Back to GetFilings.com

Index to Financial Statements

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

For transition period from              to             

Commission file number 0-20945

ANTARES PHARMA, INC.

(Exact name of registrant as specified in its charter)

707 Eagleview Boulevard,

Suite 414, Exton, PA 19341

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (610) 458-6200

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:

Common Stock, $.01 Par Value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

Aggregate market value of the voting and non-voting common stock held by nonaffiliates of the registrant as of June 30, 2003, was approximately $5,961,024 (based upon the last reported sale price of $1.03 per share on June 30, 2003, on the Nasdaq Small Cap Market).

There were 37,898,796 shares of common stock outstanding as of March 22, 2004.

Index to Financial Statements

PART I

Item 1. BUSINESS

General

On January 31, 2001, Antares Pharma, Inc. (“Antares” or the “Company”) (formerly known as Medi-Ject Corporation) completed a business combination to acquire the three operating subsidiaries of Permatec Holding AG (“Permatec”), headquartered in Basel, Switzerland. Upon consummation of the transaction, the acquired Permatec subsidiaries were renamed Antares Pharma AG, Antares Pharma IPL AG and Antares Pharma NV. Prior to the closing of the business combination, the Company did not have sufficient funds to continue operating and had determined that it was necessary to, among other things, either raise more capital or merge with another biopharmaceutical company. Medi-Ject was a company focused on delivery of drugs across the skin using needle-free technology, and Permatec specialized in delivery of drugs across the skin using transdermal patch and gel technologies. Given that both groups were focused on delivery of drugs across the skin, but with a focus on different sectors, it was believed that a business combination would be attractive to both pharmaceutical partners and to the Company’s shareholders. The transaction was accounted for as a reverse acquisition, as Permatec’s shareholders initially held approximately 67% of the outstanding stock of Antares. Accordingly, for accounting purposes, Permatec is deemed to have acquired Antares. Upon completion of the transaction the Company’s name was changed from Medi-Ject Corporation to Antares Pharma, Inc. The following discussion of the business incorporates the business combination with Permatec.

The U.S. operation, located in Minneapolis, Minnesota, develops, manufactures and markets novel medical devices, called jet injectors or needle-free injectors, that allow people to self-inject drugs without using a needle. The Company makes a small re-usable spring-action device and the attached disposable plastic needle-free syringes to hold the drug. A liquid drug is drawn up into the needle-free syringe, from a conventional vial containing a liquid drug formulation, through a small hole at the end of syringe. When the syringe is held against an appropriate part of the body and the spring is released, a piston drives the fluid stream into the tissues beneath the skin, from where the drug is dispersed into systemic circulation. A person may re-arm the device and repeat the process or attach a new sterile syringe between injections. Recently the Company has developed variations of the jet injector by adding a very small hidden needle to a pre-filled, single-use injector.

With the Permatec business combination, Antares is also committed to other methods of drug delivery such as topical gel formulations. Transdermal gels have advantages in cost, cosmetic elegance, ease of application and lack of irritancy compared with better-known transdermal patches and have applications in such therapeutic markets as hormone replacement therapy, osteoporosis therapy, cardiovascular therapy, pain management and central nervous system therapy. The Company intends for this drug delivery method to become a material part of its business moving forward.

From inception as a combined business entity, the Company had fifty-three employees with thirty-five research and development personnel, engineers, formulation chemists and technicians, engaged in designing and formulating new products for the pharmaceutical industry. As of March 15, 2004, the Company has twenty-six full-time and three part-time employees.

The Company was a pioneer in the invention of home needle-free injection systems in the late 1970s. Prior to that, needle-free injection systems were powered by large air compressors or were relatively complex and expensive, so their use was limited to mass vaccination programs by the military or school health programs or for patients classified as needle phobic. Early injectors were painful in comparison to today’s injectors, and their large size made home use difficult. The first home insulin injector was five times as heavy as the current injector, which weighs five ounces. Today’s insulin injector sells at a retail price of $335 compared to $799 eight years ago. The first growth hormone injector was introduced in Europe in 1994. This was the first success in achieving distribution through a license to a pharmaceutical manufacturer, and it has resulted in significant market penetration and a very high degree of customer satisfaction. Distribution of growth hormone injectors has expanded, through pharmaceutical company partnerships, to include Japan and other Asian countries.

The Swiss operation developed its first topical products in Argentina in the mid-1990s. This effort resulted in the commercialization of a seven-day estradiol patch in certain countries of South America in 2000. Over time, the Argentine research effort moved away from the crowded transdermal patch field and focused on topical gel formulations, which allow the delivery of estrogens, progestins, testosterone and other drugs in a gel base without the

2

Index to Financial Statements

need for an occlusive or potentially irritating adhesive bandage. The commercial potential for topical gel therapies is attractive, and several agreements with pharmaceutical companies have led to successful clinical evaluation of Antares’ formulations. The Argentine operations were moved to Basel, Switzerland in late 1999.

The Company operates in the specialized drug delivery sector of the pharmaceutical industry. Companies in this sector generally bring technology and know-how in the area of drug formulation and/or delivery devices to pharmaceutical manufacturers through licensing and development agreements. The Company views the pharmaceutical and biotechnology company as its primary customer. The Company has negotiated and executed licensing relationships in the growth hormone segment (needle-free devices in Europe and Asia), the hormone replacement segment (transdermal delivery of estradiol in South America) and the topical hormone gels segment (several development programs in place worldwide, including the United States and Europe). In addition, the Company continues to market needle-free devices for the home administration of insulin in the U.S. market though distributors, and has licensed its technology in the diabetes and obesity fields to Eli Lilly and Company.

The Company is a Minnesota corporation incorporated in February 1979. Principal executive offices are located at 707 Eagleview Boulevard, Exton, Pennsylvania 19341; telephone (610) 458-6200. The Company has wholly-owned subsidiaries in Switzerland (Antares Pharma AG and Antares Pharma IPL AG) and the Netherlands Antilles (Antares Pharma NV).

Industry Trends

Based upon previous experience in the industry, the Company believes the following significant trends in healthcare have important implications for the growth of the business.

