Anthera Pharmaceuticals Inc (Form: 10-K, Received: 03/28/2014 17:19:58)

EXPLANATORY NOTE REGARDING RESTATEMENT

Unless the context otherwise requires, we use the terms “Anthera Pharmaceuticals,” “Anthera,” “we,” “us,” “the Company” and “our” in this report to refer to Anthera Pharmaceuticals, Inc. and its subsidiaries. We use various trademarks, service marks and trade names in our business, including without limitation “Anthera Pharmaceuticals” and “Anthera.” This report also contains trademarks, services marks and trade names of other businesses that are the property of their respective holders.

This Annual Report on Form 10-K for the fiscal year ended December 31, 2013, includes restatement of the following previously filed consolidated financial statements and data (and related disclosures): (1) our consolidated balance sheet as of December 31, 2012, and the consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the fiscal years ended December 31, 2011 and 2012; (2) our selected financial data as of and for our fiscal years ended December 31, 2010, 2011and 2012 located in Part II, Item 6 of this Annual Report on Form 10-K; (3) our unaudited quarterly financial information for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 in Note 14, “Summarized Quarterly Unaudited Financial Data” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K; (4) our management’s discussion and analysis of financial condition and results of operations as of and for our fiscal years ended December 31, 2012 and 2011, and interim periods ended March 31, 2012, June 30, 2012 and September 30, 2012, contained in Part II, Item 7 of this Annual Report on Form 10-K. All the aforementioned periods are collectively referenced as “Affected Periods”.

We have completed our previously announced internal accounting review related to the accounting for warrants issued in connection with a private placement of the Company’s common stock in September 2010. As a result of this review and in consultation with our Audit Committee, we are restating our previously issued consolidated financial statements for the Affected Periods because of a misapplication in the guidance around the accounting for the warrants that were historically reflected as a component of equity as opposed to liabilities as required under the applicable accounting pronouncements. Although we have determined that the warrants should have been reflected as liabilities upon issuance, we also noted that the fair value of the warrants has been reclassified from liability to equity on July 24, 2012 upon the closing of an equity offering by the Company pursuant to which the Company issued common stock at a price per share of $8.00, which was less than the exercise price of the warrants and triggered an adjustment to the exercise price of the warrant to a floor price of $23.20 specified in the terms of the warrants. The non-cash adjustments to the consolidated financial statements, in all of the Affected Periods, do not impact the amounts previously reported for the Company’s cash and cash equivalents, operating expenses, total operating, investing or financing cash flows, and net operating loss carryforward. An explanation of the effect on our financial statements is contained in Note 2 to the consolidated financial statements contained in Part II, Item 8 of this Form 10-K.

Financial information included in the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed for the Affected Periods, and all earnings, press releases, and similar communications issued by us for the Affected Periods, are superseded in their entirety by this Annual Report on Form 10-K.

Background of Restatement

On September 24, 2010, in connection with a private placement of the Company’s common stock, we issued warrants to the investors to purchase an aggregate of 525,000 shares of the Company’s common stock at an exercise price of $26.40 per share. These warrants have an exercise period of five years and will expire on September 24, 2015. The warrants provided the holders with anti-dilution price protection in the event the Company issued securities at a price per share less than the exercise price of the warrants, subject to a floor price of $23.20 per share. Historically, the warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). However, under the guidance of ASC 815, warrant instruments that provide for anti-dilution price protection should be initially classified as derivative liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be recorded as non-cash income or expense in the statement of operations until the warrants are exercised or exercise price of the warrants becomes fixed. The Company, in consultation with the Company’s Audit Committee, determined that the financial statements in the Affected Periods should be restated to reflect the warrants as liabilities, with subsequent changes in their estimated fair value recorded as non-cash income or expense in each Affected Period until the exercise price of the warrants became fixed on July 24, 2012 upon the closing of an equity offering by the Company pursuant to which the Company sold common stock at $8.00 per share, which triggered an adjustment to the exercise price of the warrants to a floor price of $23.20 per share as specified in the warrants.

For more information regarding the restatement, please refer to Part II, Item 6, “Selected Financial Data”; Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Note 2, “Restatement of Previously Issued Consolidated Financial Statements,” and Note 14, “Summarized Quarterly Unaudited Financial Data,” of the Notes to Consolidated Financial Statements in Part II, Item 8; and Part II, Item 9A, “Controls and Procedures.”

Internal Control Considerations

Our management determined that there was a control deficiency in its internal control that constituted a material weakness as of December 31, 2013, as discussed in Part II, Item 9A of this Annual Report on Form 10-K. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. For a discussion of management’s consideration of the Company’s disclosure controls and procedures and the material weakness identified, see Part II, Item 9A included in this Annual Report on Form 10-K.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “assume,” “intend,” “potential,” “continue” or other similar words or the negative of these terms. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this report. Accordingly, you should not place undue reliance upon these forward-looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, the timing of events and circumstances and actual results could differ materially from those projected in the forward looking statements. Forward-looking statements contained in this report include, but are not limited to, statements about:

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the progress of, timing of and amount of expenses associated with our research, development and commercialization activities;

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the timing, conduct and success of our clinical studies for our product candidate;

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our ability to obtain U.S. and foreign regulatory approval for our product candidate and the ability of our product candidate to meet existing or future regulatory standards;

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our expectations regarding federal, state and foreign regulatory requirements;

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the therapeutic benefits and effectiveness of our product candidate;

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the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our product candidate;

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our ability to manufacture sufficient amounts of our product candidate for clinical studies and products for commercialization activities;

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our intention to seek to establish strategic collaborations or partnerships for the development or sale of our product candidate;

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our expectations as to future financial performance, expense levels and liquidity sources;

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the timing of commercializing our product candidate;

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our ability to compete with other companies that are or may be developing or selling products that are competitive with our product candidate;

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anticipated trends and challenges in our potential markets;

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our ability to attract and retain key personnel; and

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other factors discussed elsewhere in this report.

The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We have included important factors in the cautionary statements included in this report, particularly in the section entitled “Risk Factors” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. Except as required by law, we do not assume any intent to update any forward-looking statements after the date on which the statements are made, whether as a result of new information, future events or circumstances or otherwise.

PART I

ITEM 1. BUSINESS

Overview

Anthera Pharmaceuticals, Inc. is a biopharmaceutical company focused on developing and commercializing products to treat serious diseases associated with inflammation and autoimmune diseases. Our Phase 3 candidate, blisibimod, targets B-cell activating factor, or BAFF, which has been shown to be elevated in a variety of B-cell mediated autoimmune diseases, including systemic lupus erythematosus, (lupus), Immunoglobin A nephropathy (IgA nephropathy), lupus nephritis, vasculitis and others. Elevated BAFF is also reported in hematological diseases such as multiple myeloma and idiopathic thrombocytopenia purpura. We were incorporated as a Delaware corporation in September 2004. In January 2012, Anthera Pharmaceuticals, Limited, a wholly-owned subsidiary, was incorporated in Ireland.

Our BAFF Antagonism Portfolio

BAFF, also known as BLyS, is a tumor necrosis family member and is critical to the development, maintenance and survival of multiple B-cell lineages as well as plasma cells. B-cells and plasma cells are a vital part of the human immune system, producing natural antibody responses to invading pathogens such as viruses. Abnormal elevations in BAFF, B-cells and plasma cells have been associated with several autoimmune diseases. BAFF is primarily expressed by macrophages, monocytes and dendritic cells and interacts with three different receptors on B-cells and plasma cells including BAFF receptor, or BAFF-R, B-cell maturation antigen, or BCMA, and transmembrane activator and cyclophilin ligand interactor, or TACI. The potential role of BAFF inhibition and associated reductions in B-cell and plasma cell numbers in lupus and rheumatoid arthritis has been validated in multiple clinical studies with blisibimod and other BAFF antagonists. Based on data from our Phase 2b clinical study, we intend to advance the clinical development of our BAFF inhibitor, blisibimod, to exploit its potential clinical utility in a number of autoimmune diseases. Blisibimod, a peptibody directed against BAFF, was developed as an alternative to antibodies and is produced in Escherichia coli bacterial culture, as opposed to antibodies that are typically produced in mammalian cell culture. A peptibody is a novel fusion protein that is distinct from an antibody with several potential advantages, including ease of manufacture, potency and relatively small molecular weight. Blisibimod inhibits both soluble and membrane-bound BAFF. We have worldwide rights to blisibimod for all potential indications.

In 2012, we completed the PEARL-SC Phase 2b clinical study, which evaluated the efficacy and safety of multiple doses of subcutaneous blisibimod versus placebo in patients with active and seropositive lupus. Lupus patients suffer from a chronic autoimmune disease, where an inappropriate or abnormal immune response often leads to severe skin rash, fatigue, joint pain, ulceration, major kidney complications, including proteinuria, and cardiovascular disease. Inhibition of BAFF is believed to reduce survival of B-cells and plasma cells and autoantibodies, leading to a reduction in severity of disease and resolution of lupus symptoms.

Our product development program is focused on development of blisibimod for use as a therapeutic treatment for lupus and other serious autoimmune diseases for which we believe current treatments are either inadequate or non-existent. Our current plan includes continuing the ongoing CHABLIS-SC1 clinical study in patients with active lupus and the BRIGHT-SC1 clinical study in patients with IgA nephropathy, and evaluating the potential of blisibimod in additional autoimmune and hematological diseases through clinical and nonclinical investigations. We have successfully manufactured blisibimod at launch scale quantities. The blisibimod product is designed for at-home, self-administration and is presented as a pre-filled syringe for subcutaneous administration. We are actively pursuing various partnerships with major pharmaceutical and biotech companies to develop and commercialize blisibimod for both lupus and IgA nephropathy.

We are currently evaluating additional plans for the development of blisibimod as a treatment for patients with multiple myeloma. These indications provide multiple commercial potentials for blisibimod and may provide an accelerated and cost-efficient path to regulatory approval and commercialization. We believe that certain of these markets and product opportunities for blisibimod can be commercialized through utilization of a limited specialty sales force targeting a small set of clinical specialists. In addition, we believe blisibimod may address market opportunities in chronic indications such as lupus and to maximize these opportunities we may seek development and commercialization partners to address non-specialty and international markets.

Product Candidate	Study Name	Development Stage	Indications	Next Milestone(s)
Blisibimod	CHABLIS-SC1	Phase 3 (1)	Lupus	· 24-week interim analysis in mid-2014 on patients enrolled as of 12/31/2013
Blisibimod	CHABLIS-SC2	Phase 3 (2)	Lupus	· Initiate patient enrollment in the second half of 2014, pending positive 24-week interim analysis of CHABLIS-SC1
Blisibimod	CHABLIS-SC OLE Open Label Extension	Open Label (2)	Lupus	· Initiate patient dosing in 2014
Blisibimod	BRIGHT-SC1	Phase 2/3 (1)	IgA Nephropathy	· Complete 48-patient enrollment and induction interim biomarker in the second half of 2014

Blisibimod	BRILLIANT-SC1	Phase 3 (2)	IgA Nephropathy	· Initiate enrollment pending positive outcome of proteinuria interim analysis of BRIGHT-SC1

Blisibimod	AN-MMY3321	Phase 2 (2)	Multiple Myeloma	· Submit study protocol to FDA for comment · Initiate patient enrollment

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(1) ongoing

(2) planned for initiation

Summary of Product Development Program

Blisibimod a Potent Inhibitor of B-Cell Activating Factor

Blisibimod (also referred to as A-623) is a peptibody antagonist of the BAFF cytokine, also known as B-cell activating factor, which was initially developed as treatment for patients with severe systemic lupus. BAFF, also known as BLyS, is a tumor necrosis family member and is critical to the development, maintenance and survival of B-cells and plasma cells. B-cells represent a critical component of a human immune response to infection and other pathogens. However, abnormal elevations of B-cells and plasma cells, often accompanied by elevations in BAFF, may lead to an overactive immune response, including an increased production of immunogloblulins, which may damage normal healthy tissues and organ systems. Although the cause of lupus is still not completely understood, B-cell activation and autoantibody production from plasma cells are known to be central to the process. Evidence has emerged that over-expression of BAFF plays an important role in these disease processes. In preclinical studies, transgenic mice created to over-express BAFF begin to exhibit symptoms similar to lupus. In preclinical studies in mice that develop lupus-like disease, BAFF is known to be elevated, and treatment with blisibimod improves outcomes and survival. Similarly, in IgA nephropathy, mice that over-express BAFF develop a fatal nephropathy associated with elevated Immunoglobulin A, or IgA.

According to the Alliance for Lupus Research, it is estimated that up to 1.5 million people have lupus in the United States. Lupus Europe estimates that one in 750 women suffer from lupus in Europe and that lupus is a worldwide disease more common in some races than others. IgA nephropathy is the most common form of primary glomerulonephritis throughout the world. The prevalence of IgA nephropathy varies throughout the world, with the highest prevalence in Asia (Singapore, Japan and China), Australia, Finland and southern Europe (20 to 40% of all glomerulonephritis).

Blisibimod Development History

To date, four randomized, placebo-controlled clinical studies have been conducted with blisibimod in patients with lupus: two Phase 1 dose-ranging studies in which a total of 104 patients were enrolled, a Phase 2b double-blind placebo-controlled dose-ranging clinical outcomes study in which 547 subjects were enrolled, and a Phase 2 Open-Label Extension study (OLE) which evaluated the long-term safety of blisibimod in subjects previously enrolled in the Phase 2b PEARL-SC trial. As expected for a BAFF inhibitor, statistically significant reductions in total B-cells were observed in patients treated with blisibimod compared with placebo in all three of the placebo-controlled studies.

Based on positive results among 104 lupus patients in our licensor’s Phase 1a and 1b clinical studies, we conducted PEARL-SC, a Phase 2b randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of various subcutaneous doses of blisibimod in patients with seropositive lupus and active disease defined as SELENA-SLEDAI >6 at enrollment, which ran from mid-2010 to April 2012. The study enrolled 547 patients in 11 countries at 72 clinical sites. All patients completed the PEARL-SC study when the final enrolled patient completed six months of therapy.

In June and July of 2012 we announced results from the Phase 2b PEARL-SC study, which we believe support the initiation of a differentiated Phase 3 registration plan utilizing a 200mg weekly dose of blisibimod in patients with active lupus, despite the concomitant use of corticosteroids.

