Because we will need substantial additional capital in the future to fund our operations, our
independent registered public accounting firm included a paragraph regarding concerns about our
ability to continue as a going concern in their report on our financial statements. If additional
capital is not available, we will have to delay, reduce or cease operations.
  
    
    the rate of progress of our planned VISTA-16 study for A-002 and our planned Phase 2b
clinical study for A-623;
    
    the scope, size, rate of progress, results and costs of our preclinical studies, clinical
studies and other development activities for one or more of our other product candidates;
    
    the cost, timing and outcomes of regulatory proceedings;
    
    payments received under any strategic collaborations;
    
    the filing, prosecution and enforcement of patent claims;
 26




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
    
    the costs associated with commercializing our product candidates if they receive
regulatory approval, including the cost and timing of developing sales and marketing
capabilities, or entering into strategic collaboration with others relating to the
commercialization of our product candidates; and
    
    revenues received from approved products, if any, in the future.
  
    
    terminate, reduce or delay preclinical studies, clinical studies or other development
activities for one or more of our product candidates; or
    
    terminate, reduce or delay our (i) establishment of sales and marketing capabilities,
(ii) pursuit of strategic collaborations with others relating to the sales, marketing and
commercialization of our product candidates or (iii) other activities that may be necessary
to commercialize our product candidates, if approved for sale.
 The timing of the milestone and royalty payments we are required to make to each of Eli Lilly and
Company, Shionogi & Co., Ltd. and Amgen Inc. is uncertain and could adversely affect our cash flows
and results of operations.
 2 2 2 2
 Our limited operating history makes it difficult to evaluate our business and prospects.
  Risks Associated with Development and Commercialization of Our Product Candidates
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We depend substantially on the success of our three primary product candidates, A-002, A-623 and
A-001, which are still under clinical development. We cannot assure you that these product
candidates or any of our other product candidates will receive regulatory approval or be
successfully commercialized.
    
    
    offer therapeutic or other improvement over existing, comparable therapeutics;
    
    be proven safe and effective in clinical studies;
    
    meet applicable regulatory standards;
    
    be capable of being produced in sufficient quantities at acceptable costs;
    
    be successfully commercialized; or
    
    obtain favorable reimbursement.
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Any termination or suspension of, or delays in the commencement or completion of, clinical testing
of our product candidates could result in increased costs to us, delay or limit our ability to
generate revenue and adversely affect our commercial prospects.
  
    
    obtaining regulatory approval to commence a clinical study or complying with conditions
imposed by a regulatory authority regarding the scope or design of a clinical study;
    
    reaching agreement on acceptable terms with prospective clinical research organizations,
or CROs, and study sites, the terms of which can be subject to extensive negotiation and may
vary significantly among different CROs and study sites;
    
    manufacturing, including manufacturing sufficient quantities of a product candidate or
other materials for use in clinical studies;
    
    obtaining institutional review board (IRB), approval or the approval of other reviewing
entities to conduct a clinical study at a prospective site;
    
    recruiting and enrolling patients to participate in clinical studies for a variety of
reasons, including size of patient population, nature of clinical study protocol, the
availability of approved effective treatments for the relevant disease and competition from
other clinical study programs for similar indications;
    
    severe or unexpected drug-related adverse effects experienced by patients in a clinical
study; and
    
    retaining patients who have initiated a clinical study, but may withdraw due to treatment
protocol, adverse effects from the therapy, lack of efficacy from the treatment, personal
issues or who are lost to further follow-up.
  
    
    failure to conduct the clinical study in accordance with regulatory requirements or our
clinical protocols;
    
    inspection of the clinical study operations or study sites by the FDA or other regulatory
authorities resulting in the imposition of a clinical hold;
    
    unforeseen safety issues or any determination that a clinical study presents unacceptable
health risks; and
    
