##### 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, 2011
 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(State or Other Jurisdiction of Incorporation or Organization)
    
    20-1852016(I.R.S. Employer 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 þ
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



ANTHERA PHARMACEUTICALS, INC.
 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011
 INDEX
 PagePart I  Financial Information
    
    
    3Item 1. Financial Statements (unaudited)
    
    
    3Condensed Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    3Condensed Statements of Operations for the Three Months Ended March 31, 2011 and 2010 and for
the period from September 9, 2004 (Date of Inception) to March 31, 2011
    
    
    4Condensed Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 and
cumulative period from September 9, 2004 (Date of Inception) to March 31, 2011
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    23Part II  Other Information
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3. Defaults Upon Senior Securities
    
    
    41Item 4. (Removed and Reserved)
    
    
    41Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    42Signatures
    
    
    43EX-10.4EX-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 31,2011
    
    
    2010ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    66,557,789
    
    
    $
    40,029,972Short term investments
    
    
    11,982,185
    
    
    
    23,350,922Prepaid expenses and other current assets
    
    
    1,231,693
    
    
    
    1,864,883Total current assets
    
    
    79,771,667
    
    
    
    65,245,777Property and equipment  net
    
    
    1,325,478
    
    
    
    17,285Debt issuance costs
    
    
    348,230
    
    
    
    TOTAL
    
    $
    81,445,375
    
    
    $
    65,263,062LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    7,664,486
    
    
    $
    3,791,693Accrued
clinical studies
    
    
    8,159,476
    
    
    
    3,136,786Accrued liabilities
    
    
    475,473
    
    
    
    467,817Accrued payroll and related costs
    
    
    471,276
    
    
    
    609,086Total current liabilities
    
    
    16,770,711
    
    
    
    8,005,382Notes payable  net of discount
    
    
    23,719,801
    
    
    
    Total liabilities
    
    
    40,490,512
    
    
    
    8,005,382Commitments and ContingenciesStockholders equity (deficit)Preferred stock, $0.001 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding as of
March 31, 2011 and December 31, 2010
    
    
    
    
    
    
    Common stock, $0.001 par value, 95,000,000 shares
authorized; 32,909,914 and 32,853,032 shares issued
and outstanding as of March 31, 2011 and December
31, 2010, respectively
    
    
    32,909
    
    
    
    32,853Additional paid-in capital
    
    
    164,839,927
    
    
    
    162,919,216Accumulated comprehensive income (loss)
    
    
    291,499
    
    
    
    (50,622
    )Deficit accumulated the during the development stage
    
    
    (124,209,472
    )
    
    
    (105,643,767
    )Total stockholders equity
    
    
    40,954,863
    
    
    
    57,257,680TOTAL
    
    $
    81,445,375
    
    
    $
    65,263,062
  3




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ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
 CumulativePeriod fromSeptember 9,2004(Date ofInception) toThree Months Ended March 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011OPERATING EXPENSES:Research and development
    
    $
    16,316,758
    
    
    $
    5,241,814
    
    
    $
    97,097,481General and administrative
    
    
    2,339,882
    
    
    
    1,224,110
    
    
    
    18,558,298Total operating expenses
    
    
    18,656,640
    
    
    
    6,465,924
    
    
    
    115,655,779LOSS FROM OPERATIONS
    
    
    (18,656,640
    )
    
    
    (6,465,924
    )
    
    
    (115,655,779
    )OTHER INCOME (EXPENSE):Other expense and interest income, net
    
    
    90,935
    
    
    
    (841,377
    )
    
    
    (448,658
    )Mark-to-market adjustment of warrant liability
    
    
    
    
    
    
    (3,796,491
    )
    
    
    (3,796,491
    )Beneficial conversion features
    
    
    
    
    
    
    
    
    
    
    (4,308,544
    )Total other income (expense)
    
    
    90,935
    
    
    
    (4,637,868
    )
    
    
    (8,553,693
    )NET LOSS
    
    $
    (18,565,705
    )
    
    $
    (11,103,792
    )
    
    $
    (124,209,472
    )Net loss per share  basic and diluted
    
    $
    (0.56
    )
    