The primary endpoint of the PEARL-SC study was a clinical improvement at the lupus responder index, or SRI-5, at week 24 for the pooled blisibimod dose groups versus placebo groups. SRI-5 is defined as a five-point improvement in the SELENA-SLEDAI score, no new BILAG 1A or 2B scores, and no new increase in Physician’s Global Assessment of more than 0.3 points. The primary endpoint of this study was not met due to the lack of efficacy in the two lowest dose groups. However, the primary endpoint SRI-5 responder rates were numerically higher in subjects receiving blisibimod 200mg weekly (QW) compared with pooled placebo, from Week 16 (∆SRI 5 for blisibimod-placebo=8%, p= 0.14), through Week 24 (∆SRI 5=8.2%, p=0.15), reaching statistical significance at Week 20 (∆SRI 5=13.4%, p = 0.02, Figure 1). Treatment benefit was greater still when compared with the regimen-matched (QW) placebo. In pre-specified secondary analyses, benefit was observed at Week 24 with the 200mg QW group compared with matched placebo using modified SRI analyses in which responders attained SELENA-SLEDAI improvements of ≥7 or ≥8 (∆SRI 5 = 8.7% p=0.23; ∆SRI-7 =16.3% p=0.003; ∆SRI-8 =17.4% p=0.001, Figure 1). Blisibimod was also effective in a subgroup of patients with severe lupus with baseline SELENA-SLEDAI ≥10 and receiving corticosteroids at any dose (n=278) utilizing more stringent response thresholds (∆SRI-5=13.8%, p=0.18; ∆SRI-7=28.9%, p=0.002; ∆SRI-8=31.1%, p<0.001, Figure 2 and Table 1). Based on SELENA SLEDAI definitions, 76 subjects (13.9%) had renal involvement at baseline and 54 subjects had proteinuria equivalent ≥1g/24hr. Compared with baseline, decreases in proteinuria were observed with blisibimod from Week 12 through Week 52 in the subgroup of subjects with proteinuria equivalent ≥1 g/24hr at enrollment (Figure 3). Similarly, decreases in proteinuria were observed in subjects with proteinuria equivalent ≥0.5 g/24hr through Week 44. Significantly greater reductions in proteinuria were also observed in a subgroup of subjects with active inflammation (ie low C3) and high anti-double-stranded DNA (anti-dsDNA) (Figure 3).

Secondary endpoints included safety, improvements in variant forms of the SRI (e.g. defined by greater improvements in SELENA-SLEDAI), effects on clinical response in subgroup of patients with greater baseline disease severities, time to lupus disease flare, improvements in proteinuria, improvements in biomarkers of inflammation (e.g. anti-dsDNA, complement C3 and C4), and changes in B-cell counts. In June of 2012 we completed dosing in the PEARL-SC study.

Using a higher treatment threshold of an eight-point reduction in the SELENA-SLEDAI, or an SRI-8 endpoint, in this enhanced subgroup population, the 200mg blisibimod treatment group demonstrated a 15.6% treatment difference compared to pooled placebo (41.7% versus 26.1%, p≤0.05) and 31.1% treatment difference compare to regimen-matched placebo (41.7% versus 10.6%, p<0.001) at 24 weeks. In this “severe” subgroup, separation of clinical response was evident as early as Week 8 and numerical improvements relative to placebo were maintained beyond Week 24. This “severe” subgroup is the population that we believe will benefit most from treatment with blisibimod, and is the population whom we are enrolling in our Phase 3 CHABLIS-SC studies. Significant and early decreases in proteinuria were also observed with blisibimod as early as Week 8 in subjects with baseline proteinuria equivalent ≥1g/24 hrs. All doses of blisibimod demonstrated consistent serological response including reductions of B-cells, double-stranded-DNA antibodies and improvement in complement levels. Blisibimod was safe and well-tolerated at all dose levels with no meaningful imbalances in serious adverse events. Additional information and publications from the PEARL-SC clinical study can be found at www.anthera.com/studies_pearl-sc.htm.

Figure 1. Systemic Lupus Erythematosus Responder Index (SRI) at Various SELENA-SLEDAI Disease Improvement Levels

In Subjects Enrolled in the PEARL-SC Study (mITT Population)

According to data presented by Dr. Richard Furie at the American College of Rheumatology Annual Conference, Washington DC, 2012 in Figure 1, an SRI-5 responder achieved all of the following: ≥5 point improvement in SELENA-SLEDAI, and no new BILAG 1A or 2B organ domain scores, and no worsening (<0.3 increase) in Physician’s Global Assessment. Across all subjects enrolled in the PEARL-SC study, the percent of subjects achieving the SRI-5 at 24 weeks was higher in subjects receiving the highest dose of blisibimod (200mg QW) compared with placebo. SRI improvements compared with placebo were generally higher in subjects who attained SELENA–SLEDAI improvements of ≥6, ≥7, ≥8 (SRI-6, SRI-7 and SRI-8, respectively). Graphs show data for blisibimod (200mg QW) and treatment matched or pooled placebo administered subcutaneously for 24 weeks.

Figure 2. Systemic Lupus Erythematosus Responder Index (SRI) in Subjects with Baseline

SELENA-SLEDAI ≥10 and Receiving Steroids

According to data presented by Dr. Richard Furie at the American College of Rheumatology Annual Conference, Washington DC, 2012 in Figure 2, a n SRI-5 responder achieved all of the following: ≥5 point improvement in SELENA-SLEDAI, and no new BILAG 1A or 2B organ domain scores, and no worsening (<0.3 increase) in Physician’s Global Assessment. In a subgroup analysis of patients with severe lupus disease (SELENA–SLEDAI≥10 and receiving steroid at baseline, n=278), the percent of subjects achieving the SRI-5 was higher in subjects receiving the highest dose of blisibimod (200mg QW) compared with placebo. SRI improvements compared with placebo were higher still in subjects who attained SELENA–SLEDAI improvements of ≥6, ≥7, ≥8 (SRI-6, SRI-7 and SRI-8, respectively). Graph shows data for blisibimod (200mg QW) and regimen matched placebo administered subcutaneously for 24 weeks.

Table 1. The Proportion of Subjects with Severe Lupus Who Attained the Criteria for the SLE Responder Index at Week 24

	Pooled Placebo	200mg QW Placebo	200mg QW blisibimod	Real Difference versus Pooled Placebo	Real Difference versus 200mg QW Placebo
Total Study N	N=269	N=92	N=92
Subgroup N	N=138	N=47	N=48
SRI-5	47.1% N=65	40.4% N=19	54.2% N=26	+7.1% p=0.48	+13.8% p=0.18
SRI-5 + No Increase in Steroid Dose	43.5% N=60	38.3% N=18	52.1% N=25	+8.6% p=0.48	+13.8% p=0.18
SRI-6	46.4% N=64	38.3% N=18	54.2% N=26	+7.8% p=0.43	+15.9% p=0.12
SRI-7	28.3% N=39	12.8% N=6	41.7% N=20	+13.4% p=0.11	+28.9% p=0.002
SRI-8	26.1% N=36	10.6% N=5	41.7% N=20	+15.6% p=0.05	+31.1% p < 0.001

Analyses were conducted in the subgroup of subjects with more severe lupus (SELENA-SLEDAI score ≥10) at enrollment. SLE Responder Index (SRI) is defined as patients who respond to treatment and achieve a reduction in SELENA-SLEDAI equal to or greater than the number indicated, no new BILAG 1A or 2B organ domain scores, and no increase in Physician's Global Assessment (PGA) of greater than 0.3 on a three point scale.

Figure 3. Effects of Blisibimod on Proteinuria in Subjects with SLE Enrolled in the PEARL-SC Study

In subjects with baseline urinary protein excretion equivalent to 1-6g/24hrs, treatment with blisibimod resulted in significantly greater reductions in proteinuria compared to placebo from Week 8 through Week 24. Furthermore, the observed treatment-related decreases in proteinuria resulted in near normalization of the proteinuria to ≤1g/24hrs in those subjects receiving blisibimod. Graphs show data from subgroups of patients defined by baseline proteinuria for blisibimod. Separately, data are shown for the subgroup of subjects with high inflammatory biomarker status at enrollment, defined by low C3 and high anti-dsDNA autoantibodies at baseline. Data are plotted for all pooled blisibimod dose levels as well as 200mg once-weekly and placebo administered subcutaneously for 24 weeks in the PEARL-SC trial. See data presented by Dr. Richard Furie at the European League Against Rheumatology Annual Conference, Madrid, Spain 2013 in Figure 3.

In this study, statistically significant reductions in total B-cells were observed in patients treated with blisibimod compared with placebo due to its mechanism of BAFF inhibition. In addition, treatment with blisibimod was associated with significant improvements in lupus disease activity and lupus biomarkers, including anti-dsDNA antibodies, proteinuria, immunoglobulins including IgG and IgM, and complement components C3 and C4. Blisibimod was safe and well-tolerated at all dose levels evaluated in this study, with no meaningful imbalances in serious adverse events or infections compared with placebo (see Table 2 in the next section).

Open-Label Extension Study in Patients Enrolled in PEARL-SC Study

In order to evaluate longer-term safety of blisibimod, patients with lupus who completed the PEARL-SC study were able to participate in an OLE study in which they were treated with active drug (blisibimod). The OLE study was opened in Q2 2012 and closed in Q2 2013 after subjects had completed a minimum of one year of continuous therapy with blisibimod. Interim data from the combined PEARL-SC and OLE studies were presented at the 2013 Annual Scientific Meeting of the American College of Rheumatology and Association of Rheumatology Health Professionals (ACR/ARHP). In addition, a case report was published summarizing observations in a patient who was randomized to placebo in the PEARL-SC study then experienced a rapid improvement in serum cryoglobulins upon initiation of blisibimod therapy in the OLE study (Golima et al., Rheumatology , 2013).

The emerging data for the OLE study corroborate the effects of 24-week therapy with blisibimod observed in the PEARL-SC study. Specifically, the improvements in proteinuria observed in the subgroup of patients with abnormal proteinuria at enrollment (Figure 4), were maintained over 52 weeks of continuous blisibimod therapy. In addition, the effects observed with blisibimod on peripheral B-cells, anti-dsDNA autoantibodies, and complement C3 and C4 and immunoglobulins IgG and IgM observed over 24 weeks of dosing in the PEARL-SC study were found to be durable over 52 weeks of therapy through the OLE study (Figures 5 and 6). Blisibimod was safe and well-tolerated at all dose levels through the PEARL-SC and OLE studies, with no associated increase in risk of severe infection (Table 2).

Table 2. Adverse Events and Serious Adverse Events Reported in the Phase 2 Placebo-controlled and OLE trials with Blisibimod in Patients with Lupus

	PEARL-SC		Open-Label
	Placebo	Blisibimod	Blisibimod
	N=266	N=280	N=380
Overview (% incidence )
AEs	85	82.5	60.5
Serious AEs	15.8	11.1	4.7
AEs Related to Study Drug	37.2	40	40
AEs Leading to Withdrawal	7.9	5.7	5.7
AEs Leading to Death	1.1	1.4	0
Severe Infection AEs	1.1	1.4	1.3
Severe Injection Site Reactions	0	0	0
Serious Adverse Events Occurring in >1 Subject, n(%)
Herpes zoster	2 (0.8)	2 (0.7)	0
Pneumonia	4 (1.5)	3 (1.1)	1 (0.3)
Urinary tract infections	2 (0.8)	2 (0.7)	1 (0.3)
SLE	3 (1.1)	2 (0.7)	0
Deep vein thrombosis	2 (0.8)	3 (1.1)	0
Cellulitis	0	0	3 (0.8)

The data from the Phase 2 program with blisibimod support the ongoing exploration of blisibimod’s efficacy and safety in the Phase 3 study in patients with lupus (CHABLIS-SC1) as well as the Phase 2 study in patients with IgA nephropathy (BRIGHT-SC1). Additional information for the OLE clinical studies can be found at www.anthera.com /studies_open-label-extension-study.htm.

Figure 4. Durable Effects of Blisibimod on Proteinuria in the PEARL-SC and OLE Studies in Subjects with Lupus

According to data presented by Dr. Richard Furie at the American College of Rheumatology Annual Conference, San Diego 2013, in Figure 4, the significant improvements in proteinuria in patients with lupus randomized to blisibimod compared with placebo observed in the PEARL-SC study were found to be durable through their continuing exposure to blisibimod in the OLE study. Graphs show data for blisibimod (all pooled dose levels as well as 200mg once-weekly) and placebo administered subcutaneously for 24 weeks in the PEARL-SC trial, and interim data for subjects who continued to receive blisibimod through the OLE trial are presented through Week 52.

Figure 5. Effects of Blisibimod on Lupus Biomakers in the Phase 2 PEARL-SC and Open-Label Extension Trials

According to data presented by Dr. Richard Furie at the American College of Rheumatology Annual Conference, San Diego 2013 in Figure 5, w ith its mechanism of BAFF inhibition, blisibimod treatment was associated with significant reductions in the numbers of total B-cells, anti-dsDNA antibodies, as well as significant increases in complement components C3 and C4. Graphs show data for blisibimod (all pooled dose levels as well as 200mg once-weekly) and placebo administered subcutaneously for 24 weeks in the PEARL-SC trial, and interim data for subjects who continued to receive blisibimod through the OLE trial are presented through Week 52.

Figure 6. Effects of Blisibimod on Serum Immunoglobulins

According to data presented by Dr. Richard Furie at the American College of Rheumatology Annual Conference, San Diego 2013 in Figure 6, s ignificant reductions in immunoglobulins IgG and IgM were observed with blisibimod compared with placebo during the placebo-controlled PEARL-SC study. These effects were found to be durable in subjects who continued to receive blisibimod through the OLE study. The effects on immunoglobulins were not associated with infection risk, nor were alterations in white blood cells, monocytes, or neutrophils associated with blisibimod. Graphs show data for blisibimod (all pooled dose levels as well as 200mg once-weekly) and placebo administered subcutaneously for 24 weeks in the PEARL-SC trial, and interim data for subjects who continued to receive blisibimod through the OLE trial are presented through Week 52.

PART IV

ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

(a)	The following documents are filed as part of this report:

(1)

Index list to Consolidated Financial Statements:

	Page
Report of Independent Registered Public Accounting Firm	F-2
Report of Independent Registered Public Accounting Firm	F-3
Balance Sheets	F-4
Statements of Operations	F-5
Statements of Comprehensive Loss	F-6
Statements of Stockholders’ Equity (Deficit)	F-7
Statements of Cash Flows	F-10
Notes to Consolidated Financial Statements	F-11

(2)

Consolidated financial statement Schedules

All other schedules are omitted because they are not required or the required information is included in the consolidated financial statements or notes thereto.

(3)

Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Anthera Pharmaceuticals, Inc.

