10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

OR

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

For the transition period from              to             

Commission file number 1-35144

Sagent Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	98-0536317
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1901 N. Roselle Road, Suite 700 Schaumburg, Illinois	60195
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (847) 908-1600

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark 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  x    No  ¨

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 the definitions 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	x
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 Exchange Act).    Yes  ¨    No  x

At October 31, 2012, there were 28,072,934 shares of the registrant’s common stock outstanding.

Sagent Pharmaceuticals, Inc.

Table of Contents

		Page No.
PART I –	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011		1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011		2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2012 and 2011		3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		23
Item 4.	Controls and Procedures		23
PART II –	OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		24
Item 4.	Mine Safety Disclosures		24
Item 5.	Other Information		24
Item 6.	Exhibits		25
	Signature		26

In this report, “Sagent,” “we,” “us” and “our” refers to Sagent Pharmaceuticals, Inc. and subsidiaries, and “Common Stock” refers to Sagent’s common stock.

Sagent Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

	September 30, 2012			December 31, 2011
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	26,789		$	52,203
Short-term investments		39,068			73,761
Accounts receivable, net of chargebacks and other deductions		30,761			29,028
Inventories, net		39,356			41,487
Due from related party		1,009			2,379
Prepaid expenses and other current assets		3,758			1,988
Total current assets		140,741			200,846
Property, plant, and equipment, net		773			884
Investment in joint ventures		21,754			22,762
Intangible assets, net		4,676			5,426
Other assets		390			590
Total assets	$	168,334		$	230,508
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	20,636		$	35,403
Due to related party		5,811			4,303
Accrued profit sharing		3,894			3,753
Accrued liabilities		7,374			7,634
Current portion of long-term debt		—			8,182
Notes payable		—			24,867
Total current liabilities		37,715			84,142
Long term liabilities:
Long-term debt		—			4,091
Other long-term liabilities		6			606
Total liabilities		37,721			88,839
Stockholders’ equity:
Common stock—$0.01 par value, 100,000,000 authorized and 28,006,411 and 27,901,174 outstanding at September 30, 2012 and December 31, 2011, respectively		280			279
Additional paid-in capital		270,999			266,062
Accumulated other comprehensive income		2,923			2,162
Accumulated deficit		(143,589	)		(126,834	)
Total stockholders’ equity		130,613			141,669
Total liabilities and stockholders’ equity	$	168,334		$	230,508

See accompanying notes to condensed consolidated financial statements.

1

Sagent Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Net revenue	$	49,429		$	41,281		$	130,389		$	103,879
Cost of sales		42,208			34,344			110,900			89,604
Gross profit		7,221			6,937			19,489			14,275
Operating expenses:
Product development		4,011			3,460			12,700			8,191
Selling, general and administrative		7,169			6,688			22,089			18,139
Management reorganization		739			—			739			—
Equity in net (income) loss of joint ventures		(940	)		401			(589	)		1,598
Total operating expenses		10,979			10,549			34,939			27,928
Loss from operations		(3,758	)		(3,612	)		(15,450	)		(13,653	)
Interest income and other		60			104			210			179
Interest expense and other		(52	)		(1,223	)		(1,515	)		(2,985	)
Change in fair value of preferred stock warrants		—			—			—			(838	)
Loss before income taxes		(3,750	)		(4,731	)		(16,755	)		(17,297	)
Provision for income taxes		—			—			—			—
Net loss	$	(3,750	)	$	(4,731	)	$	(16,755	)	$	(17,297	)
Net loss per common share:
Basic	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)
Diluted	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)
Weighted-average of shares used to compute net loss per common share:
Basic		27,977			27,875			27,943			17,480
Diluted		27,977			27,875			27,943			17,480

See accompanying notes to condensed consolidated financial statements.

2

Sagent Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands, except per share amounts)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Net loss	$	(3,750	)	$	(4,731	)	$	(16,755	)	$	(17,297	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		362			98			641			655
Unrealized gains (losses) on available for sale securities		15			(151	)		120			(238	)
Total other comprehensive income (loss), net of tax		377			(53	)		761			417
Comprehensive loss	$	(3,373	)	$	(4,784	)	$	(15,994	)	$	(16,880	)

See accompanying notes to condensed consolidated financial statements.

3

Sagent Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine months ended September 30,
	2012			2011
Cash flows from operating activities
Net loss	$	(16,755	)	$	(17,297	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,198			1,865
Stock-based compensation		4,297			1,617
Equity in net (income) loss of joint ventures		(589	)		1,598
Change in fair value of preferred stock warrants		—			838
Dividends from unconsolidated joint venture		2,755			—
Changes in operating assets and liabilities:
Accounts receivable, net		(1,733	)		(12,686	)
Inventories, net		2,131			(7,222	)
Prepaid expenses and other current assets		(1,793	)		2,467
Due from related party		1,370			528
Accounts payable and other accrued liabilities		(13,322	)		(2,858	)
Net cash used in operating activities		(18,441	)		(31,150	)
Cash flows from investing activities
Capital expenditures		(54	)		(214	)
Return of principal balance (funding) of restricted cash		23			(465	)
Investments in unconsolidated joint ventures		(517	)		(127	)
Return of capital from unconsolidated joint venture		—			924
Purchases of investments		(144,897	)		(93,193	)
Sale of investments		178,937			15,627
Purchase of product rights		(3,026	)		(3,008	)
Net cash provided by (used in) investing activities		30,466			(80,456	)
Cash flows from financing activities
Reduction in short-term notes payable		(24,867	)		(1,057	)
Proceeds from issuance of long-term debt		—			15,000
Repayment of long-term debt		(12,273	)		(682	)
Proceeds from issuance of common stock, net of issuance costs		585			101,582
Payment of deferred financing costs		(884	)		(80	)
Net cash (used in) provided by financing activities		(37,439	)		114,763
Net (decrease) increase in cash and cash equivalents		(25,414	)		3,157
Cash and cash equivalents, at beginning of period		52,203			34,376
Cash and cash equivalents, at end of period	$	26,789		$	37,533

See accompanying notes to condensed consolidated financial statements

4

Sagent Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands, except for share and per share information)

(Unaudited)

Note 1. Basis of presentation:

Our interim condensed consolidated financial statements are unaudited. We prepared the condensed consolidated financial statements following rules for interim reporting as prescribed by the U.S. Securities and Exchange Commission (“SEC”). As permitted under those rules, we have condensed or omitted a number of footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). It is management’s opinion that these financial statements include all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of our financial position, operating results and cash flows. Operating results for any interim period are not necessarily indicative of future or annual results.

The condensed consolidated financial statements include Sagent as well as our wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. We account for our investments in Kanghong Sagent (Chengdu) Pharmaceutical Corporation Limited (“KSCP”) and Sagent Agila LLC (formerly Sagent Strides LLC) using the equity method of accounting, as our interest in each entity provides for joint financial and operational control. Operating results of our KSCP equity method investment are reported on a one-month lag.

You should read these statements in conjunction with our consolidated financial statements and related notes for the year ended December 31, 2011, included in our Annual Report on Form 10-K filed with the SEC on March 29, 2012.

New Accounting Pronouncements:

In May 2011, new guidance was issued on the accounting for fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as a description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. We adopted this guidance on January 1, 2012. Adoption of this guidance did not have a significant impact on our financial results.

Note 2. Investments:

Our investments at September 30, 2012 were comprised of the following:

	Cost basis		Unrealized gains		Unrealized losses			Recorded basis		Cash and cash equivalents		Short term investments
Assets
Cash	$	11,377	$	—	$	—		$	11,377	$	11,377	$	—
Money market funds		15,412		—		—			15,412		15,412		—
Corporate bonds and notes		25,838		32		—			25,870		—		25,870
Commercial paper		13,199		—		(1	)		13,198		—		13,198
	$	65,826	$	32	$	(1	)	$	65,857	$	26,789	$	39,068

5

Investments with continuous unrealized losses for less than twelve months and their related fair values at September 30, 2012 were as follows:

	Fair value		Unrealized losses
Corporate bonds and notes	$	4,008	$	(1	)
Commercial paper		13,198		(1	)
	$	17,206	$	(2	)

Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Because we do not currently intend to sell these investments, and it is not more likely than not that we will be required to sell our investments before recovery of their amortized cost basis, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The original cost and estimated current fair value of our fixed-income securities at September 30, 2012 are set forth below.

	Cost basis		Estimated fair value
Due in one year or less	$	39,037	$	39,068
	$	39,037	$	39,068

Note 3. Inventories:

Inventories at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012								December 31, 2011
	Approved			Pending regulatory approval		Inventory			Approved			Pending regulatory approval		Inventory
Finished goods	$	41,376		$	509	$	41,885		$	47,666		$	—	$	47,666
Raw materials		346			—		346			—			264		264
Inventory reserve		(2,875	)		—		(2,875	)		(6,443	)		—		(6,443	)
	$	38,847		$	509	$	39,356		$	41,223		$	264	$	41,487

Note 4. Intangible assets, net:

Intangible assets at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Intangible assets, net		Gross carrying amount		Accumulated amortization			Intangible assets, net
Product licensing rights	$	3,156	$	(1,427	)	$	1,729	$	2,528	$	(1,070	)	$	1,458
Product development rights		2,947		—			2,947		3,968		—			3,968
	$	6,103	$	(1,427	)	$	4,676	$	6,496	$	(1,070	)	$	5,426

6

Movements in intangible assets were due to the following:

	Product licensing rights			Product development rights
December 31, 2011	$	1,458		$	3,968
Acquisition of product rights		628			2,398
Amortization of product rights		(357	)		(3,419	)
September 30, 2012	$	1,729		$	2,947

The weighted-average period prior to the next extension or renewal for the 19 products comprising our product licensing rights intangible asset was 36 months at September 30, 2012.

We currently estimate amortization expense over each of the next five years as follows:

	Amortization expense
For the year ending:
September 30, 2013	$	2,874
September 30, 2014		777
September 30, 2015		287
September 30, 2016		197
September 30, 2017		98

Note 5. Investment in KSCP:

Changes in our investment in KSCP during the nine months ended September 30, 2012 were as follows:

Investment in KSCP at January 1, 2012	$	20,888
Equity in net loss of KSCP		(3,137	)
Currency translation adjustment		641
Investments in KSCP		130
Investment in KSCP at September 30, 2012	$	18,522

Condensed statement of operations information of KSCP is presented below.

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Condensed statement of operations information
Net revenues	$	—		$	—		$	—		$	—
Gross profit		—			—			—			—
Net loss		(2,459	)		(1,782	)		(5,766	)		(4,839	)

Note 6. Accrued liabilities:

Accrued liabilities at September 30, 2012 and December 31, 2011 were as follows:

	September 30,		December 31,
	2012		2011
Payroll and employee benefits	$	3,213	$	2,222
Sales and marketing		3,691		4,604
Other accrued liabilities		470		808
	$	7,374	$	7,634

7

Note 7. Debt:

In February 2012, we entered into a Loan and Security Agreement with Silicon Valley Bank (the “SVB Agreement”). The SVB Agreement provides for a $40,000 asset based revolving loan facility, with availability subject to a borrowing base consisting of eligible accounts receivable and inventory and the satisfaction of conditions precedent specified in the SVB Agreement. The SVB Agreement matures on February 13, 2016, at which time all outstanding amounts will become due and payable. Borrowings under the SVB Agreement may be used for general corporate purposes, including funding working capital. Amounts drawn bear an interest rate equal to, at our option, either a Eurodollar rate plus 2.50% per annum or an alternative base rate plus 1.50% per annum. We also pay a commitment fee on undrawn amounts equal to 0.30% per annum. The SVB Agreement contains various covenants and restrictions, including covenants requiring us to maintain a minimum adjusted quick ratio and a minimum level of free cash flow, and restrictions on our ability to incur additional indebtedness, make certain investments, create liens, pay dividends, sell assets or enter into a merger or acquisition. During the continuance of an event of default, at Silicon Valley Bank’s option, all obligations will bear interest at a rate per annum equal to 5.00% per annum above the otherwise applicable rate. At March 31, 2012, we were in default of the free cash flow covenant in the SVB Agreement. On May 10, 2012, Silicon Valley Bank agreed to waive the covenant at March 31, 2012 and modified the covenant for the remainder of 2012. In connection with the waiver and modification, we paid a fee of $100. As of September 30, 2012, no borrowings were outstanding and we were in compliance with all of our covenants under the SVB Agreement.

