##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-K
   þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    September 30,
    2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period fromto   Commission File
    No. 1-15803
 AvanirPharmaceuticals,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

33-0314804(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)101 Enterprise Suite 300,
    Aliso Viejo, California(Address of principal
    executive offices)

92656(Zip
    Code)   (949) 389-6700
 (Registrants telephone
    number, including area code)
 Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.0001 par value

The NASDAQ Global Market  Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





Table of
    Contents
   
 PagePART IItem 1.

Business


1Item 1A.

Risk Factors


9Item 1B.

Unresolved Staff Comments


17Item 2.

Properties


17Item 3.

Legal Proceedings


17Item 4.

Submission of Matters to a Vote of Security
    Holders


18PART IIItem 5.

Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


18Item 6.

Selected Financial Data


18Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


18Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


29Item 8.

Financial Statements and Supplementary Data


30Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


30Item 9A (T).

Controls and Procedures


30Item 9B.

Other Information


31PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


31Item 11.

Executive Compensation


33Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


33Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


33Item 14.

Principal Accounting Fees and Services


33PART IVItem 15.

Exhibits, Financial Statement Schedules


33SIGNATURES


38EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I  Item 1.
    Business  This Annual Report on
    Form 10-K
    contains forward-looking statements concerning future events and
    performance of our Company. When used in this report, the words
    intend, estimate,
    anticipate, believe, plan,
    goal and expect and similar expressions
    as they relate to Avanir PHARMACEUTICALS, INC.are included to identify forward-looking statements.
    These forward-looking statements are based on our current
    expectations and assumptions and many factors could cause our
    actual results to differ materially from those indicated in
    these forward-looking statements. You should review carefully
    the factors included in this report in Item 1A, Risk
    Factors. We disclaim any intent to update or announce
    revisions to any forward-looking statements to reflect actual
    events or developments.
  Executive
    Overview
  tm ® over-the-counter Avanir
  Zenvia
    for the treatment of PBA
         1




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Zenvia
    for the treatment of neuropathic pain
        moderate-to-severe
  Drug
    Candidates and Marketed Products
  Zenvia 
    Pseudobulbar Affect (PBA) Indication
   2




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Top Line
    Safety and Efficacy Data from STAR Trial
      Zenvia 20/10 mg
   3




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Open
    Label Safety and Efficacy Data from STAR Trial
        Zenvia 
    Neuropathic Pain Indications
       4




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Other
    Programs
  Docosanol
    10% Cream  Cold Sores
  over-the-counter ®
    Xenerex
    Human Antibody Technology  Anthrax/Other Infectious
    Diseases
   5




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Competition
    Zenvia for Pseudobulbar Affect.
  
    Antidepressants, including
    Prozac®,

    Celexa®,

    Zoloft®,

    Paxil®,

    Elavil®

    and
    Pamelor®

    and others;
    Atypical antipsychotic agents, including
    Zyprexa®,

    Risperdal®,

    Seroquel,
    Abilify®,

    Geodon®

    and others; and
    Miscellaneous agents, including
    Symmetrel®,

    Lithium and others.    Zenvia for DPN pain.
  
    Cymbalta®;
    Lyrica®
    Narcotic products; and
    Off-label uses of non-narcotic products, such as the
    anticonvulsants phenytoin, carbamazepine and topamax, and the
    antidepressant amitriptyline.  Docosanol 10% cream.
  
    Over-the-counter
    preparations, including
    Carmex®,

    Zilactin®,

    Campho®,

    Orajel®,

    Herpecin®

    and others;
    Zovirax®

    acyclovir (oral and topical) and
    Valtrex®

    valacyclovir (oral) prescription products marketed by Biovail
    Corporation and GSK, respectively, and
    Famvir®

    famciclovir (oral) and
    Denavir®

    penciclovir (topical) prescription products marketed by Novartis. 6




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Manufacturing
    Patents
    and Proprietary Rights
    United States


ForeignDescription

Issued


Expiration


Pending


Issued


Expiration


PendingZenvia


7



Up to 2025



2



43



Up to 2023



17Other


52







23



105







171Total


59







25



148







188           Government
    Regulations
    
    Animal pharmacology studies to obtain preliminary information on
    the safety and efficacy of a drug; and
    Nonclinical evaluation in vitroand in vivoincluding extensive toxicology studies.   7




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
    Phase I investigations are generally conducted in healthy
    subjects. In certain instances, subjects with a life-threatening
    disease, such as cancer, may participate in Phase I studies that
    determine the maximum tolerated dose and initial safety of the
    product;
    Phase II studies are conducted in limited numbers of
    subjects with the disease or condition to be treated and are
    aimed at determining the most effective dose and schedule of
    administration, evaluating both safety and whether the product
    demonstrates therapeutic effectiveness against the
    disease; and
    Phase III studies involve large, well-controlled
    investigations in diseased subjects and are aimed at verifying
    the safety and effectiveness of the drug.  and/or
        Product
    Liability Insurance
    Executive
    Officers and Key Employees of the Registrant
    Employees
   8




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##### Table of Contents



Financial
    Information about Segments
    General
    Information
  (949) 389-6700 e-mail info@avanir.com www.avanir.com.
  Form 10-K Form 10-Q Form 8-K 1-800-SEC-0330. Form 10-K.
  Item 1A.
    Risk
    Factors  Risks
    Relating to Our Business
  There can be no assurance that the FDA will approve Zenvia
    for PBA or any other indication.
      The FDAs safety concerns regarding Zenvia for the
    treatment of PBA extend to other clinical indications that we
    have been pursuing, including DPN pain. Due to these concerns,
    any future development of Zenvia for other indications is
    expected to use an alternative lower-dose quinidine formulation,
    which may negatively affect efficacy.
   9




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Even if Zenvia receives marketing approval from the FDA, the
    approval may not be on the terms that we seek and could limit
    the marketability of the drug.
    
    regulatory authorities may require the addition of labeling
    statements, such as a black box warning, which is
    the strongest type of warning that the FDA can require for a
    drug and is generally reserved for warning prescribers about
    adverse drug reactions that can cause serious injury or death;
    regulatory authorities may withdraw approval of the product
    after its initial approval;
    product labeling may be amended to restrict use in certain
    populations;
    physicians may be required to conduct additional tests prior to
    dispensing product or monitor patients taking Zenvia;
    we may be required to conduct additional studies either
    post-marketing or before approval; and
    Zenvia may not be approved by the FDA for commercialization as
    the FDA may perceive that the benefit does not outweigh the
    potential risk.    We have limited capital resources and will need to raise
    additional funds to support our operations.
     10




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Any transactions that we may engage in to raise capital could
    dilute our stockholders and diminish certain commercial
    prospects.
  and/or
    We have licensed out or sold most of our non-core drug
    development programs and related assets and these and other
    possible future dispositions carry certain risks.
  and/or
  
    diversion of managements attention from normal daily
    operations of the business;
    disputes over earn-outs, working capital adjustments or
    contingent payment obligations;
    insufficient proceeds to offset expenses associated with the
    transactions; and
    the potential loss of key employees following such a transaction.   11




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day-to-day
  Our issued patents may be challenged and our patent
    applications may be denied. Either result would seriously
    jeopardize our ability to compete in the intended markets for
    our proposed products.
    
