10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

Form 10-K

_______________

(Mark One)
☑	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

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-29959

_______________

Pain Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	91-1911336
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

7801 N. Capital of Texas Highway, Suite 260, Austin, TX 78731

(512) 501-2444

(Address, including zip code, of registrant's principal executive offices and

telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐  No☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes☐No☑

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑No☐.

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  ☐	Accelerated filer  ☑
Non-accelerated filer  ☐ (Do not check if a smaller reporting company)	Smaller reporting company  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐No ☑

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $82,913,105computed by reference to the last sales price of $2.21as reported on the NASDAQ Global Select Market, as of the last business day of the Registrant's most recently completed second fiscal quarter, June 30, 2013.

The number of shares outstanding of the Registrant's common stock on January12,  2014was 45,510,038.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its 2014Annual Meeting of Stockholders (the "Proxy Statement"), to be filed with the Securities and Exchange Commission, are incorporated by reference to Part III of this Form 10-K Report.

PAIN THERAPEUTICS, INC.

FORM 10-K

INDEX

		Page
	PART I
Item 1.	Business.........................................................................................................................................	3
Item 1A.	Risk Factors...................................................................................................................................	10
Item 1B.	Unresolved Staff Comments...............................................................................................................	24
Item 2.	Properties.........................................................................................................................................	24
Item 3.	Legal Proceedings.............................................................................................................................	25
Item 4.	Mine Safety Disclosures...................................................................................................................	25
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data.....................................................................................................................	27
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.............................	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.....................................................................	34
Item 8.	Financial Statements and Supplementary Data.......................................................................................	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................	50
Item 9A.	Controls and Procedures.................................................................................................................	50
Item 9B.	Other Information.........................................................................................................................	52
	PART III
Item 10.	Directors and Executive Officers and Corporate Governance...................................................................	52
Item 11.	Executive Compensation...................................................................................................................	52
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.............	52
Item 13.	Certain Relationships and Related Transactions and Director Independence.................................................	52
Item 14.	Principal Accountant Fees and Services...............................................................................................	53
	PART IV
Item 15.	Exhibits and Financial Statement Schedules.........................................................................................	53

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PART I

This document contains forward-looking statements that are based upon current expectations that are within the meaning of the Private Securities Reform Act of 1995. We intend that such statements be protected by the safe harbor created thereby. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to statements about:

· activities of Pfizer, Inc., or Pfizer, or its subsidiary King Pharmaceuticals, Inc., or King, with respect to obtaining approval of  REMOXY® (oxycodone) Extended-Release Capsules CII, by the U.S. Food and Drug Administration, or FDA, including the timing of potential clinical trial activities and the potential submission of a response to the FDA’s complete response letter with respect to REMOXY;  

· royalty, milestone or collaboration revenue we may receive from Pfizer and other payments we may receive from our collaboration agreements;

· expectations regarding REMOXY commercialization activities of Pfizer and Pfizer’s acquisition of King potentially facilitating commercial success of REMOXY, if approved by the FDA;

· expansion of our potential product line, including the formulation of additional dosage forms of our drug candidates;

· operating losses and anticipated operating and capital expenditures;

· expected uses of capital resources;

· the potential benefits of our drug candidates;

· the utility of protection of our intellectual property and the timing of expiration of patents covering our product candidates;

· expected future sources of revenue and capital and increasing cash needs;

· potential competitors or competitive products;

· market acceptance of our drug candidates and potential drug candidates;

· expenses increasing, interest income decreasing or fluctuations in our operating results;

· expectations regarding trade secrets, technological innovations, licensing agreements and outsourcing of certain business functions;

· anticipated hiring and development of our internal systems and infrastructure;

· the sufficiency of our current resources to fund our operations over the next twelve months;

· assumptions and estimates used for our disclosures regarding stock-based compensation; and

· estimates concerning the realization of deferred tax assets.

Such forward-looking statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties relating to:

· difficulties or delays in the potential regulatory approval of REMOXY and in planned activities with respect to REMOXY development;

· the successful development and commercialization of REMOXY pursuant to the Pfizer Agreements;

· difficulties or delays in development, testing, clinical trials (including patient enrollment), regulatory approval, production and commercialization of our drug candidates;

· unexpected adverse side effects or inadequate therapeutic efficacy of our drug candidates that could slow or prevent product approval (including the risk that current and past results of clinical trials are not indicative of future results of clinical trials) or potential post-approval market acceptance;

· the uncertainty of protection of our intellectual property rights or trade secrets;

· potential infringement of the intellectual property rights of third parties;

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· pursuing in-license and acquisition opportunities;

· maintenance or third-party funding of our collaboration and license agreements;

· hiring and retaining personnel; and

· our financial position and our ability to obtain additional financing if necessary.

In addition, such statements are subject to the risks and uncertainties discussed in the "Risk Factors" section and elsewhere in this document.

Item 1.Business

Overview

We are a biopharmaceutical company that develops novel drugs. Our lead drug candidate, REMOXY, is an extended-release oral formulation of oxycodone for the management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. We designed REMOXY to discourage common methods of tampering and misuse. REMOXY is being developed pursuant to a strategic alliance we have with Pfizer under the Pfizer Agreements.

Pfizer acquired King in early 2011, and references in this section to Pfizer include references to King. We believe Pfizer's acquisition of King may facilitate REMOXY's commercial success, if approved by the FDA.

We and King jointly managed a Phase III clinical program and NDA submission for REMOXY. In mid-2008, the FDA accepted our NDA for REMOXY with Priority Review. In December 2008, we received from the FDA a Complete Response Letter for the NDA for REMOXY. In this Complete Response Letter, the FDA indicated additional non-clinical data was required to support the approval of REMOXY. Also, the FDA did not request or recommend additional clinical efficacy studies prior to approval. In 2009, King assumed sole responsibility for the regulatory approval of REMOXY. In December 2010, King resubmitted the REMOXY NDA. In January 2011, we announced that the FDA had accepted the resubmission of the REMOXY NDA.  In June 2011, we and Pfizer announced that King received a Complete Response Letter from the FDA in response to King’s resubmission of the REMOXY NDA.  The FDA's Complete Response Letter raised concerns related to, among other matters, the Chemistry, Manufacturing, and Controls section of the NDA for REMOXY.

In March 2013, Pfizer met with the FDA to discuss Pfizer’s plans to respond to the Complete Response Letter. On May 9, 2013, Pfizer provided us with a copy of minutes of their March 2013 FDA meeting as well as a letter that we filed with the SEC on Form 8-K on May 10, 2013.

On October 21, 2013, Pfizer informed us that, having achieved technical milestones related to manufacturing, they plan to continue the development program for REMOXY. We also were informed that, following guidance received from the FDA earlier this year, Pfizer plans to proceed with the additional clinical studies and other actions required to address the Complete Response Letter received in June 2011. These new clinical studies are expected to include, in part, a pivotal bioequivalence study with amodified REMOXY formulation to bridge to the clinical data related to the original REMOXY formulation, and an abuse-potential study with the modified formulation. The FDA did not require any further drug efficacy trials. Pfizer has indicated that the complete response submission is not expected to occur prior to mid-2015.

On October 21, 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. This amendment did not change any of the economic terms related to REMOXY. We are eligible to receive from Pfizer a $15.0 million payment upon FDA approval of REMOXY. Pfizer is obligated to fund the commercialization expenses of, and has the exclusive right to market and sell, REMOXY pursuant to the Pfizer Agreements. After commercial launch, we will receive from Pfizer a royalty of 20% of net sales of REMOXY in the United States, except as to the first cumulative $1.0 billion in net sales, which royalty is set at 15%. The royalty rate outside the U.S. is 10%. Pfizer is also obligated to reimburse us for our payment of third-party royalty obligations related to this strategic alliance.

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REMOXY

REMOXY is a novel controlled-release oral capsule form of oxycodone in a highly viscous liquid formulation matrix that includes novel excipients. It is specifically formulated to help address issues of abuse and misuse of time-release oxycodone tablets.  Sales of time-release oxycodone were estimated to be over $3.0 billion in 2009.

The analgesic action of extracts of the opium poppy plant has been known for millennia. In more recent decades, semi-synthetic opium derivatives, such as oxycodone, a generic drug in clinical use since the 1930’s, have become a standard of care for treating moderate-to-severe pain.

Opioid misuse and abuse are significant public health problems. It is well-known that medicinal opioids such as oxycodone can produce both analgesia and euphoria. The search for euphoric effects can lead to drug-seeking behavior, tolerance and dependence. In particular, rapid increases in plasma levels of oxycodone may lead to overdose, respiratory depression or death.

The REMOXY formulation is designed to resist common methods of chemical or physical manipulation. REMOXY’s capsule dosage form provides therapeutic drug levels of oxycodone on a twice-daily dosing schedule, while resisting the rapid increases in plasma levels of oxycodone associated with common methods of abuse and misuse. Its formulation also resists delivery by unapproved routes of administration, such as injection, snorting or inhalation.

REMOXY is an investigational drug candidate whose safety and efficacy have not yet been established by the FDA. REMOXY is intended to meet the needs of physicians who appropriately prescribe opioid painkillers and who seek to minimize the risks of drug diversion, abuse or accidental patient misuse as well as the needs of pharmacists and the managed care healthcare system in the United States.

Abuse-resistant formulations of Hydromorphone, Hydrocodone and Oxymorphone

We believe the abuse-resistant technology used in REMOXY is applicable to different oral opioid painkillers. As part of the October 2013 amendment to the Pfizer Agreements, Pfizer terminated its rights and obligations with respect to abuse-resistant formulations of hydrocodone, hydromorphone and oxymorphone. Under the terms of the amendment, we do not have any royalty or other obligations to Pfizer and we now own all commercial rights with respect to these drug candidates.

Our abuse-resistant product candidates are intended to meet the needs of physicians who appropriately prescribe opioid painkillers and who seek to minimize the risks of drug diversion, abuse or accidental patient misuse as well as the needs of pharmacists and the managed care healthcare system in the United States. Investigational New Drug, or IND, applications for all three drug candidates are in place with FDA.

Early-stageproduct candidates

We continue to develop early-stagenovel product candidates. We own all commercial rights to these early-stageproduct candidates.

Strategy

Our corporate strategy is to spend carefully but to keep innovation at the top of our agenda.  Our clinical goal is to continue to develop novel drugs that are more effective or safer than drugs used in the clinic today. Elements of our strategy include:

Focus on Clinical Development Stage Products.We believe this focus will enable us to generate product revenues earlier than if we were focused on early-stage research and discovery activities.

Retain Significant Rights to Our Drugs.We currently retain worldwide commercialization rights to all of our technology and drug candidates in all markets and indications, except for REMOXY, which is subject to the Pfizer Agreements. In general,we intend to independently develop our drug candidates through late-stage clinical trials. In market segments that require large or specialized sales forces, we may seek sales and marketing alliances with third parties.

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Outsource Key Functions.We intend to continue to outsource preclinical studies, clinical trials and formulation and manufacturing activities. We believe outsourcing permits significant time savings and allows for more efficient deployment of our resources.

Pursue In-licensing or Acquisition Opportunities.We intend to evaluate promising drug candidates or technologies to further expand our product pipeline. Our in-licensing strategy consists of evaluating clinical or preclinical stage opportunities in therapeutic areas that can benefit from our core expertise in drug development. Such in-licensing or acquisition opportunities may be in pain management or in other therapeutic areas outside of pain management. We believe this element of our corporate strategy could diversify some of the risks inherent in focusing on a single therapeutic area and could also increase our probability of commercial success.

We also conduct basic research in collaboration with academic and other partners. Our research and development expenses were $8.3 million in 2011,  $7.6 million in 2012 and $4.9 million in 2013. We recorded contract revenue related to customer-sponsored research activities under the Pfizer Agreementsof $0.6 million in 2011 and $0.2 million in 2012.

Our Intellectual Property

We own or license a number of U.S. and foreign patents, patent applications and rights to patents covering our products and technology. We consider the overall protection of our patents and other intellectual property rights to be of material value and act to protect these rights from infringement.

We seek to protect our technology by, among other methods, filing and prosecuting U.S. and foreign patents and patent applications with respect to our technology and products and their uses. The focus of our patent strategy is to secure and maintain intellectual property rights to technology for the following categories of our business:

· the technology that forms the basis of REMOXY and our other abuse resistant drug candidates;

· the technologies related to our pre-clinical product candidates; and

· the manufacture and use of our drug candidates.

However, we may rely on certain proprietary technologies and know-how that are not patentable. We protect our proprietary information, in part, by the use of confidentiality agreements with our employees, consultants, and certain of our contractors.

We plan to prosecute and defend our patent applications, allowed patents, issued patents and proprietary information. Our competitive position and potential future revenues will depend in large part upon our ability to protect our intellectual property from challenges and to enforce our patent rights against potential infringements.

Patents expire, on a country by country basis, at various times depending on various factors, including the filing date of corresponding patent applications.Our material patents and the material patents we license from third parties include the following issued U.S. Patents: 8,420,120;  8,415,401; 8,354,124; 8,168,217; 8,153,152; 8,147,870;  8,133,507;  7,833,543; 6,413,536; 5,968,542; and 5,747,058.

Our presently issued U.S. patents and the presently issued U.S. patents we license from third parties for REMOXY are currently estimated to expire by 2031. In Europe, the presently granted patents for REMOXY are currently estimated to expire by 2023. Patents may have their term extended for various reasons including the grant of patent term adjustments, patent term extensions, or supplemental protection certificates, or may have their term shortened for various reasons including by terminal disclaimers.

Certain U.S. patent applications and patent applications outside the U.S. are pending. If the patent applications do not result in issued or granted patents, the duration or scope of our patent rights may be limited and our future revenues could be lower as a result.

If our competitors are able to successfully challenge the validity or scope of our patent rights, based on the existence of prior art or otherwise, they might be able to market products that contain features and clinical benefits similar to those of our drug candidates, and demand for our drug candidates could decline as a result.

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We may be involved in additional challenges to our intellectual property. An adverse outcome of any challenges to our intellectual property could result in loss of claims or a reduction of scope of claims of these patents and could have a material adverse impact on our future revenues.

Strategic Alliance with Pfizer

Our strategic alliance with Pfizer includes a collaboration agreement and a license agreement to develop and commercialize REMOXY.  As part of the October 2013 amendment to the Pfizer Agreements, Pfizer terminated its rights and obligations with respect to abuse-resistant formulations of hydrocodone, hydromorphone and oxymorphone.

We and Pfizer have a joint oversight committee, or JOC, to oversee strategies for the strategic alliance. Pfizer retains sole responsibility for the regulatory approval of REMOXY. We retain all development and commercial rights to REMOXY in Australia and New Zealand.

Pfizer is obligated to fund the commercialization expenses of, and has the exclusive right to market and sell, REMOXY.  The royalty rate for net sales of REMOXY in the United States is 20%, except as to the first $1.0 billion in cumulative net sales in the United States, for which the royalty is 15%. The royalty rate for net sales of REMOXY outside the United States is 10%. Pfizer is also obligated to reimburse us for our payment of third-party royalty obligations related to this strategic alliance.

We have received the following program fee and milestone payments under the Pfizer Agreements:

	Year Received	Amount Received (mm)
Upfront program fee payment	2005	$	150
Program fee payment related to an amendment to the strategic alliance	2010	$	5
Milestone payments related to:
acceptance by the FDA of the NDA for REMOXY	2008	$	15
acceptance by the FDA of the IND for abuse-resistant oxymorphone	2011	$	5
acceptance by the FDA of the IND for abuse-resistant hydrocodone	2008	$	5
acceptance by the FDA of the IND for abuse-resistant hydromorphone	2006	$	5

We will receive a $15.0 million cash milestone payment from Pfizer upon regulatory approval of REMOXY in the United States. In addition, subject to certain limitations, Pfizer is obligated to fund development expenses incurred by us pursuant to the collaboration agreement.

The collaboration agreement with Pfizer continues until the later of the expiration of any patent rights licensed under the license agreement or developed under the collaboration agreement and the expiration of all periods of market exclusivity with respect to REMOXY. Currently, the last to expire issued patent covered by such arrangement expires by 2031; however, such date may be extended by the issuance of any additional patents pursuant to pending patent applications. We and Pfizer can terminate the collaboration agreement under certain circumstances, including material breach and insolvency. Ourlicense agreement with Pfizer terminates at the time that the collaboration agreement terminates.

Formulation Agreement with Durect Corporation

We have an exclusive, worldwide Development and License Agreement, or the Durect Agreement, with Durect Corporation, or Durect, to use a patented technology that forms the basis for certain drug candidates, including REMOXY. We reimburse Durect for formulation and related work, and make milestone payments based on the achievement of certain technical, clinical or regulatory milestones. Aggregate payments to Durect from the inception of the Durect Agreement in late 2002 to December 31, 2013 were approximately $38.0 million. We paid Durect $1.0 million in upfront payments under the Durect Agreement and $1.7 million for achievement of certain clinical and regulatory milestones. We could pay up to another $7.6 million of potential payments under the Durect Agreement following achievement of certain clinical and regulatory milestones. We have sub-licensed to Pfizer certain rights to develop and to commercialize REMOXY. Pfizer is obligated to

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reimburse us for all expenses for formulation and related work and for milestone payments we incur under our agreement with Durect related to REMOXY.

We also are obligated to pay Durect royalties on any related drug sales. These royalties range from 6.0% to 11.5%, depending on the level of sales of licensed products in a given calendar year. In turn, Pfizer is obligated to reimburse us for all royalty expenses we incur under the agreement with Durect for REMOXY product sales under the Pfizer Agreements.  Durect is obligated to supply Pfizer with certain components of REMOXY pursuant to a commercial supply agreement between Pfizer and Durect.

The Durect Agreement terminates on a country-by-country basis upon the later of the expiration of the last to expire of the patents licensed under such agreement or a certain number of years following first commercial sale in such country. Currently, the last to expire patent covered by such agreement expires by 2031. However, we expect such date may be extended by the issuance of any additional patents pursuant to pending patent applications. We can terminate the Durect Agreement with notice to Durect and we and Durect can terminate such agreement under certain circumstances, including material breach and insolvency.

Under our license agreement with Pfizer, we are obligated not to amend or terminate our agreement with Durect if an amendment or termination would alter the rights or obligations of Pfizer under the Pfizer Agreements.

Manufacturing

We do not own any manufacturing facilities. We plan to continue to outsource formulation, manufacturing and related activities.

We rely on a limited number of third-party manufacturers to formulate, manufacture, fill, label, ship or store all of our drug candidates. We have entered into agreements with and rely upon qualified third parties for the formulation or manufacture of our clinical supplies. These supplies and the manufacturing facilities must comply with DEA regulations and current good manufacturing practices, or GMPs, enforced by the FDA and other government agencies.

We and Pfizer rely on Durect and other third-party manufacturers to formulate, manufacture, fill, label, ship or store REMOXY.  We rely on Durect to formulate other abuse-resistant drug candidates and their components. Pfizer is responsible for all manufacturing and supply of REMOXY. REMOXY and our abuse-resistant formulations of hydromorphone, hydrocodone and oxymorphone are formulated using, in part, proprietary technology licensed from Durect.

Government Regulation

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of pharmaceuticals and in our ongoing research and development activities. All of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical testing and clinical trials and other pre-marketing approval requirements by the FDA and regulatory authorities in other countries. In the United States, various federal, and in some cases state, statutes and regulations also govern or impact upon the manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require us to spend substantial resources. Regulatory approval, when and if obtained, may be limited in scope which may significantly limit the indicated uses for which our products may be marketed. Further, approved drugs, as well as their manufacturers, are subject to ongoing review and discovery of previously unknown problems with such products that may result in restrictions on their manufacture, sale or use or in their withdrawal from the market.

Applicable FDA regulations require the filing of an NDA or a Biologic License Application, or BLA and approval by the FDA prior to commercialization of any of our drug candidates in the United States.

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The Drug Approval Process

We will be required to complete several activities before we can market any of our drug candidates for human use in the United States, including:

· preclinical studies;

· submission to the FDA of an IND which must become effective before human clinical trials commence;

· adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate;

· submission to the FDA of an NDA; and

· FDA approval of the NDA prior to any commercial sale or shipment of the drug.

Preclinical tests include laboratory evaluation of product chemistry and formulation, as well as animal studies to assess the potential safety of the product. Preclinical safety tests must be conducted by laboratories that comply with FDA regulations regarding Good Laboratory Practice. We submitted the results of preclinical tests to the FDA as part of our INDs prior to commencing clinical trials. We may be required to conduct additional toxicology studies.

Based on preclinical testing, an IND is filed with the FDA to begin human testing of the drug in the United States. The IND becomes effective if not rejected by the FDA within 30 days. The IND must indicate the results of previous experiments, how, where and by whom the new clinical trials will be conducted, the chemical structure of the compound, the method by which it is believed to work in the human body, any toxic effects of the compound found in the animal studies and how the compound is manufactured. All clinical trials must be conducted in accordance with Good Clinical Practice. In addition, an Institutional Review Board, or IRB, generally comprised of physicians at the hospital or clinic where the proposed clinical trials will be conducted, must review and approve the IND. The IRB also continues to monitor the clinical trial. We must submit progress reports detailing the results of the clinical trials to the FDA at least annually. In addition, the FDA may, at any time during the 30-day period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials under the IND cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. An FDA imposed clinical hold on an IND application can result in substantial delay and large, unforeseen expenses, and it may cancel the viability of developing a new drug candidate in the United States.

Clinical trials are typically conducted in three sequential phases that may overlap. Phase I clinical trials typically study a drug’s safety profile, and may include the safe dosage range. Phase I clinical trials also determine how a drug is absorbed, distributed, metabolized and excreted by the body, and the duration of its action. In addition, we may, to the extent feasible, assess early indicators of a drug’s efficacy in our Phase I clinical trials. In Phase II clinical trials, controlled studies are conducted on volunteer patients with the targeted disease or condition. The primary purpose of these tests is to evaluate the effectiveness of the drug on the volunteer patients as well as to determine a drug’s side effect profile. These clinical trials may be conducted concurrently with Phase I clinical trials. In addition, Phase I/II clinical trials may be conducted to evaluate not only the efficacy of the drug on the patient population, but also its safety. During Phase III clinical trials, the drug is studied in an expanded patient population and in multiple sites. Physicians monitor the patients to determine efficacy and to observe and report adverse events that may result from use of the drug.

Our clinical trials are designed to produce clinical information about how our drugs perform compared to placebo or compared to existing drugs where appropriate. We have designed most Phase II and Phase III clinical trials to date as randomized, double-blind, placebo-controlled, dose-ranging studies. A randomized clinical trial is one in which patients are randomly assigned to the various study treatment arms. A double-blind clinical trial is one in which the patient, the physician and our trial monitor are unaware if the patient is receiving placebo or study drug in order to preserve the integrity of the clinical trial and reduce bias. A placebo-controlled clinical trial is one in which a subset of patients is purposefully given inactive medication.

We may not successfully complete Phase I, Phase II or Phase III clinical trials within any specified time period, or at all, with respect to any of our drug candidates. Furthermore, we or the FDA may suspend clinical trials at any time in response to concerns that participants are exposed to an unacceptable health risk.

After the completion of clinical trials, if there is substantial evidence that the drug is safe and effective, an NDA is filed with the FDA. The NDA must contain all of the information on the drug gathered to that date, including data from the clinical trials. NDAs are often the equivalent of over 100,000 pages in length.

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The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. In such an event, the NDA must be resubmitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the Federal Food, Drug and Cosmetic Act, the FDA reviews the NDA and responds to the applicant. The review process is typically extended for significant amounts of time by the FDA’s requests for additional information or clarification regarding information already provided in the submission. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee.

If the FDA’s evaluations of the NDA and the manufacturing facilities are favorable, the FDA may issue either a Complete Response Letter indicating either an approval or may identify conditions that must be met in order to secure final approval of the NDA. When and if those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter, authorizing commercial marketing of the drug for certain indications. If the FDA’s evaluation of the NDA submission or manufacturing facilities is not favorable, the FDA may refuse to approve the NDA or issue a not approvable letter.

If the FDA approves the NDA, the drug becomes available for physicians to prescribe. Periodic reports must be submitted to the FDA, including descriptions of any adverse reactions reported. The FDA may request additional post marketing studies, or Phase IV clinical trials, to evaluate long-term effects of the approved drug.

