Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO BIOSANTE'S FINANCIAL STATEMENTS
INDEX TO ANI'S FINANCIAL STATEMENTS
TABLE OF CONTENTS

Table of Contents


Filed Pursuant to Rule 424(b)(3)
Registration No. 333-185391


LOGO

 


LOGO

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

To our Stockholders:

         On October 3, 2012, BioSante Pharmaceuticals, Inc. (BioSante) and ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. (ANI), entered into a merger agreement pursuant to which ANI will merge with and into BioSante, with BioSante continuing as the surviving company. The boards of directors of BioSante and ANI have approved unanimously the merger agreement and the merger and believe that the merger of the two companies will create more value than either company could achieve individually. The combined company that will result from the merger will be a fully integrated specialty pharmaceutical company focused on developing, manufacturing and marketing branded and generic prescription pharmaceuticals.

         Pursuant to the terms of the merger agreement, upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. Following completion of the merger, the current ANI stockholders are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and the current BioSante stockholders are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante as of a determination date prior to the closing date of the merger, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. If the merger had been completed on January 17, 2013, the record date for the BioSante special meeting, an aggregate of approximately 27.9 million shares of BioSante common stock would have been issuable to ANI stockholders upon completion of the merger (as determined prior to an anticipated reverse stock split of BioSante common stock), assuming BioSante's net cash is $18.0 million as of the determination date.

         BioSante common stock is listed on The NASDAQ Global Market and trades under the symbol "BPAX". On January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, the closing sale price of BioSante common stock was $1.36 per share. ANI is a privately held specialty pharmaceutical company. Following completion of the merger, the combined company is expected to be renamed "ANI Pharmaceuticals, Inc." and to change its trading symbol on The NASDAQ Global Market. ANI has reserved the symbol "ANIP" for this purpose.

         This joint proxy statement/prospectus provides you with detailed information about the special meetings of stockholders of BioSante and ANI to consider the merger and related business. Your vote is very important. Whether or not you plan to attend your respective company's special meeting of stockholders, please submit your proxy as soon as possible to make sure that your shares are represented at the applicable meeting. In addition to being a proxy statement for both BioSante and ANI, this document is also a prospectus to be used by BioSante when issuing BioSante common stock to ANI stockholders in connection with the merger. BioSante and ANI encourage you to read the entire document carefully. Please pay particular attention to the section entitled "Risk Factors" beginning on page 38 for a discussion of the risks related to the merger, the combined company following completion of the merger, and the business and operations of each of BioSante and ANI.

         BioSante and ANI are excited about the opportunities that the proposed merger brings to both BioSante and ANI stockholders and thank you for your consideration and continued support.

 
GRAPHIC

Stephen M. Simes
Vice Chairman, President and
Chief Executive Officer
BioSante Pharmaceuticals, Inc.
 
GRAPHIC

Arthur S. Przybyl
President and Chief Executive Officer
ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the BioSante common stock to be issued pursuant to the merger or determined if the information in this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

         This joint proxy statement/prospectus is dated January 22, 2013 and is first being mailed or otherwise delivered to stockholders of BioSante and ANI on or about January 25, 2013.


Table of Contents


REFERENCES TO ADDITIONAL INFORMATION

        This joint proxy statement/prospectus forms a part of a registration statement on Form S-4 filed by BioSante Pharmaceuticals, Inc. with the Securities and Exchange Commission (SEC). It constitutes a prospectus of BioSante under Section 5 of the Securities Act of 1933, as amended (the Securities Act), and the rules and regulations thereunder, with respect to the shares of BioSante common stock to be issued to holders of capital stock of ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. in the merger. In addition, it constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations thereunder, and a notice of meeting with respect to the BioSante special meeting of stockholders. It also constitutes a proxy statement of ANI and a notice of meeting with respect to the ANI special meeting of stockholders.

        BioSante has supplied all information contained in this joint proxy statement/prospectus relating to BioSante and ANI has supplied all information contained in this joint proxy statement/prospectus relating to ANI.

        If you would like to request documents from BioSante or ANI, please send a request by telephone or email to either BioSante or ANI at the following address:

BioSante Pharmaceuticals, Inc.
111 Barclay Boulevard
Lincolnshire, Illinois 60069
Attention: Investor Relations
Tel: (847) 478-0500 ext. 120
Email: info@biosantepharma.com
  ANIP Acquisition Company d/b/a
ANI Pharmaceuticals, Inc.
210 Main Street West
Baudette, Minnesota 56623
Attention: Investor Relations
Tel: (218) 634-3500
Email: arthur.przybyl@anipharmaceuticals.com

        If you would like to request documents, please do so by February 22, 2013 in order to receive them before the special meetings. See "Where You Can Find More Information" beginning on page 300.


Table of Contents

LOGO

BioSante Pharmaceuticals, Inc.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On March 15, 2013

Dear BioSante Stockholder:

        A special meeting of the stockholders of BioSante Pharmaceuticals, Inc. will be held on March 15, 2013 at 8:00 a.m., local time, at BioSante's corporate office located at 111 Barclay Boulevard, Lincolnshire, Illinois 60069, for the following purposes:

        Stockholders also will consider and act on any other matters as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

        The board of directors of BioSante has fixed January 17, 2013 as the record date for the determination of BioSante stockholders entitled to notice of, and to vote at, the BioSante special meeting or any adjournments or postponements of the BioSante special meeting. Only holders of record of BioSante common stock and BioSante class C special stock at the close of business on the BioSante record date are entitled to notice of, and to vote at, the BioSante special meeting. At the close of business on the record date, BioSante had 24,422,240 shares of common stock and 65,211 shares of BioSante class C special stock outstanding and entitled to vote.

        Your vote is important. The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, having voting power outstanding on the record date for the BioSante special meeting is required for approval of BioSante Proposals No. 1, 2 and 3. The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, present in person or represented by proxy at the BioSante special meeting, is required for approval of BioSante Proposals No. 4 and 5. Please also note that the approval of BioSante Proposal No. 1 is not conditioned upon the approval of BioSante Proposals No. 2, 3, 4 or 5; however, the approval of BioSante Proposals No. 2 and 3 is


Table of Contents

conditioned upon the approval of BioSante Proposal No. 1 by the BioSante stockholders and the approval of the corresponding proposal by the ANI stockholders.

        Even if you plan to attend the BioSante special meeting in person, BioSante requests that you complete, sign and return the enclosed proxy card and thus ensure that your shares will be represented at the BioSante special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of BioSante Proposals No. 1 through 5. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the BioSante special meeting and will count as a vote against BioSante Proposals No. 1 through 3. If you do attend the BioSante special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

        The BioSante board of directors has determined that the merger agreement and the transactions contemplated by it, including the merger and the issuance of shares of BioSante common stock in the merger, are advisable and in the best interests of BioSante and its stockholders. The BioSante board of directors unanimously has approved and adopted the merger agreement and the transactions contemplated by it, including the merger and the issuance of shares of BioSante common stock in the merger, and recommends that BioSante stockholders vote "FOR" the adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, and "FOR" the other merger related proposals.

    By Order of the Board of Directors,

 

 


GRAPHIC
    Phillip B. Donenberg
Senior Vice President, Finance,
Chief Financial Officer and Secretary

January 22, 2013
Lincolnshire, Illinois

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR BIOSANTE'S SPECIAL MEETING TO BE HELD ON MARCH 15, 2013

The accompanying joint proxy statement/prospectus is available at www.proxyvote.com/BioSante.


Table of Contents

LOGO

ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On March 15, 2013

Dear ANI Stockholder:

        A special meeting of the stockholders of ANI will be held on March 15, 2013 at 9:00 a.m., local time, at the offices of MVP Capital Partners located at 259 N. Radnor-Chester Road, Suite 130, Radnor, Pennsylvania 19087, for the following purposes:

        Stockholders also will consider and act on any other matters as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

        The board of directors of ANI has fixed January 17, 2013 as the record date for the determination of ANI stockholders entitled to notice of, and to vote at, the ANI special meeting or any adjournments or postponements of the ANI special meeting. Only holders of record of ANI capital stock at the close of business on the ANI record date are entitled to notice of, and to vote at, the ANI special meeting. At the close of business on the record date, ANI had 2,375,312 shares of series D convertible preferred stock, 34,810 shares of series C convertible preferred stock, 78,491 shares of series B convertible preferred stock, 102,774 shares of series A convertible preferred stock and 23,613 shares of common stock outstanding and entitled to vote.

        Your vote is important. The affirmative vote of holders of a majority of the shares of ANI common stock, calculated on an as-converted basis and voting together as a single class, and 65 percent of the shares of ANI series D convertible preferred stock having voting power outstanding on the record date for the ANI special meeting is required for approval of ANI Proposal No. 1. The affirmative vote of holders of a majority of ANI common stock, calculated on an as-converted basis, present in person or represented by proxy at the ANI special meeting is required for approval of ANI Proposal No. 2.

