##### 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 September 30, 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(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-1852016(I.R.S. Employer
Identification No.)25801 Industrial Boulevard, Suite B 
Hayward, California(Address of Principal Executive Offices)
    
    94545(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 SEPTEMBER 30, 2010
 INDEX
 PagePart I  Financial InformationItem 1. Financial Statements (unaudited)Condensed Balance Sheets as of September 30, 2010 and December 31, 2009
    
    
    3Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2010
and 2009 and for the period from September 9, 2004 (Date of Inception) to September 30, 2010
    
    
    4Condensed Statement of Stockholders Equity (Deficit) and Comprehensive Loss for the period
from December 31, 2009 to September 30, 2010
    
    
    5Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 and
cumulative period from September 9, 2004 (Date of Inception) to September 30, 2010
    
    
    6Notes to Condensed Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4T. Controls and Procedures
    
    
    28Part II  Other InformationItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. (Removed and Reserved)
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    48Signatures
    
    
    49EX-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
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    51,208,720
    
    
    $
    3,803,384Short term investments
    
    
    21,878,890
    
    
    
    Prepaid expenses and other current assets
    
    
    1,813,482
    
    
    
    19,825Total current assets
    
    
    74,901,092
    
    
    
    3,823,209Property and equipmentnet
    
    
    22,113
    
    
    
    12,994Deferred financing cost
    
    
    
    
    
    
    1,922,183Other assets
    
    
    
    
    
    
    130,403TOTAL
    
    $
    74,923,205
    
    
    $
    5,888,789LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    2,798,085
    
    
    $
    3,145,706Accrued clinical study
    
    
    967,917
    
    
    
    565,034Accrued liabilities
    
    
    497,785
    
    
    
    767,663Accrued payroll and related costs
    
    
    573,920
    
    
    
    153,235Warrant and derivative liabilities
    
    
    
    
    
    
    406,130Convertible promissory notes
    
    
    
    
    
    
    13,129,877Total current liabilities
    
    
    4,837,707
    
    
    
    18,167,645Total liabilities
    
    
    4,837,707
    
    
    
    18,167,645Commitments and Contingencies (Note 9)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 September 30,
2010 and December 31, 2009, respectively;
(aggregate liquidation value of $0 and $52,597,692
as of September 30, 2010 and December 31, 2009,
respectively)
    
    
    
    
    
    
    8,146Common stock, $0.001 par value, 95,000,000 and
18,443,341 shares authorized; 32,796,690 and
1,566,199 shares issued and outstanding as of
September 30, 2010 and December 31, 2009,
respectively
    
    
    32,796
    
    
    
    1,566Additional paid-in capital
    
    
    162,494,362
    
    
    
    52,941,384Accumulated comprehensive income
    
    
    161,987
    
    
    
    Deficit accumulated the during the development stage
    
    
    (92,603,647
    )
    
    
    (65,229,952
    )Total stockholders equity (deficit)
    
    
    70,085,498
    
    
    
    (12,278,856
    )TOTAL
    
    $
    74,923,205
    
    
    $
    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)Three months ended
    
    
    Nine months ended
    
    
    toSeptember 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010OPERATING EXPENSES:Research and development
    
    $
    6,885,125
    
    
    $
    2,525,948
    
    
    $
    18,565,088
    
    
    $
    7,727,129
    
    
    $
    69,889,069General and administrative
    
    
    1,510,021
    
    
    
    884,908
    
    
    
    4,244,000
    
    
    
    2,730,482
    
    
    
    14,161,567Total operating expenses
    
    
    8,395,146
    
    
    
    3,410,856
    
    
    
    22,809,088
    
    
    
    10,457,611
    
    
    
    84,050,636LOSS FROM OPERATIONS
    
    
    (8,395,146
    )
    
    
    (3,410,856
    )
    
    
    (22,809,088
    )
    
    
    (10,457,611
    )
    
    
    (84,050,636
    )OTHER EXPENSE:Interest and other income
    
    
    61,606
    
    
    
    
    
    
    
    76,562
    
    
    
    21,559
    
    
    
    1,096,322Interest and other expense
    
    
    
    
    
    
    (193,556
    )
    
    
    (4,641,169
    )
    
    
    (289,776
    )
    