Other Regulatory Requirements

The FDA mandates that drugs be manufactured in conformity with current GMP. If the FDA approves any of our drug candidates we will be subject to requirements for labeling, advertising, record keeping and adverse experience reporting. Failure to comply with these requirements could result, among other things, in suspension of regulatory approval, recalls, injunctions or civil or criminal sanctions. We may also be subject to regulations under other federal, state, and local laws, including the Occupational Safety and Health Act, the Environmental Protection Act, the Clean Air Act, national restrictions on technology transfer, and import, export, and customs regulations. In addition, any of our products that contain narcotics will be subject to DEA regulations relating to manufacturing, storage, distribution and physician prescribing procedures. It is possible that any portion of the regulatory framework under which we operate may change and that such change could have a negative impact on our current and anticipated operations.

The Controlled Substances Act imposes various registration, record-keeping and reporting requirements, procurement and manufacturing quotas, labeling and packaging requirements, security controls and a restriction on prescription refills on certain pharmaceutical products. A principal factor in determining the particular requirements, if any, applicable to a product is its actual or potential abuse profile. The DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Any of our drug candidates that contain a scheduled substance will be subject to regulation by the DEA.

Competition

Our success will depend, in part, upon our ability to achieve market share at the expense of existing and established and future products in the relevant target markets. Existing and future products, therapies, technological approaches or delivery systems will compete directly with our products. Competing products may provide greater therapeutic benefits for a specific indication, or may offer comparable performance at a lower cost. Companies that currently sell generic or proprietary opioid formulations may include, but are not limited to, Roxane Laboratories, Purdue Pharma, Pfizer, Abbott Laboratories, Endo Pharmaceuticals, Teva Pharmaceuticals, Elkins-Sinn, Watson Laboratories, Ortho-McNeil Pharmaceutical and Forest Pharmaceuticals. Alternative technologies are being developed to address the issue of abuse or misuse of opioid painkillers or increase opioid potency, as well as alternatives to opioid therapy for pain management, several of which are in clinical trials or are awaiting approval from the FDA.

We compete with fully integrated pharmaceutical companies, smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have opioid drugs already approved by the FDA or in development and operate larger research and

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development programs in these fields than we do. In addition, many of these competitors, either alone or together with their collaborative partners, have substantially greater financial resources than we do, as well as significantly greater experience in:

· developing drugs;

· undertaking preclinical testing and human clinical trials;

· obtaining FDA and other regulatory approvals of drugs;

· formulating and manufacturing drugs; and

· launching, marketing, distributing and selling drugs.

Developments by competitors may render our drug candidates or technologies obsolete or non-competitive. We also compete with these companies for qualified personnel and opportunities for product acquisitions, joint ventures or other strategic alliances.

REMOXY® is a trademark of Pain Therapeutics, Inc.

Incorporation

We were incorporated in Delaware in May 1998.

Employees

As of December 31, 2013, we had 8 employees. We engage consultants from time to time to perform services on retainer, a per diem or hourly basis.

Available Information

We file electronically with the Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.paintrials.com, by contacting our corporate offices by calling 512-501-2444 or by sending an e-mail message to IR@paintrials.com.

Item 1A.Risk Factors

Our future operating results may vary substantially from anticipated results due to a number of factors, many of which are beyond our control. The following discussion highlights some of these factors and the possible impact of these factors on future results of operations. You should carefully consider these factors before making an investment decision. If any of the following factors actually occur, our business, financial condition or results of operations could be harmed. In that case, the price of our common stock could decline, and you could experience losses on your investment in our common stock.

Clinical and Regulatory Risks

If we or our collaborators fail to obtain the necessary regulatory approvals, or if such approvals are limited, we and our collaborators will not be allowed to commercialize our drug candidates, and we will not generate product revenues.

Satisfaction of all regulatory requirements for commercialization of a drug candidate typically takes many years, is dependent upon the type, complexity and novelty of the drug candidate, and requires the expenditure of substantial resources for research and development. In December 2008, we received from the FDA a Complete Response Letter for the NDA for

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REMOXY. In this Complete Response Letter, the FDA indicated additional non-clinical data was required to support the approval of REMOXY. Also, the FDA did not request or recommend additional clinical efficacy studies prior to approval. In March 2009, King assumed sole responsibility for the regulatory approval of REMOXY. In December 2010, King resubmitted the NDA for REMOXY. In June 2011, we and Pfizer announced that King received a Complete Response Letter from the FDA in response to King’s resubmission of the REMOXY NDA. The FDA’s Complete Response Letter raised concerns related to, among other matters, the Chemistry, Manufacturing, and Controls section of the NDA for REMOXY. Certain drug lots showed inconsistent release performance during in vitro testing. In October 2013, Pfizer announced that its proposed continued development plan for REMOXY is expected to include additional clinical studies (including a bioequivalence study and an abuse-potential study) required to address the Complete Response Letter received in June 2011. There can be no assurance that additional studies for REMOXY will be successfully completed, that the FDA will approve an NDA for REMOXY (even with additional data) or that the FDA will not require additional clinical or non-clinical data to be submitted even if the proposed additional studies are completed successfully. Failure to complete the studies, obtaining data from such studies (even if completed) that is insufficient to support approval of REMOXY, or any adverse decisions by the FDA (including any decision by the FDA to require additional clinical or non-clinical data) may significantly delay or prevent the potential approval of REMOXY and could result in Pfizer ceasing their development of or pursuing regulatory approval of REMOXY.

Our research and clinical approaches may not lead to drugs that the FDA considers safe for humans and effective for indicated uses we are studying. The FDA may require additional studies, in which case we or our collaborators would have to expend additional time and resources and would likely delay the date of potentially receiving regulatory approval. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals would:

•delay commercialization of, and product revenues from, our drug candidates; and

•diminish the competitive advantages that we may have otherwise enjoyed, which would have an adverse effect on our operating results and financial condition.

Even if we or our collaborators comply with all FDA regulatory requirements, our drug candidates may never obtain regulatory approval. If we or our collaborators fail to obtain regulatory approval for any of our drug candidates we will have fewer commercial products, if any, and corresponding lower product revenues, if any. Even if our drug candidates receive regulatory approval, such approval may involve limitations on the indications and conditions of use or marketing claims for our products. Further, later discovery of previously unknown problems or adverse events could result in additional regulatory restrictions, including withdrawal of products. The FDA may also require us or our collaborators to commit to perform lengthy Phase IV post-approval clinical efficacy or safety studies. Our expending additional resources on such trials would have an adverse effect on our operating results and financial condition.

In jurisdictions outside the United States, we or our collaborators must receive marketing authorizations from the appropriate regulatory authorities before commercializing our drugs. Regulatory approval processes outside the United States generally include all of the aforementioned requirements and risks associated with FDA approval.

If we or our collaborators are unable to design, conduct and complete clinical trials successfully, our drug candidates will not be able to receive regulatory approval.

In order to obtain FDA approval for any of our drug candidates, we or our collaborators must submit to the FDA an NDA that demonstrates with substantive evidence that the drug candidate is both safe and effective in humans for its intended use. This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials.

Results from Phase I clinical programs may not support moving a drug candidate to Phase II or Phase III clinical trials. Phase III clinical trials may not demonstrate the safety or efficacy of our drug candidates. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. Results of later clinical trials may not replicate the results of prior clinical trials and preclinical studies. Even if the results of Phase III clinical trials are positive, we or our collaborators may have to commit substantial time and additional resources to conducting further preclinical studies and clinical trials before obtaining FDA approval for any of our drug candidates.

Clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous requirements. The clinical trial process also consumes a significant amount of time. Furthermore, if participating patients in clinical trials suffer drug-related adverse reactions during the course of such clinical trials, or if we, our collaborators or the

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FDA believe that participating patients are being exposed to unacceptable health risks, such clinical trials will have to be suspended or terminated. Failure can occur at any stage of the clinical trials, and we or our collaborators could encounter problems that cause abandonment or repetition of clinical trials.

Clinical trials with REMOXY and our potential future clinical trials for other drug candidates for treatment of pain measure clinical symptoms, such as pain and physical dependence that are not biologically measurable. The success in these clinical trials depends on reaching statistically significant changes in patients’ symptoms based on clinician-rated scales. Due in part to a lack of consensus on standardized processes for assessing clinical outcomes, these scores may or may not be reliable, useful or acceptable to regulatory agencies.

In addition, completion of clinical trials can be delayed by numerous factors, including:

•delays in identifying and agreeing on acceptable terms with prospective clinical trial sites;

•slower than expected rates of patient recruitment and enrollment;

•unanticipated patient dropout rates;

•increases in time required to complete monitoring of patients during or after participation in a clinical trial; and

•unexpected need for additional patient-related data.

Any of these delays could significantly impact the timing, approval and commercialization of our drug candidates and could significantly increase our overall costs of drug development.

Even if clinical trials are completed as planned, their results may not support expectations or intended marketing claims. The clinical trials process may fail to demonstrate that our drug candidates are safe and effective for indicated uses. Such failure would cause us to abandon a drug candidate and could delay development of other drug candidates.

Clinical trial designs that were discussed with authorities prior to their commencement may subsequently be considered insufficient for approval at the time of application for regulatory approval.

We discuss with and obtain guidance from regulatory authorities on certain of our clinical development activities. With the exception of our Special Protocol Assessment, or SPA, such as the one we completed with the FDA with respect to the Phase III clinical trial for REMOXY, these discussions are not binding obligations on the part of regulatory authorities.

Regulatory authorities may revise previous guidance or decide to ignore previous guidance at any time during the course of our clinical activities or after the completion of our clinical trials. Even with successful clinical safety and efficacy data, including such data from a clinical trial conducted pursuant to an SPA, we or our collaborators may be required to conduct additional, expensive clinical trials to obtain regulatory approval.

Developments by competitors may establish standards of care that affect our ability to conduct our clinical trials as planned.

We have conducted clinical trials of our drug candidates comparing our drug candidates to both placebo and other approved drugs. Changes in standards related to clinical trial design could affect our ability to design and conduct clinical trials as planned. For example, regulatory authorities may not allow us to compare our drug candidates to placebo in a particular clinical indication where approved products are available. In that case, both the cost and the amount of time required to conduct a clinical trial could increase.

The DEA limits the availability of the active ingredients in certain of our current drug candidates and, as a result, quotas for these ingredients may not be sufficient to complete clinical trials, or to meet commercial demand or may result in clinical delays.

The U.S. Drug Enforcement Administration, or DEA, regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Certain active ingredients in our current drug candidates, such as oxycodone, are listed by the DEA as Schedule II under the Controlled Substances Act of 1970. Consequently, their manufacture, research, shipment, storage, sale and use are subject to a high degree of oversight and regulation. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Furthermore, the amount of Schedule II substances that can be obtained for clinical trials and commercial distribution is limited by the DEA and quotas

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for these substances may not be sufficient to complete clinical trials or meet commercial demand. There is a risk that DEA regulations may interfere with the supply of the drugs used in clinical trials for our product candidates, and, in the future, the ability to produce and distribute our products in the volume needed to meet commercial demand.

Conducting clinical trials of our drug candidates or potential commercial sales of a drug candidate may expose us to expensive product liability claims and we may not be able to maintain product liability insurance on reasonable terms or at all.

The risk of product liability is inherent in the testing of pharmaceutical products. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or terminate testing of one or more of our drug candidates. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of our drug candidates. We currently carry clinical trial insurance but do not carry product liability insurance. If we successfully commercialize one or more of our drug candidates, we may face product liability claims, regardless of FDA approval for commercial manufacturing and sale. We may not be able to obtain such insurance at a reasonable cost, if at all. Even if our agreements with any current or future corporate collaborators entitle us to indemnification against product liability losses, such indemnification may not be available or adequate should any claim arise.

If our drug candidates receive regulatory approval, we and our collaborators will be subject to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements, and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of which may result in significant expense and limit our and our collaborators’ ability to commercialize our potential drugs.

Any regulatory approvals that our drug candidates receive may also be subject to limitations on the indicated uses for which the drug may be marketed or contain requirements for potentially costly post-marketing follow-up studies. In addition, if the FDA approves any of our drug candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for the drug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the drug, including but not limited to adverse events of unanticipated severity or frequency, or the discovery that adverse events previously observed in preclinical research or clinical trials that were believed to be minor actually constitute much more serious problems, may result in restrictions on the marketing of the drug, and could include withdrawal of the drug from the market.

The FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. For example, on July 9, 2012, the FDA approved a risk management program, known as a Risk Evaluation and Mitigation Strategy, or REMS, for extended-release and long-acting opioid analgesics, or ER/LA opioid analgesics. This REMS will require companies affected by the REMS to make available training for health care professionals who prescribe ER/LA opioid analgesics on proper prescribing practices and also to distribute educational materials to prescribers and patients on the safe use of ER/LA opioid analgesics.

We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could prevent us from marketing our drugs and our business could suffer.

Risks Relating to our Collaboration Agreements

Pfizer’s acquisition of King may have an adverse impact on our collaboration.

Pfizer completed its acquisition of King in 2011. Drugs or drug candidates being commercialized or developed by Pfizer, its subsidiaries and affiliates may compete for research, development and commercialization resources with REMOXY. Further, any post-merger integration of Pfizer’s and King’s businesses may divert the attention of management and personnel from their focus on seeking approval of REMOXY. Pfizer is a much larger company than King was prior to Pfizer’s acquisition of King. Pfizer may have different strategic interests than King had as an independent company. There can be no assurance that King or Pfizer will devote sufficient resources to the continued development of REMOXY in a timely manner.

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If Pfizer or other outside collaborators fail to devote sufficient time and resources to drug development programs related to our product candidates, or if their performance is substandard, regulatory submissions and introductions for our products may be delayed.

We rely on Pfizer and its subsidiaries to devote time and resources to the development, manufacturing and commercialization of REMOXY under the Pfizer Agreements. Pfizer and its subsidiaries and affiliates may commercialize, develop or acquire drugs or drug candidates that may compete directly or compete for resources with REMOXY. For instance, Pfizer is developing ALO-02 (an extended release abuse resistant formulation of oxycodone that would compete with REMOXY) and owns Embeda® (an extended-release oral formulation of morphine sulfate), and Avinza® (a once-daily morphine treatment for moderate to severe pain). There can be no assurance that these other drugs or other drug candidates in the Pfizer corporate family will not become competitive with REMOXY. Pfizer may also determine, outside of the context of internal resource competition, to cease pursuit of development of REMOXY due to perceived difficulties of achieving regulatory approval, including as a result of potential time and cost concerns and concerns regarding any potential additional requests by the FDA for clinical or non-clinical data to support approval. If time and resources devoted are limited or there is a failure to fund the continued development of REMOXY as required by the Pfizer Agreements, or there is otherwise a failure to perform as we expect, we may not achieve clinical and regulatory milestones and regulatory submissions and related product introductions may be delayed or prevented, and revenues that we would receive from these activities will be less than expected. In addition, if Pfizer fails to perform as required under the Pfizer Agreements, their failure may jeopardize our rights under our license with Durect.

We rely on Durect as the sole source provider of certain components of REMOXY. Durect’s failure for any reason to provide these components could result in delays or failures in product testing or delivery, cost overruns or other problems that could materially harm our business.

We depend on independent investigators and collaborators, such as universities and medical institutions, to conduct our clinical trials under agreements with us. These investigators and collaborators are not our employees and we cannot control the amount or timing of resources that they devote to our programs. They may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such activities ourselves. If these investigators or collaborators fail to devote sufficient time and resources to our drug development programs, or if their performance is substandard, the approval of our regulatory submissions and our introductions of new drugs will be delayed or prevented.

Our collaborators may also have relationships with other commercial entities, some of which may compete with us. If outside collaborators assist our competitors to our detriment, the approval of our regulatory submissions will be delayed and the sales from our products, if any are commercialized, will be less than expected.

If we fail to maintain our collaboration agreements and licenses for REMOXY and other drugs designed to reduce potential risks of unintended use, we may have to reduce or delay our drug candidate development.

Our plan for developing, manufacturing and commercializing REMOXY currently requires us to successfully maintain the Pfizer Agreements and to maintain our license from Durect. If we are not able to maintain the Pfizer Agreements, we may have to limit the size or scope of, or delay or abandon the development of other drug candidates or undertake and fund development of REMOXY ourselves and if we are unable to meet the obligations necessary to maintain our license with Durect for one or more potential products we may lose the rights to utilize Durect’s technology for such potential products. If we elect to fund drug development efforts with respect to REMOXY and other drug candidates on our own, we may need to obtain additional capital, which may not be available on acceptable terms, or at all.

We may not succeed at in-licensing drug candidates or technologies to expand our product pipeline.

We may not successfully in-license drug candidates or technologies to expand our product pipeline. The number of such candidates and technologies is limited. Competition among large pharmaceutical companies and biopharmaceutical companies for promising drug candidates and technologies is intense because such companies generally desire to expand their product pipelines through in-licensing. If we fail to carry out such in-licensing and expand our product pipeline, our potential future revenues may suffer.

Our collaborative agreements may not succeed or may give rise to disputes over intellectual property, disputes concerning the scope of collaboration activities or other issues.

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Our strategy to focus on drug development requires us to enter into collaborative agreements with third parties, such as the Pfizer Agreements and our license agreement with Durect. Such agreements are generally complex and contain provisions that could give rise to legal disputes, including potential disputes concerning ownership of intellectual property under collaborations or disputes concerning the scope of collaboration activities. Such disputes can delay or prevent the development of potential new drug products, or can lead to lengthy, expensive litigation or arbitration. Other factors relating to collaborative agreements may adversely affect our business, including:

•the development of parallel products by our collaborators or by a competitor;

•arrangements with collaborative partners that limit or preclude us from developing certain products or technologies;

•premature termination of a collaborative or license agreement; or

•failure by a collaborative partner to provide required funding, to devote sufficient resources to the development of or legal defense of our potential products or to provide data or other information to us as required by our collaborative agreements.

Risks Relating to Commercialization

If physicians and patients do not accept and use our drugs, we will not achieve sufficient product revenues and our business will suffer.

Even if the FDA approves our drugs, physicians and patients may not accept and use them. Acceptance and use of our drugs will depend on a number of factors including:

•perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drugs, and, in particular, the effectiveness of REMOXY in reducing potential risks of unintended use;

•perceptions by physicians regarding the cost benefit of REMOXY in reducing potential risks of unintended use;

•published studies demonstrating the cost-effectiveness of our drugs relative to competing products;

•availability of reimbursement for our products from government or healthcare payers;

•our or our collaborators’ ability to implement a risk management plan prior to the distribution of any Schedule II drug; and

•effectiveness of marketing and distribution efforts by Pfizer, us and other licensees and distributors.

Because we expect to rely on sales generated by our current lead drug candidates for substantially all of our revenues for the foreseeable future, the failure of any of these drugs to find market acceptance would harm our business and could require us to seek additional financing.

If Pfizer or its subsidiaries are not successful in developing and commercializing REMOXY, our revenues and our business will suffer.

Our ability to earn royalties from sales of REMOXY and milestone revenue depends on Pfizer’s ability to obtain regulatory approval for and commercialize REMOXY. Additionally, our ability to earn royalties from sales of REMOXY will depend on Pfizer’s ability to maintain regulatory approval and achieve market acceptance of REMOXY once commercialized. Pfizer or its subsidiaries may elect to independently develop drugs that could compete with ours or fail to commit sufficient resources to the development, marketing and distribution of REMOXY. Pfizer may not proceed with the commercialization of REMOXY with the same degree of urgency as we would because of other priorities they face. If Pfizer is not successful in developing or commercializing REMOXY for a variety of reasons, including but not limited to competition from other pharmaceutical companies, or if Pfizer fails to perform as we expect, our potential for revenue from REMOXY, if any, could be dramatically reduced and our business would suffer.

If we are unable to develop our own sales, marketing and distribution capabilities, or if we are not successful in contracting with third parties for these services on favorable terms, or at all, our product revenues could be disappointing.

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We currently have no sales, marketing or distribution capabilities. Except with regard to REMOXY, in order to commercialize our products, if any are approved by the FDA, we will either have to develop such capabilities internally or collaborate with third parties who can perform these services for us. If we decide to commercialize any of our drugs ourselves, we may not be able to hire the necessary experienced personnel and build sales, marketing and distribution operations which are capable of successfully launching new drugs and generating sufficient product revenues. In addition, establishing such operations will take time and involve significant expense.

If we decide to enter into new co-promotion or other licensing arrangements with third parties, we may be unable to locate acceptable collaborators because the number of potential collaborators is limited and because of competition from others for similar alliances with potential collaborators. Even if we are able to identify one or more acceptable new collaborators, we may not be able to enter into any collaborative arrangements on favorable terms, or at all.

In addition, due to the nature of the market for our drug candidates, it may be necessary for us to license all or substantially all of our drug candidates not covered by the Pfizer Agreements to a single collaborator, thereby eliminating our opportunity to commercialize these other products independently. If we enter into any such new collaborative arrangements, our revenues are likely to be lower than if we marketed and sold our products ourselves.

In addition, any revenues we receive would depend upon our collaborators’ efforts which may not be adequate due to lack of attention or resource commitments, management turnover, change of strategic focus, business combinations or other factors outside of our control. Depending upon the terms of our collaboration, the remedies we have against an under-performing collaborator may be limited. If we were to terminate the relationship, it may be difficult or impossible to find a replacement collaborator on acceptable terms, or at all.

If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient product revenues and our business will suffer.

The market for our drug candidates is characterized by intense competition and rapid technological advances. If our drug candidates receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. If our products are unable to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.

We and our collaborators will compete for market share against fully integrated pharmaceutical companies or other companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have drugs already approved or drug candidates in development that will or may compete against our approved drug candidates. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs and have substantially greater financial resources than we do, as well as significantly greater experience in:

•developing drugs;

•conducting preclinical testing and human clinical trials;

•obtaining FDA and other regulatory approvals of drugs;

•formulating and manufacturing drugs; and

•launching, marketing, distributing and selling drugs.

If Pfizer or we fail to obtain acceptable prices or an adequate level of reimbursement for our products from healthcare payers, our ability to generate product revenues will be diminished.

Our ability to earn royalties from sales of REMOXY, and our ability to commercialize drugs we (alone or with other collaborators) may develop outside the Pfizer Agreements, will depend in part on the extent to which reimbursement can be obtained for such drugs from:

•government and health administration authorities;

•private health maintenance organizations and health insurers; and

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•other healthcare payers.

Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, health maintenance organizations and managed care organizations, are challenging the prices charged for medical products and services and/or are seeking pharmacoeconomic data to justify formulary acceptance and reimbursement practices. We currently have not generated pharmacoeconomic data on any of our drug candidates. Government and other healthcare payers increasingly are attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs, and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has or has not granted labeling approval. Adequate third-party insurance coverage may not be available to patients for any products we discover and develop, alone or with collaborators. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our products, market acceptance of our drug candidates could be limited.

Government agencies may establish and promulgate usage guidelines that could limit the use of our drug candidates.

Government agencies, professional and medical societies, and other groups may establish usage guidelines that apply to our drug candidates. These guidelines could address such matters as usage and dose, among other factors. Application of such guidelines could limit the clinical use or commercial appeal of our drug candidates.

Risks Relating to our Intellectual Property

Our ability to commercialize our drug candidates will depend on our ability to sell such products without infringing the patent or proprietary rights of third parties. If we are sued for infringing the intellectual property rights of third parties, such litigation will be costly and time consuming and an unfavorable outcome would have a significant adverse effect on our business.

Our ability to commercialize our drug candidates will depend on our ability to sell such products without infringing the patents or other proprietary rights of third parties. Intellectual property rights in the areas of controlled-release technology and pharmaceutical ingredients are complicated and are continuously evolving. Holders of patent rights in these areas may allege that the commercialization of REMOXY or our other drug candidates infringes such patent rights. While we believe that we would have valid defenses to any claim of infringement, there can be no assurance that these or other third-party patents will not limit our ability to commercialize REMOXY or our other drug candidates.