    the claims in any pending patent applications will be allowed or
    that patents will be granted;
    competitors will not develop similar or superior technologies
    independently, duplicate our technologies, or design around the
    patented aspects of our technologies;
    our technologies will not infringe on other patents or rights
    owned by others, including licenses that may not be available to
    us;
    any of our issued patents will provide us with significant
    competitive advantages;
    challenges will not be instituted against the validity or
    enforceability of any patent that we own or, if instituted, that
    these challenges will not be successful; or
    we will be able to secure additional worldwide intellectual
    property protection for our Zenvia patent portfolio.    It is unclear whether we would be eligible for patent-term
    restoration in the U.S. under applicable law and we
    therefore do not know whether our patent-term can be
    extended
     12




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If we fail to obtain regulatory approval in foreign
    jurisdictions, we would not be able to market our products
    abroad and our revenue prospects would be limited.
    We face challenges retaining members of management and other
    key personnel.
    Risks
    Relating to Our Industry
  There are a number of difficulties and risks associated with
    clinical trials and our trials may not yield the expected
    results.
      
    the results from earlier clinical trials may not be predictive
    of results that will be obtained from subsequent clinical
    trials, particularly larger trials;
    institutional review boards or regulators, including the FDA,
    may hold, suspend or terminate our clinical research or the
    clinical trials of our product candidates for various reasons,
    including noncompliance with 13




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regulatory requirements or if, in their opinion, the
    participating subjects are being exposed to unacceptable health
    risks;  
    subjects may drop out of our clinical trials;
    our preclinical studies or clinical trials may produce negative,
    inconsistent or inconclusive results, and we may decide, or
    regulators may require us, to conduct additional preclinical
    studies or clinical trials;
    trial results derived from top-line data, which is based on a
    preliminary analysis of efficacy and safety data related to
    primary and secondary endpoints, may change following a more
    comprehensive review of the complete data set derived from a
    particular clinical trial or may change due to FDA requests to
    analyze the data differently; and
    the cost of our clinical trials may be greater than we currently
    anticipate.  and/or
      
    delays in our ability to submit an NDA;
    the refusal by the FDA to accept for filing any NDA we may
    submit;
    requests for additional studies or data;
    delays in obtaining an approval;
    the rejection of an application; or
    the approval of the drug, but with adverse labeling claims that
    could adversely affect the commercial market.    The pharmaceutical industry is highly competitive and most of
    our competitors have larger operations and have greater
    resources. As a result, we face significant competitive
    hurdles.
     14




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If we fail to comply with regulatory requirements, regulatory
    agencies may take action against us, which could significantly
    harm our business.
        We rely on insurance companies to mitigate our exposure for
    business activities, including developing and marketing
    pharmaceutical products for human use.
    Risks
    Related to Reliance on Third Parties
  Because we depend on clinical research centers and other
    contractors for clinical testing and for certain research and
    development activities, the results of our clinical trials and
    such research activities are, to a certain extent, beyond our
    control.
   15




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We depend on third parties to manufacture, package and
    distribute compounds for our drugs and drug candidates. The
    failure of these third parties to perform successfully could
    harm our business.
    We generally do not control the development of compounds
    licensed to third parties and, as a result, we may not realize a
    significant portion of the potential value of any such license
    arrangements.
    We expect to rely entirely on third parties for international
    registration, sales and marketing efforts.
   16




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Risks
    Relating to Our Stock
  Our stock price has historically been volatile and we expect
    that this volatility will continue for the foreseeable
    future.
    
    comments made by securities analysts, including changes in their
    recommendations;
    short selling activity by certain investors, including any
    failures to timely settle short sale transactions;
    announcements by us of financing transactions
    and/or
    future sales of equity or debt securities;
    sales of our common stock by our directors, officers or
    significant stockholders;
    lack of volume of stock trading leading to low liquidity;
    market and economic conditions; and
    Announcements we may make regarding our compliance with
    continued listing standards on the NASDAQ Global Market.    quarter-to-quarter.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings   17




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Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Common Stock PriceFiscal 2009


Fiscal 2008High


Low


High


LowFirst Quarter

$
0.70


$
0.23


$
2.84


$
1.25Second Quarter

$
0.68


$
0.25


$
1.43


$
0.94Third Quarter

$
2.62


$
0.39


$
1.35


$
1.00Fourth Quarter

$
4.09


$
1.75


$
1.04


$
0.40       Information
    About Our Equity Compensation Plans
  Form 10-K.
  Item 6.
    Selected
    Financial Data  Rule 12b-2
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Annual Report on
    Form 10-K
    contains forward-looking statements concerning future events and
    performance of the Company. When used in this report, the words
    intend, estimate,
    anticipate, believe, plan or
    expect and similar expressions are included to
    identify forward-looking statements. These forward-looking
    statements are based on our current expectations and assumptions
    and many factors could cause our actual results to differ
    materially from those indicated in these forward-looking
    statements. You should review carefully the factors identified
    in this report in Item 1A, Risk Factors. We
    disclaim any intent to update or announce revisions to any
    forward-looking statements to reflect actual events or
    developments. Except as otherwise indicated herein, all dates
    referred to in this report represent periods or dates fixed with
    reference to the calendar year, rather than our fiscal year
    ending September 30.
  In August 2007, we sold our FazaClo business and related
    support operations to Azur Pharma, Inc. We have reflected the
    financial results of this business as discontinued operations in
    the consolidated statements of
 18




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operations for the year ended September 30, 2008. Unless
    otherwise noted, this Managements Discussion and Analysis
    of Financial Condition and Results of Operations relates only to
    financial results from continuing operations.
  Executive
    Overview
  tm ® over-the-counter Avanir
    
    In March 2009, we enrolled the last of 326 patients into
    the confirmatory Phase III STAR trial. The final number of
    patients exceeded the original target by approximately 20%
    allowing a larger safety database and increased statistical
    power for the study.
    In April 2009, we completed additional preclinical and clinical
    studies that were conducted to enhance the complete response to
    the approvable letter and to assist with planned label
    discussions with the FDA.
    In June 2009, we were added to the broad-market Russell
    3000®

    Index, an investment tool comprised of 3,000 of the
    countrys largest and most liquid stocks.
    In July 2009, we completed enrollment of the open label
    extension of the confirmatory Phase III STAR trial. In
    total, 282 of 326 patients (or 86.5%) completed the 12-week
    double-blind phase of the study and were eligible to enroll in
    the open label extension phase. A total of 253 (or 89.7%) of
    eligible patients chose to enroll in the 12-week open label
    safety extension.
    In August 2009, we announced the results of the double-blind
    phase of the confirmatory Phase III STAR trial which
    demonstrated that both doses of Zenvia met the primary efficacy
    endpoint in the treatment of patients with PBA and that Zenvia
    demonstrated an improved safety and tolerability profile
    relative to the original formulation.
    In August 2009, we raised gross proceeds of approximately
    $10.6 million through the sale of approximately
    4.5 million shares of common stock. The shares were sold
    into the open market at prevailing prices through our financing
    facility with Cantor Fitzgerald & Co.
    In October 2009, we received a Notice of Allowance
    from the United States Patent and Trademark Office
    (USPTO) thereby extending the period of commercial
    exclusivity for Zenvia into 2025. Upon issuance, the patent will
    provide Avanir with patent protection for low-dose quinidine
    formulations of Zenvia used to treat patients with PBA.
    In November 2009, we announced results of the 12-week open label
    phase of the confirmatory phase III STAR trial which
    demonstrated that the following patient groups displayed
    statistically significant improvement in their CNS-LS scores:
    1) patients maintained on Zenvia 30/10 mg, 2) patients
    who titrated from Zenvia 20/10 mg to Zenvia 30/10 mg and
    3) patients originally placed on placebo that initiated
    Zenvia 30/10 mg. 19