Concurrent with entering into the SVB Agreement, we repaid in full with cash on hand all outstanding amounts under our former term loan credit facility and senior secured revolving credit facility, plus certain associated fees, and terminated the agent’s and lender’s commitments to extend further credit under those facilities. Concurrent with the repayment and termination of these agreements, all liens and security interests against our property that secured the obligations under these agreements were released and discharged. Loans under the SVB Agreement are secured by a lien on substantially all of our and our principal operating subsidiary’s assets, other than our equity interests in our joint ventures and certain other limited exceptions.

As part of the termination of these prior agreements, we were required to pay to the lenders under those facilities $1,500 of early termination fees and a $600 exit fee associated with the term loan credit facility; however, $1,050 of such fees owing to Silicon Valley Bank under these agreements were deferred in connection with the execution of the SVB Agreement and will only be payable upon the occurrence of certain early termination events as set forth in the SVB Agreement. We have accounted for the termination of these prior agreements as the extinguishment of the term loan credit facility, and the partial extinguishment of the senior secured revolving credit facility. We recorded $1,124 in the nine months ended September 30, 2012 to account for early termination fees and the acceleration of deferred financing costs related to the partial extinguishment of these facilities within interest expense in the condensed consolidated statement of operations.

Note 8. Fair value measurements:

Assets measured at fair value on a recurring basis as of September 30, 2012 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	15,412	$	15,412	$	—	$	—
Corporate bonds and notes	$	25,870	$	—	$	25,870	$	—
Commercial paper		13,198		—		13,198		—
Short-term investments	$	39,068	$	—	$	39,068	$	—
Total assets	$	54,480	$	15,412	$	39,068	$	—

The fair value of our Level 2 investments is based on a combination of quoted market prices of similar securities and matrix pricing provided by third-party pricing services utilizing securities of similar quality and maturity.

8

Assets measured at fair value on a recurring basis as of December 31, 2011 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	25,373	$	25,373	$	—	$	—
Commercial paper	$	28,948	$	—	$	28,948	$	—
Corporate bonds and notes		40,313		—		40,313		—
US government securities		4,500		—		4,500		—
Short-term investments	$	73,761	$	—	$	73,761	$	—
Total assets	$	99,134	$	25,373	$	73,761	$	—

There were no transfers of assets between Level 1 and Level 2 during the periods presented.

During the nine months ended September 30, 2011 changes in the fair value of our preferred stock warrants measured using significant unobservable inputs (Level 3), were comprised of the following:

	Nine months ended September 30, 2011
Balance at beginning of period	$	1,432
Change in fair value of warrants		838
Exercise of warrants		(2,270	)
Balance at end of period	$	—

In April 2011, the holder of our preferred stock warrants exercised all of the warrants concurrent with our initial public offering. Accordingly, no preferred stock warrants are outstanding at September 30, 2012 or December 31, 2011.

Note 9. Accumulated other comprehensive income:

Accumulated other comprehensive income at September 30, 2012 and December 31, 2011 is comprised of the following:

	September 30, 2012		December 31, 2011
Currency translation adjustment, net of tax	$	2,892	$	2,251
Unrealized gains (losses) on available for sale securities, net of tax		31		(89	)
Total accumulated other comprehensive income	$	2,923	$	2,162

Note 10. Earnings per share:

Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Because of their anti-dilutive effect, 2,403,630 and 1,767,977 common share equivalents, comprised of restricted stock and unexercised stock options, have been excluded from the calculation of diluted earnings per share for the three and nine month periods ended September 30, 2012 and 2011, respectively.

9

The table below presents the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2012 and 2011:

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Basic and dilutive numerator:
Net loss, as reported	$	(3,750	)	$	(4,731	)	$	(16,755	)	$	(17,297	)
Denominator:
Weighted-average common shares outstanding - basic (in thousands)		27,977			27,875			27,943			17,480
Net effect of dilutive securities:
Stock options and restricted stock		—			—			—			—
Weighted-average common shares outstanding - diluted (in thousands)		27,977			27,875			27,943			17,480
Net loss per common share (basic)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)
Net loss per common share (diluted)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)

Note 11. Stock-based compensation:

We granted 124,900 and 322,770 stock options during the three and nine months ended September 30, 2012, and granted 13,608 restricted stock units and 34,050 restricted stock awards during the nine months ended September 30, 2012. We granted 63,250 and 137,420 stock options during the three and nine months ended September 30, 2011, respectively. There were 47,341 and 92,228 stock options exercised during the three and nine months ended September 30, 2012, with an aggregate intrinsic value of $391 and $969, respectively.

Note 12. Net revenue by product:

Net revenue by product line is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Therapeutic class:
Anti-infective	$	18,173	$	20,122	$	57,314	$	42,562
Critical care		20,897		9,434		53,885		38,230
Oncology		10,359		11,725		19,190		23,087
	$	49,429	$	41,281	$	130,389	$	103,879

Note 13. Management reorganization:

In August 2012, we completed a reorganization of our executive management team in which we eliminated certain positions within the Company. Costs associated with the reorganization, primarily severance related charges, were recognized during the third quarter and are reflected under the Management Reorganization caption in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012.

Note 14. Related party transactions:

As of September 30, 2012 and December 31, 2011, respectively, we had a receivable of $485 and $298 from Sagent Agila LLC, which is expected to offset future profit-sharing payments. As of September 30, 2012 and December 31, 2011, respectively, we also had a deposit of $517 and $2,081 with our Sagent Agila LLC joint venture partner, Strides Arcolab International Limited (“Strides”), for future inventory purchases. These amounts are included within due from related party on the condensed consolidated balance sheets. As of September 30, 2012 and December 31, 2011, respectively, we had a payable of $3,838 and $4,303 to Sagent Agila LLC, principally for the acquisition of inventory and amounts due under profit-sharing arrangements. During the three and nine months ended September 30, 2012, Sagent Agila LLC distributed $4,385 and $5,510, respectively, of profit sharing receipts to its joint venture partners. As the Sagent Agila joint venture had sufficient cumulative earnings at September 30, 2012, our share of the distribution for the nine months ended September 30, 2012 has been treated as a dividend received in the condensed consolidated statements of cash flows.

10

Note 15. Commitments and contingencies:

From time to time, we are subject to claims and litigation arising in the normal course of business. At this time, there are no proceedings of which we are aware that we expect will have a material adverse effect on our consolidated financial position or results of operations.

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere in this report and with our audited financial statements and the notes found in our most recent Annual Report on Form 10-K filed with the SEC on March 29, 2012. Unless otherwise noted, all dollar amounts are in thousands.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “could have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. In addition, this report contains forward-looking statements regarding our ability to generate operating profit in the near term; the adequacy of our current cash balances to fund our ongoing operations; our utilization of our net operating loss carryforwards; and our ability to meet our obligations under our Revolving Credit Facility with Silicon Valley Bank.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, and the cautionary statements set forth below, as well as elsewhere in this Quarterly Report on Form 10-Q, and those contained in Item 1A under the heading “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC on March 29, 2012, identify important factors that could cause actual results to differ materially from those indicated by our forward-looking statements. Such factors, include, but are not limited to:

• we rely on our business partners for the manufacture of our products, and if our business partners fail to supply us with high-quality active pharmaceutical ingredient (“API”) or finished products in the quantities we require on a timely basis, sales of our products could be delayed or prevented, our revenues could decline and we may not achieve profitability;

• if we or any of our business partners are unable to comply with the quality and regulatory standards applicable to pharmaceutical drug manufacturers, or if approvals of pending applications are delayed as a result of quality or regulatory compliance concerns or merely backlogs at the US Food and Drug Administration (“FDA”), we may be unable to meet the demand for our products, may lose potential revenues and may not achieve profitability;

• changes in the regulations, enforcement procedures or regulatory policies established by the FDA and other regulatory agencies are expected to increase the costs and time of development of our products and could delay or prevent sales of our products and our revenues could decline and we may not achieve profitability;

• three of our products, heparin, levofloxacin in pre-mix bags, and cefepime, each of which is supplied to us by a single vendor, represent a significant portion of our net revenues and, if the volume or pricing of any of these products declines, or we are unable to satisfy market demand for these products, it could have a material adverse effect on our business, financial position and results of operations;

• we participate in highly competitive markets, dominated by a few large competitors, and if we are unable to compete successfully, our revenues could decline and our future profitability could be jeopardized;

• if we are unable to continue to develop and commercialize new products in a timely and cost-effective manner, we may not achieve our expected revenue growth or profitability or such revenue growth and profitability, if any, could be delayed;

• if we are unable to maintain our GPO and distributor relationships, our revenues could decline and future profitability would be jeopardized;

• we rely on a limited number of pharmaceutical wholesalers to distribute our products;

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• we depend to a significant degree upon our key personnel, the loss of whom could adversely affect our operations;

• we may be exposed to product liability claims that could cause us to incur significant costs or cease selling some of our products;

• if reimbursement by government-sponsored or private sector insurance programs for our current or future products is reduced or modified, our business could suffer;

• current and future decline of national and international economic conditions could adversely affect our operations;

• we are subject to risks associated with managing our international network of collaborations which include business partners and other suppliers of components, API and finished products located throughout the world;

• we may never realize the expected benefits from our investment in our KSCP joint venture in China and the joint venture may require additional capital investment to continue its operations; and

• we may seek to engage in strategic transactions, including the acquisition of products or businesses, that could have a variety of negative consequences, and we may not realize the intended benefits of such transactions.

We derive many of our forward-looking statements from our work in preparing, reviewing and evaluating our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, it is impossible for us to anticipate or accurately calculate the impact of all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include, but are not limited to, those disclosed in this Quarterly Report on Form 10-Q, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and those disclosed in Item 1A under the heading “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC on March 29, 2012. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Introduction

We are a specialty pharmaceutical company that develops and sources products that we sell primarily in the United States of America through our highly experienced sales and marketing team.

With a primary focus on generic injectable pharmaceuticals, we offer our customers a broad range of products across anti-infective, oncolytic and critical care indications in a variety of presentations, including single- and multi-dose vials, pre-filled ready-to-use syringes and premix bags. We generally seek to develop injectable products including those where the form or packaging of the product can be enhanced to improve delivery, product safety or end-user convenience. Our management team includes industry veterans who have previously served critical functions at other injectable pharmaceutical companies and key customer groups and have long-standing relationships with customers, regulatory agencies, and suppliers. We have rapidly established a growing and diverse product portfolio and product pipeline as a result of our innovative business model, which combines an extensive network of international development, sourcing and manufacturing collaborations with our proven and experienced U.S.-based regulatory, quality assurance, business development, project management, and sales and marketing teams.