In addition, because patent applications are published some time after filing, and because applications can take several years to issue, there may be currently pending third-party patent applications that are unknown to us, which may later result in issued patents. If a third-party claims that we infringe on its patents or other proprietary rights, we could face a number of issues that could seriously harm our competitive position, including:

•infringement claims that, with or without merit, can be costly and time consuming to litigate, can delay the regulatory approval process and can divert management’s attention from our core business strategy;

•substantial damages for past infringement which we may have to pay if a court determines that our products or technologies infringe upon a competitor’s patent or other proprietary rights;

•a court order prohibiting us from commercializing our products or technologies unless the holder licenses the patent or other proprietary rights to us, which such holder is not required to do;

•if a license is available from a holder, we may have to pay substantial royalties or grant cross licenses to our patents or other proprietary rights; and

•redesigning our process so that it does not infringe the third-party intellectual property rights, which may not be possible, or which may require substantial time and expense including delays in bringing our own products to market. Such actions could harm our competitive position and our ability to generate revenue and could result in increased costs.

If we are unable to protect our intellectual property, our competitors could develop and market products with similar features that may reduce demand for our drug candidates.

Our success, competitive position and potential future revenues will depend in part on our ability to protect our intellectual property. If we or our collaborators fail to file, prosecute, obtain or maintain certain patents, our competitors could market

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products that contain features and clinical benefits similar to those of our products, and demand for our products could decline as a result.

We and our collaborators have filed patent applications in the United States and select international jurisdictions to protect our intellectual property.The coverage sought in a patent application can be denied or significantly reduced before or after the patent is issued. Consequently, we do not know whether any of our pending applications will result in the issuance of patents, or if any existing or future patents will provide significant protection or commercial advantage or will be circumvented by others. There can be no assurance that patents will issue from our pending or future patent applications or, if issued, that such patents will be of commercial benefit to us, afford us adequate protection from competing products, or not be challenged or declared invalid. Thus, if these patent applications do not result in issued patents or result ina patent that is challenged by others, the duration or scope of our patent rights may be limited and our future revenues could be lower as a result.

We may be involved in challenges to our intellectual property. An adverse outcome of a challenge to our intellectual property could result in loss of claims of patents or other intellectual property rights that pertain to certain drugs we currently have under development and could have a material adverse impact on our future revenues.

We intend to file additional patent applications relating to our technology, products and processes. We may direct our collaborators to file additional patent applications relating to the licensed technology or we may do so ourselves. However, our competitors may challenge, invalidate or circumvent any of our current or future patents. These patents may also fail to provide us with meaningful competitive advantages.

We may become involved in expensive litigation or other legal proceedings related to our existing intellectual property rights, including patents.

We expect that we will rely upon patents, trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. Others may independently develop substantially equivalent proprietary information or be issued patents that may prevent the sale of our products or know-how or require us to license such information and pay significant fees or royalties in order to produce our products.

Our technology could infringe upon claims of patents owned by others. If we were found to be infringing on a patent held by another, we might have to seek a license to use the patented technology. In that case, we might not be able to obtain such a license on terms acceptable to us, or at all. If a legal action were to be brought against us or our licensors, we could incur substantial defense costs, and any such action might not be resolved in our favor. If such a dispute were to be resolved against us, we could have to pay the other party large sums of money and our use of our technology and the testing, manufacture, marketing or sale of one or more of our proposed products could be restricted or prohibited.

Risks Relating to our Business and Strategy

If we are not successful in attracting and retaining qualified personnel, we could experience delays in completing necessary clinical trials, in the regulatory approval process or in formulating, manufacturing, marketing and selling our potential products.

We depend on the services of our key personnel, including Remi Barbier, our Chairman, President and Chief Executive Officer. The loss of key personnel, including members of executive management as well as key bioengineering, product development, and technical personnel, could disrupt our operations and have an adverse effect on our business. We will need to hire additional qualified personnel with expertise in clinical research, preclinical testing, government regulation, formulation and manufacturing and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and our search for such personnel may not be successful. Attracting and retaining qualified personnel is critical to our success.

We have employees whose equity ownership in the Company could result in a substantial increase in personal wealth if the fair value of our common stock increases. Over time, this increase in personal wealth may make it more challenging to retain these employees.

If third-party manufacturers of our drug candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may be higher than expected.

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We have no manufacturing facilities and have limited experience in drug product development and commercial manufacturing. We lack the resources and expertise to formulate, manufacture or test the technical performance of our drug candidates. We currently rely on a limited number of experienced personnel and a small number of contract manufacturers and other vendors to formulate, test, supply, store and distribute drug supplies for our clinical trials. Our reliance on a limited number of vendors exposes us to the following risks, any of which could delay our clinical trials, and, consequently, FDA approval of our drug candidates and commercialization of our products, result in higher costs, or deprive us of potential product revenues:

•Contract commercial manufacturers, their sub-contractors or other third parties we rely on, may encounter difficulties in achieving the volume of production needed to satisfy clinical needs or commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, and may experience shortages of qualified personnel to adequately staff production operations.

•Our contract manufacturers could default on their agreements with us to provide clinical supplies or meet our requirements for commercialization of our products.

•For certain of our drug candidates, the use of alternate manufacturers may be difficult because the number of potential manufacturers that have the necessary governmental licenses to produce narcotic products is limited. Additionally, the FDA and the DEA must approve any alternative manufacturer of our products before we may use the alternative manufacturer to produce our supplies.

•It may be difficult or impossible for us to find a replacement manufacturer on acceptable terms quickly, or at all. Our contract manufacturers and vendors may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store and distribute our products.

•If any contract manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to such innovation.

We may not be able to successfully develop or commercialize potential drug candidates for indications other than pain.

Our research and development activities include development of potential drug candidates for indications other than pain. We have no history of developing such drug candidates. We do not know whether any of our planned development activities will result in marketable products. We do not anticipate that our drug candidates in these areas will reach the market for at least several years, if at all.

Our employees and consultants are generally subject to confidentiality or other agreements with their former employers and they may inadvertently or otherwise violate those agreements.

Many of our employees and consultants were previously employed at universities or biotechnology or pharmaceutical companies. While we require our employees and consultants to honor any agreements they may have entered into prior to working with us, we may be subject to claims that we inadvertently or otherwise used or disclosed trade secrets or other confidential information belonging to former employers. Failure to defend such claims could result in loss of valuable rights or personnel, which in turn could harm or prevent commercialization of our drug candidates. Successful defense against such claims can be expensive and might distract us from executing our strategies.

Law enforcement concerns over diversion of opioids and social issues around abuse of opioids may make the regulatory approval process and commercialization of our drug candidates very difficult.

Media stories regarding the diversion of opioids and other controlled substances are commonplace. Law enforcement agencies or regulatory agencies may apply policies that seek to limit the availability of opioids. Such efforts may adversely affect the regulatory approval and commercialization of our drug candidates.

Developments by competitors may render our products or technologies obsolete or non-competitive.

Alternative technologies and products are being developed to improve or replace the use of opioids for pain management, several of which are in clinical trials or are awaiting approval from the FDA. In addition, the active ingredients in nearly all opioid drugs are available in generic form. Drug companies that sell generic opioid drugs represent substantial competition. Many of these organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater experience in drug development and in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. Our competitors may market less expensive or more effective drugs that would compete with our drug candidates or reach market with competing drugs before we are able to reach market with our drug candidates.

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These organizations also compete with us to attract qualified personnel and partners for acquisitions, joint ventures or other collaborations.

Business interruptions could limit our ability to operate our business.

Our operations as well as those of our collaborators on which we depend are vulnerable to damage or interruption from computer viruses, human error, natural disasters, electrical and telecommunication failures, international acts of terror and similar events. We have not established a formal disaster recovery plan and our back-up operations and our business interruption insurance may not be adequate to compensate us for losses we may suffer. A significant business interruption could result in losses or damages incurred by us and require us to cease or curtail our operations.

Unfavorable media coverage of opioid pharmaceuticals could negatively affect our business.

Opioid drug abuse receives a high degree of media coverage. Unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs, the limitations of abuse-resistant formulations, public inquiries and investigations into prescription drug abuse, litigation or regulatory activity, or the independent actions of Pfizer regarding the sales, marketing, distribution or storage of REMOXY, could adversely affect our reputation. Such negative publicity could have an adverse effect on the potential size of the market for our drug candidates and decrease revenues and royalties, which would adversely affect our business and financial results.

Risks Relating to Manufacturing

We rely on third-party commercial drug manufacturers for drug supply.

Approved third-party commercial drug manufacturers may subsequently be stopped from producing, storing, shipping or testing our drug products due to their non-compliance with federal, state or local regulations. Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the DEA, and corresponding state and foreign government agencies to ensure strict compliance with GMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

In addition, even if we enter into long-term supply arrangements with third-party suppliers, we cannot control changes in strategy by third-party suppliers that affect their ability or willingness to continue to supply our drug products on acceptable terms.

If our drug supply for one of our drug candidates was interrupted, our operations could be negatively affected.

If we and Pfizer cannot formulate and scale-up a wide range of dosage forms of REMOXY, we and Pfizer might determine that the commercial opportunity for REMOXY in certain dosage forms is too limited to warrant further investment in clinical testing and development.

We and Pfizer plan to formulate and scale-up a wide range of dosage forms of REMOXY. We and Pfizer may not be able to successfully complete our formulation or scale-up activities or we may determine that the commercial opportunity for REMOXY in certain dosage forms is too limited to warrant further investment. If we and Pfizer are unsuccessful in our formulation or scale-up activities with REMOXY, our future revenue from milestones and royalties under the Pfizer Agreements may be less than expected and our operations may suffer.

We and, with respect to REMOXY, Pfizer rely solely on Durect to provide us with certain components drug candidates designed to reduce potential risks of unintended use and will continue to rely on Durect to produce commercial supplies of these components.

We and, with respect to REMOXY, Pfizer rely on Durect as the sole source provider of certain components of drug candidates designed to reduce the potential risks of unintended use, and will rely solely on Durect to produce commercial supplies of these components. Durect’s failure for any reason to provide these components or to achieve and maintain satisfactory manufacturing standards could result in product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could materially harm our business.

Durect may encounter manufacturing difficulties involving production yields, quality control and quality assurance. Durect is subject to ongoing periodic unannounced inspection by the FDA and corresponding state and foreign agencies to

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ensure strict compliance with government regulations and corresponding foreign standards. We cannot control Durect’s compliance with these regulations and standards.

If Pfizer receives marketing approval for and commercially launches REMOXY, Durect may need to materially expand its manufacturing capacity. Durect may not be able to increase its manufacturing capacity for REMOXY in a timely or economic manner, or at all. Moreover, significant scale up of manufacturing will require additional validation studies, which are subject to FDA review and approval. If Durect is unable to successfully increase the manufacturing capacity for such components of REMOXY, at an acceptable cost or otherwise, and Pfizer is unable to establish alternative manufacturing capabilities, commercialization of REMOXY may be delayed, prevented or impaired or there may be a shortage in supply, which would harm our future revenues and cause our business to suffer.

Risks Relating to our Financial Position and Need for Financing

Our operating history may make it difficult for you to evaluate our business to date and to assess its future viability.

Our operations from our inception to date have been limited to organizing and staffing our company, acquiring, developing and securing our technology, undertaking preclinical studies and clinical trials of our drug candidates and forming collaborations. We have not yet demonstrated our ability to obtain regulatory approval, formulate and manufacture our drug candidates on a commercial scale or conduct sales and marketing activities. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

We have a history of losses and expect to incur substantial losses and negative operating cash flows for the foreseeable future.

Although we were profitable in some years in the past based on payments received pursuant to the Pfizer Agreements and interest income, we have yet to generate any revenues from product sales. We have an accumulated deficit of $104.1 millionat December 31, 2013. Even if we succeed in developing and commercializing one or more of our drug candidates, we expect to continue to use significant cash resources in our operations for the foreseeable future. We anticipate that our expenses will increase substantially in the foreseeable future as we:

•continue to conduct preclinical studies and clinical trials for our drug candidates;

•seek regulatory approvals for our drug candidates;  

•develop, formulate, manufacture and commercialize our drug candidates;

•implement additional internal systems and develop new infrastructure;

•acquire or in-license additional products or technologies, or expand the use of our technology;

•maintain, defend and expand the scope of our intellectual property; and

•hire additional personnel.

We will need to generate significant revenues to achieve and maintain profitability. If we or our collaborators cannot successfully develop, obtain regulatory approval for and commercialize our drug candidates, we will not be able to generate such revenues or achieve profitability in the future. Our failure to achieve or maintain profitability would have a material adverse impact on the market price of our common stock.

If we cannot raise additional capital on acceptable terms, we may be unable to complete planned clinical trials of any or some of our drug candidates or to pursue attractive business opportunities.

We have funded all of our operations and capital expenditures with the proceeds from our public and private stock offerings, payments received under the Pfizer Agreements and interest earned on our investments. We expect that our current cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. However, we may elect to raise additional funds within such twelve-month period or need to raise additional funds thereafter and additional financing may not be available on favorable terms, if at all. Even if we succeed in selling additional securities to raise funds, our existing stockholders’ ownership percentage would be reduced and new investors may demand rights, preferences or privileges senior to those of existing stockholders. If we raise additional capital through debt financing, if available, such financings may involve covenants that restrict our business activities. If we raise additional capital through strategic alliance and license arrangements such as the Pfizer Agreements, we may have to

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trade our rights to our technology, intellectual property or drug candidates to others in such arrangements on terms that may not be favorable to us.

If we determine that we need to raise additional funds and we are not successful in doing so, we may be unable to complete the clinical development of some or all of our drug candidates or to seek or obtain FDA approval of our drug candidates. We then could be forced to discontinue product development, enter into a relationship with an additional strategic partner earlier than currently intended, reduce sales and marketing efforts or forego attractive business opportunities.

Risks Relating to an Investment in our Common Stock

Our stock price has been volatile and could experience a sudden decline in value.

Our common stock has experienced significant price and volume fluctuations and may continue to experience volatility in the future. You may not be able to sell your shares quickly or at the latest market price if trading in our stock is not active or the volume is low. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:

•results of or delays in efforts to seek regulatory approval for REMOXY, and in preclinical studies and clinical trials for our other drug candidates;

•announcements by Pfizer regarding progress in, or decisions regarding whether to pursue, development of REMOXY;  

•publicity regarding actual or potential medical results relating to products under development by us or others;

•the status of our collaboration agreements;

•announcements of technological innovations or new commercial products by us or others;

•developments in patent or other proprietary rights by us or others;

•comments or opinions by securities analysts or major stockholders;

•adverse media coverage related to opioid pharmaceuticals;

•future sales of our common stock by existing stockholders;

•developments with respect to potential merger and acquisition activity of companies with whom we have strategic alliances or other agreements;

•regulatory developments or changes in regulatory guidance enacted by applicable governmental or other authorities;

•litigation, including with respect to the lawsuit currently filed against us and our officers, or threats of litigation;

•economic and other external factors or other disaster or crises;

•the departure of any of our officers, directors or key employees;

•period-to-period fluctuations in financial results; and

•limited daily trading volume.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010, SEC regulations and the rules of The NASDAQ Stock Market LLC, create uncertainty for public companies. If we were unable to continue to comply with these requirements, we could be delisted from trading on the NASDAQ Global Select Market, or Nasdaq, and thereafter trading in our common stock, if any, may be conducted through the over-the-counter or other market. As a consequence of such delisting, an investor would likely find it more difficult to dispose of, or to obtain quotations as to the price of, our common stock. Delisting of our common stock could also result in lower prices per share of our common stock than would otherwise prevail.

We are involved in a class action filed against us and our officers that is expensive and time consuming, and, in the event of an adverse outcome, could harm our business, financial condition or results of operations.

On December 2, 2011, a purported class action was filed against us and our executive officers in the U.S. District Court for the Western District of Texas. This complaint alleges, among other things, violations of Section 10(b), Rule 10b-5, and

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Section 20(a) of the Exchange Act arising out of allegedly untrue or misleading statements of material facts made by us regarding REMOXY’s development and regulatory status during the purported class period, February 3, 2011 through June 23, 2011. The complaint states that monetary damages are being sought, but no amounts are specified. On June 3, 2013, the Court certified a class consisting of all purchasers of our common stock and a class period of December 27, 2010 through June 26, 2011.

As with any litigation proceeding, we cannot predict with certainty the eventual outcome of any outstanding legal actions. We have incurred expenses in connection with the defense of this lawsuit, and we may have to pay damages or settlement costs in connection with any resolution thereof. Any such expenses, damages or settlement costs may be substantial. In addition, because of the number of shareholders involved, plaintiffs in class action lawsuits may claim enormous monetary damages even if the alleged claim is small on a per-shareholder basis. Any such expenses, damages or settlement costs may be substantial. Although we have insurance coverage against which we may claim recovery against some of these expenses and costs, the amount of coverage may not be adequate to cover the full amount or certain expenses and costs may be outside the scope the policies we maintain. In the event of an adverse outcome or outcomes, our business could be materially harmed from depletion of cash resources, negative impact on our reputation, or restrictions or changes to our governance or other processes that may result from any final disposition of the lawsuit. Moreover, responding to and defending pending litigation significantly diverts management’s attention from our operations.

Anti-takeover provisions in our charter documents, our Stockholder Rights Plan and Delaware law may prevent or delay removal of incumbent management or a change of control.

Anti-takeover provisions of our amended and restated certificate of incorporation and amended and restated bylaws, our Stockholder Rights Plan and Delaware law may have the effect of deterring or delaying attempts by our stockholders to remove or replace management, engage in proxy contests and effect changes in control. The provisions of our charter documents include:

•a classified board so that only one of the three classes of directors on our board of directors is elected each year;

•elimination of cumulative voting in the election of directors;

•procedures for advance notification of stockholder nominations and proposals;

•the ability of our board of directors to amend our bylaws without stockholder approval; and

•the ability of our board of directors to issue up to 10,000,000 shares of preferred stock without stockholder approval upon the terms and conditions and with the rights, privileges and preferences as our board of directors may determine.

The rights issued pursuant to our Stockholder Rights Plan will become exercisable, subject to certain exceptions, the tenth business day after a person or group announces acquisition of 15% or more of our common stock or announces commencement of a tender or exchange offer the consummation of which would result in ownership by the person or group of 15% or more of our common stock.

In addition, as a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless certain specific requirements are met as set forth in Section 203.

These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

Our share ownership is concentrated, and our officers, directors and principal stockholders can exert significant control over matters requiring stockholder approval.

Due to their combined stock holdings, our officers, directors and principal stockholders (stockholders holding greater than 5% of our common stock) acting collectively may have the ability to exercise significant influence over matters requiring stockholder approval including the election of directors and approval of significant corporate transactions. In particular, Remi Barbier, our founder, Chairman of the Board of Directors, President and Chief Executive Officer, owns or controls a significant amount of the voting power of our outstanding capital stock. This concentration of ownership may delay or prevent a change in control of the Company and may make some transactions, including but not limited to any merger, consolidation, or sale of substantially all of our assets, more difficult or impossible to complete without the support of key stockholders.

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Publicly available information regarding stockholders’ ownership may not be comprehensive because the SEC does not require certain large stockholders to publicly disclose their stock ownership positions.

If the fair value of our stock increases and outstanding Performance Awards vest, we expect to use substantial amounts of cash to fund employee tax liabilities.

We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards.  If these Performance Awards vest, we expect to issue the employees shares of our common stock net of statutory employment taxes. This net issuance results in fewer shares issued and uses our cash to fund these taxes. The use of cash could be substantially higher, depending on the fair value of our common stock on the date the Performance Awards vest. If our use of cash to fund these taxes is substantial, our stock price could decline.

We may in the future seek to fund the cash used for Performance Awards through the sale of our common stock. However, we may not be successful in selling shares of our common stock to fund the cash used for Performance Awards. If the number of shares we sell to fund the cash used for Performance awards is significant, our stock price could decline.

Volatility in the stock prices of other companies may contribute to volatility in our stock price.

The stock market in general, Nasdaq and the market for technology companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has been particular volatility in the market prices of securities of early stage life sciences companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management’s attention and resources.

Our operating results may fluctuate from quarter to quarter and this fluctuation may cause our stock price to decline.

Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future. Factors contributing to these fluctuations include, among other items, the timing and amounts of collaboration revenue recognized under the Pfizer Agreements, the timing and enrollment rates of clinical trials for our drug candidates, our need for clinical supplies and the valuation of stock-based compensation. Thus, quarter-to-quarter comparisons of our operating results may not be not indicative of what we might expect in the future. As a result, in some future quarters our clinical, financial or operating results may not meet the expectations of securities analysts and investors that could result in a decline in the price of our stock.

If securities or industry analysts publish inaccurate or unfavorable research about our business or product candidates, our stock price could decline.

Securities or industry analysts publish research and reports about our business or product candidates. An analyst’s conclusions regarding prospects for product candidates in the biopharmaceutical industry can include judgments based on the limited publicly-available data.  If one or more analysts issues unfavorable research about our business or our product candidates, including a downgrade of our common stock, the price of our stock may decline.

There may not be an active, liquid trading market for our common stock.

There is no guarantee that an active trading market for our common stock will be maintained on Nasdaq. Investors may not be able to sell their shares quickly or at the latest market price if trading in our stock is not active.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TX that expires in 2014. We believe that our facilities are adequate and suitable for our current needs.

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Item 3.Legal Proceedings

KB Partners I, L.P., Individually and On Behalf of All Others Similarly Situated v. Pain Therapeutics, Inc., Remi Barbier, Nadav Friedmann and Peter S. Roddy.

On December 2, 2011, a purported class action was filed against us and our executive officers in the U.S. District Court for the Western District of Texas. This complaint alleges, among other things, violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Exchange Act arising out of allegedly untrue or misleading statements of material facts made by us regarding REMOXY’s development and regulatory status during the purported class period, February 3, 2011 through June 23, 2011. The complaint states that monetary damages are being sought, but no amounts are specified. On June 3, 2013, the Court certified a class consisting of all purchasers of our common stock and a class period of December 27, 2010 through June 26, 2011.

Item 4.Mine Safety Disclosures

Not applicable.

PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the NASDAQ Global Select Market, or Nasdaq, under the symbol "PTIE." The following table sets forth the high and low sales prices per share of our common stock as reported on Nasdaqfor the periods indicated.

		Sales Prices
		High		Low
Fiscal 2012:
First Quarter	$	4.53	$	3.45
Second Quarter	$	5.03	$	3.41
Third Quarter	$	5.37	$	3.50
Fourth Quarter	$	5.86	$	2.34
Fiscal 2013:
First Quarter	$	3.79	$	2.40
Second Quarter	$	5.57	$	2.18
Third Quarter	$	3.45	$	2.15
Fourth Quarter	$	4.90	$	2.58

We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and, notwithstanding our special nondividend distributions in December 2012 (of $0.75 per share of common stock totaling $34.0 million) and December 2010 (of $2.00 per share of common stock totaling $85.7 million), we have not paid and do not anticipate paying any cash dividends in the foreseeable future. As of January 12, 2014, there were approximately 56 holders of record of our common stock.

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Performance Graph

The following line graph compares the percentage change in the cumulative return to the stockholders of our common stock with the cumulative return of the NASDAQ Composite Index and the NASDAQ Pharmaceutical Index for the period commencing December 31, 2008.  

The graph assumes that $100 was invested on December 31, 2008 in our common stock or an index, and that all dividends were reinvested.  Notwithstanding our special nondividend distributions completed in 2012 and 2010, we have not declared or paid any dividends on our common stock.  Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

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Item 6.Selected Financial Data (in thousands except per share data)

The following selected financial data should be read together with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this report. The selected balance sheet data at December 31, 2013 and 2012 and the selected statement of operations data for 2013, 2012 and 2011 have been derived from our audited financial statements that are included elsewhere in this report. The selected balance sheet data at December 31, 2011,  2010 and 2009 and the statements of operations for 2010 and 2009 have been derived from our audited financial statements not included in this report. Historical results are not necessarily indicative of the results to be expected in the future.