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Critical
    Accounting Policies and Estimates for Continuing
    Operations
    Share-Based
    Compensation
       20




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Revenue
    Recognition
  General.
   21




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Revenue Arrangements with Multiple
    Deliverables. and/or
    License Arrangements. and/or
  and/or
    Royalty Revenues.
    Revenues from Sale of Royalty Rights. units-of-revenue
 22




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Research Services Arrangements. agreed-upon
  Government Research Grant Revenue.
  Product Sales  Active Pharmaceutical Ingredient
    Docosanol (API Docosanol).
    Cost
    of Revenues
    Recognition
    of Expenses in Outsourced Contracts
  and/or
  Research
    and Development Expenses
   23




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
    The technology is in the early stage of development and has no
    alternative uses;
    There is substantial uncertainty regarding the future success of
    the technology or product;
    There will be difficulty in completing the remaining
    development; and
    There is substantial cost to complete the work.  Acquired contractual rights.
  Effects
    of Inflation
    Results
    of Operations
       24




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Comparison
    of Fiscal 2009 and 2008
  Revenues
    and Cost of Revenues
  Year Ended September 30,2009


2008


$ Change


% ChangePRODUCT SALESNet revenues

$



$
129,820


$
(129,820
)


−100
%Cost of revenues


73,135



21,714



51,421



237
%Product gross (loss) margin


(73,135
)


108,106



(181,241
)


−168
%REVENUES AND COST OF RESEARCH SERVICES AND OTHERRevenues:Revenues from royalties and royalty rights


3,642,675



3,616,102



26,573



1
%Revenues from license agreements


533,834



2,205,724



(1,671,890
)


−76
%Revenues from government research grant services






1,006,922



(1,006,922
)


−100
%Revenues from research services and other


4,176,509



6,828,748



(2,652,239
)


−39
%Costs:Cost of research and development services


10,224



249,281



(239,057
)


−96
%Cost of government research grant






940,130



(940,130
)


−100
%Costs from research services and grants


10,224



1,189,411



(1,179,187
)


−99
%Research services and other gross margin


4,166,285



5,639,337



(1,473,052
)


−26
%Total gross margin

$
4,093,150


$
5,747,443


$
(1,654,293
)


−29
%   Revenues
        Cost
    of Revenues
   25




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Year Ended September 30,2009


2008


$ Change


% ChangeOPERATING EXPENSESResearch and development

$
15,867,049


$
14,110,743


$
1,756,306



12
%General and administrative


10,150,766



10,599,158



(448,392
)


−4
%Total Operating Expenses

$
26,017,815


$
24,709,901


$
1,307,914



5
%   Research
    and Development Expenses
    General
    and Administrative Expenses
    Share-Based
    Compensation
      Interest
    Expense and Interest Income
   26




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Other,
    net
    Loss
    from Discontinued Operations
    Net
    Loss
    Liquidity
    and Capital Resources
      IncreaseSeptember 30,


(Decrease)


September 30,2009


During Period


2008Cash, cash equivalents and investments in securities

$
31,954,487


$
(10,286,040
)

$
42,240,527Cash and cash equivalents

$
31,486,012


$
(9,897,918
)

$
41,383,930Net working capital

$
26,685,567


$
(10,486,069
)

$
37,171,636   27




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Year Ended


Change


Year EndedSeptember 30,


Between


September 30,2009


Periods


2008Net cash used in operating activities

$
(20,290,160
)

$
(3,611,951
)

$
(16,678,209
)Net cash provided by investing activities


357,362



(671,629
)


1,028,991Net cash provided by financing activities


10,034,880



(16,510,306
)


26,545,186Net increase (decrease) in cash and cash equivalents

$
(9,897,918
)

$
(20,793,886
)

$
10,895,968   Operating activities.
  Investing activities.
  Financing activities.
  Form S-3
  Form S-3
    Payments Due by PeriodLess thanTotal


1 Year


1-3 Years


3-5 YearsOperating lease obligations(1)

$
4,587,651


$
1,530,249


$
2,705,743


$
351,659Purchase obligations(2)


1,038,294



1,038,294







Total

$
5,625,945


$
2,568,543


$
2,705,743


$
351,659     (1)
    
    Operating lease obligations are exclusive of payments we expect
    to receive under sublease agreements.(2)
    
    Purchase obligations consist of the total of trade accounts
    payable and trade related accrued expenses at September 30,
    2009 which approximates our contractual commitments for goods
    and services in the normal course of our business. 28




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Zenvia License Milestone Payments.
  Management
    Outlook
      Recent
    Authoritative Guidance
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rate Sensitivity
   29




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held-to-maturity. held-to-maturity
        Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f).
 30




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Internal Control  Integrated Framework
    Changes
    in Internal Control over Financial Reporting
  Rule 13a-15(f)
  Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Executive
    Officers and Key Employees of the Registrant
    Executive OfficersKeith A. Katkin


38


President and Chief Executive OfficerRandall E. Kaye, M.D.


47


Senior Vice President, Chief Medical OfficerChristine G. Ocampo


37


Vice President, Finance, SecretaryKey EmployeesEric S. Benevich


44


Vice President, CommunicationsGregory J. Flesher


39


Vice President, Business Development   Executive
    Officers
  Keith Katkin.
 31




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Randall E. Kaye, M.D.
  Christine G. Ocampo.
  Key
    Employees
  Eric S. Benevich.
  Gregory J. Flesher.
  Code of
    Ethics
  Form 8-K.
 32




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Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    page F-1.
      Exhibit



Incorporated by Reference HereinNumber

Description

Form

Date3.1

Certificate of Incorporation of the Registrant

Current Report on Form 8-K, as Exhibit 3.1

March 25, 20093.2

Bylaws of the Registrant

Current Report on Form 8-K, as Exhibit 3.2

March 25, 20093.3

Certificate of Ownership and Merger merging Avanir
    Pharmaceuticals, a California corporation, with and into Avanir
    Pharmaceuticals, Inc., a Delaware corporation

Current Report on Form 8-K, as Exhibit 3.3

March 25, 20093.4

Certificate of Designations of Series A Junior
    Participating Cumulative Preferred Stock

Registration Statement on
    Form 8-A/A
    (File No. 001-15803), as Exhibit 3.3

March 25, 20094.1

Form of Common Stock Certificate

Current Report on Form 8-K, as Exhibit 4.1

March 25, 20094.2

Form of Senior Indenture

Registration Statement on Form S-3 (File No. 333-161789), as
    Exhibit 4.3

September 8, 20094.3

Form of Subordinated Indenture

Registration Statement on Form S-3 (File No. 333-161789), as
    Exhibit 4.4

September 8, 2009 33




---



##### Table of Contents



Exhibit



Incorporated by Reference HereinNumber

Description

Form

Date4.4

Form of Common Stock Warrant, issued in connection with the
    Subscription Agreement dated March 26, 2008