After a drug loses patent protection, the branded version of the drug often faces competition from generic alternatives. Often market share may be preserved by altering the delivery method, e.g., a single daily controlled release dosage form rather than two to four pills a day. The Company expects pharmaceutical manufacturers will continue to seek differentiating delivery characteristics to defend against generic competition and to optimize convenience to patients. The altered delivery method may be an injection device or a novel formulation that offers convenience or improved dosage schedules. Major companies now focus on life cycle management of their products to maximize return on investment and often consider phased product improvement opportunities to maintain competitiveness against other major companies or generic competition.

The increasing trend of pharmaceutical companies marketing directly to consumers, as well as the recent focus on patient rights may encourage the use of innovative, user-friendly drug delivery. Part of this trend involves offering patients a wider choice of dosage forms. The Company believes the patient-friendly attributes of its topical gel and jet injection technologies meet these market needs.

The focus on new topical formulations complements the Company’s earlier experience with the new injection methods. The Company envisions its program with topical gel formulation as second-generation technology, replacing the older transdermal patch products with more patient-friendly products. Topical gels will offer the patient more choices and added convenience with no compromise of efficacy. Although newer, the gel technology is based upon so-called GRAS (“Generally Recognized as Safe”) substances, meaning the toxicology profiles of the ingredients are known and widely used. This approach has a major regulatory benefit and may reduce the cost and time of product development and approval.

Many drugs, including selected hormones and protein biopharmaceuticals, are destroyed in the gastrointestinal tract and may only be administered through the skin, the lung or by injection. Pulmonary delivery is complex and has not yet been commercialized for therapeutic proteins intended for systemic delivery. Injection remains the mainstay of protein delivery. Therefore, the growing number of protein biopharmaceuticals requiring injection may have limited commercial potential if patient compliance with conventional injection treatment is not optimal. The failure to take all prescribed injections can lead to increased health complications for the patient, decreased drug sales for pharmaceutical companies and increased healthcare costs for society. In addition, it is becoming increasingly recognized that conventional syringe needles require special and often costly disposal methods.

In addition to the increase in the number of drugs requiring self-injection, recommended changes in the frequency of insulin injections for the treatment of diabetes also may contribute to an increase in the number of self-injections. For

3

Index to Financial Statements

many years, standard treatment protocol was for insulin to be administered once or twice daily for the treatment of diabetes. However, according to major studies (the Diabetes Control and Complications Trial), tightly controlling the disease by, among other things, administration of insulin as many as four to six times a day, can decrease its debilitating effects. The Company believes that with the increasing incidence of diabetes coupled with an increasing awareness of this disease, the benefits of tightly controlling diabetes will become more widely known, and the number of insulin injections self-administered by people with diabetes will increase. The need to increase the number of insulin injections given per day may also motivate patients with diabetes to seek an alternative to traditional needles and syringes.

The importance of vaccines in industrialized and emerging nations is expanding as the prevalence of infectious diseases increases. New vaccines and improved routes of administration are the subject of intense research in the pharmaceutical industry. In the past, the Company had focused only upon the injection of medication in the home, but in 2000 the Company began to research the feasibility of using its devices for vaccines and new vaccine ingredients.

Due to the substantial costs involved, marketing efforts are not currently focused on drug applications administered by healthcare professionals. Jet injection systems, however, may be attractive to hospitals, doctors’ offices and clinics, and such applications may be explored in the future. The issues raised by accidental needle sticks and disposal of used syringes have led to the development of syringes with sheathed needles as well as the practice of administering injections through intravenous tubing to reduce the number of contaminated needles. In 1998, the State of California banned the use of exposed needles in hospitals and doctors’ offices, if alternatives exist, and several additional states have adopted similar legislation. In November 2000 the Federal Government issued guidelines encouraging institutions to replace needles wherever practical. The Company believes that needle-free injection systems may be attractive to healthcare professionals as a further means to reduce accidental needle sticks and the burdens of disposing of contaminated needles. Furthermore, certain products, particularly DNA vaccines, may actually be more effective if delivered by jet injection, particularly where such injections are given intradermally/subdermally. The Company’s mini-needle technology is capable of delivering vaccines in this way, and the Company is approaching vaccine companies to discuss this potential use.

Market Opportunity

According to industry sources, an estimated 9 to 12 billion needles and syringes are sold annually worldwide. The Company believes that a significant portion of these are used for the administration of drugs that could be delivered using its injectors, but that only a small percentage of people who self-administer drugs currently use jet injection systems. The Company believes that this lack of market penetration is due to older examples of needle-free technology not meeting customer needs owing to cost and performance limitations, and the small size of the companies directly marketing the technology not being able to gain a significant “share of voice” in the marketplace. The Company believes that its technology overcomes limitations of the past and that its business model of working with pharmaceutical company partners has the potential for substantial market penetration. To date neither the Company nor its competitors have achieved substantial market penetration under this model. However, the Company’s largest customer is a pharmaceutical company (Ferring), and one of the Company’s major competitors, Bioject Medical Technologies, Inc., has a pharmaceutical company (Serono) as its largest customer. In 2003, Antares licensed its needle-free injection technology to Eli Lilly and Company for use in the fields of diabetes and obesity.

Antares’ focus is on the market for the delivery of self-administered injectable drugs. The largest and most mature segments of this market consist of the delivery of insulin for patients with diabetes and human growth hormone for children with growth retardation. In the U.S., over 3.2 million people inject insulin for the treatment of diabetes, resulting in an estimated 2.3 billion injections annually, and the Company believes that the number of insulin injections will increase with time as the result of new diabetes management techniques, which recommend more frequent injections. A second attractive market has developed with growth hormone; children suffering from growth retardation take daily hormone injections for an average of five years. The number of children with growth retardation is small relative to diabetes, but most children are needle averse. The Company’s pharmaceutical partner in Europe has made significant inroads using its injectors in this market, and the Company expects similar progress in other geographic regions where partnerships have already been established. Other injectable drugs that are presently self-administered and may be suitable for injection with the Company’s systems include therapies for the prevention of blood clots and the treatment of multiple sclerosis, migraine headaches, inflammatory diseases, impotence, infertility, AIDS and hepatitis. Antares also believes that many injectable drugs currently under development will be administered by self-injection once they reach the market. It is estimated that there will be 190 biotechnology injectable drugs on the market in 2005, compared with 80 in 2000 and ten in 1990. This is supported by the continuing development of important chronic care

4

Index to Financial Statements

products that can only be given by injection, the ongoing effort to reduce hospital and institutional costs by early patient release, and the gathering momentum of new classes of drugs that require injection. A representative list of such drugs introduced in recent years that all require home injection include Enbrel^®(Amgen, Wyeth) for treatment of rheumatoid arthritis, Aranesp^® (Amgen) for treatment of anemia, Kineret^® (Amgen) for rheumatoid arthritis, Forteo^™ (Lilly) for treatment of osteoporosis, Intron^® A (Schering Plough) and Roferon^® (Roche) for hepatitis C, Lantus^® (Aventis Pharma) for diabetes, Rebif^® (Serono) for multiple sclerosis, Copaxone (Teva) for multiple sclerosis and Gonal-F^® for fertility treatment. The dramatic increase in numbers of products for self-administration by injection and the breadth of therapeutic areas covered by this partial listing is an exciting representation of the opportunity for Antares’ device portfolio. The estimated value of this market in 2005 is $30 billion.