    lack of adequate funding to continue the clinical study, including the incurrence of
unforeseen costs due to enrollment delays, requirements to conduct additional clinical
studies and increased expenses associated with the services of our CROs and other third
parties.
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The results of biomarker assays in earlier clinical studies in A-002 are not necessarily predictive
of future results, and therefore the results of biomarker assays in the VISTA-16 study may not be
similar to those observed previously.
 2
 Because the results of preclinical testing or earlier clinical studies are not necessarily
predictive of future results, A-002, A-623, A-001 or any other product candidate we advance into
clinical studies may not have favorable results in later clinical studies or receive regulatory
approval.
  If we breach the license agreements for our primary product candidates, we could lose the ability
to continue the development and commercialization of our primary product candidates.
 2
  Our industry is subject to intense competition. If we are unable to compete effectively, our
product candidates may be rendered non-competitive or obsolete.
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2 2 2 2
  Our product candidates may cause undesirable adverse effects or have other properties that could
delay or prevent their regulatory approval or limit the commercial profile of any approved label.
  
    
    regulatory authorities may withdraw their approval of the product;
    
    regulatory authorities may require the addition of labeling statements, such as warnings
or contraindications;
    
    we may be required to change the way the product is administered, conduct additional
clinical studies or change the labeling of the product;
    
    we could be sued and held liable for harm caused to patients; and
    
    our reputation may suffer.
  31




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After the completion of our clinical studies, we cannot predict whether or when we will obtain
regulatory approval to commercialize our product candidates and we cannot, therefore, predict the
timing of any future revenue from these product candidates.
  We have reached agreement with the FDA on an SPA for our planned VISTA-16 study of A-002 for the
potential treatment of acute coronary syndrome, which does not guarantee any particular outcome
from regulatory review of the study or the product candidate.
  Even if our product candidates receive regulatory approval, they may still face future development
and regulatory difficulties.
  
    
    issue warning letters or untitled letters;
    
    seek an injunction or impose civil or criminal penalties or monetary fines;
    
    suspend or withdraw regulatory approval;
    
    suspend any ongoing clinical studies;
    
    refuse to approve pending applications or supplements to applications filed by us;
    
    suspend or impose restrictions on operations, including costly new manufacturing
requirements; or
    
    seize or detain products, refuse to permit the import or export of products, or require
us to initiate a product recall.
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New legal and regulatory requirements could make it more difficult for us to obtain approvals for
our product candidates and could limit or make more burdensome our ability to commercialize any
approved products.
  If any of our product candidates for which we receive regulatory approval does not achieve broad
market acceptance, the revenue that we generate from its sales, if any, will be limited.
  
    
    demonstration of clinical safety and efficacy compared to other products;
    
    the relative convenience, ease of administration and acceptance by physicians and payors
of A-002 in the treatment of acute coronary syndrome, A-623 in the treatment of lupus and
A-001 in the prevention of acute chest syndrome associated with sickle cell disease;
    
    the prevalence and severity of any adverse effects;
    
    limitations or warnings contained in a products FDA-approved labeling;
    
    availability of alternative treatments, including, in the case of A-002, a number of
competitive products being studied for anti-inflammatory benefits in patients with acute
coronary syndrome or expected to be commercially launched in the near future;
    
    pricing and cost-effectiveness;
    
    the effectiveness of our or any future collaborators sales and marketing strategies;
    
    our ability to obtain and maintain sufficient third-party coverage or reimbursement from
government health care programs, including Medicare and Medicaid; and
    
    the willingness of patients to pay out-of-pocket in the absence of third-party coverage.
  33




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Our future success depends on our ability to retain our chief executive officer and other key
executives and to attract, retain and motivate qualified personnel.
  Legislative or regulatory reform of the health care system in the United States and foreign
jurisdictions may affect our ability to sell our products profitably.
     34




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We face potential product liability exposure, and, if successful claims are brought against us, we
may incur substantial liability.
  