Current Report on Form 8-K, as Exhibit 10.2

March 27, 20084.5

Stockholder Rights Agreement, dated as of March 20, 2009,
    by and between Avanir Pharmaceuticals, Inc. and American Stock
    Transfer & Trust Company, LLC

Registration Statement on
    Form 8-A/A
    (File No. 001-15803), as Exhibit 4.2

March 25, 20094.6

Form of Rights Certificate with respect to the Stockholder
    Rights Agreement, dated as of March 20, 2009

Registration Statement on
    Form 8-A/A
    (File No. 001-15803), as Exhibit 4.2

March 25, 200910.1

License Agreement, dated as of March 31, 2000, by and
    between Avanir Pharmaceuticals and SB Pharmco Puerto Rico, a
    Puerto Rico Corporation

Current Report on Form 8-K, as Exhibit 10.1

May 4, 200010.2

License Purchase Agreement, dated as of November 22, 2002,
    by and between Avanir Pharmaceuticals and Drug Royalty USA,
    Inc.

Current Report on Form 8-K, as Exhibit 99.1

January 7, 200310.3

Research, Development and Commercialization Agreement, dated as
    of April 27, 2005, by and between Avanir Pharmaceuticals
    and Novartis International Pharmaceutical Ltd.*

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2005, as Exhibit 10.1

August 15, 200510.4

Standard Industrial Net Lease by and between Avanir
    Pharmaceuticals and BC Sorrento, LLC, effective as of
    September 1, 2000

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2000, as Exhibit 10.1

August 14, 200010.5

Standard Industrial Net Lease by and between Avanir
    Pharmaceuticals and Sorrento Plaza, effective as of May 20,
    2002

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2002, as Exhibit 10.1

August 13, 200210.6

Office lease agreement, dated as of April 28, 2006, by and
    between RREEF America REIT II Corp. FFF and Avanir
    Pharmaceuticals

Annual Report on Form 10-K for the fiscal year ended September
    30, 2006, as Exhibit 10.7

December 18, 200610.7

License Agreement, dated as of August 1, 2000, by and
    between Avanir Pharmaceuticals and IriSys Research &
    Development, LLC*

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2000, as Exhibit 10.2

August 14, 200010.8

Sublease agreement, dated as of September 5, 2006, by and
    between Avanir Pharmaceuticals and Sirion Therapeutics,
    Inc.

Annual Report on Form 10-K for the fiscal year ended September
    30, 2006, as Exhibit 10.9

December 18, 200610.9

Exclusive Patent License Agreement, dated as of April 2,
    1997, by and between IriSys Research & Development,
    LLC and the Center for Neurologic Study

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2005, as Exhibit 10.1

May 13, 2005 34




---



##### Table of Contents



Exhibit



Incorporated by Reference HereinNumber

Description

Form

Date10.10

Amendment to Exclusive Patent License Agreement, dated as of
    April 11, 2000, by and between IriSys Research &
    Development, LLC and the Center for Neurologic Study

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2005, as Exhibit 10.2

May 13, 200510.11

Manufacturing Services Agreement, dated as of January 4,
    2006, by and between Patheon Inc. and Avanir Pharmaceuticals*

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2006, as Exhibit 10.1

May 10, 200610.12

Quality Agreement, dated as of January 4, 2006, by and
    between Avanir Pharmaceuticals and Patheon Inc.*

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2006, as Exhibit 10.2

May 10, 200610.13

Docosanol License Agreement, dated as of January 5, 2006,
    by and between Kobayashi Pharmaceutical Co., Ltd. And Avanir
    Pharmaceuticals*

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2006, as Exhibit 10.3

May 10, 200610.14

Docosanol Data Transfer and Patent License Agreement, dated as
    of July 6, 2006, by and between Avanir Pharmaceuticals and
    Healthcare Brands International Limited*

Annual Report on Form 10-K for the fiscal year ended September
    30, 2006, as Exhibit 10.21

December 18, 200610.15

Development and License Agreement, dated as of August 7,
    2006, by and between Eurand, Inc. and Avanir Pharmaceuticals*

Annual Report on Form 10-K for the fiscal year ended September
    30, 2006, as Exhibit 10.22

December 18, 200610.16

Amended and Restated 1998 Stock Option Plan

Annual Report on Form 10-K for the fiscal year ended September
    30, 2001, as Exhibit 10.2

December 21, 200110.17

Amended and Restated 1994 Stock Option Plan

Annual Report on Form 10-K for the fiscal year ended September
    30, 2001, as Exhibit 10.4

December 21, 200110.18

Amended and Restated 2000 Stock Option Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.1

May 14, 200310.19

Form of Restricted Stock Grant Notice for use with Amended and
    Restated 2000 Stock Option Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.2

May 14, 200310.20

2003 Equity Incentive Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.3

May 14, 200310.21

Form of Non-Qualified Stock Option Award Notice for use with
    2003 Equity Incentive Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.4

May 14, 200310.22

Form of Restricted Stock Grant for use with 2003 Equity
    Incentive Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.5

May 14, 200310.23

Form of Restricted Stock Grant Notice (cash consideration) for
    use with 2003 Equity Incentive Plan

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2003, as Exhibit 10.6

May 14, 2003 35




---



##### Table of Contents



Exhibit



Incorporated by Reference HereinNumber

Description

Form

Date10.24

Form of Indemnification Agreement with certain Directors and
    Executive Officers of the Registrant

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2009, as Exhibit 10.1

July 30, 200910.25

2005 Equity Incentive Plan

Annual Report on Form 10-K for the fiscal year ended September
    30, 2005, as Exhibit 10.21

December 14, 200510.26

Form of Stock Option Agreement for use with 2005 Equity
    Incentive Plan

Current Report on Form 8-K, as Exhibit 10.1

March 23, 200510.27

Form of Restricted Stock Unit Grant Agreement for use with 2005
    Equity Incentive Plan and 2003 Equity Incentive Plan

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.36

December 21, 200710.28

Form of Restricted Stock Purchase Agreement for use with 2005
    Equity Incentive Plan

Annual Report on Form 10-K for the fiscal year ended September
    30, 2006, as Exhibit 10.35

December 18, 200610.29

Form of Change of Control Agreement

Current Report on Form 8-K, as Exhibit 10.2

December 10, 200710.30

Employment Agreement with Keith Katkin, dated as of
    June 13, 2005

Annual Report on Form 10-K for the fiscal year ended September
    30, 2005, as Exhibit 10.25

December 14, 200510.31

Employment Agreement with Randall Kaye, dated as of
    December 23, 2005

Quarterly Report on Form 10-Q for the quarter ended December 31,
    2005, as Exhibit 10.1

February 9, 200610.32

Amended and Restated Change of Control Agreement, dated as of
    February 27, 2007, by and between Avanir Pharmaceuticals
    and Randall Kaye

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.43

December 21, 200710.33

Employment Agreement with Keith Katkin, dated as of
    March 13, 2007

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.44

December 21, 200710.34

Bonus Agreement, dated as of September 10, 2007, by and
    between Avanir Pharmaceuticals and Keith Katkin

