10-Q

United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from                      to                     .

Commission File Number: 001-32949

JAVELIN PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	88-0471759
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

125 CambridgePark Drive, Cambridge, MA 02140
(Address of principal executive offices) (Zip Code)

Issuer’s telephone number: (617) 349-4500

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 past 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 þ No o

     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 o Accelerated filer þ  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

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

     At November 1, 2008, 60,620,473 shares of the Registrant’s Common Stock, par value $0.001, were outstanding.

JAVELIN PHARMACEUTICALS, INC. AND SUBSIDIARIES

INDEX

	Page
PART I — FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007		3
Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2008 and 2007 and the cumulative period from February 23, 1998 (inception) to September 30, 2008		4
Condensed Consolidated Statement of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2008		5
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2008 and 2007 and the cumulative period from February 23, 1998 (inception) to September 30, 2008		6
Notes to Condensed Consolidated Financial Statements (unaudited)		8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		22
ITEM 4. CONTROLS AND PROCEDURES		22
PART II — OTHER INFORMATION
ITEM 6. EXHIBITS		22
SIGNATURES		23
CERTIFICATIONS
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION
EX-10.1: DEVELOPMENT AND TOLL MANUFACTURING AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

2

PART I — FINANCIAL INFORMATION

Item 1: Financial Statements

Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets

	(Unaudited)
	September 30,			December 31,
	2008			2007
Assets
Current assets:
Cash and cash equivalents	$	34,664,716		$	15,931,243
Short term marketable securities available for sale		—			21,319,150
Accounts receivable, product sales		368,052			—
Inventory		2,039,462			116,143
Prepaid expenses and other current assets		522,745			1,289,809
Total current assets		37,594,975			38,656,345
Long term marketable securities available for sale		1,800,000			—
Fixed assets, at cost, net of accumulated depreciation		1,273,816			545,195
Intangible assets, net of accumulated amortization		3,627,301			3,795,577
Other assets		156,820			154,498
Total assets		44,452,912			43,151,615
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses		10,165,706			8,156,788
Deferred lease liability		540,677			484,141
Total current liabilities		10,706,383			8,640,929
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized as of September 30, 2008 and December 31, 2007, none of which are outstanding		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized as of September 30, 2008 and December 31, 2007; 60,620,473 and 48,990,845 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		60,620			48,990
Additional paid-in capital		173,842,803			144,922,785
Other comprehensive income		16,022			8,594
Deficit accumulated during the development stage		(140,172,916	)		(110,469,683	)
Total stockholders’ equity		33,746,529			34,510,686
Total liabilities and stockholders’ equity	$	44,452,912		$	43,151,615

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(Unaudited)

													Cumulative from
													February 23, 1998
	For the three months ended						For the nine months ended						(inception) to
	September 30,						September,						September 30,
	2008			2007			2008			2007			2008
Revenues:
Product revenue	$	366,050		$	—		$	611,352		$	—		$	611,352
Government grants and contracts		—			—			—			—			5,804,824
Total revenues		366,050			—			611,352			—			6,416,176
Costs and expenses:
Costs of product revenue		272,358			—			451,763			—			451,763
Research and development		6,887,952			5,383,688			17,043,301			13,354,130			93,279,868
Selling, general and administrative		4,163,646			3,486,724			13,400,159			9,283,866			56,941,524	(1)
Depreciation and amortization		85,958			25,537			206,561			69,119			482,824
Total costs and expenses		11,409,914			8,895,949			31,101,784			22,707,115			151,155,979
Operating loss		(11,043,864	)		(8,895,949	)		(30,490,432	)		(22,707,115	)		(144,739,803	)
Other income (expense):
Interest income		229,958			675,050			807,760			1,349,958			4,927,120
Interest expense		—			—			—			(699	)		(944,657	)
Other income (expense)		(33,275	)		—			2,814			—			607,799
Total other income		196,683			675,050			810,574			1,349,259			4,590,262
Net loss before income tax provision		(10,847,181	)		(8,220,899	)		(29,679,858	)		(21,357,856	)		(140,149,541	)
Income tax provision		23,375			—			23,375			—			23,375
Net loss		(10,870,556	)		(8,220,899	)		(29,703,233	)		(21,357,856	)		(140,172,916	)
Deemed dividend related to beneficial conversion feature of Series B redeemable convertible preferred stock		—			—			—			—			(3,559,305	)
Net loss attributable to common stockholders	$	(10,870,556	)	$	(8,220,899	)	$	(29,703,233	)	$	(21,357,856	)	$	(143,732,221	)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.18	)	$	(0.17	)	$	(0.54	)	$	(0.48	)
Weighted average shares		60,393,432			48,423,815			54,767,751			44,384,795

(1) Includes related party transactions of $1,075,182 cumulative from February 23, 1998 (inception) through December 31, 2002.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

4

Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Statement of Stockholders’ Equity
For the Nine Months Ended September 30, 2008
(Unaudited)

										Deficit
							Accumulated			Accumulated
					Additional		Other			during the			Total
	Common Stock				Paid-in		Comprehensive			Development			Stockholders’
	Shares		Amount		Capital		Income (Loss)			Stage			Equity
Balance at December 31, 2007		48,990,845	$	48,990	$	144,922,785	$	8,594		$	(110,469,683	)	$	34,510,686
Net loss for the period ending September 30, 2008											(29,703,233	)		(29,703,233	)
Cumulative translation adjustment								16,022						16,022
Change in unrealized gain on investments								(8,594	)					(8,594	)
Total comprehensive income (loss)														(29,695,805	)
Share based compensation expense						2,662,442								2,662,442
Exercise of stock options		206,522		207		507,154								507,361
Sale of common stock under a registered direct offering, net of costs of $1,767,857		11,423,106		11,423		25,750,422								25,761,845
Balance at September 30, 2008		60,620,473	$	60,620	$	173,842,803	$	16,022		$	(140,172,916	)	$	33,746,529

The accompanying notes are an integral part of the unaudited condensed financial statements.

5

Javelin Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2008
(Unaudited)

							Cumulative from
	For the Nine Months Ended						February 23, 1998
	September 30,						(Inception) to
	2008			2007			September 30, 2008
Cash flows from operating activities:
Net Loss	$	(29,703,233	)	$	(21,357,856	)	$	(140,172,916	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		206,561			69,119			482,824
Amortization of intangible asset		168,276			—			172,699
Stock based compensation expense		2,662,442			2,702,332			8,945,431
Realized gain on sale of marketable securities		(34,773	)		—			(34,773	)
Amortization of premium/discount on marketable securities		(6,324	)		(2,364	)		(44,862	)
Amortization of deferred financing costs		—			—			252,317
Amortization of original issue discount		—			—			101,564
Amortization of unearned compensation		—			—			345,672
Non-cash expense of issuance of Common Stock in connection with acquisition of a license		—			—			18,600,000
Non-cash expense recognized with issuance of Common Stock for license milestone		—			—			100,000
Non-cash expense recognized with issuance of Common Stock for liquidation damages		—			—			373,299
Amortization of discount on debenture		—			—			314,795
Warrants issued in consideration for services rendered		—			—			3,003,076
Non-cash expense contributed by affiliate		—			—			1,075,182
Changes in assets and liabilities:
(Increase) decrease in grant receivable		—			113,645			—
(Increase) decrease in inventory		(1,923,319	)		—			(2,039,462	)
(Increase) decrease in prepaid expenses, other current assets and other assets		396,159			(321,726	)		(1,028,354	)
(Decrease) increase in accounts payable, accrued expenses and other liabilities		2,024,940			2,204,260			8,183,395
Increase (decrease) in deferred lease liability		56,536			114,079			540,677
Increase in due to Licensor		—			—			500,000
Net cash used in operating activities		(26,152,735	)		(16,478,511	)		(100,329,436	)
Cash flows from investing activities:
Purchases of short-term investments		(2,100,000	)		(43,824,915	)		(82,752,017	)
Sales and redemptions of short-term investments		21,651,653			35,260,000			81,031,653
Capital expenditures		(934,651	)		(133,509	)		(1,756,110	)
Acquisition of intangible assets		—			—			(1,800,000	)
Net cash provided by (used in) investing activities		18,617,002			(8,698,424	)		(5,276,474	)
Cash flows from financing activities:
Proceeds from exercise of warrants		—			486,647			752,213
Proceeds from exercise of options		507,361			1,047,311			1,908,119
Proceeds from sale of Common Stock		27,529,702			45,295,800			122,921,776
Proceeds from sale of Preferred Stock		—			—			25,451,201
Costs associated with sale of Common Stock		(1,767,857	)		(3,498,087	)		(9,344,579	)
Costs associated with sale of Preferred Stock		—			—			(1,764,385	)
Proceeds from notes payable		—			—			2,015,000
Proceeds from issuance of debenture		—			—			1,000,000

6

					Cumulative from
	For the Nine Months Ended				February 23, 1998
	September 30,				(Inception) to
	2008		2007		September 30, 2008
Repayment of debenture		—		—		(1,000,000	)
Costs associated with notes payable		—		—		(153,719	)
Repayment of notes payable		—		—		(1,515,000	)
Net cash provided by financing activities		26,269,206		43,331,671		140,270,626
Net increase (decrease) in cash and cash equivalents		18,733,473		18,154,736		34,664,716
Cash and cash equivalents at beginning of period		15,931,243		9,273,479		—
Cash and cash equivalents at end of period	$	34,664,716	$	27,428,215	$	34,664,716
Supplemental disclosures:
Cash paid for interest	$	—	$	—	$	271,633
Supplemental disclosure of non-cash investing and financing activities:
Non-cash issuance of Common Stock	$	—	$	—	$	500,000
Non-cash addition of intangible assets	$	—	$	—	$	2,000,000
Options and warrants issued for services and financings	$	—	$	—	$	1,222,574
Conversion of merger note and accrued interest to Series C stock	$	—	$	—	$	519,795
Recapitalization in connection with merger with Intrac	$	—	$	—	$	1,153

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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JAVELIN PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Javelin Pharmaceuticals, Inc., along with its wholly owned subsidiaries Javelin Pharmaceuticals UK Limited, Javelin Pharmaceuticals GmbH, and Innovative Drug Delivery Systems, Inc. (collectively, “we,” “us,” the “Company” or “Javelin”), is a development stage enterprise engaged in the research, development and commercialization of innovative treatments for the relief of moderate to severe pain. We conduct operations in a single segment. Substantially all of our operations are within the United States of America, but we have established branch offices in the United Kingdom and Germany. On October 31, 2007, we received marketing authorization approval in the U.K. for Dyloject^®, our proprietary injectable formulation of diclofenac sodium (75 mg/2 ml). Commercial launch of the product occurred in December 2007 upon first inclusion in local hospital formularies. Product revenues related to Dyloject began in the first quarter of 2008.

In addition to the normal risks associated with a new business venture, there can be no assurance that our research and development will be successfully completed or that any approved product will be commercially viable. In addition, we operate in an environment of rapid change in technology, are governed by rules, regulations, and requirements of the regulatory agencies, are dependent upon raising capital to fund operations, and are dependent upon the services of our employees, collaborators and consultants.

2. Summary of Significant Accounting Policies

Basis of Preparation

The condensed consolidated financial statements include the accounts of Javelin Pharmaceuticals, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary for a fair statement of our financial position, results of operations and cash flows.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes included in our Annual Report on Form 10-K for the year ended December 31, 2007. Our accounting policies are described in the Notes to the Consolidated Financial Statements in our 2007 Annual Report on Form 10-K and updated, as necessary, in this Form 10-Q.

The consolidated balance sheet as of December 31, 2007 was derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.

The financial statements have been prepared on a going-concern basis, which assumes realization of all assets and settlement or payment of all liabilities in the ordinary course of business. We have limited capital resources, net operating losses and negative cash flows from operations since inception and expect these conditions to continue for the foreseeable future. We began generating revenues from product sales in the United Kingdom in the first quarter of 2008. The extent of the anticipated product sales is dependent upon many factors, including market acceptance of our product. Although we believe that our existing cash resources will be sufficient to support the current operating plan at least through June 2009, we will need additional financing to support our operating plan thereafter or we will need to modify our operating plan accordingly. Our operating plan will also be affected by the acceptance of our product into the marketplace, the pricing of our product under the formulary process, and the timing and extent of our expenses associated with our operations. In addition, we have the limited ability to reduce discretionary spending to preserve cash. We may seek to raise additional funds through the private and/or public sale of our equity securities. We may also seek to raise capital through collaborative arrangements with corporate sources or other sources of financing. There can be no assurance that such additional financing, if at all available, can be obtained on terms reasonable to us. In the event that sufficient funds are not available, we will need to postpone or discontinue planned operations and projects. Our continuance as a going concern is dependent upon, among other things, our ability to obtain adequate long-term financing, the success of our research and development programs and our

8

attainment of profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates relate to the valuation of equity instruments issued for services rendered, fair value measurements, recoverability of fixed assets and deferred taxes. Actual results could differ from those estimates.