        Even if you plan to attend the ANI special meeting in person, ANI requests that you complete, sign and return the enclosed proxy card and thus ensure that your shares will be represented at the ANI special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of ANI Proposals No. 1 and 2. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the ANI special meeting and will count as a vote against ANI Proposal No. 1. If you do attend the ANI special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

        The ANI board of directors has determined that the merger agreement and the transactions contemplated by it, including the merger, are advisable and in the best interests of ANI and its stockholders. The ANI board of directors has unanimously approved and adopted the merger


Table of Contents

agreement and the transactions contemplated by it, including the merger, and recommends that ANI stockholders vote "FOR" the adoption of the merger agreement and the transactions contemplated thereby, including the merger, and "FOR" the adjournment of the ANI special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of ANI Proposal No. 1.

    By Order of the Board of Directors,

 

 


GRAPHIC
    Charlotte C. Arnold
Vice President and Chief Financial Officer

Baudette, Minnesota
January 22, 2013

 

 

Table of Contents


TABLE OF CONTENTS

 
  Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER

    1  

QUESTIONS AND ANSWERS FOR BIOSANTE STOCKHOLDERS ABOUT THE BIOSANTE SPECIAL MEETING

   
6
 

QUESTIONS AND ANSWERS FOR ANI STOCKHOLDERS ABOUT THE ANI SPECIAL MEETING

   
12
 

SUMMARY

   
16
 

The Companies

    16  

Summary of the Merger

    17  

Reasons for the Merger

    17  

Opinion of Oppenheimer & Co. Inc. 

    18  

Risk Factors

    18  

Merger Consideration and Adjustment

    19  

Treatment of ANI Stock Options and Warrants

    21  

Treatment of BioSante Stock Options, Warrants and Convertible Senior Notes

    21  

Management of the Combined Company Following the Merger

    21  

Interests of BioSante's Directors and Officers in the Merger

    22  

Interests of ANI's Directors and Officers in the Merger

    23  

Conditions to Completion of the Merger

    24  

No Solicitation

    25  

Termination of the Merger Agreement

    25  

Termination Fees and Expenses

    26  

Vote Required

    27  

Voting Agreements

    27  

Material U.S. Federal Income Tax Consequences of the Merger

    28  

Regulatory Approvals

    28  

Anticipated Accounting Treatment

    29  

Appraisal Rights

    29  

Comparison of Stockholder Rights

    29  

Contingent Value Rights

    29  

SELECTED HISTORICAL FINANCIAL INFORMATION AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AND DATA

   
30
 

Selected Historical Financial Data of BioSante

    30  

Selected Historical Financial Data of ANI

    31  

Summary Unaudited Pro Forma Condensed Combined Financial Data of BioSante and ANI

    32  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

   
34
 

MARKET PRICE AND DIVIDEND INFORMATION

   
35
 

BioSante

    35  

ANI

    37  

RISK FACTORS

   
38
 

Risks Related to the Merger

    38  

Risks Related to the Combined Company if the Merger is Completed

    46  

Risks Related to BioSante

    50  

Risks Related to ANI

    77  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

   
91
 

i


Table of Contents

 
  Page  

THE SPECIAL MEETING OF BIOSANTE STOCKHOLDERS

    92  

General

    92  

Date, Time and Place

    92  

Purposes of the BioSante Special Meeting

    92  

Recommendations of the BioSante Board of Directors

    92  

Record Date and Voting Power

    93  

Voting and Revocation of Proxies

    93  

Quorum and Required Vote

    94  

Solicitation of Proxies

    95  

Delivery of Proxy Materials to Households Where Two or More Stockholders Reside

    95  

Other Matters

    95  

MATTERS BEING SUBMITTED TO A VOTE OF BIOSANTE STOCKHOLDERS

   
96
 

BioSante Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, including the Merger and the Issuance of Shares of BioSante Common Stock in the Merger

    96  

BioSante Proposal No. 2—Approval of Amendment to BioSante's Certificate of Incorporation to Effect a Reverse Split of BioSante Common Stock and Class C Special Stock at the Discretion of BioSante and ANI at a Ratio of Either One-for-Two, One-for-Three, One-for-Four or One-for-Five. 

    97  

BioSante Proposal No. 3—Approval of Amendment to BioSante's Certificate of Incorporation to Change Corporate Name

    108  

BioSante Proposal No. 4—Advisory Vote on Golden Parachute Compensation

    109  

BioSante Proposal No. 5—Approval of Possible Adjournment of the BioSante Special Meeting

    110  

THE SPECIAL MEETING OF ANI STOCKHOLDERS

   
111
 

General

    111  

Date, Time and Place

    111  

Purposes of the ANI Special Meeting

    111  

Recommendations of the ANI Board of Directors

    111  

Record Date and Voting Power

    111  

Voting and Revocation of Proxies

    112  

Quorum and Required Vote

    112  

Solicitation of Proxies

    113  

Other Matters

    113  

MATTERS BEING SUBMITTED TO A VOTE OF ANI STOCKHOLDERS

   
114
 

ANI Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, Including the Merger

    114  

ANI Proposal No. 2—Approval of Possible Adjournment of the ANI Special Meeting

    115  

THE MERGER

   
116
 

General

    116  

Background of the Merger

    116  

BioSante Reasons for the Merger

    128  

ANI Reasons for the Merger

    132  

Opinion of Oppenheimer & Co. Inc. 

    134  

Certain Financial Forecasts of ANI Used in Connection with the Merger

    141  

Interests of BioSante's Directors and Officers in the Merger

    143  

Interests of ANI's Directors and Officers in the Merger

    148  

Regulatory Approvals

    150  

NASDAQ Listing of BioSante Common Stock

    150  

ii


Table of Contents

 
  Page  

Restrictions on Sales of BioSante Common Stock Received by ANI Stockholders in the Merger

    151  

Material U.S. Federal Income Tax Consequences of the Merger

    151  

Anticipated Accounting Treatment

    151  

Appraisal Rights

    152  

THE MERGER AGREEMENT

   
156
 

Structure of the Merger

    156  

Completion of the Merger

    156  

Merger Consideration and Adjustment

    156  

Determination of BioSante's Net Cash

    158  

Treatment of ANI Stock Options and Warrants

    159  

Conditions to Completion of the Merger

    159  

No Solicitation

    160  

Meetings of Stockholders; Change in Board Recommendation

    162  

Covenants; Conduct of Business Pending the Merger

    162  

Other Agreements

    163  

Termination

    164  

Termination Fees and Expenses

    165  

Representations and Warranties

    166  

Amendments

    167  

VOTING AND OTHER ANCILLARY AGREEMENTS

   
168
 

ANI Voting Agreements

    168  

BioSante Voting Agreements

    168  

Lock-Up Agreements

    169  

CONTINGENT VALUE RIGHTS

   
170
 

General

    170  

Contingent Value Rights Agreement

    170  

Material Terms of the CVRs

    170  

Discretion of BioSante to Issue CVRs

    171  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

   
172
 

BIOSANTE'S BUSINESS

   
175
 

Overview

    175  

Description of BioSante's Female Sexual Health, Menopause, Contraception and Male Hypogonadism Products

    177  

Description of BioSante's GVAX Cancer Vaccines and Other Technologies

    182  

Sales and Marketing

    183  

Research and Product Development

    183  

Manufacturing

    183  

Patents, Licenses and Proprietary Rights

    183  

Competition

    185  

Governmental Regulation

    186  

Employees

    191  

Properties

    191  

Legal Proceedings

    191  

Available Information

    192  

BIOSANTE'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
193
 

Business Overview

    193  

iii


Table of Contents

 
  Page  

Proposed Merger with ANI

    193  

Financial Overview

    196  

Financial Overview

    199  

Results of Operations

    200  

Liquidity and Capital Resources

    203  

Critical Accounting Policies

    209  

Recently Issued Accounting Pronouncements

    210  

Quantitative and Qualitative Disclosures About Market Risk

    210  

ANI'S BUSINESS

   
211
 

Overview

    211  

Operations

    211  

Mission and Strategy

    212  

Government Regulation

    212  

Research and Development

    217  

Patents, Trademarks and Licenses

    217  

Customers

    218  

Markets

    218  

Marketing and Distribution

    219  

Competition

    220  

Product Liability

    220  

Suppliers and Raw Materials

    221  

Employees

    221  

ANI'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
222
 

Overview

    222  

Recent Developments

    223  

Critical Accounting Policies and the Use of Estimates

    223  

Recently Issued Accounting Standards

    225  

General

    226  

Results of Operations for the Nine Months Ended September 30, 2012 and 2011

    227  

Results of Operations for the Years Ended December 31, 2011 and 2010

    231  

Liquidity and Capital Resources

    234  

Off-Balance Sheet Arrangements

    238  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   
239
 

MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER

   
250
 

Directors and Executive Officers of the Combined Company Following the Merger

    250  

Director Independence

    253  

Board Committees of the Combined Company

    254  

Certain Relationships and Related Transactions

    256  

Director Compensation

    262  

Executive Compensation

    265  

Compensation Committee Interlocks and Insider Participation

    273  

PRINCIPAL STOCKHOLDERS OF BIOSANTE

   
274
 

PRINCIPAL STOCKHOLDERS OF ANI

   
276
 

PRINCIPAL STOCKHOLDERS OF COMBINED COMPANY

   
280
 

DESCRIPTION OF BIOSANTE CAPITAL STOCK

   
282
 

Authorized and Outstanding Capital Stock

    282  

iv


Table of Contents

 
  Page  

Common Stock

    282  

Class C Special Stock

    283  

Preferred Stock

    283  

Anti-Takeover Effects of Provisions of BioSante's Certificate of Incorporation and Bylaws and Delaware Law