    
    (5,340,789
    )Beneficial conversion features
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,308,544
    )Total other income (expense)
    
    
    61,606
    
    
    
    (193,556
    )
    
    
    (4,564,607
    )
    
    
    (268,217
    )
    
    
    (8,553,011
    )NET LOSS
    
    $
    (8,333,540
    )
    
    $
    (3,604,412
    )
    
    $
    (27,373,695
    )
    
    $
    (10,725,828
    )
    
    $
    (92,603,647
    )Net loss per sharebasic and diluted
    
    $
    (0.36
    )
    
    $
    (2.37
    )
    
    $
    (1.40
    )
    
    $
    (7.16
    )Weighted-average number of shares
used in per share calculationbasic
and diluted
    
    
    22,964,279
    
    
    
    1,520,875
    
    
    
    19,567,058
    
    
    
    1,498,108
  4




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##### Table of Contents



Anthera Pharmaceuticals, Inc.
(A Development Stage Company)
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
 (unaudited)
 DeficitAccumulated
    
    
    Accumulated
    
    
    TotalConvertible
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Other
    
    
    During
    
    
    StockholdersPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Development
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Stage
    
    
    (Deficit)BALANCEDecember 31, 2009
    
    
    8,146,308
    
    
    $
    8,146
    
    
    
    1,566,199
    
    
    $
    1,566
    
    
    $
    52,941,384
    
    
    $
    
    
    
    $
    (65,229,952
    )
    
    $
    (12,278,856
    )Conversion of convertible preferred stock to common stock at a ratio of 1:1
    
    
    (8,146,308
    )
    
    
    (8,146
    )
    
    
    8,146,308
    
    
    
    8,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock for cash at $7.00 per sharenet of issuance cost of $3,021,966
    
    
    
    
    
    
    
    
    
    
    6,000,000
    
    
    
    6,000
    
    
    
    37,075,034
    
    
    
    
    
    
    
    
    
    
    
    37,081,034Issuance of common stock upon conversion of convertible promissory notes and accrued interest at $5.25 and $6.28 per share
    
    
    
    
    
    
    
    
    
    
    2,511,235
    
    
    
    2,511
    
    
    
    13,880,601
    
    
    
    
    
    
    
    
    
    
    
    13,883,112Issuance of common stock upon release of escrow funds
    
    
    
    
    
    
    
    
    
    
    2,598,780
    
    
    
    2,599
    
    
    
    17,097,373
    
    
    
    
    
    
    
    
    
    
    
    17,099,972Issuance of common stock upon cashless exercise of warrants
    
    
    
    
    
    
    
    
    
    
    194,474
    
    
    
    194
    
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    412Issuance of common stock to collaborator in lieu of milestone payment
    
    
    
    
    
    
    
    
    
    
    531,914
    
    
    
    532
    
    
    
    3,499,468
    
    
    
    
    
    
    
    
    
    
    
    3,500,000Issuance of common stock upon exercise of overallotment by underwriters net of issuance cost of $17,291
    
    
    
    
    
    
    
    
    
    
    604,492
    
    
    
    605
    
    
    
    3,959,662
    
    
    
    
    
    
    
    
    
    
    
    3,960,267Issuance of common stock upon exercise of stock options
    
    
    
    
    
    
    
    
    
    
    118,878
    
    
    
    119
    
    
    
    89,066
    
    
    
    
    
    
    
    
    
    
    
    89,185Issuance of common stock upon private placement transaction, net of issuance cost of $468,964
    
    
    
    
    
    
    
    
    
    
    10,500,000
    
    
    
    10,500
    
    
    
    23,806,591
    
    
    
    
    
    
    
    
    
    
    
    23,817,091Issuance of warrants in conjunction with private placement transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,323,944
    
    
    
    
    
    
    
    
    
    
    
    5,323,944Net change of early exercise of stock options and liability
    
    
    
    
    
    
    
    
    
    
    24,410
    
    
    
    24
    
    
    
    (5,336
    )
    
    
    
    
    
    
    
    
    
    
    (5,312
    )Reclass of warrant and derivative liability to equity in conjunction with conversion of convertible promissory notes into
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,473,491
    
    
    
    
    
    
    
    
    
    
    