Research and Development Costs

We expense all research and development costs as incurred for which there is no alternative future use. Such expenses include licensing and upfront fees paid in connection with collaborative agreements, as well as expenses incurred in performing research and development activities including salaries and benefits, clinical trial and related clinical manufacturing expenses, share-based compensation expenses, contract services and other outside expenses.

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101 (SAB 101), as amended by SAB 104. We recognize revenue from product sales when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured and we have no further performance obligations.

Our product revenue consists of sales of Dyloject in the U.K., which began in the first quarter of 2008. We sell product directly to hospitals upon approval from their formulary process at a price which has been approved by the U.K. National Health Services. Due to the nature of our pricing as approved by the U.K. National Health Services and the national healthcare process, as of September 30, 2008, our sales do not have any provisions for chargebacks, rebates, discounts or other adjustments to gross revenue recorded.

Our return policy allows for returns based on subjective criteria of the buyer for a limited period of time after the product is delivered. Because we started recording sales in the first quarter of 2008, we do not have a significant amount of history to draw upon in determining the level of returns that we might experience based on our return policy. As such, we believe it is appropriate not to record revenue on those shipments occurring in the reporting period that could be returned in the following reporting period, and will recognize revenues on those shipments when the right of return restrictions lapse in the subsequent period.

Recent Accounting Pronouncements

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We adopted SFAS 159 effective January 1, 2008 and decided not to elect the fair value option for our existing financial assets and liabilities. Therefore, adoption of SFAS 159 did not have any impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We do not currently expect this pronouncement to have a significant impact on our financial statements.

9

3. Inventory

Inventory is valued at the lower of cost or market, with cost determined under the first-in, first-out, or FIFO, method. It is comprised entirely of Dyloject. The components of inventory are as follows:

	September 30,		December 31,
	2008		2007
Work in process	$	994,175	$	—
Finished goods		1,045,287		116,143
Total	$	2,039,462	$	116,143

The large increase in inventory is primarily due to our effort to ramp up inventory required for future sales of Dyloject.

4. Intangible Assets

As of September 30, 2008 and December 31, 2007, our intangible assets related to our Shimoda milestones were as follows:

	September 30,			December 31,
	2008			2007
Cost	$	3,800,000		$	3,800,000
Accumulated amortization		(172,699	)		(4,423	)
Intangibles, net	$	3,627,301		$	3,795,577

For the three and nine months ended September 30, 2008, our amortization expense of the intangible assets amounted to $56,092 and $168,276, respectively.

5. Fair Value Measurements

Effective January 1, 2008, we adopted Statement of Financial Accounting Standard No. 157, “Fair Value Measurement”, or SFAS 157, for our financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In accordance with the provisions of FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157", we have elected to defer implementation of SFAS 157 as it relates to our non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis until January 1, 2009. We are evaluating the impact, if any, this Standard will have on our non-financial assets and liabilities.

SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

     Level 1 — Quoted prices that are available in active markets for identical assets or liabilities. The types of financial instruments included in Level 1 are marketable equity available for sale securities that are traded in an active exchange market.

     Level 2 — Pricing inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Instruments included in this category are warrants and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

     Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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As indicated in the table below, our marketable securities are the only asset or liabilities that are measured at fair value on a recurring basis as of September 30, 2008.

	As of
	September 30,
	2008		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	1,800,000		—		—	$	1,800,000
	$	1,800,000		—		—	$	1,800,000

The following table sets forth a summary of the changes in the fair value of our Level 3 financial assets that are measured at fair value on a recurring basis:

	Three and Nine Months Ended
	September 30, 2008
	Auction Rate Securities
Beginning balance	$	—
Transfer into Level 3		1,800,000
Ending balance	$	1,800,000

Our Level 3 financial assets consist of student loan auction rate securities issued by a state agency and an auction rate security of a closed end mutual fund. The closed end mutual fund primarily invests in common stocks, including dividend paying common stocks such as those issued by utilities, real estate investment trusts and regulated investment companies under the Internal Revenue Code. The Fund also invests in fixed income securities such as U.S. government securities, preferred stocks and bonds.

Due to recent adverse developments in the global credit and capital markets, certain auctions have failed as a result of liquidity issues and there is little to no current market activity for these instruments. As a result Level 1 and Level 2 pricing inputs are unavailable to support the fair value of these securities. Therefore, we have reclassified these securities from Level 2 to Level 3 in the third quarter of 2008. As of September 30, 2008, the fair value of these securities were valued based on significant management judgments, including the credit ratings of the securities which are Aaa or better, the quality of the underlying investments, the pricing of the instrument, if available, or the underlying investments, and the rate of interest currently accruing on these instruments compared to other instruments of a similar nature, maturity and quality. Based on these factors fair value is stated at par value as of September 30, 2008.

6. Income Taxes

We account for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). SFAS No. 109 requires that we recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. SFAS No. 109 also requires that the deferred tax assets be reduced by a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires an entity to recognize the impact of a tax position in its financial statements if that position is more likely than not to be sustained on audit based on the technical merits of the position. The provisions of FIN 48 were effective as of the beginning of fiscal year 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. We have evaluated our tax positions related to our deferred tax assets and their valuation allowances as of September 30, 2008. As a result of our evaluation, we believe that our income tax filing positions and deductions would be sustained on audit and do not anticipate any adjustments that would result in a material change to our financial position. Therefore, no reserves

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for uncertain income tax positions have been recorded pursuant to FIN 48. For the three and nine months ended September 30, 2008, we have recorded $23,375 for income taxes related to our foreign operations. As of the date of these condensed consolidated financial statements, all tax years for which we have a net operating loss are open to the possibility of examination by federal, state, or local taxing authorities. Our policy is to recognize interest related to income tax matters to interest expense and penalties related to income tax matters to other expense. We had no amounts accrued for interest or penalties as of September 30, 2008.

7. Stockholders’ Equity

Registered direct offering of common stock

In May 2008, we sold 11,423,106 shares of our Common Stock to certain institutional and individual investors in a registered direct offering. The aggregate gross proceeds from the offering were approximately $27.5 million, and the aggregate net proceeds, after deducting the fees of the placement agents and other offering expenses, were approximately $25.8 million. We anticipate using the net proceeds from the sale of the Common Stock offered to fund clinical research and development programs, the commercialization and manufacturing of our product and our product candidates, and for other general corporate purposes. The Common Stock sold in the offering has been registered on a universal shelf registration statement on Form S-3 (No. 333-149090) that was filed with the Securities and Exchange Commission (the “SEC”) on February 6, 2008 and declared effective by the SEC on February 12, 2008, and under which approximately $32.5 million remains available for future issuance.

Comprehensive Loss

Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”, established standards for reporting and display of comprehensive loss and its components in the financial statements. For the nine months ended September 30, 2008, our comprehensive loss was $29.7 million, which consisted primarily of our net loss, as well as an $8,594 change in unrealized gain on marketable securities and $16,022 cumulative translation adjustment impact in consolidation of our foreign subsidiaries. For the nine months ended September 30, 2007, our comprehensive loss was $21.3 million, which consisted of our net loss and $12,075 change in unrealized gain on marketable securities.

8. Share Based Compensation

Stock Incentive Plan

We recorded share-based compensation for the three and nine months ended September 30, 2008 and 2007 as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
\
Research and development	$	323,017	$	308,808	$	871,569	$	883,084
Selling, general and administrative		607,738		604,575		1,790,873		1,819,248
Total impact on results of operations		930,755		913,383		2,662,442		2,702,332
Per share impact on results of operations	$	0.02	$	0.02	$	0.05	$	0.06

Included in share based compensation are expenses of $20,441 and $27,254 related to our employee stock purchase plan for the three and nine months ending September 30, 2008, respectively. The fair values of the stock option grants were estimated on the dates of grant using the Black-Scholes option valuation model that uses the following weighted-average assumptions:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008		2007			2008			2007
\
Expected volatility		—		80	%		76	%		80	%
Expected life		—		5.0 years			5.0 years			5.0 years
Dividend yield		—		0	%		0	%		0	%
Risk free interest rate		—		4.4	%		2.8	%		4.6	%
Weighted average per share grant date fair value	$	—	$	3.60		$	1.99		$	3.59

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Transactions involving options granted under the 2005 Plan during the nine months ended September 30, 2008 are summarized as follows:

	Options Outstanding					Options Exercisable
	Number			Weighted Average		Number		Weighted Average
	of Shares			Exercise Price		Exercisable		Exercise Price
Balance outstanding, January 1, 2008		5,845,797		$	3.38		3,447,820	$	2.65
Granted during the period		1,983,782		$	3.13		—		—
Exercised during the period		(206,522	)	$	2.46		—		—
Forfeited during the period		(276,968	)	$	3.88		—		—
Expired during the period		(237,580	)	$	3.37		—		—
Balance outstanding, September 30, 2008		7,108,509		$	3.32		3,969,316	$	3.01

In the nine months ended September 30, 2008, we granted stock options having exercise prices ranging from $2.49 to $4.11 per share, with a weighted average exercise price of $3.13, which primarily vest over three years. This includes an annual award to employees of approximately 762,000 in January 2008 at a grant price of $3.53, an award of 850,000 stock options to our new Chief Executive Officer in March 2008 at a grant price of $2.86, and 100,000 performance based awards granted in May 2008 to a member of senior management. The deemed per share weighted average fair value of our Common Stock at the time of the stock option grant for the nine months ended September 30, 2008 was $1.99, based upon the quoted market closing prices on the date of the grants using the Black-Scholes method. We had no option awards granted for the three months ended September 30, 2008.

The weighted average remaining contractual lives of the options outstanding and exercisable were approximately 7.4 years and 6.2 years, respectively. We have not capitalized any compensation cost or recorded significant stock based compensation charges related to the modification of any stock option grants for the three months and nine months ended September 30, 2008 and 2007. We received proceeds of $507,361 for stock options exercised during the nine months ended September 30, 2008. During the three and nine months ended September 30, 2007, we received proceeds of $49,000 and $746,945, respectively, from stock options exercised.

As of September 30, 2008, the total compensation cost related to unvested option awards not yet recognized amounted to $5.2 million, which will be recognized over a weighted average of 1.7 years.

Non-Plan Options

The following table summarizes non-plan stock option information as of September 30, 2008:

Options Outstanding							Options Exercisable
			Weighted		Weighted				Weighted
			Average		Average				Average
Exercise	Number		Contractual		Exercise		Number		Exercise
Price	Outstanding		Life		Price		Vested		Price
$3.87		1,106,444		2.17	$	3.87		1,106,444	$	3.87

There were no transactions involving non-plan stock options during the nine months ended September 30, 2008.

9. Net Loss Per Share

We prepare our per share data in accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”). Basic net loss per share is computed on the basis of net loss for the period divided by the weighted average number of shares of common stock outstanding during the period. Since we have incurred net losses since inception, diluted net loss per share does not include the number of shares issuable upon exercise of outstanding options and warrants and the conversion of preferred stock since such inclusion would be anti-dilutive. In addition, for all periods presented, 227,040 shares of Common Stock were held in escrow and have been excluded from the calculation of basic and diluted per share amounts.

The calculation of basic and diluted net loss per share is as follows:

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Numerator:
Net loss, basic and diluted	$	(10,870,556	)	$	(8,220,899	)	$	(29,703,233	)	$	(21,357,856	)
Denominator:
Weighted average common shares		60,393,432			48,423,815			54,767,751			44,384,795
Net loss per share, basic and diluted	$	(0.18	)	$	(0.17	)	$	(0.54	)	$	(0.48	)

Potentially dilutive common stock which has been excluded from diluted per share amounts because their effect would have been anti-dilutive includes the following:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2008				2007				2008				2007
			Weighted				Weighted				Weighted				Weighted
	Weighted		Average		Weighted		Average		Weighted		Average		Weighted		Average
	Average		Exercise		Average		Exercise		Average		Exercise		Average		Exercise
	Number		Price		Number		Price		Number		Price		Number		Price
Options		8,282,307	$	3.39		7,556,449	$	3.47		8,211,598	$	3.41		7,706,304	$	3.39
Warrants		2,380,649	$	2.63		2,460,305	$	2.65		2,380,649	$	2.63		2,600,376	$	2.64
Total		10,662,956				10,016,754				10,592,247				10,306,680

10. Commitments and Contingencies

     Operating Leases

     We recognize rental expense for leases on the straight-line basis over the life of the lease.