    $
    (0.83
    )Weighted-average number of shares used in per
share calculation  basic and diluted
    
    
    32,895,152
    
    
    
    13,344,231
  4




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ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
 September 9,2004(Date ofInception) toThree Months Ended March 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011CASH FLOW FROM OPERATING ACTIVITIES:Net loss
    
    $
    (18,565,705
    )
    
    $
    (11,103,792
    )
    
    $
    (124,209,472
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    4,556
    
    
    
    3,270
    
    
    
    94,164Amortization of premium/(discount) on short-term investments
    
    
    74,061
    
    
    
    
    
    
    
    45,929Realized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    8,682Realized gain from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    (214
    )Stock-based compensation expense
    
    
    587,698
    
    
    
    52,616
    
    
    
    1,924,852Issuance of common stock for consulting service
    
    
    
    
    
    
    
    
    
    
    41,366Issuance of preferred and common stock for service and license fee
    
    
    
    
    
    
    3,500,000
    
    
    
    5,750,000Issuance of preferred stock in lieu of interest payment
    
    
    
    
    
    
    173,194
    
    
    
    330,575Beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    4,308,544Amortization of discount on convertible promissory notes
    
    
    
    
    
    
    540,993
    
    
    
    677,715Amortization of discount on term loan
    
    
    15,095
    
    
    
    
    
    
    
    15,095Amortization of debt issuance costs
    
    
    2,788
    
    
    
    227,955
    
    
    
    310,387Mark-to-market adjustment on warrant liability
    
    
    
    
    
    
    3,796,491
    
    
    
    3,795,776Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    633,190
    
    
    
    (339,427
    )
    
    
    (1,231,695
    )Accounts payable
    
    
    2,566,210
    
    
    
    (103,890
    )
    
    
    6,615,264Accrued
clinical studies
    
    
    5,022,690
    
    
    
    (242,336
    )
    
    
    8,159,476Accrued liabilities
    
    
    (56,626
    )
    
    
    (34,662
    )
    
    
    404,343Accrued payroll and related costs
    
    
    (137,810
    )
    
    
    25,922
    
    
    
    471,276Net cash used in operating activities
    
    
    (9,853,853
    )
    
    
    (3,503,666
    )
    
    
    (92,487,937
    )INVESTING ACTIVITIES:Property and equipment purchases
    
    
    
    
    
    
    (5,746
    )
    
    
    (107,079
    )Proceeds from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    400Purchase of short-term investments
    
    
    (1,996,000
    )
    
    
    
    
    
    
    (41,745,256
    )Proceeds from sale of short-term investments
    
    
    13,318,014
    
    
    
    
    
    
    
    29,850,146Restricted cash
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    11,322,014
    
    
    
    (5,746
    )
    
    
    (12,001,789
    )FINANCING ACTIVITIES:Proceeds from issuance of convertible notes
    
    
    
    
    
    
    
    
    
    
    26,560,000Proceeds from issuance of term loan
    
    
    25,000,000
    
    
    
    
    
    
    
    25,000,000Payment of debt issuance costs
    
    
    (291,500
    )
    
    
    (2,572
    )
    
    
    (599,099
    )Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    32,210,278Payment of
financing costs for initial public and private offering
    
    
    (13,818
    )
    
    
    (850,416
    )
    
    
    (3,533,957
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    57,202,972
    
    
    
    90,789,015Proceeds from issuance of common stock pursuant to employee stock purchase
plan
    
    
    
    
    
    
    
    
    
    
    81,226Proceeds from exercise of stock options
    
    
    50,192
    
    
    
    17,653
    
    
    
    390,236Net cash provided by financing activities
    
    
    24,744,874
    
    
    
    56,367,637
    
    
    
    170,897,699Effect of exchange rate changes on cash
    
    
    314,782
    
    
    
    
    
    
    
    149,816NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    26,527,817
    
    
    
    52,858,225
    
    
    
    66,557,789CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    40,029,972
    
    
    
    3,803,384
    
    
    