Hayward, California

We have audited the accompanying consolidated balance sheet of Anthera Pharmaceuticals, Inc. a development stage company (the “Company”), as of December 31, 2013 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for year then ended and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for the period from inception (September 9, 2004) to December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the consolidated financial statements of Anthera Pharmaceuticals, Inc. for the period from inception to December 31, 2012. Such statements are included in the cumulative inception to December 31, 2013 totals of the consolidated statements of operations, comprehensive loss, and cash flows and reflect a net loss of 89% of the cumulative total. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to amounts for the period from inception to December 31, 2012, included in the cumulative totals, is based solely on the report of other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Anthera Pharmaceuticals, Inc. at December 31, 2013, and the results of its operations and its cash flows for the year then ended and for the period from inception (September 9, 2004) to December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

San Jose, California

March 28, 2014

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Anthera Pharmaceuticals, Inc.:

We have audited the accompanying balance sheet of Anthera Pharmaceuticals, Inc. (a development stage company) (the “Company”) as of December 31, 2012, and the related statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such 2012 and 2011 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2012, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the accompanying 2012 and 2011 financial statements have been restated to correct an error.

/s/ Deloitte & Touche LLP

San Francisco, California

March 26, 2013 (March 28, 2014 as to the effects of the restatement and the reverse stock split discussed in Notes 2 and 1, respectively, to the consolidated financial statements)

F-3

ANTHERA PHARMACEUTICALS, INC

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share amounts)

	December 31, 2013			December 31, 2012
ASSETS
				(As restated)(1)

Current assets:
Cash and cash equivalents	$	25,946		$	19,431
Short-term investments		—			5,322
Prepaid expenses and other current assets		358			426
Total current assets		26,304			25,179
Property and equipment—net		812			1,150
Restricted cash		10,000			—
Other assets		301			116
TOTAL	$	37,417		$	26,445
LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)
Current liabilities:
Accounts payable	$	3,519		$	5,206
Accrued clinical studies		472			3,374
Accrued liabilities		474			497
Accrued payroll and related costs		319			344
Short term portion of notes payable, net of discount		2,777			9,329
Total current liabilities		7,561			18,750
Notes payable, net of discount		15,098			11,221
Total liabilities		22,659			29,971
Commitments and contingencies (Note 7)
Stockholders’ equity (deficit)
Common stock, $0.001 par value, 100,000,000 shares authorized; 19,415,901 and 9,893,924 shares issued and outstanding as of December 31, 2013 and 2012, respectively		19			10
Additional paid-in capital		301,946			252,827
Accumulated other comprehensive loss		—			(17	)
Deficit accumulated during the development stage		(287,207	)		(256,346	)
Total stockholders’ equity (deficit)		14,758			(3,526	)
TOTAL	$	37,417		$	26,445

(1)	See Note 2 “Restatement of Previously Issued Consolidated Financial Statements” of Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

F-4

ANTHERA PHARMACEUTICALS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share amounts)

	Year Ended December 31,									Cumulative Period from September 9, 2004 (Date of Inception) to December 31,
	2013			2012			2011			2013
				(As restated) (1)			(As restated) (1)
OPERATING EXPENSES:
Research and development	$	21,684		$	49,219		$	85,281		$	236,965
General and administrative		6,563			6,715			7,857			37,353
Total operating expenses		28, 247			55,934			93,138			274,318
LOSS FROM OPERATIONS		(28,247	)		(55,934	)		(93,138	)		(274,318	)
OTHER INCOME (EXPENSE):
Other income (expense)		(15	)		(111)			606			1,485
Interest expense		(2,599	)		(3,354	)		(2,803	)		(10,301	)
Mark-to-market adjustment of warrant liability		—			14,070			(3,738)			236
Beneficial conversion features		—			—			—			(4,309	)
Total other income (expense)		(2,614	)		10,605			(5,935	)		(12,889	)
NET LOSS	$	(30,861	)	$	(45,329	)	$	(99,073	)	$	(287,207	)
Net loss per share—basic and diluted	$	(1.69	)	$	(6.27	)	$	(21.18	)
Weighted-average number of shares used in per share calculation—basic and diluted		18,267,413			7,225,406			4,677,210

(1)	See Note 2 “Restatement of Previously Issued Consolidated Financial Statements” of Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

F-5

ANTHERA PHARMACEUTICALS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands except share and per share amounts)

	Years Ended December 31,											Cumulative Period from September 9, 2004 (Date of Inception) to December 31,
	2013			2012				2011				2013
				(As restated) (1)				(As restated) (1)
Net loss	$	(30, 861	)		$	(45,329	)		$	(99,073	)	$	(287,207	)
Unrealized gain on short term investments , net		17				12				21			—
Comprehensive loss		(30,844	)			(45,317	)			(99,052	)		(287,207	)

(1)	See Note 2 “Restatement of Previously Issued Consolidated Financial Statements” of Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

F-6

Anthera Pharmaceuticals, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands except share and per share amounts )

	Convertible Preferred Stock				Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Deficit Accumulated During Development			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Capital			Loss			Stage			(Deficit)
DATE OF INCEPTION—September 9, 2004
Issuance of common stock to founders for cash		—	$	—		17,523		$	—	$	—		$	—		$	—		$	—
Issuance of common stock to founders for service		—		—		91,997			—		2			—			—			2
Repurchase of common stock from founder		—		—		(9,126	)		—		—			—			—			—
Issuance of Series A convertible preferred stock for cash at $1.47 per share, net of issuance cost of $9		526,955		1		—			—		767			—			—			768
Issuance of Series A convertible preferred stock in exchange for service at $1.47 per share		25,575		—		—			—		38			—			—			38
Issuance of common stock upon exercise of stock options		—		—		4,161					5			—			—			5
Reclass of early exercise of stock options to liability		—		—		(3,650	)		—		(4	)		—			—			(4	)
Share-based compensation related to equity awards		—		—		—			—		1			—			—			1
Net loss		—		—		—			—		—			—			(554	)		(554	)
BALANCE—December 31, 2005		552,530		1		100,905			—		809			—			(554	)		256
Conversion of Series A convertible preferred stock to Series A-1 convertible preferred stock at a ratio of 1:1		—		—		—			—		—			—			—			—
Issuance of Series A-2 convertible preferred stock for cash at $5.14 per share—net of issuance cost of $202		1,138,677		1		—			—		5,645			—			—			5,646
Issuance of Series A-2 convertible preferred stock upon conversion of convertible promissory notes at $3.85 and $5.14 per share		224,248		—		—			—		962			—			—			962
Issuance of Series A-2 convertible preferred stock in exchange for licensed technology at $5.14 per share		257,744		—		—			—		1,324			—			—			1,324
Beneficial conversion feature related to conversion of convertible promissory notes into Series A-1 convertible preferred stock		—		—		—			—		190			—			—			190
Issuance of Series B convertible preferred stock for cash at $7.28 per share—net of issuance cost of $21		2,619,568		3		—			—		19,036			—			—			19,039
Issuance of Series B convertible preferred stock in exchange for licensed technology at $7.28 per share		127,297		—		—			—		926			—			—			926
Issuance of common stock upon exercise of stock options		—		—		15,697			—		17			—			—			17
Reclass of early exercise of stock options to liability		—		—		(4,601	)		—		(5	)		—			—			(5	)
Share-based compensation related to equity awards		—		—		—			—		9			—			—			9
Net loss		—		—		—			—		—			—			(8,679	)		(8,679	)
BALANCE—December 31, 2006		4,920,064		5		112,001			—		28,913			—			(9,233	)		19,685
Issuance of common stock upon exercise of stock options		—		—		61,700			—		118			—			—			118
Reclass of early exercise of stock options liability		—		—		(30,020	)		—		(60	)		—			—			(60	)
Issuance of common stock for service		—		—		2,044			—		2			—			—			2
Share-based compensation related to equity awards		—		—		—			—		87			—			—			87
Unrealized loss on short-term investments		—		—		—			—		—			(2	)		—			(2	)
Net loss		—		—		—			—		—			—			(25,695	)		(25,695	)
BALANCE—December 31, 2007		4,920,064		5		145,725			—		29,060			(2	)		(34,928	)		(5,865	)
Conversion of Series B convertible preferred stock to Series B-1 convertible preferred stock at a ratio of 1:1		—		—		—			—		—			—			—			—
Issuance of Series B-2 convertible preferred stock for cash at $7.28 per share—net of issuance cost of $242		962,066		1		—			—		6,512			—			—			6,513
Issuance of Series B-2 convertible preferred stock upon conversion of convertible promissory notes at $5.46 per share		2,235,661		2		—			—		12,198			—			—			12,200
Issuance of Series B-2 convertible preferred stock in lieu of interest payment at $5.46 per share		28,517		—		—			—		156			—			—			156
Issuance of warrants in connection with issuance of Series B-2 convertible preferred stock		—		—		—			—		244			—			—			244
Beneficial conversion feature related to conversion of convertible promissory notes into Series B-2 convertible preferred stock		—		—		—			—		4,119			—			—			4,119
Issuance of common stock upon exercise of stock options		—		—		22,485			—		68			—			—			68
Release of early exercise of stock options liability		—		—		16,022			—		13			—			—			13
Repurchase of common stock upon employee termination		—		—		(2,371	)		—		(5	)		—			—			(5	)
Share-based compensation related to equity awards		—		—		—			—		195			—			—			195
Unrealized gain on short-term investments		—		—		—			—		—			1			—			1
Net loss		—		—		—			—		—			—			(18,099	)		(18,099	)
BALANCE—December 31, 2008		8,146,308		8		181,861			—		52,560			(1	)		(53,027	)		(460	)

See accompanying notes to consolidated financial statements.

F-7

Anthera Pharmaceuticals, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands except share and per share amounts )

	Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Deficit Accumulated During Development			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital		Loss			Stage			(Deficit)
BALANCE—December 31, 2008		8,146,308		$	8			181,861	$	—	$	52,560	$	(1	)	$	(53,027	)	$	(460	)
Issuance of common stock upon exercise of stock options		—			—			2,386		—		15		—			—			15
Release of early exercise of stock options liability		—			—			11,527		—		26		—			—			26
Share-based compensation related to equity awards		—			—			—		—		342		—			—			342
Unrealized gain on short-term investments		—			—			—		—		—		1			—			1
Net loss		—			—			—		—		—		—			(12,203	)		(12,203	)
BALANCE —December 31, 2009		8,146,308			8			195,774		—	$	52,943		—			(65,230	)		(12,279	)
Conversion of convertible preferred stock to common stock at a ratio of 1:1		(8,146,308	)		(8	)		1,018,288		1		7		—			—			—
Issuance of common stock for cash at $56.00 per share—net of issuance cost of $3,039		—			—			750,000		1		37,080		—			—			37,081
Issuance of common stock upon conversion of convertible promissory notes and accrued interest at $42.00 and $50.24 per share		—			—			313,904		—		13,884		—			—			13,884
Issuance of common stock upon release of escrow funds		—			—			324,847		—		17,100		—			—			17,100
Issuance of common stock upon cashless exercise of warrants		—			—			24,309		—		—		—			—			—
Issuance of common stock to collaborator in lieu of milestone payment		—			—			66,497		—		3,500		—			—			3,500
Issuance of common stock upon exercise of overallotment by underwriters net of issuance cost of $17		—			—			75,561		—		3,961		—			—			3,961
Issuance of common stock upon exercise of stock options		—			—			17,359		—		116		—			—			116
Issuance of common stock pursuant to employee stock purchase plan		—			—			3,114		—		81		—			—			81
Issuance of common stock upon private placement transaction, net of issuance cost of $508(1)		—			—			1,312,492		2		22,800		—			—			22,802
Net change of early exercise of stock options and liability		—			—			4,479		—		1		—			—			1
Reclass of warrant and derivative liability to equity in conjunction with conversion of convertible promissory notes into common stock		—			—			—		—		4,473		—			—			4,473
Share-based compensation related to equity awards		—			—			—		—		702		—			—			702
Unrealized loss on short-term investments		—			—			—		—		—		(50	)		—			(50	)
Net loss(1)		—			—			—		—		—		—			(46,714	)		(46,714	)
BALANCE—December 31, 2010		—			—			4,106,624		4		156,648		(50	)		(111,944	)		44,658
Issuance of common stock upon exercise of stock options		—			—			33,793		—		241		—			—			241
Issuance of common stock for cash at $60.00 per share—net of issuance cost of $198		—			—			958,333		1		53,852		—			—			53,853
Issuance of common stock upon exercise of warrants		—			—			8,333		—		220		—			—			220
Issuance of common stock upon release of restricted stock units		—			—			3,918		—		102		—			—			102
Issuance of common stock pursuant to employee stock purchase plan		—			—			3,535		—		134		—			—			134
Net change of early exercise of stock options and liability		—			—			2,126		—		21		—			—			21
Issuance of warrants in conjunction with debt financing		—			—			—		—		1,276		—			—			1,276
Share-based compensation related to equity awards		—			—			—		—		1,293		—			—			1,293
Unrealized gain on short-term investments		—			—			—		—		—		21			—			21
Net loss(1)		—			—			—		—		—		—			(99,073	)		(99,073	)
BALANCE—December 31, 2011		—		$	—			5,116,662	$	5	$	213,787	$	(29	)	$	(211,017	)	$	2,746

See accompanying notes to consolidated financial statements.

F-8

Anthera Pharmaceuticals, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands except share and per share amounts)

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Deficit Accumulated During Development			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		Loss			Stage			(Deficit)
BALANCE—December 31, 2011		—	$	—		5,116,662	$	5	$	213,787	$	(29	)	$	(211,017	)	$	2,746
Issuance of common stock upon exercise of stock options		—		—		19,316		—		157		—			—			157
Issuance of common stock for cash at $8.00 per share—net of issuance cost of $98		—		—		4,743,750		5		35,570		—			—			35,575
Issuance of common stock upon release of restricted stock units		—		—		6,862		—		65		—			—			65
Issuance of common stock pursuant to employee stock purchase plan		—		—		6,749		—		29		—			—			29
Reclass of warrant liability to equity (1)		—		—		—		—		2,268		—			—			2,268
Net change of early exercise of stock options and liability		—		—		585		—		7		—			—			7
Share-based compensation related to equity awards		—		—		—		—		944		—			—			944
Unrealized loss on short-term investments		—		—		—		—		—		12			—			12
Net loss (1)		—		—		—		—		—		—			(45,329	)		(45,329	)
BALANCE—December 31, 2012		—		—		9,893,924		10		252,827		(17)			(256,346	)		(3,526)
Issuance of common stock upon release of restricted stock units		—		—		31,081		—		51		—			—			51
Issuance of common stock pursuant to employee stock purchase plan		—		—		13,961		—		38		—			—			38
Issuance of common stock for cash at $5.28 per share, net of issuance cost of $474		—		—		8,712,119		9		42,737		—			—			42,746
Issuance of common stock pursuant to an equity purchase agreement , net of issuance cost of $471		—		—		764,816		—		2,959		—			—			2,959
Share-based compensation related to equity awards		—		—		—		—		3,054		—			—			3,054
Issuance of warrants in conjunction with debt financing		—		—		—		—		280		—			—			280
Unrealized loss on short-term investments		—		—		—		—		—		17			—			17
Net loss		—		—		—		—		—		—			(30,861)			(30,861)
BALANCE—December 31, 2013		—	$	—		19,415,901	$	19	$	301,946	$	—		$	(287,207	)	$	14,758

(1)	See Note 2 “Restatement of Previously Issued Consolidated Financial Statements” of Notes to Consolidated Financial Statements

See accompanying notes to consolidated financial statements.