     For the three and nine months ended September 30, 2008, we recognized rent expense of $194,654 and $566,734, respectively, compared to $127,033 and $303,214 related to the three and nine months ended September 30, 2007. We recorded a deferred lease liability of $540,677 and $484,141 at September 30, 2008 and December 31, 2007, respectively, for rent expense in excess of amounts paid.

     Legal Proceedings

     From time to time, we are involved in disputes or legal proceedings arising in the ordinary course of business. However, we do not believe that any such current disputes or known pending proceedings will have a material adverse effect on our financial position, results of operations or cash flows.

     Research Collaboration, Licensing and Consulting Agreements

     In connection with our research and development efforts, we have entered into various arrangements that provide us with rights to develop, produce and market products using certain know-how, technology and patent rights maintained by the parties. Terms of the various license agreements may require us to make milestone payments upon the achievement of certain product development objectives and pay royalties on future sales, if any, on commercial products resulting from the collaboration.

     In July 2008, we entered into a Development and Toll Manufacturing Agreement (the “Manufacturing Agreement”) with Baxter Healthcare Corporation (“Baxter”) for drug supply in the European Union. Under the Manufacturing Agreement, we committed to purchase approximately $3.65 million worth of Dyloject product manufactured to our specifications. The Manufacturing Agreement commenced on July 30, 2008 and runs until the third anniversary of the receipt of a first regulatory approval necessary for the manufacture, in Baxter’s facility, of Dyloject for selected European countries. Such approval has not been received to date. Thereafter, the Manufacturing Agreement is renewable in one-year increments. As is customary in such agreements, either party may terminate upon written notice upon the occurrence of certain events, including breach, insolvency or the lack of Medicines and Healthcare Products Regulatory Agency or European Medicines Agency approval for Dyloject by a specified date, subject to certain cure provisions and restrictions.

Item 2: Management’s Discussion and Analysis of Financial Conditions and Results of Operations

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This discussion and analysis should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2007 included in the 2007 Form 10-K and the condensed consolidated unaudited financial statements as of September 30, 2008. Operating results are not necessarily indicative of results that may occur in future periods.

Forward Looking Statements

We are including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by or on our behalf. Forward looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. Certain statements contained herein are forward-looking statements and accordingly involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in good faith forward-looking statements. Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including, without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished. Any forward-looking statement contained in this document speaks only as of the date on which the statement is made. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events.

In addition to other factors and matters discussed elsewhere herein, the following are important factors that in our view could cause actual results to differ materially from those discussed in the forward-looking statements: the rate of acceptance of our product by physicians or patients; the carrying-out of our research and development program for our product candidates, including demonstrating their safety and efficacy at each stage of testing; our ability to attract and/or maintain manufacturing, research, development and/or commercialization partners; the timely receipt of regulatory approvals, including product and patent approvals; the commercialization of our product candidates, at reasonable costs; the ability of our suppliers to continue to provide sufficient supply of products; the ability to compete against products intended for similar use by recognized and well capitalized pharmaceutical companies; our ability to raise capital when needed, and without adverse and highly dilutive consequences to stockholders; and our ability to retain management and attract additional employees as required. We are also subject to numerous risks relating to our product and our product candidates, manufacturing, regulatory, financial resources, competition and personnel as set forth in the section “Risk Factors” in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Except to the extent required by applicable laws or rules, we disclaim any obligations to update any forward looking statements to reflect events or circumstances after the date hereof.

Overview

We are a specialty pharmaceutical company that applies proprietary technologies to develop new products and improved formulations of existing drugs that target current unmet and underserved medical needs primarily in the pain management market. Our product and our product candidates are designed to offer enhanced pain relief, fewer adverse side effects and faster relief of pain compared to other currently available treatments. We have three late stage product candidates in clinical development in the United States: Dyloject™ (diclofenac sodium injectable), Ereska^TM (intranasal Ketamine, formerly referred to as PMI-150) and Rylomine^TM (intranasal morphine). On October 31, 2007, we received marketing authorization approval in the United Kingdom (“U.K.”) for Dyloject^®, our proprietary injectable formulation of diclofenac sodium (75 mg/2 ml). Commercial launch of the product occurred in December 2007 upon first inclusion in local hospital formularies. Product revenues related to Dyloject began in the first quarter of 2008.

We have devoted substantially all of our resources since we began our operations in February 1998 to the development and more recently the commercialization of proprietary pharmaceutical products for the treatment of pain. We have not generated significant revenues from product sales, with all of such revenues being generated by the sale of Dyloject in the U.K. during 2008. Since our inception, we have incurred an accumulated net loss attributable to our common stockholders of approximately $140.2 million through September 30, 2008, excluding approximately $3.6 million of a deemed dividend; although $18.6 million of this amount was related to a non-cash charge we incurred for the issuance of common stock in connection with the acquisition of a license. These losses have resulted principally from costs incurred in research and development activities, including acquisition of technology rights, general and administrative expenses, and most recently, sales and marketing expenses related to the commercialization of Dyloject in the UK. Research and development activities include salaries, benefits and stock based compensation for our research, development and

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manufacturing employees, costs associated with non-clinical and clinical trials, process development and improvement, regulatory and filing fees, and clinical and commercial scale manufacturing. Selling, general and administrative related costs include salaries, benefits and stock based compensation for employees, temporary and consulting expenses, and costs associated with our pre- and post- launch selling and marketing activities in the United Kingdom.

Since our inception, we have incurred approximately $93.3 million of research and development costs. The major research projects undertaken by us include the development of Dyloject, Ereska and Rylomine. Total research and development costs incurred to date for each of these products were approximately $29.1 million, $25.0 million and $19.0 million, respectively. In addition, we incurred approximately $1.6 million of research and development costs since inception that do not relate to our major research projects, and we incurred a charge of approximately $18.6 million related to the merger of IDDS (our predecessor corporation) with Pain Management, Inc. and the related acquisition of a licensing agreement in 1998.

For various reasons, many of which are outside our control, including timing and results of our clinical trials, requirements imposed by regulatory agencies, obtaining regulatory approval and our dependence on third parties, we cannot estimate the total remaining costs to be incurred to commercialize our product candidates, nor is it possible to estimate when, if ever, any of our product candidates will be approved by regulatory agencies for commercial sale. In addition, we may experience adverse results in the development of our product candidates, which could result in significant delays in obtaining approval to sell our product candidates, additional costs to be incurred to obtain regulatory approval or failure to obtain regulatory approval. If any of our product candidates were to experience setbacks, it would have a material adverse effect on our financial position and operating results. Even if we successfully complete development and obtain regulatory approval of one or more of our product candidates, difficulties in commercial scale manufacturing, failure to gain favorable pricing from various institutions, and failure of physicians and patients to accept our products as a safe, cost-effective alternative compared to existing products would have a material adverse effect on our business.

Our financial statements have been prepared on a going-concern basis, which assumes realization of assets and settlement of liabilities in the ordinary course of business. We have limited capital resources, significant net operating losses and negative cash flows from operations since inception and expect these conditions to continue for the foreseeable future. We started to generate revenues from product sales in 2008 in the United Kingdom. The extent of the product sales is dependent upon many factors, including market acceptance of our product. Although we believe that our existing cash resources will be sufficient to support our current operating plan at least through June 2009, we will need additional financing to support our operating plan thereafter or we will need to modify our operating plan accordingly. Our operating plan will also be affected by the acceptance of our product into the marketplace, the pricing of our product under the formulary process, and the timing and extent of our expenses associated with our operations. We may raise additional funds through the private and/or public sale of our equity securities. We may also seek to raise capital through collaborative arrangements with corporate sources or other sources of financing. There can be no assurance that such additional financing, if at all available, can be obtained on terms reasonable to us. If sufficient funds are not available, we will need to postpone or discontinue future planned operations and projects.

Results of Operations

Three and Nine Months Ended September 30, 2008 and 2007

Revenues

Product Revenue. For the three and nine months ended September 30, 2008, we recorded product revenue of $366,050 and $611,352, respectively, which consists entirely of sales of Dyloject, our proprietary injectable formulation of diclofenac sodium (75 mg/2 ml), in the U.K. Commercial launch of the product occurred in December 2007 upon first inclusion in local hospital formularies.

We do not expect to generate significant revenue from sales of product in 2008. Future sales of Dyloject in 2008 are dependent to a large extent on the ability of our product to penetrate the existing market in the U.K. through our efforts to gain approval of the product with advantageous pricing by hospital formularies and physicians’ acceptance of our product.

Government Grants and Contracts. Prior to 2008, all of our revenues since our inception were derived from government grants and contracts. In October 2000, we received a grant of $1.2 million from the U.S. Department of Defense (the “DOD”). In May 2003, the DOD extended funding of the development of Ereska by awarding us a $4.3 million contract. The DOD reimbursed us for certain research and development costs related to the Ereska development program.

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Costs and Expenses

Costs of Product Revenues. For the three and nine months ended September 30, 2008, our cost of product revenues was $272,358 and $451,763, respectively, resulting in gross margins of 26% for both of the periods. The high cost of product revenues was due to the low yields and high per unit costs for production, shipping, labeling, packaging and sampling costs related to our current contract manufacturer and early supply chain deployment for a new product launch. Additionally, subsequent inventory produced in 2008 resulted in costs for sampling of units for testing prior to labeling and packaging which impacted the current period’s cost of product revenues. The value of these units is immediately expensed to cost of goods sold in that period.

As our production volumes increase, there is the potential for our gross margin to increase as we work to develop manufacturing process improvements and efficiencies. Whether that potential can be realized and the extent to which such potential can be realized are uncertain.

Research and Development Expenses. Research and development expenses consist primarily of salaries, stock based compensation and related expenses for personnel, materials and supplies used to develop and manufacture our product candidates. Other research and development expenses include compensation paid to consultants and outside service providers to run the non-clinical and clinical trials. We expense research and development costs as incurred. We expect that we will continue to incur significant research and development expenses in the future as our three product candidates proceed with pivotal clinical trials and progress through the later stages of product development towards commercialization. Research and development expenses may fluctuate from period to period due to the timing and nature of non-clinical and clinical trial expenditures and regulatory filings.

Research and development expenses increased from approximately $5.4 million for the three months ended September 30, 2007 to $6.9 million for the three months ended September 30, 2008. Research and development expenses increased from approximately $13.4 million for the nine months ended September 30, 2007 to $17.0 million for the nine months ended September 30, 2008.

For the three months ended September 30, 2008, the increase in research and development expenses compared to the same period of 2007 was primarily attributable to higher clinical trial expenses of approximately $1.5 million for Dyloject and Ereska in the third quarter of 2008 over 2007. In the third quarter of 2008, we incurred expenses related to the initiation of our Phase 3 safety study for Dyloject intended to supplement our summary of integrated patient safety data base, a part of our New Drug Application (NDA) for Dyloject in the United States, planned for submission to the U.S. Food and Drug Administration (the “FDA”) in 2009. Additionally, clinical trial expenses increased for costs related to Ereska’s pivotal Phase 3 efficacy study to support the NDA for Ereska in the US, which began enrollment in June 2008. Manufacturing-related costs decreased by approximately $0.5 million for the third quarter of 2008 from the third quarter of 2007, primarily related to lower costs incurred for Ereska and Dyloject production. Additionally, consulting costs increased by approximately $0.2 million compared to the third quarter of 2007.

For the nine months ended September 30, 2008, the increase in research and development compared to the same period of 2007 relates primarily to increased clinical trial costs of $1.1 million, increased manufacturing costs of $0.9 million, higher salaries and benefits of $0.5 million, increased consulting fees of $0.5 million, and pharmacovigilance costs of $0.3 million. In 2008, the manufacturing increase related primarily to the scale up and validation of Baxter as a secondary supplier for Dyloject in the UK, as well as costs associated with increased drug supply needs for ongoing clinical trials for Dyloject and Ereska. Expenses associated with clinical trials and consulting costs were higher for the nine months ended September 30, 2008 versus 2007 primarily due to increased costs for our ongoing studies for Dyloject and Ereska in the U.S., offset by Rylomine studies we were completing in the early part of 2007. Salaries and benefits were higher due to increased full-time personnel in 2008 versus 2007.

We expect our research and development expenses to continue to increase in the near term as we expand our development efforts and our drug candidates continue or enter into the pivotal Phase 3 clinical program and file for regulatory approvals. The increase may fluctuate from period to period due to the time and nature of clinical trial expenditures and regulatory filings.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of salaries, stock based compensation and other related costs for personnel in executive, finance, accounting, information technology and human resource functions. Other costs include medical information services, monitoring, sales and marketing costs related to the launch of Dyloject in the UK, including our contracted sales force, medical education and market research. Additionally, it includes facility costs and professional fees for legal and accounting services.