    4,473,491Stock-based compensation expense related to consultant options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,399
    
    
    
    
    
    
    
    
    
    
    
    8,399Stock-based compensation expense related to employee options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344,467
    
    
    
    
    
    
    
    
    
    
    
    344,467Change in other comprehensive lossunrealized gain on investments and foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,987
    
    
    
    
    
    
    
    161,987Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,373,695
    )
    
    
    (27,373,695
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,211,708
    )BALANCESeptember 30, 2010
    
    
    
    
    
    
    
    
    
    
    32,796,690
    
    
    $
    32,796
    
    
    $
    162,494,362
    
    
    $
    161,987
    
    
    $
    (92,603,647
    )
    
    $
    70,085,498
  5




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##### Table of Contents



ANTHERA PHARMACEUTICALS, INC.
(A Development Stage Company)
 
 CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)
 September 9, 2004(Date of Inception)Nine Months Ended September 30,
    
    
    to September 30,2010
    
    
    2009
    
    
    2010CASH FLOW FROM OPERATING ACTIVITIES:Net loss
    
    $
    (27,373,695
    )
    
    $
    (10,725,828
    )
    
    $
    (92,603,647
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    12,453
    
    
    
    14,599
    
    
    
    84,780Amortization of discount on short-term investments
    
    
    
    
    
    
    
    
    
    
    (130,248
    )Realized loss on short-term investments
    
    
    
    
    
    
    1,160
    
    
    
    8,682Realized gain from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    (214
    )Stock-based compensation expenseemployees
    
    
    344,467
    
    
    
    203,215
    
    
    
    821,346Stock-based compensation expenseconsultants
    
    
    8,399
    
    
    
    2,889
    
    
    
    166,344Issuance 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 debt issuance cost and discount on convertible promissory notes
    
    
    768,948
    
    
    
    39,266
    
    
    
    985,314Mark to market adjustment on warrant and derivative liability
    
    
    3,796,491
    
    
    
    
    
    
    
    3,795,776Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    (1,793,658
    )
    
    
    29,812
    
    
    
    (1,813,484
    )Accounts payable
    
    
    1,413,408
    
    
    
    125,931
    
    
    
    2,798,084Accrued clinical study
    
    
    402,883
    
    
    
    109,007
    
    
    
    967,917Accrued liabilities
    
    
    (248,095
    )
    
    
    348,720
    
    
    
    174,179Accrued payroll and related costs
    
    
    420,685
    
    
    
    29,020
    
    
    
    573,920License fee payable
    
    
    
    
    
    
    (500,000
    )
    
    
    Net cash used in operating activities
    
    
    (18,574,520
    )
    
    
    (10,322,209
    )
    
    
    (73,430,848
    )INVESTING ACTIVITIES:Property and equipment purchases
    
    
    (21,572
    )
    
    
    (3,853
    )
    
    
    (107,079
    )Proceeds from disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    400Purchase of short-term investments
    
    
    (22,458,692
    )
    
    
    
    
    
    
    (37,259,256
    )Proceeds from sale of short-term investments
    
    
    747,000
    
    
    
    
    
    
    
    15,669,132Net cash provided by (used in) investing activities
    
    
    (21,733,264
    )
    
    
    (3,853
    )
    
    
    (21,696,803
    )FINANCING ACTIVITIES:Proceeds from issuance of convertible notes
    
    
    
    
    
    
    10,000,000
    
    
    
    26,560,000Payment of debt issuance cost
    
    
    (210,282
    )
    
    
    
    
    
    
    (307,599
    )Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    32,210,278Payment of financing cost for initial public offering and private offering
    
    
    (2,949,473
    )
    
    
    
    
    
    
    (3,223,357
    )Proceeds from issuance of common stock
    
    
    90,788,900
    
    
    
    
    
    
    
    90,789,015Proceeds from exercise of stock options
    
    
    89,185
    
    
    
    15,213
    
    
    
    313,244Net cash provided by financing activities
    
    
    87,718,330
    
    
    
    10,015,213
    
    
    
    146,341,581Effect of exchange rate changes on cash and cash equivalents
    
    
    (5,210
    )
    
    
    
    
    
    
    (5,210
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    47,405,336
    
    
    
    (310,849
    )
    