F-9

ANTHERA PHARMACEUTICALS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,									September 9, 2004 (Date of Inception) to December 31,
	2013			2012			2011			2013
				(As restated) (1)			(As restated) (1)

CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(30,861	)	$	(45,329	)	$	(99,073	)	$	(287,207	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		353			331			80			854
Amortization of premium on short-term investments		—			—			84			56
Realized loss/(gain) on short-term investments and foreign currency exchange rates fluctuation		12			46			(8)			(106	)
Stock-based compensation expense		3,145			960			2,423			7,865
Issuance of preferred and common stock for license fee, interest and service		—			—			—			6,122
Beneficial conversion feature		—			—			—			4,309
Amortization of discount and deferred interest on convertible notes and notes payable		979			749			364			3,033
Amortization of debt issuance cost		190			123			374			730
Mark-to-market adjustment on warrant liability		—			(14,070)			3,738			(236)
Changes in assets and liabilities:
Prepaid expenses and other assets		66			184			1,253			(361	)
Accounts payable		(1,833	)		(12,226)			13,574			3,564
Accrued clinical studies		(2,902	)		(4,340)			4,579			474
Accrued liabilities		(1,036	)		(35	)		(191	)		(801)
Accrued payroll and related costs		(25	)		(28	)		(264)			292
Net cash used in operating activities		(31,912	)		(73,635	)		(73,067	)		(261,412	)
INVESTING ACTIVITIES:
Property and equipment purchases		(15	)		(207	)		(1,346	)		(1,675	)
Purchase of short-term investments		—			(10,671	)		(4,735	)		(55,155	)
Proceeds from maturities of short-term investments		5,328			7,095			26,313			55,268
Increase in restricted cash		(10,000	)		—			—			(10,000)
Net cash provided by (used in) investing activities		(4,687	)		(3,783)			20,232			(11,562	)
FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes and notes payable, net of issuance costs		19,798			—			24,700			70,750
Principal payment against note payable		(22,436	)		(4,468)			—			(26,904	)
Proceeds from issuance of preferred stock, net		—			—			—			32,210
Proceeds from issuance of common stock, net of offering costs		45,746			35,575			54,012			222,602
Proceeds from issuance of common stock pursuant to employee stock purchase plan and exercise of stock options		39			186			376			1,022
Proceeds from issuance of common stock pursuant to exercise of warrant		—			—			220			220
Withholding taxes paid on vested restricted stock units		(32	)		(37	)		(879)			(948	)
Net cash provided by financing activities		43,115			31,256			78,429			298,952
Effect of exchange rate changes on cash		(1	)		(31)			—			(32	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,515			(46,193)			25,594			25,946
CASH AND CASH EQUIVALENTS—Beginning of period		19,431			65,624			40,030			—
CASH AND CASH EQUIVALENTS—End of period	$	25,946		$	19,431		$	65,624		$	25,946
SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	2,477		$	2,583		$	1,838		$	6,913
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible promissory notes and accrued interest into common stock, Series A-2 convertible preferred stock and Series B-2 convertible preferred stock, including unamortized debt discount	$	—		$	—		$	—		$	27,386
Beneficial conversion feature	$	—		$	—		$	—		$	4,309
Reclassification of issuance costs charged to equity	$	—		$	—		$	—		$	3,565
Issuance of warrants in conjunction with debt financing	$	280		$	—		$	1,276		$	1,556

(1)	See Note 2 “Restatement of Previously Issued Consolidated Financial Statements” of Notes to Consolidated Financial Statements

See accompanying notes to consolidated financial statements.

F-10

ANTHERA PHARMACEUTICALS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Anthera Pharmaceuticals, Inc. (the “Company” or “Anthera”) was incorporated on September 9, 2004 in the state of Delaware. Anthera is a biopharmaceutical company focused on developing and commercializing therapeutics to treat serious diseases associated with inflammation and autoimmune diseases. The Company’s primary product candidate, blisibimod, targets elevated levels of B-cell activating factor, or BAFF, which has been associated with a variety of B-cell mediated autoimmune diseases, including systemic lupus erythematosus, or lupus, IgA nephropathy, lupus nephritis, multiple myeloma, vasculitis, idiopathic thrombocytopenia purpura, and others. In January 2012, Anthera Pharmaceuticals, Limited, a wholly-owned subsidiary, was incorporated in Ireland.

The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Accordingly, the Company is considered to be in the development stage as of December 31, 2013, as defined by guidance issued by the Financial Accounting Standards Board (“FASB”). Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing; develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. To date, the Company has funded its operations through equity offerings, private placements of convertible debt and debt financings, raising net proceeds of approximately $325.6 million.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP. From September 9, 2004 (Date of Inception) through December 31, 2013, the Company had an accumulated a deficit of $287.2 million. During 2013, the Company incurred a net loss of $30.9 million and had negative cash flows from operations of $31.9 million. The Company expects to continue to incur substantial losses and negative cash flows from operations over the next several years during its clinical development phase. To fully execute its business plan, the Company will need to complete certain research and development activities and clinical studies. Further, the Company’s product candidate will require regulatory approval prior to commercialization. These activities may span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company plans to meet its capital requirements primarily through issuances of equity securities, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect the Company’s ability to achieve its intended business objectives.

Reverse Split of Common Stock

On July 15, 2013, the Company effectuated a 1-for-8 reverse split of its common stock. All references to shares of common stock outstanding and per share data for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted to reflect such reverse split.

2. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the issuance of the Company’s 2012 consolidated financial statements, the Company concluded that its previously issued 2012, 2011 and 2010 consolidated financial statements should be restated because of a misapplication in the guidance around accounting for the warrants issued in September 2010.

Background of Restatement

On September 24, 2010, in connection with a private placement of the Company’s Common Stock, the Company issued warrants to the investors to purchase an aggregate of 525,000 shares of the Company’s common stock at an exercise price of $26.40 per share. These warrants have an exercise period of five years and will expire on September 24, 2015. The warrants provided the holders with anti-dilution price protection in the event the Company issues securities at a price per share less than the exercise price of the warrants. Historically, the warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). Under the guidance of ASC 815, warrant instruments that provide for anti-dilution price protection, should be initially classified as derivative liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be recorded as non-cash income or expense in the statement of operations until the applicable warrants are exercised or the exercise price of the warrants becomes fixed. Management, in consultation with the Company’s Audit Committee, determined that the financial statements should be restated to reflect the warrants as liabilities, with subsequent changes in their estimated fair value recorded as non-cash income or expense until the exercise price of the warrants became fixed on July 24, 2012 upon the closing of an equity offering by the Company pursuant to which the Company sold common stock at $8.00 per share, which triggered an adjustment to the exercise price of the warrants to a floor price of $23.20 per share as specified in the warrants.

F-11

Impact of the Restatement

The effects of the restatement on the following financial statement line items as of and for the periods indicated are summarized in the following tables (in thousands except share and per share amounts, net loss per basic and diluted share has been adjusted for the Company’s 1-for-8 reverse split of its outstanding common stock effectuated on July 15, 2013) :

Consolidated Statement of Operations impact for the Years ended December 31, 2012 and 2011

	Year ended December 31,
	2012								2011
	As reported			Adjustments		As restated			As reported			Adjustments			As restated


Operating expenses
R Research and development	$	49,219		$	—	$	49,219		$	85,281		$	—		$	85,281
General and administrative		6,715			—		6,715			7,857			—			7,857
Total operating expense		55,934			—		55,934			93,138			—			93,138
Loss from operations		(55,934	)		—		(55,934	)		(93,138	)		—			(93,138	)
Other income (expense):
In Other income (expense)		(111	)		—		(111)			606			—			606
Interest expense		(3,354	)		—		(3,354	)		(2,803	)		—			(2,803	)
Mark-to-market adjustment of warrants liability		—			14,070		14,070			—			(3,738	)		(3,738	)
Beneficial conversion features		—			—		—			—			—			—
Total other income (expense)		(3,465	)		14,070		10,605			(2,197	)		—			(5,935	)
Net loss	$	(59,399	)	$	14,070	$	(45,329	)	$	(95,335	)	$	(3,738	)	$	(99,073	)
N Net loss per share — basic and diluted	$	(8.22	)	$	1.95	$	(6.27	)	$	(20.38	)	$	(0.80	)	$	(21.18	)
Weighted average shares used in net income (loss) per share — basic and diluted		7,225,406			—		7,225,406			4,677,210			—			4,677,210

Consolidated Balance Sheet Impact as of December 31, 2012

	As Previously						As
	Reported			Adjustments			Restated

Assets
Current assets:
Cash and cash equivalents	$	19,431		$	—		$	19,431
Short-term investments		5,322			—			5,322
Prepaid expenses and other current assets		426			—			426
Total current assets		25,179			—			25,179
Property and equipment — net		1,150			—			1,150
Other assets		116			—			116
TOTAL	$	26,445		$	—		$	26,445

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	5,206		$	—		$	5,206
Accrued clinical studies		3,374			—			3,374
Accrued liabilities		497			—			497
Accrued payroll and related costs		344			—			344
Short-term portion of notes payable, net of discount		9,329			—			9,329
Total current liabilities		18,750			—			18,750
Notes payable, net of discount		11,221			—			11,221
Total liabilities		29,971			—			29,971
Common stock		10			—			10
Additional paid-in capital		256,859			(4,032	)		252,827
Accumulated comprehensive loss		(17	)		—			(17	)
Deficit accumulated during the development stage		(260,378	)		4,032			(256,346	)
Total shareholders’ equity (deficit)	$	(3,526	)	$	—		$	(3,526	)
TOTAL	$	26,445		$	—		$	26,445

F-12

Additional paid-in Capital and Deficit Accumulated during the Development Stage Impact

In addition to the effects on the consolidated balance sheet as of December 31, 2012, and consolidated statements of operations for the years ended December 31, 2012 and 2011, discussed above, the restatement affected the additional paid-in capital and deficit accumulated during the development stage as of December 31, 2010 and 2011 as follows:

	Year Ended
	December 31,
	2011			2010

Additional paid-in capital, as previously reported (1)	$	220,087		$	162,948
Effect of restatement adjustment on additional paid-in capital for the current period		—			(6,300	)
Cumulative adjustment to additional paid-in capital		(6,300	)		—
Total restatement adjustments		(6,300	)		(6,300	)
Additional paid-in capital, as restated (1)	$	213,787		$	156,648

(1)	Adjusted for the Company’s 1-for-8 reverse stock split effectuated on July 15, 2013.

	Year Ended
	December 31,
	2011			2010

Deficit accumulated during the development, as previously reported	$	(200,979	)	$	(105,644	)
Effect of restatement adjustment on deficit accumulated during the development stage for the current period		(3,738	)		(6,300	)
Cumulative adjustment to deficit accumulated during the development stage		(6,300	)		—
Total restatement adjustments		(10,038	)		(6,300	)
Deficit accumulated during the development, as restated	$	(211,017	)	$	(111,944	)

The restatement effect on the statement of cash flows for the years ended December 31, 2012, 2011 and 2010 was the non-cash mark-to-market adjustment on the warrant liability of $14,070, $3,738 and $6,300, respectively, and an offsetting effect on net loss recorded for the respective periods, resulting in no net impact to the consolidated statements of cash flows. Therefore, the consolidated statements of cash flows are not included as there were no changes to the Company’s operating , investing and financing net cash flows as previously reported.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to clinical trial accruals, our tax provision and stock-based compensation. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates.

F-13

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity or remaining maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of cash currencies and money market funds, for which the carrying amounts are reasonable estimates of fair value. Cash equivalents are recognized at fair value.

Short-Term Investments

Securities with maturity exceeding three months but less than one year are classified as short-term investments. Realized gains and losses and declines in value judged to be other-than-temporary are determined based on specific identification method and are reported in the statements of operations.

Restricted Cash

At December 31, 2013, the Company had restricted cash of $10.0 million to fund a cash security account related to its Square 1 Bank Loan Agreement (see Note 8 for further details). The Company did not have any restricted cash at December 31, 2012.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. The Company’s cash equivalents consist of certificates of deposit with maturities less than three months and treasury money market funds. The Company’s short-term investments consist of certificates of deposit with maturities exceeding three months but less than one year. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to significant credit risk related to cash, cash equivalents and short-term investments.

Property and Equipment—Net

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets, which range from three to five years, using the straight-line method. Repairs and maintenance costs are expensed as incurred. Leasehold improvements are stated at cost and amortized using the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.

Long-Lived Assets

The Company’s long-lived assets and other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Through December 31, 2013, the Company had not experienced impairment losses on its long-lived assets.

Warrants

Warrants are recorded either as equity instruments or derivative liabilities at their estimated fair value at the date of issuance. In the case of warrants recorded as liabilities, subsequent changes in estimated fair value are recorded in other income (expense) in the Company’s statement of operations in each subsequent period. The warrants are measured at estimated fair value using the Black Scholes valuation model, which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of issuance, and at each subsequent reporting period, based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the measurement date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our historical rate, which we anticipate to remain at zero. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates. However these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different.

Accrued Clinical Studies

Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. Expenses related to clinical studies are generally accrued based on time and materials incurred by the service providers and in accordance with the contracts. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of service providers’ invoice at least monthly in arrears for services performed. The Company periodically confirms the accuracy of estimates with the service providers and makes adjustments if necessary. Examples of estimated accrued clinical expenses include:

•

fees paid to Contract Research Organizations, or CROs, in connection with clinical studies;

•

fees paid to investigative sites in connection with clinical studies;

•

fees paid to contract manufacturers in connection with the production of clinical study materials; and

•

fees paid to vendors in connection with preclinical development activities.

F-14

Research and Development Costs

Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by CROs, materials and supplies, licenses and fees, and overhead allocations consisting of various administrative and facilities related costs. Clinical study expenses are further separated into two main categories: clinical development and pharmaceutical development. Clinical development costs include costs for Phase 1, 2 and 3 clinical studies. Pharmaceutical development costs consist of expenses incurred in connection with manufacturing campaign, product formulation and chemical analysis.