Current Report on Form 8-K, as Exhibit 10.1

December 10, 200710.35

Asset Purchase Agreement, dated as of July 2, 2007, by and
    among Avanir Pharmaceuticals, Alamo Pharmaceuticals, LLC and
    Azur Pharma Inc.*

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.49

December 21, 200710.36

Sublease Agreement, dated as of July 2, 2007, by and
    between Avanir Pharmaceuticals and Halozyme, Inc. (11388
    Sorrento Valley Rd., San Diego, CA)

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.51

December 21, 200710.37

Sublease Agreement, dated as of July 2, 2007, by and
    between Avanir Pharmaceuticals and Halozyme, Inc. (11404
    Sorrento Valley Rd., San Diego, CA)

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.52

December 21, 2007 36




---



##### Table of Contents



Exhibit



Incorporated by Reference HereinNumber

Description

Form

Date10.38

Third Amendment to Lease, dated as of July 19, 2007, by and
    between Avanir Pharmaceuticals and RREEF America REIT II Corp.
    FFF

Annual Report on Form 10-K for the fiscal year ended September
    30, 2007, as Exhibit 10.53

December 21, 200710.39

Asset Purchase and License Agreement, dated as of March 6,
    2008, by and among Avanir Pharmaceuticals, Xenerex Biosciences
    and Emergent Biosolutions, Inc.*

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2008, as Exhibit 10.1

May 14, 200810.40

Payoff Letter, dated as of June 2, 2008, by and between
    Neal R. Cutler and Avanir Pharmaceuticals

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2008, as Exhibit 10.1

August 8, 200810.41

Sublease Agreement, dated as of April 21, 2009, by and
    between Avanir Pharmaceuticals, Inc. and Halozyme, Inc.

Quarterly Report on Form 10-Q for the quarter ended March 31,
    2009, as Exhibit 10.1

May 8, 200910.42

Controlled Equity
Offeringsm

Sales Agreement, dated as of July 30, 2009, by and between
Avanir Pharmaceuticals, Inc. and Cantor Fitzgerald &
Co.

Quarterly Report on Form 10-Q for the quarter ended June 30,
    2009, as Exhibit 10.2

July 30, 200921.1

List of Subsidiaries

Filed herewith23.1

Consent of Independent Registered Public Accounting Firm

Filed herewith31.1

Certification of Chief Executive Officer pursuant to
    Section 302 of Sarbanes-Oxley Act of 2002

Filed herewith31.2

Certification of Chief Financial Officer pursuant to
    Section 302 of Sarbanes-Oxley Act of 2002

Filed herewith32.1

Certification of Chief Executive Officer pursuant to
    Section 906 of Sarbanes-Oxley Act of 2002

Filed herewith32.2

Certification of Chief Financial Officer pursuant to
    Section 906 of Sarbanes-Oxley Act of 2002

Filed herewith     *
    
    Confidential treatment has been granted with respect to portions
    of this exhibit pursuant to an application requesting
    confidential treatment under
    Rule 24b-2
    of the Securities Exchange Act of 1934. A complete copy of this
    exhibit, including the redacted terms, has been separately filed
    with the Securities and Exchange Commission. 37




---



##### Table of Contents



SIGNATURES    Avanir Pharmaceuticals,
    INC.
  By:
    /s/  Keith
    A. Katkin   President and Chief Executive Officer
      Signature

Title

Date/s/  Keith
    A. KatkinKeith
    A. Katkin

President and Chief Executive Officer (Principal Executive
    Officer)

November 25, 2009/s/  Christine
    G. OcampoChristine
    G. Ocampo

Vice President, Finance
    (Principal Financial Officer)

November 25, 2009/s/  Craig
    A. WheelerCraig
    A. Wheeler

Director, Chairman of the Board

November 25, 2009/s/  Stephen
    G. Austin, CPAStephen
    G. Austin, CPA

Director

November 25, 2009/s/  Charles
    A. MathewsCharles
    A. Mathews

Director

November 25, 2009/s/  David
    J. Mazzo, Ph.D.David
    J. Mazzo, Ph.D.

Director

November 25, 2009/s/  Dennis
    G. PodlesakDennis
    G. Podlesak

Director

November 25, 2009/s/  Nicholas
    SimonNicholas
    Simon

Director

November 25, 2009/s/  Scott
    M. Whitcup, M.D.Scott
    M. Whitcup, M.D.

Director

November 25, 2009  38




---



##### 



AvanirPharmaceuticals,
    Inc.
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  
  PageReport of Independent Registered Public
    Accounting Firm


F-2Financial Statements:Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Loss


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-7Financial Statement Schedules:Financial statement schedules have been omitted for the reason
    that the required information is presented in the consolidated
    financial statements or notes thereto, the amounts involved are
    not significant or the schedules are not applicable.   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   Avanir
  Avanir
    Avanir
  Corbin &
    Company LLP
    F-2




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  CONSOLIDATED
    BALANCE SHEETS
  September 30,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
31,486,012


$
41,383,930Inventories


114,098



17,000Prepaid expenses


397,100



1,030,630Other current assets


331,717



237,334Current portion of restricted investments in marketable
    securities


200,775



388,122Total current assets


32,529,702



43,057,016Restricted investments in marketable securities, net of current
    portion


267,700



468,475Property and equipment, net


310,677



806,909Non-current inventories


710,531



1,316,277Other assets


249,462



257,484TOTAL ASSETS

$
34,068,072


$
45,906,161LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,214,117


$
451,846Accrued expenses and other liabilities


1,001,599



1,881,401Accrued compensation and payroll taxes


1,345,859



1,192,457Current portion of deferred revenues


2,282,560



2,333,932Current portion of notes payable






25,744Total current liabilities


5,844,135



5,885,380Accrued expenses and other liabilities, net of current portion


652,395



868,517Deferred revenues, net of current portion


7,629,807



10,152,100Total liabilities


14,126,337



16,905,997Commitments and contingenciesStockholders equity:Preferred stock  $0.0001 par value,
    10,000,000 shares authorized, no shares issued or
    outstanding as of September 30, 2009 and 2008






Common stock  $0.0001 par value,
    200,000,000 shares authorized; 83,084,182 and
    78,213,986 shares issued and outstanding as of
    September 30, 2009 and 2008, respectively


8,308



7,821Additional paid-in capital


297,923,915



284,986,815Accumulated deficit


(277,990,488
)


(255,994,472
)Total stockholders equity


19,941,735



29,000,164TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
34,068,072


$
45,906,161    F-3




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##### Table of Contents



AvanirPharmaceuticals, Inc.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Years Ended September 30,2009


2008REVENUES FROM PRODUCT SALESNet revenues

$



$
129,820Cost of revenues


73,135



21,714Product gross (loss) margin


(73,135
)


108,106REVENUES AND COST OF RESEARCH SERVICES AND OTHERRevenues from royalties and royalty rights


3,642,675



3,616,102Revenues from license agreements


533,834



2,205,724Revenues from government research grant services






1,006,922Revenues from research services and other


4,176,509



6,828,748Cost of research and development services


10,224



249,281Cost of government research grant






940,130Research services and other gross margin


4,166,285



5,639,337Total gross margin


4,093,150



5,747,443OPERATING EXPENSESResearch and development


15,867,049



14,110,743General and administrative


10,150,766



10,599,158Total operating expenses


26,017,815



24,709,901Operating loss


(21,924,665
)