	Years ended December 31,
	2013		2012		2011		2010		2009
Statement of operations data:
Program fee revenue	$	41,119	$	10,641	$	10,897	$	10,496	$	14,348
Collaboration revenue		—		249		587		1,313		6,215
Milestone revenue		—		—		—		5,000		—
Total revenue		41,119		10,890		11,484		16,809		20,563
Research and development expense		4,917		7,605		8,300		15,746		21,059
General and administrative expense		4,837		7,182		6,698		14,766		6,258
Total operating expenses		9,754		14,787		14,998		30,512		27,317
Operating income (loss)		31,365		(3,897)		(3,514)		(13,703)		(6,754)
Interest and other income, net		106		451		901		1,680		1,777
Loss before provision for (benefit from) income taxes		31,471		(3,446)		(2,613)		(12,023)		(4,977)
Provision for (benefit from) income taxes		(73)		—		—		—		(1,510)
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)	$	(12,023)	$	(3,467)
Net income (loss) per share
Basic	$	0.70	$	(0.08)	$	(0.06)	$	(0.28)	$	(0.08)
Diluted	$	0.70	$	(0.08)	$	(0.06)	$	(0.28)	$	(0.08)
Weighted-average shares used in computing net income (loss) per share
Basic		45,007		44,753		44,160		42,644		42,165
Diluted		45,208		44,753		44,160		42,644		42,165
	December 31,
	2013		2012		2011		2010		2009
Balance sheet data:
Cash and cash equivalents	$	48,588	$	49,355	$	73,144	$	4,798	$	35,794
Marketable securities		1,250		6,899		24,987		86,428		139,965
Working capital		48,302		46,508		85,217		84,414		159,959
Total assets		50,103		56,859		98,963		99,195		182,005
Deferred program fee revenue		—		41,119		51,760		62,657		68,153
Total liabilities		1,801		43,723		54,570		66,262		73,753
Total stockholders' equity		48,302		13,136		44,393		32,933		108,252

Data for 2012 includes a special nondividend distribution of $0.75 per share, totaling $34.0 million. Data for 2010 includes a special nondividend distribution of $2.00 per share, totaling $85.7 million.

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included elsewhere in this report. Operating results are not necessarily indicative of results that may occur in future periods.

Overview

We are a biopharmaceutical company that develops novel drugs. Our lead drug candidate, REMOXY, is an extended-release oral formulation of oxycodone for the management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. We designed REMOXY to discourage common methods of tampering and misuse. REMOXY is being developed pursuant to a strategic alliance we have with Pfizer under the Pfizer Agreements.

Pfizer acquired King in early 2011, and references in this section to Pfizer include references to King. We believe Pfizer's acquisition of King may facilitate REMOXY's commercial success, if approved by theFDA.

We and King jointly managed a Phase III clinical program and NDA submission for REMOXY. In mid-2008, the FDA accepted our NDA for REMOXY with Priority Review. In December 2008, we received from the FDA a Complete Response Letter for the NDA for REMOXY. In this Complete Response Letter, the FDA indicated additional non-clinical data was required to support the approval of REMOXY. Also, the FDA did not request or recommend additional clinical efficacy studies prior to approval. In 2009, King assumed sole responsibility for the regulatory approval of REMOXY. In December 2010, King resubmitted the REMOXY NDA. In January 2011, we announced that the FDA had accepted the resubmission of the REMOXY NDA. In June 2011, we and Pfizer announced that King received a Complete Response Letter from the FDA in response to King’s resubmission of the REMOXY NDA. The FDA's Complete Response Letter raised concerns related to, among other matters, the Chemistry, Manufacturing, and Controls section of the NDA for REMOXY.

In March 2013, Pfizer met with the FDA to discuss Pfizer’s plans to respond to the Complete Response Letter. On May 9, 2013, Pfizer provided us with a copy of minutes of their FDA meetingas well as a letter that we filed with the SEC on Form 8-K on May 10, 2013.

On October 21, 2013, Pfizer informed us that, having achieved technical milestones related to manufacturing, they plan to continue the development program for REMOXY. We also were informed that, following guidance received from the FDA earlier this year, Pfizer plans to proceed with the additional clinical studies and other actions required to address the Complete Response Letter received in June 2011. These new clinical studies are expected to include, in part, a pivotal bioequivalence study with the modified REMOXY formulation to bridge to the clinical data related to the original REMOXY formulation, and an abuse-potential study with the modified formulation. The FDA did not require any further drug efficacy trials. The complete response submission is not expected to occur before mid-2015.

On October 21, 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. This amendment did not change any of the economic terms related to REMOXY. We are eligible to receive from Pfizer a $15.0 million payment upon FDA approval of REMOXY. Pfizer is obligated to fund the commercialization expenses of, and has the exclusive right to market and sell, REMOXY pursuant to the Pfizer Agreements. After commercial launch, we will receive from Pfizer a royalty of 20% of net sales of REMOXY in the United States, except as to the first cumulative $1.0 billion in net sales, which royalty is set at 15%. The royalty rate outside the U.S. is 10%. Pfizer is also obligated to reimburse us for our payment of third-party royalty obligations related to this strategic alliance.

As part of the October 2013 amendment to the Pfizer Agreements, Pfizer terminated its rights and obligations with respect to abuse-resistant formulations of hydrocodone, hydromorphone and oxymorphone. Under the terms of the amendment, we are not restricted under the Pfizer Agreements from developing or marketing, and we do not have any royalty or other obligations to Pfizer with respect to, these drug candidates. Investigational New Drug, or IND, applications for all three of these drug candidates are in place with FDA.

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We have received the following program fee and milestone payments under the Pfizer Agreements:

	Year Received	Amount Received (mm)
Upfront program fee payment	2005	$	150
Program fee payment related to an amendment to the strategic alliance	2010	$	5
Milestone payments related to:
acceptance by the FDA of the NDA for REMOXY	2008	$	15
acceptance by the FDA of the IND for abuse-resistant oxymorphone	2011	$	5
acceptance by the FDA of the IND for abuse-resistant hydrocodone	2008	$	5
acceptance by the FDA of the IND for abuse-resistant hydromorphone	2006	$	5

We have yet to generate any revenues from product sales. We have recorded an accumulated deficit of $104.1 million at December 31, 2013. These losses have resulted principally from costs incurred in connection with research and development activities, salaries and other personnel-related costs and general corporate expenses. Research and development activities include costs of preclinical and clinical trials as well as clinical supplies associated with our drug candidates. Salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees and non-employees. Our operating results may fluctuate substantially from period to period as a result of the timing of preclinical activities, enrollment rates of clinical trials for our drug candidates and our need for clinical supplies.

We expect to continue to use significant cash resources in our operations for the next several years. Our cash requirements for operating activities and capital expenditures may increase substantially in the future as we:

· conduct preclinical and clinical trials for our drug candidates;

· seek regulatory approvals for our drug candidates;

· develop, formulate, manufacture and commercialize our drug candidates;

· implement additional internal systems and develop new infrastructure;

· acquire or in-license additional products or technologies, or expand the use of our technology;

· maintain, defend and expand the scope of our intellectual property; and

· hire additional personnel.

Product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our drug candidates. If our development efforts result in regulatory approval and successful commercialization of our drug candidates, we will generate revenue from direct sales of our drugs and/or, if we license our drugs to future collaborators, from the receipt of license fees and royalties from sales of licensed products. We conduct our research and development programs through a combination of internal and collaborative programs. We rely on arrangements with universities, our collaborators, contract research organizations and clinical research sites for a significant portion of our product development efforts.

We focus substantially all our research and development efforts on research and development of clinical development stage products. The following table summarizes expenses by category for research and development efforts (in thousands):

	Years ended December 31,
	2013		2012		2011
Compensation	$	3,047	$	5,756	$	5,785
Contractor fees and supplies		1,227		1,099		1,176
Other common costs		643		750		1,339
	$	4,917	$	7,605	$	8,300

Contractor fees and supplies generally include expenses for preclinical studies and clinical trials and costs for formulation and manufacturing activities. Other common costs include the allocation of common costs such as facilities.

Our technology has been applied across certain of our portfolio of drug candidates. Data, know-how, personnel, clinical results, research results and other matters related to the research and development of any one of our drug candidates also relate to, and further the development of, our other drug candidates. For example, we expect that results of non-clinical studies, such as pharmacokinetics, toxicology and other studies, regarding certain components of REMOXY to be applicable to the other abuse-deterrent drug candidates since all such abuse-deterrent drug candidates are expected to utilize such components. As a

29

result, costs allocated to a specific drug candidate may not necessarily reflect the actual costs surrounding research and development of that drug candidate due to cross application of the foregoing.

Estimating the dates of completion of clinical development, and the costs to complete development, of our drug candidates would be highly speculative, subjective and potentially misleading. Pharmaceutical products take a significant amount of time to research, develop and commercialize. The clinical trial portion of the development of a new drug alone usually spans several years. We expect to reassess our future research and development plans based on our review of data we receive from our current research and development activities. The cost and pace of our future research and development activities are linked and subject to change.

On December 2, 2011, a purported class action was filed against us and our executive officers in the U.S. District Court for the Western District of Texas. This complaint alleges, among other things, violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Exchange Act arising out of allegedly untrue or misleading statements of material facts made by us regarding REMOXY’s development and regulatory status during the purported class period, February 3, 2011 through June 23, 2011. The complaint states that monetary damages are being sought, but no amounts are specified.On June 3, 2013, the Court certified a class consisting of all purchasers of our common stock and a class period of December 27, 2010 through June 26, 2011.

Critical Accounting Policies

The preparation of our financial statements in accordance with United States generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and interest income in our financial statements and accompanying notes. We evaluate our estimates on an ongoing basis, including those estimates related to agreements, research collaborations and investments. We base our estimates on historical experience and various other assumptions that we believe 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 from these estimates under different assumptions or conditions. The following items in our financial statements require significant estimates and judgments:

· Revenue recognition and deferred program fee revenue. We recognize program fee revenue, collaboration revenue and milestone revenue in connection with our strategic alliance with Pfizer.Program fee revenue is derived from upfront payments under the Pfizer Agreements, including the $150.0 million paid to us at the beginning of the strategic alliance and the $5.0 million we received in July 2010 in connection with an amendment the Pfizer Agreements. Through the end of the third quarter of 2013, these payments were recognized from receipt ratably over our estimate of the development period for the fourth of four drug candidates expected to be developed under the Pfizer Agreements.In October 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. As a result of the amendment, we no longer have any substantive responsibilities for development activities pursuant to the Pfizer Agreements and we recognized all remaining deferred program fee revenue as program fee revenue during the fourth quarter of 2013. Collaboration revenues from reimbursement of development expenses pursuant to our collaboration agreement with Pfizer are generally recognized when Pfizer has completed its review of the expenses invoiced to them. We recognize milestone payments from Pfizer as revenue when we achieve the underlying developmental milestone as the milestone payments are not dependent upon any other future activities or achievement of any other future milestones and the achievement of each of the developmental milestones were substantively at risk and contingent at the effective date of the collaboration. Substantial effort is involved in achieving each of the developmental milestones. These milestones represent the culmination of discrete earnings processes and the amount of each milestone payment is reasonable in relation with the level of effort associated with the achievement of the milestone. Each milestone payment is non-refundable and non-creditable when made. The ongoing research and development services being provided to Pfizer under the collaboration are priced at fair value based upon the reimbursement of expenses incurred pursuant to the collaboration with Pfizer.

· Stock-based compensation. We recognize expense in the statement of operations for the fair value of all share-based payments to employees and directors, including grants of employee stock options and other share based awards. For stock options, we use the Black-Scholes option valuation model and the single-option award approach and straight-line attribution method. Using this approach, the compensation cost is amortized on a straight-line basis over the vesting period of each respective stock option, generally four years.

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We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. The value of these awards is the product of the number of shares of our common stock to be issued under the award multiplied by the fair market value of a share of our common stock on the date of grant. These awards include future performance conditions. We estimate an implicit service period for achieving these performance conditions. Performance Awards vest and common stock is issued on achieving performance conditions. We recognize stock-based compensation expense for Performance Awards when we conclude that achieving a performance condition is probable. We periodically review and update as appropriate our estimates of the implicit service periods and the likelihood of achieving the performance conditions.

· Taxes. We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.We have accumulated significant deferred tax assets. Deferred income taxes reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings, if any. We are uncertain as to the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance. We may in the future determine that more of our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period. We classify interest recognized in connection with our tax positions as interest expense, when appropriate.

Results of Operations

Years Ended December 31, 2013 and 2012

Revenue – Program fee revenue 

We received a $150.0 million upfront fee in 2005 in connection with the closing of the Pfizer Agreements and $5.0 million in July 2010 in connection with an amendment to the Pfizer Agreements.  As a result of the October 2013 Amendment to the Pfizer Agreements, we recognized the balance of current and non-current portions of deferred program fee revenue as program fee revenue during the fourth quarter of 2013. Related program fee revenue were $41.1 million in 2013 and $10.6 million in 2012.

Revenue - Collaboration revenue

Collaboration revenues were $0.2 million in 2012. These revenues related to reimbursement of our development expenses incurred pursuant to the Pfizer Agreements. As a result of the October 2013 Amendment to the Pfizer Agreements, we expect collaboration revenues to be immaterial in the future.

Research and Development Expense

Research and development expense consists primarily of costs of development work associated with our drug candidates. Research and development expenses decreased to $4.9million in 2013 from $7.6 million in 2012, primarily due to lower cash compensation and non-cash stock related compensation. Research and development expenses included $1.3 million in non-cash stock related compensation expense in 2013 and $3.2 million in non-cash stock related compensation expense in 2012.

We expect research and development expenses to fluctuate over the next several years as we continue our development efforts. We expect our development efforts to result in our drug candidates progressing through various stages of clinical trials. Our research and development expenses may fluctuate from period to period due to the timing and scope of our development activities and the results of clinical trials and preclinical studies.

General and Administrative Expense

General and administrative expenses consist primarily of compensation and other general corporate expenses. General and administrative expenses decreased to $4.8 million in 2013 from $7.2 million in 2012, primarily due to lowerlower cash

31

compensation and non-cash stock related compensation. General and administrative expenses included $1.8 million in non-cash stock related compensation expense in 2013 and $3.4 million in non-cash stock related compensation expense in 2012.

We expect other general and administrative expenses to increase over the next several years in connection with support of precommercialization and commercialization activities for our drug candidates. The increase may fluctuate from period to period due to the timing and scope of these activities and the results of clinical trials and preclinical studies.

Interest and Other Income, Net

Interest and other income, net, decreased to $0.1 million in 2013 from $0.5 million in 2012.  We expect our interest income to decrease in the future as we use cash to fund our operations.

Provision for Income Taxes

In 2013, we recognized a benefit from income taxes related to unrecognized tax benefits for use of certain research and development tax credits in 2006. We did not provide for federal income taxes in 2013 or 2012 because we had a tax loss for both 2013 and 2012.  

Years Ended December 31, 2012 and 2011

Revenue – Program fee revenue 

We received a $150.0 million upfront fee in 2005 in connection with the closing of the Pfizer Agreements and $5.0 million in July 2010 in connection with an amendment to the Pfizer Agreements. Revenues recognized from amortization of upfront fees were $10.6 million in 2012 and $10.9 million in 2011.

Revenue - Collaboration revenue

Collaboration revenues were $0.2 million in 2012 and $0.6 million in 2011. These revenues related to reimbursement of our development expenses incurred pursuant to the Pfizer Agreements. Collaboration revenues were lower in 2012 as compared to 2011 primarily because the reimbursement of expenses we incurred pursuant to the Pfizer Agreements was lower in 2012 as compared to 2011.

Research and Development Expense

Research and development expense consists primarily of costs of development work associated with our drug candidates. Research and development expenses decreased to $7.6 million in 2012 from $8.3 million in 2011, primarily due to lower headcount and facilities-related costs.  Research and development expenses included $3.2 million in non-cash stock related compensation expense in 2012 (including $0.8 million related to the nondividend distribution in December 2012) and $2.7 million in 2011.

General and Administrative Expense

General and administrative expenses consist primarily of compensation and other general corporate expenses. General and administrative expenses increased to $7.2 million in 2012 from $6.7 million in 2011, primarily due to higher non-cash stock related compensation expense, offset in part by lower headcount and facilities-related costs. General and administrative expenses included $3.4 million in non-cash stock related compensation expense in 2012 (including $1.0 million related to the nondividend distribution in December 2012) and $2.8 million in 2011.

Interest and Other Income, Net

Interest and other income, net, decreased to $0.5 million in 2012 from $0.9 million in 2011.  

Provision for Income Taxes

We did not provide for federal income taxes in 2012 or 2011 because we had a tax loss for both 2012 and 2011.

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Liquidity and Capital Resources

Since inception, we have financed our operations primarily through public and private stock offerings, payments received under the Pfizer Agreements and interest earned on our investments. We intend to continue to use our capital resources to fund research and development activities, capital expenditures, working capital requirements and other general corporate purposes. As of December 31, 2013, cash, cash equivalents and marketable securities were $49.8 million.

Net cash used in operating activities was $6.9 million for 2013 and $7.2 million for 2012.

Net cash provided by investing activities was $5.7 million for 2013 compared to $17.6 million for 2012. Investing activities for both years consisted primarily of the purchase, sale and maturities of marketable securities. We did not use any cash to purchase property, equipment and leasehold improvements in 2013 and 2012.  

Net cash provided by financing activities was $0.5 million in 2013 and consisted primarily of cash from stock option exercises.  Net cash used by financing activities was $34.2 million for 2012. In December 2012, we paid our stockholders $34.0 million in a special non-dividend distribution of $0.75 per share. Other cash used in financing activities in 2012 consisted of $0.5 million in cash used to pay statutory taxes on Performance Awards that were exercised net of taxes, offset in part by $0.2 million received from stock option exercises. We expect cash used to pay for statutory taxes on stock options and Performance Awards may increase in the future.

Realization of our other deferred tax assets is dependent on future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance. In 2013, we reduced our deferred tax assets and deferred tax liabilities related to unrecognized tax benefits for use of certain research and development tax credits in prior years that will never be realized and we no longer have any uncertain tax positions.  Except for the benefit from income taxes recognized in 2013, the change in deferred assets and liabilities was offset by a reduction in our valuation allowance. In connection with the amendment to the Pfizer Agreements in October 2013, we recognized all our deferred program fee revenue as program fee revenue during the fourth quarter of 2013. This revenue did result in taxable income because all of this deferred revenue was recognized in our tax returns as taxable income in prior years. We also reduced our deferred tax assets for deferred license fee revenue during the fourth quarter of 2013. This reduction was offset by a reduction in our valuation allowance. 

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TX that expires in 2014. Future minimum lease payments by year are as follows (in thousands):

	2014		Total
Future minimum lease payments	$	81	$	81

We have license agreements that require us to make milestone payments upon the successful achievement of milestones, including clinical milestones. Our license agreements also require us to pay certain royalties to our licensors if we succeed in fully commercializing products under these license agreements. All of these potential future payments are cancelable as of December 31, 2013. Our formulation agreement with Durect Corporation obligates us to make certain milestone payments upon achieving clinical milestones and regulatory milestones. Pfizer is obligated to reimburse us for any of our milestone payments and royalty payments to Durect Corporation.

We have an accumulated deficit of $104.1 million at December 31, 2013. We expect our cash requirements to be significant in the future. The amount and timing of our future cash requirements will depend on regulatory and market acceptance of our drug candidates and the resources we devote to researching and developing, formulating, manufacturing, commercializing and supporting our products. We believe that our current resources should be sufficient to fund our operations for at least the next 12 months. We may seek additional future funding through public or private financing within this timeframe, if such funding is available and on terms acceptable to us.

Off-balance Sheet Arrangements

As of December 31, 2013, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage

33

in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our cash investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the interest rate later rises, the principal amount of our investment will probably decline. A hypothetical 50 basis point increase in interest rates reduces the fair value of our available-for-sale securities at December 31, 2013 by an immaterial amount. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including commercial paper, government and non-government debt securities and/or money market funds that invest in such securities. We have no holdings of derivative financial or commodity instruments. As of December 31, 2013, our investments consisted of investments in corporate notes and obligations or in money market accounts and checking funds with variable market rates of interest. We believe our credit risk is immaterial.

Item 8.Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm.................................................................................	35
Balance Sheets.............................................................................................................................................	36
Statements of Operations...............................................................................................................................	37
Statements of Comprehensive Income.............................................................................................................	38
Statements of Stockholders' Equity...............................................................................................................	39
Statements of Cash Flows.............................................................................................................................	40
Notes to Financial Statements.........................................................................................................................	41

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Pain Therapeutics, Inc.

We have audited the accompanying balance sheets of Pain Therapeutics, Inc. as of December 31, 2013 and 2012, and the related statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended 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 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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, the financial statements referred to above present fairly, in all material respects, the financial position of Pain Therapeutics, Inc. at December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Pain Therapeutics, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework (1992 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 4, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Austin, Texas

February 4, 2014

35

PAIN THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share data)
	December 31,
		2013		2012
ASSETS
Current assets:
Cash and cash equivalents	$	48,588	$	49,355
Marketable securities		1,250		6,899
Other current assets		265		253
Total current assets		50,103		56,507
Other assets		—		352
Total assets	$	50,103	$	56,859
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	445	$	361
Accrued development expense		641		929
Deferred program fee revenue - current portion		—		7,832
Accrued compensation and benefits		712		853
Other current liabilities		3		24
Total current liabilities		1,801		9,999
Non-current liabilities:
Deferred program fee revenue - non-current portion		—		33,287
Deferred tax liabilities		—		437
Total liabilities		1,801		43,723
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.001 par value; 120,000,000 shares authorized; 45,510,038 and
45,326,940 shares issued and outstanding at December 31, 2013 and 2012, respectively		45		45
Additional paid-in-capital		152,363		148,738
Accumulated other comprehensive income		1		4
Accumulated deficit		(104,107)		(135,651)
Total stockholders' equity		48,302		13,136
Total liabilities and stockholders' equity	$	50,103	$	56,859

See accompanying notes to financial statements.

36

PAIN THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
	Years ended December 31,
	2013		2012		2011
Revenue:
Program fee revenue	$	41,119	$	10,641	$	10,897
Collaboration revenue		—		249		587
Total revenue		41,119		10,890		11,484
Operating expenses:
Research and development		4,917		7,605		8,300
General and administrative		4,837		7,182		6,698
Total operating expenses		9,754		14,787		14,998
Operating income (loss)		31,365		(3,897)		(3,514)
Interest and other income, net		106		451		901
Income (loss) before provision for (benefit from) income taxes		31,471		(3,446)		(2,613)
Provision for (benefit from) income taxes		(73)		—		—
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Net income (loss) per share
Basic	$	0.70	$	(0.08)	$	(0.06)
Diluted	$	0.70	$	(0.08)	$	(0.06)
Weighted-average shares used in computing net income (loss) per share
Basic		45,007		44,753		44,160
Diluted		45,208		44,753		44,160

See accompanying notes to financial statements.

37

PAIN THERAPEUTICS, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
	Years ended December 31,
	2013		2012		2011
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Other comprehensive loss:
Net unrealized losses on marketable securities		(3)		(124)		(397)
Comprehensive income (loss)	$	31,541	$	(3,570)	$	(3,010)

See accompanying notes to financial statements.

38

PAIN THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
						Accumulated
						other				Total
	Common stock			Additional		comprehensive		Accumulated		stockholders'
	Shares	Par value		paid-in capital		income		deficit		equity
Balance at December 31, 2010	42,910,164	$	43	$	161,957	$	525	$	(129,592)	$	32,933
Issuance of common stock pursuant to exercise of stock options and awards	1,781,769		2		8,908		—		—		8,910
Issuance of common stock related to employee stock purchase plan	40,084		—		122		—		—		122
Compensation with respect to non-employee option grants	—		—		60		—		—		60
Compensation with respect to employee option grants and share based awards	—		—		5,378		—		—		5,378
Other comprehensive loss	—		—		—		(397)		—		(397)
Net loss	—		—		—		—		(2,613)		(2,613)
Balance at December 31, 2011	44,732,017	$	45	$	176,425	$	128	$	(132,205)	$	44,393
Issuance of common stock pursuant to exercise of stock options and awards,
net of taxes paid on net issuance of stock options and awards	574,370		—		(366)		—		—		(366)
Issuance of common stock related to employee stock purchase plan	20,553		—		64		—		—		64
Compensation with respect to non-employee option grants	—		—		75		—		—		75
Compensation with respect to employee option grants and share based awards	—		—		6,535		—		—		6,535
Non-dividend cash distribution of $0.75 per share	—		—		(33,995)		—		—		(33,995)
Other comprehensive loss	—		—		—		(124)		—		(124)
Net loss	—		—		—		—		(3,446)		(3,446)
Balance at December 31, 2012	45,326,940	$	45	$	148,738	$	4	$	(135,651)	$	13,136
Issuance of common stock pursuant to exercise of stock options and awards,	166,635		—		492		—		—		492
Issuance of common stock related to employee stock purchase plan	16,463		—		32		—		—		32
Compensation with respect to non-employee option grants	—		—		95		—		—		95
Compensation with respect to employee option grants and share based awards	—		—		3,006		—		—		3,006
Other comprehensive loss	—		—		—		(3)		—		(3)
Net loss	—		—		—		—		31,544		31,544
Balance at December 31, 2013	45,510,038	$	45	$	152,363	$	1	$	(104,107)	$	48,302

See accompanying notes to financial statements.