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Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).

Adjusted Gross Profit

We use the non-GAAP financial measure “Adjusted Gross Profit” and corresponding ratios. We define Adjusted Gross Profit as gross profit plus our share of the gross profit earned through our Sagent Agila joint venture which is included in the equity in net (income) loss of joint ventures line on the Condensed Consolidated Statements of Operations. We believe that Adjusted Gross Profit is relevant and useful supplemental information for our investors. Our management believes that the presentation of this non-GAAP financial measure, when considered together with our GAAP financial measures and the reconciliation to the most directly comparable GAAP financial measure, provides a more complete understanding of the factors and trends affecting Sagent than could be obtained absent these disclosures. Management uses Adjusted Gross Profit and corresponding ratios to make operating and strategic decisions and evaluate our performance. We have disclosed this non-GAAP financial measure so that our investors have the same financial data that management uses with the intention of assisting you in making comparisons to our historical operating results and analyzing our underlying performance. Our management believes that Adjusted Gross Profit provides a useful supplemental tool to consistently evaluate the profitability of our products that have profit sharing arrangements. The limitation of this measure is that it includes an item that does not have an impact on reported gross profit. The best way that this limitation can be addressed is by using Adjusted Gross Profit in combination with our GAAP reported gross profit. Because Adjusted Gross Profit calculations may vary among other companies, the Adjusted Gross Profit figures presented below may not be comparable to similarly titled measures used by other companies. Our use of Adjusted Gross Profit is not meant to and should not be considered in isolation or as a substitute for, or superior to, any GAAP financial measure. You should carefully evaluate the following tables reconciling Adjusted Gross Profit to our GAAP reported gross profit for the periods presented.

	Three months ended September 30,									% of net revenues, three months ended September 30,
	2012		2011		$ Change		% Change			2012			2011			% Change
Adjusted Gross Profit	$	9,489	$	7,375	$	2,114		29	%		19.2	%		17.9	%		1.3	%
Sagent share of gross profit earned by Sagent Agila joint venture		2,268		438		1,830		418	%		4.6	%		1.1	%		3.5	%
Gross Profit	$	7,221	$	6,937	$	284		4	%		14.6	%		16.8	%		(2.2	)%

	Nine months ended September 30,									% of net revenues, nine months ended September 30,
	2012		2011		$ Change		% Change			2012			2011			% Change
Adjusted Gross Profit	$	23,629	$	15,629	$	8,000		51	%		18.1	%		15.0	%		3.1	%
Sagent share of gross profit earned by Sagent Agila joint venture		4,140		1,354		2,786		206	%		3.2	%		1.3	%		1.9	%
Gross Profit	$	19,489	$	14,275	$	5,214		37	%		14.9	%		13.7	%		1.2	%

EBITDA and Adjusted EBITDA

We use the non-GAAP financial measures “EBITDA” and “Adjusted EBITDA” and corresponding growth ratios. We define EBITDA as net loss less interest expense, net of interest income, provision for income taxes, depreciation and amortization. We define Adjusted EBITDA as net loss less interest expense, net of interest income, provision for income taxes, depreciation and amortization, stock-based compensation expense and the equity in net loss of our KSCP joint venture. We believe that EBITDA and Adjusted EBITDA are relevant and useful supplemental information for our investors. Our management believes that the presentation of these non-GAAP financial

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measures, when considered together with our GAAP financial measures and the reconciliation to the most directly comparable GAAP financial measures, provides a more complete understanding of the factors and trends affecting Sagent than could be obtained absent these disclosures. Management uses EBITDA, Adjusted EBITDA and corresponding ratios to make operating and strategic decisions and evaluate our performance. We have disclosed these non-GAAP financial measures so that our investors have the same financial data that management uses with the intention of assisting you in making comparisons to our historical operating results and analyzing our underlying performance. Our management believes that EBITDA and Adjusted EBITDA are useful supplemental tools to evaluate the underlying operating performance of the company on an ongoing basis. The limitation of these measures is that they exclude items that have an impact on net loss. The best way that these limitations can be addressed is by using EBITDA and Adjusted EBITDA in combination with our GAAP reported net loss. Because EBITDA and Adjusted EBITDA calculations may vary among other companies, the EBITDA and Adjusted EBITDA figures presented below may not be comparable to similarly titled measures used by other companies. Our use of EBITDA and Adjusted EBITDA is not meant to and should not be considered in isolation or as a substitute for, or superior to, any GAAP financial measure. You should carefully evaluate the following tables reconciling EBITDA and Adjusted EBITDA to our GAAP reported net loss for the periods presented.

	Three months ended September 30,
	2012			2011			$ Change			% Change
Adjusted EBITDA	$	1,004		$	(1,062	)	$	2,066			195	%
Stock-based compensation expense		1,641			566			1,075			190	%
Equity in net loss of KSCP joint venture		1,115			809			306			38	%
EBITDA	$	(1,752	)	$	(2,437	)	$	685			28	%
Depreciation and amortization expense1		2,006			1,175			831			71	%
Interest expense, net		(8	)		1,119			(1,127	)		-101	%
Provision for income taxes		—			—			—			—
Net loss	$	(3,750	)	$	(4,731	)	$	981			21	%
	Nine months ended September 30,
	2012			2011			$ Change			% Change
Adjusted EBITDA	$	(3,304	)	$	(8,580	)	$	5,276			61	%
Stock-based compensation expense		4,297			1,617			2,680			166	%
Equity in net loss of KSCP joint venture		3,137			2,761			376			14	%
EBITDA	$	(10,738	)	$	(12,958	)	$	2,220			17	%
Depreciation and amortization expense1		4,712			1,533			3,179			207	%
Interest expense, net		1,305			2,806			(1,501	)		-53	%
Provision for income taxes		—			—			—
Net loss	$	(16,755	)	$	(17,297	)	$	542			3	%

¹ Depreciation and amortization expense excludes $22 and $144 of amortization in the three months ended September 30, 2012 and 2011, respectively, and $486 and $332 in the nine months ended September 30, 2012 and 2011, respectively, related to deferred financing fees, which is included within interest expense and other in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011.

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Discussion and Analysis

Consolidated results of operations

The following compares our condensed consolidated results of operations for the three months ended September 30, 2012 with those of the three months ended September 30, 2011:

	Three months ended September 30,
	2012			2011			$ change			% change
Net revenue	$	49,429		$	41,281		$	8,148			20	%
Cost of sales		42,208			34,344			7,864			23	%
Gross profit		7,221			6,937			284			4	%
Gross profit as % of net revenues		14.6	%		16.8	%		(2.2	)%
Operating expenses:
Product development		4,011			3,460			551			16	%
Selling, general and administrative		7,169			6,688			481			7	%
Management reorganization		739			—			739			100	%
Equity in net (income) loss of joint ventures		(940	)		401			(1,341	)		334	%
Total operating expenses		10,979			10,549			430			4	%
Loss from operations		(3,758	)		(3,612	)		(146	)		-4	%
Interest income and other		60			104			(44	)		-42	%
Interest expense		(52	)		(1,223	)		1,171			96	%
Change in fair value of preferred stock warrants		—			—			—			0	%
Loss before income taxes		(3,750	)		(4,731	)		981			21	%
Provision for income taxes		—			—			—			0	%
Net loss	$	(3,750	)	$	(4,731	)	$	981			21	%
Net loss per common share:
Basic	$	(0.13	)	$	(0.17	)	$	0.04			24	%
Diluted	$	(0.13	)	$	(0.17	)	$	0.04			24	%

Net revenue: Net revenue for the three months ended September 30, 2012 totaled $49.4 million, an increase of $8.1 million, or 20%, as compared to $41.3 million for the three months ended September 30, 2011. The launch of 33 new codes or presentations of 11 products since September 30, 2011 contributed $18.3 million in revenue during the third quarter of 2012. Net revenue for products launched prior to September 30, 2011 decreased $10.1 million, or 25%, to $31.1 million in the third quarter of 2012 due primarily to lower pricing of products initially launched in the third quarter of 2011.

Cost of sales: Cost of sales for the three months ended September 30, 2012 totaled $42.2 million, an increase of $7.9 million, or 23%, as compared to $34.3 million for the three months ended September 30, 2011. Gross profit as a percentage of net revenue was 14.6% for the three months ended September 30, 2012, and 16.8% for the three months ended September 30, 2011. The decrease in gross profit as a percentage of net revenue was driven primarily by reduced pricing on products initially launched in the third quarter of 2011. Adjusted Gross Profit as a percentage of net revenue was 19.2% for the three months ended September 30, 2012, and 17.9% for the three months ended September 30, 2011. The increase in Adjusted Gross Profit as a percentage of net revenue was driven primarily by the sale of rocuronium, of which there was a shortage during the third quarter of 2012 and oxaliplatin, which was launched at patent expiry, partially offset by reduced pricing on products initially launched in the third quarter of 2011.

Product development: Product development expense for the three months ended September 30, 2012 totaled $4.0 million, an increase of $0.6 million, or 16%, as compared to $3.5 million for the three months ended September 30, 2011. The increase in product development expense was primarily due to the timing of milestone payments and the purchase of API for our development programs, as the number of products under development has not changed significantly as compared with the third quarter of 2011.

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As of September 30, 2012, our new product pipeline included 32 products represented by 58 Abbreviated New Drug Applications (“ANDAs”) which we had filed, or licensed rights to, that were under review by the US Food and Drug Administration (“FDA”) and eight products represented by 15 ANDAs that have been recently approved and were pending commercial launch, including three ANDAs which were launched during October 2012. We expect to launch approximately half of these remaining new products by the end of 2013. We also had an additional 24 products represented by 28 ANDAs under initial development at September 30, 2012.

Selling, general and administrative: Selling, general and administrative expenses for the three months ended September 30, 2012, totaled $7.2 million, an increase of $0.5 million, or 7%, as compared to $6.7 million for the three months ended September 30, 2011. The increase in selling, general and administrative expense was primarily due to additional stock compensation expense. Selling, general and administrative expense as a percentage of net revenue was 15% and 16% for the three months ended September 30, 2012 and 2011, respectively.

Management reorganization: Restructuring expenses, primarily severance related charges in connection with eliminated positions, for the three months ended September 30, 2012 totaled $0.7 million. There were no such restructuring expenses in the three months ended September 30, 2011.

Equity in net (income) loss of joint ventures: Equity in net income of joint ventures for the three months ended September 30, 2012 totaled $0.9 million, an increase of $1.3 million, or 334%, as compared to equity in net loss of joint ventures of $0.4 million for the three months ended September 30, 2011. The increase was primarily due to increased income generated by the Sagent Agila joint venture, partially offset by losses of our KSCP joint venture primarily due to its additional development activities. Included in this amount are the following (amounts in thousands of dollars):

	Three Months Ended September 30,
	2012			2011
Sagent Agila LLC – Earnings directly related to the sale of product	$	(2,268	)	$	(438	)
Sagent Agila LLC – Product development costs		213			30
Kanghong Sagent (Chengdu) Pharmaceutical Co – net loss		1,115			809
Equity in net (income) loss of joint ventures	$	(940	)	$	401

Interest expense: Interest expense for the three months ended September 30, 2012 was $0.1 million, a decrease of $1.2 million, or 96%, as compared to $1.2 million, for the three months ended September 30, 2011. The decrease was due to lower borrowings outstanding during the three months ended September 30, 2012, as we did not borrow against our new SVB revolving loan facility during the third quarter of 2012.

