A.P. Pharma announces financial results for its third quarter ended September 30, 2009

A.P. Pharma, Inc. (Nasdaq: APPA), a specialty pharmaceutical company, today reported financial results for its third quarter ended September 30, 2009.

Results of Operations

A.P. Pharma’s net loss for the third quarter 2009 was $1.2 million, or $0.04 per share, compared with a $6.2 million net loss, or $0.20 per share, for the third quarter of 2008. The decreased net loss for the third quarter of 2009, as compared to the same period in 2008, was primarily due to lower research and development expenses related to APF530, largely reflecting the completion of the Phase 3 clinical trial, and recognition of income previously deferred, in connection with the termination of a license agreement for APF530 with RHEI Pharmaceuticals, N.V. (RHEI). Additionally, expenses decreased in the third quarter of 2009 as compared to the same period in 2008, as a result of A.P. Pharma’s earlier decision to suspend, for the time being, development of its other product candidates in order to focus its resources on the submission of the new drug application (NDA) for APF530 and other cost containment initiatives undertaken by the Company.

Cash, cash equivalents and marketable securities as of September 30, 2009 were $1.6 million, compared with $10.5 million at December 31, 2008.

In October 2009, A.P. Pharma sold approximately 8 million shares of its common stock, and warrants to purchase additional stock, for gross proceeds of approximately $8.1 million. The Company believes this financing will enable the Company to fund its operations through 2010, based on expected spending levels and certain anticipated positive cash inflows.

“A.P. Pharma continues to have a productive 2009, with the U.S. Food and Drug Administration’s acceptance of our new drug application for APF530, a new licensing agreement with Merial for use of our Biochronomer^TM technology, and the recent $8.1 million private placement,” said Ronald Prentki, A.P. Pharma's President and Chief Executive Officer.

“Due in part to our cost containment efforts, we have been successful in reducing operating expenses by 75% compared to the same period last year,” Mr. Prentki continued. “With the recent financing, anticipated cash flows, and continued conservative spending, we believe the Company’s resources are sufficient to support our operations through the March 2010 PDUFA date for APF530, and the remainder of 2010. Over the next year, we will focus the full attention of the Company on working with the FDA to secure the product’s approval and to establishing a commercialization partnership for APF530.”

Recent Developments:

• Acceptance of the NDA for APF530 for the prevention of chemotherapy-induced nausea and vomiting (CINV) by the U.S. Food and Drug Administration (FDA). Based on the Prescription Drug User Fee Act (PDUFA), the FDA has issued an action date of March 18, 2010.
• Entered into a licensing and development agreement with Merial Limited for a long-acting pain management product for use with companion animals. The Company received an upfront payment and will receive on-going development funding and potential future milestones and royalties.
• Completed an equity placement providing initial funding of approximately $8.1 million as part of a two tranche financing, which may provide up to $13.1 million in total.
• A.P. Pharma’s common stock listing was transferred from The Nasdaq Global Market to The Nasdaq Capital Market on October 28, 2009. The Company’s securities will continue to trade on The Nasdaq Stock Market under the symbol “APPA.”