The Company charges research and development costs, including clinical study costs, to expense when incurred. Clinical study costs are a significant component of research and development expenses. All of the Company’s clinical studies are performed by third-party CROs. The Company accrues costs for clinical studies performed by CROs based on patient enrollment activities and adjusts the estimates, if required, based upon the Company’s ongoing review of the level of effort and costs actually incurred by the CROs. The Company monitors levels of performance under each significant contract, including the extent of patient enrollment and other activities through communications with the CROs, and adjusts the estimates, if required, on a monthly basis so that clinical expenses reflect the actual effort expended by each CRO.

All material CRO contracts are terminable by the Company upon written notice and the Company is generally only liable for actual effort expended by the CROs and certain noncancelable expenses incurred at any point of termination.

Comprehensive Loss

Comprehensive loss consists of certain changes in equity that is excluded from net loss. Specifically, the Company includes unrealized losses on available for sale securities in other comprehensive loss. Comprehensive loss for each period presented is set forth in the Statement of Comprehensive Loss.

Income Taxes

The Company accounts for income taxes in accordance with the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

Segments

The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. The Company’s long-lived tangible assets consisted of mainly machineries purchased by the Company and installed by its contract manufacturing vendor, Fujifilm Diosynth Boservices, in the United Kingdom. The machineries are used for all of the Company’s blisibimod product manufacturing campaigns.

Net Loss Per Share

Basic net loss attributable to common stockholders per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted Earnings Per Share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any convertible preferred dividends and the after-tax amount of interest recognized in the period associated with any convertible debt. The numerator also is adjusted for any other changes in income or loss that would result from the assumed conversion of those potential common shares, such as profit-sharing expenses. Diluted EPS is identical to basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.

F-15

The following table summarizes the Company’s calculation of net loss per common share (in thousands except share and per share amounts):

	Year Ended December 31,
	2013			2012			2011
Net loss per share
Numerator
Net loss	$	(30,861	)	$	(45,329	)	$	(99,073	)
Denominator
Weighted-average common shares outstanding		18,267,413			7,225,543			4,678,881
Less: Weighted-average shares subject to repurchase		—			(137	)		(1,671	)
Denominator for basic and diluted net loss per share		18,267,413			7,225,406			4,677,210
Basic and diluted net loss per share	$	(1.69	)	$	(6.27	)	$	(21.18	)

As the Company incurred net losses for all of the periods presented, the following outstanding potentially dilutive securities were excluded from the computation of diluted net loss per share, as the effect of including them would have been antidilutive:

	Years Ended December 31,
	2013		2012		2011
Total options to purchase common stock		1,997,075		300,468		255,535
Total common stock subject to repurchase		—		—		585
Total warrants to purchase common stock		675,006		601,477		601,477
Total restricted stock units		42,042		28,106		25,794
Total		2,714,123		930,051		883,391

Stock-Based Compensation

The Company uses the Black-Scholes option pricing model as the method for determining the estimated fair value for all stock-based awards, including employee stock options, and rights to purchase shares under the Company’s Employee Stock Purchase Plan based on their estimated fair value, and recognize the costs in our consolidated financial statements over the employees’ requisite service period. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards, including the option’s expected term and the price volatility of the underlying stock. Additionally, the Company is required to include an estimate of the number of awards that will be forfeited in calculating compensation costs, which are recognized over the requisite service period of the awards on a straight-line basis.

Expected Term —The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method.

Expected Volatility —Expected volatility is estimated using comparable public company volatility for similar terms.

Expected Dividend —The Black-Scholes option pricing model calls for a single expected dividend yield as an input and the Company has never paid dividends and has no plans to pay dividends.

Risk-Free Interest Rate —The risk-free interest rate used in the Black-Scholes option pricing method is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Estimated Forfeitures —The estimated forfeiture rate is determined based on the Company’s historical forfeiture rates to date. The Company monitors actual expenses and periodically updates the estimate.

Equity instruments issued to nonemployees are recorded at their fair value as determined in accordance with guidance provided by the FASB and are periodically revalued as the equity instruments vest and recognized as expense over the related service period.

F-16

4. CASH EQUIVALENTS AND INVESTMENTS

The Company’s cash and cash equivalents as of December 31, 2013 are as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Fair Value
Cash	$	1,006	$	—	$	1,006
Money market funds		24,940		—		24,940
Total	$	25,946	$	—	$	25,946

The Company’s cash and cash equivalents, and short-term investments as of December 31, 2012 were as follows (in thousands):

	Amortized Cost			Gross Unrealized Losses		Fair Value
Cash	$	3,811		$	—	$	3,811
Money market funds		15,620			—		15,620
Certificates of deposit		5,325			(3)		5,322
Total		24,756			(3)		24,753
Less amounts classified as cash and cash equivalents		(19,431	)		—		(19,431	)
Total short-term investments	$	5,325		$	(3)	$	5,322

Realized losses recorded for the years ended December 31, 2013, 2012 and 2011 and for the period from September 9, 2004 (Date of Inception) to December 31, 2013 were immaterial.

5. FAIR VALUE OF INSTRUMENTS

Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a hierarchy for inputs used in measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The fair value hierarchy is broken down into the three input levels summarized below:

•

Level 1 —Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and trading securities with quoted prices on active markets.

•

Level 2 —Valuations based on inputs other than the quoted prices in active markets that are observable either directly or indirectly in active markets. Examples of assets and liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds, commercial paper, certificates of deposit and over-the-counter derivatives.

•

Level 3 —Valuations based on unobservable inputs in which there are little or no market data, which require us to develop our own assumptions.

The following tables present the Company’s fair value hierarchy for all its financial assets (including those in cash and cash equivalents), in thousands, by major security type measured at fair value on a recurring basis as of December 31, 2013 and 2012 (in thousands):

	December 31, 2013
	Estimated Fair Value		Level 1		Level 2		Level 3
Money market funds	$	24,940	$	24,940	$	—	$	—


	December 31, 2012
	Estimated Fair Value		Level 1		Level 2		Level 3
Money market funds	$	15,620	$	15,620	$	—	$	—
Certificates of deposit		5,322		—		5,322		—
Total	$	20,942	$	15,620	$	5,322	$	—

F-17

At December 31, 2013 and 2012, the fair value of the principal amount of the Company’s outstanding notes payable are classified within the hierarchy as follows (in thousands):

	December 31, 2013
	Estimated Fair Value		Level 1		Level 2		Level 3
Notes Payable ($18,095, net of $220 note discount)	$	17,875	$	—	$	—	$	17,875

	December 31, 2012
	Estimated Fair Value		Level 1		Level 2		Level 3
Notes Payable ($21,083, net of $553 note discount)	$	20,550	$	—	$	—	$	20,550

The fair value of notes payable is estimated based on current interest rates available to us for debt instruments in similar terms, degrees of risk and remaining maturities. The carrying value of these obligations, as of each period presented, approximate their respective fair values. For disclosure purposes, the fair value of the principal amount of our outstanding debt obligations is considered to be a Level 3 measurement.

There were no transfers between Level 3, Level 2 or Level 1 during the years ended December 31, 2013 and 2012.

6. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following (in thousands):

	December 31,
	2013			2012
Lab equipment	$	1,312		$	1,312
Computers and software		50			50
Office equipment and furniture		60			45
Leasehold improvements		206			206
Total property and equipment	$	1,628		$	1,613
Less accumulated depreciation and amortization		(816	)		(463	)
Property and equipment, net	$	812		$	1,150

The Company recorded the following depreciation expense in the respective periods (in thousands):

	Year Ended December 31,						Period from September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Depreciation expense	$	353	$	331	$	80		$	854

7. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its main operating facility in Hayward, California. The lease is for approximately 14,000 square feet and expires on September 30, 2014. The Company recognizes rental expense on the facility on a straight line basis over the term of the lease. Differences between the straight-line net expense on rent payments is classified as deferred rent liability and included in the accrued liabilities on the balance sheet. In November 2013, the Company renewed its facility lease for an additional three years beginning October 2014 and ending September 2017.

F-18

Rent expense was as follows (in thousands):

	Year Ended December 31,						Period from September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Rent expense	$	215	$	217	$	184	$	1,307

As of December 31, 2013, future minimum lease payments under noncancellable operating leases were as follows (in thousands):

2014	$	217
2015		220
2016		222
2017		167
Total	$	826

Other Commitments

In December 2007, the Company with Amgen, Inc. (“Amgen”) entered into a worldwide, exclusive license agreement (the “Amgen Agreement”) to develop and commercialize blisibimod in any indication, including for the treatment of systemic lupus erythematosus (“lupus”). Under the terms of the Amgen Agreement, the Company paid a nonrefundable, upfront license fee of $6.0 million. As there is no future alternative use for the technology, the Company expensed the license fee in research and development expenses during 2007.

Under the terms of the Amgen Agreement, the Company is obligated to make additional milestone payments to Amgen of up to $33.0 million upon the achievement of certain development and regulatory milestones. The Company is also obligated to pay tiered royalties on future net sales of products, ranging from the high single digits to the low double digits, which are developed and approved as defined by this collaboration. The Company’s royalty obligations as to a particular licensed product will be payable, on a country-by-country and licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country or (b) 10 years after the first commercial sale of the applicable licensed product in the applicable country. As of December 31, 2013, there were no outstanding obligations due to Amgen.

8. NOTES PAYABLE

In March 2011, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Hercules Technology Growth Capital, Inc. and Hercules Technology II, L.P. (together, “Hercules”). In conjunction with the Hercules loan, the Company issued a seven-year warrant to purchase 40,178 shares of the Company’s common stock at an exercise price of $48.00 per share. The warrant is immediately exercisable and expires in March 2018. The Company estimated the fair value of this warrant using the Black-Scholes option valuation model with the following assumptions: expected term of seven years, a risk-free interest rate of 2.87%, expected volatility of 63% and 0% expected dividend yield, resulting in a $1.3 million discount from the par value of the loan, which was amortized as additional interest expense over the term of the loan using the effective interest rate method. Additionally, the Company was obligated to pay an end of the term charge of $937,500, which was also being expensed over the term of the loan. The Company repaid indebtedness under the Loan Agreement in full on April 3, 2013 in conjunction with the Company’s debt refinance (see below). The unamortized note discount and end of term charge was fully expensed to interest expense in April 2013 as a result of the payoff. As of December 31, 2013, the warrant remained outstanding and exercisable.

On April 3, 2013, the Company entered a Credit and Security Agreement (the “Midcap Credit Agreement”) with MidCap Financial SBIC, LP (“Midcap”), pursuant to which Midcap made a $10.0 million loan (the “Midcap Loan”) to the Company. Proceeds from the Midcap Loan were used to repay the entire outstanding principal and end of term charge due to Hercules. The MidCap Credit Agreement matures on October 3, 2016 and the loan bears interest at an annual rate equal to 9.75%. Interest and principal are payable in cash on a monthly basis beginning May 1, 2013. The loan is secured by a pledge of substantially all assets of the Company, excluding intellectual property as well as the Cash Security Account (see further discussion below). In conjunction with the Midcap Loan, the Company issued a warrant to purchase 73,529 shares of its common stock, at an exercise price of $5.44 per share. The warrant is immediately exercisable and expires on October 3, 2016. The Company estimated the fair value of this warrant using the Black-Scholes option valuation model with the following assumptions: expected term of 3.5 years, a risk-free interest rate of 0.39%, expected volatility of 124% and 0% expected dividend yield. The Company applied the relative fair value method to allocate the $10.0 million proceeds received under the MidCap Credit Agreement between the loan and warrant. The initial carrying amount assigned to the loan was $9.7 million and was recorded as Notes payable—net of discount on the Company’s balance sheet. The fair value allocated to the warrant of $280,000 was recorded as an increase to additional paid-in capital in the Company’s balance sheet. The resulting $280,000 discount from the $10.0 million par value of the loan is amortized as an additional interest expense over the term of the loan using the effective interest rate method. At December 31, 2013, this warrant remains outstanding and exercisable.

F-19

On April 3, 2013, the Company entered into a Loan and Security Agreement (the “Square 1 Loan Agreement”) with Square 1 Bank, pursuant to which Square 1 Bank made a $10.0 million loan to the Company. The proceeds of such loan are used exclusively to fund a cash security account (the “Cash Security Account”) at Square 1 Bank. The term loan under the Square 1 Loan Agreement matures on April 3, 2017 and bears interest at an annual rate equal to 1.00%. Interest is payable in cash on a monthly basis starting May 1, 2013 and the principal is payable in lump sum upon maturity of the term loan. However, the Company may prepay the principal in whole or in part from time to time without penalty or premium. The Square 1 Loan Agreement contains customary representations and warranties and certain affirmative and negative covenants including, among other things, maintenance of a balance in the Cash Security Account of not less than the lesser of (a) $10.0 million and (b) the aggregate amount all debt, principal, interest and other amounts owed to Square 1 Bank in the Cash Security Account, and restrictions on mergers. The loan under the Square 1 Term Loan Agreement is not guaranteed by any of the Company’s existing subsidiaries, nor have any existing subsidiaries of the Company pledged any of their assets to secure the loan.

In connection with the Midcap and Square 1 Agreements, the Company incurred note issuance costs of approximately $298,000, which are recorded as long-term assets on the Company’s balance sheet. The note issuance costs are being amortized to interest expense over the term of the Loan Agreements using the effective interest rate method.

Notes payable as of December 31, 2013 consists of (in thousands):

	2013
Notes payable, net of discount	$	17,875
Less current maturities, net of discount		(2,777)
Non-current maturities, net of discount	$	15,098

Notes payable as of December 31, 2012 consists of (in thousands):

	2012
Notes payable, net of discount	$	20,550
Less current maturities, net of discount		(9,329)
Non-current maturities, net of discount	$	11,221

Annual maturities of long-term debt as of December 31, 2013 are as follows (in thousands):

2014	$	2,857
2015		2,857
2016		2,381
2017		10,000
Total	$	18,095

9. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

Prior to the IPO, the Company funded its operations through private equity offerings and placements of convertible debt, raising net proceeds of approximately $47.6 million. In connection with the completion of the IPO in March 2010, all of the Company’s outstanding convertible debt and outstanding shares of preferred were converted into common stock and no liquidation preference remained.

In February 2010, the Company’s Registration Statement on Form S-1 was declared effective for its IPO, pursuant to which the Company sold 750,000 shares of its common stock at a public offering price of $56.00 per share. The Company received net proceeds of approximately $37.1 million from this transaction. Concurrent with the closing of the IPO, the Company received an aggregate of $17.1 million from the issuance of 324,847 shares of its common stock to certain of its investors pursuant to a common stock purchase agreement.

F-20

In April 2010, the Company sold 75,561 shares of common stock pursuant to the exercise of the underwriters’ over-allotment option in connection with the Company’s IPO and received net proceeds of approximately $4.0 million.