    
    51,208,720CASH AND CASH EQUIVALENTSBeginning of period
    
    
    3,803,384
    
    
    
    7,895,113
    
    
    
    CASH AND CASH EQUIVALENTSEnd of period
    
    $
    51,208,720
    
    
    $
    7,584,264
    
    
    $
    51,208,720SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION:Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    15,229Taxes paid
    
    $
    18,972
    
    
    $
    2,299
    
    
    $
    48,559NONCASH 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
    
    $
    13,883,112
    
    
    $
    
    
    
    $
    27,200,493Beneficial conversion feature
    
    $
    
    
    
    $
    
    
    
    $
    4,308,544Unamortized debt discount charged to equity in conjunction with conversion of
promissory notes into common stock
    
    $
    185,883
    
    
    $
    
    
    
    $
    185,833Reclassification of warrant and derivative liabilities to additional paid-in capital
    
    $
    406,130
    
    
    $
    
    
    
    $
    406,130Reclass of issuance costs charged to equity
    
    $
    3,508,221
    
    
    $
    
    
    
    $
    3,508,221Accrued and deferred financing costs
    
    $
    284,864
    
    
    $
    837,536
    
    
    $
    284,864
  6




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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
  7




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##### Table of Contents



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Unaudited Interim Financial Information
  Use of Estimates
  Cash and Cash Equivalents
    Concentration of Credit Risk
  8




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##### Table of Contents



Property and EquipmentNet
  Deferred Financing Cost
 Other Assets and Deferred Costs
 Long-Lived Assets
 Property, Plant, and Equipment
 Fair Value of Financial Instruments
   Level 1
 Level 2
 Level 3
   9




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##### Table of Contents



Stock-Based Compensation
 Compensation 
Stock Compensation
  Expected Term
 Expected Volatility
 Expected Dividend
 Risk-Free Interest Rate
 Estimated Forfeitures
 Equity
 Research and Development
  Research and Development
  10




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##### Table of Contents



Income Taxes
 Income Taxes
  Segments
  Adoption of Accounting Standards
 Derivatives and Hedging
  4. NET LOSS PER SHARE
 Earnings Per Share
 11




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss per shareNumeratorNet loss
    
    $
    (8,333,540
    )
    
    $
    (3,604,412
    )
    
    $
    (27,373,695
    )
    
    $
    (10,725,828
    )Denominator
Weighted-average common shares outstanding
    
    
    23,009,288
    
    
    
    1,625,884
    
    
    
    19,619,670
    
    
    
    1,619,650Less: Weighted-average shares subject to repurchase
    
    
    (45,009
    )
    
    
    (105,009
    )
    
    
    (52,612
    )
    
    
    (121,542
    )Denominator for basic and diluted net loss per share
    
    
    22,964,279
    
    
    
    1,520,875
    
    
    
    19,567,058
    
    
    
    1,498,108Basic and diluted net loss per share
    
    $
    (0.36
    )
    
    $
    (2.37
    )
    
    $
    (1.40
    )
    
    $
    (7.16
    )
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Options to purchase common stock
    
    
    965,977
    
    
    
    526,797
    
    
    
    749,613
    
    
    
    526,102Common stock subject to repurchase
    
    
    45,009
    
    
    
    105,009
    
    
    
    52,612
    
    
    
    121,542Warrants to purchase common stock
    
    
    676,701
    
    
    
    194,474
    
    
    
    464,828
    
    
    
    194,474Convertible preferred stock
    
    
    
    
    
    
    8,146,308
    
    
    
    
    
    
    
    8,146,308Restricted stock units
    
    
    273,652
    
    
    
    
    
    
    
    93,220
    
    
    
    Total
    
    
    1,961,339
    
    
    
    8,972,588
    
    
    
    1,360,273
    
    
    
    8,988,426
 5. CASH EQUIVALENTS AND INVESTMENTS
  GrossAmortized
    
    
    UnrealizedCost
    
    
    Gain/(Losses)
    
    
    Fair ValueCash
    
    $
    625,961
    
    
    $
    
    
    
    $
    625,961Money market funds
    
    
    50,582,760
    
    
    
    
    
    
    
    50,582,760Certificates of deposit
    
    
    12,851,000
    
    
    