Provision for income taxes: We have generated tax losses since inception and do not believe that it is more likely than not that our net operating loss carryforwards and other deferred tax assets will be utilized. As a result, we have decided that a full valuation allowance is required against our deferred tax assets. Because none of our current net operating loss carryforwards expire before 2027, we expect that we will have a reasonable opportunity to utilize all of these loss carryforwards before they expire, but such loss carryforwards will be usable only to the extent that we generate sufficient taxable income.

Net loss and net loss per common share: The net loss for the three months ended September 30, 2012 of $3.8 million decreased by $1.0 million, or 21%, from the $4.7 million net loss for the three months ended September 30, 2011. Net loss per common share decreased by $0.04, or 24%. The decrease in net loss per common share is due to the following factors:

Basic and diluted EPS for the three months ended September 30, 2011	$	(0.17	)
Increases in operations		0.04
Increase in common shares outstanding		0.00
Basic and diluted EPS for the three months ended September 30, 2012	$	(0.13	)

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Adjusted EBITDA: Adjusted EBITDA for the three months ended September 30, 2012 was $1.0 million, an increase of $2.1 million, or 195%, from negative $1.1 million for the three months ended September 30, 2011. The improvement in Adjusted EBITDA is driven by the increase in Adjusted Gross Profit and reduced selling, general and administrative expense cash expenditures.

The following compares our condensed consolidated results of operations for the nine months ended September 30, 2012 with those of the nine months ended September 30, 2011:

	Nine months ended September 30,
	2012			2011			$ change			% change
Net revenue	$	130,389		$	103,879		$	26,510			26	%
Cost of sales		110,900			89,604			21,296			24	%
Gross profit		19,489			14,275			5,214			37	%
Gross profit as % of net revenues		14.9	%		13.7	%		1.2	%
Operating expenses:
Product development		12,700			8,191			4,509			55	%
Selling, general and administrative		22,089			18,139			3,950			22	%
Management reorganization		739			—			739			100	%
Equity in net (income) loss of joint ventures		(589	)		1,598			(2,187	)		137	%
Total operating expenses		34,939			27,928			7,011			25	%
Loss from operations		(15,450	)		(13,653	)		(1,797	)		-13	%
Interest income and other		210			179			31			17	%
Interest expense		(1,515	)		(2,985	)		1,470			49	%
Change in fair value of preferred stock warrants		—			(838	)		838			100	%
Loss before income taxes		(16,755	)		(17,297	)		542			3	%
Provision for income taxes		—			—			—			0	%
Net loss	$	(16,755	)	$	(17,297	)	$	542			3	%
Net loss per common share:
Basic	$	(0.60	)	$	(0.99	)	$	0.39			39	%
Diluted	$	(0.60	)	$	(0.99	)	$	0.39			39	%

Net revenue: Net revenue for the nine months ended September 30, 2012 totaled $130.4 million, an increase of $26.5 million, or 26%, as compared to $103.9 million for the nine months ended September 30, 2011. The launch of 33 codes or presentations of 11 products since September 30, 2011 contributed $27.3 million of the net revenue increase in the current period. Net revenue for products launched prior to September 30, 2011 decreased $0.8 million, or 1%, to $103.1 million in the first nine months of 2012, due primarily to lower pricing, especially on our heparin and gemcitabine products, partially offset by increased volumes, mainly from products launched during the third quarter of 2011.

Cost of sales: Cost of sales for the nine months ended September 30, 2012 totaled $110.9 million, an increase of $21.3 million, or 24%, as compared to $89.6 million for the nine months ended September 30, 2011. Gross profit as a percentage of net revenue was 14.9% for the nine months ended September 30, 2012, and 13.7% for the nine months ended September 30, 2011. The increase in gross profit as a percentage of net revenue was driven primarily by the sale of $1.2 million of heparin previously reserved as excess inventories. Adjusted Gross Profit as a percentage of net revenue was 18.1% for the nine months ended September 30, 2012, and 15.0% for the nine months ended September 30, 2011. The increase in Adjusted Gross Profit as a percentage of net revenue was driven primarily by the sale of higher value products, including rocuronium, which was on shortage during the third quarter of 2012 and oxaliplatin, which was launched at patent expiry, partially offset by reduced pricing on products initially launched in the third quarter of 2011.

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Product development: Product development expense for the nine months ended September 30, 2012 totaled $12.7 million, an increase of $4.5 million, or 55%, as compared to $8.2 million for the nine months ended September 30, 2011. The increase in product development expense was primarily due to the timing of milestone payments and the purchase of API for our development programs, as the number of products under development has not changed significantly as compared with the first nine months of 2011.

Selling, general and administrative: Selling, general and administrative expenses for the nine months ended September 30, 2012, totaled $22.1 million, an increase of $4.0 million, or 22%, as compared to $18.1 million for the nine months ended September 30, 2011. The increase in selling, general and administrative expense was primarily due to increases in stock compensation expense and increases in headcount to support our continued growth and manage the requirements of operating as a public company. Selling, general and administrative expense as a percentage of net revenue was 17% for both the nine months ended September 30, 2012 and 2011.

Equity in net (income) loss of joint ventures: Equity in net income of joint ventures for the nine months ended September 30, 2012 totaled $0.6 million, an increase of $2.2 million, or 137%, as compared to equity in net loss of joint ventures of $1.6 million for the nine months ended September 30, 2011. The increase was primarily due to increased income generated by the Sagent Agila joint venture, partially offset by additional losses of our KSCP joint venture primarily due to its development activities. Included in this amount are the following (in thousands of dollars).

	Nine Months Ended September 30,
	2012			2011
Sagent Agila LLC – Earnings directly related to the sale of product	$	(4,141	)	$	(1,354	)
Sagent Agila LLC – Product development costs		415			191
Kanghong Sagent (Chengdu) Pharmaceutical Co – net loss		3,137			2,761
Equity in net (income) loss of joint ventures	$	(589	)	$	1,598

Interest expense: Interest expense for the nine months ended September 30, 2012 totaled $1.5 million, a decrease of $1.5 million, or 49%, as compared to $3.0 million for the nine months ended September 30, 2011. The decrease was principally due to lower borrowings during 2012, partially offset by $0.8 million of fees and the write-off of $0.4 million of deferred financing costs associated with the early termination and partial extinguishment of our senior secured revolving and term loan credit facilities in February 2012. We did not draw against the SVB revolving loan facility following our entry into this agreement in February 2012. Excluding fees associated with the early termination of our credit facilities, interest expense for the nine months ended September 30, 2012 was $0.4 million.

Provision for income taxes: We have generated tax losses since inception and do not believe that it is more likely than not that our net operating loss carryforwards and other deferred tax assets will be utilized. As a result, we have decided that a full valuation allowance is required against our deferred tax assets. Because none of our current net operating loss carryforwards expire before 2027, we expect that we will have a reasonable opportunity to utilize all of these loss carryforwards before they expire, but such loss carryforwards will be usable only to the extent that we generate sufficient taxable income.

Net loss and net loss per common share: The net loss for the nine months ended September 30, 2012 of $16.8 million decreased by $0.5 million, or 3%, from the $17.3 million net loss for the nine months ended September 30, 2011. Net loss per common share decreased by $0.39, or 39%. The decrease in net loss per common share is due to the following factors:

Basic and diluted EPS for the nine months ended September 30, 2011	$	(0.99	)
Increase in operations		0.02
Increase in common shares outstanding		0.37
Basic and diluted EPS for the nine months ended September 30, 2012	$	(0.60	)

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Adjusted EBITDA: Adjusted EBITDA for the nine months ended September 30, 2012 of negative $3.3 million increased by $5.3 million, or 61%, from negative $8.6 million for the nine months ended September 30, 2011. The improvement in Adjusted EBITDA is driven predominately by the increased cash earnings of the business during the nine months ended September 30, 2012, as our Adjusted Gross Profit increased by $8.0 million during the period, partially offset by increased selling, general and administrative cash expenditures.

Liquidity and Capital Resources

Funding Requirements

As of September 30, 2012, we have not generated any operating profit and may not in the near term. We expect our continuing operating losses to result in the continued use of cash for operations. Our future capital requirements will depend on a number of factors, including the continued commercial success of our existing products, launching the 40 products that are represented by our 73 ANDAs that have been recently approved and are pending commercial launch or are pending approval by the FDA as of September 30, 2012, successfully identifying and sourcing other new product opportunities, and business acquisition activity.

Based on our existing business plan, we expect our cash, cash equivalents and short-term investments of approximately $65.9 million as of September 30, 2012, together with borrowings available under our SVB revolving loan facility, will be sufficient to fund our planned operations, including the continued development of our product pipeline, for at least the next 12 months. However, we may require additional funds in the event we change our business plan, pursue strategic transactions, including the acquisition of businesses or products, or encounter unexpected developments, including unforeseen competitive conditions within our product markets, changes in the regulatory environment or the loss of key relationships with suppliers, group purchasing organizations or end-user customers.

If required, additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities or by selling convertible debt securities, further dilution to our existing stockholders may result. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private equity offerings or debt financings, which may not be available to us on terms we consider acceptable or at all.

If adequate funds are not available, we may be required to terminate, significantly modify or delay the development or commercialization of new products. We may elect to raise additional funds even before we need them if we believe that the conditions for raising capital are favorable.

Cash Flows

Overview

On September 30, 2012, cash and cash equivalents on hand totaled $26.8 million. Short-term investments, generally U.S. government or investment grade corporate debt securities with a remaining term of two years or less, totaled $39.1 million. Working capital totaled $103.1 million and our current ratio (current assets to current liabilities) was approximately 3.7 to 1.0.

Sources and Uses of Cash

Operating activities: Net cash used in operating activities was $18.4 million for the nine months ended September 30, 2012, compared with $31.2 million during the nine months ended September 30, 2011. The decrease in the use of cash was primarily due to improvements in our adjusted EBITDA and reductions in working capital relative to 2011.

Investing activities: Net cash provided by investing activities was $30.5 million for the nine months ended September 30, 2012, compared to $80.5 million net cash used in investing activities during the nine months ended September 30, 2011. The change in cash flows from investing activities relates primarily to the net sale of short-term investments of $34.0 million to repay in full all amounts due under our term loan and senior secured revolving credit facilities in February 2012. Net cash used in investing activities during the nine months ended September 30, 2011 included $77.6 million from the net purchase of short-term investments.

20

Financing activities: Net cash used in financing activities was $37.4 million for the nine months ended September 30, 2012, primarily related to the repayment in full of all outstanding amounts due under our term loan and senior secured revolving credit facilities in February 2012. Net cash provided by financing activities of $114.8 million for the nine months ended September 30, 2011 included $101.6 million in proceeds from our initial public offering and $15.0 million in proceeds from borrowings related to the term loan credit facility.