According to one industry publication, worldwide hormone replacement revenues, the initial focus of the Company’s transdermal patch and topical gel formulation program, were expected to grow to $4.0 billion by 2002. As of 1998, only 15% of these sales were composed of transdermal delivery systems in the U.S. Further growth in this sector is likely to be achieved by the use of testosterone products in both male and female applications. The importance of gel products containing testosterone for men has been exemplified with the success of Androgel^®) (Unimed-Solvay) for treatment of male hypogonadism, where second year sales in the US were greater than $200 million. A new market opportunity also exists with the use of low dose testosterone for treatment of female sexual dysfunction, a complaint that it is suggested could affect 30-50% of women. Currently no effective treatments are available for this disorder. Antares Pharma, along with its US partner BioSante, has testosterone products in clinical trial for both female and male applications. However, the Company believes that the industry is shifting away from oral systems, as evidenced in Europe, more specifically France, the leading country in the use of transdermal hormone replacement therapy. According to an industry report, 64.8% of treated menopausal women in France used either patch (44.7%) or gel (20.1%) therapy. It has also been suggested that the more physiological blood levels achieved when hormones are delivered across the skin may offer some advantage over oral therapy. At this time there is no long-term evidence to support this contention. In the future, products may be formulated to address equally large opportunities in other sectors of the pharmaceutical industry, including cardiovascular, pain, infectious diseases, addiction and central nervous system therapies.

Products and Technology

Current Needle-Free Injection Systems

The Medi-Jector Vision^® is a small, easy-to-use insulin injector, introduced in October 1999, replacing the Medi-Jector Choice^®. The Vision replaced the Choice in the U.S. insulin market in 1999 and 2000, the European growth hormone market in 2002 and has replaced the Choice in the remaining international growth hormone markets. Each injector model is operated by first compressing a coil spring mechanism and then filling the attached disposable plastic syringe from a multi-use medication vial. The proper dosage is displayed in the dosage window. An injection is given by holding the injector perpendicular to the skin in a location appropriate for the injection and pressing the trigger button. Each injector is recommended to be used for two years, and the needle-free plastic syringes are recommended for a one-week usage. The U.S. retail price of the Vision insulin device (excluding the needle-free syringe) is $335 The total annual cost to the end user of needle-free syringes and related supplies is approximately $250 per year (based upon an average of two injections per day). Based in part upon the results of marketing and clinical studies performed by Antares, the Company believes that injections using an Antares injection system are considered more comfortable and more discreet than injections using a conventional needle and syringe. The needle-free syringes used with any of the injector systems do not require special disposal. Once a needle-free syringe is removed from the device portion of the system, it cannot pierce the skin; consequently, the risk of cross-infection from discarded needle-free syringes is reduced significantly from the risk associated with needles.

New Device Development

The Company is currently developing two new injector platforms. One platform, code named the MJ-8, represents a new concept in needle-free delivery, incorporating a smaller power pack with a self-contained medicinal cartridge. This device has been designed to compete with cartridge-based pen-like devices, which use replaceable needles, common in the European insulin market and rapidly replacing conventional syringes in the U.S. insulin market. A second platform, referred to as the AJ-1, combines a very low energy power source with a small hidden needle to offer a totally disposable, single-use injection system. This device can also be used to delivery volumes up to 1.0ml, whereas the Company’s current needle-free systems are limited to 0.5ml. A modification of this device is being developed to deliver

5

Index to Financial Statements

vaccines to the very superficial layers of skin, a popular direction of vaccine research. This diverse development program will offer pharmaceutical manufacturers a broad and attractive array of delivery choices while providing consumers with less expensive and more user-friendly injectors.

MJ-8 Injector. The Company believes that a continuing major obstacle to widespread market acceptance of needle-free injection systems has been the lack of a suitably compact and convenient injector. Although the size and complexity of injectors has been reduced over the years, further reduction in size is possible by limiting delivery of a single dose to 0.20ml or less. To this end, the Company has targeted the insulin market where most people in Europe and a growing number in the U.S. take several injections daily of 0.10ml to 0.15ml. Smaller doses require less energy and, therefore, smaller energy sources. The space conserved by reducing the energy source is used to store a drug cartridge within the device, adding further user convenience. Prototypes of this platform were tested in clinical trials starting in the fourth quarter of 2001 and throughout 2002.

AJ-1 Injector. The coil springs of the commercial needle-free injectors limit injection volume to 0.5ml; larger fluid volumes require larger springs and are, therefore, impractical. Nevertheless, injection volumes of 1.0ml or more are not uncommon. In 1998, engineers at Antares found that they could greatly reduce the size of the coil spring by adding a very short, hidden needle (mini-needle). They concluded that breaking the very outer layers of the skin with a small needle allows very low energy jet injection. At lower energies, the device could hold the drug in a small, standard, single-dose glass cartridge. The Company built and successfully tested a small, pre-filled, totally disposable mini-needle injector during 1999 and has continued to refine this platform for the needs of interested pharmaceutical companies. Engineers with Elan Corporation plc (“Elan”), a drug delivery company based in Ireland, developed additional proprietary technologies that complement the AJ-1 design, and in November 1998, the Company licensed the Elan technology for certain applications.

The Company expended approximately $3,556,000, $3,654,000 and $3,494,000 on research and development efforts during fiscal years 2001, 2002 and 2003, respectively. Of these amounts, approximately $729,000, $639,000 and $695,000, respectively, were funded by third-party sponsored development programs and licensing fees, which were reflected in revenues.