    283  

Limitation of Liability and Indemnification

    285  

Listing of BioSante Common Stock

    285  

Transfer Agent and Registrar

    285  

COMPARISON OF RIGHTS OF HOLDERS OF BIOSANTE STOCK AND ANI STOCK

   
286
 

LEGAL MATTERS

   
299
 

EXPERTS

   
299
 

FUTURE BIOSANTE STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

   
299
 

BioSante Stockholder Proposals

    299  

BioSante Director Nominations

    299  

WHERE YOU CAN FIND MORE INFORMATION

   
300
 

INDEX TO BIOSANTE'S FINANCIAL STATEMENTS

   
F-1
 

INDEX TO ANI'S FINANCIAL STATEMENTS

   
F-47
 

ANNEXES

       

Annex A—Agreement and Plan of Merger, As Amended

    A-1  

Annex B—Form of Voting Agreement Between BioSante and Certain Stockholders of ANI

    B-1  

Annex C—Voting Agreement Between BioSante and Meridian Venture Partners II, L.P.

    C-1  

Annex D—Form of Voting Agreement Between ANI and Directors and Officers of BioSante

    D-1  

Annex E—Form of Lock-Up Agreement

    E-1  

Annex F—Form of Contingent Value Rights Agreement

    F-1  

Annex G—Opinion of Oppenheimer & Co. Inc

    G-1  

Annex H—Section 262 of the Delaware General Corporation Law

    H-1  

Annex I—Proposed Amendment to BioSante's Certificate of Incorporation to Effect a Reverse Split of Common Stock and Class C Special Stock at the Discretion of BioSante and ANI

    I-1  

Annex J—Proposed Amendment to BioSante's Certificate of Incorporation to Change Corporate Name

    J-1  



        References to "BioSante" and "ANI" in this joint proxy statement/prospectus refer to BioSante Pharmaceuticals, Inc. and ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc., respectively. References to the "combined company" refer to BioSante, as the surviving entity after the merger and incorporating the merged business of ANI. Except as otherwise noted, references to "we," "us" or "our" refer to both BioSante and ANI. References to the "merger agreement" refer to that certain agreement and plan of merger dated as of October 3, 2012 between BioSante and ANI, as amended from time to time.

        Except as otherwise noted, references to "BioSante common stock" refer to shares of common stock, par value $0.0001 per share, of BioSante, and references to "BioSante class C special stock" refer to shares of class C special stock, par value of $0.0001 per share, of BioSante. Except as otherwise noted, references to "BioSante capital stock" refer to shares of BioSante common stock and BioSante class C special stock. References to the BioSante stockholders refer to holders of shares of BioSante common stock and/or shares of BioSante class C special stock. All BioSante share and per share

v


Table of Contents

numbers have been adjusted retroactively to reflect the one-for-six reverse stock split effected on June 1, 2012.

        Except as otherwise noted, references to "ANI series D preferred stock," "ANI series C preferred stock," "ANI series B preferred stock," "ANI series A preferred stock" and "ANI common stock" refer to shares of series D convertible preferred stock, par value $0.10 per share, of ANI, series C convertible preferred stock, par value $0.10 per share, of ANI, series B convertible preferred stock, par value $0.10 per share, of ANI, series A convertible preferred stock, par value $0.10 per share, of ANI, and common stock, par value $0.10 per share, of ANI, respectively, and references to "ANI preferred stock" refer to shares of ANI series D preferred stock, ANI series C preferred stock, ANI series B preferred stock and ANI series A preferred stock, collectively. Except as otherwise noted, references to "ANI capital stock" refer to shares of ANI preferred stock and ANI common stock. References to the ANI stockholders refer to holders of shares of ANI capital stock. All ANI share and per share numbers have been adjusted retroactively to reflect the one-for-ten reverse stock split effected on January 28, 2011.

        BioSante owns or has rights to various trademarks, trade names or service marks, including BioSante®, LibiGel®, GVAX™, The Pill-Plus™ and Elestrin™. ANI owns or has rights to various trademarks, trade names or service marks, including Cortenema® and Reglan®. This joint proxy statement/prospectus also contains trademarks, trade names and service marks of others.

vi


Table of Contents


QUESTIONS AND ANSWERS ABOUT THE MERGER

        The following section provides answers to frequently asked questions about the merger. This section, however, only provides summary information. These questions and answers may not address all issues that may be important to you as a BioSante or ANI stockholder. You should read carefully the entire joint proxy statement/prospectus, including each of the annexes.

Q:
What is the merger?

A:
BioSante and ANI have entered into an agreement and plan of merger, which is referred to in this joint proxy statement/prospectus as the merger agreement, that contains the terms and conditions of the proposed merger of BioSante and ANI. If the merger is completed, ANI will merge with and into BioSante, with BioSante continuing as the surviving company. This transaction is referred to as the merger.

Q:
Why are BioSante and ANI proposing to effect the merger?

A:
BioSante and ANI both believe that the merger of the two companies will be able to create more value than either company could achieve individually. The combined company that will result from the merger will be a fully integrated specialty branded and generic pharmaceutical company focused on developing, manufacturing and marketing branded and generic prescription pharmaceuticals. For a more complete description of the reasons for the merger, see the sections entitled "The Merger—BioSante Reasons for the Merger" beginning on page 128 and "The Merger—ANI Reasons for the Merger" beginning on page 132.

Q:
What will ANI stockholders receive in the merger?

A:
Upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. See the section entitled "The Merger Agreement—Merger Consideration and Adjustment" beginning on page 156. The exchange ratios are subject to potential adjustment as described in the merger agreement, depending upon the amount of "net cash" of BioSante, as defined in the merger agreement, and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger, and thus will not be determined until that time. Upon completion of the merger, ANI stockholders are expected to receive shares of BioSante common stock representing an aggregate of approximately 53 percent of the outstanding shares of common stock of the combined company, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company, assuming BioSante's net cash is $18.0 million as of the determination date.

1


Table of Contents

Q:
How will BioSante stockholders be affected by the merger?

A:
The merger will have no effect on the number of shares of BioSante common stock or BioSante class C special stock held by BioSante stockholders as of immediately prior to completion of the merger (subject to any changes in outstanding shares of BioSante common stock and BioSante class C special stock as a result of the reverse stock split described elsewhere in this joint proxy statement/prospectus). However, it is expected that upon completion of the merger shares of BioSante common stock will represent only an aggregate of approximately 47 percent of the outstanding shares of common stock of the combined company, assuming BioSante's net cash is $18.0 million as of the determination date. If BioSante's net cash is higher than $18.0 million as of the determination date, then shares of BioSante common stock will represent a higher percentage, but no more than 49.9 percent, of the outstanding shares of common stock of the combined company. If BioSante's net cash is less than $18.0 million as of the determination date, then shares

2


Table of Contents

Q:
Can the value of the transaction change between now and the time the merger is completed?

A:
Yes. The market value of BioSante common stock can change between now and the time the merger is completed and the exchange ratios are subject to adjustment based on BioSante's net cash. The exchange ratios will not change, however, if the market value of BioSante common stock changes. Therefore, the market value of the total transaction, and of the BioSante common stock to be issued to ANI stockholders in the merger, will increase or decrease as the market value of BioSante common stock increases or decreases. In addition, the market value of the total transaction may change as a result of an adjustment of the exchange ratios triggered by a change in BioSante's net cash between now and the net cash determination date.

Q:
Who will be the directors and executive officers of the combined company following the merger?

A:
Following the merger, the board of directors of the combined company will be as follows:

Name
  Current Principal Affiliation
Robert E. Brown, Jr.    ANI
Tracy L. Marshbanks, Ph.D.    ANI
Thomas A. Penn   ANI
Arthur S. Przybyl   ANI
Robert Schrepfer   ANI
Fred Holubow   BioSante
Ross Mangano   BioSante

Name
  Position
Arthur S. Przybyl   President and Chief Executive Officer
Charlotte C. Arnold   Vice President and Chief Financial Officer
James G. Marken   Vice President, Operations
Robert J. Jamnick   Vice President, Quality and Product Development

3


Table of Contents

Q:
What are the conditions to the completion of the merger?