39

PAIN THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
	Years ended December 31,
	2013		2012		2011
Cash flows used in operating activities:
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Deferred program fee revenue		(41,119)		(10,641)		(10,897)
Non-cash stock based compensation		3,101		6,610		5,428
Depreciation and amortization		—		122		163
Non-cash net interest income		(10)		342		1,141
Changes in operating assets and liabilities:
Receivables		—		—		7,114
Other current assets		(12)		105		(214)
Other non-current assets		352		—		74
Accounts payable		84		(103)		(643)
Accrued development expense		(288)		15		656
Accrued compensation and benefits		(141)		(62)		(797)
Excess tax benefits from equity-based compensation plans		—		(57)		339
Other accrued liabilities		(21)		(58)		(15)
Deferred tax liabilities		(437)		2		4
Net cash used in operating activities		(6,947)		(7,171)		(260)
Cash flows provided by investing activities:
Purchases of marketable securities		(6,644)		(20,768)		(2,497)
Maturities of marketable securities		12,300		38,390		62,400
Net cash provided by investing activities		5,656		17,622		59,903
Cash flows provided by (used in) financing activities:
Nondividend distribution		—		(33,995)		—
Excess tax benefits from equity-based compensation plans		—		57		(339)
Proceeds from issuance of common stock, net		524		(302)		9,042
Net cash provided by (used in) financing activities		524		(34,240)		8,703
Net increase (decrease) in cash and cash equivalents		(767)		(23,789)		68,346
Cash and cash equivalents at beginning of the period		49,355		73,144		4,798
Cash and cash equivalents at end of the period	$	48,588	$	49,355	$	73,144

See accompanying notes to financial statements.

40

PAIN THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

1.  General

We are a biopharmaceutical company that develops novel drugs. Our lead drug candidate is called REMOXY® (oxycodone) Extended-Release Capsules CII. REMOXY is a strong painkiller with a unique formulation designed to reduce potential risks of unintended use. REMOXY and three other abuse-resistant painkillers are being developed pursuant to the collaboration agreement and license agreement, or the Pfizer Agreements, between us and King Pharmaceuticals, Inc., a subsidiary of Pfizer, Inc., or Pfizer.

In the course of our development activities, we have sustained cumulative operating losses. There are no assurances that additional financing will be available on favorable terms, or at all.

2.  Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. Actual results could differ from those estimates.

Revenue Recognition and Deferred Program Fee Revenue

Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.

We and Pfizer have a strategic alliance to develop and commercialize REMOXY and up to three other opioid painkillers designed to reduce potential risks of unintended use. In connection with the strategic alliance, we recognize program fee revenue, collaboration revenue and milestone revenue.Program fee revenue is derived from upfront payments under the Pfizer Agreements, including the $150.0 million paid to us at the beginning of the strategic alliance and the $5.0 million we received in July 2010 in connection with an amendment the Pfizer Agreements. Through the end of the third quarter of 2013, these payments were recognized from receipt ratably over our estimate of the development period for the fourth of four drug candidates expected to be developed under the Pfizer Agreements. In October 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. As a result of the amendment, we no longer have any substantive responsibilities for development activities pursuant to the Pfizer Agreements and we recognized all remaining deferred program fee revenue as program fee revenue during the fourth quarter of 2013.

Collaboration revenues from reimbursement of development expenses are generally recognized when Pfizer has completed its review of the expenses invoiced to them.

We recognize milestone payments from Pfizer as revenue when we achieve the underlying developmental milestone as the milestone payments are not dependent upon any other future activities or achievement of any other future milestones and the achievement of each of the developmental milestones were substantively at risk and contingent at the effective date of the collaboration. Substantial effort is involved in achieving each of the developmental milestones. These milestones represent the culmination of discrete earnings processes and the amount of each milestone payment is reasonable in relation with the level of effort associated with the achievement of the milestone. Each milestone payment is non-refundable and non-creditable when made. The ongoing research and development services being provided to Pfizer under the collaboration are priced at fair value based upon the reimbursement of expenses incurred pursuant to the collaboration with Pfizer.

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Cash, Cash Equivalents and Concentration of Credit Risk

We consider all highly liquid financial instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash maintained at two financial institutions and in money market funds. We believe the financial risks associated with these instruments are minimal. We have not incurred material losses from our investments in these securities.

Marketable Securities and Fair Value Measurements

We invest in interest bearing marketable securities, generally consisting of corporate and government securities. We may elect to sell these investments before they mature. Therefore, we hold these investments as “available for sale” and include these investments in our balance sheets as current assets, even though the contractual maturity of a particular investment may be beyond one year. We report our marketable securities at fair value, which may include unrealized gains and losses. Our unrealized gains and losses on investments are recorded as a separate component of stockholders’ equity as accumulated other comprehensive income or loss. We recognize all realized gains and losses on our available-for-sale securities in interest income in the accompanying statement of operations on a specific identification basis. Our marketable securities are maintained at one financial institution and are governed by our investment policy as approved by our Board of Directors.

To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. We would recognize an impairment charge when the decline in the estimated fair value of a marketable security below the amortized cost is determined to be other-than-temporary. We consider various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than our amortized cost, any adverse changes in the investees’ financial condition and our intent to sell or whether it is more likely than not that we would be required to sell the marketable security before its anticipated recovery.

We measure our cash equivalents and marketable securitiesat fair value on a recurring basis and have significant observable inputs where there are identical or comparable assets in the market to use in establishing our fair value measurements. We use significant observable inputs that include but are not limited to benchmark yields, reported trades, broker/dealer quotes and issuer spreads. We consider these inputs to be Level 2 inputs. Generally, the types of instruments we invest in are not traded on a market such as the NASDAQ Global Market, which we would consider to be Level 1 inputs. We do not have any investments that would require inputs considered to be Level 3. We use the bid price to establish fair value.

Business Segments

We report segment information based on how we internally evaluate the operating performance of our business units, or segments. Our operations are confined to one business segment: the development of novel drugs.

Stock-based Compensation

We recognize non-cash expense in the statement of operations for the fair value of all share-based payments, including grants of employee stock options and other share based awards. For stock options, we use the Black-Scholes option valuation model and the single-option award approach and straight-line attribution method. Using this approach, the compensation cost is amortized on a straight-line basis over the vesting period of each respective stock option, generally four years. 

We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. The value of these awards is the product of the number of shares of our common stock to be issued under the award multiplied by the fair market value of a share of our common stock on the date of grant. These awards include future performance conditions. We estimate an implicit service period for achieving these performance conditions. Performance Awards vest and common stock is issued on achieving performance conditions. We recognize non-cash stock-based compensation expense for Performance Awards when we conclude that achieving a performance condition is probable. We periodically review and update as appropriate our estimates of the implicit service periods and the likelihood of achieving the performance conditions.

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Net Loss per Share

Basic net loss per share is computed on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus dilutive potential common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding stock options and warrants. The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in thousands):

	Years ended December 31,
	2013		2012		2011
Numerator:
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share		45,007		44,753		44,160
Effect of dilutive securities - Dilution from employee stock plans		201		—		—
Weighted-average shares used to compute diluted net income (loss) per share		45,208		44,753	—	44,160
Net income (loss) per share - Basic	$	0.70	$	(0.08)	$	(0.06)
Net income (loss) per share - Diluted	$	0.70	$	(0.08)	$	(0.06)

We excluded weighted options outstanding to purchase common stock of 13.5 million for 2013, 13.2 million for 2012 and 13.7 million for 2011 from the calculation of diluted net loss per share because the effect of including these shares in this calculation would be anti-dilutive.

Income Taxes

We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.We have accumulated significant deferred tax assets. Deferred income taxes reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance. We may in the future determine that more of our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period. We classify interest and penalties recognized related to uncertain tax positions as interest expense.

Recent Accounting Pronouncements

We reviewed recently issued accounting pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption of these pronouncements to have a material impact on our financial position, results of operations or cash flows.

3.  Collaboration Agreements

Pfizer, Inc.

Our strategic alliance with Pfizer, as amended, includes a collaboration agreement and a license agreement to develop and commercialize REMOXY.We received a $150.0 million upfront fee in connection with the closing of this strategic alliance and $5.0 million in July 2010 in connection with an amendment to this strategic alliance.  As of December 31, 2013, all of these payments had been recognized as program fee revenue, including$41.1 million in 2013,  $10.6 million in 2012and $10.9 million in 2011.

In addition, Pfizerhas funded development expenses incurred by us pursuant to the collaboration agreement, of whichwe recorded as collaboration revenue $0.2 million in 2012 and$0.6 million in 2011.  Pfizeris obligated to fund the commercialization expenses of, and has the exclusive right to market and sell, REMOXY.The royalty rate for net sales of REMOXY in the United States is 20%, except as to the first $1.0 billion in cumulative net sales in the United States,

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for which the royalty is set at 15%. The royalty rate for net sales of REMOXY outside the United States is 10% on net sales.

Durect Corporation

We have an exclusive, worldwide licensing agreement with Durect Corporation to use a patented technology that forms the basis for certain drug candidates, including REMOXY. We have sub-licensed to Pfizer certain rights to develop and to commercialize REMOXY. Under the agreement with Durect, we control all of the preclinical, clinical, commercial manufacturing and sales/marketing activities for REMOXY and other abuse-resistant opioid painkillers. We reimburse Durect for formulation and related work, and will make milestone payments based on the achievement of certain technical, clinical or regulatory milestones. We also are responsible to pay Durect royalties on any related drug sales. Pfizeris obligated to reimburse us for costs we incur under the agreement with Durect for REMOXY, including royalties.

4.  Cash and Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities held as available-for-sale consisted of the following (in thousands):

	Cash, Cash Equivalents and Marketable Securities
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Accrued Interest		Total Value
December 31, 2013
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Commercial paper		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Reported as:
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Marketable securities		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Maturities:
Matures in one year or less	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Matures one to three years		—		—		—		—		—		—
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
December 31, 2012
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Corporate securities	$	6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Reported as:
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Marketable securities		6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Maturities:
Matures in one year or less	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Matures one to three years		—		—		—		—		—		—
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254

To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. Our realized gains and losses on our marketable securities were immaterial in 2013,  2012and 2011.

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Our assets measured at fair value were(in thousands):

	Level 1		Level 2		Level 3		Total
December 31, 2013
Cash and money market fund	$	48,588	$	—	$	—	$	48,588
Commercial paper		—		1,250		—		1,250
	$	48,588	$	1,250	$	—	$	49,838
December 31, 2012
Cash and money market fund	$	1,817	$	—	$	—	$	1,817
Corporate securities		—		54,437		—		54,437
	$	1,817	$	54,437	$	—	$	56,254

5.  Property and Equipment

Property and equipment at December 31, 2013 and 2012 consisted of furniture and equipment with a purchase value of $0.6 million.  All of our property and equipment was fully depreciated prior to December 31, 2012. Depreciation and amortization expense was $0.1 million in 2012 and $0.2 million in 2011.

6.  Stockholders' Equity and Stock-Based Compensation

Preferred Stock

Our Board of Directors has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.

We have a stockholder rights plan, or the Rights Plan, designed to guard against partial tender offers and other coercive tactics to gain control of the Company without offering a fair and adequate price and terms to all of the Company’s stockholders. Pursuant to the Rights Plan, our Board of Directors declared and paid a dividend of one right to purchase one one-thousandth share of our Series A Participating Preferred Stock for each outstanding share of our common stock. Each of these rights entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $40.00, subject to adjustment at any time. In 2013, we amended certain terms of the Rights Plan, primarily to provide for certain mechanical and procedural adjustments.

2008 Equity Incentive Plan

Under our 2008 Equity Incentive Plan, or 2008 Equity Plan, our employees, directors and consultants may receiveshare-based awards, including grants of stock options and Performance Awards. Our Board of Directors or a designated Committee of the Board is responsible for administration of the 2008 Equity Plan and determines the terms and conditions of each option granted, consistent with the terms of the plan.

Stock options generally expire ten years from the date of grant. Cancelled options become available for reissuance.Shares reserved for issuance and available for grant under the 2008 Equity Incentive Plan were 4.8 million as of December 31, 2013. The 2008 Equity Plan terminates in 2018.

The 2008 Equity Plan also provides for the automatic grant of options to purchase shares of common stock to outside directors. On the date of each annual stockholders’ meeting, each outside director is automatically granted an option to purchase 50,000 shares of common stock. The term of these options is ten years, the exercise price is 100% of the fair market value of the stock on the date of grant, and the option becomes exercisable as to 25% of the shares on the anniversary of its date of grant provided the optionee continues to serve as a director on such dates.

When stock options or Performance Awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled and returned to the 2008 Equity Plan. We then use our cash to pay tax authorities the

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amount of statutory taxes owed by and on behalf of the award recipient.

Stock Options

The following summarizes information about stock option activity during2013:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				In years		In millions
Outstanding as of December 31, 2012	15,519,562	$	4.27	5.0	$	0.2
Granted	1,870,000	$	2.44
Exercised	(287,449)	$	3.98
Cancelled	(968,220)	$	4.25
Outstanding as of December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Vested and expected to vest at December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Exercisable at December 31, 2013	12,791,698	$	4.24	4.0	$	10.3

The pre-tax intrinsic value of options exercised,  calculated by multiplying options exercised by the difference between our stock price on the date of exercise and the exercise price of the options, was approximately $0.2 million in 2013, immaterial in 2012 and $5.9 million in 2011.

The following summarizes information about stock options outstanding at December 31, 2013 by a range of exercise prices:

				Options outstanding				Options exercisable
					Weighted
					average	Weighted			Weighted
				Number of	remaining	average		Number of	average
Range of exercise prices				outstanding	contractual	exercise		vested	exercise
From		To		options	life (in years)	price		options	price
$	2.33	$	2.80	3,241,253	7.8	$	2.49	1,531,894	$	2.55
$	2.89	$	3.41	4,320,747	5.5	$	3.23	3,169,166	$	3.22
$	3.49	$	4.69	3,239,249	2.9	$	4.41	3,199,031	$	4.42
$	4.75	$	4.88	3,716,638	3.0	$	4.84	3,716,638	$	4.84
$	4.90	$	7.65	1,616,006	6.3	$	6.96	1,174,969	$	6.77
				16,133,893	5.0	$	4.06	12,791,698	$	4.24

We use Black-Scholes to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price of our common stock. For options granted to employees and directors, we used certain factors to value each stock option granted, which resulted in a weighted average fair value of options granted during 2013, 2012and 2011, as follows:

	2013	2012	2011
Volatility	58% to 64%	56% to 64%	50% to 60%
Risk-free interest rates	1% to 2%	1%	1% to 3%
Expected life of option	7 years	6 years	6 years
Dividend yield	zero	zero	zero
Forfeiture rate	zero	7%	6%
Weighted average fair value of stock options granted	$1.54	$1.70	$4.68

Volatility is based on reviews of the historical volatility of our common stock. Risk-free interest rates are based on yields of U.S. treasury notes in effect at the date of grant. Expected life of option is based on actual historical option exercises. Dividend yield is zero because we do not anticipate paying cash dividends in the foreseeable future. We estimate forfeitures and adjust this estimate periodically based in part on the extent to which actual forfeitures differ from our estimates.

For options granted to non-employees, we estimate the fair value of stock options granted using factors similar to those used for stock options granted to employees and directors and appropriate for the terms underlying the stock options

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granted to non-employees. We re-measure the compensation expense for options granted to non-employees each reporting period.  

As of December 31, 2013, we expect to recognize compensation costs of $16.3 million related to non-vested options over the weighted average remaining recognition period of 2.5 years.

Performance Awards

At December 31, 2013, we have outstanding 3,250,065 shares of Performance Awards. We did not grant, issue via exercise or cancel any Performance Awards during 2013. If and when these Performance Awards vest, we would recognize $7.7 million in non-cash stock-based compensation. The modifications to outstanding Performance Awards in 2013 decreased the amount we would recognize if and when these Performance Awards vest by $3.5 million. These Performance Awards expire in 2022. If Performance Awards expire, the underlying shares return to the 2008 Equity Incentive Plan.

2000 Employee Stock Purchase Plan

Under the amended and restated 2000 Employee Stock Purchase Plan, or the Purchase Plan, eligible employees may purchase common stock through payroll deductions of up to 15% of the employee’s compensation. In May 2013, we issued 16,463 shares pursuant to the Purchase Plan.

The purchase price of the stock under the Purchase Plan is generally 85% of the lower of the fair market value of the common stock at the beginning of the offering period or at the end of the purchase period. We use Black-Scholes to estimate the fair value of rights granted under the Purchase Plan, using assumptions similar to those used in determining the fair value of options. Stock based compensation costs related to the Purchase Plan was immaterial in 2013.

Stock-Based Compensation

Our non-cash stock-based compensation was$3.1 million in 2013, $6.6 million in 2012 and $5.4 million in 2011. In 2013, we modified outstanding share-based awards to provide for full acceleration of vesting in the event that a plan participant has their service provider status with the Company terminated by the Company (or any successor entity) without cause or terminated by such participant for good reason at any time following a change in control of the Company.As a result of these modifications, the amount of stock-based compensation we recognized in 2013 was reduced by an immaterial amount.

7.  Employee 401(k) Benefit Plan

We have a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees. Employees are eligible to participate in the plan the first day of the month after hire and may contribute up to the current statutory limits under Internal Revenue Service regulations. The 401(k) plan permits us to make additional matching contributions on behalf of all employees. Through December 31, 2013, we have not made any matching contributions.

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8.  Income Taxes

We recorded a non-cash benefit from income taxes in 2013 related to previously unrecognized tax benefits for use of certain research and development tax credits in 2006. Other than this benefit, we did not provide for income taxes in 2013 as a result of we had a net operating loss for tax purposes in 2013. A reconciliation between the amount computed by multiplying our income before benefit from income taxes for 2013 by the U.S. statutory tax rate and our benefit from income taxes follows (in thousands):

	2013
Tax at U.S. statutory tax rate of 34%	$	10,725
State taxes		(73)
Equity-based compensation		844
Research credits		(81)
Other		(242)
Change in valuation allowance		(11,246)
Benefit from income taxes	$	(73)

We did not have a provision for income taxes in 2012 or 2011 because we had a net operating loss for tax purposes in those years.

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

	December 31,
	2013		2012		2011
Deferred tax assets:
Net operating loss carryforwards	$	10,200	$	9,200	$	6,500
Stock-related compensation		11,100		11,700		12,000
Research & development credit carryforwards		5,700		6,400		6,300
Deferred license fee revenue		—		14,600		19,900
Other		600		600		900
		27,600		42,500		45,600
Valuation allowance		(27,600)		(42,200)		(45,300)
	$	—	$	300	$	300

We are uncertain about the timing and amount of any future profits. Accordingly, we offset our deferred tax assets by a valuation allowance. The valuation allowance decreased by $15.0 in 2013, $3.1 million in 2012 and $0.8 million in 2011.

Our pre-tax net operating loss carryforwards of$32.7 million are federal and expire between 2029 and 2033.  Our deferred tax assets exclude certain federal tax deductions associated with stock option transactions over and above the stock related compensation expenses in our financial statements by approximately $2.6 million. If and when we are able to reduce our income taxes payable with these tax deductions, we will credit additional paid-in capital.

As of December 31, 2013, we had federal research and development tax credits of approximately $9.5 million, which expire in the years 2023 through 2033.

Our deferred tax liabilities at December 31, 2012 resulted from reserves for credits used to reduce state taxes paid for 2006 and 2008. In 2013, we concluded that these reserves will never be realized. Interest expense related to our tax positions was immaterial for 2013, 2012 and 2011.

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Unrecognized tax benefits

We have unrecognized tax benefits related primarily to tax credits. In 2013, we reduced our unrecognized tax benefits for the lapse of applicable statute of limitations for tax credits used in prior years. A reconciliation of the beginning and ending unrecognized tax benefits recorded for 2013, 2012and 2011 follows (in thousands):

		2013		2012		2011
Beginning balance	$	5,200	$	5,100	$	4,800
Additions based on tax positions related to the current year		100		100		300
Lapse of applicable statute of limitations		(600)		—		—
Reductions for tax positions related to prior years		(900)		—		—
Ending balance	$	3,800	$	5,200	$	5,100

9.  Leases and Commitments

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TX that expires in 2014.   Future minimum lease payments are as follows for the years ended December 31, (in thousands):

	2014		Total
Future minimum lease payments	$	81	$	81

We believe that our facilities are adequate and suitable for our current needs. Rent expense was $0.1 million for 2013 and 2012 and $0.6 million for 2011.

We conduct our product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites. We have contractual arrangements with these organizations, however these contracts are cancelable on thirty days’ notice and our obligations under these contracts are largely based on services performed.

10.  Legal proceedings

K B Partners I, L.P., Individually and On Behalf of All Others Similarly Situated v. Pain Therapeutics, Inc., Remi Barbier, Nadav Friedmann and Peter S. Roddy.

On December 2, 2011, a purported class action was filed against us and our executive officers in the U.S. District Court for the Western District of Texas. This complaint alleges, among other things, violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Exchange Act arising out of allegedly untrue or misleading statements of material facts made by us regarding REMOXY’s development and regulatory status during the purported class period, February 3, 2011 through June 23, 2011. The complaint states that monetary damages are being sought, but no amounts are specified. On June 3, 2013, the Court certified a class consisting of all purchasers of our common stock and a class period of December 27, 2010 through June 26, 2011.

11.  Selected Quarterly Financial Data (Unaudited) (in thousands, except per share data)

	Quarters Ended
	March 31		June 30		September 30		December 31
2013
Total revenue	$	1,958	$	1,959	$	1,958	$	35,244
Net income (loss)	$	(408)	$	(301)	$	(762)	$	33,015
Basic net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.73
Diluted net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.72
2012
Total revenue	$	2,973	$	2,724	$	2,725	$	2,468

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Net income (loss)	$	30	$	(130)	$	(1,550)	$	(1,796)
Basic and diluted net income (loss) per share	$	0.00	$	(0.00)	$	(0.03)	$	(0.04)

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.  

Item 9A.Controls and Procedures

Evaluation of disclosure controls and procedures.  Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Management’s annual report on internal control over financial reporting. We are responsible for establishing and maintaining adequate internal control over our financial reporting.We have assessed the effectiveness of internal control over financial reporting as of December 31, 2013. Our assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (1992 Framework).  

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on using the COSO criteria, we believe our internal control over financial reporting as of December 31, 2013was effective.

Changes in internal control over financial reporting.  There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2013that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements included in this Annual Report on Form 10-K and has issued a report on the effectiveness of our internal control over financial reporting.The attestation report of Ernst & Young LLP is included below.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Pain Therapeutics, Inc.

We have audited Pain Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) (the COSO criteria). Pain Therapeutic, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s annual report on internal control over financial reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Pain Therapeutics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Pain Therapeutics, Inc. as of December 31, 2012 and 2011, and the related statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2013 of Pain Therapeutics, Inc. and our report dated February 4, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Austin, Texas

February 4, 2014

51

Item 9B.Other Information

None

PART III

Item 10.Directors and Executive Officers and Corporate Governance

The information regarding our directors, executive officers, director nomination process and the audit committee of our board of directors is incorporated by reference from "Directors and Executive Officers" in our Proxy Statement for our 2014Annual Meeting of Stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended requires our executive officers and directors and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC.  Executive officers, directors and greater than ten percent (10%) stockholders are required by Commission regulation to furnish us with copies of all Section 16(a) forms they file. We believe all of our executive officers and directors complied with all applicable filing requirements during 2013.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer.We publicize the Code of Ethics through posting the policy on our website, http://www.paintrials.com. We will disclose on our website any waivers of, or amendments to, our Code of Ethics.