Asset based revolving loan facility

In February 2012, we entered into a Loan and Security Agreement with Silicon Valley Bank (the “SVB Agreement”). The SVB Agreement provides for a $40.0 million asset based revolving loan facility, with availability subject to a borrowing base consisting of eligible accounts receivable and inventory and the satisfaction of conditions precedent specified in the SVB Agreement. The SVB Agreement matures on February 13, 2016, at which time all outstanding amounts will become due and payable. Borrowings under the SVB Agreement may be used for general corporate purposes, including funding working capital. Amounts drawn bear an interest rate equal to, at our option, either a Eurodollar rate plus 2.50% per annum or an alternative base rate plus 1.50% per annum. We also pay a commitment fee on undrawn amounts equal to 0.30% per annum. The SVB Agreement contains various covenants and restrictions, including covenants requiring us to maintain a minimum adjusted quick ratio and a minimum level of free cash flow, and restrictions on our ability to incur additional indebtedness, make certain investments, create liens, pay dividends, sell assets or enter into a merger or acquisition. During the continuance of an event of default, at Silicon Valley Bank’s option, all obligations will bear interest at a rate per annum equal to 5.00% per annum above the otherwise applicable rate.

As of September 30, 2012, there were no borrowings outstanding under our Silicon Valley Bank revolving loan facility. At March 31, 2012, we were not in compliance with the free cash flow covenant included in the SVB Agreement, which required that we achieve free cash flow, defined as net loss less interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, equity in net loss of our KSCP joint venture, capital expenditures and capitalized product development costs of negative $2.0 million for the three months ended March 31, 2012. On May 10, 2012, Silicon Valley Bank waived our non-compliance with this covenant, and modified the free cash flow covenant for the remainder of 2012. In connection with the waiver and modification, we paid a fee of $0.1 million. We are in compliance with all of our covenants under the SVB Agreement at September 30, 2012.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We have no off-balance sheet arrangements other than the contractual obligations that are discussed below and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on March 29, 2012.

Aggregate Contractual Obligations:

The following table summarizes our long-term contractual obligations and commitments as of September 30, 2012. The actual amount that may be required in the future to repay borrowings under the SVB Agreement may be different, as a result of borrowings under the facility.

21

	Payments due by period
Contractual obligations (1)	Total		Less than one year		1-3 years		3-5 years		More than five years
Long-term debt obligations (2)	$	—	$	—	$	—	$	—	$	—
Operating lease obligations (3)		1,279		286		599		394		—
Contingent milestone payments (4)		20,269		13,072		6,668		464		65
Joint venture funding requirements (5)		232		72		150		—		—
	$	21,780	$	13,430	$	7,417	$	858	$	65

⁽¹⁾  We had no material purchase commitments, individually or in the aggregate, under our manufacturing and supply agreements.

⁽²⁾  No amounts were drawn under the SVB revolving loan facility as of September 30, 2012.

⁽³⁾  Includes annual minimum lease payments related to non-cancelable operating leases.

⁽⁴⁾  Includes management’s estimate for contingent potential milestone payments and fees pursuant to strategic business agreements for the development and marketing of finished dosage form pharmaceutical products assuming all contingent milestone payments occur. Does not include contingent royalty payments, which are dependent on the introduction of new products.

⁽⁵⁾  Includes minimum funding requirements in connection with our existing joint ventures.

Critical Accounting Policies

We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions.

We have identified the following critical accounting policies:

• Revenue recognition;

• Inventories;

• Income taxes;

• Stock-based compensation;

• Valuation and impairment of marketable securities;

• Product development; and

• Intangible assets.

For a discussion of critical accounting policies affecting us, see the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” and under Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 29, 2012.

There have been no other material changes to the Company’s critical accounting policies and estimates since December 31, 2011.

New Accounting Guidance

See Note 1. Basis of Presentation – New Accounting Pronouncements, for a discussion of new accounting guidance.

22

Contingencies

See Note 14. Commitments and Contingencies, and Part II, Item 1. Legal Proceedings for a discussion of contingencies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our market risks relate primarily to changes in interest rates. Our SVB revolving loan facility bears floating interest rates that are tied to LIBOR and an alternate base rate and, therefore our statements of operations and our cash flows will be exposed to changes in interest rates. As we had no borrowings outstanding at September 30, 2012, there is no impact related to potential changes in the LIBOR rate on our interest expense at September 30, 2012. We historically have not engaged in interest rate hedging activities related to our interest rate risk.

At September 30, 2012, we had cash and cash equivalents and short-term investments of $26.8 million and $39.1 million, respectively. Our cash and cash equivalents are held primarily in cash and money market funds, and our short-term investments are held primarily in corporate debt securities, including commercial paper. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.

While we operate primarily in the U.S., we do have foreign currency considerations. We generally incur sales and pay our expenses in U.S. dollars. Our KSCP joint venture and substantially all of our business partners that supply us with API, product development services, finished products and manufacturing services are located in a number of foreign jurisdictions, and we believe they generally incur their respective operating expenses in local currencies. As a result, these business partners may be exposed to currency rate fluctuations and experience an effective increase in their operating expenses in the event their local currency appreciates against the U.S. dollar. In this event, such business partners may elect to stop providing us with these services or attempt to pass these increased costs back to us through increased prices. Historically we have not used derivatives to protect against adverse movements in currency rates.

We do not have any foreign currency or any other material derivative financial instruments.

Item 4. 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 Quarterly Report on Form 10-Q. Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our certifying officers, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Internal Control over Financial Reporting.

Management, together with our CEO and CFO, evaluated the changes in our internal control over financial reporting during the quarter ended September 30, 2012. We determined that there were no changes in our internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we are subject to claims and litigation arising in the ordinary course of business. At this time, there are no proceedings of which management is aware that are expected to have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors.

There are no material changes from the risk factors previously disclosed in our most recent Annual Report on Form 10-K filed with the SEC on March 29, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities during the Quarter ended September 30, 2012

There are currently no share repurchase programs authorized by our Board of Directors. We made no repurchases of our common stock during the third quarter of 2012.

Recent Sales of Unregistered Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits.

Exhibit Number	Description
3.1	Certificate of Incorporation of Sagent Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.3 in the Company’s Registration Statement on Form S-1, as amended (File Nos. 333-170979 and 333-173597)).
3.2	Bylaws of Sagent Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.4 in the Company’s Registration Statement on Form S-1, as amended (File Nos. 333-170979 and 333-173597)).
10.1	Loan and Security Agreement, dated February 13, 2012, by and among Sagent Pharmaceuticals, Inc., Sagent Pharmaceuticals, and Silicon Valley Bank. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 16, 2012).
10.2	First Loan Modification Agreement, dated May 10, 2012, by and among Sagent Pharmaceuticals, Inc., Sagent Pharmaceuticals, and Silicon Valley Bank. (Incorporated by Reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 31, 2012).
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1**	The following materials from Sagent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011, (iii) the Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2012 and 2011, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011, (v) Notes to the Condensed Consolidated Financial Statements and (vi) document and entity information.

* Filed herewith

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101.1 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

25

Signature

Pursuant to the requirements 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.

SAGENT PHARMACEUTICALS INC.

/s/ Jonathon M. Singer

Jonathon M. Singer

Executive Vice President and Chief Financial Officer

November 8, 2012

26

EX-31.1

EXHIBIT 31.1

Certifications

I, Jeffrey M. Yordon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sagent Pharmaceuticals, 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 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)) 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) Paragraph omitted in accordance with SEC Release No. 34-47986;

(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 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.

Date: November 8, 2012

/s/ Jeffrey M. Yordon

Jeffrey M. Yordon

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certifications

I, Jonathon M. Singer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sagent Pharmaceuticals, 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 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)) 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) Paragraph omitted in accordance with SEC Release No. 34-47986;

(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 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.

Date: November 8, 2012

/s/ Jonathon M. Singer

Jonathon M. Singer

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey M. Yordon, President and Chief Executive Officer of Sagent Pharmaceuticals, Inc. (“Sagent”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that Sagent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in Sagent’s Quarterly Report on Form 10-Q fairly presents in all material respects Sagent’s financial condition and results of operations.

/s/ Jeffrey M. Yordon

Jeffrey M. Yordon

President and Chief Executive Officer

November 8, 2012

I, Jonathon M. Singer, Chief Financial Officer of Sagent Pharmaceuticals, Inc. (“Sagent”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that Sagent’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in Sagent’s Quarterly Report on Form 10-Q fairly presents in all material respects Sagent’s financial condition and results of operations.

/s/ Jonathon M. Singer

Jonathon M. Singer

Executive Vice President and Chief Financial Officer

November 8, 2012

A signed original of these written statements required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Sagent Pharmaceuticals, Inc. and will be retained by Sagent Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Intangible Assets, Net (Details Textual) (Product Licensing Rights [Member])	9 Months Ended
	Sep. 30, 2012 Right
Product Licensing Rights [Member]
Intangible Assets, Net (Textual) [Abstract]
Number of Products	19
Weighted-average period prior to the next extension or renewal	36 months

XML

Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Basic and dilutive numerator:
Net loss	$ (3,750)	$ (4,731)	$ (16,755)	$ (17,297)
Denominator:
Weighted-average common shares outstanding - basic	27,977	27,875	27,943	17,480
Net effect of dilutive securities:
Stock options and restricted stock
Weighted-average common shares outstanding - diluted	27,977	27,875	27,943	17,480
Basic	$ (0.13)	$ (0.17)	$ (0.60)	$ (0.99)
Diluted	$ (0.13)	$ (0.17)	$ (0.60)	$ (0.99)

XML

Fair Value Measurements (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair Value Measurements (Additional Textual) [Abstract]
Transfer of assets from level 1 to level 2	$ 0	$ 0
Warrant [Member]
Fair Value Measurements (Textual) [Abstract]
Preferred stock warrants outstanding	0	0

XML

Investments (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Investments with unrealized losses and fair values
Fair value	$ 17,206
Unrealized losses	(2)
Corporate Bonds and Notes [Member]
Investments with unrealized losses and fair values
Fair value	4,008
Unrealized losses	(1)
Commercial Paper [Member]
Investments with unrealized losses and fair values
Fair value	13,198
Unrealized losses	$ (1)

XML

Investment in KSCP (Tables)

9 Months Ended

Sep. 30, 2012

Investment in KSCP [Abstract]

Changes in investment in KSCP

Changes in our investment in KSCP during the nine months ended September 30, 2012 were as follows:

Investment in KSCP at January 1, 2012	$	20,888
Equity in net loss of KSCP		(3,137	)
Currency translation adjustment		641
Investments in KSCP		130
Investment in KSCP at September 30, 2012	$	18,522

Condensed statement of operations information of KSCP

Condensed statement of operations information of KSCP is presented below.