    CASH AND CASH EQUIVALENTS  End of period
    
    $
    66,557,789
    
    
    $
    56,661,609
    
    
    $
    66,557,789SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION:Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    15,229Taxes paid
    
    $
    
    
    
    $
    10,136
    
    
    $
    52,746NONCASH INVESTING 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
    
    $
    
    
    
    $
    
    
    
    $
    4,308,544Unamortized debt discount charged to equity in conjunction with conversion
of promissory notes into common stock
    
    $
    
    
    
    $
    185,833
    
    
    $
    185,883Reclassification of warrant and derivative liabilities to additional
paid-in capital
    
    $
    
    
    
    $
    406,130
    
    
    $
    406,130Issuance costs charged to equity
    
    $
    
    
    
    $
    3,021,966
    
    
    $
    3,564,932Accrued and deferred financing and debt issuance costs
    
    $
    78,700
    
    
    $
    982,504
    
    
    $
    78,700Liability accrued for equipment purchases
    
    $
    1,312,748
    
    
    $
    
    
    
    $
    1,312,748
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ANTHERA PHARMACEUTICALS, INC.
 (A Development Stage Company)
 
 NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Organization
 2 2
  Basis of Presentation
  Significant Accounting Policies
  Use of Estimates
  6




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2. NET LOSS PER SHARE
   Three Months Ended March 31,2011
    
    
    2010Net loss per shareNet loss
    
    $
    (18,565,705
    )
    
    $
    (11,103,792
    )Weighted-average common shares outstanding
    
    
    32,917,289
    
    
    
    13,357,149Less: Weighted-average shares subject to repurchase
    
    
    (22,137
    )
    
    
    (12,918
    )Total basic and diluted net loss per share
    
    
    32,895,152
    
    
    
    13,344,231Basic and diluted net loss per share
    
    $
    (0.56
    )
    
    $
    (0.83
    )
  Three Months Ended March 31,2011
    
    
    2010Options to purchase common stock
    
    
    940,430
    
    
    
    1,102,614Common stock subject to repurchase
    
    
    22,137
    
    
    
    12,918Warrants to purchase common stock
    
    
    4,582,136
    (2)
    
    
    493,268
    (1)Restricted stock units
    
    
    302,200
    
    
    
    5,844,903
    
    
    
    1,608,800
 
 (1)
    
    The warrants were exercised upon the closing of the Companys initial public offering (IPO) in March 2010.(2)
    
    Consists of 357,136 warrants which carry a contractual term of five years and terminate upon the earlier of
i) five years from the date of issuance, which will be July 17, 2014 or September 9, 2014, and ii) upon
certain corporate transactions; 4,200,000 warrants which carry a contractual term of five years expiring
September 24, 2015 and 25,000 warrants which carry a contractual term of seven years expiring March 25,
2018. Each of the warrants contains a customary net issuance feature, which allows the warrant holder to
pay the exercise price of the warrant by forfeiting a portion of the executed warrant shares with a value
equal to the aggregate exercise price. 7




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3. CASH EQUIVALENTS AND INVESTMENTS
  March 31, 2011GrossAmortized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Losses
    
    
    Fair ValueCash
    
    $
    44,860,866
    
    
    $
    
    
    
    $
    44,860,866Money market funds
    
    
    16,514,928
    
    
    
    
    
    
    
    16,514,928Certificates of deposit
    
    
    11,989,000
    
    
    
    (6,815
    )
    
    
    11,982,185Investments in foreign sovereign debt
    
    
    5,186,304
    
    
    
    (4,309
    )
    
    
    5,181,995Total
    
    
    78,551,098
    
    
    
    (11,124
    )
    
    
    78,539,974Less amounts classified as cash and cash equivalents
    
    
    (66,562,098
    )
    
    
    4,309
    
    
    
    (66,557,789
    )Total
    
    $
    11,989,000
    
    
    $
    (6,815
    )
    
    $
    11,982,185
 December 31, 2010GrossAmortized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Losses
    
    
    Fair ValueCash
    
    $
    15,499,182
    
    
    $
    
    
    
    $
    15,499,182Money market funds
    
    
    19,467,096
    
    
    