    
    impairment of our business reputation;
    
    withdrawal of clinical study participants;
    
    costs of related litigation;
    
    distraction of managements attention from our primary business;
    
    substantial monetary awards to patients or other claimants;
    
    the inability to commercialize our product candidates; and
    
    decreased demand for our product candidates, if approved for commercial sale.
  If we use hazardous and biological materials in a manner that causes injury or violates applicable
law, we may be liable for damages.
  We rely on third parties to conduct, supervise and monitor our clinical studies, and those third
parties may perform in an unsatisfactory manner, such as by failing to meet established deadlines
for the completion of these clinical studies, or may harm our business if they suffer a
catastrophic event.
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Any failure by our third-party manufacturers on which we rely to produce our preclinical and
clinical drug supplies and on which we intend to rely to produce commercial supplies of any
approved product candidates may delay or impair our ability to commercialize our product
candidates.
     If we are unable to establish sales and marketing capabilities or enter into agreements with third
parties to market and sell our product candidates, we may be unable to generate any revenue.
  36




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##### Table of Contents



Guidelines and recommendations published by various organizations may adversely affect the use of
any products for which we may receive regulatory approval.
  Risks Related to Our Intellectual Property
 If our or our licensors patent positions do not adequately protect our product candidates or any
future products, others could compete with us more directly, which would harm our business.
 2
   
    
    we or our licensors were the first to make the inventions covered by each of our pending
patent applications;
    
    we or our licensors were the first to file patent applications for these inventions;
    
    others will not independently develop similar or alternative technologies or duplicate
any of our technologies;
    
    any of our or our licensors pending patent applications will result in issued patents;
    
    any of our or our licensors patents will be valid or enforceable;
    
    any patents issued to us or our licensors and collaborators will provide a basis for
commercially viable products, will provide us with any competitive advantages or will not be
challenged by third parties;
 37




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##### Table of Contents




    
    we will develop additional proprietary technologies or product candidates that are
patentable; or
    
    the patents of others will not have an adverse effect on our business.
 We may be unable to adequately prevent disclosure of trade secrets and other proprietary
information.
  We license patent rights from third-party owners. If we, or such owners, do not properly maintain
or enforce the patents underlying such licenses, our competitive position and business prospects
will be harmed.
 2
 2
  If we do not obtain protection under the Hatch-Waxman Act and similar foreign legislation to extend
our licensed patent terms and to obtain market exclusivity for our product candidates, our business
will be materially harmed.
  38




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##### Table of Contents



Our current patent positions and license portfolio may not include all patent rights needed for the
full development and commercialization of our product candidates. We cannot be sure that patent
rights we may need in the future will be available for license to us on commercially reasonable
terms, or at all.
    Litigation regarding patents, patent applications and other proprietary rights may be expensive and
time consuming. If we are involved in such litigation, it could cause delays in bringing product
candidates to market and harm our ability to operate.
   39




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##### Table of Contents



Risks Related to the Securities Markets and Investment in Our Common Stock
 Market volatility may affect our stock price and the value of your investment.
  
    
    plans for, progress in and results from clinical studies for A-002, A-623, A-001 and our
other product candidates;
    
    announcements of new products, services or technologies, commercial relationships,
acquisitions or other events by us or our competitors;
    
    developments concerning proprietary rights, including those pertaining to patents held by
Eli Lilly and Shionogi & Co., Ltd. concerning our sPLA2inhibitors and Amgen
concerning A-623;
    
    failure of any of our product candidates, if approved, to achieve commercial success;
    
    fluctuations in stock market prices and trading volumes of securities of similar
companies;
    
    general market conditions and overall fluctuations in U.S. equity markets;
    
    variations in our operating results, or the operating results of our competitors;
    
    changes in our financial guidance or securities analysts estimates of our financial
performance;
    
    changes in accounting principles;
    
    sales of large blocks of our common stock, including sales by our executive officers,
directors and significant stockholders;
    
    additions or departures of any of our key personnel;
    
    announcements related to litigation;
    
    changing legal or regulatory developments in the United States and other countries; and
    
    discussion of us or our stock price by the financial press and in online investor
communities.
  Management has discretion in allocating the net proceeds from our initial public offering and may
do so in ways that you and other stockholders may not approve.
  40




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##### Table of Contents



Because a small number of our existing stockholders own a majority of our voting stock, your
ability to influence corporate matters will be limited.
  Future sales of shares by existing shareholders could cause our stock price to decline.
  We may need to raise additional capital to fund our operations, which may cause dilution to our
existing stockholders, restrict our operations or require us to relinquish rights.
  We
will continue to incur significant increased costs as a result of operating as a public company, and our
management will be required to divert attention from product development to devote substantial time
to compliance initiatives.
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##### Table of Contents