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Selling, general and administrative expenses increased from approximately $3.5 million for the three months ended September 30, 2007 to $4.2 million for the three months ended September 30, 2008. Selling, general and administrative expenses increased from approximately $9.3 million for the nine months ended September 30, 2007 to $13.4 million for the nine months ended September 30, 2008. The increase in selling, general and administrative expenses for the three and nine months ended September 30, 2008 over the comparable periods of 2007 resulted primarily from increased sales and marketing costs related to the launch of Dyloject in the UK. Additional increases were due to facility costs, headcount and personnel costs as we expand and improve our administrative infrastructure, as well as general administrative and professional fees to support the launch.

For the three and nine months ended September 30, 2008, the increase compared to 2007 was primarily due to costs related to our contract sales force in the U.K., as well as increased promotional, market research, and market education costs in 2008 related to the approval and commercial launch of Dyloject in the UK. For the three and nine months ended September 30, 2008, these costs increased $0.6 million and $2.4 million, respectively, compared to the similar periods in 2007. For the nine months ended September 30, 2008, additional increases were the result of salary, stock based compensation and benefits expense, which increased by approximately $0.5 million over the same period of 2007 for our selling, general and administrative employees. The increase was due primarily to the addition of full time personnel in the sales and marketing areas, and the associated benefits. Legal, accounting and other third party service fees for the nine months ending September 30, 2008 increased by approximately $0.4 million compared to 2007, primarily related to increased legal expenses and patent costs.

We expect selling, general and administrative expenses to fluctuate in the near term depending on the results of active partnership discussions of our first commercial project, Dyloject.

Interest Income. Interest income consists of interest earned on our cash, cash equivalents and short term marketable securities available for sale. Interest income decreased from approximately $0.7 million for the three months ended September 30, 2007 to approximately $0.2 million for the three months ended September 30, 2008. Interest income decreased from approximately $1.3 million for the nine months ended September 30, 2007 to approximately $0.8 million for the nine months ended September 30, 2008. The decrease was primarily due to current market conditions providing lower yields on investments, and lower average cash balances.

Other Income. Other income for the nine months ended September 30, 2008 consists primarily of gains on the sales of marketable securities in the first quarter of 2008, offset by foreign exchange transaction losses realized in the third quarter of 2008.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through the public sale and private placement of our equity securities, debt financings and grant revenue primarily from the DOD, and to a lesser extent in 2008, product revenues. We may raise additional funds through the private and/or public sale of our equity securities. We may also seek to raise capital through collaborative arrangements with corporate sources or other sources of financing. We intend to continue to use the proceeds from these sources to fund ongoing research and development activities, activities related to potential future commercialization, capital expenditures, working capital requirements and other general purposes. As of September 30, 2008, we had cash, cash equivalents and marketable securities of approximately $36.5 million, including $1.8 million of long-term marketable securities, compared to $37.2 million as of December 31, 2007. Substantially all of our cash and cash equivalents at September 30, 2008 were in money markets that are covered under the U.S. Treasury Department’s Temporary Guarantee Program for Money Market Funds through December 18, 2008.

In May 2008, we sold 11,423,106 shares of our Common Stock to certain institutional and individual investors in a registered direct offering. The aggregate gross proceeds from the offering were approximately $27.5 million, and the aggregate net proceeds, after deducting the fees of the placement agents and other offering expenses, were approximately $25.8 million. We anticipate using the net proceeds from the sale of the Common Stock offered to fund clinical research and development programs, the commercialization and manufacturing of our product and our product candidates, and for other general corporate purposes. The Common Stock sold in the offering has been registered on a universal shelf registration statement on Form S-3 (No. 333-149090) that was filed with the Securities and Exchange Commission (the “SEC”) on February 6, 2008 and declared effective by the SEC on February 12, 2008, and under which approximately $32.5 million remains available for future issuance.

Although we believe that our existing cash resources will be sufficient to support our current operating plan at least through June 2009, we will need additional financing to support our operating plan thereafter or we will need to modify our operating plan

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accordingly. Our operating plan will also be affected by the acceptance of our product into the marketplace, the pricing of our product under the formulary process, and the timing and extent of our expenses associated with our operations. We may raise additional funds through the private and/or public sale of our equity securities. We may need to raise additional funds to meet long-term planned goals. There can be no assurance that additional financing, if at all available, can be obtained on terms acceptable to us. If we are unable to obtain such additional financing, future operations will need to be scaled back or discontinued.

As a development stage enterprise, our primary efforts, to date, have been devoted to conducting research and development, raising capital, forming collaborations and recruiting staff. We have limited capital resources and revenues, have experienced a $143.7 million net loss attributable to our common stockholders and have had negative cash flows from operations since inception. These losses have resulted principally from costs incurred in research and development activities, including acquisition of technology rights, increasing costs related to potential future commercialization of our product candidates, and selling, general and administrative expenses. As of September 30, 2008, we have paid an aggregate of $5.6 million and $4.0 million in cash since inception to West Pharmaceutical Services, Inc. and Shimoda Biotech (Proprietary) Ltd., respectively, pursuant to license agreements that we have entered into with these entities. We expect to incur additional operating losses until such time as we generate sufficient revenue to offset expenses, and we may never achieve profitable operations.

We expect that our cash requirements for operating activities will increase due to the following future activities:

• Conduct continued commercialization activities in support of Dyloject product launch and expansion in the U.K. including medical information services, pharmacovigilance monitoring, and our contract sales force; and pre-launch planning, development of market plans, pricing and reimbursement application, development of regional sales and marketing capabilities for other European countries;

• Conduct clinical and non-clinical programs, including Phase 3 clinical trials to support regulatory submissions and label extensions of our product candidates;

• Continue to support Good Manufacturing Practices (“GMP”) drug supply requirements of our non-clinical and clinical trials; complete formal stability testing, analytical development, methods development, specification development and commercial scale-up;

• Maintain, protect and expand our intellectual property;

• Develop expanded internal infrastructure; and

• Hire additional personnel.

Cash used in operating activities

From inception through September 30, 2008, net cash used in operating activities was approximately $100.3 million. Net cash used in operating activities increased to approximately $26.2 million for the nine months ended September 30, 2008 from approximately $16.5 million for the nine months ended September 30, 2007.

Net cash used in operating activities for the nine months ended September 30, 2008 consists primarily of our net loss of $29.7 million. The increase in net cash used in operating activities was due primarily to higher cash outflows associated with an increase in selling, general and administrative expenses and research and development activity in the first nine months of 2008. Significant increases were directly related to salaries, benefits and infrastructure costs related to the addition of several new personnel, sales and marketing costs associated with the commercial launch of Dyloject, and advancing our research and development clinical trials for each of our product candidates. Operating cash flows differ from net income as a result of non-cash charges or changes in working capital, primarily our non-cash stock based compensation expenses, which were approximately $2.7 million in 2008 and in 2007, respectively. Also in the first nine months of 2008, our outstanding payables increased by approximately $2.0 million, our prepaid expenses, other current assets and other assets decreased $0.4 million, and our inventory levels increased by approximately $1.9 million.

Cash used in investing activities

19

From inception through September 30, 2008, net cash used in investing activities was approximately $5.3 million, primarily related to the net purchases of short term marketable securities available for sale. For the nine months ended September 30, 2008, gross purchases were approximately $2.1 million, while gross proceeds from sales and maturities were approximately $21.7 million. For the nine months ended September 30, 2008, cash outflows for capital expenditures were approximately $0.9 million, primarily related to leasehold improvements. We expect that cash used for investing activities in 2008 will fluctuate based on future financing and the need to utilize our current investments for operations or capital improvements.

Cash provided by financing activities

From inception through September 30, 2008, net cash provided by financing activities was approximately $140.3 million. As discussed elsewhere in this Quarterly Report on Form 10-Q, in May 2008, we sold 11,423,106 shares of our Common Stock to certain institutional and individual investors in a registered direct offering. The aggregate gross proceeds from the offering were approximately $27.5 million, and the aggregate net proceeds, after deducting the fees of the placement agents and other offering expenses, were approximately $25.8 million. Additionally, for the nine months ended September 30, 2008, net cash from financing activities included proceeds of approximately $0.5 million from the exercise of stock options during the period. We expect that cash provided by financing activities will fluctuate based on our ability to raise additional funds through the private and/or public sale of our equity securities, and the future volume of warrants and stock options exercised.

20

Commitments

The following table summarizes our commitments as of September 30, 2008:

	Payments due by period
									Beyond
	Total		< 1 year		1-3 years		3-5 years		5 years
Operating leases	$	2,980,165	$	875,196	$	1,569,899	$	535,070	$	—
License Agreement		9,000,000		4,000,000		5,000,000		—		—
Manufacturing Supply Agreements		26,060,987		9,625,281		5,079,872		11,355,834		—
	$	38,041,152	$	14,500,477	$	11,649,771	$	11,890,904	$	—

The timing of the remaining milestones for Shimoda and Archimedes is dependent upon factors that are beyond our control, including our ability to recruit patients, the outcome of future non-clinical and clinical trials and any requirements imposed on our non-clinical and clinical trials by regulatory agencies. However, for the purpose of the above table, we have assumed that the payment of the milestones will occur between one to three years from September 30, 2008.

New Accounting Pronouncements

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early application is allowed under certain circumstances. We adopted SFAS 159 effective January 1, 2008 and decided not to elect the fair value option for our existing financial assets and liabilities. Therefore, adoption of SFAS 159 did not have any impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008. We do not currently expect this pronouncement to have a significant impact on our financial statements.

Critical Accounting Estimates

Research and Development Costs. Since our inception, we have incurred approximately $93.3 million of research and development costs. The major research projects undertaken by us include the development of Dyloject, Ereska and Rylomine. We expense all research and development costs as incurred for which there is no alternative future use. For various reasons, many of which are outside our control, including timing and results of our clinical trials, requirements imposed by regulatory agencies, obtaining regulatory approval and dependence on third parties, we cannot estimate the total remaining costs to be incurred to commercialize our product candidates, nor is it possible to estimate when, if ever, any of our product candidates will be approved by regulatory agencies for commercial sale. In addition, we may experience adverse results in the development of our product candidates, which could result in significant delays in obtaining approval to sell our product candidates, additional costs to be incurred to obtain regulatory approval or failure to obtain regulatory approval. In the event any of our product candidates were to experience setbacks, it would have a material adverse effect on our financial position and operating results. Even if we successfully complete development and obtain regulatory approval of one or more of our product candidates, difficulties in commercial scale manufacturing, and failure to gain favorable pricing from various institutions, failure of physicians and patients to accept our products as a safe, cost-effective alternative compared to existing products would have a material adverse effect on our business.

Stock Based Compensation. We make certain assumptions in order to value and expense our various share-based payment awards. In connection with valuing stock options and warrants, we use the Black-Scholes model, which requires us to estimate certain subjective assumptions. The key assumptions we make are: the expected volatility of our stock; the expected term of the award; and the expected forfeiture rate. We review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value stock-based awards granted in future periods. Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.

21

Income Taxes. We have incurred operating losses since inception and have established valuation allowances equal to the total deferred tax assets due to the uncertainty with respect to achieving profitable operations in the future. Should the uncertainty regarding our ability to achieve profitable operations change in the future, we would reverse all or a portion of the valuation allowance, the effect of which could be material to our financial statements.

Off Balance Sheet Arrangements

Certain warrants issued in conjunction with our common stock financing are equity linked derivatives and accordingly represent an off balance sheet arrangement. These warrants meet the scope exception in paragraph 11(a) of Statement of Financial Accounting Standards No. 133 — “Accounting for Derivative Instruments and Hedging Activities”, or SFAS 133, and are accordingly not accounted for as derivatives for purposes of SFAS 133, but instead included as a component of equity. See Footnote 6 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and the Statement of Shareholders’ Equity for more information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk (Auction Rate Securities)

As of September 30, 2008, we had approximately $1.8 million in non-current available for sale marketable securities, consisting of student loan auction rate securities issued by a state agency and an auction rate security of a closed end mutual fund. The closed end mutual fund primarily invests in common stocks, including dividend paying common stocks such as those issued by utilities, real estate investment trusts and regulated investment companies under the Internal Revenue Code. The Fund also invests in fixed income securities such as U.S. government securities, preferred stocks and bonds.

Due to recent adverse developments in the global credit and capital markets, certain auctions have failed as a result of liquidity issues and there is little to no current market activity for these instruments. As of September 30, 2008, the fair value of these securities were valued based on significant management judgments, including the credit ratings of the securities which were Aaa or better, the quality of the underlying investments, the pricing of the instrument, if available, or the underlying investments, and the rate of interest currently accruing on these instruments compared to other instruments of a similar nature, maturity and quality. Based on these factors, we believe the fair value is stated at par value as of September 30, 2008.

If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any ratings downgrades on the auction note securities in our portfolio, we may incur impairments to our investment portfolio, which could negatively affect our financial condition, cash flow and reported earnings, and the lack of liquidity of our auction note securities could have a material impact on our financial flexibility and ability to fund our operations.