Topical Delivery Products

Antares’ ATD^™ Gel product containing estradiol and norethindrone acetate (“NETA”) was licensed to Solvay in Europe in 1999 and has progressed successfully through Phase II clinical evaluation. Phase III studies may commence in 2004. In 2000, the Company signed an exclusive agreement with BioSante, an early stage U.S. pharmaceutical company, that began clinical studies of four ATD^™ Gel hormone formulations for commercialization in the U.S. and other countries. BioSante’s clinical studies with estradiol gel (Bio-E-Gel^™) are at Phase III, and those with testosterone gel for female sexual dysfunction (LibiGel^™) are in Phase II.

Patents

When appropriate, the Company actively seeks protection for its products and proprietary information by means of U.S. and international patents and trademarks. With the injection device technology, the Company currently holds 22 patents and has an additional 70 applications pending in the U.S. and other countries. With the Company’s topical delivery technologies, it holds five patents, and an additional 30 applications in various countries are pending. The patents have expiration dates ranging from 2013 to 2022.

Some of the Company’s technology is developed on its behalf by independent outside contractors. To protect the rights of its proprietary know-how and technology, Company policy requires all employees and consultants with access to proprietary information to execute confidentiality agreements prohibiting the disclosure of confidential information to anyone outside the Company. These agreements also require disclosure and assignment to the Company of discoveries and inventions made by such individuals while devoted to Company-sponsored activities. Companies with which Antares has entered into development agreements have the right to certain technology developed in connection with such agreements.

6

Index to Financial Statements

Manufacturing

The Company operates a U.S. device manufacturing facility in compliance with current Quality System Regulations (“QSR”) established by the Food and Drug Administration (“FDA”) and by the centralized European regulatory authority (Medical Device Directive). Injector and disposable parts are manufactured by third-party suppliers and are assembled by a third-party supplier. Packaging is performed by a third-party supplier under the direction of the Company. Final quality control is performed by the Company. The Company may need to invest in automated assembly equipment if volume increases in the future.

On February 22, 2003 the Company entered into a manufacturing agreement under which all assembly work that had been performed by the Company at its Minneapolis facility was to be outsourced to a third-party supplier (“Supplier”). Under the terms of the agreement, the Supplier is responsible for procurement of raw materials and components, inspection of procured materials, production, assembly, testing, sterilization, labeling, packaging and shipping to the Company’s customers. The transition of the assembly operations to the Supplier was completed in May 2003. The Company will continue to have responsibility for the manufacturing of the product including the quality of all products and the release of all products produced by the Supplier. The agreement has an initial term of two years.

The Company was obligated, until January 1, 2004, to negotiate with Becton Dickinson before any other company for exclusive rights to manufacture disposable plastic components of certain injector systems under certain conditions. The Company pays Becton Dickinson royalties on sales of plastic components of certain injector systems.

The ATD^™ Gel formulations for clinical studies are currently manufactured by contract under the Company’s supervision.

Marketing

The Company’s basic business strategy is to develop and manufacture new products specific to certain pharmaceutical applications and to market through the existing distribution systems of pharmaceutical and medical device companies.

During 2001, 2002 and 2003, international revenue accounted for 62%, 59% and 77% of total revenue, respectively. Europe (primarily Germany) accounted for 85%, 96% and 95% of international revenue in 2001, 2002 and 2003, respectively, with the remainder coming primarily from Asia. Ferring BV accounted for 38%, 49% and 62% of the Company’s worldwide revenues in 2001, 2002 and 2003, respectively. BioSante Pharmaceuticals, Inc. accounted for 28%, 30% and 14% of the Company’s worldwide revenues in 2001, 2002 and 2003, respectively. Revenue from Ferring resulted from sales of injection devices and related disposable components. Revenue from BioSante resulted from license fees, development fees, milestone payments and clinical testing supplies for hormone replacement therapy transdermal gel formulations.

Injection Devices

The Company markets needle-free injectors for insulin and growth hormone delivery through pharmaceutical companies and medical products distributors in over 20 countries. Device and related disposable product sales in 2003 were approximately $2.6 million. Historical product development alliances, from which licensing and development fees were obtained, include those with Becton Dickinson, Schering-Plough Corporation and the Organon division of Akzo Nobel.

With respect to current injection device selling efforts, the Company’s relationship with Ferring BV best reflects the Company’s basic strategy. Ferring is selling human growth hormone throughout Europe with a marketing campaign tied exclusively to the Antares needle-free delivery system. Ferring has been successful in establishing a user base of more than 3,000 children for its drug using the Antares needle-free system. In the Netherlands, where Ferring enjoys its largest market share, 22% of children taking growth hormone use Antares’ injector. During the past six years, a Japanese pharmaceutical company, JCR, has distributed small numbers of growth hormone injectors to hospital-based physicians. In 1999, SciGen Pte Ltd. began distribution in Asia of Antares’ growth hormone injectors along with its drug.

7

Index to Financial Statements

The table below summarizes the Company’s current collaborative and distribution agreements in the injection device sector.

Distribution agreements are arrangements under which the Company’s products are supplied to end-users through the distributor. The Company provides the distributor with injection devices, and the distributor often receives a margin on sales. The Company currently has two distribution agreements under which the distributors sell the Company’s injector devices and related components for use with insulin. To date, the revenue received from these agreements has not been material.

Under the Company’s growth hormone agreements, the Company sells its injection devices to partners who manufacture and/or market human growth hormone directly. The partner then markets the Company’s devices with its human growth hormone. The Company receives benefit from these agreements in the form of manufacturing margins and royalties on end-sales of the Company’s products.

Under the Company’s December 1993 agreement with Ferring, the Company granted Ferring exclusive rights to use and market, throughout Europe and the former Soviet Union, the Company’s injector device for use with the administration of human growth hormone. Under the agreement, Ferring was required to pay the Company upon the occurrence of certain events, such as completion of certain clinical studies and receipt of regulatory approvals. The Company has received all such payments, and currently, the Company receives payment from Ferring for injectors supplied to Ferring. Unless Ferring exercises its option to renew the agreement for two-year periods, the agreement will terminate ten years following Ferring’s receipt of technical and regulatory approvals to market the Company’s injector devices in France, Germany, Italy and Spain. The last of such approvals was received December 1996. In 2003, revenue from Ferring accounted for 82% of the Company’s product sales. Revenue from the remaining two growth hormone agreements accounted for 5% or less of product sales in 2001, 2002 and 2003.