Item 11.Executive Compensation

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading "Executive Compensation and Other Matters."

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item regarding security ownership of certain beneficial owners and management is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading "Security Ownership of Certain Beneficial Owners and Management."

The following table summarizes the securities authorized for issuance under our equity compensation plans as of December 31, 2013:

	Number of
	Securities to be	Weighted Average		Number of Securities
	Issued Upon	Exercise Price of		Remaining Available
	Exercise of	Outstanding		for Future Issuance
	Outstanding	Options,		Under Equity
	Options, Warrants	Warrants		Compensation
	and Rights	and Rights		Plans
Equity compensation plans approved by stockholders	19,383,958	$	3.38	5,239,628
Equity compensation plans not approved by stockholders	—	$	—	—
	19,383,958	$	3.38	5,239,628

Item 13.Certain Relationships and Related Transactions and Director Independence

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to

52

in Item 10 above where it appears under the heading "Certain Relationships and Related Transactions."

Item 14.Principal Accountant Fees and Services

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading“Principal Accountant Fees and Services.”

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)The following documents are filed as part of this Form 10-K:

(1)Financial Statements (included in Part II of this report):

Report of Independent Registered Public Accounting Firm

Balance Sheets

Statements of Operations

Statements of Comprehensive Income

Statements of Stockholders' Equity

Statements of Cash Flows

Notes to Financial Statements

(2)Financial Statement Schedules:

All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements.

(3)Management Contracts, Compensatory Plans and Arrangements.  

Management contracts, compensatory plans and arrangements are indicated by the symbol “*” in the applicable exhibits listed in Item 15(b), below.

(b)Exhibits

The exhibits listed below are filed as part of this Form 10-K other than Exhibit 32.1, which shall be deemed furnished.

Exhibit Number	Description of Document
3.1   (1)	Amended and Restated Certificate of Incorporation.
3.2  (2)	Amended and Restated Bylaws.
4.1   (1)	Specimen Common Stock Certificate.
4.2   (3)	Preferred Stock Rights Agreement, dated as of April 28, 2005, between the Company and Mellon Investor Services LLC, including the Certificate of Designation, the form of Rights Certificate and Summary of Rights attached thereto as Exhibits A, B and C, respectively.
10.1   (4)*	Form of Indemnification Agreement between Pain Therapeutics and each of its directors and officers.
10.2   (4)*	1998 Equity Incentive Plan and form of agreements thereunder.
10.3   (5)*	Employment Agreement dated October 23, 2001, between Registrant and Nadav Friedmann, PhD. M.D.
10.4   (6)	Collaboration Agreement dated November 9, 2005, between Registrant and King Pharmaceuticals, Inc.
10.5   (6)	License Agreement dated November 9, 2005, between Registrant and King Pharmaceuticals, Inc.
10.6   (7) +	Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.
10.7   (7) +	Amendment dated December 15, 2005 to Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.
10.9 (8)	2008 Equity Incentive Plan.
10.10 (9)*	Form of Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan.
10.11 (9)*	Form of Performance Share Award Agreement under 2008 Equity Incentive Plan.
10.12 (9)*	Form of Restricted Stock Award Agreement under 2008 Equity Incentive Plan.
10.13 (9)*	Form of Stock Option Award Agreement under 2008 Equity Incentive Plan.
10.14 (10)*	Employment Agreement dated July 1, 1998 and amended December 17, 2008 between Registrant and Remi Barbier.

53

10.15 (10)*	Employment Agreement dated August 29, 2000 and amended December 30, 2008 between Registrant and Grant L. Schoenhard, Ph.D.
10.16 (10)*	Employment Agreement dated November 18, 2002 and amended December 30, 2008 between Registrant and Peter S. Roddy.
10.17 (11)	Letter Agreement dated June 24, 2010 with Amendments to the License and Collaboration Agreements between the Registrant and King Pharmaceuticals, Inc.
10.18 (11)*	2000 Employee Stock Purchase Plan, as amended and restated.
10.19 (12)	Lease agreement, dated as of February 14, 2011 between Registrant and StoneCliff Office, L.P.
10.20 (6)	Amended Lease agreement, dated as of December 20, 2011 between Registrant and StoneCliff Office, L.P.
10.21 (13)*	Amendment Number 1 to the 2008 Equity Incentive Plan.
10.22 (13)*	Amendment No. 2 to Employment Agreement between Registrant and Remi Barbier.
10.23	Letter Agreement dated October 21, 2013 with Amendments to the License and Collaboration Agreements between the Registrant and King Pharmaceuticals, Inc.
23.1	Consent of Independent Registered Public Accounting Firm.
24.1	Power of Attorney (see page 60).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 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.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

__________

(1)Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2005.

(2)Incorporated by reference from exhibits to our report on Form 10-Q for the period ending March 31,  2013.

(3)Incorporated by reference from exhibits to our report on Form 8-K as filed with the SEC on May 3, 2005.

(4)Incorporated by reference from our registration statement on Form S-1, registration number 333-32370, declared effective by the SEC on July 13, 2000.

(5) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2001.

(6) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2011.

(7)  Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2005.

(8)  Incorporated by reference from exhibits to our report on Form 8-K as filed with the SEC on May 29, 2008.

(9) Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2008.

(10) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2008.

(11) Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2010.

(12) Incorporated by reference from our report on Form 10-Q for the period ending March 31, 2011.

(13) Incorporated by reference from our report on Form 10-Q for the period ending June 30, 2013.

+  Confidential treatment has been requested or granted for certain portions of this exhibit. The omitted portions have been filed separately with the Securities and Exchange Commission.

*Management contract, compensatory plan or arrangement.

(b)Exhibits

The exhibits listed under Item 15(a)(3) hereof are filed as part of this Form 10-K other than Exhibit 32.1, which shall be deemed furnished.

(c)Financial Statement Schedules

All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements.

54

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.

PAIN THERAPEUTICS, INC.

By:/s/REMI BARBIER

Remi Barbier

President, Chief Executive Officer and Chairman of the Board of Directors

Dated: February 5, 2014

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Remi Barbier and Peter S. Roddy, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may 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/ REMIBARBIER	President, Chief Executive Officer and	February 5, 2014
Remi Barbier	Chairman of the Board of Directors
	(Principal Executive Officer)
/s/ PETER S. RODDY Peter S. Roddy	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	February 5, 2014
/s/  NADAV FRIEDMANN, PH.D., M.D.	Chief Operating and Medical Officer	February 5, 2014
Nadav Friedmann, Ph.D., M.D.	and Director
/s/  ROBERT Z. GUSSIN, PH.D.	Director	February 5, 2014
Robert Z. Gussin, Ph.D.
/s/  MICHAEL J. O'DONNELL, ESQ.	Director and Secretary	February 5, 2014
Michael J. O'Donnell, Esq.
/s/  SAIRA RAMASASTRY	Director	February 5, 2014
Saira Ramasastry
/s/  SANFORD R. ROBERTSON	Director	February 5, 2014
Sanford R. Robertson
/s/  PATRICK SCANNON, M.D, PH.D.	Director	February 5, 2014
Patrick Scannon, M.D., Ph.D.

EXHIBIT INDEX

Exhibit Number	Description of Document
3.1   (1)	Amended and Restated Certificate of Incorporation.
3.2   (2)	Amended and Restated Bylaws.
4.1   (1)	Specimen Common Stock Certificate.
4.2   (3)	Preferred Stock Rights Agreement, dated as of April 28, 2005, between the Company and Mellon Investor Services LLC, including the Certificate of Designation, the form of Rights Certificate and Summary of Rights attached thereto as Exhibits A, B and C, respectively.
10.1   (4)*	Form of Indemnification Agreement between Pain Therapeutics and each of its directors and officers.
10.2   (4)*	1998 Equity Incentive Plan and form of agreements thereunder.
10.3   (5)*	Employment Agreement dated October 23, 2001, between Registrant and Nadav Friedmann, PhD. M.D.
10.4   (6)	Collaboration Agreement dated November 9, 2005, between Registrant and King Pharmaceuticals, Inc.
10.5   (6)	License Agreement dated November 9, 2005, between Registrant and King Pharmaceuticals, Inc.
10.6   (7) +	Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.
10.7   (7) +	Amendment dated December 15, 2005 to Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.
10.9 (8)*	2008 Equity Incentive Plan.
10.10 (9)*	Form of Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan.
10.11 (9)*	Form of Performance Share Award Agreement under 2008 Equity Incentive Plan.
10.12 (9)*	Form of Restricted Stock Award Agreement under 2008 Equity Incentive Plan.
10.13 (9)*	Form of Stock Option Award Agreement under 2008 Equity Incentive Plan.
10.14 (10)*	Employment Agreement dated July 1, 1998 and amended December 17, 2008 between Registrant and Remi Barbier.
10.15 (10)*	Employment Agreement dated August 29, 2000 and amended December 30, 2008 between Registrant and Grant L. Schoenhard, Ph.D.
10.16 (10)*	Employment Agreement dated November 18, 2002 and amended December 30, 2008 between Registrant and Peter S. Roddy.
10.17 (11)  +	Letter Agreement dated June 24, 2010 with Amendments to the License and Collaboration Agreements between the Registrant and King Pharmaceuticals, Inc.
10.18 (11)*	2000 Employee Stock Purchase Plan, as amended and restated.
10.19 (12)	Lease agreement, dated as of February 14, 2011 between Registrant and StoneCliff Office, L.P.
10.20 (6)	Amended Lease agreement, dated as of December 20, 2011 between Registrant and StoneCliff Office, L.P.
10.21 (13)*	Amendment Number 1 to the 2008 Equity Incentive Plan.
10.22 (13)*	Amendment No. 2 to Employment Agreement between Registrant and Remi Barbier.
10.23	Letter Agreement dated October 21, 2013 with Amendments to the License and Collaboration Agreements between the Registrant and King Pharmaceuticals, Inc.
23.1	Consent of Independent Registered Public Accounting Firm.
24.1	Power of Attorney (see page 60).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 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.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

__________

(1)Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2005.

(2)Incorporated by reference from exhibits to our report on Form 10-Q for the period ending March 31, 2005.

(3)Incorporated by reference from exhibits to our report on Form 8-K as filed with the SEC on May 3, 2005.

(4)Incorporated by reference from our registration statement on Form S-1, registration number 333-32370, declared effective by the SEC on July 13, 2000.

(5) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2001.

(6) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2011.

(7)  Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2005.

(8) Incorporated by reference from exhibits to our report on Form 8-K as filed with the SEC on May 29, 2008.

(9) Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2008.

(10) Incorporated by reference from exhibits to our report on Form 10-K for the period ending December 31, 2008.

(11) Incorporated by reference from exhibits to our report on Form 10-Q for the period ending June 30, 2010.

(12) Incorporated by reference from our report on Form 10-Q for the period ending March 31, 2011.

(13) Incorporated by reference from our report on Form 10-Q for the period ending June 30, 2013.

+  Confidential treatment has been requested or granted for certain portions of this exhibit. The omitted portions have been filed separately with the Securities and Exchange Commission.

*Management contract, compensatory plan or arrangement.

EX-10.23

EXHIBIT 10.23

Letter Agreement dated October 21, 2013 with Amendments to the License and Collaboration Agreements between the Registrant and King Pharmaceuticals, Inc.

October21,2013

ViaEmail

RemiBarbier

Chairman,President &CEOPainTherapeutics,Inc.

7801NCapitalofTexasHighwaySuite260

Austin,Texas78731

Re:Agreement betweenPainTherapeutic, Inc.("PTI")andPfizerInc.,assuccessorininteresttoKingPharmaceuticals, Inc.("Pfizer")

ThesignatoriesbelowarepartiestoagreementsbywhichPfizeristhesublicenseeofrightsgrantedbyPTIassetforthintheLicenseAgreement("LA")datedasofNovember9,2005,asamended,byandbetweenPTIandPfizer,  andtheCollaborationAgreement("CA"),datedasofNovember9,2005,asamended,byandbetweenPTIandPfizer. PTIisthelicenseeofrightsgrantedbyDurectCorporation("Durect")assetforthintheDevelopmentandLicenseAgreementdatedasofDecember 19,2002,asamended(the"DLA"),byandbetweenPTIandDurectrelatedtothedevelopmentandcommercializationofopioidagonistproductsincorporatingtheSABERTechnology,thefirstofthesebeingtheoxycodoneproductRemoxyasdefinedintheCA.

Thepartiesherebyagreetothefollowingmatters:

1.ReturnofProductsother thanRemoxy:Effectiveasofthedatehereof,PfizerherebyelectstoterminateallofPfizer'srightsandobligationsundertheLAandCAwithrespecttohydrocodone,oxymorphone,andhydromorphone,henceforthTerminatedProductspursuanttoSection3.1.4oftheCA(providedthattheninety(90)daypriorwrittennoticerequiredbySection3.1.4shallnotapply). PTIagreesandacknowledgesPfizershallnotbesubjecttoSection3.1.3(a)and(b)oftheCA. Forclarity,PfizershallnotberequiredtodesignatereplacementsfortheTerminatedProductsortomaintainaminimumoffour(4)Products. PTIshallnotdesignateanyreplacementProductonPfizer'sbehalf.RemoxyshallbetheonlyProductsubjecttotheCAandLA.

2. AllrightsandobligationswithregardtotheTerminatedProductsshallimmediatelyreverttoPTIandvestexclusivelyinPTIwithoutanyroyaltyorotherobligationtoPfizerinaccordaricewithSection9.2.2(a)oftheCAandSection2.2.3oftheLA. ExceptforrightsandobligationsundertheDLA,LAandCAwithrespecttoRemoxy,asofthedate

hereofPfizershallhavenofurtherrightorobligationtodevelop,commercializeorsub­licensetheTerminatedProductsoranyproductotherthanRemoxyundertheDLA,LAandCA. PfizershallnolongerbesubjecttoandshallhavenofurtherobligationswithrespecttoanyprovisionsoftheDLAinconnectionwiththeTerminatedProductsoranyproductsotherthanRemoxy.

3. FreedomtoDevelopAnyOpioidProduct: Section7.1oftheCAisherebyamendedtoprovidethattheprovisionsofSection7.1oftheCAshallnotapplytotheTerminatedProducts. Fortheavoidanceofdoubt,PTIshallbefreetodevelopormarketTerminatedProductsintheFieldintheTerritoryonitsownorwithorthroughanAffiliate,Sublicensee,licenseeorotherThirdparty,orgranttoanyAffiliate,Sublicensee,licenseeorotherThirdpartyanyright,option,orlicensetodosowithoutnoticeorapprovalfromPfizer.

4. ThefourthsentenceofSection3.6oftheCA"Kingwillspendatleast$10million..."totheendoftheSection3.6shallbedeletedinitsentirety.

5. MinimumAnnualSpend:AllobligationsofPfizerwithrespecttotheMinimumSpendwhetherundertheDLAorCAorLA,shallbeconsideredtobefullysatisfiedanddischargedandPfizershallhavenofurtherobligationorliabilityinrespectthereofPfizershallnotseekrepaymentofanyamountspaidtoPTI,andPTIshallnotseekanyfurtherpaymentsfromPfizer,withrespecttotheMinimumSpendundertheDLAforthetermof theCA.

6. Miscellaneous:NothinginthisAgreementshallbeconstruedorinferredbyPTIoranyotherpartyasindicatingPfizer's "go/nogo"decision withrespecttoRemoxy.

7. Publicity:NeitherPartymaypubliclydisclosetheexistenceortermsofthisAgreementwithoutthepriorwrittenconsentoftheotherParty,exceptthatPTImaydisclosetheexistenceandtermsofthisAgreementinapressreleaseorotherfilingwiththeSecuritiesandExchangeCommission. PTIagreestoprovidePfizerwithadraftcopyofanysuchpressreleaseorfilingpriortoitspublicdisclosure.

8. ExpensesrelatedtoReturnedProducts:PTIagreesthatPfizerisnotobligatedtopaythecostsofanyclinicaltrialsorotherdevelopmentexpensesrelatedtotheTerminatedProducts,pursuanttoSection9.2.2(a)(i)oftheCA,providedthatPfizershallcontinuetobeboundbytheotherprovisionsofSection9.2.2(a),andprovidedfurtherthatifPfizershallterminateitsrightsandobligationstoDevelopRemoxy,orterminatestheCAorLA,PfizershallbeobligatedtopayallcostsofclinicaltrialsandotherdevelopmentexpensesinconnectionwithRemoxyassetforthinSection9.2.2(a)oftheCA.

9. Non-disparagement:Neitherpartyshalldiscourageorotherwisepreventanyconsultant,contractors,vendorsorthird-partiesfromprovidingproductsorservicestotheotherwithrespecttothedevelopmentandcommercialization ofTerminatedProductsorRemoxy.

2

10. Full-force:ExceptasexpresslysetforthinthisAgreement,theCAandLAremaininfullforceandeffect.

11. DefinedTerms:Capitalizedtermsunlessdefinedinthislettershallhavethemeaningsascribedtothemintherelevantagreementsbetweenthepartieshereto.

12. Counterparts:Thislettermaybeexecutedintwoormorecounterparts,eachofwhichshallbedeemedanoriginal,butallofwhichtogethershallconstituteoneandthesameinstrument.Afacsimileor.pdfsignaturetothislettershallbeeffectiveasanoriginalsignature.

Pleasesignbelowtoacknowledgeyouracceptanceandagreementtothisletter.

PainTherapeutics, Inc.

By:/s/ REMI BARBIER

Name:Remi Barbier

Title:Chairman, President and CEO

'

PfizerInc.

By:/s/ STEVEN J. ROMANO, M.D.

Name:Steven J. Romano, M.D.

Title:SVP, Medicines Development Group Head

3

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. No. 333-115362, No. 333-108145) of Pain Therapeutics, Inc. and in the related Prospectus, and in the Registration Statements (Form S-8 No. 333-168390, No. 333-152676, No. 333-147336, No. 333-134364, No. 333-115361, No. 333-105138, No. 333-68118 and No. 333-41660) pertaining to the 2008 Equity Incentive Plan, the 1998 Stock Plan and 2000 Employee Stock Purchase Plan of Pain Therapeutics, Inc. of our reports dated February 4, 2014, with respect to the financial statements of Pain Therapeutics, Inc., and the effectiveness of internal control over financial reporting of Pain Therapeutics, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2013.

/s/Ernst &Young LLP

Austin, Texas

February 4, 2014

EX-31.1

EXHIBIT 31.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Remi Barbier, certify that:

1. I have reviewed this Report on Form 10-K of Pain Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ REMI BARBIER

Remi Barbier,

Chairman of the Board of Directors,

President and Chief Executive Officer

(Principal Executive Officer)

Date: February 5, 2014

EX-31.2

EXHIBIT 31.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter S. Roddy, certify that:

1. I have reviewed this Report on Form 10-K of Pain Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ PETER S. RODDY

Peter S. Roddy,

Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: February 5, 2014

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND THE

CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Remi Barbier, Chairman of the Board of Directors, President and Chief Executive Officer and Peter S. Roddy, Vice President and Chief Financial Officer of Pain Therapeutics, Inc. (the “Company”), hereby certify that to the best of our knowledge:

1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and to which this certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, and

2. The information contained in this Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 5, 2014

/s/ REMI BARBIER

Remi Barbier,

Chairman of the Board of Directors,

President and Chief Executive Officer

/s/ PETER S. RODDY

Peter S. Roddy,

Vice President and Chief Financial Officer

XML

Income Taxes (Schedule Of Deferred Tax Assets And Valuation Allowance) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Net operating loss carryforwards	$ 10,200	$ 9,200	$ 6,500
Stock-related compensation	11,100	11,700	12,000
Research & development credit carryforwards	5,700	6,400	6,300
Deferred license fee revenue		14,600	19,900
Other	600	600	900
Total deferred tax assets	27,600	42,500	45,600
Valuation allowance	(27,600)	(42,200)	(45,300)
Net deferred tax assets		$ 300	$ 300

XML

Stockholders' Equity And Stock-Based Compensation (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-cash stock based compensation	$ 3,101,000	$ 6,610,000	$ 5,428,000
2008 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance	4,800,000
Common stock shares granted to outside directors	50,000
Expiration period of stock options granted	10 years
Fair market value percent	100.00%
Options exercisable percentage	25.00%
Pre-tax intrinsic value of options exercised	200,000		5,900,000
Compensation costs prior to forfeiture	16,300,000
Weighted average remaining recognition period	2 years 6 months
2000 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair market value percent	85.00%
Payroll deductions	15.00%
Shares reserved for issuance	16,463
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance awards granted	3,250,065
Additional stock compensation expense	7,700,000
Decrease to additional stock compensation expense	$ 3,500,000
Series A Preferred Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, Preferred Stock	$ 40.00

XML

Leases And Commitments (Tables)

12 Months Ended

Dec. 31, 2013

Leases And Commitments [Abstract]

Future Minimum Lease Payments

	2014		Total
Future minimum lease payments	$	81	$	81

XML

Leases And Commitments (Future Minimum Lease Payments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Leases And Commitments [Abstract]
2014	$ 81
Total	$ 81

XML

Income Taxes (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
Provision for income taxes	$ (73,000)	$ 0	$ 0
Valuation allowance decreased	15,000,000	3,100,000	800,000
Part of valuation allowance as tax benefits associated with stock option transactions	2,600,000
Federal [Member]
Operating Loss Carryforwards [Line Items]
Pre-tax net operating loss carryforwards	32,700,000
Federal research and development tax credits	$ 9,500,000
Federal [Member] | Minimum [Member]
Operating Loss Carryforwards [Line Items]
Expiration date of pre-tax net operating loss carryforwards	Jan. 01, 2029
Expiration date of federal research and development tax credits	Jan. 01, 2023
Federal [Member] | Maximum [Member]
Operating Loss Carryforwards [Line Items]
Expiration date of pre-tax net operating loss carryforwards	Dec. 31, 2033
Expiration date of federal research and development tax credits	Dec. 31, 2033

XML

General

12 Months Ended

Dec. 31, 2013

General [Abstract]

General

1.  General

We are a biopharmaceutical company that develops novel drugs. Our lead drug candidate is called REMOXY® (oxycodone) Extended-Release Capsules CII. REMOXY is a strong painkiller with a unique formulation designed to reduce potential risks of unintended use. REMOXY and three other abuse-resistant painkillers are being developed pursuant to the collaboration agreement and license agreement, or the Pfizer Agreements, between us and King Pharmaceuticals, Inc., a subsidiary of Pfizer, Inc., or Pfizer.

In the course of our development activities, we have sustained cumulative operating losses. There are no assurances that additional financing will be available on favorable terms, or at all.