Item 4. Controls and Procedures

We have disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) to ensure that material information relating to us and our consolidated subsidiaries are recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, particularly during the period in which this quarterly report has been prepared. Our principal executive officer and principal financial officer have reviewed and evaluated our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective at ensuring that material information is recorded, processed, summarized and reported on a timely and accurate basis in our filings with the SEC.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	JAVELIN PHARMACEUTICALS, INC.
Date: November 10, 2008	By:	/s/ Martin J. Driscoll
		Name:	Martin J. Driscoll
		Title:	Chief Executive Officer
Date: November 10, 2008	By:	/s/ Stephen J. Tulipano
		Name:	Stephen J. Tulipano
		Title:	Chief Financial Officer

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EXHIBIT INDEX

Exhibit
No.	Description
10.1	Development and Toll Manufacturing Agreement, dated as of July 30, 2008, between the Company and Baxter Healthcare Corporation. (1)
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended, and the omitted material has been separately filed with the Securities and Exchange Commission.

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EX-10.1

Exhibit 10.1

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

DEVELOPMENT AND TOLL
MANUFACTURING AGREEMENT

between

JAVELIN PHARMACEUTICALS, INC.

and

BAXTER HEALTHCARE CORPORATION

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

TABLE OF CONTENTS

1.	DEFINITIONS	1
2.	BAXTER OBLIGATIONS FOR SUPPLY AND FUTURE DEVELOPMENT WORK	5
3.	API, NOVEL EXCIPIENT AND MATERIALS	6
4.	MANUFACTURE	7
5.	PRODUCT SPECIFICATIONS; CERTIFICATE OF ANALYSIS	8
6	LABELING AND PACKAGING	9
7.	FORECASTS	9
8.	PURCHASE ORDERS	9
9.	DELIVERY	11
10.	PRICE AND PAYMENTS	11
11.	INSPECTION OF PRODUCT	12
12.	ACCESS TO MANUFACTURING FACILITY AND RECORDS	12
13.	REPRESENTATIONS AND WARRANTIES; DISCLAIMERS; LIMITATION OF LIABILITY	14
14.	INDEMNIFICATION	16
15.	RECALLS	17
16.	TERM AND TERMINATION	18
17.	CONFIDENTIALITY	19
18.	INSURANCE	21
19.	MISCELLANEOUS	21
SCHEDULE 1.9		25
SCHEDULE 1.27		26
SCHEDULE 1.29		27
SCHEDULE 1.31		28
SCHEDULE 1.31A		29
SCHEDULE 2.1		30
SCHEDULE 10.1		31

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

DEVELOPMENT AND TOLL MANUFACTURING AGREEMENT

          This Development and Toll Manufacturing Agreement (this “Agreement”) is entered into as of this 30th day of July, 2008 (the “Effective Date”) by and between Javelin Pharmaceuticals, Inc., a Delaware corporation, having its principal place of business at 125 Cambridge Park Drive, Cambridge, MA 02140 (“Purchaser”), and Baxter Healthcare Corporation, a Delaware corporation, having a place of business at 2 Esterbrook Lane, Cherry Hill, NJ 08003 (“Supplier”).

          WHEREAS, Supplier manufactures certain pharmaceutical products;

          WHEREAS, Purchaser intends to distribute and market finished dosage pharmaceutical products, including, without limitation, a certain intravenous dosage product sometimes currently known as “Diclofenac Sodium Injection (the “Product”); and

          WHEREAS, Supplier and Purchaser have entered into a Development and Toll Manufacturing Agreement, dated April 25, 2007, (“US Agreement”) for activities related to Product to be sold in the United States, and the parties now want to enter into an agreement for activities related to Product to be sold in certain other European countries (as defined herein), and

          NOW, THEREFORE, in consideration of the covenants and obligations expressed herein, and intending to be legally bound hereby, the parties agree as follows:

1.       DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:

1.1	“Acceptable Product” has the meaning assigned thereto in Section 11.1.
1.2	“Activities” has the meaning assigned thereto in Section 4.3.
1.3	“Affiliate” means any individual or entity directly or indirectly controlling, controlled by, or under common control with a party. For purposes of this definition, “control” means the direct or indirect ownership of at least fifty percent (50%) of the outstanding voting securities of a party, or the right to control the policy decisions of such party. Notwithstanding the foregoing, the term “Affiliate” does not include subsidiaries in which a party or its Affiliates owns a majority of the ordinary voting power to elect a majority of the board of directors, but is restricted from electing such majority by contract or otherwise, until such time as such restrictions are no longer in effect.

1

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

1.4	“Alternate Presentation” means any alternative configuration of the Product other than in two (2) mL vials with one (1) or two (2) mL fill volumes and packaged in either a ten (10) or twenty-five (25) unit Baxter standard vial packaging configuration.
1.5	“Alternative Source Period” has the meaning assigned thereto in Section 8.7.
1.6	“Annual Period” means a period of twelve (12) calendar months, beginning on (i) the date of the First Regulatory Approval in one of the Member States for the Product manufactured at the Manufacturing. Facility, or (ii) the date of Regulatory Approval of the Product in Germany, whichever is later, and each 12-month period thereafter during the Term.
1.7	“API” means the active pharmaceutical ingredient diclofenac sodium USP/Ph.Eur.
1.8	“API Specifications” means the specifications for or concerning the manufacturing, testing, and packaging of bulk API set forth in Schedule 1.88 attached hereto, as the same may be amended from time to time upon written agreement of the parties.
1.9	“Binding Forecast” has the meaning assigned thereto in Section 7.2.
1.10	“Calendar Year” means a period of twelve (12) calendar months, beginning each January 1 and ending on the subsequent December 31 during the Term.
1.11	“Certificate of Analysis” has the meaning assigned thereto in Section 5.2.
1.12	“Claim” has the meaning assigned thereto in Section 14.3.
1.13	“Commercially Reasonable Efforts” means efforts and resources normally used by a party for a compound or product owned by it or to which it has rights, which is of similar market potential at a similar stage in its product life, taking into account the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the profitability of the applicable product, and other relevant factors.
1.14	“Confidential Information” means all proprietary and confidential information of a party, including, without limitation, trade secrets, technical information, business information, sales information, customer and potential customer lists and identities, product sales plans, license and sublicense agreements, inventions, developments, discoveries, know-how, methods, techniques, formulae, data, processes, and other proprietary ideas, whether or not protectable under patent,

2

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

	trademark, copyright, or other legal principles, that the other party has access to or receives, but does not include information that (a) is or becomes publicly available through no breach of this Agreement by the receiving party; (b) was already known to the receiving party at the time it was disclosed to the receiving party hereunder; (c) is independently developed by employees of the receiving party without the aid, use, or application of Confidential Information received from the disclosing party hereunder; or (d) is received from a Third Party which is under no obligation of confidentiality to the disclosing party.
1.15	“Directives” means the European Medicines Agency (EMEA) Directives as the same may be amended from time to time, and rules and regulations promulgated there under.
1.16	“EMEA” means the European Medicines Agency or any successor entity.
1.17	“Force Majeure Event” has the meaning assigned thereto in Section 19.7.
1.18	“Full Lot” means Baxter’s prevailing batch size with the same intermediate packaging, single language product insert and labeling per lot.
1.19	“GMP” means good manufacturing practice promulgated by the MHRA or EMEA, including, without limitation, Directive 2003/94/EC, Directive 2004/27/EC, Directive 91/412/EEC and all applicable directives, rules and regulations, policies and guidelines in effect at a given time.
1.20	“Indemnitee” has the meaning assigned thereto in Section 14.3.
1.21	“Indemnitor” has the meaning assigned thereto in Section 14.3.
1.22	“Manufacturing Facility’” means Supplier’s facility located at 2 Esterbrook Lane, Cherry Hill, New Jersey 08003.
1.23	“Materials” means any or all chemical substances, inactive ingredients, excipients other than the Novel Excipient, components, labels, packaging materials, and other consumable materials used in the manufacture of the Product; provided, however, that the term “Materials” shall not include any equipment used in the manufacture of the Product.
1.24	“Member States” means France, Germany, United Kingdom, Spain and Italy.
1.25	“MHRA” means the Medicines and Healthcare products Regulatory Agency, or any successor entity.
1.26	“Novel Excipient” means hydroxypropylbetadex.

3

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

1.27	“Novel Excipient Specifications” means the specifications for or concerning the manufacturing, testing, and packaging of the Novel Excipient set forth in Schedule 1.27 attached hereto, as the same may be amended from time to time upon written agreement of the parties.
1.28	“Product” means the pharmaceutical product currently known as Diclofenac Sodium Injection or Dyloject® containing the API.
1.29	“Product Specifications” means the specifications for or concerning the manufacturing, testing, and packaging of Product set forth in Schedule 1.29 attached hereto, as the same may be amended from time to time upon written agreement of the parties.
1.30	“Proposed Response” has the meaning assigned thereto in Section 12.2.
1.31	“Quality Agreement” means the applicable agreement, dated as of the date hereof, between Supplier and Purchaser, in the form of Schedule 1.31 attached hereto relating to the Product manufactured at the Manufacturing Facility.
1.32	“Reasonable Steps” has the meaning assigned thereto in Section 17.1.
1.33	“Recall” means any action by Purchaser and its Affiliates, or Supplier and its Affiliates, to recover title or possession or halt distribution, prescription, or consumption of Product sold or shipped to Third Parties. The term “Recall” also applies to Product that would have been subject to recall if it had been shipped.
1.34	“Regulations” means the MHRA Regulations as the same maybe amended from time to time, and rules and regulations promulgated there under.
1.35	“Regulatory Approvals” means all authorizations by the appropriate Regulatory Authorities that are required for the manufacture (other than manufacturing facility licenses, approvals, or authorizations), marketing, promotion, pricing, and sale of the Product in the Member States.
1.36	“Regulatory Authority” means any national, supra-national, regional, state, or local regulatory agency, department, bureau, commission, council, or other governmental entity in the Member States involved in the granting of Regulatory Approval for the Product, including, without limitation, the MHRA or EMEA.
1.37	“Rolling Forecast” has the meaning assigned thereto in Article 7.
1.38	“Seizure” means any action by the MHRA or EMEA to detain or destroy Product or prevent the distribution, prescription, consumption, or release of Product.

4

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

1.39	“Technical Coordinator” has the meaning assigned thereto in Section 2.2.1 hereof.
1.40	“Term” has the meaning assigned thereto in Section 16.1.
1.41	“Third Party” means any person or entity other than Supplier, Purchaser, and their respective Affiliates.
1.42	“Unit” means each two (2) mL vial with a one (1) or two (2) mL fill volume.

2. BAXTER OBLIGATIONS FOR SUPPLY AND FUTURE DEVELOPMENT WORK

2.1	Process or Development Tasks. Supplier is providing development work in accordance with the provisions of Schedule 2.1 to the US Agreement. The parties anticipate the development work under the US Agreement will also be used for this Agreement. Supplier shall provide Purchaser with the Marketing Authorization Application documentation for the Product.
2.2	Development Work and Budget. If any events occur necessitating additional process or development work, the parties will meet and develop a schedule to define the additional work and the additional costs. Purchaser shall make payments to Supplier for its performance of the additional work in accordance with the budget and payment schedule (the “Budget”) established with respect to the additional work, as described in the Development Plan within [***] days of the later to occur of (i) completion of the relevant portion of the additional work triggering such payment pursuant to the Budget, to Purchaser’s reasonable satisfaction, and (ii) receipt of a detailed invoice with respect to same.
2.3	Obligation to Supply Product. During the Term, Supplier shall manufacture and supply Product to Purchaser, and Purchaser shall purchase Product from Supplier, pursuant to the provisions of this Agreement.
2.4	Technical Coordinator.

(a)	Appointment. Purchaser shall appoint an authorized technical representative and a back-up technical representative by providing written notice of such representatives to Supplier (each, a “Technical Coordinator”). Purchaser may replace either of its Technical Coordinators at any time, with or without cause, by providing written notice thereof to Supplier.
(b)	Responsibilities of Technical Coordinators. The Technical Coordinators shall be responsible for communications, other than legal notices, between the parties in matters of quality, manufacturing, project management, and

5

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

compliance with respect to the Product. The Technical Coordinators shall be available on a regular basis for consultation during the Term regarding Supplier’s performance under this Agreement, and compliance with applicable Specifications, Purchaser’s quality requirements, the quality requirements of applicable laws or Regulatory Authorities having jurisdiction over the manufacture of Product hereunder, GMPs, and all other applicable regulatory requirements.