On January 22, 2003, the Company entered into a License Agreement with Ferring, under which the Company licensed certain of its intellectual property and extended the territories available to Ferring for use of certain of the Company’s needle-free injector devices. Specifically, the Company granted to Ferring an exclusive, perpetual, irrevocable, royalty-bearing license, within a prescribed manufacturing territory, to manufacture certain of the Company’s needle-free injector devices for the field of human growth hormone. The Company granted to Ferring similar non-exclusive rights outside of the prescribed manufacturing territory. In addition, the Company granted to Ferring a non-exclusive right to make and have made the equipment required to manufacture the licensed products, and an exclusive, perpetual, royalty-free license in a prescribed territory to use and sell the licensed products.

The Company also granted to Ferring a right of first offer to obtain an exclusive worldwide license to manufacture and sell the Company’s AJ-1 device in a specified field.

8

Index to Financial Statements

As consideration for the license grants, Ferring paid the Company EUR500,000 ($532,400) upon execution of the License Agreement, and paid an additional EUR1,000,000 ($1,082,098) on February 24, 2003. Ferring will also pay the Company royalties for each device manufactured by or on behalf of Ferring, including devices manufactured by the Company. Beginning on January 1, 2004, EUR500,000 ($541,049) of the license fee received on February 24, 2003 will be credited against the royalties owed by Ferring, until such amount is exhausted. These royalty obligations expire, on a country-by-country basis, when the respective patents for the products expire, despite the fact that the License Agreement does not itself expire until the last of such patents expires.

Over the past few years, the Company has taken several steps to increase its U.S. insulin injector distribution. As a result, in March 2001, the Company transferred U.S. distribution to Diabetic Express, a division of Care Services, Inc. Antares has concluded that the successful distribution of insulin devices will require additional physician support and the marketing power of a major insulin manufacturer. However, the Company’s current effort will continue because its devices provide a vital service to certain patients and provide the Company with considerable information regarding the needs of people required to self-administer drugs by injection.

On September 12, 2003, the Company entered into a Development and License Agreement (the “License Agreement”) with Eli Lilly and Company (“Lilly”). Under the License Agreement, the Company granted Lilly an exclusive license to certain of the Company’s needle-free technology in the fields of diabetes and obesity. The Company also granted an option to Lilly to apply the technology in one additional therapeutic area.

Topical Delivery Products

Over the short term, the majority of revenues generated from topical drug formulation will be through the fees generated by licensing and development agreements.

The following table describes existing pharmaceutical relationships in the topical delivery sector.

The agreements in the table are license agreements under which the Company’s partners are conducting clinical evaluations of the Company’s products. For competitive reasons, the Company’s partners usually do not divulge the exact stage of clinical development. The two major agreements in the topical delivery sector are with Solvay Pharmaceuticals and BioSante Pharmaceuticals, Inc. Under the Company’s June 1999 agreement with Solvay, the Company granted an exclusive license to Solvay for the Company’s transdermal gel technology for delivery of an estradiol/progestin combination for hormone replacement therapy. The exclusive license applies to all countries and territories in the world, except for the United States, Canada, Japan and Korea. The agreement contains a development plan under which the Company and Solvay collaborate to bring the product to market. Solvay must pay the Company a license fee of $5 million in four separate payments, all of which are due upon completion of various phases of the development plan. To date, the Company has received $1.75 million of this fee. Once commercial sale of the product begins, Solvay is required to, on a quarterly basis, pay the Company a royalty based on a percentage of sales. The royalty payments will be required for a period of 15 years or when the last patent for the product expires, whichever is later.

In June 2000, the Company granted an exclusive license to BioSante to allow BioSante to develop and commercialize four of the Company’s gel technology products for use in hormone replacement therapy in the United

9

Index to Financial Statements

States, Canada and other countries. BioSante paid the Company $1 million upon execution of the agreement and is also required to pay the Company royalty payments once commercial sales of the products have begun. The royalty payments are based on a percentage of sales of the products and must be paid for a period of 10 years following the first commercial sale of the products, or when the last patent for the products expires, whichever is later. The agreement also provides for milestone payments to the Company upon the occurrence of certain events related to regulatory filings and approvals.

Competition

Competition in the injectable drug delivery market is intensifying. The Company faces competition from traditional needle syringes, newer pen-like and sheathed needle syringes and other needle-free injection systems as well as alternative drug delivery methods including oral, transdermal and pulmonary delivery systems. Nevertheless, the vast majority of injections are currently administered using needles. Because injection is typically only used when other drug delivery methods are not feasible, the needle-free injection systems may be made obsolete by the development or introduction of drugs or drug delivery methods which do not require injection for the treatment of conditions the Company has currently targeted. In addition, because the Company intends to enter into collaborative arrangements with pharmaceutical companies, the Company’s competitive position will depend upon the competitive position of the pharmaceutical company with which it collaborates for each drug application.

Two companies currently sell injectors to the U.S. insulin market. Antares believes that it retained the largest market share in 2003 and competes on the basis of device size, price and ease of use. In 1998, Bioject Medical Technologies, Inc., the manufacturer of a needle-free gas-powered injector, purchased the insulin injector business of Vitajet, and after some months of redesign, entered the U.S. insulin injector market. Equidyne, Inc. entered the worldwide insulin injector market in mid-2000 but was no longer operating in this area as of late 2003.

Powderject Pharmaceuticals, plc, a British research company, is developing a needle-free injection system based upon the principle of injecting a fine dry powder. Bioject and Powderject compete actively and successfully for licensing agreements with pharmaceutical manufacturers. Powderject has recently refocused exclusively on the use of its technology for vaccine delivery and licensed its technology for therapeutic applications to AlgoRx, a United States company.

The Company expects the needle-free injection market to expand, even though improvements continue to be made in needle syringes, including syringes with hidden needles and pen-like needle injectors. The Company expects to compete with existing needle injection methods as well as new delivery methods yet to be commercialized. For example, Inhale Therapeutic Systems, Inc. (now Nektar Therapeutics), in partnership with Pfizer, Inc. and Aventis Pharmaceuticals, is completing Phase III clinical testing of inhaled insulin which, if successful, could replace the use of injection for some patients.