In September 2010, the Company completed a private placement transaction with certain accredited investors pursuant to which the Company sold an aggregate of 1,312,492 units at a purchase price of $24.00 per unit, with each unit consisting of one share of common stock and a warrant to purchase an additional 0.4 shares of common stock. Each warrant is exercisable in whole or in part at any time until September 24, 2015 at a per share exercise price of $26.40, subject to certain adjustments as specified in the warrant. The Company received net proceeds of approximately $22.8 million.

In June 2011, the Company utilized its shelf registration statement to sell 958,333 shares of its common stock at $60.00 per share. The Company received net proceeds of approximately $53.9 million.

In January 2012, the Company filed a universal shelf registration statement on Form S-3 (File No. 333-179043), which was declared effective on January 24, 2012, for the proposed offering from time to time of up to $100.0 million of our securities, including common stock, preferred stock, debt securities and/or warrants. In July 2012, the Company issued 4,743,750 shares of common stock at $8.00 per share pursuant to the shelf registration, raising net proceeds of approximately $35.6 million. In January 2013, the Company issued 7,575,757 shares of common stock at $5.28 per share under the shelf registration at an initial closing of a public offering, followed by 1,136,362 at a second closing in February 2013, raising net proceeds of approximately $42.7 million. In April 2013, the Company increased the amount of securities that may be issued under the registration statement by $3.2 million through the filing of a post-effective amendment pursuant to Rule 462(b) of the Securities Act. In April 2013, the Company registered approximately $19.0 million for sale under the LPC Purchase Agreement, leaving a balance of approximately $205,000 under this shelf registration statement for future issuance as of December 31, 2013.

On April 5, 2013, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company has the right to sell to LPC up to an aggregate of $18.5 million in shares of the our common stock. Upon executing the agreement, LPC made an initial purchase of $2.0 million in shares of common stock. Subsequent to the initial purchase, the Company has sold approximately $1.1 million in shares of common stock to LPC in 2013. As of December 31, 2013, approximately $15.4 million of shares of the Company’s common stock remained available to be sold under the Purchase Agreement.

On November 15, 2013, the Company entered into a Sales Agreement (the “Agreement”) with Cowen and Company, LLC (“Cowen”) to create an at-the-market equity program (“ATM”) under which the Company from time to time may offer and sell shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $25.0 million through Cowen, as agent. As of December 31, 2013, the Company had not sold any shares of its common stock pursuant to the Agreement.

In April 2013, the Company filed a universal shelf registration statement with the SEC on Form S-3 (File No. 333-187780) for the proposed offering from time to time of up to $100.0 million of our securities, including common stock, preferred stock, debt securities and/or warrants. On November 15, 2013, the Company registered $25.0 million under the registration statement for the Cowen ATM. As of December 31, 2013, the Company had not sold any shares of our common stock pursuant to the ATM and $75.0 million remains available for future issuance under this shelf registration statement.

Based on the requirements of Form S-3, however, there are certain factors, such as volume of trading in our common stock and our stock price, which limit the amount that can be raised in a short period of time through Purchase Agreement and registration statements described above.

At December 31, 2013, the Company had reserved the following shares for future issuance:

Common stock warrants outstanding			675,006
Common stock options outstanding			1,997,075
Restricted stock units outstanding			42,042
Common stock available for future grant under ESPP plan			78,873
Common stock options available for future grant under stock option plan			711,718
Total			3,504,714

F-21

The Company’s Fifth Amended and Restated Certificate of Incorporation designates 5,000,000 shares of the Company’s capital stock as undesignated preferred stock.

Warrants

In July and September 2009, the Company sold (i) convertible promissory notes, or the 2009 notes, that are secured by a first priority security interest in all of the Company's assets, and (ii) warrants, or the 2009 warrants, to purchase shares of the Company's equity securities to certain of its investors for an aggregate purchase price of $10.0 million. These transactions are collectively referred to as the 2009 bridge financing. The 2009 notes and accrued interest were converted into shares of the Company's common stock at a discount of 25% in March 2010 upon the closing of the Company's IPO. The 2009 warrants carry an exercise price of $56.00 per share. Each of the 2009 warrants is exercisable in whole or in part at any time until the latest date of September 9, 2014. As of December 31, 2013, 44,639 shares of warrants remain outstanding and exercisable. Each of the warrants contains a net issuance feature, which allows the warrant holder to pay the exercise price of the warrant by forfeiting a portion of the exercised warrant shares with a value equal to the aggregate exercise. The Company measured the fair value of the 2009 warrants using the Black-Scholes option pricing model on issuance date and adjusted the fair value at the end of each reporting period based on the following assumptions:

	March 31,			December 31,			September 30,
	2010			2009			2009

Expected Volatility		94	%		78	%		78	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		2.28	%		2.34	%		2.38	%
Expected Term (years)		5.00			5.00			5.00

The Company recorded the fair value of the warrants as a discount to the 2009 notes and amortized as interest expense over the terms of the 2009 notes. The Company re-measured the fair value of the 2009 warrants on December 31, 2009 and recorded the change in fair value in non-operating income. Upon conversion of the 2009 notes into shares of common stock at the completion of the Company’s IPO, the fair value of the 2009 warrants was re-measured again by the Company and the change in fair value of $1.5 million was recorded in non-operating expense during the year ended December 31, 2010. The derivative liability and unamortized discount were reclassified to additional paid-in-capital as a result of the conversion of the 2009 notes

On September 24, 2010, the Company closed a private placement transaction with certain accredited investors pursuant to which the Company sold an aggregate of 1,312,492 units at a purchase price of $24.00 per unit, with each unit consisting of one share of common stock and a warrant to purchase an additional 0.40 shares of common stock. Each warrant is exercisable in whole or in part at any time until September 24, 2015 at a per share exercise price of $26.40, subject to certain adjustments as specified in the warrant. As of December 31, 2013, 516,660 shares of warrants remain outstanding and exercisable. Each of the warrants contains a net issuance feature, which allows the warrant holder to pay the exercise price of the warrant by forfeiting a portion of the exercised warrant shares with a value equal to the aggregate exercise. As discussed in Note 2, Restatement of Previously Issued Consolidated Financial Statements, the warrants were historically reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). In March 2014, the Company performed an internal accounting review related to the accounting for warrants. As a result of this review and in consultation with the Company’s Audit Committee, the Company restated its previously issued consolidated financial statements for the Affected Periods. The Company measured the fair value of the warrants using the Black-Scholes option pricing model on issuance date and adjusted the fair value at the end of each reporting period based on the following assumptions:

	September 30, 2012			June 30, 2012		March 31, 2012		December 31, 2011		December 31, 2010		September 30, 2010

Expected Volatility		114	%	108	%	88	%	65	%	63	%	64	%
Dividend Yield		0	%	0	%	0	%	0	%	0	%	0	%
Risk-Free Interest Rate		0.33	%	0.33	%	0.33	%	0.35	%	1.37	%	1.37	%
Expected Term (years)		3.00		3.25		3.50		3.75		4.75		5.00

The initial fair value of the warrants would be recorded as derivative liability in September 30, 2010 and the change in fair value subsequent to the initial measurement was recorded in non-operating income (expense) until the exercise price of the warrants became fixed on July 24, 2012 upon the closing of an equity offering by the Company pursuant to which the Company sold common stock at $8.00 per share, which triggered an adjustment to the exercise price of the warrants to a floor price, or $23.20, specified in the warrant agreements and the derivative liability would be reclassified to additional paid-in-capital .

10. STOCK-BASED AWARDS

Option Plan

On March 25, 2013, the Company’s board of directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was also approved by the Company’s stockholders at its annual general meeting on May 16, 2013. The Company initially reserved 1,750,000 shares of its common stock for the issuance of awards under the 2013 Plan, plus all shares remaining available for grant under the Company’s 2010 Stock Option and Incentive Plan (the “2010 Plan), plus any additional shares returned under the 2010 Plan or 2013 Plan as a result of the cancellation, forfeiture or other termination (other than by exercise) of awards issued pursuant to the 2010 Plan or 2013 Plan, subject in all cases to adjustment including reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock. Of the shares of common stock reserved for issuance under the 2013 Plan, no more than 750,000 shares will be issued to any individual participant as incentive options, non-qualified options or stock appreciation rights during any calendar year. The 2013 Plan permits the granting of incentive and non-statutory stock options, restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, performance share awards, cash-based awards and dividend equivalent rights to eligible employees, directors and consultants. The option exercise price of an option granted under the 2013 Plan may not be less than 100% of the fair market value of a share of the Company’s common stock on the date the stock option is granted. Options granted under the 2013 Plan have a maximum term of 10 years and generally vest over four years. In addition, in the case of certain large stockholders, the minimum exercise price of incentive options must equal 110% of fair market value on the date of grant and the maximum term is limited to five years. Subject to overall Plan limitations, the maximum aggregate number of shares of common stock that may be issued in the form of incentive options shall not exceed 6,250,000 shares of common stock.

The 2013 Plan does not allow the option holders to exercise their options prior to vesting.

F-22

The following table summarizes stock option activity for 2011, 2012 and 2013 (in thousands except share and per share information):

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at December 31, 2010		159,499		$	10.11		5.29		4,701
Options granted		146,689		$	47.65
Options exercised		(33,793	)	$	8.28
Options cancelled		(16,860	)	$	52.22
Balance at December 31, 2011		255,535		$	29.12		3.07	$	5,762
Options granted		101,831		$	16.42
Options exercised		(19,317	)	$	8.12
Options cancelled		(37,581	)	$	45.19
Balance at December 31, 2012		300,468		$	24.15		2.06	$	126
Options granted		2,124,250		$	4.79
Options exercised		—		$	—
Options cancelled		(427,643	)	$	16.41
Balance at December 31, 2013		1,997,075		$	5.21		9.11	$	48
Ending vested at December 31, 2013		213,609		$	8.71		6.55	$	44

As of December 31, 2013, the vested and expected to vest stock options was 1,958,078.

The assumptions used in the Black-Scholes option-pricing model to value stock options are as follows:

	Year Ended December 31,						Period from September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Expected Volatility		94%		68%		63%		90%
Dividend Yield		0%		0%		0%		0%
Risk-Free Interest Rate		1.08%		1.26%		2.25%		1.45%
Expected Term (years)		5.79		6.25		6.25		5.88

The intrinsic value of stock options represents the difference between the exercise price of stock options and the market price of our stock on that day for all in-the-money options. Additional information related to our stock options is summarized below (in thousands except per share information):

	Year Ended December 31,						Period from September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Weighted-average fair value per share granted	$	3.55	$	10.01	$	28.65	$	5.29
Intrinsic value of options exercised	$	—	$	683	$	1,579	$	3,090
Proceeds received from the exercise of stock options	$	—	$	157	$	280	$	782
Grant date fair value of options vested	$	550	$	1,102	$	1,929	$	4,225

There was $5.2 million of total unrecognized compensation expense as of December 31, 2013 related to stock options. The unrecognized compensation expense will be amortized on a straight-line basis over a weighted-average remaining period of 3.20 years.

F-23

Information about stock options outstanding, vested and expected to vest as of December 31, 2013, was as follows:

		Outstanding, Vested and Expected to Vest				Options Vested
Range of Exercise Price		Number of Shares		Weighted- Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number of Shares
$	2.08 - $4.56		192,155		8.28	$	2.29		51,071
$	4.88 - $65.36		1,804,920		9.19	$	10.73		162,538
Total			1,997,075		9.11	$	8.71		213,609

As of December 31, 2013, there were 711,718 shares available for grant under the 2013 Plan.

Restricted Stock Units

The Company grants restricted stock unit awards (“RSUs”) under its 2010 Plan, as determined by the Company’s compensation committee. The restricted stock units granted represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. An exercise price and monetary payment are not required for receipt of restricted stock units or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Substantially all of the RSUs vest over four years.

In June 2011, the Company amended the 2010 Plan to allow individuals who had received RSUs to net share settle in excess of the minimum statutory withholding amount for taxes. In accordance with guidance issued by the FASB, this modification resulted in the RSUs being classified as a liability, and the subsequent change in fair value to be recorded as expense. The unsettled RSUs are remeasured at each reporting date and will continue to be remeasured until they are fully vested in approximately 0.33 year. Any changes in valuation are recorded as compensation expense for the period. As of December 31, 2013, the liability related to the unsettled awards was not significant.

The following table summarizes activity related to our restricted stock units:

	Shares			Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2010		37,816		$	41.02
Restricted stock units granted		5,501		$	46.56
Restricted stock units released		(16,257	)	$	41.83
Restricted stock units forfeitures and cancellations		(1,266	)	$	35.83
Outstanding at December 31, 2011		25,794		$	41.95
Restricted stock units granted		19,108		$	37.70
Restricted stock units released		(9,263	)	$	41.28
Restricted stock units forfeitures and cancellations		(7,533	)	$	27.91
Outstanding at December 31, 2012		28,106		$	43.04
Restricted stock units granted		53,584		$	5.12
Restricted stock units released		(37,774	)	$	24.85
Restricted stock units forfeitures and cancellations		(1,874	)	$	42.88
Outstanding at December 31, 2013		42,042		$	11.06

2010 Employee Stock Purchase Plan

Effective July 2010, under the terms of the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. The Company initially reserved 12,500 shares of common stock for issuance thereunder plus on January 1, 2011 and each January 1 thereafter, the number of shares of stock reserved and available for issuance under the Plan shall be cumulatively increased by the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) 31,250 shares of common stock.

F-24

Under the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. The purchase price per share is 85% of the fair market value of the common stock as of the first date or the ending date of the applicable semi-annual purchase period, whichever is less (the “Look-Back Provision”). The 15% discount and the Look-Back Provision make the ESPP compensatory. The Black-Scholes option pricing model was used to value the employee stock purchase rights. For the years ended December 31, 2013, 2012, 2011 and the period from September 9, 2004 (Inception Date) through December 31, 2013, the following weighted-average assumptions were used in the valuation of the stock purchase rights:

	Year Ended December 31,						Period from September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Expected Volatility		126%		129%		62%		96%
Dividend Yield		0%		0%		0%		0%
Risk-Free Interest Rate		0.11%		0.18%		0.08%		0.13%
Expected Term (years)		0.50		0.50		0.50		0.46

Stock-Based Compensation Expense

Total stock-based compensation expense, including expense recorded for the ESPP, was as follows (in thousands):

	Year Ended December 31,							Period from September 9, 2004 (Date of Inception) to December 31,
	2013			2012		2011		2013
Research and development	$	1,451	(1)	$	460	$	1,014	$	3,508
General and administrative		1,694	(2)		500		1,409		4,358
Total employee stock-based compensation	$	3,145		$	960	$	2,423	$	7,866

(1)

Included in research and development expense was approximately $799,000 in non-cash stock-based compensation associated with the voluntary surrender of stock options by our employees in the quarter ended March 31, 2013.