2.5	Notification. Supplier shall immediately notify Purchaser of any event that is reasonably likely to cause a breach by Supplier of its obligations under this Agreement or of any issue that might result in a supply interruption of any duration.
2.6	[***]
2.7	Right of First Refusal for Additional European Union Member States. Purchaser also grants to Supplier, under similar terms and conditions listed herein, and as may need to be modified by mutual agreement of the parties (including pricing), the right of first refusal to produce the Product, in the current presentation or in alternate presentations for distribution and sale in countries in Europe in additional to the Member States.

3. API, NOVEL EXCIPIENT AND MATERIALS.

3.1	Supply of API and Materials. Purchaser has chosen those suppliers of API, Novel Excipient and Materials identified in Purchaser’s regulatory filing for the Product. During the Term, Supplier shall purchase API, Novel Excipient and Materials, from those companies included in the regulatory filing for Product, for use by Supplier in the manufacture of Product to be supplied to Purchaser under this Agreement.
3.2	Purchaser is responsible for certifying and auditing all Product-related suppliers. At Purchasers request, Supplier will supply Purchaser with a statement regarding supplier compliance for common suppliers used and audited by Supplier. Supplier makes no guarantee of continued maintenance of supplier audits on a routine basis.
3.3	Testing of API and Novel Excipient. Supplier shall test API and Novel Excipient, in accordance with the procedures identified in Schedules 1.8 and 1.27 to verify that the API meets the API Specifications and that the Novel Excipient meets the Novel Excipient Specifications.

6

[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

3.4

Failure to Meet API Specifications or Novel Excipient Specifications. If the API provided by the API supplier fails to meet the API Specifications, or the Novel Excipient provided by the Novel Excipient supplier fails to meet the Novel Excipient Specifications, Supplier agrees to notify Purchaser immediately in writing, which notice shall state with particularity the reasons such APT fails to meet the API Specifications or such Novel Excipient fails to meet the Novel Excipient Specifications, and shall include copies of any documentation in support of Supplier’s conclusion. Purchaser shall timely cooperate with Supplier in addressing the failure, and if such failure cannot be remedied, in identifying and qualifying an alternate API supplier or Novel Excipient supplier. Such qualification shall be at Purchaser’s expense.

3.5

Change Controls. Purchaser shall require that suppliers-provide notice of any proposed change to the API, Novel Excipient or Materials, including process specifications, validation and/or controls, as well as the manufacturing and/or packaging of the API, Novel Excipient or Materials. Supplier shall not be responsible for any failure by any supplier to provide such notice.

4. MANUFACTURE.

4.1	Manufacturing Facility. Supplier shall manufacture all Product supplied to Purchaser pursuant to this Agreement at the Manufacturing Facility.
4.2	Manufacture of Product. Supplier agrees to manufacture and supply the Product in accordance with (a) the Product Specifications, (b) the applicable Regulatory Approvals, as the same may be amended from time to time, (c) GMP requirements, and (d) all other applicable laws, rules, regulations and internal specifications. Upon either Party becoming aware of any proposed changes in the Regulatory Approvals, it shall promptly notify the other Party and shall consult with the other party regarding the proposed changes and activities. Supplier shall not have the right to decline to implement any change in the Regulatory Approvals.
4.3	Manufacturing Changes. The Product Specifications shall be amended as (a) reasonably requested by Purchaser or (b) necessary to conform such Product Specifications to the regulatory requirements necessary to obtain and maintain Regulatory Approvals with respect to the Product in the reasonable discretion of Purchaser. If any change in the Product Specifications, or if any change in the Regulatory Approvals, applicable laws, rules, or regulations or sources of Materials requires either (a) a change in the Product manufacturing process, or (b) Supplier to conduct development, testing, or other activities (e.g., process development, stability testing, validation of new specifications) (collectively, “Activities”) in addition to those activities Supplier conducted or is required to

7

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	conduct in its manufacture of the Product prior to such change being requested or required, Purchaser shall reimburse Supplier for all commercially reasonable documented costs incurred by Supplier in connection with such change. If Supplier requires regulatory changes to support improved process or yield improvements, then Purchaser, in consultation with Supplier, agrees to submit such changes to the EMEA or MHRA, as required, and Supplier shall pay for such changes. Changes implemented to support improved process or yield improvements shall not result in interruption in the supply or quality of the Product.
4.4	Procurement of Materials. Supplier shall timely procure and maintain adequate inventories of all API, Novel Excipient and Materials necessary for the production of Product. Title to all such Materials shall reside in Supplier.
4.5	Regulatory Filings. Each party shall provide the other, as applicable, with all Regulatory Approval submissions, annual reports, and correspondence to the EMEA or MHRA on issues reasonably related to the performance of Supplier’s obligations as set forth in this Agreement.
4.6	Compliance with Laws and Regulations. While the Product is in its possession or under its control, Supplier shall comply with all applicable laws, Regulations, and directives, including EMEA or MHRA requirements, regarding the manufacture, handling, and storage of the Product.

5. PRODUCT SPECIFICATIONS; CERTIFICATE OF ANALYSIS.

5.1 Product Specifications and Release Testing. As of the time of delivery by Supplier, each batch of Product shall conform to the Product Specifications. Supplier shall perform release testing according to the testing methods set forth in the Product Specifications, to release the Product from the Manufacturing Facility. Purchaser shall be responsible for all additional release testing.

5.2 Certificate of Analysis. Supplier shall provide to Purchaser a Certificate of Analysis with each shipment of Product to Purchaser or its designated recipient stating that the Product conforms to the Product Specifications. The Certificate of Analysis shall be in a format agreed upon by Supplier and Purchaser, and such Certificate of Analysis shall include the results of release testing conducted by Supplier on the Product. Supplier shall also provide Purchaser with a copy of the manufacturing and controls information for the applicable batch(es) delivered. Additional copies of the manufacturing and controls documentation for the applicable batch(es) shall be provided at Purchaser’s expense, ([***] per page).

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6. LABELING AND PACKAGING. All Product shipped and delivered by Supplier to Purchaser, under this Agreement shall be packaged and labeled in accordance with this Agreement, the then-current packaging and labeling specifications provided by Purchaser, and GMPs. Prior to the Effective Date, Purchaser supplied Supplier with labeling for the Product (including the EAN number(s) for the Product). Supplier shall print, either directly or through a Third Party, labels and other printed material to be included as part of the Product. From time to time, Purchaser may provide Supplier with modified labeling and upon receipt thereof, Supplier shall use its Commercially Reasonable Efforts to incorporate such new labeling on the Product in accordance with Purchaser’s requested schedule therefore. Purchaser shall provide Supplier with any modifications to the labeling for the Product as promptly as possible in order to ensure compliance with any and all applicable regulations. Purchaser shall reimburse Supplier for all pre-approved commercially reasonable costs incurred by Supplier in making modifications to labeling, branding, or imprinting packaging and/or manufacturing processes to accommodate Purchaser’s new labeling or to accommodate any other changes requested by Purchaser and agreed to by Supplier. Such reimbursement shall be made pursuant to invoices submitted by Supplier to Purchaser, which invoices shall be payable within [***] days after Purchaser’s receipt thereof Upon Purchaser’s request, Supplier shall promptly enter into a separate written label agreement with Purchaser, setting forth Supplier’s obligations relating to the labeling of Product hereunder.

7. FORECASTS. Throughout the Term, Purchaser, shall provide Supplier with a rolling one (1) year forecast by calendar month (the “Rolling Forecast”) of its expected purchases of Product as follows:

7.1

Forecasts. On or before each [***] during the Term, Purchaser shall provide Supplier with a written forecast of Purchaser’s expected purchases of Product for a period of [***] calendar months beginning on the date of such forecast. [***] percent of the forecast for the [***] calendar months and [***] percent of the forecast for the [***] calendar months shall be binding on Purchaser, subject to Section 8.3, and the forecast for the [***] calendar months shall not be binding on Purchaser. As soon as commercially reasonable, Purchaser shall supply an initial forecast.

7.2

Binding Forecasts. The portion of each Rolling Forecast that is binding on Purchaser as provided in Section 7.1 shall be a “Binding Forecast.” The portion of each Rolling Forecast that is not binding on Purchaser as provided in Section 7.1 shall be used by Supplier and Purchaser solely for planning purposes.

8. PURCHASE ORDERS.

8.1 Placement of Purchase Orders. From time to time during the Term, Purchaser shall place purchase orders with Supplier, in a format chosen by Purchaser,

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specifying the quantity of Product desired in Full Lots, and the place(s) to which and the manner and dates by which delivery is to be made; said delivery dates to be no earlier than [***] calendar days after the purchase order date. All purchase orders shall be sent by Purchaser to the following address or via electronic exchange:

Baxter Healthcare Corporation
2 Esterbrook Lane
Chevy Hill, New Jersey 08003
Attn.: Director of Logistics
Tel.: 856-489-2114
Fax: 856-424-2592

	or to such other addresses as Supplier may notify Purchaser from time to time.
8.2	Acceptance of Purchase Orders. Purchase orders made in accordance with this Article 8 shall be deemed to be accepted by Supplier if Supplier has not rejected said purchase orders within [***] business days after receipt of the same; provided, however, that Supplier shall not reject any purchase order specifying quantities which purchase orders are otherwise in accordance with the provisions of this Article 8.
8.3	Quantity Limitations. Supplier shall execute all accepted purchase orders for quantities of Product ordered up to and including [***] percent of the quantity of Product set forth in the applicable Binding Forecast for each calendar month. Supplier shall use its Commercially Reasonable Efforts to fulfill orders for quantities of Product greater than [***] percent of the quantity set forth in the applicable Binding Forecast for each calendar month.
8.4	Minimum Purchase Requirements. Following receipt of Regulatory Approval for the Product, Purchaser shall purchase a Minimum of [***] Units in the first Annual Period and [***] Units during each Annual Period thereafter. In any Annual Period in which Purchaser does not purchase the Minimum Units, Purchaser shall pay to Supplier [***].
8.5	Conflict. In the event of any conflict between the provisions of this Agreement and any purchase order, the provisions of this Agreement shall control.
8.6	Failure to Supply. In the event (i) Supplier cannot or does not properly satisfy all of Purchaser’s Orders for Product on a timely basis in accordance with this Section 8 for a period of [***] days, and such failure is not attributable to a failure to properly supply API, Novel Excipient or Materials by the suppliers, or (ii) any facility involved in the manufacture or storage of Product hereunder is prohibited

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from, or materially adversely affected in its ability to, produce, store, or otherwise be involved in the provision of Product to Purchaser under this Agreement by the appropriate regulatory authorities, and such material adverse event is not a Force Majeure Event, Purchaser can qualify an alternate manufacturing source and purchase Product from such alternate source until such time as Supplier can resume manufacture of the Products (the “Alternate Source Period”). Supplier shall, as requested by Purchaser and at Supplier’s expense, provide the technical transfer package for the Product to Purchaser and/or third parties designated by Purchaser to manufacture Product in accordance with all legal and regulatory requirements as quickly as possible. [***].

9. DELIVERY. Supplier shall execute all accepted purchase orders by delivering the appropriate quantity of Product to Supplier’s designated mutually agreeable carrier(s) at the Manufacturing Facility no later than the delivery dates provided in the applicable purchase order. Title and risk of loss shall pass to Purchaser when each order of Product is delivered to the designated carrier at the Manufacturing Facility. Supplier shall instruct the designated carrier to deliver the Product to such address as Purchaser may provide to Supplier from time to time. All shipments shall be accompanied by temperature monitoring devices or other indicators, at Purchaser’s expense.

10. PRICE AND PAYMENTS.

10.1	Price. Purchaser shall purchase from Supplier, and Supplier shall sell to Purchaser, Product at the purchase price set forth in Schedule 10.1 attached. The pricing may be adjusted [***], beginning on [***] and [***] thereafter during the Initial Term, as defined in Section 16. 1, and any renewals, by a percentage equal to the percentage change in the [***] during the [***]-month period ending the preceding [***] (or if discontinued such equivalent index as is mutually agreed to by the parties). [***].
10.2	Freight, Insurance, and Taxes. Purchaser shall pay all actual freight, insurance, and government sales tax imposed on purchasers for resale, and duties and other fees (except tax on income to Supplier) incurred in connection with the sale and shipment of Product to Purchaser.
10.3	Payment. Payments to Supplier for the purchase price of Product, as well as any other payment due from Purchaser to Supplier pursuant to this Agreement, shall be made by Purchaser within [***] days after the later of the date of invoice or the product ship date from the Manufacturing Facility, except as to orders for Product that are rejected by Purchaser in accordance with the procedures set forth in Article 11 or that the parties dispute are in conformance with the Specifications. In the event that Product is rejected by Purchaser, but is determined to be Acceptable Product pursuant to Section 11.2, the payment for such Product shall

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be due and payable within [***] business days after the determination with respect to such Product is made in accordance with Section 11.2 hereof.