(18,962,458
)OTHER INCOME (EXPENSES)Interest income


204,190



1,283,302Interest expense


(517
)


(540,618
)Gain on early extinguishment of debt






967,547Gain on sale of Xenerex antibodies






120,274Other, net


(271,824
)


1,222,481Loss from continuing operations before provision for income
    taxes


(21,992,816
)


(15,909,472
)Provision for income taxes


3,200



3,200Loss from continuing operations


(21,996,016
)


(15,912,672
)DISCONTINUED OPERATIONSLoss from discontinued operations






(231,848
)Loss from sale of discontinued operations






(1,351,219
)Loss from discontinued operations






(1,583,067
)Net loss

$
(21,996,016
)

$
(17,495,739
)BASIC AND DILUTED NET LOSS PER SHARE:Loss from continuing operations

$
(0.28
)

$
(0.27
)Loss from discontinued operations






(0.03
)Net loss

$
(0.28
)

$
(0.30
)Basic and diluted weighted average number of common shares
    outstanding


78,844,251



58,901,030    F-4




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##### Table of Contents



AvanirPharmaceuticals, Inc.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
    LOSS
  AccumulatedAdditional





Other


TotalCommon Stock


Paid-in


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


Amount


Capital


Deficit


Income (Loss)


Equity


LossBALANCE, SEPTEMBER 30, 2007


43,117,358


$
4,312


$
245,527,400


$
(238,498,733
)

$
(2,745
)

$
7,030,234Net loss














(17,495,739
)






(17,495,739
)

$
(17,495,739
)Issuance of common stock in connection with:Sale of stock, net of offering costs


35,007,246



3,500



37,835,342











37,838,842Vesting of restricted stock units and awards


113,361



11



260











271Common stock surrendered


(21,979
)


(2
)


(29,848
)










(29,850
)Forfeiture of restricted awards


(2,000
)


















Share-based compensation expense










1,653,661











1,653,661Reclassification adjustment for unrealized gains on investments
    in marketable securities


















2,745



2,745



2,745BALANCE, SEPTEMBER 30, 2008


78,213,986



7,821



284,986,815



(255,994,472
)






29,000,164


$
(17,492,994
)Net loss














(21,996,016
)






(21,996,016
)

$
(21,996,016
)Issuance of common stock in connection with:Sale of stock, net of offering costs


4,613,350



461



10,246,419











10,246,880Vesting of restricted stock units


346,294



35



(35
)










Common stock surrendered


(89,448
)


(9
)


(186,247
)










(186,256
)Share-based compensation expense










2,876,963











2,876,963BALANCE, SEPTEMBER 30, 2009


83,084,182


$
8,308


$
297,923,915


$
(277,990,488
)

$



$
19,941,735


$
(21,996,016
)    F-5




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##### Table of Contents



AvanirPharmaceuticals, Inc.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended September 30,2009


2008OPERATING ACTIVITIES:Net loss

$
(21,996,016
)

$
(17,495,739
)Loss from discontinued operations






1,583,067Adjustments to reconcile loss from continuing operations to net
    cash used in operating activities:Depreciation and amortization


260,780



445,980Share-based compensation expense


2,876,963



1,639,756Amortization of debt discount






232,776Gain on extinguishment of debt






(967,547
)Gain on sale of Xenerex antibodies






(120,274
)Loss on impairment of assets






41,048Loss on disposal of assets


266,212



26,852Changes in operating assets and liabilities:Receivables






72,000Inventories


508,648



21,714Prepaid expenses and other assets


547,169



1,220,915Accounts payable


762,271



144,146Accrued expenses and other liabilities


(1,095,924
)


(471,342
)Accrued compensation and payroll taxes


153,402



780Deferred revenues


(2,573,665
)


(2,834,398
)Net cash used in operating activities of continuing operations


(20,290,160
)


(16,460,266
)Net cash used in operating activities of discontinued operations






(217,943
)Net cash used in operating activities


(20,290,160
)


(16,678,209
)INVESTING ACTIVITIES:Investments in securities






(527
)Proceeds from sales and maturities of investments in securities


388,122



2,300,111Purchase of property and equipment


(33,010
)


(134,374
)Proceeds from sale of Xenerex antibodies






210,000Proceeds from disposal of assets


2,250



5,000Net cash provided by investing activities


357,362



2,380,210Net cash used in investing activities of discontinued operations






(1,351,219
)Net cash provided by investing activities


357,362



1,028,991FINANCING ACTIVITIES:Proceeds from issuances of common stock and warrants, net of
    commissions and offering costs


10,246,880



37,838,842Tax withholding payments reimbursed by surrender of restricted
    stock


(186,256
)


(29,579
)Payments on notes and capital lease obligations


(25,744
)


(11,264,077
)Net cash provided by financing activities


10,034,880



26,545,186Net (decrease) increase in cash and cash equivalents


(9,897,918
)


10,895,968Cash and cash equivalents at beginning of year


41,383,930



30,487,962Cash and cash equivalents at end of year

$
31,486,012


$
41,383,930SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Interest paid

$
517


$
447,508Income taxes paid

$
6,427


$
51,108SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ANDFINANCING ACTIVITIES:Common stock surrendered

$
186,256


$
29,850    F-6




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##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Description
    of Business  Avanir tm hydrobromide/quinidine ® over-the-counter Avanir
  
  2.
    Summary
    of Significant Accounting Policies  Basis
    of presentation
  Avanir
  Form 10-K,
  ® Avanir
  Avanir Avanir Avanir Avanir Avanir Avanir Avanir Avanir Avanir Avanir Avanir
 F-7




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Management
    estimates
    Cash
    and cash equivalents
    Restricted
    investments in marketable securities
  held-to-maturity
  Concentrations
        Inventories
  first-in,
 F-8




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Property
    and equipment
    Capitalization
    and Valuation of Long-Lived Assets
    
    A significant underperformance relative to expected historical
    or projected future operating results;
    A significant change in the manner of our use of the acquired
    asset or the strategy for our overall business; and/or
    A significant negative industry or economic trend.    Deferred
    rent
    Fair
    value of financial instruments
   F-9




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Revenue
    recognition
      Product Sales  Active Pharmaceutical Ingredient
    Docosanol (API Docosanol).
  Multiple
    Element Arrangements.
  and/or
   F-10




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    License Arrangements.
  and/or
    Research Services Arrangements. agreed-upon agreed-upon
  Royalty Arrangements.
    ® units-of-revenue
 F-11




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Government Research Grant Revenues.
  Cost
    of revenues
    Recognition
    of expenses in outsourced contracts
  and/or
  Research
    and development expenses
      
    The technology is in the early stage of development and has no
    alternative uses;
    There is substantial uncertainty regarding the future success of
    the technology or product;
    There will be difficulty in completing the remaining
    development; and
    There is substantial cost to complete the work.  Acquired contractual rights.
  Share-Based
    Compensation
   F-12




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Fiscal 2009


Fiscal 2008From Continuing Operations:General and administrative expense

$
2,213,242


$
1,149,018Research and development expense


663,721



490,738Share-based compensation expense related to continuing operations


2,876,963



1,639,756From discontinued operations:






13,905Share-based compensation expense

$
2,876,963


$
1,653,661   Fiscal 2009


Fiscal 2008Share-based compensation expense from:Stock options

$
919,478


$
666,129Restricted stock units


1,957,485



848,535Restricted stock awards






138,997Total

$
2,876,963


$
1,653,661    F-13




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restructuring
    expense
    Advertising
    expenses
    Income
    taxes
      740-10-50,
  and/or
      Comprehensive
    income (loss)
   F-14




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Computation
    of net loss per common share
      Fiscal 2009


Fiscal 2008Stock options


2,185,938



624,027Performance stock options


2,031,218



2,048,200Stock warrants


12,240,437



12,509,742Restricted stock units(1)


2,505,434



2,432,416     (1)
    
    Includes 692,448 and 173,374 shares of restricted stock in
    fiscal 2009 and 2008, respectively, awarded to directors that
    have vested but are still restricted until the directors resign.  Recent
    authoritative guidance
  Multiple-Deliverable Revenue Arrangements.
  Subsequent Events.
  Determining Fair Value when the Volume and Level of Activity
    for the Asset or Liability have Significantly Decreased and
    Identifying Transactions That Are Not Orderly.
 F-15




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recognition and Presentation of
    Other-Than-Temporary
    Impairments. other-than-temporary other-than-temporary
  Interim Disclosures about Fair Value of Financial
    Instruments.
  Determining Whether an Instrument (or an Embedded Feature) Is
    Indexed to an Entitys Own Stock.
  Noncontrolling Interests in Consolidated Financial
    Statements.
  The Fair Value Option for Financial Assets and Financial
    Liabilities.
  Fair Value Measurements.
 F-16




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Sale of
    FazaClo        Fiscal 2008OPERATING AND OTHER EXPENSESGeneral and administrative expenses

$
231,848Loss on sale of FazaClo


1,351,219NET LOSS

$
1,583,067        F-17




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Fair
    Value of Financial Instruments    
    Level 1-Quoted
    prices in active markets for identical assets and liabilities.
    Level 2-Inputs
    other than Level 1 that are observable, either directly or
    indirectly, such as quoted prices for similar assets and
    liabilities, quoted prices in the markets that are not active;
    or other inputs that are observable or can be corroborated by
    observable market data for substantially the full term of the
    assets or liabilities.
    Level 3-Unobservable
    inputs that are supported by little or no market activity and
    that are significant to the fair value of the assets or
    liabilities.    5.
    Restricted
    Investments in Marketable Securities  held-to-maturity.
  6.
    Inventories      September 30,


September 30,2009


2008Raw materials

$
824,629


$
1,333,277Less: current portion


(114,098
)


(17,000
)Non-current portion

$
710,531


$
1,316,277    F-18




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Balance at





Balance atSeptember 30,


Additional


September 30,2008


Reserves


2009Reserve for excess and obsolete inventoryReserve for docosanol API

$
50,000


$
68,760


$
118,760Reserve for DM and Q API






383,000



383,000Total

$
50,000


$
451,760


$
501,760   Balance at





Balance atSeptember 30,


Additional


September 30,2007


Reserves


2008Reserve for excess and obsolete inventoryReserve for docosanol API

$
50,000


$



$
50,000Reserve for DM and Q API










Total

$
50,000


$



$
50,000   7.
    Property
    and Equipment    As of September 30, 2009


As of September 30, 2008Gross








GrossCarrying


Accumulated





Carrying


AccumulatedValue


Depreciation


Net


Value


Depreciation


NetComputer equipment and related software

$
1,330,223


$
(1,211,096
)

$
119,127


$
1,319,891


$
(1,080,132
)

$
239,759Leasehold improvements


37,790



(18,916
)


18,874



37,790



(11,362
)


26,428Office equipment furniture and fixtures


756,672



(583,996
)


172,676



763,260



(484,257
)


279,003Manufacturing equipment














261,719







261,719Total property and equipment

$
2,124,685


$
(1,814,008
)

$
310,677


$
2,382,660


$
(1,575,751
)

$
806,909      F-19




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Accrued
    Expenses and Other Liabilities    September 30,


September 30,2009


2008Accrued research and development expenses

$
372,494


$
1,404,556Accrued general and administrative expenses


270,401



160,759Deferred rent


19,516



48,638Lease restructuring liability(1)


991,583



1,135,965Total accrued expenses and other liabilities


1,653,994



2,749,918Less: current portion


(1,001,599
)


(1,881,401
)Accrued expenses and other liabilities, non-current portion

$
652,395


$
868,517     (1)
    
    In fiscal 2006, the Company relocated all operations other than
    research and development from San Diego, California to
    Aliso Viejo, California. In fiscal 2007, the Company subleased a
    total of approximately 49,000 square feet of laboratory and
    office space in San Diego and relocated remaining personnel
    and clinical trial support functions to the Companys
    offices in Aliso Viejo, California. Restructuring expenses
    included recognition of the estimated loss due to the exit of
    the Companys leases of approximately $2.1 million. No
    further costs were incurred related to these restructuring
    events in fiscal 2008. In April 2009, the Company entered into a
    sublease for office space in San Diego, California.
    Sublease rental payments commenced in September 2009 pursuant to
    this sublease. In September 2009, the Company recognized a loss
    of approximately $172,000 related to a lease restructuring
    liability resulting from a sublease entered into in April 2009
    for office buildings subleased in San Diego, California.
    The lease restructuring loss is included in rent expense in
    fiscal 2009.    Balance at





Balance atSeptember 30,


Payments/


September 30,2008


Reductions


2009Accrued RestructuringLease restructuring liability

$
1,135,965


$
(144,382
)

$
991,583Total


1,135,965


$
(144,382
)


991,583Less current portion


(316,086
)






(358,704
)Total

$
819,879






$
632,879  F-20




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Deferred
    Revenues/Sale of Licenses  ®
  Drug RoyaltyUSA Agreement


Other Agreements


TotalNet deferred revenues as of October 1, 2008

$
12,202,198


$
283,834


$
12,486,032Changes during the period:Recognized as revenues during period


(2,289,831
)


(283,834
)


(2,573,665
)Net deferred revenues as of September 30, 2009

$
9,912,367


$



$
9,912,367Classified and reported as:Current portion of deferred revenues

$
2,282,560


$



$
2,282,560Deferred revenues, net of current portion


7,629,807







7,629,807Total deferred revenues

$
9,912,367


$



$
9,912,367   Drug RoyaltyUSA Agreement


Other Agreements


TotalNet deferred revenues as of October 1, 2007

$
14,738,509


$
581,921


$
15,320,430Changes during the period:Additions






250,000



250,000Recognized as revenues during period


(2,536,311
)


(548,087
)


(3,084,398
)Net deferred revenues as of September 30, 2008

$
12,202,198


$
283,834


$
12,486,032Classified and reported as:Current portion of deferred revenues

$
2,106,740


$
227,192


$
2,333,932Deferred revenues, net of current portion


10,095,458



56,642



10,152,100Total deferred revenues

$
12,202,198


$
283,834


$
12,486,032   Drug Royalty Agreement
   F-21




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Kobayashi Docosanol License Agreement
      HBI Docosanol License Agreement
      Emergent Biosolutions License Agreement
 F-22




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Commitments
    and Contingencies  Operating lease commitments.
      Less Payments to beMinimum