(2)

Included in general and administrative expense was approximately $661,000 in non-cash stock-based compensation associated with the voluntary surrender of stock options by our employees in the quarter ended March 31, 2013.

11. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution 401(k) plan, or the 401(k) Plan. Employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations. Prior to 2011, the Company had not made any contributions to the 401(k) Plan. In December 2012, the Company amended its 401(k) plan to provide for non-elective employer contribution at the Company’s discretion. During the year ended December 31, 2013 and for the period from September 9, 2004 (Inception Date) through December 31, 2013, the Company contributed approximately $260,000 in non-elective employer contribution into the employees’ 401(k) accounts.

12. INCOME TAXES

The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements and has established a full valuation allowance against its deferred tax assets.

F-25

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

The significant components of the Company’s deferred tax assets for the years ended December 31, 2013 and 2012 are as follows (in thousands):

	December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	26,306		$	19,375
Tax credits		1,857			1,080
Intangible assets		2,217			2,483
Capitalized R&D		23,458			17,646
Other		606			1,973
Total deferred tax assets		54,444			42,557
Deferred tax liabilities		—			—
Valuation allowance		(54,444	)		(42,557	)
Net deferred tax asset	$	—		$	—

A reconciliation of the statutory tax rates and the effective tax rate for the years ended December 2013, 2012, and 2011 is as follows:

	2013			2012			2011
					(As restated)
Statutory rate		34	%		34	%		34	%
State tax		6	%		(11)	%		6	%
Tax credit		2	%		0	%		1	%
Expiration of tax attributes due to section 382 limitations		0	%		(118)	%		0	%
Stock based compensation		(3)	%		0	%		0	%
Revaluation of warrant liability		0	%		11	%		0	%
Valuation allowance		(39)	%		84	%		(41)	%
Effective tax rates		0	%		0	%		0	%

Tax benefits of net operating losses, temporary differences and credit carryforwards are recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s history of operating losses, management believes that the deferred tax assets arising from the above-mentioned future tax benefits are currently not likely to be realized and, accordingly, has provided a full valuation allowance. The net valuation allowance increased by $11.9 million in 2013, decreased by $38.3 million and increased by $39.2 million in 2012 and 2011, respectively, and $54.4 million for the period from September 9, 2004 (Date of Inception) to December 31, 2013.

The amount of the valuation allowance for deferred tax assets associated with excess tax deduction from stock-based compensation arrangement that is allocated to contributed capital of the future tax benefits are subsequently recognized in the amount of $1.4 million.

Net operating losses and tax return credit carryforwards as of December 31, 2013, are as follows (in thousands):

	Amount		Expiration Years
Net operating losses—federal	$	66,070	Beginning 2024
Net operating losses—state	$	65,852	Beginning 2014
Tax return credits—federal	$	641	Beginning 2032
Tax return credits—state	$	1,842	Do not expire

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited.

The Company incurred a Section 382 ownership change in 2012 and as such, the Company's net operating loss carryforwards have been limited. In addition, the pre-change R&D tax credits have also been limited for federal tax purposes. As a result of the Section 382 limitation, a significant portion of the Company’s net operating losses and R&D credits (deferred tax assets) have been written off.

F-26

As of December 31, 2013, the Company had unrecognized tax benefits of $0.8 million, all of which would not currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. The Company did not anticipate any significant change to the unrecognized tax benefit balance as of December 31, 2013. A reconciliation of unrecognized tax benefits is as follows (in thousands):

	Amount
Balance as of December 31, 2010		1,361
Additions based on tax positions related to current year		404
Balance as of December 31, 2011		1,765
Reductions based on tax positions related to prior years		(1,300	)
Additions based on tax positions related to current year		80
Balance as of December 31, 2012		545
Additions based on tax positions related to prior year		104
Additions based on tax positions related to current year		179
Balance as of December 31, 2013	$	828

For the year ended December 31, 2012, the $1.3 million reduction in the unrecognized tax benefit related to prior years’ positions is due to the Section 382 limitation discussed above.

The Company would classify interest and penalties related to uncertain tax positions in income tax expense, if applicable. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2013. The tax years 2004 through 2013 remain open to examination by one or more major taxing jurisdictions to which the Company is subject.

The Company does not anticipate that total unrecognized net tax benefits will significantly change prior to the end of 2013.

13. SUMMARIZED QUARTERLY UNAUDITED FINANCIAL DATA FOR FISCAL 2013

Quarterly results were as follows (in thousands, except per share data):

	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
2013
OPERATING EXPENSES:
Research and development	$	4,929		$	5,265		$	4,051		$	7,439
General and administrative		1,972			1,688			1,470			1,433
LOSS FROM OPERATIONS		(6,901	)		(6,953	)		(5,521	)		(8,872	)
Other income (expense)		25			(6	)		14			(48	)
Interest income (expense)		(704	)		(1,322	)		(296	)		(277	)
NET LOSS	$	(7,580	)	$	(8,281	)	$	(5,803	)	$	(9,197	)
Net loss per share—basic and diluted	$	(0.49	)	$	(0.43	)	$	(0.30	)	$	(0.48	)
Shares used in computing basic and diluted net loss per share		15,515,502			19,059,130			19,196,140			19,354,950

14. SUMMARIZED QUARTERLY UNAUDITED FINANCIAL DATA FOR FISCAL 2012

As discussed in Note 2, Restatement of Previously Issued Consolidated Financial Statements, the Company determined it needed to restate its previously issued consolidated financial information, including the unaudited financial information for the quarterly periods ended March 31, 2012, June 30, 2012 and September 30, 2012. The restatement resulted from a correction to the accounting of warrants issued by the Company in connection with a private placement of its common stock in September 2010. The restatement does not have any net impact on operating, investing and financing cash flows previously reported in the Company's consolidated statements of cash flows. Therefore, the consolidated statements of cash flows are not included herein. The following tables summarize the effects of the restatement on its previously issued unaudited condensed consolidated financial statements (in thousands, except per share data):

F-27

2012 Quarterly Consolidated Statement of Operations (unaudited)

	March 31, 2012						June 30, 2012												September 30, 2012												December 31, 2012
	Three Months Ended						Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended						Three Months Ended
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Operating expenses
Research and development	$	17,738		$	17,738		$	14,865		$	14,865		$	32,603		$	32,603		$	9,527		$	9,527		$	42,130		$	42,130		$	7,089
General and administrative		2,322			2,322			1,799			1,799			4,121			4,121			1,594			1,594			5,715			5,715			1,000

Total operating expense		20,060			20,060			16,664			16,664			36,724			36,724			11,121			11,121			47,845			47,845			8,089

Loss from operations		(20,060	)		(20,060	)		(16,664	)		(16,664	)		(36,724	)		(36,724	)		(11,121	)		(11,121	)		(47,845	)		(47,845	)		(8,089	)
Other income (expense):
Other income (expense)		(10	)		(10	)		(28	)		(28	)		(38	)		(38	)		(46	)		(46	)		(84	)		(84	)		(27	)
Interest expense		(843	)		(843	)		(908	)		(908	)		(1,751	)		(1,751	)		(806	)		(806	)		(2,557	)		(2,557	)		(797	)
Mark-to-market adjustment of warrants liability		-			11,382			-			3,822			-			15,204			-			(1,134	)		-			14,070			-

Total other income (expense)		(853	)		10,529			(936	)		2,886			(1,789	)		13,415			(852	)		(1,986	)		(2,641	)		11,429			(824	)

Net loss	$	(20,913	)	$	(9,531	)	$	(17,600	)	$	(13,778	)	$	(38,513	)	$	(23,309	)	$	(11,973	)	$	(13,107	)	$	(50,486	)	$	(36,416	)	$	(8,913	)

Net loss per share — basic and diluted	$	(4.08	)	$	(1.86	)	$	(3.43	)	$	(2.68	)	$	(7.51	)	$	(4.54	)	$	(1.38	)	$	(1.51	)	$	(7.97	)	$	(5.75	)	$	(0.90	)
Weighted average shares used in net income (loss) per share — basic and diluted		5,125,044			5,125,044			5,137,218			5,137,218			5,131,126			5,131,126			8,703,790			8,703,790			6,330,705			6,330,705			9,890,094

2012 Quarterly Consolidated Balance Sheets (unaudited)

	As of March 31, 2012						As of June 30, 2012						As of September 30, 2012
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Assets
Current assets:
Cash and cash equivalents	$	42,349		$	42,349		$	20,537		$	20,537		$	40,985		$	40,985
Short-term investments		1,680			1,680			2,354			2,354			1,470			1,470
Prepaid expenses and other current assets		520			520			304			304			547			547
Total current assets		44,549			44,549			23,195			23,195			43,002			43,002
Property and equipment — net		1,388			1,388			1,287			1,287			1,238			1,238
O Other assets		214			214			179			179			147			147
Total assets	$	46,151		$	46,151		$	24,661		$	24,661		$	44,387		$	44,387

L Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,846		$	13,846		$	10,299		$	10,299		$	4,122		$	4,122
Accrued clinical studies		8,010			8,010			7,166			7,166			10,893			10,893
Accrued liabilities		847			847			452			452			488			488
Accrued payroll and related costs		323			323			610			610			850			850
S Short-term portion of notes payable, net of discount		7,139			7,139			8,767			8,767			9,039			9,039
T Total current liabilities		30,165			30,165			27,294			27,294			25,392			25,392
Notes payable, net of discount		17,340			17,340			15,920			15,920			13,585			13,585
Warrant liability		—			4,956			—			1,134			—			—
Total liabilities		47,505			52,461			43,214			44,348			38,977			38,977
Common stock		5			5			5			5			10			10
Additional paid-in capital		220,565			214,265			221,024			214,724			256,906			252,874
Accumulated comprehensive income (loss)		(32)			(32)			(90)			(90)			(41	)		(41	)
Deficit accumulated during the development stage		(221,892	)		(220,548	)		(239,492	)		(234,326	)		(251,465	)		(247,433	)
T Total stockholders’ equity (deficit)		(1,354)			(6,310)			(18,553)			(19,687)			5,410			5,410
T Total liabilities and stockholders’ equity (deficit)	$	46,151		$	46,151		$	24,661		$	24,661		$	44,387		$	44,387

F-28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ANTHERA PHARMACEUTICALS, INC.


	By:	/s/ Paul F. Truex
		Paul F. Truex


		President and Chief Executive Officer (Principal Executive Officer)

Dated: March 28, 2014

POWER OF ATTORNEY

We, the undersigned officers and directors of Anthera Pharmaceuticals, Inc., hereby severally constitute and appoint Paul F. Truex and May Liu, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him or her and in his or her name, place and stead, and in any and all capacities, to sign for us and in our names in the capacities indicated below any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Paul F. Truex	President, Chief Executive Officer and Director (Principal Executive Officer)	March 28, 2014
Paul F. Truex

/s/ May Liu	Senior Vice President, Finance and Administration (Principal Accounting Officer)	March 28, 2014
May Liu

/s/ Christopher S. Henney	Chairman of the Board of Directors	March 28, 2014
Christopher S. Henney

/s/ Bogdan Dziurzynski	Director	March 28, 2014
Bogdan Dziurzynski

/s/ James I. Healy	Director	March 28, 2014
James I. Healy

/s/ Daniel K. Spiegelman	Director	March 28, 2014
Daniel K. Spiegelman

/s/ David E. Thompson	Director	March 28, 2014
David E. Thompson

/s/ Sanford S. Zweifach	Director	March 28, 2014
Sanford S. Zweifach

Exhibit Index

Number		Description
3.1		Fifth Amended and Restated Certificate of Incorporation(1)

3.2		Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation filed October 12, 2012(2)

3.3		Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation filed July 12, 2013 and effective July 15, 2013(3)

3.4		Amended and Restated Bylaws(4)

4.1		Specimen certificate evidencing shares of common stock(5)

4.2		Form of Warrant sold pursuant to that Securities Purchase Agreement, among the Company and the purchasers thereto, dated September 20, 2010(6)

4.3		Form of Warrant Agreement dated as of March 25, 2011(7)

4.4		Warrant to Purchase Common Stock issued to MidCap Financial SBIC, LP dated April 3, 2013(8)

#10.1		2005 Equity Incentive Plan and form agreements thereunder(9)

#10.2		Amended and Restated 2010 Stock Option and Incentive Plan(10)

#10.3		Certificate of Amendment to Amended and Restated 2010 Stock Option and Incentive Plan(11)

#10.4		Form of Non-Qualified Stock Option Agreement for Company Employees Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(12)

#10.5		Form of Non-Qualified Stock Option Agreement for Non-Employee Directors Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(12)

#10.6		Form of Incentive Stock Option Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(12)

#10.7		Form of Restricted Stock Award Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(12)

#10.8		Restricted Stock Unit Award Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(13)

#10.9		2010 Employee Stock Purchase Plan(14)

#10.10		Amendment No. 1 to 2010 Employee Stock Purchase Plan(15)

#10.11		Amendment No. 2 to 2010 Employee Stock Purchase Plan(16)

#10.12		2013 Stock Option and Incentive Plan(17)

#10.13		Form of Non-Qualified Stock Option Agreement for Company Employees Under the 2013 Stock Option and Incentive Plan

#10.14		Form of Non-Qualified Stock Option Agreement for Non-Employees Under the 2013 Stock Option and Incentive Plan

#10.15		Form of Incentive Stock Option Agreement Under the 2013 Stock Option and Incentive Plan

#10.16		Form of Restricted Stock Award Agreement Under the 2013 Stock Option and Incentive Plan

#10.17		Form of Restricted Stock Unit Award Agreement Under the 2013 Stock Option and Incentive Plan

#10.18		Form of Amended and Restated Indemnification Agreement(18)

#10.19		Form of Amended and Restated Change in Control Agreement(19)

#10.20		Form of Amended and Restated Severance Benefits Agreement(20)

+10.21		License Agreement between Amgen Inc. and the Company, dated as of December 18, 2007(21)

10.22		Amendment No. 1 to License Agreement between Amgen Inc. and the Company, dated as of October 16, 2009(22)

10.23		Form of Securities Purchase Agreement, among the Company and the purchasers thereto, dated September 20, 2010(23)

10.24		Credit and Security Agreement by and between the Company and MidCap Financial SBIC, LP, dated as of April 3, 2013(24)

10.25		Loan and Security Agreement by and between the Company and Square 1 Bank, dated as of April 3, 2013(25)

10.26		Lease by and between the Company and MEPT Mount Eden LLC, dated as of May 4, 2011(26)

10.27		Lease Amendment by and between the Company and MEPT Mount Eden LLC, dated as of November 13, 2013

10.28		Second Amended and Restated Change in Control Agreement, by and between the Company and Dr. Colin Hislop, dated as of August 5, 2011(27)

10.29		Second Amended and Restated Change in Control Agreement, by and between the Company and Dr. Debra Odink, dated as of August 5, 2011(28)

10.30		Deferred Compensation Agreement by and between the Company and Paul Truex, effective as of December 27, 2012(29)

10.31		Deferred Compensation Election Form by and between the Company and Paul Truex, effective as of December 7, 2013

14.1		Code of Business Conduct and Ethics(30)

16.1		Letter from Deloitte & Touche LLP, regarding change in certified accountant(31)

21.1		Subsidiaries of Anthera Pharmaceuticals, Inc.(32)

23.1		Consent of BDO USA LLP, independent registered public accounting firm

23.2		Consent of Deloitte & Touche LLP, independent registered public accounting firm

24.1		Power of Attorney (included on signature page hereto)

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended


31.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*			XBRL Instance Document.