A:
The obligations of each of BioSante and ANI to consummate the merger are subject to the satisfaction or waiver (if permissible) at or before the effective time of the merger of the following conditions:

the adoption by the requisite vote of BioSante stockholders of the merger agreement, including the merger and the issuance of shares of BioSante common stock pursuant to the merger agreement, and approval by the requisite vote of BioSante stockholders of the amendments to BioSante's certificate of incorporation to effect the reverse stock split and change the company's corporate name;

the adoption of the merger agreement, including the merger, by the requisite vote of ANI stockholders;

the absence of any legal prohibition to completing the merger;

the effectiveness of, and the absence of any stop order with respect to, the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part;

the continued listing of BioSante's common stock on The NASDAQ Global Market and the approval for listing on The NASDAQ Global Market or The NASDAQ Capital Market of the shares of BioSante common stock issuable in the merger; and

the receipt of legal opinions from BioSante's and ANI's outside counsel that the merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.
Q:
What will happen to BioSante or ANI if, for any reason, the merger does not close?

A:
BioSante and ANI have invested significant time and incurred, and expect to continue to incur, significant expenses related to the proposed merger. In the event the merger does not close, each

4


Table of Contents

Q:
When do BioSante and ANI expect the merger to be completed?

A:
The merger will be completed upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, but such filing only will be made upon the satisfaction or waiver (if permissible) of the conditions specified in the merger agreement, including receipt of the necessary approvals of BioSante and ANI stockholders at their respective special meetings and other customary closing conditions. It is possible that factors outside the control of BioSante and ANI could result in the merger not being completed or being completed later than expected. Although the exact timing of completion of the merger cannot be predicted with certainty, BioSante and ANI currently anticipate completing the merger in the first quarter of 2013.

5


Table of Contents


QUESTIONS AND ANSWERS FOR BIOSANTE STOCKHOLDERS
ABOUT THE BIOSANTE SPECIAL MEETING

        The following section provides answers to frequently asked questions about the BioSante special meeting of stockholders. This section, however, only provides summary information. These questions and answers may not address all issues that may be important to you as a BioSante stockholder. You should read carefully the entire joint proxy statement/prospectus, including each of the annexes.

Q:
What proposals will be voted on at the BioSante special meeting?

A:
The following proposals will be voted on at the BioSante special meeting:

The first proposal to be voted upon is whether to adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger. See "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, including the Merger and the Issuance of Shares of BioSante Common Stock in the Merger," "The Merger" and "The Merger Agreement" beginning on pages 96, 116 and 156, respectively, for a more detailed description of the transaction.

The second proposal to be voted upon is whether to approve an amendment to BioSante's certificate of incorporation to effect a reverse split of BioSante common stock and BioSante class C special stock at the discretion of BioSante and ANI at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five. See "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 2—Approval of Amendment to BioSante's Certificate of Incorporation to Effect Reverse Split of BioSante Common Stock and Class C Special Stock at the Discretion of BioSante and ANI at a Ratio of Either One-for-Two, One-for-Three, One-for-Four or One-for-Five" beginning on page 97 for a more detailed description of the proposed amendment.

The third proposal to be voted upon is whether to approve an amendment to BioSante's certificate of incorporation to change the name of BioSante in connection with the merger to "ANI Pharmaceuticals, Inc." See "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 3—Approval of Amendment to BioSante's Certificate of Incorporation to Change Corporate Name" beginning on page 108 for a more detailed description of the proposed amendment.

The fourth proposal to be voted upon is whether to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of BioSante under existing arrangements in connection with the merger. See "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 4—Advisory Vote on Golden Parachute Compensation" beginning on page 109 for a more detailed description of the advisory vote.

The fifth proposal to be voted upon is whether to adjourn the BioSante special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the first, second and third proposals. See "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 5—Approval of Possible Adjournment of the BioSante Special Meeting" beginning on page 110 for a more detailed description of the possible adjournment.

Q:
What risks should I consider before I vote on the proposed merger transaction and other merger related proposals?

A:
You should review the section entitled "Risk Factors" beginning on page 38.

6


Table of Contents

Q:
How does the BioSante board of directors recommend that BioSante stockholders vote?

A:
After careful consideration, the BioSante board of directors unanimously has approved the merger agreement, including the merger and the issuance of shares of BioSante common stock in the merger, and each of the proposals described in this joint proxy statement/prospectus that BioSante stockholders are being asked to consider, and has determined that they are advisable, fair to and in the best interests of BioSante stockholders. Accordingly, the BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" each such proposal.

Q:
Why is the proposal to amend BioSante's charter to effect the reverse stock split included in this joint proxy statement/prospectus and is it necessary for the completion of the merger?

A:
It is expected that immediately prior to the effective time of the merger, BioSante will effect a reverse split of the BioSante common stock and BioSante class C special stock at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five (with the exact ratio to be determined by BioSante and ANI immediately prior to completion of the merger). The reverse stock split is intended to ensure that the listing rules of The NASDAQ Stock Market are satisfied in connection with the issuance of shares of BioSante common stock in the merger. Under the listing rules of The NASDAQ Stock Market, the combined company must file an initial listing application in connection with the merger and comply with the initial listing rules of the applicable NASDAQ market to continue to be listed on such market following the merger. BioSante common stock is required to be listed on The NASDAQ Global Market or The NASDAQ Capital Market as a condition to closing the merger. The initial listing rules of The NASDAQ Global Market and The NASDAQ Capital Market require a company to have, among other things, a $4.00 per share minimum bid price. Because the current per share price of BioSante common stock is less than $4.00, the reverse stock split is necessary to meet the minimum bid listing requirement.

Q:
Why is the proposal to amend BioSante's charter to effect the change in BioSante's corporate name included in this joint proxy statement/prospectus and is it necessary for the completion of the merger?

A:
Both BioSante and ANI believe that the change in the corporate name of BioSante from "BioSante Pharmaceuticals, Inc." to "ANI Pharmaceuticals, Inc." will allow for recognition of the combined company's business following completion of the merger. The current name will no longer accurately reflect the business of the combined company and the mission of the combined company subsequent to the completion of the merger. The approval of the amendment to BioSante's certificate of incorporation to effect the change in corporate name by the BioSante stockholders is a condition to closing the merger.

Q:
Can I dissent and require appraisal of my shares?

A:
No. Under the Delaware General Corporation Law, BioSante stockholders will not have appraisal rights in connection with the merger or any of the other proposals described in this joint proxy statement/prospectus that the BioSante stockholders are being asked to consider. See "The Merger—Appraisal Rights" beginning on page 152.

Q:
When and where is the BioSante special meeting?

A:
The BioSante special meeting of stockholders will be held on Friday, March 15, 2013 at 8:00 a.m., local time, at BioSante's corporate offices located at 111 Barclay Boulevard, Lincolnshire, Illinois 60069 to consider and vote on the proposals related to the merger agreement and the transactions contemplated by it. For additional information relating to the BioSante special meeting, please see the section entitled "The Special Meeting of BioSante Stockholders" beginning on page 92.

7


Table of Contents

Q:
Who is soliciting my proxy?

A:
This proxy is being solicited by the BioSante board of directors.

Q:
What do I do now?

A:
BioSante urges you to read carefully and consider this joint proxy statement/prospectus, including its annexes, and consider how the proposed merger affects you.
Q:
Who is entitled to vote at the BioSante special meeting?

A:
Holders of record of BioSante common stock and BioSante class C special stock at the close of business on January 17, 2013 are entitled to notice of and to vote at the BioSante special meeting. As of January 17, 2013, 24,422,240 shares of BioSante common stock were issued and outstanding and entitled to vote and 65,211 shares of BioSante class C special stock were issued and outstanding and entitled to vote.

Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:
If your shares are registered directly in your name with BioSante's transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the "stockholder of record." These proxy materials are sent to you by mail directly by BioSante.
Q:
If I am a stockholder of record of BioSante capital stock, how do I vote?

A:
You may vote by proxy over the Internet by visiting the website established for that purpose at https://www.proxyvote.com and following the instructions (please note you must type an "s" after http), or you may vote by mail or by telephone. Alternatively, if you are a stockholder of record, you may vote in person at the BioSante special meeting. You will receive a ballot when you arrive.

Q:
If I am a beneficial owner of shares held in street name, how do I vote?

A:
You may vote by proxy over the Internet by visiting the website established for that purpose at https://www.proxyvote.com and following the instructions (please note you must type an "s" after http), or you may vote by mail or by telephone. If you are a beneficial owner of shares held in street name and you wish to vote in person at the BioSante special meeting, you must obtain a valid proxy from the organization that holds your shares.

8


Table of Contents

Q:
What can I do if I change my mind after I vote my shares?

A:
A stockholder of record may revoke its proxy at any time before it is used on the date of the BioSante special meeting by delivering to the corporate secretary of BioSante:

written notice of revocation,

a duly executed proxy bearing a later date or time than that of the previously submitted proxy, or

a later dated vote by Internet or telephone, or a ballot cast in person at the BioSante special meeting.
Q:
What shares are included on the proxy card?

A:
If you are a stockholder of record of BioSante capital stock, you will receive only one proxy card for all the shares of BioSante capital stock you hold in certificate form and in book-entry form.
Q:
What are the voting requirements to approve each of the proposals that will be voted on at the BioSante special meeting?