Received fromYear Ending September 30,

Payments


Subleases


Net Payments2010

$
1,530,249


$
888,699


$
641,5502011


1,483,195



961,425



521,7702012


1,222,548



997,422



225,1262013


351,659



281,801



69,858Total

$
4,587,651


$
3,129,347


$
1,458,304   Legal contingencies.
      Guarantees and Indemnities.
 F-23




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Center for Neurologic Study (CNS) 
  11.
    Notes
    Payable    September 30, 200810.43% equipment loan due February 2009

$
16,27510.17% equipment loan due January 2009


9,469Total


25,744Less: current portion


(25,744
)Total long-term notes payable

$
   Senior Notes.
  Equipment Loans.
 F-24




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Stockholders
    Equity  Preferred
    Stock
        Common
    stock
  Fiscal 2009.
    Fiscal 2008. 5-year
     F-25




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Common Stock Issued and Warrants and



Common Stock


Gross Amount


Average PriceStock Options Exercised

Date

Shares


Received(1)


per Share(2)Fiscal year ended September 30, 2009:Registered offering of common stock

Aug-09


4,613,350


$
10,787,907


$
2.34Restricted stock units

Various


346,294






$
Total




4,959,644


$
10,787,907Fiscal year ended September 30, 2008:Registered offering of common stock

Apr-08


34,972,678


$
40,000,000


$
1.14Private placement of common stock

Jan-08


34,568



44,200


$
1.28Restricted stock awards and restricted stock units

Various


113,361






$
Total




35,120,607


$
40,044,200     (1)
    
    Amount received represents the amount before the cost of
    financing and after underwriters discount, if any.(2)
    
    Average price per share has been rounded to two decimal places.  Warrants
  5-year
  5-year
    Shares of


WeightedCommon Stock


AveragePurchasable Upon


Exercise Price


Range ofExercise of Warrants


per Share


Exercise PricesOutstanding October 1, 2008


12,509,742


$
1.59


$
1.43-$8.92Expired


(269,305
)

$
8.92


$
8.92Outstanding September 30, 2009


12,240,437


$
1.43


$
1.43   Employee
    Equity Incentive Plans
   F-26




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2005 Equity Incentive Plan.
  2003 Equity Incentive Plan.
  2000 Stock Option Plan.
 F-27




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock Options. 10-year
            Shares of





Weighted AverageCommon Stock


Weighted Average


Remaining


AggregatePurchasable Upon


Exercise Price per


Contractual Term


IntrinsicExercise of Options


Share


(in Years)


ValueOutstanding October 1, 2008


624,027


$
6.61Granted


1,613,110


$
0.53Forfeited


(49,039
)

$
4.74Expired


(2,160
)

$
5.22Outstanding September 30, 2009


2,185,938


$
2.17



8.5


$
2,606,644Vested and expected to vest in the future,September 30, 2009


1,890,512


$
2.40



8.5


$
2,179,945Exercisable, September 30, 2009


302,501


$
10.73



5.8


$
11,645      F-28




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2009

2008Expected volatility

100.8%  101.3%


95.8
%Weighted-average volatility

100.8%


95.8
%Average expected term in years

5.0


5.0Risk-free interest rate (zero coupon U.S. Treasury Note)

1.6%  2.3%


2.9
%Expected dividend yield

0%


0
%   :
  Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedRemaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


Life in Years


Price


Exercisable


Price$ 0.47-$ 0.53


1,428,010



9.2


$
0.53






$
$ 0.54-$ 2.41


448,741



8.3


$
1.29



13,000


$
1.18$ 4.60-$ 9.92


87,250



6.1


$
6.66



72,251


$
6.69$10.24-$13.60


180,687



5.5


$
11.93



180,687


$
11.93$15.84-$19.38


41,250



5.9


$
16.16



36,563


$
16.202,185,938



8.5


$
2.17



302,501


$
10.73   Performance Stock Options.
   F-29




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008Expected volatility

95.4%  98.9%Weighted-average volatility

97.8%Average expected term in years

5.4  6.0Risk-free interest rate (zero coupon U.S. Treasury Note)

3.4%  3.5%Expected dividend yield

0%     Shares of



Weighted AverageCommon Stock

Weighted Average

Remaining

AggregatePurchasable Upon

Exercise Price per

Contractual Term

IntrinsicExercise of Options

Share

(In Years)

ValueOutstanding October 1, 2008


2,048,200


$
0.88Forfeited


(16,982
)

$
0.88Outstanding September 30, 2009


2,031,218


$
0.88



8.8


$
2,437,462Vested and expected to vest in the future, September 30,
    2009


1,699,398


$
0.88



8.8


$
2,039,277Exercisable, September 30, 2009


236,300


$
0.88



8.8


$
283,560     Restricted stock units.
  Weighted AverageGrant DateNumber of Shares


Fair ValueUnvested, October 1, 2008


2,259,042


$
1.85Granted


420,000


$
0.44Vested


(865,356
)

$
1.22Forfeited


(700
)

$
2.06Unvested, September 30, 2009


1,812,986


$
1.83      F-30




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Restricted stock awards.
  13.
    Research,
    License, Supply and other Agreements  Center for Neurologic Study (CNS) 
  HBI Docosanol License Agreement country-by-country
  Kobayashi Docosanol License Agreement
 F-31




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        GlaxoSmithKline Subsidiary, SB Pharmco Puerto Rico, Inc.
    (GlaxoSmithKline). over-the-counter
  P.N. Gerolymatos SA.
    (Gerolymatos).
  ACO HUD.
    Emergent Biosolutions.
 F-32




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NIH/NIAID
  Non-anthrax related antibodies.
  Government research grants.
  14.
    Income
    Taxes    2009


2008Current:State and foreign

$
3,200


$
3,200Deferred:Federal


(5,948,313
)


(5,147,297
)State and foreign


(1,026,174
)


(1,115,570
)(6,974,487
)


(6,262,867
)Increase in deferred income tax asset valuation allowance


6,974,487



6,262,867Total income tax provision

$
3,200


$
3,200  F-33




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    September 30,2009


2008Net operating loss carryforwards

$
90,497,829


$
83,265,183Deferred revenue


3,920,337



4,943,699Research credit carryforwards


11,295,872



10,964,507Capitalized research and development costs


986,955



1,263,921Capitalized license fees and patents


3,075,544



3,411,306Share-based compensation and options


3,449,222



2,584,645Foreign tax credits


595,912



595,912Other


750,675



622,961Deferred income tax assets


114,572,346



107,652,134Deferred tax liabilities:Other


(459
)


(54,734
)Deferred tax liabilities


(459
)


(54,734
)Less valuation allowance for net deferred income tax assets


(114,571,887
)


(107,597,400
)Net deferred tax assets / (liabilities)

$



$
       2009


2008Federal statutory rate


(34
)%


(34
)%Increase in deferred income tax asset valuation allowance


32



36State income taxes, net of federal effect


(6
)


(6
)Research and development credits


(1
)


(4
)Expired net operating loss and other credits


8



7Other


1



1Effective income tax rate


0
%


0
%   15.
    Employee
    Savings Plan   F-34




---



##### Table of Contents



AvanirPharmaceuticals, Inc.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    16.
    Segment
    Information        17.
    Subsequent
    Event     F-35