Competition in the formulation sector differs in that the market is considerably larger, more mature and dominated by much larger companies like ALZA Corporation and Elan Corporation plc. Other large competitors include SkyePharma plc and Alkermes, Inc. These companies have substantially greater capital resources, more experienced research teams, larger facilities and a broader range of products and technologies. Nevertheless, ALZA and Elan have focused in recent years on growth through the acquisition and sale of traditional pharmaceutical products.

Government Regulation

Antares’ products and manufacturing operations are subject to extensive government regulations, both in the United States and abroad. In the United States, the FDA administers the Federal Food Drug and Cosmetic Act (the “FDC Act”) and has adopted various regulations affecting the Company’s business, including those governing the introduction of new medical devices, the observation of certain standards and practices with respect to the manufacturing and labeling of medical devices, the maintenance of certain records and the reporting of device-related deaths, serious injuries and certain malfunctions to the FDA. Manufacturing facilities and certain company records are also subject to FDA inspections. The FDA has broad discretion in enforcing the FDC Act and the regulations thereunder, and noncompliance can result in a variety of regulatory steps ranging from warning letters, product detentions, device alerts or field corrections to mandatory recalls, seizures, injunctive actions and civil or criminal actions or penalties.

10

Index to Financial Statements

Drug delivery systems such as injectors may be legally marketed as a medical device or may be evaluated as part of the drug approval process in connection with a new drug application (“NDA”) or a Product License Application (“PLA”). Combination drug/device products raise unique scientific, technical and regulatory issues. The FDA has established an Office of Combination Products to address the challenges associated with the premarket review and regulation of combination products. New drug/delivery combinations require the submission of a request for designation for the Office of Combination Products to determine assignment to the appropriate regulatory center. To the extent permitted under the FDC Act and current FDA policy, the Company intends to seek the required approvals and clearance for the use of its new injectors, as modified for use in specific drug applications under the medical device provisions, rather than under the new drug provisions, of the FDC Act.

Products regulated as medical devices may not be commercially distributed in the United States unless they have been found substantially equivalent to a marketed product or approved by the FDA, unless otherwise exempted from the FDC Act and regulations thereunder. There are two methods for obtaining such clearance or approvals. Under Section 510(k) of the FDC Act (“510(k) notification”), certain products qualify for a pre-market notification (“PMN”) of the manufacturer’s intention to commence marketing the product. The manufacturer must, among other things, establish in the PMN that the product to be marketed is substantially equivalent to another legally marketed product (that is, that it has the same intended use and that it is as safe and effective as a legally marketed device and does not raise questions of safety and effectiveness that are different from those associated with the legally marketed device). Marketing may commence when the FDA issues a letter finding substantial equivalence to such a legally marketed device. The FDA may require, in connection with a PMN, that it be provided with animal and/or human test results. If a medical device does not qualify for the 510(k) procedure, the manufacturer must file a pre-market approval (“PMA”) application under Section 515 of the FDC Act. A PMA must show that the device is safe and effective and is generally a much more complex submission than a 510(k) notification, typically requiring more extensive pre-filing testing and a longer FDA review process. The Company believes that injection systems, when indicated for use with drugs or biologicals approved by the FDA, will be regulated as medical devices and are eligible for clearance through the 510(k) notification process. There can be no assurance, however, that the FDA will not require a PMA in the future.

In addition to submission when a device is being introduced into the market for the first time, a PMN is also required when the manufacturer makes a change or modification to a previously marketed device that could significantly affect safety or effectiveness, or where there is a major change or modification in the intended use or in the manufacture of the device. When any change or modification is made in a device or its intended use, the manufacturer is expected to make the initial determination as to whether the change or modification is of a kind that would necessitate the filing of a new 510(k) notification. The Company has received 510(k) marketing clearance from the FDA to allow marketing of the Medi-Jector Choice and the Medi-Jector Vision systems for the delivery of U-100 insulin. In the future the Company or its partners may submit 510(k) notifications with regard to further device design improvements and uses with additional drug therapies.

If the FDA concludes that any or all of the Company’s new injectors must be handled under the new drug provisions of the FDC Act, substantially greater regulatory requirements and approval times will be imposed. Use of a modified new product with a previously unapproved new drug likely will be handled as part of the NDA for the new drug itself. Under these circumstances, the device component will be handled as a drug accessory and will be approved, if ever, only when the NDA itself is approved. The Company’s injectors may be required to be approved as a combination drug/device product under a supplemental NDA for use with previously approved drugs. Under these circumstances, the Company’s device could be used with the drug only if and when the supplemental NDA is approved for this purpose. It is possible that, for some or even all drugs, the FDA may take the position that a drug-specific approval must be obtained through a full NDA or supplemental NDA before the device may be packaged and sold in combination with a particular drug.

To the extent that the Company’s modified injectors are packaged with the drug, as part of a drug delivery system, the entire package is subject to the requirements for drug/device combination products. These include drug manufacturing requirements, drug adverse reaction reporting requirements, and all of the restrictions that apply to drug labeling and advertising. In general, the drug requirements under the FDC Act are more onerous than medical device requirements. These requirements could have a substantial adverse impact on the Company’s ability to commercialize its products and its operations.

11

Index to Financial Statements

In the European Union, a drug delivery device that is an integral combination with the drug to be delivered is considered part of the medicinal product and is regulated as a drug. Gels are drug delivery devices which are, therefore, regulated as drugs and must comply with the requirements described in the Council Directive 65/65/EEC.

The FDC Act also regulates quality control and manufacturing procedures by requiring the Company and its contract manufacturers to demonstrate compliance with the current Quality System Regulations (“QSR”). The FDA’s interpretation and enforcement of these requirements have been increasingly strict in recent years and seem likely to be even more stringent in the future. The FDA monitors compliance with these requirements by requiring manufacturers to register with the FDA and by conducting periodic FDA inspections of manufacturing facilities. If the inspector observes conditions that might violate the QSR, the manufacturer must correct those conditions or explain them satisfactorily. Failure to adhere to QSR requirements would cause the devices produced to be considered in violation of the FDA Act and subject to FDA enforcement action that might include physical removal of the devices from the marketplace.