    (11,276
    )
    
    
    12,839,724Corporate bonds
    
    
    9,074,163
    
    
    
    (34,998
    )
    
    
    9,039,165Total
    
    $
    73,133,884
    
    
    $
    (46,274
    )
    
    $
    73,087,610Less amounts classified as cash and cash equivalents
    
    
    (51,208,720
    )
    
    
    
    
    
    
    (51,208,720
    )Total
    
    $
    21,925,164
    
    
    $
    (46,274
    )
    
    $
    21,878,890
  6. FAIR VALUE
  12




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##### Table of Contents



EstimatedFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash
    
    $
    625,961
    
    
    $
    625,961
    
    
    $
    
    
    
    $
    Money market funds
    
    
    50,582,760
    
    
    
    50,582,760
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    12,839,724
    
    
    
    12,839,724
    
    
    
    
    
    
    
    Corporate bonds
    
    
    9,039,165
    
    
    
    9,039,165
    
    
    
    
    
    
    
    Total Investments
    
    $
    73,087,610
    
    
    $
    73,087,610
    
    
    $
    
    
    
    $
    
  7. PROPERTY AND EQUIPMENT
  Computers and software
    
    $
    77,319Office equipment and furniture
    
    
    16,730Leasehold Improvements
    
    
    10,802Total property and equipment
    
    
    104,851Less accumulated depreciation
    
    
    (82,738
    )Property and equipment, net
    
    $
    22,113
  8. DEFERRED FINANCING COST
  9. COMMITMENTS AND CONTINGENCIES
 2 2
  13




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10. CONVERTIBLE PROMISSORY NOTES AND EQUITY FINANCING
   14




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##### Table of Contents



11. STOCKHOLDERS EQUITY
 Preferred Stock
   Common Stock
   Warrants for purchase of common stock
    
    
    4,557,136Common stock options outstanding
    
    
    1,307,066Restricted stock units outstanding
    
    
    333,000Common stock options available for future grant under stock option plan
    
    
    24,314Total
    
    
    6,221,516
 Reverse Stock Split
  Warrants
  , Distinguishing Liabilities from Equity
 15




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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
  16




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##### Table of Contents



12. STOCK OPTIONS
 Option Plan
  Early Exercise of Employee Options
  17




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##### Table of Contents



Weighted-AverageUnvested Shares
    
    Shares
    
    
    Grant PriceBalance as of December 31, 2009
    
    
    69,424
    
    
    $
    0.45Early exercise of options
    
    
    18,011
    
    
    $
    1.37Vested
    
    
    (42,421
    )
    
    $
    0.34Repurchases
    
    
    (6,267
    )
    
    $
    0.26Balance as of September 30, 2010
    
    
    38,747
    
    
    $
    1.11
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Life in Years
    
    
    ValueBalance as of December 31, 2009
    
    
    1,323,776
    
    
    $
    0.92
    
    
    
    7.94
    
    
    $
    17,312,745Options granted
    
    
    112,000
    
    
    $
    4.82Options exercised
    
    
    (118,878
    )
    
    $
    0.75Options cancelled
    
    
    (9,832
    )
    
    $
    1.50Balance as of September 30, 2010
    
    
    1,307,066
    
    
    $
    1.27
    
    
    
    6.85
    
    
    $
    3,932,101Ending Vested Stock Options as of September 30, 2010
    
    
    1,012,144
    
    
    $
    0.90
    
    
    
    7.01
    
    
    $
    3,374,209Ending Vested and Expected to Vest Stock Options as
of September 30, 2010
    
    
    1,307,066
    
    
    $
    1.27
    
    
    
    6.85
    
    
    $
    3,932,101
  Outstanding, Vested and Expected to Vest
    
    Options VestedWeighted-Average
    
    Weighted-Remaining
    
    AverageNumber of
    
    Contractual Life
    
    Exercise
    
    Number ofRange of Exercise Price
    
    Shares
    
    (in Years)
    
    Price
    
    Shares$0.14  $0.14
    
    
    4,672
    
    
    
    5.55
    
    
    $
    0.14
    
    
    
    4,672$0.26  $0.26
    
    
    567,161
    
    
    
    6.40
    
    
    $
    0.26
    
    
    