XML

Selected Quarterly Financial Data (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Selected Quarterly Financial Data [Abstract]
Total revenue	$ 35,244	$ 1,958	$ 1,959	$ 1,958	$ 2,468	$ 2,725	$ 2,724	$ 2,973	$ 41,119	$ 10,890	$ 11,484
Net income (loss)	$ 33,015	$ (762)	$ (301)	$ (408)	$ (1,796)	$ (1,550)	$ (130)	$ 30	$ 31,471	$ (3,446)	$ (2,613)
Net income (loss) per share - Basic	$ 0.73	$ (0.02)	$ (0.01)	$ (0.01)					$ 0.70	$ (0.08)	$ (0.06)
Net income (loss) per share - Diluted	$ 0.72	$ (0.02)	$ (0.01)	$ (0.01)					$ 0.70	$ (0.08)	$ (0.06)
Basic and diluted net income (loss) per share					$ (0.04)	$ (0.03)	$ 0.00	$ 0.00

XML

Collaboration Agreements (Details) (USD $)	1 Months Ended	12 Months Ended			85 Months Ended
	Jul. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Nov. 30, 2012
Collaboration Agreements [Abstract]
Upfront cash payment	$ 5,000,000				$ 150,000,000
Program fee revenue		41,119,000	10,641,000	10,897,000
Collaboration revenue			249,000	587,000
Royalty rate for net sales		20.00%
Cumulative net sales		$ 1,000,000,000
Royalty rate for cumulative net sales		15.00%
Royalty rate on all of net sales		10.00%

XML

Summary Of Significant Accounting Policies (Numerators And Denominators In The Calculation Of Basic And Diluted Net Loss Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Numerator
Net income (loss)					$ 31,544	$ (3,446)	$ (2,613)
Denominator
Weighted-average shares used to compute basic net income (loss) per share					45,007	44,753	44,160
Effect of dilutive securities - Dilution from employee stock plans					201
Weighted-average shares used to compute diluted net income (loss) per share					45,208	44,753	44,160
Net income (loss) per share - Basic	$ 0.73	$ (0.02)	$ (0.01)	$ (0.01)	$ 0.70	$ (0.08)	$ (0.06)
Net income (loss) per share - Diluted	$ 0.72	$ (0.02)	$ (0.01)	$ (0.01)	$ 0.70	$ (0.08)	$ (0.06)

XML

Cash And Cash Equivalents And Marketable Securities (Cash, Cash Equivalents And Marketable Securities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 48,588	$ 49,355	$ 73,144	$ 4,798
Cash and cash equivalents, Short Term Investment, Amortized Cost	49,837	56,250
Cash and cash equivalents, Short Term Investment Unrealized Gains	1	4
Cash and cash equivalents, Short Term Investment Unrealized Loss
Accrued Interest
Estimated Fair Value, Marketable securities	1,250	6,899
Cash and cash equivalents, Short Term Investment, Fair Value	49,838	56,254
Marketable Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Amortized Cost Basis	1,250	6,898
Available-for-sale securities, Gross Unrealized Gains		1
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Estimated Fair Value, Marketable securities	1,250	6,899
Cash And Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	48,587	49,352
Available-for-sale securities, Gross Unrealized Gains	1	3
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Cash and cash equivalents, Fair Value	48,588	49,355
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Amortized Cost Basis	1,250
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Estimated Fair Value, Marketable securities	1,250
Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Amortized Cost Basis		6,898
Available-for-sale securities, Gross Unrealized Gains		1
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Estimated Fair Value, Marketable securities		6,899
Cash And Cash Equivalents, Reported Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	48,587	49,352
Available-for-sale securities, Gross Unrealized Gains	1	3
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Cash and cash equivalents, Fair Value	48,588	49,355
Matures In One Year Or Less [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Short Term Investment, Amortized Cost	49,837	56,250
Available-for-sale securities, Gross Unrealized Gains	1	4
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Cash and cash equivalents, Short Term Investment, Fair Value	49,838	56,254
Matures One To Three Years [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities, Gross Unrealized Losses
Accrued Interest
Estimated Fair Value, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Short Term Investment, Fair Value	49,838	56,254
Estimated Fair Value, Fair Value Disclosure [Member] | Marketable Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Fair Value, Marketable securities	1,250	6,899
Estimated Fair Value, Fair Value Disclosure [Member] | Cash And Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	48,588	49,355
Estimated Fair Value, Fair Value Disclosure [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Fair Value, Marketable securities	1,250
Estimated Fair Value, Fair Value Disclosure [Member] | Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Fair Value, Marketable securities		6,899
Estimated Fair Value, Fair Value Disclosure [Member] | Cash And Cash Equivalents, Reported Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Fair Value	48,588	49,355
Estimated Fair Value, Fair Value Disclosure [Member] | Matures In One Year Or Less [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, Short Term Investment, Fair Value	$ 49,838	$ 56,254

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Cash And Cash Equivalents And Marketable Securities (Assets Measured At Fair Value On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 49,838	$ 56,254
Cash And Money Market Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	48,588	1,817
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,250
Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		54,437
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	48,588	1,817
Level 1 [Member] | Cash And Money Market Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	48,588	1,817
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,250	54,437
Level 2 [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,250
Level 2 [Member] | Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		54,437
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value
Level 3 [Member] | Cash And Money Market Fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value
Level 3 [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value
Level 3 [Member] | Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value

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Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows used in operating activities:
Net income (loss)	$ 31,544	$ (3,446)	$ (2,613)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Deferred program fee revenue	(41,119)	(10,641)	(10,897)
Non-cash stock based compensation	3,101	6,610	5,428
Depreciation and amortization		122	163
Non-cash net interest income	(10)	342	1,141
Changes in operating assets and liabilities:
Receivables			7,114
Other current assets	(12)	105	(214)
Other non-current assets	352		74
Accounts payable	84	(103)	(643)
Accrued development expense	(288)	15	656
Accrued compensation and benefits	(141)	(62)	(797)
Excess tax benefits from equity-based compensation plans		(57)	339
Other accrued liabilities	(21)	(58)	(15)
Deferred tax liabilities	(437)	2	4
Net cash used in operating activities	(6,947)	(7,171)	(260)
Cash flows provided by investing activities:
Purchases of marketable securities	(6,644)	(20,768)	(2,497)
Maturities of marketable securities	12,300	38,390	62,400
Net cash provided by investing activities	5,656	17,622	59,903
Cash flows provided by (used in) financing activities:
Nondividend distribution		(33,995)
Excess tax benefits from equity-based compensation plans		57	(339)
Proceeds from issuance of common stock, net	524	(302)	9,042
Net cash provided by (used in) financing activities	524	(34,240)	8,703
Net increase (decrease) in cash and cash equivalents	(767)	(23,789)	68,346
Cash and cash equivalents at beginning of the period	49,355	73,144	4,798
Cash and cash equivalents at end of the period	$ 48,588	$ 49,355	$ 73,144

XML

Property And Equipment (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Furniture And Equipment [Member]	Dec. 31, 2012 Furniture And Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, purchase value			$ 0.6	$ 0.6
Depreciation and amortization expense	$ 0.1	$ 0.2

XML

Income Taxes (Schedule Of Unrecognized Tax Benefits) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Beginning balance	$ 5,200	$ 5,100	$ 4,800
Additions based on tax positions related to the current year	100	100	300
Lapse of applicable statute of limitations	(600)
Reductions for tax positions related to prior years	(900)
Ending Balance	$ 3,800	$ 5,200	$ 5,100

XML

Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 48,588	$ 49,355
Marketable securities	1,250	6,899
Other current assets	265	253
Total current assets	50,103	56,507
Other assets		352
Total assets	50,103	56,859
Current liabilities:
Accounts payable	445	361
Accrued development expense	641	929
Deferred program fee revenue - current portion		7,832
Accrued compensation and benefits	712	853
Other current liabilities	3	24
Total current liabilities	1,801	9,999
Non-current liabilities:
Deferred program fee revenue - non-current portion		33,287
Deferred tax liabilities		437
Total liabilities	1,801	43,723
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding
Common stock, $.001 par value; 120,000,000 shares authorized; 45,510,038 and 45,326,940 shares issued and outstanding at December 31, 2013 and 2012, respectively	45	45
Additional paid-in-capital	152,363	148,738
Accumulated other comprehensive income	1	4
Accumulated deficit	(104,107)	(135,651)
Total stockholders' equity	48,302	13,136
Total liabilities and stockholders' equity	$ 50,103	$ 56,859

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Statements Of Stockholders' Equity (USD $) In Thousands, except Share data	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Income [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2010	$ 43	$ 161,957	$ 525	$ (129,592)	$ 32,933
Balance, Shares at Dec. 31, 2010	42,910,164
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards	2	8,908			8,910
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards, shares	1,781,769
Issuance of common stock related to employee stock purchase plan		122			122
Issuance of common stock related to employee stock purchase plan, shares	40,084
Compensation with respect to non-employee option grants		60			60
Compensation with respect to employee option grants and share based awards		5,378			5,378
Other comprehensive loss			(397)		(397)
Net loss				(2,613)	(2,613)
Balance at Dec. 31, 2011	45	176,425	128	(132,205)	44,393
Balance, Shares at Dec. 31, 2011	44,732,017
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards		(366)			(366)
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards, shares	574,370
Issuance of common stock related to employee stock purchase plan		64			64
Issuance of common stock related to employee stock purchase plan, shares	20,553
Compensation with respect to non-employee option grants		75			75
Compensation with respect to employee option grants and share based awards		6,535			6,535
Non-dividend cash distribution of $0.75 per share		(33,995)			(33,995)
Other comprehensive loss			(124)		(124)
Net loss				(3,446)	(3,446)
Balance at Dec. 31, 2012	45	148,738	4	(135,651)	13,136
Balance, Shares at Dec. 31, 2012	45,326,940
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards		492			492
Issuance of common stock pursuant to exercise of stock options and awards, net of taxes paid on net issuance of stock options and awards, shares	166,635				287,449
Issuance of common stock related to employee stock purchase plan		32			32
Issuance of common stock related to employee stock purchase plan, shares	16,463
Compensation with respect to non-employee option grants		95			95
Compensation with respect to employee option grants and share based awards		3,006			3,006
Other comprehensive loss			(3)		(3)
Net loss				31,544	31,544
Balance at Dec. 31, 2013	$ 45	$ 152,363	$ 1	$ (104,107)	$ 48,302
Balance, Shares at Dec. 31, 2013	45,510,038

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Stockholders' Equity And Stock-Based Compensation (Information About Stock Options Outstanding) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options, outstanding	16,133,893
Weighted average remaining contractual life	5 years
Weighted average exercise price, Options outstanding	$ 4.06
Number of vested options, Options exercisable	12,791,698
Weighted average exercise price, Options exercisable	$ 4.24
$2.33 - $2.80 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 2.33
Range of exercise prices, Maximum	$ 2.80
Stock options, outstanding	3,241,253
Weighted average remaining contractual life	7 years 9 months 18 days
Weighted average exercise price, Options outstanding	$ 2.49
Number of vested options, Options exercisable	1,531,894
Weighted average exercise price, Options exercisable	$ 2.55
$2.89 - $3.41 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 2.89
Range of exercise prices, Maximum	$ 3.41
Stock options, outstanding	4,320,747
Weighted average remaining contractual life	5 years 6 months
Weighted average exercise price, Options outstanding	$ 3.23
Number of vested options, Options exercisable	3,169,166
Weighted average exercise price, Options exercisable	$ 3.22
$3.49 - $4.69 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 3.49
Range of exercise prices, Maximum	$ 4.69
Stock options, outstanding	3,239,249
Weighted average remaining contractual life	2 years 10 months 24 days
Weighted average exercise price, Options outstanding	$ 4.41
Number of vested options, Options exercisable	3,199,031
Weighted average exercise price, Options exercisable	$ 4.42
$4.75 - $4.88 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 4.75
Range of exercise prices, Maximum	$ 4.88
Stock options, outstanding	3,716,638
Weighted average remaining contractual life	3 years
Weighted average exercise price, Options outstanding	$ 4.84
Number of vested options, Options exercisable	3,716,638
Weighted average exercise price, Options exercisable	$ 4.84
$4.90 - $7.65 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, Minimum	$ 4.90
Range of exercise prices, Maximum	$ 7.65
Stock options, outstanding	1,616,006
Weighted average remaining contractual life	6 years 3 months 18 days
Weighted average exercise price, Options outstanding	$ 6.96
Number of vested options, Options exercisable	1,174,969
Weighted average exercise price, Options exercisable	$ 6.77

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Cash And Cash Equivalents And Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2013

Cash And Cash Equivalents And Marketable Securities [Abstract]

Cash, Cash Equivalents And Marketable Securities

	Cash, Cash Equivalents and Marketable Securities
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Accrued Interest		Total Value
December 31, 2013
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Commercial paper		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Reported as:
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Marketable securities		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Maturities:
Matures in one year or less	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Matures one to three years		—		—		—		—		—		—
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
December 31, 2012
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Corporate securities	$	6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Reported as:
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Marketable securities		6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Maturities:
Matures in one year or less	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Matures one to three years		—		—		—		—		—		—
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254

Assets Measured At Fair Value On Recurring Basis

	Level 1		Level 2		Level 3		Total
December 31, 2013
Cash and money market fund	$	48,588	$	—	$	—	$	48,588
Commercial paper		—		1,250		—		1,250
	$	48,588	$	1,250	$	—	$	49,838
December 31, 2012
Cash and money market fund	$	1,817	$	—	$	—	$	1,817
Corporate securities		—		54,437		—		54,437
	$	1,817	$	54,437	$	—	$	56,254

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Stockholders' Equity And Stock-Based Compensation (Weighted Average Fair Value Of Options Granted) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stockholders' Equity And Stock-Based Compensation [Abstract]
Volatility, Minimum	58.00%	56.00%	50.00%
Volatility, Maximum	64.00%	64.00%	60.00%
Risk-free interest rates		1.00%
Risk-free interest rates, Minimum	1.00%		1.00%
Risk-free interest rates, Maximum	2.00%		3.00%
Expected life of option	7 years	6 years	6 years
Dividend yield	0.00%	0.00%	0.00%
Forfeiture rate	0.00%	7.00%	6.00%
Weighted average fair value of stock options granted	$ 1.54	$ 1.70	$ 4.68

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Schedule Of Effective Income Tax Rate Reconciliation

	2013
Tax at U.S. statutory tax rate of 34%	$	10,725
State taxes		(73)
Equity-based compensation		844
Research credits		(81)
Other		(242)
Change in valuation allowance		(11,246)
Benefit from income taxes	$	(73)

Schedule Of Deferred Tax Assets And Valuation Allowance

	December 31,
	2013		2012		2011
Deferred tax assets:
Net operating loss carryforwards	$	10,200	$	9,200	$	6,500
Stock-related compensation		11,100		11,700		12,000
Research & development credit carryforwards		5,700		6,400		6,300
Deferred license fee revenue		—		14,600		19,900
Other		600		600		900
		27,600		42,500		45,600
Valuation allowance		(27,600)		(42,200)		(45,300)
	$	—	$	300	$	300

Schedule Of Unrecognized Tax Benefits

		2013		2012		2011
Beginning balance	$	5,200	$	5,100	$	4,800
Additions based on tax positions related to the current year		100		100		300
Lapse of applicable statute of limitations		(600)		—		—
Reductions for tax positions related to prior years		(900)		—		—
Ending balance	$	3,800	$	5,200	$	5,100

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Statements Of Stockholders' Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2012
Statements Of Stockholders' Equity [Abstract]
Non-dividend cash distribution, per share	$ 0.75

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Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	120,000,000	120,000,000
Common stock, shares issued	45,510,038	45,326,940
Common stock, shares outstanding	45,510,038	45,326,940

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Leases And Commitments

12 Months Ended

Dec. 31, 2013

Leases And Commitments [Abstract]

Leases And Commitments

9.  Leases and Commitments

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TX that expires in 2014.   Future minimum lease payments are as follows for the years ended December 31, (in thousands):

	2014		Total
Future minimum lease payments	$	81	$	81

We believe that our facilities are adequate and suitable for our current needs. Rent expense was $0.1 million for 2013 and 2012 and$0.6 million for 2011.

We conduct our product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites. We have contractual arrangements with these organizations, however these contracts are cancelable on thirty days’ notice and our obligations under these contracts are largely based on services performed.

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jan. 12, 2014	Jun. 30, 2013
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	PTIE
Entity Registrant Name	PAIN THERAPEUTICS INC
Entity Central Index Key	0001069530
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		45,510,038
Entity Public Float			$ 82,913,105
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No

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Legal Proceedings

12 Months Ended

Dec. 31, 2013

Legal Proceedings [Abstract]

Legal Proceedings

10.  Legal proceedings

K B Partners I, L.P., Individually and On Behalf of All Others Similarly Situated v. Pain Therapeutics, Inc., Remi Barbier, Nadav Friedmann and Peter S. Roddy.

On December 2, 2011, a purported class action was filed against us and our executive officers in the U.S. District Court for the Western District of Texas. This complaint alleges, among other things, violations of Section 10(b), Rule 10b-5, and Section 20(a) of the Exchange Act arising out of allegedly untrue or misleading statements of material facts made by us regarding REMOXY’s development and regulatory status during the purported class period, February 3, 2011 through June 23, 2011. The complaint states that monetary damages are being sought, but no amounts are specified. On June 3, 2013, the Court certified a class consisting of all purchasers of our common stock and a class period of December 27, 2010 through June 26, 2011.

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Statements Of Operations (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenue:
Program fee revenue	$ 41,119,000	$ 10,641,000	$ 10,897,000
Collaboration revenue		249,000	587,000
Total revenue	41,119,000	10,890,000	11,484,000
Operating expenses:
Research and development	4,917,000	7,605,000	8,300,000
General and administrative	4,837,000	7,182,000	6,698,000
Total operating expenses	9,754,000	14,787,000	14,998,000
Operating income (loss)	31,365,000	(3,897,000)	(3,514,000)
Interest and other income, net	106,000	451,000	901,000
Income (loss) before provision for (benefit from) income taxes	31,471,000	(3,446,000)	(2,613,000)
Provision for (benefit from) income taxes	(73,000)	0	0
Net income (loss)	$ 31,544,000	$ (3,446,000)	$ (2,613,000)
Net income (loss) per share
Basic	$ 0.70	$ (0.08)	$ (0.06)
Diluted	$ 0.70	$ (0.08)	$ (0.06)
Weighted-average shares used in computing net income (loss) per share
Basic	45,007	44,753	44,160
Diluted	45,208	44,753	44,160

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Cash And Cash Equivalents And Marketable Securities

12 Months Ended

Dec. 31, 2013

Cash And Cash Equivalents And Marketable Securities [Abstract]

Cash And Cash Equivalents And Marketable Securities

4.  Cash and Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities held as available-for-sale consisted of the following (in thousands):

	Cash, Cash Equivalents and Marketable Securities
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Accrued Interest		Total Value
December 31, 2013
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Commercial paper		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Reported as:
Cash and cash equivalents	$	48,587	$	1	$	—	$	48,588	$	—	$	48,588
Marketable securities		1,250		—		—		1,250		—		1,250
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Maturities:
Matures in one year or less	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
Matures one to three years		—		—		—		—		—		—
	$	49,837	$	1	$	—	$	49,838	$	—	$	49,838
December 31, 2012
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Corporate securities	$	6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Reported as:
Cash and cash equivalents	$	49,352	$	3	$	—	$	49,355	$	—	$	49,355
Marketable securities		6,898		1		—		6,899		—		6,899
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Maturities:
Matures in one year or less	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254
Matures one to three years		—		—		—		—		—		—
	$	56,250	$	4	$	—	$	56,254	$	—	$	56,254

To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. Our realized gains and losses on our marketable securities were immaterial in 2013, 2012and 2011.

Our assets measured at fair value were (in thousands):

	Level 1		Level 2		Level 3		Total
December 31, 2013
Cash and money market fund	$	48,588	$	—	$	—	$	48,588
Commercial paper		—		1,250		—		1,250
	$	48,588	$	1,250	$	—	$	49,838
December 31, 2012
Cash and money market fund	$	1,817	$	—	$	—	$	1,817
Corporate securities		—		54,437		—		54,437
	$	1,817	$	54,437	$	—	$	56,254

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Collaboration Agreements

12 Months Ended

Dec. 31, 2013

Collaboration Agreements [Abstract]

Collaboration Agreements

3.  Collaboration Agreements

Pfizer, Inc.

Our strategic alliance with Pfizer, as amended, includes a collaboration agreement and a license agreement to develop and commercialize REMOXY. We received a $150.0 million upfront fee in connection with the closing of this strategic alliance and $5.0 million in July 2010 in connection with an amendment to this strategic alliance. As of December 31, 2013, all of these payments had been recognized as program fee revenue, including$41.1 million in 2013,  $10.6 million in 2012and $10.9 million in 2011.

In addition, Pfizer has funded development expenses incurred by us pursuant to the collaboration agreement, of which we recorded as collaboration revenue $0.2 million in 2012 and$0.6 million in 2011. Pfizer is obligated to fund the commercialization expenses of, and has the exclusive right to market and sell, REMOXY.The royalty rate for net sales of REMOXY in the United States is 20%, except as to the first $1.0 billion in cumulative net sales in the United States, for which the royalty is set at 15%. The royalty rate for net sales of REMOXY outside the United States is 10% on net sales.

Durect Corporation

We have an exclusive, worldwide licensing agreement with Durect Corporation to use a patented technology that forms the basis for certain drug candidates, including REMOXY. We have sub-licensed to Pfizer certain rights to develop and to commercialize REMOXY. Under the agreement with Durect, we control all of the preclinical, clinical, commercial manufacturing and sales/marketing activities for REMOXY and other abuse-resistant opioid painkillers. We reimburse Durect for formulation and related work, and will make milestone payments based on the achievement of certain technical, clinical or regulatory milestones. We also are responsible to pay Durect royalties on any related drug sales. Pfizer is obligated to reimburse us for costs we incur under the agreement with Durect for REMOXY, including royalties.

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Stockholders' Equity And Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Stockholders' Equity And Stock-Based Compensation [Abstract]

Stock Option Activity

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				In years		In millions
Outstanding as of December 31, 2012	15,519,562	$	4.27	5.0	$	0.2
Granted	1,870,000	$	2.44
Exercised	(287,449)	$	3.98
Cancelled	(968,220)	$	4.25
Outstanding as of December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Vested and expected to vest at December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Exercisable at December 31, 2013	12,791,698	$	4.24	4.0	$	10.3

Information About Stock Options Outstanding

				Options outstanding				Options exercisable
					Weighted
					average	Weighted			Weighted
				Number of	remaining	average		Number of	average
Range of exercise prices				outstanding	contractual	exercise		vested	exercise
From		To		options	life (in years)	price		options	price
$	2.33	$	2.80	3,241,253	7.8	$	2.49	1,531,894	$	2.55
$	2.89	$	3.41	4,320,747	5.5	$	3.23	3,169,166	$	3.22
$	3.49	$	4.69	3,239,249	2.9	$	4.41	3,199,031	$	4.42
$	4.75	$	4.88	3,716,638	3.0	$	4.84	3,716,638	$	4.84
$	4.90	$	7.65	1,616,006	6.3	$	6.96	1,174,969	$	6.77
				16,133,893	5.0	$	4.06	12,791,698	$	4.24

Weighted Average Fair Value Of Options Granted

	2013	2012	2011
Volatility	58% to 64%	56% to 64%	50% to 60%
Risk-free interest rates	1% to 2%	1%	1% to 3%
Expected life of option	7 years	6 years	6 years
Dividend yield	zero	zero	zero
Forfeiture rate	zero	7%	6%
Weighted average fair value of stock options granted	$1.54	$1.70	$4.68

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Selected Quarterly Financial Data

12 Months Ended

Dec. 31, 2013

Selected Quarterly Financial Data [Abstract]

Selected Quarterly Financial Data

11.  Selected Quarterly Financial Data (Unaudited) (in thousands, except per share data)

	Quarters Ended
	March 31		June 30		September 30		December 31
2013
Total revenue	$	1,958	$	1,959	$	1,958	$	35,244
Net income (loss)	$	(408)	$	(301)	$	(762)	$	33,015
Basic net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.73
Diluted net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.72
2012
Total revenue	$	2,973	$	2,724	$	2,725	$	2,468
Net income (loss)	$	30	$	(130)	$	(1,550)	$	(1,796)
Basic and diluted net income (loss) per share	$	0.00	$	(0.00)	$	(0.03)	$	(0.04)

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Employee 401(k) Benefit Plan

12 Months Ended

Dec. 31, 2013

Employee 401(k) Benefit Plan [Abstract]

Employee 401(k) Benefit Plan

7.  Employee 401(k) Benefit Plan

We have a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees. Employees are eligible to participate in the plan the first day of the month after hire and may contribute up to the current statutory limits under Internal Revenue Service regulations. The 401(k) plan permits us to make additional matching contributions on behalf of all employees. Through December 31, 2013, we have not made any matching contributions.

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Property And Equipment

12 Months Ended

Dec. 31, 2013

Property And Equipment [Abstract]

Property And Equipment

5.  Property and Equipment

Property and equipment at December 31, 2013 and 2012 consisted of furniture and equipment with a purchase value of $0.6 million.  All of our property and equipment was fully depreciated prior to December 31, 2012. Depreciation and amortization expense was $0.1 million in 2012 and $0.2 million in 2011.

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Stockholders' Equity And Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Stockholders' Equity And Stock-Based Compensation [Abstract]

Stockholders' Equity And Stock-Based Compensation

6.  Stockholders' Equity and Stock-Based Compensation

Preferred Stock

Our Board of Directors has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.

We have a stockholder rights plan, or the Rights Plan, designed to guard against partial tender offers and other coercive tactics to gain control of the Company without offering a fair and adequate price and terms to all of the Company’s stockholders. Pursuant to the Rights Plan, our Board of Directors declared and paid a dividend of one right to purchase one one-thousandth share of our Series A Participating Preferred Stock for each outstanding share of our common stock. Each of these rights entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of $40.00, subject to adjustment at any time. In 2013, we amended certain terms of the Rights Plan, primarily to provide for certain mechanical and procedural adjustments.