A:

Proposal
 
Vote Required
Adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger   Majority of the outstanding shares of BioSante common stock and BioSante class C special stock, voting together as a single class, and entitled to vote

Approval of amendment to effect reverse split of BioSante common stock and BioSante class C special stock at the discretion of BioSante and ANI at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five

 

Majority of the outstanding shares of BioSante common stock and BioSante class C special stock, voting together as a single class, and entitled to vote

Approval of amendment to effect change of corporate name to "ANI Pharmaceuticals, Inc."

 

Majority of the outstanding shares of BioSante common stock and BioSante class C special stock, voting together as a single class, and entitled to vote

Approval, on an advisory (non-binding) basis, of the compensation payable to certain executive officers of BioSante under existing arrangements in connection with the merger

 

Majority of the shares of BioSante common stock and BioSante class C special stock present in person or represented by proxy, voting together as a single class, and entitled to vote when a quorum is present

Approval of adjournment of the BioSante special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the first three proposals

 

Majority of the shares of BioSante common stock and BioSante class C special stock present in person or represented by proxy, voting together as a single class, and entitled to vote when a quorum is present

9


Table of Contents

Q:
What constitutes a quorum at the BioSante special meeting?

A:
The presence at the BioSante special meeting, either in person or by proxy, of the holders of one-third of the outstanding shares of BioSante common stock and BioSante class C special stock entitled to vote shall constitute a quorum for the transaction of business. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum. A "broker non-vote" occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

Q:
Could other matters be decided at the BioSante special meeting?

A:
As of the date of the printing of this joint proxy statement/prospectus, neither BioSante nor ANI knew of any matters to be raised at the BioSante special meeting other than those referred to in this joint proxy statement/prospectus. If other matters are properly presented at the BioSante special meeting for consideration, the proxy committee appointed by the BioSante board of directors (the persons named in your proxy card if you are a BioSante stockholder of record) will have the discretion to vote on those matters for you.

Q:
Who will count the vote?

A:
An officer of BioSante or a designee will tabulate the votes and act as inspector of the election.

Q:
Who is paying for this proxy solicitation?

A:
BioSante will bear the cost of soliciting proxies, including the printing, mailing and filing of this joint proxy statement/prospectus, the proxy card and any additional information furnished to BioSante stockholders. BioSante has engaged Phoenix Advisory Partners, a proxy solicitation firm, to solicit proxies from BioSante stockholders. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of BioSante common stock for the forwarding of solicitation materials to the beneficial owners of BioSante common stock. BioSante will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

10


Table of Contents

Q:
Whom should I call with questions?

A:
If you have additional questions, you should contact:

BioSante Pharmaceuticals, Inc.
111 Barclay Boulevard
Lincolnshire, Illinois 60069
Attention: Investor Relations
Phone Number: (847) 478-0500, ext. 120
Email Address: info@biosantepharma.com

AST Phoenix Advisors
110 Wall Street, 27th Floor
New York, New York 10005
Telephone: (877) 478-5038
Email Address: info@phoenixadvisorsast.com

11


Table of Contents


QUESTIONS AND ANSWERS FOR ANI STOCKHOLDERS
ABOUT THE ANI SPECIAL MEETING

        The following section provides answers to frequently asked questions about the ANI special meeting of stockholders. This section, however, only provides summary information. These questions and answers may not address all issues that may be important to you as an ANI stockholder. You should read carefully the entire joint proxy statement/prospectus, including each of the annexes.

Q:
What proposals will be voted on at the ANI special meeting?

A:
The following proposals will be voted on at the ANI special meeting:

The first proposal to be voted upon is whether to adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby, including the merger. See "Matters Being Submitted to a Vote of ANI Stockholders—ANI Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, including the Merger," "The Merger" and "The Merger Agreement" beginning on pages 114, 116 and 156, respectively, for a more detailed description of the transaction.

The second proposal to be voted upon is whether to adjourn the ANI special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the first proposal. See "Matters Being Submitted to a Vote of ANI Stockholders—ANI Proposal No. 2—Approval of Possible Adjournment of the ANI Special Meeting" beginning on page 115 for a more detailed description of the possible adjournment.

Q:
What risks should I consider before I vote on the proposed merger transaction?

A:
You should review the section entitled "Risk Factors" beginning on page 38.

Q:
How does the ANI board of directors recommend that ANI stockholders vote?

A:
After careful consideration, the ANI board of directors has unanimously approved the merger agreement, including the merger, and each of the proposals described in this joint proxy statement/prospectus that the ANI stockholders are being asked to consider, and has determined that they are advisable, fair to and in the best interests of ANI stockholders. Accordingly, the ANI board of directors unanimously recommends that ANI stockholders vote "FOR" each such proposal.

Q:
Can I dissent and require appraisal of my shares?

A:
Yes. Under the Delaware General Corporation Law, ANI stockholders will have appraisal rights in connection with the merger. See "The Merger—Appraisal Rights" beginning on page 152.

Q:
When and where is the ANI special meeting?

A:
The ANI special meeting of stockholders will be held on Friday, March 15, 2013 at 9:00 a.m., local time, at the offices of MVP Capital Partners located at 259 N. Radnor-Chester Road, Suite 130, Radnor, Pennsylvania 19087 to consider and vote on the proposals related to the merger agreement and the transactions contemplated by it. For additional information relating to the ANI special meeting, please see the section entitled "The Special Meeting of ANI Stockholders" beginning on page 111.

Q:
Who is soliciting my proxy?

A:
This proxy is being solicited by the ANI board of directors.

12


Table of Contents

Q:
What do I do now?

A:
ANI urges you to read carefully and consider this joint proxy statement/prospectus, including its annexes, and consider how the proposed merger affects you.
Q:
Who is entitled to vote at the ANI special meeting?

A:
Every stockholder of ANI on the record date is entitled to vote at the ANI special meeting. Holders of record of ANI capital stock at the close of business on January 17, 2013 are entitled to notice of and to vote at the ANI special meeting. As of January 17, 2013, 2,375,312 shares of ANI series D preferred stock, 34,810 shares of ANI series C preferred stock, 78,491 shares of ANI series B preferred stock, 102,774 shares of ANI series A preferred stock and 23,613 shares of ANI common stock were issued and outstanding and entitled to vote.

Q:
How do I vote?

A:
You may vote by mail, or alternatively, you may vote in person at the ANI special meeting. You will receive a ballot when you arrive.

Q:
What can I do if I change my mind after I vote my shares?

A:
A stockholder of record may revoke its proxy at any time before it is used on the date of the ANI special meeting by delivering to the corporate secretary of ANI:

written notice of revocation,

a duly executed proxy bearing a later date or time than that of the previously submitted proxy, or

a later dated vote by a ballot cast in person at the ANI special meeting.

Q:
What shares are included on the proxy card?

A:
If you are a stockholder of record of ANI capital stock, you will receive only one proxy card for all the shares of ANI capital stock you hold in certificate form.

13


Table of Contents

Q:
What are the voting requirements to approve each of the proposals that will be voted on at the ANI special meeting?

A:

Proposal
 
Vote Required
Adoption of the merger agreement and the transactions contemplated thereby, including the merger   Majority of the outstanding shares of ANI capital stock entitled to vote, calculated on an as-converted basis, voting as a single class, and 65 percent of the outstanding shares of ANI series D preferred stock entitled to vote

Approval of adjournment of the ANI special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the adoption of the merger agreement and the transactions contemplated thereby, including the merger

 

Majority of the shares of ANI capital stock entitled to vote, calculated on an as-converted basis, present in person or represented by proxy and voting as a single class
Q:
What constitutes a quorum at the ANI special meeting?

A:
The presence at the ANI special meeting, either in person or by proxy, of the holders of a majority of the voting power of the issued and outstanding shares of ANI capital stock entitled to vote will constitute a quorum for the transaction of business. Abstentions are counted as present and entitled to vote for purposes of determining a quorum.

Q:
Could other matters be decided at the ANI special meeting?

A:
As of the date of the printing of this joint proxy statement/prospectus, neither BioSante nor ANI knew of any matters to be raised at the ANI special meeting other than those referred to in this joint proxy statement/prospectus. If other matters are properly presented at the ANI special meeting for consideration, the proxy committee appointed by the ANI board of directors (the persons named in your proxy card) will have the discretion to vote on those matters for you.

Q:
Who will count the vote?

A:
An officer of ANI or a designee will tabulate the votes and act as inspector of the election.

14


Table of Contents

Q:
Who is paying for this proxy solicitation?

A:
ANI will bear the cost of soliciting proxies, including the printing, mailing and filing of this joint proxy statement/prospectus, the proxy card and any additional information furnished to the ANI stockholders.

Q:
Whom should I call with questions?