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Condensed statement of operations information
Net revenues	$	—		$	—		$	—		$	—
Gross profit		—			—			—			—
Net loss		(2,459	)		(1,782	)		(5,766	)		(4,839	)

XML

Stock- Based Compensation (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Stock Based Compensation (Textual) [Abstract]
Granted stock options	124,900	63,250	322,770	137,420
Exercised stock option	47,341		92,228
Aggregate intrinsic value	$ 391		$ 969
Restricted Stock Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Granted restricted units			34,050
Restricted Stock Units (RSUs) [Member]
Stock Based Compensation (Textual) [Abstract]
Granted restricted units			13,608

XML

Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accrued Liabilities
Payroll and employee benefits	$ 3,213	$ 2,222
Sales and marketing	3,691	4,604
Other accrued liabilities	470	808
Accrued Liabilities, Total	$ 7,374	$ 7,634

XML

Intangible Assets, Net (Details 1) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Product Licensing Rights [Member]	Sep. 30, 2012 Product Development Rights [Member]
Movements in intangible assets
Beginning Balance	$ 4,676	$ 5,426	$ 1,458	$ 3,968
Acquisition of product rights			628	2,398
Amortization of product rights			(357)	(3,419)
Ending Balance	$ 4,676	$ 5,426	$ 1,729	$ 2,947

XML

Related Party Transactions (Details Textual) (Sagent Agila LLC [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011
Sagent Agila LLC [Member]
Related Party Transactions (Textual) [Abstract]
Receivables from related party	$ 485	$ 485	$ 298
Deposit with related party	517	517	2,081
Payable for the acquisition of inventory	3,838	3,838	4,303
Distributed profit sharing receipt	$ 4,385	$ 5,510

XML

Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accumulated other comprehensive income
Currency translation adjustment, net of tax	$ 2,892	$ 2,251
Unrealized gains (losses) on available for sale securities, net of tax	31	(89)
Total accumulated other comprehensive income	$ 2,923	$ 2,162

XML

Inventories

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

Note 3. Inventories:

Inventories at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012								December 31, 2011
	Approved			Pending regulatory approval		Inventory			Approved			Pending regulatory approval		Inventory
Finished goods	$	41,376		$	509	$	41,885		$	47,666		$	—	$	47,666
Raw materials		346			—		346			—			264		264
Inventory reserve		(2,875	)		—		(2,875	)		(6,443	)		—		(6,443	)
	$	38,847		$	509	$	39,356		$	41,223		$	264	$	41,487

XML

Debt (Details Textual) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
SVB Agreement [Member]
Debt (Textual) [Abstract]
Interest rate obligation, otherwise applicable rate	5.00%
Exit fees with term loan credit facility	$ 600
Fees own under deferred termination event	1,050
Deferred financing costs within interest expense, early termination fees	1,124
SVB Agreement [Member] | Revolving Credit Facility [Member]
Debt (Textual) [Abstract]
Amount available under revolving credit facility	40,000
Interest rate	Eurodollar rate plus 2.50% per annum or an alternative base rate plus 1.50% per annum.
Commitment fee on undrawn amounts	0.30%
Covenant fee	100
Borrowings outstanding	0
Early termination fees	$ 1,500
Agreement maturity date	Feb. 13, 2016
Silicon Valley Bank [Member]
Debt (Textual) [Abstract]
SVB Agreement and Revolving Loan Facility	Feb. 13, 2012
Option A [Member] | SVB Agreement [Member] | Revolving Credit Facility [Member]
Debt (Textual) [Abstract]
Basis Spread on Variable Rate	2.50%
Option B [Member] | SVB Agreement [Member] | Revolving Credit Facility [Member]
Debt (Textual) [Abstract]
Basis Spread on Variable Rate	1.50%

XML

Earnings per share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings per share [Abstract]

Schedule of Calculation of Numerator and Denominator in Earnings Per Share

The table below presents the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2012 and 2011:

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Basic and dilutive numerator:
Net loss, as reported	$	(3,750	)	$	(4,731	)	$	(16,755	)	$	(17,297	)
Denominator:
Weighted-average common shares outstanding - basic (in thousands)		27,977			27,875			27,943			17,480
Net effect of dilutive securities:
Stock options and restricted stock		—			—			—			—
Weighted-average common shares outstanding - diluted (in thousands)		27,977			27,875			27,943			17,480
Net loss per common share (basic)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)
Net loss per common share (diluted)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)

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Accumulated other comprehensive income (Tables)

9 Months Ended

Sep. 30, 2012

Accumulated other comprehensive income [Abstract]

Accumulated other comprehensive income

Accumulated other comprehensive income at September 30, 2012 and December 31, 2011 is comprised of the following:

	September 30, 2012		December 31, 2011
Currency translation adjustment, net of tax	$	2,892	$	2,251
Unrealized gains (losses) on available for sale securities, net of tax		31		(89	)
Total accumulated other comprehensive income	$	2,923	$	2,162

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Fair Value Measurements (Details) (Assets measured at fair value on a recurring basis [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of assets measured at fair value on a recurring basis
Total assets	$ 54,480	$ 99,134
Money Market Funds [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	15,412	25,373
Commercial Paper [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	13,198	28,948
Corporate Bonds and Notes [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	25,870	40,313
US government securities [Member]
Summary of assets measured at fair value on a recurring basis
Total assets		4,500
Short-term Investments [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	39,068	73,761
Quoted prices in active markets for identical assets (Level 1) [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	15,412	25,373
Quoted prices in active markets for identical assets (Level 1) [Member] | Money Market Funds [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	15,412	25,373
Quoted prices in active markets for identical assets (Level 1) [Member] | Commercial Paper [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Quoted prices in active markets for identical assets (Level 1) [Member] | Corporate Bonds and Notes [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Quoted prices in active markets for identical assets (Level 1) [Member] | US government securities [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Quoted prices in active markets for identical assets (Level 1) [Member] | Short-term Investments [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant other observable inputs (Level 2) [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	39,068	73,761
Significant other observable inputs (Level 2) [Member] | Money Market Funds [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant other observable inputs (Level 2) [Member] | Commercial Paper [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	13,198	28,948
Significant other observable inputs (Level 2) [Member] | Corporate Bonds and Notes [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	25,870	40,313
Significant other observable inputs (Level 2) [Member] | US government securities [Member]
Summary of assets measured at fair value on a recurring basis
Total assets		4,500
Significant other observable inputs (Level 2) [Member] | Short-term Investments [Member]
Summary of assets measured at fair value on a recurring basis
Total assets	39,068	73,761
Significant unobservable inputs (Level 3) [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant unobservable inputs (Level 3) [Member] | Money Market Funds [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant unobservable inputs (Level 3) [Member] | Commercial Paper [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant unobservable inputs (Level 3) [Member] | Corporate Bonds and Notes [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant unobservable inputs (Level 3) [Member] | US government securities [Member]
Summary of assets measured at fair value on a recurring basis
Total assets
Significant unobservable inputs (Level 3) [Member] | Short-term Investments [Member]
Summary of assets measured at fair value on a recurring basis
Total assets

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Net revenue by product (Tables)

9 Months Ended

Sep. 30, 2012

Net revenue by product [Abstract]

Schedule of Net Amount of Risk by Product and Guarantee

Net revenue by product line is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Therapeutic class:
Anti-infective	$	18,173	$	20,122	$	57,314	$	42,562
Critical care		20,897		9,434		53,885		38,230
Oncology		10,359		11,725		19,190		23,087
	$	49,429	$	41,281	$	130,389	$	103,879

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Basis of Presentation (Details Textual)	9 Months Ended
	Sep. 30, 2012
Basis of Presentation (Textual) [Abstract]
Operating results reporting period lag	1 month

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Investments

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Investments

Note 2. Investments:

Our investments at September 30, 2012 were comprised of the following:

	Cost basis		Unrealized gains		Unrealized losses			Recorded basis		Cash and cash equivalents		Short term investments
Assets
Cash	$	11,377	$	—	$	—		$	11,377	$	11,377	$	—
Money market funds		15,412		—		—			15,412		15,412		—
Corporate bonds and notes		25,838		32		—			25,870		—		25,870
Commercial paper		13,199		—		(1	)		13,198		—		13,198
	$	65,826	$	32	$	(1	)	$	65,857	$	26,789	$	39,068

Investments with continuous unrealized losses for less than twelve months and their related fair values at September 30, 2012 were as follows:

	Fair value		Unrealized losses
Corporate bonds and notes	$	4,008	$	(1	)
Commercial paper		13,198		(1	)
	$	17,206	$	(2	)

Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Because we do not currently intend to sell these investments, and it is not more likely than not that we will be required to sell our investments before recovery of their amortized cost basis, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The original cost and estimated current fair value of our fixed-income securities at September 30, 2012 are set forth below.

	Cost basis		Estimated fair value
Due in one year or less	$	39,037	$	39,068
	$	39,037	$	39,068

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Investments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Assets
Cost basis	$ 65,826
Unrealized gains	32
Unrealized losses	(1)
Recorded basis	65,857
Cash and cash equivalents	26,789	52,203	37,533	34,376
Short-term investments	39,068	73,761
Cash [Member]
Assets
Cost basis	11,377
Unrealized gains
Unrealized losses
Recorded basis	11,377
Cash and cash equivalents	11,377
Short-term investments
Money Market Funds [Member]
Assets
Cost basis	15,412
Unrealized gains
Unrealized losses
Recorded basis	15,412
Cash and cash equivalents	15,412
Short-term investments
Corporate Bonds and Notes [Member]
Assets
Cost basis	25,838
Unrealized gains	32
Unrealized losses
Recorded basis	25,870
Cash and cash equivalents
Short-term investments	25,870
Commercial Paper [Member]
Assets
Cost basis	13,199
Unrealized gains
Unrealized losses	(1)
Recorded basis	13,198
Cash and cash equivalents
Short-term investments	$ 13,198

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Investment in KSCP (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Changes in investment in KSCP
Investment in KSCP at January 1, 2012			$ 22,762
Equity in net loss of KSCP	940	(401)	589	(1,598)
Investment in KSCP at September 30, 2012	21,754		21,754
KSCP [Member]
Changes in investment in KSCP
Investment in KSCP at January 1, 2012			20,888
Equity in net loss of KSCP			(3,137)
Investments in KSCP			130
Investment in KSCP at September 30, 2012	18,522		18,522
KSCP [Member] | Equity Method Investments [Member]
Changes in investment in KSCP
Currency translation adjustment			$ 641

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 26,789	$ 52,203
Short-term investments	39,068	73,761
Accounts receivable, net of chargebacks and other deductions	30,761	29,028
Inventories, net	39,356	41,487
Due from related party	1,009	2,379
Prepaid expenses and other current assets	3,758	1,988
Total current assets	140,741	200,846
Property, plant, and equipment, net	773	884
Investment in joint ventures	21,754	22,762
Intangible assets, net	4,676	5,426
Other assets	390	590
Total assets	168,334	230,508
Current liabilities:
Accounts payable	20,636	35,403
Due to related party	5,811	4,303
Accrued profit sharing	3,894	3,753
Accrued liabilities	7,374	7,634
Current portion of long-term debt		8,182
Notes payable		24,867
Total current liabilities	37,715	84,142
Long term liabilities:
Long-term debt		4,091
Other long-term liabilities	6	606
Total liabilities	37,721	88,839
Stockholders' equity:
Common stock-$0.01 par value, 100,000,000 authorized and 28,006,411 and 27,901,174 outstanding at September 30, 2012 and December 31, 2011, respectively	280	279
Additional paid-in capital	270,999	266,062
Accumulated other comprehensive income	2,923	2,162
Accumulated deficit	(143,589)	(126,834)
Total stockholders' equity	130,613	141,669
Total liabilities and stockholders' equity	$ 168,334	$ 230,508

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2011
Summary of fair value of preferred stock warrants measured using significant unobservable inputs
Balance at beginning of period	$ 1,432
Change in fair value of warrants	838
Exercise of warrants	(2,270)
Balance at end of period