11. INSPECTION OF PRODUCT.

11.1	Inspection, Rejection of Product. Purchaser may analyze representative samples of each lot of Product delivered hereunder for purposes of determining whether the same meets the Specifications and was manufactured in accordance with GMP (“Acceptable Product”), and, if performed, shall do so within [***] days from the date of shipment (or, in the case of a latent defect, within [***] days after discovery of such latent defect). Purchaser shall notify Supplier in writing within said [***] days of rejection of any of the Product that Purchaser is rejecting said Product because it is not Acceptable Product.
11.2	Third Party Analysis. If Supplier, after good faith consultation with Purchaser, disputes any finding by Purchaser that Product is not Acceptable Product, representative samples of such Product shall be forwarded to a Third Party jointly selected by Supplier and Purchaser for analysis, which analysis shall be performed in compliance with applicable MHRA Regulations for retesting of pharmaceutical products. The findings of such Third Party regarding whether the Product was Acceptable Product shall be binding upon Supplier and Purchaser. The cost of such analysis by such Third Party shall be borne by the party whose findings differed from those generated by such Third Party.
11.3	Replacement of Product. Unless any nonconformity is caused by a negligent or wrongful act or omission by Purchaser or its agents, Supplier shall, at no cost to Purchaser, and at Purchaser’s election: (a) replace any Product order, or portion thereof, that is not Acceptable Product within [***] days; or (b) cancel any order or portion of an order for which non-Acceptable Product was delivered.
11.4	Disposition of Rejected Product. Supplier shall instruct Purchaser as to the disposition of any Product order or portion thereof determined not to be Acceptable Product. At the sole option of Supplier, said Product may be returned to Supplier, at Supplier’s expense, including shipping costs, or destroyed in an environmentally acceptable manner, at Supplier’s expense.
11.5	Qualified Persons Requirements. The costs of services or audits provided by an EMEA Qualified Person(s) will be borne by Purchaser.

12. ACCESS TO MANUFACTURING FACILITY AND RECORDS.

12.1 Inspection b Regulatory Authorities. Upon the request of the MHRA, EMEA or other Regulatory Authority, such Regulatory Authority shall have access to

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	observe and inspect the Manufacturing Facility and procedures used for the manufacture, testing, labeling, packaging and/or warehousing of the Product and to audit such facilities for compliance with GMP and/or other applicable regulatory standards.
12.2	Notification of Injuries and Inspections. Supplier shall notify Purchaser within two (2) business days of any written or oral inquiries, notifications, observations or inspection activity by the MHRA, EMEA or other Regulatory Authority in regard to any Product. Supplier shall provide a complete description of any such governmental inquiries, notifications, inspections or observations promptly after such visit or inquiry. Supplier shall furnish to Purchaser (a) within two (2) business days after receipt, any report or correspondence issued by the MHRA, EMEA or other Regulatory Authority in connection with such visit or inquiry, including, but not limited to, any EMEA or MHRA observations, that pertain to the Product in the Member States, and (b) not later than five (5) business days prior to the time it provides to the MHRA, EMEA or other Regulatory Authority, copies of proposed responses or explanations relating to items set forth above (each, a “Proposed Response”), in each case redacted of trade secrets or other confidential or proprietary information of Supplier that are unrelated to its obligations under this Agreement or to Product. Supplier shall discuss with Purchaser and consider in good faith any comments provided by Purchaser on the Proposed Response. After the filing of a response with the Regulatory Authority, Supplier shall notify Purchaser and provide Purchaser with copies of any further contacts with such agency relating to the subject matter of the response.
12.3	Inspection by Purchaser. Supplier shall permit Purchaser or Purchaser’s mutually agreed upon designee to inspect once annually that portion of the Manufacturing Facility where Product is manufactured (including those sections of the manufacturing, packaging, laboratory and warehousing facilities utilized in the manufacture, packaging, storage, testing, shipping or receiving of Products. Such inspections may include Active Ingredients, the work in process and Products as well as all batch records). Such right shall also include the right to review such documents as is reasonably necessary for the purpose of assessing Supplier’s compliance with the Product Specifications and applicable regulations. Such inspection and document review shall be conducted upon reasonable prior notice by Purchaser, but not less than thirty (30) days prior to the proposed inspection, at a time and date mutually agreeable to Supplier and Purchaser, and shall be coordinated by the Technical Coordinators. Purchaser shall also have a right to inspect the Manufacturing Facility as set forth in this Section 12.3 at any time during the Term if (i) Purchaser has reasonable cause to be concerned with whether the Manufacturing Facility complies with applicable regulations, or (ii) in the event an audit results in adverse findings in which case Purchaser shall be

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entitled to re-audit the Manufacturing Facility, until the adverse findings are resolved, without reference to the once annual limitation.

13. REPRESENTATIONS AND WARRANTIES; DISCLAIMERS; LIMITATION OF LIABILITY.

13.1 Representations and Warranties by Supplier. Supplier hereby represents, warrants and covenants that:

(a)	it is a corporation or entity duly organized and validly existing under the laws of the state of its incorporation;
(b)	the execution, delivery, and performance of this Agreement by Supplier has been duly authorized by all requisite corporate action and does not require any shareholder action or approval,
(c)	it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
(d)	the execution, delivery, and performance by Supplier of this Agreement and its compliance with the provisions of this Agreement does not and shall not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any other Agreement to which it is a party; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction, or decree of any court or governmental authority entered against it or by which any of its property is bound;
(e)	it shall at all times comply with all applicable material laws and regulations relating to its activities under this Agreement;
(f)	all Product supplied hereunder conforms to the Product Specifications and any manufacturing, packaging, labeling or storage specifications provided by Purchaser to Supplier, has been and shall be manufactured, packaged, labeled and stored in accordance with the applicable Regulatory Approvals and GMP, and was not adulterated or misbranded while in Supplier’s possession or at any time prior to delivery of such Product by Supplier hereunder.

13.2 Representations and Warranties by Purchaser. Purchaser hereby represents, warrants and covenants that:

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(a)	it is a corporation or entity duly organized and validly existing under the laws of the state of its incorporation;
(b)	the execution, delivery, and performance of this Agreement by Purchaser has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;
(c)	it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
(d)	the execution, delivery, and performance by Purchaser of this Agreement and its compliance with the provisions of this Agreement does not and shall not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) any other Agreement to which it is a party; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction, or decree of any court or governmental authority entered against it or by which any of its property is bound; and
(e)	it shall at all times comply with all applicable material laws and regulations relating to its activities under this Agreement.

13.3	Disclaimer of Warranties by Supplier. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SUPPLIER HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, WITHRESPECT TO THE PRODUCT AND THE MANUFACTURING FACILITY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT.
13.4	Disclaimer of Warranties by Purchaser. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, WITH RESPECT TO THE API OR PRODUCT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT.
13.5	Limitation of Liability. EXCEPT IN CONNECTION WITH A BREACH BY EITHER PARTY OF ARTICLE 17, THE INDEMNIFICATION OBLIGATION OF SUPPLIER UNDER SECTION 14.1, AND THE INDEMNIFICATION OBLIGATION OF PURCHASER UNDER SECTION 14.2, NEITHER SUPPLIER NOR PURCHASER SHALL BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL

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DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE, LOSS OF PROFITS, COST OF REPLACEMENT, OR COMMERCIAL LOSS) ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

14. INDEMNIFICATION.

14.1	Indemnification by Supplier. Supplier shall indemnify and hold harmless Purchaser, its Affiliates, and its and their officers, directors, employees, and agents from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, expenses, and disbursements, including, without limitation, the costs, expenses, and disbursements, as and when incurred, of investigating, preparing, or defending any action, suit, proceeding, or investigation asserted by a Third Party (including, without limitation, reasonable attorneys’ fees and expenses), caused by, relating to, based upon, arising out of, or in connection with (a) any failure of Product supplied hereunder to conform to the Product Specifications; (b) any failure of Product supplied hereunder to be manufactured in accordance with applicable Regulatory Approvals and GMP; (c) any adulteration of Product supplied hereunder while in Supplier’s possession; (d) breach of any of Supplier’s representations, warranties, or covenants under this Agreement; or (e) Supplier’s willful misconduct or negligence.
14.2	Indemnification by Purchaser. Purchaser shall indemnify and hold harmless Supplier and its officers, directors, employees, and agents from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, expenses, and disbursements, including, without limitation, the costs, expenses, and disbursements, as and when incurred, of investigating, preparing, or defending any action, suit, proceeding, or investigation asserted by a Third Party (including, without limitation, reasonable attorneys’ fees and expenses), caused by, relating to, based upon, arising out of, or in connection with (a) breach of any of Purchaser’s representations, warranties, or covenants under this Agreement; or (b) Purchaser’s willful misconduct or negligence.
14.3	Procedure for Indemnification. Each party seeking to be reimbursed, indemnified, defended, and/or held harmless under Sections 14.1 or 14.2 (each, an “Indemnitee”) shall (a) provide the party obligated to indemnify such Indemnitee (the “Indemnitor”) with prompt, written notice of any claim, suit, demand, or other action for which such Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless (each, a “Claim”), which notice shall include a reasonable identification of the alleged facts giving rise to such Claim; (b) grant such party reasonable authority and control over the defense and settlement of any

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such Claim; and (c) reasonably cooperate with such party and its agents in defense of any such Claim, at the Indemnitor’s expense. Each Indemnitee shall have the right to participate in the defense of any Claim for which Indemnitee seeks to be reimbursed, indemnified, defended, or held harmless, by using attorneys of such Indemnitee’s choice, at such Indemnitee’s expense. Any settlement of a Claim for which any Indemnitee seeks to be reimbursed, indemnified, defended, and/or held harmless under this Article 14 shall be subject to the prior written approval of such Indemnitee, which approval shall not be unreasonably withheld, conditioned, or delayed.

15. RECALLS.

15.1	Recall. In the event of an actual or threatened Recall of API or Product required or recommended by a Regulatory Authority of competent jurisdiction within the Member States, or if Recall of API or Product is reasonably deemed advisable by Purchaser in its sole discretion, such Recall shall be promptly implemented and administered by Purchaser in a manner which is appropriate and reasonable under the circumstances and in conformity with accepted trade practices. Supplier shall assist Purchaser as requested by Purchaser to ensure a timely, accurate, and complete Recall. The costs of any such Recall shall be borne by the party or parties whose actions or omissions caused the Recall to be necessary. Supplier shall have no obligation to pay costs of Recalls of API. Supplier shall have no obligation to pay costs of Recalls of Product to the extent such recalls are (a) caused by actions of Third Parties occurring after such Product is sold by Purchaser; (b) due to design defects in the specifications, packaging or labeling not attributable to Supplier’s execution of its responsibilities under this Agreement; or (c) due to any other breach by Purchaser of its duties under this Agreement, unless such Recall is due to a breach by both Purchaser and Supplier of their duties under this Agreement.
15.2	Duty to Inform. Each party shall keep the other party fully and promptly informed of any notification, event, or other information, whether received directly or indirectly, which might affect the marketability, safety, or effectiveness of Product or might result in a Recall or Seizure of API or Product by the MHRA, EMEA or other Regulatory Authority.
15.3	Recall Due to Supplier Breach. In the event of any Recall or Seizure arising out of or resulting from Supplier’s breach of this Agreement, Supplier shall, at the election of Purchaser, either:

(a) supply Product, without charge to Purchaser, in an amount sufficient to replace the amount of Product Recalled or Seized; or

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(b) refund to Purchaser, or give credit to Purchaser against outstanding receivables due from Purchaser, against the price of Product to be delivered to Purchaser in the future, in amounts equal to the price paid by Purchaser to Supplier for Product so Recalled or Seized plus the reasonable transportation costs incurred by Purchaser and not otherwise recovered by Purchaser in respect of such Recalled or Seized Product.

	Supplier shall also pay to Purchaser Purchaser’s reasonable out-of-pocket expenses incurred in connection with such Recall or Seizure.
15.4	Recall Not Due to Supplier Breach. In the event of any Recall or Seizure not arising out of or resulting from Supplier’s breach of this Agreement, Purchaser shall pay to Supplier Supplier’s reasonable out-of-pocket expenses incurred in connection with such Recall or Seizure.