The FDA’s Medical Device Reporting Regulation requires companies to provide information to the FDA on the occurrence of any death or serious injuries alleged to have been associated with the use of their products, as well as any product malfunction that would likely cause or contribute to a death or serious injury if the malfunction were to recur. In addition, FDA regulations prohibit a device from being marketed for unapproved or uncleared indications. If the FDA believes that a company is not in compliance with these regulations, it could institute proceedings to detain or seize company products, issue a recall, seek injunctive relief or assess civil and criminal penalties against the company or its executive officers, directors or employees.

The Company is also subject to the Occupational Safety and Health Act (“OSHA”) and other federal, state and local laws and regulations relating to such matters as safe working conditions, manufacturing practices, environmental protection and disposal of hazardous or potentially hazardous substances.

Sales of medical devices outside of the U.S. are subject to foreign legal and regulatory requirements. The Company’s transdermal and injection systems have been approved for sale only in certain foreign jurisdictions. Legal restrictions on the sale of imported medical devices and products vary from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ. Antares relies upon the companies marketing its injectors in foreign countries to obtain the necessary regulatory approvals for sales of the Company’s products in those countries. Generally, products having an effective 510(k) clearance or PMA may be exported without further FDA authorization.

The Company has obtained ISO 9001:2000/EN 46001 qualification for its manufacturing systems. This certification shows that the Company’s procedures and manufacturing facilities comply with standards for quality assurance, design capability and manufacturing process control. Such certification, along with European Medical Device Directive certification, evidences compliance with the requirements enabling the Company to affix the CE Mark to current products. The CE Mark denotes conformity with European standards for safety and allows certified devices to be placed on the market in all European Union (“EU”) countries. Semi-annual audits by the Company’s notified body, British Standards Institute, are required to demonstrate continued compliance.

Forward Looking Statements

Antares and its representatives may from time to time make written or oral forward-looking statements with respect to its annual or long-term goals, including statements contained in its filings with the Securities and Exchange Commission and in reports to shareholders.

The words or phrases “will likely result,” “are expected to,” “will continue to,” “is anticipated,” “estimate,” “project,” “may,” “should,” “plans,” “believes,” “predicts,” “intends,” “potential” or “continue” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Antares cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Antares is identifying the important risk factors below that could affect its financial performance and could cause its actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

12

Index to Financial Statements

The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.

Risk Factors

The following “risk factors” contain important information about us and our business and should be read in their entirety. Additional risks and uncertainties not known to us or that we now believe to be not material could also impair our business. If any of the following risks actually occur, our business, results of operations and financial condition could suffer significantly. As a result, the market price of our common stock could decline and you could lose all of your investment. In this Section, the terms “we” and “our” refer to Antares Pharma, Inc.

Risks Related to Our Business

We have incurred significant losses to date, and there is no guarantee that we will ever become profitable

We had negative working capital of ($2,972,057) at December 31, 2002 and working capital of $615,371 at December 31, 2003. We incurred net losses of ($11,608,765) and ($32,817,964) in the fiscal years ended 2002 and 2003, respectively. In addition, we have accumulated aggregate net losses from the inception of business through December 31, 2003 of ($74,126,619). The costs for research and product development of our drug delivery technologies along with marketing and selling expenses and general and administrative expenses have been the principal causes of our losses. Our results for 2003 included noncash charges of approximately $24,000,000 related to the restructuring of our capital structure and warrants that were classified as debt under generally accepted accounting principles. In the third quarter of 2003, we amended all of our warrants that were classified as debt to cause the warrants to be accounted for as equity.

We recently completed three private placements in February and March 2004 in which we received aggregate gross proceeds of $15,120,000. We believe that the combination of these equity financings and projected product sales and product development and license revenues will provide us with sufficient funds to support operations until the Company achieves profitability and is able to generate its own working capital.

Long-term capital requirements will depend on numerous factors, including, but not limited to, the status of collaborative arrangements, the progress of research and development programs and the receipt of revenues from sales of products. Our ability to achieve and/or sustain profitable operations depends on a number of factors, many of which are beyond our control. These factors include, but are not limited to, the following:

13

Index to Financial Statements

We depend on a limited number of customers for the majority of our revenue, and the loss of any one of these customers could substantially reduce our revenue

During fiscal 2003, we derived approximately 62% and 14% of our revenue, respectively, from the following two customers:

The loss of either of these customers would cause our revenues to decrease significantly, increase our continuing losses from operations and, ultimately, could require us to cease operating. If we cannot broaden our customer base, we will continue to depend on a few customers for the majority of our revenues. Additionally, if we are unable to negotiate favorable business terms with these customers in the future, our revenues and gross profits may be insufficient to allow us to achieve and/or sustain profitability or continue operations.

If we or our third-party manufacturer are unable to supply Ferring BV with our devices pursuant to our current license agreement with Ferring, Ferring would own a fully paid up license for certain of our intellectual property

Pursuant to our license agreement with Ferring BV, we licensed certain of our intellectual property related to our needle-free injection devices, including a license that allows Ferring to manufacture our devices on its own for use with its human growth hormone product. This license becomes effective if we are unable to continue to supply product to Ferring under our current supply agreement. In accordance with the license agreement, we entered into a manufacturing agreement with a third party to manufacture our devices for Ferring. If we or this third party are unable to meet our obligations to supply Ferring with our devices, Ferring would own a fully paid up license to manufacture our devices and to use and exploit our intellectual property in connection with Ferring’s human growth hormone product. In such event, we would no longer receive royalty revenues from Ferring, and we would no longer be able to license such technology to other parties for use in the field of human growth hormone therapy.

We have limited manufacturing experience and may experience manufacturing difficulties related to the use of new materials and procedures, which could increase our production costs and, ultimately, decrease our profits

Our past assembly, testing and manufacturing experience for certain of our technologies has involved the assembly of products from machined stainless steel and composite components in limited quantities. Our planned future drug delivery technologies necessitate significant changes and additions to our manufacturing and assembly process to accommodate new components. These systems must be manufactured in compliance with regulatory requirements, in a timely manner and in sufficient quantities while maintaining quality and acceptable manufacturing costs. In the course of these changes and additions to our manufacturing and production methods, we may encounter difficulties, including problems involving yields, quality control and assurance, product reliability, manufacturing costs, existing and new equipment, component supplies and shortages of personnel, any of which could result in significant delays in production. Additionally, in February 2003, we entered into a manufacturing agreement under which a third party will assemble certain component parts of our MJ6B and MJ7 devices. There can be no assurance that this third-party manufacturer will be able to meet these regulatory requirements or our own quality control standards. Therefore, there can be no assurance that we will be able to successfully produce and manufacture our drug delivery technology. Any failure to do so would negatively impact our business, financial condition and results of operations.