We do not intend to pay dividends on our common stock so any returns will be limited to the
value of our stock.
  Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition
of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
  
    
    a classified and staggered board of directors whose members can only be dismissed for
cause;
    
    the prohibition on actions by written consent of our stockholders;
    
    the limitation on who may call a special meeting of stockholders;
    
    the establishment of advance notice requirements for nominations for election to our
board of directors or for proposing matters that can be acted upon at stockholder meetings;
    
    the ability of our board of directors to issue preferred stock without stockholder
approval, which would increase the number of outstanding shares and could thwart a takeover
attempt; and
    
    the requirement of at least 75% of the outstanding common stock to amend any of the
foregoing provisions.
  Our ability to use our net operating loss carryforwards may be subject to limitation and may result
in increased future tax liability to us.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Unregistered Sales of Equity Securities
  (i)
    
    1,985,575 shares of common stock upon the conversion of convertible promissory notes
issued in July and September 2009 and associated accrued interest, at a price of $5.25, or
75% of our initial public offering price of $7.00 per share;(ii)
    
    2,598,780 shares of common stock to certain of our investors pursuant to a common stock
purchase agreement, at a price of $7.00 per share, minus any per-share underwriting
discounts, commissions or fees;(iii)
    
    525,660 shares of common stock upon the conversion of convertible promissory notes
issued in December 2009 and associated accrued interest, at a price equal to our initial
public offering price of $7.00 per share, minus any per-share underwriting discounts,
commissions or fees;(iv)
    
    265,957 shares of common stock to Eli Lilly and Company, one of our licensors, in
satisfaction of a $1.75 million milestone payment, at a price equal to our initial public
offering price of $7.00 per share, minus any per-share underwriting discounts, commissions
or fees; and(v)
    
    265,957 shares of common stock to Shionogi & Co., Ltd., one of our licensors, in
satisfaction of a $1.75 million milestone payment, at a price equal to our initial public
offering price of $7.00 per share, minus any per-share underwriting discounts, commissions
or fees.
  Use of Proceeds
   Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  Total Number of Shares
    
    Maximum Number ofTotal Number of
    
    
    
    Purchased as Part of
    
    Shares that May YetShares Number
    
    Average Price
    
    Publicly Announced Plans
    
    Be Purchased UnderPeriod
    
    Purchased
    
    Paid Per Share
    
    or Programs
    
    the Plans or Programs1/1/2010  1/31/2010
    
    0
    
    0
    
    N/A
    
    N/A2/1/2010  2/28/2010
    
    0
    
    0
    
    N/A
    
    N/A3/1/2010  3/31/2010
    
    6,267 (1)
    
    $0.26
    
    N/A
    
    N/ATotal
    
    6,267
    
    N/A
    
    N/A
    
    N/A
 43




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##### Table of Contents



(1)
    
    Represents unvested shares of common stock that we repurchased from former employees at their
original issuance price pursuant to restricted stock purchase agreements.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
(REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  3.1
    
    Fifth Amended and Restated Certificate of Incorporation (filed as Exhibit 3.6 to the
registrants Registration Statement on Form S-1/A (File No. 333-161930) filed with the
SEC on February 3, 2010, and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws (filed as Exhibit 3.7 to the registrants Registration
Statement on Form S-1/A (File No. 333-161930) filed with the SEC on February 3, 2010,
and incorporated herein by reference).10.1
    
    Forms of Restricted Stock Unit Agreements under the 2010 Stock Option and Incentive Plan.31.1
    
    Certification of President and Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer and Vice President of Administration pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of President and Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer and Vice President of
Administration pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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SIGNATURES
  ANTHERA PHARMACEUTICALS, INC.May 14, 2010
    By:
    /s/ Paul F. TruexPaul F. TruexPresident and Chief Executive OfficerMay 14, 2010
    By:
    /s/ Christopher P. LoweChristopher P. LoweChief Financial Officer and Vice
President of Administration 45