2008 Equity Incentive Plan

Under our 2008 Equity Incentive Plan, or 2008 Equity Plan, our employees, directors and consultants may receiveshare-based awards, including grants of stock options and Performance Awards. Our Board of Directors or a designated Committee of the Board is responsible for administration of the 2008 Equity Plan and determines the terms and conditions of each option granted, consistent with the terms of the plan.

Stock options generally expire ten years from the date of grant. Cancelled options become available for reissuance.Shares reserved for issuance and available for grant under the 2008 Equity Incentive Plan were 4.8 million as of December 31, 2013. The 2008 Equity Plan terminates in 2018.

The 2008 Equity Plan also provides for the automatic grant of options to purchase shares of common stock to outside directors. On the date of each annual stockholders’ meeting, each outside director is automatically granted an option to purchase 50,000 shares of common stock. The term of these options is ten years, the exercise price is 100% of the fair market value of the stock on the date of grant, and the option becomes exercisable as to 25% of the shares on the anniversary of its date of grant provided the optionee continues to serve as a director on such dates.

When stock options or Performance Awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled and returned to the 2008 Equity Plan. We then use our cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.

Stock Options

The following summarizes information about stock option activity during2013:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				In years		In millions
Outstanding as of December 31, 2012	15,519,562	$	4.27	5.0	$	0.2
Granted	1,870,000	$	2.44
Exercised	(287,449)	$	3.98
Cancelled	(968,220)	$	4.25
Outstanding as of December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Vested and expected to vest at December 31, 2013	16,133,893	$	4.06	5.0	$	16.3
Exercisable at December 31, 2013	12,791,698	$	4.24	4.0	$	10.3

The pre-tax intrinsic value of options exercised,  calculated by multiplying options exercised by the difference between our stock price on the date of exercise and the exercise price of the options, was approximately $0.2 million in 2013, immaterial in 2012 and $5.9 million in 2011.

The following summarizes information about stock options outstanding at December 31, 2013 by a range of exercise prices:

				Options outstanding				Options exercisable
					Weighted
					average	Weighted			Weighted
				Number of	remaining	average		Number of	average
Range of exercise prices				outstanding	contractual	exercise		vested	exercise
From		To		options	life (in years)	price		options	price
$	2.33	$	2.80	3,241,253	7.8	$	2.49	1,531,894	$	2.55
$	2.89	$	3.41	4,320,747	5.5	$	3.23	3,169,166	$	3.22
$	3.49	$	4.69	3,239,249	2.9	$	4.41	3,199,031	$	4.42
$	4.75	$	4.88	3,716,638	3.0	$	4.84	3,716,638	$	4.84
$	4.90	$	7.65	1,616,006	6.3	$	6.96	1,174,969	$	6.77
				16,133,893	5.0	$	4.06	12,791,698	$	4.24

We use Black-Scholes to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price of our common stock. For options granted to employees and directors, we used certain factors to value each stock option granted, which resulted in a weighted average fair value of options granted during 2013, 2012and 2011, as follows:

	2013	2012	2011
Volatility	58% to 64%	56% to 64%	50% to 60%
Risk-free interest rates	1% to 2%	1%	1% to 3%
Expected life of option	7 years	6 years	6 years
Dividend yield	zero	zero	zero
Forfeiture rate	zero	7%	6%
Weighted average fair value of stock options granted	$1.54	$1.70	$4.68

Volatility is based on reviews of the historical volatility of our common stock. Risk-free interest rates are based on yields of U.S. treasury notes in effect at the date of grant. Expected life of option is based on actual historical option exercises. Dividend yield is zero because we do not anticipate paying cash dividends in the foreseeable future. We estimate forfeitures and adjust this estimate periodically based in part on the extent to which actual forfeitures differ from our estimates.

For options granted to non-employees, we estimate the fair value of stock options granted using factors similar to those used for stock options granted to employees and directors and appropriate for the terms underlying the stock options granted to non-employees. We re-measure the compensation expense for options granted to non-employees each reporting period.  

As of December 31, 2013, we expect to recognize compensation costs of $16.3 million related to non-vested options over the weighted average remaining recognition period of 2.5 years.

Performance Awards

At December 31, 2013, we have outstanding 3,250,065 shares of Performance Awards. We did not grant, issue via exercise or cancel any Performance Awards during 2013. If and when these Performance Awards vest, we would recognize $7.7 million in non-cash stock-based compensation. The modifications to outstanding Performance Awards in 2013 decreased the amount we would recognize if and when these Performance Awards vest by $3.5 million. These Performance Awards expire in 2022. If Performance Awards expire, the underlying shares return to the 2008 Equity Incentive Plan.

2000 Employee Stock Purchase Plan

Under the amended and restated 2000 Employee Stock Purchase Plan, or the Purchase Plan, eligible employees may purchase common stock through payroll deductions of up to 15% of the employee’s compensation. In May 2013, we issued 16,463 shares pursuant to the Purchase Plan.

The purchase price of the stock under the Purchase Plan is generally 85% of the lower of the fair market value of the common stock at the beginning of the offering period or at the end of the purchase period. We use Black-Scholes to estimate the fair value of rights granted under the Purchase Plan, using assumptions similar to those used in determining the fair value of options. Stock based compensation costs related to the Purchase Plan was immaterial in 2013.

Stock-Based Compensation

Our non-cash stock-based compensation was$3.1 million in 2013, $6.6 million in 2012 and $5.4 million in 2011. In 2013, we modified outstanding share-based awards to provide for full acceleration of vesting in the event that a plan participant has their service provider status with the Company terminated by the Company (or any successor entity) without cause or terminated by such participant for good reason at any time following a change in control of the Company.As a result of these modifications, the amount of stock-based compensation we recognized in 2013 was reduced by an immaterial amount.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Income Taxes

8.  Income Taxes

We recorded a non-cash benefit from income taxes in 2013 related to previously unrecognized tax benefits for use of certain research and development tax credits in 2006. Other than this benefit, we did not provide for income taxes in 2013 as a result of we had a net operating loss for tax purposes in 2013. A reconciliation between the amount computed by multiplying our income before benefit from income taxes for 2013 by the U.S. statutory tax rate and our benefit from income taxes follows (in thousands):

	2013
Tax at U.S. statutory tax rate of 34%	$	10,725
State taxes		(73)
Equity-based compensation		844
Research credits		(81)
Other		(242)
Change in valuation allowance		(11,246)
Benefit from income taxes	$	(73)

We did not have a provision for income taxes in 2012 or 2011 because we had a net operating loss for tax purposes in those years.

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

	December 31,
	2013		2012		2011
Deferred tax assets:
Net operating loss carryforwards	$	10,200	$	9,200	$	6,500
Stock-related compensation		11,100		11,700		12,000
Research & development credit carryforwards		5,700		6,400		6,300
Deferred license fee revenue		—		14,600		19,900
Other		600		600		900
		27,600		42,500		45,600
Valuation allowance		(27,600)		(42,200)		(45,300)
	$	—	$	300	$	300

We are uncertain about the timing and amount of any future profits. Accordingly, we offset our deferred tax assets by a valuation allowance. The valuation allowance decreased by $15.0 in 2013, $3.1 million in 2012 and $0.8 million in 2011.

Our pre-tax net operating loss carryforwards of$32.7 million are federal and expire between 2029 and 2033.  Our deferred tax assets exclude certain federal tax deductions associated with stock option transactions over and above the stock related compensation expenses in our financial statements by approximately$2.6 million. If and when we are able to reduce our income taxes payable with these tax deductions, we will credit additional paid-in capital.

As of December 31, 2013, we had federal research and development tax credits of approximately $9.5 million, which expire in the years 2023 through 2033.

Our deferred tax liabilities at December 31, 2012 resulted from reserves for credits used to reduce state taxes paid for 2006 and 2008. In 2013, we concluded that these reserves will never be realized. Interest expense related to our tax positions was immaterial for 2013, 2012 and 2011.

Unrecognized tax benefits

We have unrecognized tax benefits related primarily to tax credits. In 2013, we reduced our unrecognized tax benefits for the lapse of applicable statute of limitations for tax credits used in prior years. A reconciliation of the beginning and ending unrecognized tax benefits recorded for 2013, 2012and 2011 follows (in thousands):

		2013		2012		2011
Beginning balance	$	5,200	$	5,100	$	4,800
Additions based on tax positions related to the current year		100		100		300
Lapse of applicable statute of limitations		(600)		—		—
Reductions for tax positions related to prior years		(900)		—		—
Ending balance	$	3,800	$	5,200	$	5,100

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Stockholders' Equity And Stock-Based Compensation (Stock Option Activity) (Details) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Stockholders' Equity And Stock-Based Compensation [Abstract]
Beginning Balance, Number of Options, Outstanding	15,519,562
Number of Options, Granted	1,870,000
Number of Options, Exercised	(287,449)
Number of Options, Cancelled	(968,220)
Ending Balance, Number of Options, Outstanding	16,133,893	15,519,562
Number of Options, Vested and expected to vest	16,133,893
Number of Options, Exercisable	12,791,698
Beginning Balance, Weighted Average Exercise Price	$ 4.27
Weighted Average Exercise Price, Granted	$ 2.44
Weighted Average Exercise Price, Exercised	$ 3.98
Weighted Average Exercise Price, Cancelled	$ 4.25
Ending Balance, Weighted Average Exercise Price	$ 4.06	$ 4.27
Weighted Average Exercise Price, Vested and expected to vest	$ 4.06
Weighted Average Exercise Price, Exercisable	$ 4.24
Beginning of year, Weighted Average Remaining Contractual Term	5 years	5 years
End of year, Weighted Average Remaining Contractual Term	5 years	5 years
Weighted Average Remaining Contractual Term, Vested and expected to vest	5 years
Weighted Average Remaining Contractual Term, Exercisable	4 years
Beginning Balance, Aggregate Intrinsic Value	$ 0.2
Ending Balance, Aggregate Intrinsic Value	16.3	0.2
Aggregate Intrinsic Value, Vested and expected to vest	16.3
Aggregate Intrinsic Value, Exercisable	$ 10.3

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Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Numerators And Denominators In The Calculation Of Basic And Diluted Net Loss Per Share

	Years ended December 31,
	2013		2012		2011
Numerator:
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share		45,007		44,753		44,160
Effect of dilutive securities - Dilution from employee stock plans		201		—		—
Weighted-average shares used to compute diluted net income (loss) per share		45,208		44,753	—	44,160
Net income (loss) per share - Basic	$	0.70	$	(0.08)	$	(0.06)
Net income (loss) per share - Diluted	$	0.70	$	(0.08)	$	(0.06)

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Selected Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2013

Selected Quarterly Financial Data [Abstract]

Quarterly Financial Information

	Quarters Ended
	March 31		June 30		September 30		December 31
2013
Total revenue	$	1,958	$	1,959	$	1,958	$	35,244
Net income (loss)	$	(408)	$	(301)	$	(762)	$	33,015
Basic net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.73
Diluted net income (loss) per share	$	(0.01)	$	(0.01)	$	(0.02)	$	0.72
2012
Total revenue	$	2,973	$	2,724	$	2,725	$	2,468
Net income (loss)	$	30	$	(130)	$	(1,550)	$	(1,796)
Basic and diluted net income (loss) per share	$	0.00	$	(0.00)	$	(0.03)	$	(0.04)

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Leases And Commitments (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 sqft	Dec. 31, 2012	Dec. 31, 2011
Office space	6,000
Rent expense	$ 0.1	$ 0.1	$ 0.6
Austin, TX [Member]
Operating lease expiration year	2014

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Statements Of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statements Of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ 31,544	$ (3,446)	$ (2,613)
Other comprehensive loss:
Net unrealized losses on marketable securities	(3)	(124)	(397)
Comprehensive income (loss)	$ 31,541	$ (3,570)	$ (3,010)

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

2.  Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. Actual results could differ from those estimates.

Revenue Recognition and Deferred Program Fee Revenue

Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.

We and Pfizer have a strategic alliance to develop and commercialize REMOXY and up to three other opioid painkillers designed to reduce potential risks of unintended use. In connection with the strategic alliance, we recognize program fee revenue, collaboration revenue and milestone revenue.Program fee revenue is derived from upfront payments under the Pfizer Agreements, including the $150.0 million paid to us at the beginning of the strategic alliance and the $5.0 million we received in July 2010 in connection with an amendment the Pfizer Agreements. Through the end of the third quarter of 2013, these payments were recognized from receipt ratably over our estimate of the development period for the fourth of four drug candidates expected to be developed under the Pfizer Agreements. In October 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. As a result of the amendment, we no longer have any substantive responsibilities for development activities pursuant to the Pfizer Agreements and we recognized all remaining deferred program fee revenue as program fee revenue during the fourth quarter of 2013.

Collaboration revenues from reimbursement of development expenses are generally recognized when Pfizer has completed its review of the expenses invoiced to them.

We recognize milestone payments from Pfizer as revenue when we achieve the underlying developmental milestone as the milestone payments are not dependent upon any other future activities or achievement of any other future milestones and the achievement of each of the developmental milestones were substantively at risk and contingent at the effective date of the collaboration. Substantial effort is involved in achieving each of the developmental milestones. These milestones represent the culmination of discrete earnings processes and the amount of each milestone payment is reasonable in relation with the level of effort associated with the achievement of the milestone. Each milestone payment is non-refundable and non-creditable when made. The ongoing research and development services being provided to Pfizer under the collaboration are priced at fair value based upon the reimbursement of expenses incurred pursuant to the collaboration with Pfizer.

Cash, Cash Equivalents and Concentration of Credit Risk

We consider all highly liquid financial instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash maintained at two financial institutions and in money market funds. We believe the financial risks associated with these instruments are minimal. We have not incurred material losses from our investments in these securities.

Marketable Securities and Fair Value Measurements

We invest in interest bearing marketable securities, generally consisting of corporate and government securities. We may elect to sell these investments before they mature. Therefore, we hold these investments as “available for sale” and include these investments in our balance sheets as current assets, even though the contractual maturity of a particular investment may be beyond one year. We report our marketable securities at fair value, which may include unrealized gains and losses. Our unrealized gains and losses on investments are recorded as a separate component of stockholders’ equity as accumulated other comprehensive income or loss. We recognize all realized gains and losses on our available-for-sale securities in interest income in the accompanying statement of operations on a specific identification basis. Our marketable securities are maintained at one financial institution and are governed by our investment policy as approved by our Board of Directors.

To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. We would recognize an impairment charge when the decline in the estimated fair value of a marketable security below the amortized cost is determined to be other-than-temporary. We consider various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than our amortized cost, any adverse changes in the investees’ financial condition and our intent to sell or whether it is more likely than not that we would be required to sell the marketable security before its anticipated recovery.

We measure our cash equivalents and marketable securitiesat fair value on a recurring basis and have significant observable inputs where there are identical or comparable assets in the market to use in establishing our fair value measurements. We use significant observable inputs that include but are not limited to benchmark yields, reported trades, broker/dealer quotes and issuer spreads. We consider these inputs to be Level 2 inputs. Generally, the types of instruments we invest in are not traded on a market such as the NASDAQ Global Market, which we would consider to be Level 1 inputs. We do not have any investments that would require inputs considered to be Level 3. We use the bid price to establish fair value.

Business Segments

We report segment information based on how we internally evaluate the operating performance of our business units, or segments. Our operations are confined to one business segment: the development of novel drugs.

Stock-based Compensation

We recognize non-cash expense in the statement of operations for the fair value of all share-based payments, including grants of employee stock options and other share based awards. For stock options, we use the Black-Scholes option valuation model and the single-option award approach and straight-line attribution method. Using this approach, the compensation cost is amortized on a straight-line basis over the vesting period of each respective stock option, generally four years. 

We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. The value of these awards is the product of the number of shares of our common stock to be issued under the award multiplied by the fair market value of a share of our common stock on the date of grant. These awards include future performance conditions. We estimate an implicit service period for achieving these performance conditions. Performance Awards vest and common stock is issued on achieving performance conditions. We recognize non-cash stock-based compensation expense for Performance Awards when we conclude that achieving a performance condition is probable. We periodically review and update as appropriate our estimates of the implicit service periods and the likelihood of achieving the performance conditions.

Net Loss per Share

Basic net loss per share is computed on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus dilutive potential common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding stock options and warrants. The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in thousands):

	Years ended December 31,
	2013		2012		2011
Numerator:
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share		45,007		44,753		44,160
Effect of dilutive securities - Dilution from employee stock plans		201		—		—
Weighted-average shares used to compute diluted net income (loss) per share		45,208		44,753	—	44,160
Net income (loss) per share - Basic	$	0.70	$	(0.08)	$	(0.06)
Net income (loss) per share - Diluted	$	0.70	$	(0.08)	$	(0.06)

We excluded weighted options outstanding to purchase common stock of 13.5 million for 2013, 13.2 million for 2012 and 13.7 million for 2011 from the calculation of diluted net loss per share because the effect of including these shares in this calculation would be anti-dilutive.

Income Taxes

We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.We have accumulated significant deferred tax assets. Deferred income taxes reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance. We may in the future determine that more of our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period. We classify interest and penalties recognized related to uncertain tax positions as interest expense.

Recent Accounting Pronouncements

We reviewed recently issued accounting pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption of these pronouncements to have a material impact on our financial position, results of operations or cash flows.

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Summary Of Significant Accounting Policies (Narrative) (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended			85 Months Ended
	Jul. 31, 2010	Dec. 31, 2013 segment item	Dec. 31, 2012	Dec. 31, 2011	Nov. 30, 2012
Summary Of Significant Accounting Policies [Abstract]
Upfront cash payment	$ 5.0				$ 150.0
Number of financial institutions that maintain cash and cash equivalents		2
Contractual maturity of a particular investment		1 year
Number of financial institutions that maintain marketable securities		1
Number of business segments		1
Vesting period of stock options		4 years
Anti-dilutive shares excluded from computation of diluted net loss per share		13.5	13.2	13.7

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Income Taxes (Schedule Of Effective Income Tax Rate Reconciliation) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Tax at U.S. statutory tax rate of 34%	$ 10,725,000
State taxes	(73,000)
Equity-based compensation	844,000
Research credits	(81,000)
Other	(242,000)
Change in valuation allowance	(11,246,000)
Benefit from income taxes	$ (73,000)	$ 0	$ 0
U.S. statutory tax rate	34.00%

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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Policies [Abstract]

Use Of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. Actual results could differ from those estimates.

Revenue Recognition And Deferred Program Fee Revenue

Revenue Recognition and Deferred Program Fee Revenue

Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.

We and Pfizer have a strategic alliance to develop and commercialize REMOXY and up to three other opioid painkillers designed to reduce potential risks of unintended use. In connection with the strategic alliance, we recognize program fee revenue, collaboration revenue and milestone revenue.Program fee revenue is derived from upfront payments under the Pfizer Agreements, including the $150.0 million paid to us at the beginning of the strategic alliance and the $5.0 million we received in July 2010 in connection with an amendment the Pfizer Agreements. Through the end of the third quarter of 2013, these payments were recognized from receipt ratably over our estimate of the development period for the fourth of four drug candidates expected to be developed under the Pfizer Agreements. In October 2013, we and Pfizer amended the Pfizer Agreements to focus on REMOXY. As a result of the amendment, we no longer have any substantive responsibilities for development activities pursuant to the Pfizer Agreements and we recognized all remaining deferred program fee revenue as program fee revenue during the fourth quarter of 2013.

Collaboration revenues from reimbursement of development expenses are generally recognized when Pfizer has completed its review of the expenses invoiced to them.

We recognize milestone payments from Pfizer as revenue when we achieve the underlying developmental milestone as the milestone payments are not dependent upon any other future activities or achievement of any other future milestones and the achievement of each of the developmental milestones were substantively at risk and contingent at the effective date of the collaboration. Substantial effort is involved in achieving each of the developmental milestones. These milestones represent the culmination of discrete earnings processes and the amount of each milestone payment is reasonable in relation with the level of effort associated with the achievement of the milestone. Each milestone payment is non-refundable and non-creditable when made. The ongoing research and development services being provided to Pfizer under the collaboration are priced at fair value based upon the reimbursement of expenses incurred pursuant to the collaboration with Pfizer.

Cash, Cash Equivalents And Concentration Of Credit Risk

Cash, Cash Equivalents and Concentration of Credit Risk

We consider all highly liquid financial instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash maintained at two financial institutions and in money market funds. We believe the financial risks associated with these instruments are minimal. We have not incurred material losses from our investments in these securities.

Marketable Securities And Fair Value Measurements

Marketable Securities and Fair Value Measurements

We invest in interest bearing marketable securities, generally consisting of corporate and government securities. We may elect to sell these investments before they mature. Therefore, we hold these investments as “available for sale” and include these investments in our balance sheets as current assets, even though the contractual maturity of a particular investment may be beyond one year. We report our marketable securities at fair value, which may include unrealized gains and losses. Our unrealized gains and losses on investments are recorded as a separate component of stockholders’ equity as accumulated other comprehensive income or loss. We recognize all realized gains and losses on our available-for-sale securities in interest income in the accompanying statement of operations on a specific identification basis. Our marketable securities are maintained at one financial institution and are governed by our investment policy as approved by our Board of Directors.

To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. We would recognize an impairment charge when the decline in the estimated fair value of a marketable security below the amortized cost is determined to be other-than-temporary. We consider various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than our amortized cost, any adverse changes in the investees’ financial condition and our intent to sell or whether it is more likely than not that we would be required to sell the marketable security before its anticipated recovery.

We measure our cash equivalents and marketable securitiesat fair value on a recurring basis and have significant observable inputs where there are identical or comparable assets in the market to use in establishing our fair value measurements. We use significant observable inputs that include but are not limited to benchmark yields, reported trades, broker/dealer quotes and issuer spreads. We consider these inputs to be Level 2 inputs. Generally, the types of instruments we invest in are not traded on a market such as the NASDAQ Global Market, which we would consider to be Level 1 inputs. We do not have any investments that would require inputs considered to be Level 3. We use the bid price to establish fair value.

Business Segments

Business Segments

We report segment information based on how we internally evaluate the operating performance of our business units, or segments. Our operations are confined to one business segment: the development of novel drugs.

Stock-Based Compensation

Stock-based Compensation

We recognize non-cash expense in the statement of operations for the fair value of all share-based payments, including grants of employee stock options and other share based awards. For stock options, we use the Black-Scholes option valuation model and the single-option award approach and straight-line attribution method. Using this approach, the compensation cost is amortized on a straight-line basis over the vesting period of each respective stock option, generally four years. 

We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. The value of these awards is the product of the number of shares of our common stock to be issued under the award multiplied by the fair market value of a share of our common stock on the date of grant. These awards include future performance conditions. We estimate an implicit service period for achieving these performance conditions. Performance Awards vest and common stock is issued on achieving performance conditions. We recognize non-cash stock-based compensation expense for Performance Awards when we conclude that achieving a performance condition is probable. We periodically review and update as appropriate our estimates of the implicit service periods and the likelihood of achieving the performance conditions.

Net Loss Per Share

Net Loss per Share

Basic net loss per share is computed on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus dilutive potential common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding stock options and warrants. The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in thousands):

	Years ended December 31,
	2013		2012		2011
Numerator:
Net income (loss)	$	31,544	$	(3,446)	$	(2,613)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share		45,007		44,753		44,160
Effect of dilutive securities - Dilution from employee stock plans		201		—		—
Weighted-average shares used to compute diluted net income (loss) per share		45,208		44,753	—	44,160
Net income (loss) per share - Basic	$	0.70	$	(0.08)	$	(0.06)
Net income (loss) per share - Diluted	$	0.70	$	(0.08)	$	(0.06)

We excluded weighted options outstanding to purchase common stock of 13.5 million for 2013, 13.2 million for 2012 and 13.7 million for 2011 from the calculation of diluted net loss per share because the effect of including these shares in this calculation would be anti-dilutive.

Income Taxes

Income Taxes

We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.We have accumulated significant deferred tax assets. Deferred income taxes reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance. We may in the future determine that more of our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period. We classify interest and penalties recognized related to uncertain tax positions as interest expense.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

We reviewed recently issued accounting pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption of these pronouncements to have a material impact on our financial position, results of operations or cash flows.