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net loss	$ (16,755)	$ (17,297)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,198	1,865
Stock-based compensation	4,297	1,617
Equity in net (income) loss of joint ventures	(589)	1,598
Change in fair value of preferred stock warrants		838
Dividends from unconsolidated joint venture	2,755
Changes in operating assets and liabilities:
Accounts receivable, net	(1,733)	(12,686)
Inventories, net	2,131	(7,222)
Prepaid expenses and other current assets	(1,793)	2,467
Due from related party	1,370	528
Accounts payable and other accrued liabilities	(13,322)	(2,858)
Net cash used in operating activities	(18,441)	(31,150)
Cash flows from investing activities
Capital expenditures	(54)	(214)
Return of principal balance (funding) of restricted cash	23	(465)
Investments in unconsolidated joint ventures	(517)	(127)
Return of capital from unconsolidated joint venture		924
Purchases of investments	(144,897)	(93,193)
Sale of investments	178,937	15,627
Purchase of product rights	(3,026)	(3,008)
Net cash provided by (used in) investing activities	30,466	(80,456)
Cash flows from financing activities
Reduction in short-term notes payable	(24,867)	(1,057)
Proceeds from issuance of long-term debt		15,000
Repayment of long-term debt	(12,273)	(682)
Proceeds from issuance of common stock, net of issuance costs	585	101,582
Payment of deferred financing costs	(884)	(80)
Net cash (used in) provided by financing activities	(37,439)	114,763
Net (decrease) increase in cash and cash equivalents	(25,414)	3,157
Cash and cash equivalents, at beginning of period	52,203	34,376
Cash and cash equivalents, at end of period	$ 26,789	$ 37,533

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Inventory valuation
Finished goods	$ 41,885	$ 47,666
Raw materials	346	264
Inventory reserve	(2,875)	(6,443)
Inventory, Net, Total	39,356	41,487
Approved [Member]
Inventory valuation
Finished goods	41,376	47,666
Raw materials	346
Inventory reserve	(2,875)	(6,443)
Inventory, Net, Total	38,847	41,223
Pending Regulatory Approval [Member]
Inventory valuation
Finished goods	509
Raw materials		264
Inventory reserve
Inventory, Net, Total	$ 509	$ 264

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Investments (Tables)

9 Months Ended

Sep. 30, 2012

Investments [Abstract]

Investments

Our investments at September 30, 2012 were comprised of the following:

	Cost basis		Unrealized gains		Unrealized losses			Recorded basis		Cash and cash equivalents		Short term investments
Assets
Cash	$	11,377	$	—	$	—		$	11,377	$	11,377	$	—
Money market funds		15,412		—		—			15,412		15,412		—
Corporate bonds and notes		25,838		32		—			25,870		—		25,870
Commercial paper		13,199		—		(1	)		13,198		—		13,198
	$	65,826	$	32	$	(1	)	$	65,857	$	26,789	$	39,068

Investments with unrealized losses and fair values

Investments with continuous unrealized losses for less than twelve months and their related fair values at September 30, 2012 were as follows:

	Fair value		Unrealized losses
Corporate bonds and notes	$	4,008	$	(1	)
Commercial paper		13,198		(1	)
	$	17,206	$	(2	)

Cost and estimated current fair value of fixed-income securities

The original cost and estimated current fair value of our fixed-income securities at September 30, 2012 are set forth below.

	Cost basis		Estimated fair value
Due in one year or less	$	39,037	$	39,068
	$	39,037	$	39,068

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Intangible Assets, Net (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of intangible assets
Gross carrying amount	$ 6,103	$ 6,496
Accumulated amortization	(1,427)	(1,070)
Intangible assets, net	4,676	5,426
Product Licensing Rights [Member]
Schedule of intangible assets
Gross carrying amount	3,156	2,528
Accumulated amortization	(1,427)	(1,070)
Intangible assets, net	1,729	1,458
Product Development Rights [Member]
Schedule of intangible assets
Gross carrying amount	2,947	3,968
Accumulated amortization
Intangible assets, net	$ 2,947	$ 3,968

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Intangible assets, net (Tables)

9 Months Ended

Sep. 30, 2012

Intangible assets, net [Abstract]

Schedule of intangible assets

Intangible assets at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Intangible assets, net		Gross carrying amount		Accumulated amortization			Intangible assets, net
Product licensing rights	$	3,156	$	(1,427	)	$	1,729	$	2,528	$	(1,070	)	$	1,458
Product development rights		2,947		—			2,947		3,968		—			3,968
	$	6,103	$	(1,427	)	$	4,676	$	6,496	$	(1,070	)	$	5,426

Movements in intangible assets

Movements in intangible assets were due to the following:

	Product licensing rights			Product development rights
December 31, 2011	$	1,458		$	3,968
Acquisition of product rights		628			2,398
Amortization of product rights		(357	)		(3,419	)
September 30, 2012	$	1,729		$	2,947

Schedule of estimate amortization expense over each of the next five years

We currently estimate amortization expense over each of the next five years as follows:

	Amortization expense
For the year ending:
September 30, 2013	$	2,874
September 30, 2014		777
September 30, 2015		287
September 30, 2016		197
September 30, 2017		98

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Basis of presentation

9 Months Ended

Sep. 30, 2012

Basis of presentation [Abstract]

Basis of presentation

Note 1. Basis of presentation:

Our interim condensed consolidated financial statements are unaudited. We prepared the condensed consolidated financial statements following rules for interim reporting as prescribed by the U.S. Securities and Exchange Commission (“SEC”). As permitted under those rules, we have condensed or omitted a number of footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). It is management’s opinion that these financial statements include all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of our financial position, operating results and cash flows. Operating results for any interim period are not necessarily indicative of future or annual results.

The condensed consolidated financial statements include Sagent as well as our wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. We account for our investments in Kanghong Sagent (Chengdu) Pharmaceutical Corporation Limited (“KSCP”) and Sagent Agila LLC (formerly Sagent Strides LLC) using the equity method of accounting, as our interest in each entity provides for joint financial and operational control. Operating results of our KSCP equity method investment are reported on a one-month lag.

You should read these statements in conjunction with our consolidated financial statements and related notes for the year ended December 31, 2011, included in our Annual Report on Form 10-K filed with the SEC on March 29, 2012.

New Accounting Pronouncements:

In May 2011, new guidance was issued on the accounting for fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as a description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. We adopted this guidance on January 1, 2012. Adoption of this guidance did not have a significant impact on our financial results.

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized shares	100,000,000	100,000,000
Common stock, outstanding shares	28,006,411	27,901,174

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Stock-based compensation

9 Months Ended

Sep. 30, 2012

Stock-based compensation [Abstract]

Stock-based compensation

Note 11. Stock-based compensation:

We granted 124,900 and 322,770 stock options during the three and nine months ended September 30, 2012, and granted 13,608 restricted stock units and 34,050 restricted stock awards during the nine months ended September 30, 2012. We granted 63,250 and 137,420 stock options during the three and nine months ended September 30, 2011, respectively. There were 47,341 and 92,228 stock options exercised during the three and nine months ended September 30, 2012, with an aggregate intrinsic value of $391 and $969, respectively.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Sagent Pharmaceuticals, Inc.
Entity Central Index Key	0001369786
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		28,072,934

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Net revenue by product

9 Months Ended

Sep. 30, 2012

Net revenue by product [Abstract]

Net revenue by product

Note 12. Net revenue by product:

Net revenue by product line is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Therapeutic class:
Anti-infective	$	18,173	$	20,122	$	57,314	$	42,562
Critical care		20,897		9,434		53,885		38,230
Oncology		10,359		11,725		19,190		23,087
	$	49,429	$	41,281	$	130,389	$	103,879

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Operations [Abstract]
Net revenue	$ 49,429	$ 41,281	$ 130,389	$ 103,879
Cost of sales	42,208	34,344	110,900	89,604
Gross profit	7,221	6,937	19,489	14,275
Operating expenses:
Product development	4,011	3,460	12,700	8,191
Selling, general and administrative	7,169	6,688	22,089	18,139
Management reorganization	739		739
Equity in net (income) loss of joint ventures	(940)	401	(589)	1,598
Total operating expenses	10,979	10,549	34,939	27,928
Loss from operations	(3,758)	(3,612)	(15,450)	(13,653)
Interest income and other	60	104	210	179
Interest expense and other	(52)	(1,223)	(1,515)	(2,985)
Change in fair value of preferred stock warrants				(838)
Loss before income taxes	(3,750)	(4,731)	(16,755)	(17,297)
Provision for income taxes
Net loss	$ (3,750)	$ (4,731)	$ (16,755)	$ (17,297)
Net loss per common share:
Basic	$ (0.13)	$ (0.17)	$ (0.60)	$ (0.99)
Diluted	$ (0.13)	$ (0.17)	$ (0.60)	$ (0.99)
Weighted-average of shares used to compute net loss per common share:
Basic	27,977	27,875	27,943	17,480
Diluted	27,977	27,875	27,943	17,480

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Accrued liabilities

9 Months Ended

Sep. 30, 2012

Accrued liabilities [Abstract]

Accrued liabilities

Note 6. Accrued liabilities:

Accrued liabilities at September 30, 2012 and December 31, 2011 were as follows:

	September 30,		December 31,
	2012		2011
Payroll and employee benefits	$	3,213	$	2,222
Sales and marketing		3,691		4,604
Other accrued liabilities		470		808
	$	7,374	$	7,634

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Investment in KSCP

9 Months Ended

Sep. 30, 2012

Investment in KSCP [Abstract]

Investment in KSCP

Note 5. Investment in KSCP:

Changes in our investment in KSCP during the nine months ended September 30, 2012 were as follows:

Investment in KSCP at January 1, 2012	$	20,888
Equity in net loss of KSCP		(3,137	)
Currency translation adjustment		641
Investments in KSCP		130
Investment in KSCP at September 30, 2012	$	18,522

Condensed statement of operations information of KSCP is presented below.

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Condensed statement of operations information
Net revenues	$	—		$	—		$	—		$	—
Gross profit		—			—			—			—
Net loss		(2,459	)		(1,782	)		(5,766	)		(4,839	)

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Inventories (Tables)

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventory valuation

Inventories at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012								December 31, 2011
	Approved			Pending regulatory approval		Inventory			Approved			Pending regulatory approval		Inventory
Finished goods	$	41,376		$	509	$	41,885		$	47,666		$	—	$	47,666
Raw materials		346			—		346			—			264		264
Inventory reserve		(2,875	)		—		(2,875	)		(6,443	)		—		(6,443	)
	$	38,847		$	509	$	39,356		$	41,223		$	264	$	41,487

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Management reorganization

9 Months Ended

Sep. 30, 2012

Management reorganization [Abstract]

Management reorganization

Note 13. Management reorganization:

In August 2012, we completed a reorganization of our executive management team in which we eliminated certain positions within the Company. Costs associated with the reorganization, primarily severance related charges, were recognized during the third quarter and are reflected under the Management Reorganization caption in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012.