Our products have achieved only limited acceptance by patients and physicians, which continues to have a negative effect on our revenue

Our business ultimately depends on patient and physician acceptance of our needle-free injectors, gels and our other drug delivery technologies as an alternative to more traditional forms of drug delivery, including injections using a needle and transdermal patch products. To date, our device technologies have achieved only limited acceptance from such parties. The degree of acceptance of our drug delivery systems depends on a number of factors. These factors include, but are not limited to, the following:

14

Index to Financial Statements

Physicians may refuse to prescribe products incorporating our drug delivery technologies if they believe that the active ingredient is better administered to a patient using alternative drug delivery technologies, that the time required to explain use of the technologies to the patient would not be offset by advantages, or they believe that the delivery method will result in patient noncompliance. Factors such as patient perceptions that a gel is inconvenient to apply or that devices do not deliver the drug at the same rate as conventional drug delivery methods may cause patients to reject our drug delivery technologies. Because only a limited number of products incorporating our drug delivery technologies are commercially available, we cannot yet fully assess the level of market acceptance of our drug delivery technologies.

A 2002 National Institute of Health (NIH) study questioned the safety of hormone replacement therapy for menopausal women, and our female hormone replacement therapy business may suffer as a result

In July 2002, the NIH halted a long-term study being conducted on oral female hormone replacement therapy (HRT) using a combination of estradiol and progestin because the study showed an increased risk of breast cancer, heart disease and blood clots in women taking the combination therapy. The arm of the study using estrogen alone was stopped in March 2004 after the NIH concluded that the benefits of estrogen did not outweigh the stroke risk for women in this trial. The halted study looked at only one brand of oral combined HRT and of estrogen, and there is no information on whether brands with different levels of hormones would carry the same risk. In January 2003, the FDA announced that it would require new warnings on the labels of HRT products, and it advised patients to consult with their physicians about whether to continue treatment with continuous combined HRT and to limit the period of use to that required to manage post-menopausal vasomotor symptoms only. Subsequently, additional analysis from the NIH study has suggested a slight increase in the risk of cognitive dysfunction developing in patients on long-term combined HRT. Other HRT studies have found potential links between HRT and an increased risk of dementia and asthma. These results and recommendations impacted the use of HRT, and product sales have diminished significantly. We cannot yet assess the impact any of the studies’ results may have on our contracts for our transdermal gel products designed for HRT. We also cannot predict whether our alternative route of transdermal administration of HRT products will carry the same risk as the oral products used in the study.

If transdermal gels do not achieve market acceptance, we may be unable to achieve profits from this technology

Because transdermal gels are a newer, less understood method of drug delivery, our potential consumers have little experience with manufacturing costs or pricing parameters. Our assumption of higher value may not be shared by the consumer. To date, transdermal gels have gained successful entry into only a limited number of markets. There can be no assurance that transdermal gels will ever gain market acceptance beyond these markets sufficient to allow us to achieve and/or sustain profitable operations in this product area.

We rely on third parties to supply components for our products, and any failure to retain relationships with these third parties could negatively impact our ability to manufacture our products

Certain of our technologies contain a number of customized components manufactured by various third parties. Regulatory requirements applicable to medical device and transdermal patch manufacturing can make substitution of suppliers costly and time-consuming. In the event that we could not obtain adequate quantities of these customized components from our suppliers, there can be no assurance that we would be able to access alternative sources of such components within a reasonable period of time, on acceptable terms or at all. The unavailability of adequate quantities, the inability to develop alternative sources, a reduction or interruption in supply or a significant increase in the price of components could have a material adverse effect on our ability to manufacture and market our products.

15

Index to Financial Statements

We may be unable to successfully expand into new areas of drug delivery technology, which could negatively impact our business as a whole

We intend to continue to enhance our current technologies. Even if enhanced technologies appear promising during various stages of development, we may not be able to develop commercial applications for them because

We have not yet completed research and development work or obtained regulatory approval for any technologies for use with any drugs other than insulin, human growth hormone and estradiol. There can be no assurance that any newly developed technologies will ultimately be successful or that unforeseen difficulties will not occur in research and development, clinical testing, regulatory submissions and approval, product manufacturing and commercial scale-up, marketing, or product distribution related to any such improved technologies or new uses. Any such occurrence could materially delay the commercialization of such improved technologies or new uses or prevent their market introduction entirely.

As health insurance companies and other third-party payors increasingly challenge the products and services for which they will provide coverage, our individual consumers may be unable to afford to use our products, which could substantially reduce our revenues

Our injector device products are currently sold in the European Community (EC) and in the United States for use with human growth hormone or insulin. In the case of human growth hormone, our products are provided to users at no cost by the drug manufacturer. In the United States the injector products are only available for use with insulin.

Although it is impossible for us to identify the amount of sales of our products that our customers will submit for payment to third-party insurers, at least some of these sales may be dependent in part on the availability of adequate reimbursement from these third-party healthcare payors. Currently, insurance companies and other third-party payors reimburse the cost of certain technologies on a case-by-case basis and may refuse reimbursement if they do not perceive benefits to a technology’s use in a particular case. Third-party payors are increasingly challenging the pricing of medical products and services, and there can be no assurance that such third-party payors will not in the future increasingly reject claims for coverage of the cost of certain of our technologies. Insurance and third-party payor practice vary from country to country, and changes in practices could negatively affect our business if the cost burden for our technologies were shifted more to the patient. Therefore, there can be no assurance that adequate levels of reimbursement will be available to enable us to achieve or maintain market acceptance of our technologies or maintain price levels sufficient to realize profitable operations. There is also a possibility of increased government control or influence over a broad range of healthcare expenditures in the future. Any such trend could negatively impact the market for our drug delivery technologies.

The loss of any existing licensing agreements or the failure to enter into new licensing agreements could substantially affect our revenue

Our business plans require us to enter into license agreements with pharmaceutical and biotechnology companies covering the development, manufacture, use and marketing of drug delivery technologies with specific drug therapies. Under these arrangements, the partner company typically assists us in the development of systems for such drug therapies and collect or sponsor the collection of the appropriate da