A:
If you have additional questions, you should contact:

ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc.
210 Main Street West
Baudette, Minnesota 56623
Telephone: (218) 634-3500
Investor Relations: arthur.przybyl@anipharmaceuticals.com

AST Phoenix Advisors
110 Wall Street, 27th Floor
New York, New York 10005
Telephone: (877) 478-5038
Email Address: info@phoenixadvisorsast.com

15


Table of Contents


SUMMARY

        This summary highlights selected information from this joint proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the merger and the other proposals being considered at the special meetings, you should read this entire joint proxy statement/prospectus carefully, including the attached Annexes, and the other documents to which you are referred herein. See "Where You Can Find More Information" beginning on page 300.


The Companies

BioSante Pharmaceuticals, Inc.

        BioSante Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on developing products for female sexual health and oncology. The following are BioSante's products, either approved or in clinical development:

        BioSante's corporate offices are located at 111 Barclay Boulevard, Lincolnshire, Illinois 60069 and its telephone number is (847) 478-0500. BioSante's website is located at www.biosantepharma.com. The information contained on or connected to BioSante's website is expressly not incorporated by reference into this joint proxy statement/prospectus. Additional information about BioSante is included elsewhere in this joint proxy statement/prospectus. See the sections entitled "BioSante's Business," "BioSante's Management's Discussion and Analysis of Financial Condition and Results of Operations" and BioSante's financial statements beginning on pages 175, 193 and F-1, respectively.

ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc.

        ANI is a fully integrated specialty branded and generic pharmaceutical company developing, manufacturing and marketing branded and generic prescription pharmaceuticals. In two facilities with combined manufacturing, packaging and laboratory capacity totaling 173,000 square feet, ANI manufactures oral solid dose products, as well as liquids and topicals, including narcotics and those that must be manufactured in a fully contained environment due to their potency and/or toxicity. ANI also performs contract manufacturing for other pharmaceutical companies. Over the last two years ANI has launched three new products and currently has 11 products in development. ANI's targeted areas of product development include narcotics, anti-cancers and hormones (potent compounds), and extended release niche generic prescription product opportunities.

        ANI's corporate offices are located at 210 Main Street West, Baudette, Minnesota 56623, and its telephone number is (218) 634-3500. ANI's website is located at www.anipharmaceuticals.com. The

 

16


Table of Contents

information contained on or connected to ANI's website is expressly not incorporated by reference into this joint proxy statement/prospectus. Additional information about ANI is included elsewhere in this joint proxy statement/prospectus. See the sections entitled "ANI's Business," "ANI's Management's Discussion and Analysis of Financial Condition and Result of Operations" and ANI's financial statements beginning on pages 211, 222 and F-47, respectively.


Summary of the Merger

        If the merger is completed, ANI will be merged with and into BioSante, with BioSante surviving the merger. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the merger agreement in its entirety because it is the legal document that governs the merger. For a more complete discussion of the merger, see the sections entitled "The Merger" and "The Merger Agreement" beginning on pages 116 and 156, respectively.


Reasons for the Merger

        The combined company that will result from the merger will be a fully integrated specialty branded and generic pharmaceutical company focused on developing, manufacturing and marketing branded and generic prescription pharmaceuticals. BioSante and ANI both believe that the merger of the two companies will be able to create more value than either company could achieve individually.

        Each of the boards of directors of BioSante and ANI also considered other reasons for the merger, as described herein. For example, the BioSante board of directors considered, among other reasons:

 

17


Table of Contents

        In addition, the ANI board of directors considered, among other reasons, the following:

        For a more complete discussion of BioSante's and ANI's reasons for the merger, see the sections entitled "The Merger—BioSante Reasons for the Merger" and "The Merger—ANI Reasons for the Merger" beginning on pages 128 and 132, respectively.


Opinion of Oppenheimer & Co. Inc.

        In connection with the merger, the BioSante board of directors received a written opinion, dated October 3, 2012, of BioSante's financial advisor, Oppenheimer & Co. Inc., referred to as "Oppenheimer & Co." or "BioSante's financial advisor," as to the fairness, from a financial point of view and as of the date of the opinion, to BioSante of the exchange ratios used in the merger. The full text of Oppenheimer & Co.'s written opinion, dated October 3, 2012, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this joint proxy statement/prospectus as Annex G. Oppenheimer & Co.'s opinion was provided to the BioSante board of directors in connection with its evaluation of the exchange ratios from a financial point of view to BioSante and does not address any other aspect of the merger. Oppenheimer & Co.'s opinion does not address, among other things, the underlying business decision of BioSante to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for BioSante or the effect of any other transaction in which BioSante might engage and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger. For a more complete discussion of Oppenheimer & Co.'s opinion, see the section entitled "The Merger—Opinion of Oppenheimer & Co. Inc." beginning on page 134.


Risk Factors

        Both BioSante and ANI are subject to various risks associated with their respective businesses and financial condition. In addition, the merger, as well as the possibility that the merger may not be

 

18


Table of Contents

completed, pose a number of risks to BioSante and ANI and their respective stockholders, including the following risks:

        In addition, BioSante, ANI and the combined company are subject to various risks associated with their respective businesses. These risks are discussed in greater detail in the section entitled "Risk Factors" beginning on page 38. BioSante and ANI both encourage you to read and consider all of these risks carefully.


Merger Consideration and Adjustment

        Upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger and thus will not be determined until that time. Upon completion of the merger, ANI stockholders are expected to receive shares of BioSante common stock representing an aggregate of approximately 53 percent of the outstanding shares of common stock of the combined company, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company, assuming BioSante's net cash is $18.0 million as of the determination date.

        Pursuant to the terms of ANI's certificate of incorporation, before any amounts are paid to the holders of shares of any other series of ANI preferred stock or ANI common stock, the holders of shares of ANI series D preferred stock are entitled to receive an amount per share equal to $30.00

 

19


Table of Contents

(subject to adjustment as provided in ANI's certificate of incorporation) plus all declared but unpaid dividends. The exchange ratios in the merger agreement reflect these preferential payments. As a result of such provisions, it is likely that holders of shares of other series of ANI preferred stock or ANI common stock will not receive any shares of BioSante common stock in connection with the merger.

        The following table illustrates the percentage ownership of the combined company by BioSante's and ANI's current stockholders assuming various amounts of net cash of BioSante as of the determination date.

BioSante's Net Cash as of
Determination Date Calculated
Pursuant to Merger Agreement
  BioSante Stockholder Ownership
of Outstanding Shares of
Combined Company
  ANI Stockholder Ownership
of Outstanding Shares of
Combined Company
 

$23.0 million or more

    49.9 %   50.1 %

22.0 million

    49.4 %   50.6 %

21.0 million

    48.8 %   51.2 %

20.0 million

    48.2 %   51.8 %

19.0 million

    47.6 %   52.4 %

18.0 million

    47.0 %   53.0 %

17.0 million

    46.4 %   53.6 %

        As described in more detail below under "—Conditions to Completion of the Merger," one of the conditions to ANI's obligations to complete the merger, unless waived by ANI, is BioSante's net cash as of the closing date being no less than $17.0 million as calculated and as adjusted pursuant to the provisions of the merger agreement.

        For illustrative purposes only, if the merger had been completed on December 31, 2012, and assuming BioSante's net cash as of such date was $18.0 million, the exchange ratio (without giving effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described elsewhere in this joint proxy statement/prospectus) for the ANI series D preferred stock (including shares that would have been issued to certain executive officers of ANI immediately prior to completion of the merger) would have been approximately 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock and the exchange ratio (without giving effect to the proposed reverse stock split described elsewhere in this joint proxy statement/prospectus) for the ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock would have been zero. Therefore, if the merger had been completed on such date and you owned 1,000 shares of ANI series D preferred stock as of such date, you would have had the right to receive 10,350 shares of BioSante common stock in exchange for your shares of ANI series D preferred stock. If you owned 1,000 shares of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock or ANI common stock as of such date, you would have had the right to receive no shares of BioSante common stock for such shares of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock or ANI common stock.

        No fractional shares of BioSante common stock will be issued to ANI stockholders in connection with the merger. Instead, ANI stockholders will be entitled to receive cash in lieu of any fractional shares of BioSante common stock that they otherwise would be entitled to receive in connection with the merger.

        BioSante will issue a press release after the final determination of the exchange ratios announcing the final exchange ratios and BioSante's net cash balance at the determination date.

        There will be no adjustment to the total number of shares of BioSante common stock that ANI stockholders will be entitled to receive as a result of changes in the market price of BioSante common stock. Accordingly, the market value of the shares of BioSante common stock issued in connection with the merger will depend on the market value of the shares of BioSante common stock at the time of the

 

20


Table of Contents

merger, and could vary significantly from the market value on the date of this joint proxy statement/prospectus.

        For a more complete discussion of what ANI stockholders will receive in connection with the merger and the determination of the exchange ratios, see the section entitled "The Merger Agreement—Merger Consideration and Adjustment" beginning on page 156.


Treatment of ANI Stock Options and Warrants

        All options and warrants to purchase shares of ANI capital stock outstanding immediately prior to the effective time of the merger will terminate and will no longer be outstanding immediately after the merger, except for certain warrants which although not cancelled in connection with the merger will not represent the right to acquire any equity or other interest in the combined company after the merger.