    555,351$1.34  $1.34
    
    
    266,352
    
    
    
    7.41
    
    
    $
    1.34
    
    
    
    183,771$1.51  $1.51
    
    
    345,199
    
    
    
    8.40
    
    
    $
    1.51
    
    
    
    242,168$4.19  $7.70
    
    
    123,682
    
    
    
    3.48
    
    
    $
    5.76
    
    
    
    26,1821,307,066
    
    
    
    6.85
    
    
    $
    0.90
    
    
    
    1,012,144
 Restricted Stock Units
  18




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2010 Employee Stock Purchase Plan
  Compensation  Stock Compensation  Employee Share Purchase Plans  Recognition
 Period fromSeptember 9,2004 (Date ofThree Months Ended
    
    Nine Months Ended
    
    Inception) toSeptember 30,
    
    September 30,
    
    September 30,2010
    
    2010
    
    2010Expected Volatility
    
    
    67
    %
    
    
    67
    %
    
    
    67
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    0.16
    %
    
    
    0.16
    %
    
    
    0.16
    %Expected Term (years)
    
    
    0.33
    
    
    
    0.33
    
    
    
    0.33
  Stock-Based Compensation Expense
  Period fromSeptember 9,2004(Date ofThree Months Ended
    
    
    
    
    
    
    
    
    
    
    Inception)September 30,
    
    
    Nine Months Ended September 30,
    
    
    to September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development
    
    $
    81,614
    
    
    $
    26,096
    
    
    $
    114,476
    
    
    $
    83,712
    
    
    $
    308,478General and administrative
    
    
    157,026
    
    
    
    43,595
    
    
    
    229,991
    
    
    
    119,503
    
    
    
    512,868Total stock-based compensation
    
    $
    238,640
    
    
    $
    69,691
    
    
    $
    344,467
    
    
    $
    203,215
    
    
    $
    821,346
  19




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##### Table of Contents



Period fromSeptember 9,2004 (Date ofThree Months Ended
    
    
    
    
    
    
    
    
    
    Inception) toSeptember 30,
    

Nine
Months Ended September 30,
    
    September 30,2010
    
    2010
    
    2009
    
    2010Expected Volatility
    
    
    63
    %
    
    
    69
    %
    
    
    74
    %
    
    
    79
    %Dividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    1.59
    %
    
    
    1.91
    %
    
    
    2.10
    %
    
    
    3.86
    %Expected Term (years)
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
  Nonemployee Stock-Based Compensation
   Period fromSeptember 9,2004 (Date ofInception) toThree Months Ended September 30,
    
    Nine Months Ended September 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009
    
    2010Expected Volatility
    
    
    N/A
    
    
    
    98
    %
    
    
    98
    %
    
    
    98
    %
    
    
    98
    %Dividend Yield
    
    
    N/A
    
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-Free Interest Rate
    
    
    N/A
    
    
    
    3.32
    %
    
    
    3.16
    %
    
    
    3.13
    %
    
    
    3.67
    %Expected Term (years)
    
    
    N/A
    
    
    
    8.80
    
    
    
    7.86
    
    
    
    9.09
    
    
    
    9.63
  13. RELATED PARTY TRANSACTIONS
  20




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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
  21




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##### Table of Contents



Research and Development Expenses
    For the PeriodSeptember 9,2004 (Date ofInception)Three Months Ended September 30,
    
    
    Nine Months Ended September 30,
    
    
    to September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Allocated costs:A-001
    
    $
    12,847
    
    
    $
    26,760
    
    
    $
    125,954
    
    
    $
    148,220
    
    
    $
    6,646,000Varespladib
    
    
    3,923,255
    
    
    
    1,674,306
    
    
    
    11,885,724
    (1)
    
    
    5,503,466
    
    
    
    39,746,369A-623
    
    
    1,485,707
    
    
    
    5,741
    
    
    
    3,643,827
    
    
    
    15,699
    
    
    
    9,787,244
    (2)Unallocated costs
    
    
    1,463,316
    
    
    
    819,141
    
    
    
    2,909,583
    
    
    
    2,059,744
    
    
    