    
    
    
    
    19,467,096Certificates of deposit
    
    
    14,478,000
    
    
    
    (6,765
    )
    
    
    14,471,235Corporate bonds
    
    
    4,010,563
    
    
    
    (83
    )
    
    
    4,010,480Investments in foreign sovereign debt
    
    
    10,017,010
    
    
    
    (84,109
    )
    
    
    9,932,901Total
    
    
    63,471,851
    
    
    
    (90,957
    )
    
    
    63,380,894Less amounts classified as cash and cash equivalents
    
    
    (40,045,129
    )
    
    
    15,157
    
    
    
    (40,029,972
    )Total
    
    $
    23,426,722
    
    
    $
    (75,800
    )
    
    $
    23,350,922
 4. FAIR VALUE OF INSTRUMENTS
   
    
    Level 1 Valuations are based on quoted prices in active markets for identical assets
or liabilities, and readily accessible by us at the reporting date. Examples of assets and
liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and
trading securities with quoted prices on active markets.
    
    Level 2 Valuations based on inputs other than the quoted prices in active markets that
are observable either directly or indirectly in active markets. Examples of assets and
liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds,
commercial paper, certificates of deposit and over-the-counter derivatives.
    
    Level 3 Valuations based on unobservable inputs in which there is little or no market
data, which require us to develop our own assumptions. Examples of assets and liabilities
utilizing Level 3 inputs are cost method investments, auction rate securities (ARS) and the
Primary Fund.
 8




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March 31, 2011EstimatedFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Money market funds
    
    $
    16,514,928
    
    
    $
    16,514,928
    
    
    $
    
    
    
    $
    Certificates of deposit
    
    
    11,982,185
    
    
    
    
    
    
    
    11,982,185
    
    
    
    Investments in foreign sovereign debt
    
    
    5,181,995
    
    
    
    
    
    
    
    5,181,995
    
    
    
    Total
    
    $
    33,679,108
    
    
    $
    16,514,928
    
    
    $
    17,164,180
    
    
    $
    December 31, 2010EstimatedFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Money market funds
    
    $
    19,467,096
    
    
    $
    19,467,096
    
    
    $
    
    
    
    $
    Certificates of deposit
    
    
    14,471,235
    
    
    
    
    
    
    
    14,471,235
    
    
    
    Corporate bonds
    
    
    4,010,480
    
    
    
    
    
    
    
    4,010,480
    
    
    
    Investments in foreign sovereign debt
    
    
    9,932,901
    
    
    
    
    
    
    
    9,932,901
    
    
    
    Total
    
    $
    47,881,712
    
    
    $
    19,467,096
    
    
    $
    28,414,616
    
    
    $
    
  5. PROPERTY AND EQUIPMENT
  March 31,
    
    
    December 31,2011
    
    
    2010Computers and software
    
    $
    77,318
    
    
    $
    77,318Office equipment and furniture
    
    
    16,730
    
    
    
    16,730Leasehold improvements
    
    
    10,802
    
    
    
    10,802Construction in progress
    
    
    1,312,749
    
    
    
    Total property and equipment
    
    
    1,417,599
    
    
    
    104,850Less accumulated depreciation
    
    
    (92,121
    )
    
    
    (87,565
    )Property and equipment, net
    
    $
    1,325,478
    
    
    $
    17,285
 6. COMMITMENTS AND CONTINGENCIES
 2 2
  9




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7. COMPREHENSIVE LOSS
  Three Months Ended March 31,2011
    
    
    2010Net loss
    
    $
    (18,565,705
    )
    
    $
    (11,103,792
    )Unrealized gain on available-for-sale securities
    
    
    1,268
    
    
    
    Foreign currency translation adjustments
    
    
    340,852
    
    
    
    Comprehensive loss
    
    $
    (18,223,585
    )
    
    $
    (11,103,792
    )
 8. DEBT FINANCING
 Term Loan Agreement
 Hercules Technology Growth Capital
    10




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9. STOCKHOLDERS EQUITY
 Option Plans
    Weighted-Weighted-
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicOptions
    