        For a more complete discussion of the treatment of ANI stock options and warrants, see the section entitled "The Merger—Treatment of ANI Stock Options and Warrants" beginning on page 159.


Treatment of BioSante Stock Options, Warrants and Convertible Senior Notes

        All options and warrants to purchase shares of BioSante common stock will remain outstanding immediately after the merger, but the number of shares subject to and the exercise price applicable to such options and warrants will be adjusted to reflect the reverse stock split anticipated to take place immediately prior to the effective time of the merger. Pursuant to the terms of BioSante's equity-based compensation plans, all outstanding options to acquire shares of BioSante common stock will vest immediately and become exercisable in full upon completion of the merger. However, as a result of the anticipated reverse stock split, all such options likely will terminate unexercised since the exercise prices of such options currently range from $2.02 to $220.92 per share and the employment or other service of the holders of such options, other than those held by the two BioSante directors who will remain as directors of the combined company after the merger, will be terminated in connection with the merger. As of December 31, 2012, BioSante had an aggregate of 1.1 million shares of BioSante common stock reserved for issuance upon the exercise of outstanding stock options and an aggregate of 4.7 million shares of BioSante common stock reserved for issuance upon the exercise of outstanding warrants. The exercise prices of the warrants currently range from $1.50 to $24.00 per share.

        All outstanding 3.125% convertible senior notes due May 1, 2013 of BioSante will remain outstanding immediately after the merger, but the conversion price and number of shares of BioSante common stock issuable upon any conversion of such notes will be adjusted to reflect the reverse stock split anticipated to take place immediately prior to the effective time of the merger. As of December 31, 2012, the outstanding principal amount of such notes was $8.3 million and BioSante had an aggregate of 370,871 shares of BioSante common stock reserved for issuance upon the conversion of such notes. The conversion price of the notes is currently $22.32 per share.


Management of the Combined Company Following the Merger

        Following the merger, the board of directors of the combined company will be comprised of seven members, including two current members of the BioSante board of directors and five current members of the ANI board of directors. Robert E. Brown, Jr., ANI's chairman of the board, will be chairman of

 

21


Table of Contents

the board of the combined company. Following the merger, the directors of the combined company will be as follows:

Name
  Current Principal Affiliation
Robert E. Brown, Jr.    ANI
Tracy L. Marshbanks, Ph.D.    ANI
Thomas A. Penn   ANI
Arthur S. Przybyl   ANI
Robert Schrepfer   ANI
Fred Holubow   BioSante
Ross Mangano   BioSante

        Following the merger, the executive officers of the combined company will be the current executive officers of ANI:

        For a more complete discussion of the management of the combined company after the merger, see the section entitled "Management of the Combined Company Following the Merger" beginning on page 250.


Interests of BioSante's Directors and Officers in the Merger

        In considering the recommendation of the BioSante board of directors to BioSante stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, and the other matters to be acted upon by BioSante stockholders at the BioSante special meeting, BioSante stockholders should be aware that members of the BioSante board of directors and BioSante's officers have interests in the merger that may be different from, or in addition to, or conflict with, the interests of BioSante stockholders.

        Interests of the BioSante directors and officers relate to:

Name
  Cash   Perquisites/
Benefits
  Total  

Stephen M. Simes

  $ 1,490,100   $ 87,949   $ 1,578,049  

Phillip B. Donenberg

    770,000     74,156     844,156  

Michael C. Snabes, M.D., Ph.D. 

    526,400     44,972     571,372  

 

22


Table of Contents

        The BioSante board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, and to recommend that BioSante stockholders approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, and related matters. Other than full disclosure of these potential conflicts of interest, the BioSante board of directors did not take any other steps to alleviate such potential conflicts of interest since it did not consider such potential conflicts of interest to be material in connection with its decision to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock.

        For a more complete discussion of the interests of the directors and executive officers of BioSante in the merger, see the section entitled "The Merger—Interests of BioSante's Directors and Executive Officers in the Merger" beginning on page 143.


Interests of ANI's Directors and Officers in the Merger

        In considering the recommendations of the ANI board of directors to ANI stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the other matters to be acted upon by ANI stockholders at the ANI special meeting, ANI stockholders should be aware that members of the ANI board of directors and ANI's officers have interests in the merger that may be different from, or in addition to, or conflict with, the interests of ANI stockholders.

        Interests of the ANI directors and officers relate to:

 

23


Table of Contents

        The ANI board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, and to recommend that ANI stockholders approve the merger agreement and the transactions contemplated thereby, including the merger. Other than full disclosure of these potential conflicts of interest, the ANI board of directors did not take any other steps to alleviate such potential conflicts of interest since it did not consider such potential conflicts of interest to be material in connection with its decision to approve the merger agreement and the transactions contemplated thereby, including the merger.

        For a more complete discussion of the interests of the directors and executive officers of ANI in the merger, see the section entitled "The Merger—Interests of ANI's Directors and Officers in the Merger" beginning on page 148.


Conditions to Completion of the Merger

        BioSante and ANI expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or, if permissible, waived. BioSante and ANI currently expect to complete the merger in the first quarter of 2013. However, it is possible that factors outside of BioSante's or ANI's control could require BioSante and ANI to complete the merger at a later time or not complete it at all. The obligations of each of BioSante and ANI to complete the merger are subject to the satisfaction or waiver (if permissible) at or before the effective time of the merger of the following conditions:

 

24


Table of Contents

        In addition, each party's obligation to complete the merger is further subject to the satisfaction or waiver (if permissible) by that party of the following additional conditions:

        In addition, the obligation of ANI to complete the merger is further subject to the satisfaction or waiver at or before the effective time of the merger of the following additional conditions:

        For a more complete discussion of the conditions to the completion of the merger, see the section entitled "The Merger Agreement—Conditions to Completion of the Merger" beginning on page 159.


No Solicitation

        Each of BioSante and ANI has agreed that, with certain exceptions, BioSante and ANI and their respective officers, directors, employees and advisors will not:

        The merger agreement does not, however, prohibit BioSante from considering a bona fide acquisition proposal from a third party if certain specified conditions are met. For a more complete description of the prohibition on solicitations of acquisition proposals from third parties, see "The Merger Agreement—No Solicitation" beginning on page 160.


Termination of the Merger Agreement

        Either BioSante or ANI can terminate the merger agreement, which would prevent the merger from being consummated, under certain circumstances as set forth below:

 

25


Table of Contents

        For a more complete discussion of the circumstances under which the merger agreement may be terminated, see the section entitled "The Merger Agreement—Termination" beginning on page 164.


Termination Fees and Expenses

        If the merger agreement is terminated under certain circumstances, BioSante will be required to pay ANI a termination fee of $1.0 million. The merger agreement also provides that under specified circumstances, BioSante may be required to reimburse ANI up to $500,000 for ANI's expenses in connection with the transaction. Any expenses paid by BioSante will be credited against the termination fee if the termination fee subsequently becomes payable by BioSante. If the merger agreement is

 

26


Table of Contents

terminated under certain circumstances, ANI will be required to pay BioSante a termination fee of $750,000.

        For a more complete discussion of termination fees and expenses, see the section entitled "The Merger Agreement—Termination Fees and Expenses" beginning on page 165.


Vote Required

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, having voting power outstanding on the record date for the BioSante special meeting is required for approval of the proposal to adopt the merger agreement and the transactions contemplated thereby including the merger and the issuance of shares of BioSante common stock in the merger, and the proposals to approve the two BioSante charter amendments to effect the reverse stock split and change the corporate name. The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, present in person or represented by proxy at the BioSante special meeting, is required for approval of the proposal to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of BioSante under existing arrangements in connection with the merger and the proposal to approve an adjournment of the BioSante special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the merger agreement and the transactions contemplated thereby including the merger and the issuance of shares of BioSante common stock in the merger, and/or the proposals to approve the two BioSante charter amendments to effect the reverse stock split and change the corporate name. For a more complete discussion of the matters to be considered by the BioSante stockholders at the BioSante special meeting and the vote required to approve such matters, see the section entitled "Matters Being Submitted to a Vote of BioSante Stockholders" beginning on page 96.

        The affirmative vote of holders of a majority of the shares of ANI common stock, calculated on an as-converted basis and voting together as a single class, and 65 percent of the shares of ANI series D convertible preferred stock having voting power outstanding on the record date for the ANI special meeting is required for approval of the proposal to adopt the merger agreement and the transactions contemplated thereby including the merger. The affirmative vote of holders of a majority of ANI common stock, calculated on an as-converted basis, present in person or represented by proxy at the ANI special meeting is required for approval of the proposal to approve an adjournment of the ANI special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to adopt the merger agreement and the transactions contemplated thereby including the merger. For a more complete discussion of the matters to be considered by the ANI stockholders at the ANI special meeting and the vote required to approve such matters, see the section entitled "Matters Being Submitted to a Vote of ANI Stockholders" beginning on page 114.