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Accumulated other comprehensive income

9 Months Ended

Sep. 30, 2012

Accumulated other comprehensive income [Abstract]

Accumulated other comprehensive income

Note 9. Accumulated other comprehensive income:

Accumulated other comprehensive income at September 30, 2012 and December 31, 2011 is comprised of the following:

	September 30, 2012		December 31, 2011
Currency translation adjustment, net of tax	$	2,892	$	2,251
Unrealized gains (losses) on available for sale securities, net of tax		31		(89	)
Total accumulated other comprehensive income	$	2,923	$	2,162

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Debt

9 Months Ended

Sep. 30, 2012

Debt [Abstract]

Debt

Note 7. Debt:

In February 2012, we entered into a Loan and Security Agreement with Silicon Valley Bank (the “SVB Agreement”). The SVB Agreement provides for a $40,000 asset based revolving loan facility, with availability subject to a borrowing base consisting of eligible accounts receivable and inventory and the satisfaction of conditions precedent specified in the SVB Agreement. The SVB Agreement matures on February 13, 2016, at which time all outstanding amounts will become due and payable. Borrowings under the SVB Agreement may be used for general corporate purposes, including funding working capital. Amounts drawn bear an interest rate equal to, at our option, either a Eurodollar rate plus 2.50% per annum or an alternative base rate plus 1.50% per annum. We also pay a commitment fee on undrawn amounts equal to 0.30% per annum. The SVB Agreement contains various covenants and restrictions, including covenants requiring us to maintain a minimum adjusted quick ratio and a minimum level of free cash flow, and restrictions on our ability to incur additional indebtedness, make certain investments, create liens, pay dividends, sell assets or enter into a merger or acquisition. During the continuance of an event of default, at Silicon Valley Bank’s option, all obligations will bear interest at a rate per annum equal to 5.00% per annum above the otherwise applicable rate. At March 31, 2012, we were in default of the free cash flow covenant in the SVB Agreement. On May 10, 2012, Silicon Valley Bank agreed to waive the covenant at March 31, 2012 and modified the covenant for the remainder of 2012. In connection with the waiver and modification, we paid a fee of $100. As of September 30, 2012, no borrowings were outstanding and we were in compliance with all of our covenants under the SVB Agreement.

Concurrent with entering into the SVB Agreement, we repaid in full with cash on hand all outstanding amounts under our former term loan credit facility and senior secured revolving credit facility, plus certain associated fees, and terminated the agent’s and lender’s commitments to extend further credit under those facilities. Concurrent with the repayment and termination of these agreements, all liens and security interests against our property that secured the obligations under these agreements were released and discharged. Loans under the SVB Agreement are secured by a lien on substantially all of our and our principal operating subsidiary’s assets, other than our equity interests in our joint ventures and certain other limited exceptions.

As part of the termination of these prior agreements, we were required to pay to the lenders under those facilities $1,500 of early termination fees and a $600 exit fee associated with the term loan credit facility; however, $1,050 of such fees owing to Silicon Valley Bank under these agreements were deferred in connection with the execution of the SVB Agreement and will only be payable upon the occurrence of certain early termination events as set forth in the SVB Agreement. We have accounted for the termination of these prior agreements as the extinguishment of the term loan credit facility, and the partial extinguishment of the senior secured revolving credit facility. We recorded $1,124 in the nine months ended September 30, 2012 to account for early termination fees and the acceleration of deferred financing costs related to the partial extinguishment of these facilities within interest expense in the condensed consolidated statement of operations.

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Fair value measurements

9 Months Ended

Sep. 30, 2012

Fair value measurements [Abstract]

Fair value Measurements

Note 8. Fair value measurements:

Assets measured at fair value on a recurring basis as of September 30, 2012 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	15,412	$	15,412	$	—	$	—
Corporate bonds and notes	$	25,870	$	—	$	25,870	$	—
Commercial paper		13,198		—		13,198		—
Short-term investments	$	39,068	$	—	$	39,068	$	—
Total assets	$	54,480	$	15,412	$	39,068	$	—

The fair value of our Level 2 investments is based on a combination of quoted market prices of similar securities and matrix pricing provided by third-party pricing services utilizing securities of similar quality and maturity.

Assets measured at fair value on a recurring basis as of December 31, 2011 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	25,373	$	25,373	$	—	$	—
Commercial paper	$	28,948	$	—	$	28,948	$	—
Corporate bonds and notes		40,313		—		40,313		—
US government securities		4,500		—		4,500		—
Short-term investments	$	73,761	$	—	$	73,761	$	—
Total assets	$	99,134	$	25,373	$	73,761	$	—

There were no transfers of assets between Level 1 and Level 2 during the periods presented.

During the nine months ended September 30, 2011 changes in the fair value of our preferred stock warrants measured using significant unobservable inputs (Level 3), were comprised of the following:

	Nine months ended September 30, 2011
Balance at beginning of period	$	1,432
Change in fair value of warrants		838
Exercise of warrants		(2,270	)
Balance at end of period	$	—

In April 2011, the holder of our preferred stock warrants exercised all of the warrants concurrent with our initial public offering. Accordingly, no preferred stock warrants are outstanding at September 30, 2012 or December 31, 2011.

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Earnings per share

9 Months Ended

Sep. 30, 2012

Earnings per share [Abstract]

Earnings per Share

Note 10. Earnings per share:

Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Because of their anti-dilutive effect, 2,403,630 and 1,767,977 common share equivalents, comprised of restricted stock and unexercised stock options, have been excluded from the calculation of diluted earnings per share for the three and nine month periods ended September 30, 2012 and 2011, respectively.

The table below presents the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2012 and 2011:

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Basic and dilutive numerator:
Net loss, as reported	$	(3,750	)	$	(4,731	)	$	(16,755	)	$	(17,297	)
Denominator:
Weighted-average common shares outstanding - basic (in thousands)		27,977			27,875			27,943			17,480
Net effect of dilutive securities:
Stock options and restricted stock		—			—			—			—
Weighted-average common shares outstanding - diluted (in thousands)		27,977			27,875			27,943			17,480
Net loss per common share (basic)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)
Net loss per common share (diluted)	$	(0.13	)	$	(0.17	)	$	(0.60	)	$	(0.99	)

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Investments (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Cost and estimated current fair value of fixed-income securities
Due in one year or less, cost basis	$ 39,037
Total fixed-income securities, cost basis	39,037
Due in one year or less, Estimated fair value	39,068
Total fixed-income securities, Estimated fair value	$ 39,068

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Net Revenue by Product (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Revenue By Product (Textual) [Abstract]
Net revenue by Product Line	$ 49,429	$ 41,281	$ 130,389	$ 103,879
Anti-infective [Member]
Net Revenue By Product (Textual) [Abstract]
Net revenue by Product Line	18,173	20,122	57,314	42,562
Critical care [Member]
Net Revenue By Product (Textual) [Abstract]
Net revenue by Product Line	20,897	9,434	53,885	38,230
Oncology [Member]
Net Revenue By Product (Textual) [Abstract]
Net revenue by Product Line	$ 10,359	$ 11,725	$ 19,190	$ 23,087

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 15. Commitments and contingencies:

From time to time, we are subject to claims and litigation arising in the normal course of business. At this time, there are no proceedings of which we are aware that we expect will have a material adverse effect on our consolidated financial position or results of operations.

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Accrued liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Accrued liabilities [Abstract]

Accrued liabilities

Accrued liabilities at September 30, 2012 and December 31, 2011 were as follows:

	September 30,		December 31,
	2012		2011
Payroll and employee benefits	$	3,213	$	2,222
Sales and marketing		3,691		4,604
Other accrued liabilities		470		808
	$	7,374	$	7,634

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Earnings Per Share (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share (Textual) [Abstract]
Anti-dilutive share excluded from the calculation of diluted earnings	2,403,630	1,767,977	2,403,630	1,767,977

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Investment in KSCP (Details 1) (KSCP [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
KSCP [Member]
Condensed statement of operations information of KSCP
Net revenues
Gross profit
Net loss	$ (2,459)	$ (1,782)	$ (5,766)	$ (4,839)

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (3,750)	$ (4,731)	$ (16,755)	$ (17,297)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	362	98	641	655
Unrealized gains (losses) on available for sale securities	15	(151)	120	(238)
Total other comprehensive income (loss), net of tax	377	(53)	761	417
Comprehensive loss	$ (3,373)	$ (4,784)	$ (15,994)	$ (16,880)

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Intangible assets, net

9 Months Ended

Sep. 30, 2012

Intangible assets, net [Abstract]

Intangible assets, net

Note 4. Intangible assets, net:

Intangible assets at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012							December 31, 2011
	Gross carrying amount		Accumulated amortization			Intangible assets, net		Gross carrying amount		Accumulated amortization			Intangible assets, net
Product licensing rights	$	3,156	$	(1,427	)	$	1,729	$	2,528	$	(1,070	)	$	1,458
Product development rights		2,947		—			2,947		3,968		—			3,968
	$	6,103	$	(1,427	)	$	4,676	$	6,496	$	(1,070	)	$	5,426

Movements in intangible assets were due to the following:

	Product licensing rights			Product development rights
December 31, 2011	$	1,458		$	3,968
Acquisition of product rights		628			2,398
Amortization of product rights		(357	)		(3,419	)
September 30, 2012	$	1,729		$	2,947

The weighted-average period prior to the next extension or renewal for the 19 products comprising our product licensing rights intangible asset was 36 months at September 30, 2012.

We currently estimate amortization expense over each of the next five years as follows:

	Amortization expense
For the year ending:
September 30, 2013	$	2,874
September 30, 2014		777
September 30, 2015		287
September 30, 2016		197
September 30, 2017		98

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Fair value measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair value measurements [Abstract]

Summary of assets measured at fair value on a recurring basis

Assets measured at fair value on a recurring basis as of September 30, 2012 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	15,412	$	15,412	$	—	$	—
Corporate bonds and notes	$	25,870	$	—	$	25,870	$	—
Commercial paper		13,198		—		13,198		—
Short-term investments	$	39,068	$	—	$	39,068	$	—
Total assets	$	54,480	$	15,412	$	39,068	$	—

Assets measured at fair value on a recurring basis as of December 31, 2011 consisted of the following:

	Total fair value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Money market funds	$	25,373	$	25,373	$	—	$	—
Commercial paper	$	28,948	$	—	$	28,948	$	—
Corporate bonds and notes		40,313		—		40,313		—
US government securities		4,500		—		4,500		—
Short-term investments	$	73,761	$	—	$	73,761	$	—
Total assets	$	99,134	$	25,373	$	73,761	$	—

Summary of fair value of preferred stock warrants measured using significant unobservable inputs

During the nine months ended September 30, 2011 changes in the fair value of our preferred stock warrants measured using significant unobservable inputs (Level 3), were comprised of the following:

	Nine months ended September 30, 2011
Balance at beginning of period	$	1,432
Change in fair value of warrants		838
Exercise of warrants		(2,270	)
Balance at end of period	$	—

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Intangible Assets, Net (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Schedule of estimate amortization expense over each of the next five years
For the year ending, September 30, 2013	$ 2,874
For the year ending, September 30, 2014	777
For the year ending, September 30, 2015	287
For the year ending, September 30, 2016	197
For the year ending, September 30, 2017	$ 98

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Related party transactions

9 Months Ended

Sep. 30, 2012

Related party transactions [Abstract]

Related party transactions

Note 14. Related party transactions:

As of September 30, 2012 and December 31, 2011, respectively, we had a receivable of $485 and $298 from Sagent Agila LLC, which is expected to offset future profit-sharing payments. As of September 30, 2012 and December 31, 2011, respectively, we also had a deposit of $517 and $2,081 with our Sagent Agila LLC joint venture partner, Strides Arcolab International Limited (“Strides”), for future inventory purchases. These amounts are included within due from related party on the condensed consolidated balance sheets. As of September 30, 2012 and December 31, 2011, respectively, we had a payable of $3,838 and $4,303 to Sagent Agila LLC, principally for the acquisition of inventory and amounts due under profit-sharing arrangements. During the three and nine months ended September 30, 2012, Sagent Agila LLC distributed $4,385 and $5,510, respectively, of profit sharing receipts to its joint venture partners. As the Sagent Agila joint venture had sufficient cumulative earnings at September 30, 2012, our share of the distribution for the nine months ended September 30, 2012 has been treated as a dividend received in the condensed consolidated statements of cash flows.