    13,709,456Total development
    
    $
    6,885,125
    
    
    $
    2,525,948
    
    
    $
    18,565,088
    
    
    $
    7,727,129
    
    
    $
    69,889,069
 
 (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.   22




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##### Table of Contents




    
    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.
    General and Administrative Expenses
  Critical Accounting Policies and Estimates
  23




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##### Table of Contents



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
 Compensation  Stock
Compensation
  24




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##### Table of Contents



Results of Operations
 Comparison of the Three Months Ended September 30, 2010 and 2009
 Research and Development Expenses.
 General and Administrative Expenses.
 Interest and Other Income.
 Interest and Other Expense.
 Comparison of the Nine Months Ended September 30, 2010 and 2009
 Research and Development Expenses.
 General and Administrative Expenses.
 Interest and Other Income.
 Interest and Other Expense.
 Liquidity and Capital Resources
  25




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##### Table of Contents



Cash Flows
 Nine Months Ended September 30, 2010
     Nine Months Ended September 30, 2009
    Contractual Obligations and Commitments
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsOperating lease obligations (1)
    
    $
    40,536
    
    
    $
    34,296
    
    
    $
    6,240
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Operating lease obligations reflect our obligation to make payments in connection with a
sublease that commenced in October 2008 and will expire on January 31, 2011 for approximately
7,800 square feet of office space and office equipment leases that commenced in October 2007
and will expire in June 2013. 2
 26




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##### Table of Contents



Funding Requirements
  
    
    continue clinical development of the Phase 3 VISTA-16 study for varespladib;
    
    continue clinical development of the Phase 2b PEARL-SC study for 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.
   27




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  28




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##### Table of Contents



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.
  
    
    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 a Phase 2b clinical study in patients with systemic lupus erythematosus, or
lupus, or other indications related to the development of A-623;
 29




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##### Table of Contents




    
    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.
    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 Phase 3 clinical study named VISTA-16 study for varespladib
and our Phase 2b clinical study named PEARL-SC 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;
 30




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##### Table of Contents




    
    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 2
 Our limited operating history makes it difficult to evaluate our business and prospects.
  31




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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;
    
    meet applicable regulatory standards;
    
    be capable of being produced in sufficient quantities at acceptable costs;
    
    be successfully commercialized; or
    
    obtain favorable reimbursement.
   32




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##### Table of Contents



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;
    
    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.
   33




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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.
  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.
  34




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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;
 35




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##### Table of Contents




    
    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 an 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.
  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;
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
    
    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.
  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;
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
    
    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.
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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.
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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.
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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.
  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.
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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
    
    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.
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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.
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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.
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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.
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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.
  Being a public company increases our expenses and administrative burden.
   We do not intend to pay dividends on our common stock so any returns will be limited to the
value of our stock.
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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
    
    Amended and Restated 2010 Stock Option and Incentive Plan (filed as Appendix A to the registrants Definitive
Proxy Statement on Schedule 14A filed June 8, 2010 and incorporated herein by reference).10.2
    
    2010 Employee Stock Purchase Plan (filed as Appendix B to the registrants Definitive Proxy Statement on
Schedule 14A filed June 8, 2010 and incorporated herein by reference).10.3
    
    Form of Securities Purchase Agreement, among the Company and the purchasers thereto, dated September 20, 2010
(filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on September 22, 2010,
and incorporated herein by reference).10.4
    
    Form of Registration Rights Agreement, between the Company and the Holders thereto, dated September 20, 2010
(filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on September 22, 2010,
and incorporated herein by reference).10.5
    
    Form of Warrant sold pursuant to that Securities Purchase Agreement, among the Company and the purchasers
thereto, dated September 20, 2010 (filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed
with the SEC on September 22, 2010, and incorporated herein by reference).10.6
    
    First Addendum to Sublease by and between the Company and Millipore Corporation, as successor in interest to
Guara Technologies, dated as of September 24, 2010 (filed as Exhibit 10.40 to the registrants Registration
Statement on Form S-1 (File No. 333-170099) filed with the SEC on October 22, 2010, and incorporated herein by
reference).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.November 12, 2010
    By:
    /s/ Paul F. TruexPaul F. TruexPresident and Chief Executive OfficerNovember 12, 2010
    By:
    /s/ Christopher P. LoweChristopher P. LoweChief Financial Officer and
Vice President of Administration 49