    Price
    
    Life in Years
    
    ValueBalance at December 31, 2010
    
    
    1,275,991
    
    
    $
    1.26
    
    
    
    7.07
    
    
    $
    4,700,543Granted
    
    
    988,000
    
    
    $
    5.03Exercised
    
    
    (35,747
    )
    
    $
    1.40Cancelled
    
    
    (13,313
    )
    
    $
    2.72Balance at March 31, 2011
    
    
    2,214,931
    
    
    $
    2.93
    
    
    
    8.02
    
    
    $
    8,471,231Vested at March 31, 2011
    
    
    1,080,275
    
    
    $
    1.08
    
    
    
    6.50
    
    
    $
    6,141,662Vested and expected to vest at March 31, 2011
    
    
    2,214,931
    
    
    $
    2.93
    
    
    
    8.02
    
    
    $
    8,471,231
  Period fromSeptember 9,2004 (Date ofInception) toThree Months Ended  March 31,
    
    March 31,2011
    
    2010
    
    2011Intrinsic value of options exercised
    
    $
    151,680
    
    
    $
    126,868
    
    
    $
    979,879Proceeds received from the exercise of stock options
    
    $
    50,192
    
    
    $
    17,653
    
    
    $
    395,343Grant date fair value of options vested
    
    $
    130,465
    
    
    $
    36,683
    
    
    $
    953,099
  Restricted Stock Units
  11




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Weighted-AverageGrantDate FairShares
    
    ValueOutstanding at December 31, 2010
    
    
    302,500
    
    
    $
    5.13Restricted stock units granted
    
    
    10,000
    
    
    $
    4.88Restricted stock units released
    
    
    (10,000
    )
    
    $
    4.88Restricted stock units forfeitures and cancellations
    
    
    (4,500
    )
    
    $
    4.84Outstanding at March 31, 2011
    
    
    298,000
    
    
    $
    5.13
 2010 Employee Stock Purchase Plan
   Stock-Based Compensation
   Stock Option Plans
 Period fromSeptember 9,2004 (Date ofInception) toThree Months Ended March 31,
    
    March 31,2011
    
    2010
    
    2011Expected Volatility
    
    
    63
    %
    
    
    89
    %
    
    
    74
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    2.37
    %
    
    
    3.02
    %
    
    
    3.41
    %Expected Term (years)
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
 12




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ESPP
 Period fromSeptember 9,2004 (Date ofInception) toThree Months ended
    
    March 31,March 31, 2011
    
    2011Expected Volatility
    
    
    54
    %
    
    
    64
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    0.16
    %
    
    
    0.16
    %Expected Term (years)
    
    
    0.5
    
    
    
    0.5
 Restricted Stock Units
  Stock-Compensation Summary
   Period fromSeptember 9,2004 (Date ofInception) toThree Months Ended March 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011Research and development
    
    $
    235,890
    
    
    $
    20,231
    
    
    $
    678,391General and administrative
    
    
    351,808
    
    
    
    32,385
    
    
    
    1,246,461Total employee stock-based compensation
    
    $
    587,698
    
    
    $
    52,616
    
    
    $
    1,924,852
  Nonemployee Stock-Based Compensation
  13




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10. RELATED PARTY TRANSACTIONS
  Period fromSeptember 9,2004(Date ofInception) toThree Months Ended March 31,
    
    March 31,2011
    
    2010
    
    2011Project management fees
    
    $
    620,727
    
    
    $
    38,274
    
    
    $
    1,285,918
  11. SUBSEQUENT EVENTS
  
 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, as 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
  14




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Revenue
  Research and Development Expenses
    For the PeriodSeptember 9,2004 (Date ofInception) toThree Months Ended March 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011Allocated costs:A-001
    
    $
    24,255
    
    
    $
    91,729
    
    
    $
    6,532,613
    (1)Varespladib
    
    
    9,323,210
    
    
    
    4,252,849
    (2)
    
    
    56,413,723
    (1)(2)(4)A-623
    
    
    5,680,193
    
    
    
    304,950
    
    
    