101.SCH*			XBRL Taxonomy Extension Schema Document.

101.CAL*			XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*			XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*			XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*			XBRL Taxonomy Extension Presentation Linkbase Document.

________________

+	Certain provisions of this Exhibit have been omitted pursuant to a request for confidential treatment.

#	Indicates management contract or compensatory plan, contract or agreement.

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of the section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

(1)	Filed as Exhibit 3.6 to the registrant’s Registration Statement on Form S-1/A (File No. 333-161930), filed with the SEC on February 3, 2010 and incorporated herein by reference.

(2)	Filed as same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 26, 2013 and incorporated herein by reference.

(3)	Filed as Exhibit 3.1 to the registrant Current Report on Form 8-K, filed with the SEC on July 16, 2013 and incorporated herein by reference.

(4)	Filed as Exhibit 3.7 to the registrant’s Registration Statement on Form S-1/A (File No. 333-161930) filed with the SEC on February 3, 2010 and incorporated herein by reference.

(5)	Filed as the same numbered exhibit to the registrant’s Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on January 29, 2010 and incorporated herein by reference.

(6)	Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 22, 2010 and incorporated herein by reference.

(7)	Filed as Exhibit 10.2 to registrant’s Current Report on Form 8-K, filed with the SEC on March 29, 2011 and incorporated herein by reference.

(8)	Filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2013, and incorporated herein by reference.

(9)	Filed as the same numbered exhibit to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.

(10)	Filed as Appendix A to the registrant’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on June 8, 2010 and incorporated herein by reference.

(11)	Filed as Exhibit 10.2 to registrant’s Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2011 and incorporated herein by reference.

(12)	Filed as Exhibit 10.2 to the registrant’s Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on February 3, 2010 and incorporated herein by reference.

(13)	Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2010 and incorporated herein by reference.

(14)	Filed as Appendix B to the registrant’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on June 8, 2010 and incorporated herein by reference.

(15)	Filed as Exhibit 10.42 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 7, 2011 and incorporated herein by reference.

(16)	Filed as Exhibit 10.34 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 26, 2013 and incorporated herein by reference.

(17)	Filed as Annex B to the registrants Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 5, 2013 and incorporated herein by reference.

(18)	Filed as Exhibit 10.3 to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.

(19)	Filed as the Exhibit 10.4 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.

(20)	Filed as the Exhibit 10.5 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.

(21)	Filed as Exhibit 10.10 to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.

(22)	Filed as Exhibit 10.18 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.

(23)	Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 22, 2010 and incorporated herein by reference.

(24)	Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2013, and incorporated herein by reference.

(25)	Filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2013, and incorporated herein by reference.

(26)	Filed as Exhibit 10.4 to registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2011 and incorporated herein by reference.

(27)	Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on August 9, 2011, and incorporated herein by reference.

(28)	Filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K, filed with the SEC on August 9, 2011, and incorporated herein by reference.

(29)	Filed as Exhibit 10.35 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 26, 2013 and incorporated herein by reference.

(30)	Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 7, 2011 and incorporated herein by reference.

(31)	Filed as the same numbered exhibit to the registrant’s Current Report on Form 8-K, filed with the SEC on September 9, 2013, and incorporated herein by reference.

(32)	Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2012 and incorporated herein by reference.

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Delaware (State or Other Jurisdiction of Incorporation or Organization)	20-1852016 (I.R.S. Employer Identification No.)

25801 Industrial Boulevard, Suite B
Hayward, California (Address of Principal Executive Offices)	94545 (Zip Code)

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share		The NASDAQ Global Market

		Page
	PART I
Item 1.	Business	5
Item 1A.	Risk Factors	31
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	47
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	48
Item 6.	Selected Financial Data	49
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8.	Consolidated Financial Statements and Supplementary Data	60
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	60
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	61
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	62
Item 11.	Executive Compensation	62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
Item 14.	Principal Accountant Fees and Services	62
	PART IV
Item 15.	Exhibits and Consolidated financial statement Schedules	F-1
SIGNATURES		63

Compound	Stage	Company	Indications	Notes
Benlysta® (intravenous and subcutaneous)	Approved Phase 2/3	GlaxoSmithKline plc	Lupus (approved), Lupus Nephritis, Myasthenia Gravis, Idiopathic Membranous Nephropathy Vasculitis, Pediatric Lupus	• Monoclonal antibody against soluble BAFF • Positive results reported in two Phase 3 clinical studies • Phase 3 trials in lupus (evaluating subcutaneous administration) and lupus nephritis ongoing • Phase 2 open-label trial in membranous nephropathy ongoing
Tabalumab (LY2127399) (subcutaneous and intravenous)	Phase 3	Eli Lilly and Company	Lupus, Multiple Myeloma	• Monoclonal antibody against BAFF inhibits soluble and membrane-bound BAFF • Phase 3 rheumatoid arthritis program terminated • TACI receptor fused to human Fc which targets BAFF and APRIL
Epratuzumab (intravenous)	Phase 3	Immunomedics, Inc./UCB S.A.	Lupus, Non-Hodgkin’s Lymphoma Acute Lymphoblastic Leukemia	• Humanized antibody against CD-22, an agent that specifically targets B-cells and leads to decreased activity of peripheral B-cells • Improvements in disease activity reported in placebo-controlled as well as longer-term OLE studies • Phase 3 clinical studies in severe lupus ongoing
Atacicept (intravenous and subcutaneous)	Phase 3 Phase 2	ZymoGenetics Inc./Merck Serono S.A.	Lupus	• Decreased incidence of lupus flares in patients with severe lupus reported from Phase 2/3 trial
Lupuzor (subcutaneous)	Phase 3	ImmuPharma plc	Lupus	• Modulates CD 4 T cells • Positive Phase 2b clinical study results

	High		Low
First Quarter 2012	$	67.33	$	17.60
Second Quarter 2012	$	25.68	$	5.41
Third Quarter 2012	$	14.32	$	4.83
Fourth Quarter 2012	$	9.36	$	4.64
First Quarter 2013	$	6.72	$	3.92
Second Quarter 2013	$	5.44	$	3.70
Third Quarter 2013	$	4.60	$	3.11
Fourth Quarter 2013	$	4.08	$	2.68

																						Cumulative Period From September 9, 2004 (Inception) to
	Years Ended December 31,																					December 31,

	2013			2012(1)			2011(1)			2010(2)									2009			2013
				As restated			As restated			As reported			Adjustments			As restated
	(in thousands, except share and per share data)
Statement of Operations Data:
Operating expenses
Research and development	$	21,684		$	49,219		$	85,281		$	29,457		$	—		$	29,457		$	8,415		$	236,965
General and administrative		6,563			6,715			7,857			6,301			—			6,301			3,426			37,353
Total operating expenses		28,247			55,934			93,138			35,758			—			35,758			11,841			274,318

Loss from operations		(28,247	)		(55,934	)		(93,138	)		(35,758	)		—			(35,758	)		(11,841	)		(274,318	)
Other income (expense):
Other income (expense)		(15	)		(111	)		606			(15	)		—			(15	)		(192	)		1,485
Interest expense		(2,599	)		(3,354	)		(2,803	)		(845	)		—			(845	)		(170	)		(10,301	)
Mark-to-market adjustment of warrant liability		—			14,070			(3,738	)		(3,796	)		(6,300	)		(10,096	)		—			236
Beneficial conversion feature		—			—			—			—			—			—			—			(4,309	)
Total other income (expense)		(2,614	)		10,605			(5,935	)		(4,656	)		—			(10,956	)		(362	)		(12,889	)
Net loss	$	(30,861	)	$	(45,329	)	$	(99,073	)	$	(40,414	)	$	(6,300	)	$	(46,714	)	$	(12,203	)	$	(287,207	)
Net loss per share — basic and diluted (3)(5)	$	(1.69	)	$	(6.27	)	$	(21,18	)	$	(14.11	)	$	(2.20	)	$	(16.31	)	$	(64.50	)
Weighted average shares used in net loss per share — basic and diluted (4) (5)		18,267,413			7,225,406			4,677,210			2,863,716			2,863,716			2,863,716			189,200

	Years Ended December 31,						For the Period September 9, 2004 (Date of Inception) to December 31,
	2013		2012		2011		2013
Allocated costs:
Varespladib	$	323	$	20,468	$	46,139	$	114,019(1)
Blisibimod		16,824		24,151		32,300		85,244 (2)
Varespladib sodium		—		51		118		6,681
Unallocated costs		4,537		4,549		6,724		31,021
Total development	$	21, 684	$	49,219	$	85,281	$	236,965

		2013				2012				$ Change				% Change
Research and development expense		$	21,684			$	49,219			$	(27,535	)			(56	)%

	Three Months Ended March 31,
	2013			2012			$ Change			% Change

Other income (expense)	$	25		$	(10	)	$	35			(350	%)
Interest expense		(704	)		(843	)		139			(16	%)
Mark-to-market adjustment on warrant liability		—			11,382			(11,382	)		(100	%)

Total Other income (expense)	$	(679	)	$	10,529		$	(11,208	)		(106	%)

	Three Months Ended June 30,
	2013			2012			$ Change			% Change

Other income (expense)	$	(6	)	$	(28	)	$	22			(79	%)
Interest expense		(1,322	)		(908	)		(414	)		46	%
Mark-to-market adjustment on warrant liability		—			3,822			(3,822	)		(100	%)

Total Other income (expense)	$	(1,328	)	$	2,886		$	(4,214	)		(146	%)

	Six Months Ended June 30,
	2013			2012			$ Change			% Change

Other income (expense)	$	19		$	(38	)	$	57			(150	%)
Interest expense		(2,026	)		(1,751	)		(275	)		16	%
Mark-to-market adjustment on warrant liability		—			15,204			(15,204	)		(100	%)

Total Other income (expense)	$	(2,007	)	$	13,415		$	(15,422	)		(115	%)

	Three Months Ended September 30,
	2013			2012			$ Change		% Change

Other income (expense)	$	14		$	(46	)	$	60		(130	%)
Interest expense		(296	)		(806	)		510		(63	%)
Mark-to-market adjustment on warrant liability		—			(1,134	)		1,134		(100	%)

Total Other income (expense)	$	(282	)	$	(1,986	)	$	1,704		(86	%)

	Nine Months Ended September 30,
	2013			2012			$ Change			% Change

Other income (expense)	$	33		$	(84	)	$	117			(139	%)
Interest expense		(2,322	)		(2,557	)		235			(9	%)
Mark-to-market adjustment on warrant liability		—			14,070			(14,070	)		(100	%)

Total Other income (expense)	$	(2,289	)	$	11,429		$	(13,718	)		(120	%)

Payments Due by Period	Less than 1 year		1 - 3 years		3-5 years		More than 5 years		Total
Notes Payable	$	2,857	$	5,238	$	10,000	$	—	$	18,095
Interest on Notes Payable		772		700		34		—		1,506
Facility Lease		217		442		167		—		826
Total	$	3,846	$	6,380		10,201		—	$	20,427

Option Holder:
Date of Grant:
Vesting Commencement Date:
Number of ISO Shares Subject to Option:
Exercise Price (Per Share):
Total Exercise Price:
Expiration Date:

Type of Grant:	¨ Incentive Stock Option 1	x Nonstatutory Stock Option
Exercise Schedule :	¨ Same as Vesting Schedule	¨ Early Exercise Permitted
Vesting Schedule :	Shares in each period will become fully vested on the date shown below:

Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share:	$
	[FMV on Grant Date]
Grant Date:
Expiration Date:
	[No more than 10 years]

Incremental Number of Option Shares Exercisable	Exercisability Date

( %)
( %)
( %)

Type of Grant:	x Incentive Stock Option 1	o Nonstatutory Stock Option
Exercise Schedule :	o Same as Vesting Schedule	o Early Exercise Permitted

Name of Grantee:

No. of Shares:

Grant Date:

Grant Date Fair Value:

Number of Shares Vested	Vesting Date

_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________

Name of Grantee:
No. of Restricted Stock Units Granted:
Grant Date:
Grant Date Fair Value:

Incremental (Aggregate) Number of Restricted Stock Units Vested	Vesting Date
( %)
( %)
( %)

		December 7 th , 2013
Executive: Paul F. Truex	Date
Title: President & CEO

Applicable Portion of Lease Term		Monthly Base Rent, NNN	Annual Base Rent, NNN
Beginning first day of:	Ending last day of:
October 1, 2014	September 30, 2015	$13,332.30	$159,987.60
October 1, 2015	September 30, 2016	$13,732.27	$164,787.24
October 1, 2016	September 30, 2017	$14,144.24	$169,730.88

Designated Address for Landlord :	LANDLORD :


MEPT Mount Eden LLC c/o Bentall Kennedy (U.S.) Limited Partnership	MEPT Mount Eden LLC, a Delaware limited liability company
Attn: Dir. of Asset Management - MEPT 1215 Fourth Avenue, Suite 2400	By:	MEPT Edgemoor REIT LLC, a Delaware limited liability company, its Manger
Seattle, WA 98161
Facsimile: 206-682-4769		By:	Bentall Kennedy (U.S.) Limited Partnership, its Authorized Signatory
and to:
MEPT Mount Eden LLC			By:	Bentall Kennedy (U.S.) G.P. LLC, its General Partner
c/o NewTower Trust company Attn: President/MEPT or Patrick O. Mayberry 3 Bethesda Metro Center, Suite 1600 Bethesda, MD 20814 Facsimile: 240-235-9961

Designated Address for Tenant : Anthera Pharmaceuticals, Inc.	TENANT : 11/13/13 Anthera Pharmaceuticals, Inc., a Delaware
Attn:	corporation
25801 Industrial Blvd., Suite 200 Hayward, CA 94545 Phone: Facsimile:


By:	/s/ PAUL F. TRUEX
	Name:	Paul F. Truex
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)