16. TERM AND TERMINATION.

16.1	Term and Renewal. This Agreement shall begin on the Effective Date and shall continue for three (3) years from the date of the first Regulatory Approval in a Member State for Product manufactured at the Manufacturing Facility (the “Initial Term”). There after, the Agreement will be automatically extended for consecutive [***] year terms unless either party notifies the other party in writing [***] months in advance of its desire not to extend the Agreement.
16.2	Termination for Breach. Either party may terminate this Agreement immediately by giving notice to the other party in the event that the other party commits a breach of any material provision of this Agreement that is not cured within [***] days after notice thereof by the non-breaching party.
16.3	Termination for Insolvency. Either party may terminate this Agreement immediately in the event that the other party becomes the subject of a voluntary or involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors.
16.4	Termination for Failure to Acquire MHRA or EMEA Approval. Either party may terminate this Agreement if the MHRA or EMEA has not approved the Product as manufactured in the Manufacturing Facility by [***]. However, prior to exercising this termination right, if the Product is still under review by the MHRA or EMEA on [***], the parties will negotiate in good faith to continue the Agreement.
16.5	Upon Expiration or Termination.

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16.5.1	Confidential Information. Upon expiration or termination of this Agreement, all Confidential Information shall be returned to the disclosing party or destroyed unless otherwise specified or permitted elsewhere under this Agreement. The parties may retain one (1) copy of Confidential Information for archival purposes only.
16.5.2	Materials. Upon expiration or termination of this Agreement, Supplier shall deliver all Materials purchased by Supplier in anticipation of manufacture of Product hereunder in accordance with the Rolling Forecasts, at Purchaser’s expense. Supplier shall submit an invoice to Purchaser for the reasonable cost of such Materials, and Purchaser shall pay such invoice within [***] days after the invoice date.
16.5.3	Survival. The following provisions shall survive termination or expiration of this Agreement: Articles 13-15, this Section 16.5.3, Articles 17-19, any payment obligations of the parties accruing hereunder prior to the expiration or termination of this Agreement, and any other provision that is necessary to interpret the respective rights and obligations of the parties hereunder.

16.6 Termination at Will. Following the start of the first Annual Period, Purchaser shall have the right to terminate this Agreement at any time during the Term for any reason by giving Supplier no less than twenty-four (24) months prior written Notice.

17. CONFIDENTIALITY.

17.1 Confidentiality Obligations. Except as permitted elsewhere under this Agreement, during the Term and thereafter until the third (3rd) anniversary of the effective date of termination or expiration of this Agreement, each party agrees to take Reasonable Steps (as defined in this Section 17.1) (a) to receive and maintain the Confidential Information of the other party in confidence, (b) not to disclose such Confidential Information to any third party, and (c) to promptly notify the disclosing party upon learning of any law, rule, regulation, or court order that purports to compel disclosure of any Confidential Information of the disclosing party and to reasonably cooperate with the disclosing party, at the disclosing party’s expense, in the exercise of the disclosing party’s right to protect the confidentiality of such Confidential Information. Neither party hereto shall use all or any part of the Confidential Information of the other party for any purpose other than to perform its obligations under this Agreement. The parties shall take Reasonable Steps (as defined in this Section 17.1) to ensure that their employees, representatives, and agents comply with this provision, and shall be responsible for any breach by such employees, representatives, and agents. As used herein,

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“Reasonable Steps” means at least the same degree of care that the receiving party uses to protect its own Confidential Information, and in, no event, no less than reasonable care.

17.2

Exclusions. Nothing contained herein shall prevent a party from disclosing Confidential Information pursuant to any applicable law, rule, regulation, or court order; provided, however, that such party complies with the notice provisions of Section 17.1(c) to the extent permissible under applicable laws, rules, regulations, or court orders. Such disclosure shall not alter the status of such information hereunder for all other purposes as Confidential Information. In addition, nothing contained herein shall prevent a party from disclosing Confidential Information that:

(a)	is generally known to the public at the time of disclosure or becomes generally known through no wrongful act on the part of the Recipient;
(b)	can be shown by writing to have been in the Recipient’s possession at the time of disclosure otherwise than as a result of any prior confidential disclosure by the Disclosing Party or another party or the Recipient’s breach of any legal obligation;
(c)	becomes known to the Recipient through disclosure by sources other than the Disclosing Party having no duty of confidentiality with respect to such Confidential Information, whether to the Disclosing Party or another party, and having the legal right to disclose such Confidential Information; or
(d)	is independently developed by the Recipient without reference to or reliance upon the Confidential Information.

17.3 Remedies. Each party acknowledges and agrees that the provisions of this Article 17 are reasonable and necessary to protect the other party’s interests in its Confidential Information, that any breach of the provisions of this Article 17 may result in irreparable harm to such other party, and that the remedy at law for such breach may be inadequate. Accordingly, in the event of any breach or threatened breach of the provisions of this Article 17 by a party hereto, the other party, in addition to any other relief available to it under this Agreement, at law, in equity, or otherwise, shall be entitled to seek temporary and permanent injunctive relief restraining the breaching party from engaging in and/or continuing any conduct that would constitute a breach of this Article 17, without the necessity of proving actual damages or posting a bond or other security.

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18. INSURANCE.

18.1

Each party shall obtain and keep in force during the term of this Agreement, general comprehensive liability insurance and product liability insurance covering occurrence of bodily injury and property damage in an amount of not less than $[***] combined single limit; provided, however, that Supplier may self-insure for this type of coverage.

18.2

Each party shall carry the insurance coverage set forth herein during the term of this Agreement and through the later of [***] years following termination of this Agreement or [***] following the expiration of the last to expire Product made in accordance with this Agreement. Each party shall have the right to request from the other party certificates of insurance and shall require at least thirty (30) days written notice to such party prior to any cancellation, nonrenewal or reduction in coverage below the minimum pursuant to Section 18.1.

19. MISCELLANEOUS

19.1	Assignment. During the term of this Agreement the rights of either party under this Agreement shall not be assigned, nor shall the performance of either party’s duties be delegated without the other party’s prior written consent, such consent to not be unreasonably withheld, except either party may assign this agreement to an Affiliate, a purchaser or o licensee of all or substantially all of such party’s business related to the sales of the Product in the Member States. Notice of assignment shall be given to other party at least thirty (30) days prior to the effective date of said assignment.
19.2	Entire Agreement. This Agreement, together with the referenced schedules, embodies and shall constitute the entire agreement and understanding of the parties relating to the subject matter of this Agreement and shall supersede all prior oral or written agreements, contracts, understandings, representations, or arrangements, whether oral or written, between them, relating to the subject matter of this Agreement.
19.3	Modification. No change or addition may be made to this Agreement or any schedule attached hereto except in writing, signed by a duly authorized representative of each party, and expressly stating that it is a modification of this Agreement.
19.4	Notices. All communications between the parties with respect to any of the provisions of this Agreement shall be sent to the addresses set forth below, or to such other addresses as designated by one party to the other party by notice pursuant to this Section 19.4, by nationally recognized courier or by prepaid certified mail, or by facsimile transmission or other electronic means of communications, with confirmation by letter given by the close of business on or

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before the next following business day. All notices provided hereunder shall be effective upon receipt.

If to Purchaser, to:

Javelin Pharmaceuticals, Inc.
125 Cambridge Park Drive
Cambridge, MA 02140
Attn: VP - Clinical & Commercial Manufacturing
Tel.: 212-554-4362
Fax: 212-554-4554

with a copy, which copy shall not constitute notice, to:

Javelin Pharmaceuticals, Inc.
125 Cambridge Park Drive
Cambridge, MA 02140
Attn: General Counsel
Tel.: 617-349-4512
Fax: 617-349-4505

If to Supplier, to:

Baxter Healthcare Corporation
2 Esterbrook Lane
Cherry Hill, New Jersey 08003-4099
Attn.: Plant Manager
Tel.: 856-489-2189
Fax: 856-424-8747

with a copy, which copy shall not constitute notice, to:

Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, IL 60015
Attn.: General Counsel
Tel.: 847-948-2600
Fax: 847-948-2450

19.5 Severability. If any provision of this Agreement is held to be void or unenforceable by a court of competent jurisdiction, such finding(s) shall not be construed to render any other provision of this Agreement either void or

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	unenforceable, and all other provisions shall remain in full force and effect. Upon any such determination, the parties shall make such amendments to this Agreement as necessary to remove the invalid or unenforceable part of any such provision, but otherwise achieve to the maximum extent permissible, the economic, legal, and commercial intent and objectives of the original provision.
19.6	Waiver. Failure or delay by either party in exercising or enforcing any provision, right, or remedy under this Agreement, or waiver of any remedy hereunder, in whole or in part, shall not be deemed a waiver thereof, or prevent the subsequent exercise of that or any other rights or remedy.
19.7	Force Majeure. Neither Purchaser nor Supplier shall be in breach of this Agreement if there is any failure of performance under this Agreement occasioned by any act of God, fire, act of government or state, war, civil commotion, insurrection, embargo, prevention from or hindrance in obtaining energy or other utilities, labor disputes of whatever nature, failure by a supplier to supply API, Novel Excipient or Materials or any other reason beyond the control and without the fault or negligence of the party affected thereby (a “Force Majeure Event”). Such excuse shall continue as long as the Force Majeure Event continues. Upon cessation of such Force Majeure Event, the affected party shall promptly resume performance hereunder. Each party agrees to give the other party prompt written notice of the occurrence of any Force Majeure Event, the nature thereof, and the extent to which the affected party will be unable fully to perform its obligations hereunder. Each party further agrees to use reasonable efforts to correct the Force Majeure Event as quickly as possible and to give the other party prompt written notice when it is again fully able to perform such obligations. In the event any Force Majeure event prevents Supplier from supplying Product for a period longer than one hundred twenty (120) days, Purchaser shall have the right to source the Product from Third Parties or to appoint another supplier of the Product.
19.8	Headings. The headings and captions used in this Agreement are solely for the convenience of reference and shall not affect its interpretation.
19.9	Independent Contractors. The parties acknowledge, agree and declare that the relationship hereby established between them is solely that of provider and recipient of manufacturing services and that each party hereto is an independent contractor with respect to the other.
19.10	Maintenance of Agreement. Supplier shall keep a copy of this Agreement and any amendments hereto at the Manufacturing Facility, and at any other location permitted in accordance with this Agreement where the Product is packaged or labeled, during the Term and for a period of two (2) years following the date of

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	the final shipment of Product from such facility or location. Supplier shall make such copy of the Agreement and any amendments hereto available for inspection at any reasonable hour to any officer or employee of the MHRA or EMEA who requests such copy in the course of performing his or her duties for the MHRA or EMEA
19.11	Choice of Law, Jurisdiction. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of laws principles. Any and all disputes between the parties arising out of or related to this Agreement shall be heard in the state and federal courts located in the State of Delaware, and the parties hereby consent and submit to the jurisdiction of such courts.
19.12	Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute together the same document.

          IN WITNESS WHEREOF, the parties hereto, by their authorized officers, have executed this Agreement as of the Effective Date.

JAVELIN PHARMACEUTICALS, INC.		BAXTER HEALTHCARE CORPORATION
By:	/s/ Martin Driscoll	By:	/s/ Peter J. Arduini
	Name: Martin Driscoll		Name: Peter J. Arduini
	Title: Chief Executive Officer		Title: Corporate Vice President and
			President, Medication Delivery

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

SCHEDULE 1.9

API SPECIFICATIONS

See attached specifications.

To be added by the parties upon filing of the Marketing Authorization Application with the Regulatory Authorities.

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[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

SCHEDULE 1.27

NOVEL EXCIPIENT SPECIFICATIONS

See attached specifications.

To be added by the parties upon filing of the Marketing Authorization Application with the Regulatory Authorities.

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SCHEDULE 1.29

PRODUCT SPECIFICATIONS

[***]

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SCHEDULE 1.31

QUALITY (TECHNICAL) AGREEMENT

[***]

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SCHEDULE 1.31A

LIST OF CONTACTS

[***]

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SCHEDULE 2.1

PACKAGING DEVELOPMENT

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SCHEDULE 10.1

PRICING

[***]

31

EX-31.1

Exhibit 31.1

CERTIFICATION

      I, Martin J. Driscoll, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Javelin Pharmaceuticals, Inc. (the “Company”).

      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 Company as of, and for, the periods presented in this report.

      4. The Company’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

      5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

Date: November 10, 2008	/s/ Martin J. Driscoll
	Name:	Martin J. Driscoll
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

      I, Stephen J. Tulipano, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of Javelin Pharmaceuticals, Inc. (the “Company”).

      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 Company as of, and for, the periods presented in this report.

      4. The Company’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the Company and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

      5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

Date: November 10, 2008	/s/ Stephen J. Tulipano
	Name:	Stephen J. Tulipano
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of Javelin Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin J. Driscoll, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

Date: November 10, 2008	/s/ Martin J. Driscoll
	Name:	Martin J. Driscoll
	Title:	Chief Executive Officer

      A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

      This certification accompanies each periodic report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of Javelin Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen J. Tulipano, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

Date: November 10, 2008	/s/ Stephen J. Tulipano
	Name:	Stephen J. Tulipano
	Title:	Chief Financial Officer

      A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

     This certification accompanies each periodic report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.