    17,650,085
    (3)(5)Unallocated costs
    
    
    1,289,100
    
    
    
    592,286
    
    
    
    16,501,060Total development
    
    $
    16,316,758
    
    
    $
    5,241,814
    
    
    $
    97,097,481
 
 (1)
    
    Includes Qualifying Therapeutic Discovery Project Credit under Section 48D of approximately $244,000. 15




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##### Table of Contents



(2)
    
    Includes milestone payments of $3.5 million pursuant to amendments to the license agreements with
each of Eli Lilly and Shionogi & Co. Ltd., which were paid in the form of shares of common stock.(3)
    
    Includes Qualifying Therapeutic Discovery Project Credit under Section 48D of approximately $488,000.(4)
    
    Includes license fees of $4.0 million pursuant to a license agreement with each of Eli Lilly and
Shionogi & Co. Ltd., which were paid in cash and shares of preferred stock in 2006.(5)
    
    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.
    16




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General and Administrative Expenses
  Critical Accounting Policies and Estimates
   Accrued Clinical Expenses
  
    
    fees paid to CROs in connection with clinical studies;
    
    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
  17




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Fair Value Measurements and Impairments
    
    
    Level 1 Valuations are based on quoted prices in active markets for identical assets
or liabilities, and readily accessible by us at the reporting date. Examples of assets and
liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and
trading securities with quoted prices on active markets.
    
    Level 2 Valuations based on inputs other than the quoted prices in active markets that
are observable either directly or indirectly in active markets. Examples of assets and
liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds,
commercial paper, certificates of deposit and over-the-counter derivatives.
    
    Level 3 Valuations based on unobservable inputs in which there is little or no market
data, which require us to develop our own assumptions. Examples of assets and liabilities
utilizing Level 3 inputs are cost method investments, auction rate securities (ARS) and the
Primary Fund.
     18




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Results of Operations
 Comparison of the three months ended March 31, 2011 and 2010
 Research and development expenses.
  2011
    
    2010
    
    $ Change
    
    % ChangeResearch and development expense
    
    $
    16.3
    
    
    $
    5.2
    
    
    $
    11.1
    
    
    
    213
    %
  General and administrative expenses.
  2011
    
    2010
    
    $ Change
    
    % ChangeGeneral and administrative expense
    
    $
    2.3
    
    
    $
    1.2
    
    
    $
    1.1
    
    
    
    92
    %
  Other expense and interest income, net.
  2011
    
    2010
    
    $ Change
    
    % ChangeOther expense and interest income, net
    
    $
    0.1
    
    
    $
    (0.8
    )
    
    $
    0.9
    
    
    
    113
    %Mark-to-market adjustment of warrant liability
    
    
    
    
    
    
    (3.8
    )
    
    $
    (3.8
    )
    
    
    100
    %
  Liquidity and Capital Resources
  19




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March 31, 2011
    
    
    December 31, 2010Cash and cash equivalents
    
    $
    66,557,789
    
    
    $
    40,029,972Short-term investments
    
    
    11,982,185
    
    
    
    23,350,922Total
    
    $
    78,539,974
    
    
    $
    63,380,894
   Cash Flows
 Three months ended March 31, 2011
     Three Months Ended March 31, 2010
    Contractual Obligations and Commitments
   20




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Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating lease obligations
    
    $
    30,402
    
    
    $
    26,502
    
    
    $
    3,900
    
    
    $
    
    
    
    $
    Loan Agreement
    
    $
    32,061,628
    
    
    $
    2,505,625
    
    
    $
    29,556,003
    
    
    $
    
    
    
    $
    Total
    
    $
    32,092,030
    
    
    $
    2,532,127
    
    
    $
    29,559,903
    
    
    $
    
    
    
    $
    
 2
  Funding Requirements
  
    
    continue clinical development of varespladib;
    
    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;
 21




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
    
    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.
     Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   22




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
 You should carefully consider the risks described below, together with the other information
contained in this Quarterly Report on Form 10-Q , including the financial statements and the related
notes that appear in this report. We believe the risks described below are the risks that are
material to us as of the date of this report. If any of the following risks occur, our business,
financial condition, results of operations and future growth prospects would like be materially and
adversely affected. In these circumstances, the market 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.
   23




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We have never generated any revenue and may never be profitable.
  
    
    obtain favorable results for and advance the development of our lead product candidate,
varespladib, 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 PEARL-SC or other clinical studies in patients with systemic lupus
erythematosus, or lupus, or other indications related to the development of A-623;
    
    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 varespladib, 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.
    24




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We will need substantial additional capital in the future to fund our operations. If additional
capital is not available, we will have to delay, reduce or cease operations.
  
    
    the rate of progress of our Phase 3 clinical study named VISTA-16 study for varespladib
and our Phase 2b clinical study named PEARL-SC or other studies 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;
    
    manufacturing campaign of A-623 clinical matters, including formulation development and
enhancement;
    
    non-clinical activities that we may pursue parallel to clinical trials for each clinical
compound;
    
    the cost, timing and outcomes of regulatory proceedings;
    
    payments received under any strategic collaborations;
    
    the filing, prosecution and enforcement of patent claims;
    
    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
  25




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2
 Our limited operating history makes it difficult to evaluate our business and prospects.
  Risks Associated with Development and Commercialization of Our Product Candidates
 We depend substantially on the success of our three primary product candidates, varespladib, 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.
   2 2 2
  
    
    offer therapeutic or other improvement over existing, comparable therapeutics;
    
    be proven safe and effective in clinical studies;
 26




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
    
    meet applicable regulatory standards;
    
    be capable of being produced in sufficient quantities at acceptable costs;
    
    be successfully commercialized; or
    
    obtain favorable reimbursement.
   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, or 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;
 27




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
    
    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.
   The results of biomarker assays in earlier clinical studies in varespladib 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, varespladib, 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.
  28




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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.
  2 2 2 2
  29




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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.
  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.
  Our agreement with the FDA on a SPA for our VISTA-16 study of varespladib for the potential
treatment of acute coronary syndrome does not guarantee any particular outcome from regulatory
review of the study or the product candidate.
  30




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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.
  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.
  31




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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 varespladib 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 varespladib, 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.
  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.
  Recently enacted and future legislation or regulatory reform of the health care system in the
United States and foreign jurisdictions may affect our ability to sell our products profitably.
  32




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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;
 33




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
    
    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.
  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.
  34




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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.
  35




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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;
    
    we will develop additional proprietary technologies or product candidates that are
patentable; or
 36




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##### Table of Contents




    
    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.
  37




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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.
   38




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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 varespladib, 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 sPLA2 inhibitors 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.
  Because a small number of our existing stockholders own a majority of our voting stock, your
ability to influence corporate matters will be limited.
  39




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Future sales of our common stock may 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.
  Operating as a public company increases our expenses and administrative burden.
   40




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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.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
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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
    
    Second Addendum to Sublease by and between the Company and Millipore Corporation,
as a successor in interest to Guava Technologies, dated as of January 12, 2011
(filed as Exhibit 10.41 to the registrants Annual Report on Form 10-K filed with
the SEC on March 7, 2011, and incorporated herein by reference).10.2
    
    Loan and Security Agreement dated
March 25, 2011, by and between the Company, Hercules Technology
II, L.P. and Hercules Technology Growth Capital, Inc.,
(filed as Exhibit 10.1 to the registrants Current Report on Form 8-K filed with
the SEC on March 29, 2011, and incorporated herein by reference).10.3
    
    Form of Warrant Agreement dated March 25, 2011 (filed as Exhibit 10.2 to
registrants Current Report on Form 8-K filed with the SEC on March 29, 2011, and
incorporated herein by reference).10.4
    
    Lease by and between the Company and MEPT Mount Eden LLC, dated as of May 4, 2011.31.1
    
    Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as
adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  ANTHERA PHARMACEUTICALS, INC.May 13, 2011
    By:
    /s/ Paul F. TruexPaul F. TruexPresident and Chief Executive OfficerMay 13, 2011
    By:
    /s/ Christopher P. LoweChristopher P. LoweChief Financial Officer 43