Voting Agreements

        In connection with the execution of the merger agreement, all of BioSante's directors, executive officers and affiliated entities, who collectively held approximately two percent of the outstanding shares of BioSante capital stock as of October 3, 2012, entered into a voting agreement with ANI, pursuant to which each such BioSante stockholder agreed to vote all of their shares of BioSante capital stock in favor of adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, in favor of the two charter amendments, and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transactions contemplated thereby. As of the record date for the BioSante special meeting, the shares of BioSante capital stock owned by all of BioSante's directors, executive officers and affiliated entities and thus subject to the voting agreements constituted approximately two percent of the total outstanding voting power of BioSante on that date.

 

27


Table of Contents

        In connection with the execution of the merger agreement, Meridian Venture Partners II, L.P., Argentum Capital Partners II, L.P. and four funds affiliated with First Analysis Corp., who in the aggregate held approximately 85 percent of the shares of the outstanding ANI capital stock, calculated on an as-converted basis, and approximately 86 percent of the outstanding shares of the ANI series D preferred stock, as of October 3, 2012 entered into a voting agreement with BioSante, pursuant to which they agreed to vote their shares of ANI capital stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transaction contemplated by the merger agreement. As of the record date for the ANI special meeting, the shares of ANI capital stock owned by all of ANI's directors, executive officers and affiliated entities constituted approximately 92 percent of the outstanding shares of ANI capital stock, on an as-converted basis, and approximately 94 percent of the outstanding shares of the ANI series D preferred stock on that date.

        For a more complete discussion of the voting agreements, see the section entitled "Voting and Other Ancillary Agreements" beginning on page 168. For a more complete discussion of the beneficial ownership of BioSante's and ANI's directors, executive officers and affiliates, see the sections entitled "Principal Stockholders of BioSante" and "Principal Stockholders of ANI" beginning on pages 274 and 276, respectively.


Material U.S. Federal Income Tax Consequences of the Merger

        The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and it is a condition to the completion of the merger that BioSante and ANI each receive a written opinion from their respective outside legal counsel regarding such qualification. As a result of the "reorganization," ANI stockholders generally will not recognize gain or loss for U.S. federal income tax purposes upon the exchange of their shares of ANI capital stock for shares of BioSante common stock in connection with the merger. However, if an ANI stockholder receives cash in lieu of a fractional share of BioSante common stock, then such stockholder generally will recognize gain or loss in an amount equal to the difference between such stockholder's adjusted tax basis in the fractional share and the amount of cash received. Moreover, an ANI stockholder who perfects appraisal rights and receives cash in exchange for such stockholder's shares of ANI capital stock will recognize gain or loss measured by the difference between the amount of cash received and such stockholder's adjusted tax basis in those shares. BioSante stockholders generally will not recognize gain or loss for U.S. federal income tax purposes as a result of the merger.

        Tax matters are very complicated, and the tax consequences of the merger to a particular BioSante or ANI stockholder will depend in part on such stockholder's circumstances. Accordingly, BioSante and ANI urge you to consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled "Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 172.


Regulatory Approvals

        Neither BioSante nor ANI is required to make any filings or to obtain any approvals or clearances from any antitrust regulatory authorities in the United States or other countries to consummate the merger. In the United States, BioSante must comply with applicable federal and state securities laws and The NASDAQ Stock Market rules and regulations in connection with the issuance of shares of BioSante common stock in the merger, including the filing with the SEC of the registration statement of which this joint proxy statement/prospectus is a part. For a more complete discussion of the regulatory approvals required in connection with the merger, see the section entitled "The Merger—Regulatory Approvals" beginning on page 151.

 

28


Table of Contents


Anticipated Accounting Treatment

        The merger will be accounted for as a "reverse acquisition" pursuant to which ANI will be considered the acquiring entity for accounting purposes in accordance with U.S. generally accepted accounting principles, referred to as U.S. GAAP. As such, ANI will allocate the total purchase consideration to BioSante's tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of the completion of the merger. ANI's historical results of operations will replace BioSante's historical results of operations for all periods prior to the merger. After completion of the merger, the results of operations of both companies will be included in BioSante's financial statements. For a more complete discussion of the anticipated accounting treatment of the merger, see the section entitled "The Merger—Anticipated Accounting Treatment" beginning on page 151.


Appraisal Rights

        If the merger is completed, ANI stockholders are entitled to appraisal rights under Section 262 of the Delaware General Corporation Law. Holders of BioSante common stock and BioSante class C special stock are not entitled to appraisal rights in connection with the merger. For a more complete discussion of the appraisal rights, see the provisions of Section 262 of the Delaware General Corporation Law, attached to this joint proxy statement/prospectus as Annex H, and the section entitled "The Merger—Appraisal Rights" beginning on page 152.


Comparison of Stockholder Rights

        Both BioSante and ANI are incorporated under the laws of the State of Delaware; and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the Delaware General Corporation Law and their respective certificates of incorporation and bylaws. If the merger is completed, ANI stockholders will become stockholders of BioSante, and their rights will be governed by the Delaware General Corporation Law, the certificate of incorporation of BioSante and the bylaws of BioSante. The rights of BioSante contained in the certificate of incorporation and bylaws of BioSante differ from the rights of ANI stockholders under the certificate of incorporation and bylaws of ANI, as more fully described under the section entitled "Comparison of Rights of Holders of BioSante Stock and ANI Stock" beginning on page 286.


Contingent Value Rights

        BioSante plans to issue contingent value rights (referred to as CVRs) to holders of BioSante common stock as of immediately before completion of the merger. BioSante expects that one CVR will be issued for each share of BioSante common stock outstanding as of a record date of March 15, 2013. The CVRs will be non-transferable and not attached to the shares of BioSante common stock. The CVRs will be rights to receive potential cash payments in connection with a LibiGel transaction (as defined in the contingent value rights agreement) upon the terms and subject to the conditions set forth in a contingent value rights agreement to be entered into between BioSante and a rights agent. The aggregate cash payments to be received by holders of the CVRs, if any, will be equal to 66 percent of the net cash payments received by the combined company as a result of the sale, transfer, license or similar transaction relating to BioSante's LibiGel program during the 10-year period following completion of the merger, and will not exceed $40 million in the aggregate. The form of the contingent value rights agreement is attached to this joint proxy statement/prospectus as Annex F. For a more complete discussion of the CVRs, see the section entitled "Contingent Value Rights" beginning on page 170.

 

29


Table of Contents


SELECTED HISTORICAL FINANCIAL INFORMATION AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION AND DATA

Selected Historical Financial Data of BioSante

        The selected financial data as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 are derived from BioSante's audited financial statements included in this joint proxy statement/prospectus beginning on page F-1. The selected financial data as of December 31, 2009, 2008 and 2007 and for the years ended December 31, 2008 and 2007 are derived from BioSante's financial statements, which are not included in this joint proxy statement/prospectus. The statement of operations data for the nine months ended September 30, 2012 and 2011, as well as the balance sheet data as of September 30, 2012 and 2011 are derived from BioSante's unaudited financial statements included in this joint proxy statement/prospectus beginning on page F-32. The selected historical financial data below should be read in conjunction with "BioSante's Management's Discussion and Analysis of Financial Condition and Results of Operations" and BioSante's financial statements and related notes appearing elsewhere in this joint proxy statement/prospectus. The historical results are not necessarily indicative of results to be expected in any future period.

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
 
  2012   2011   2011   2010   2009   2008   2007  
 
   
   
   
  (in thousands, except per
share data)

   
 

Statement of Operations Data:

                                           

Revenue

  $ 333   $ 321   $ 435   $ 2,474   $ 1,258   $ 3,781   $ 493  
                               

Expenses

                                           

Research and development

    14,454     37,481     44,182     39,706     13,681     15,790     4,751  

General and administration

    5,328     5,258     6,982     5,940     5,374     5,125     4,331  

Acquired in-process research and development

                    9,000          

Excess consideration paid over fair value

                    20,192          

Licensing expense

            50     269     300     836      

Depreciation and amortization

    88     118     148     168     137     43     90  
                               

Total expenses

    19,870     42,857     51,362     46,083     48,684     21,794     9,172  
                               

Other (expense) income— Convertible note fair value adjustment

    (4,037 )   (1,929 )   (23 )   (1,871 )   33          
                               

Other expense—Investment impairment charge

                (286 )            
                               

Other interest (expense) income

    (278 )   (510 )   (674 )   (675 )   (135 )   588     1,095  
                               

Other income

        15     15     245              
                               

Income tax benefit

    122                          
                               

Net loss

  $ (23,730 ) $ (44,960 ) $ (51,609 ) $ (46,196 ) $ (47,528 ) $ (17,425 ) $ (7,584 )
                               

Basic and diluted net loss per common share(1)

  $ (1.14 ) $ (2.86 ) $ (3.15 ) $ (4.21 ) $ (8.40 ) $ (3.83 ) $ (1.79 )
                               

Weighted average number of common shares and common equivalent shares outstanding(1)

    20,841     15,745     16,398     10,985     5,659     4,551     4,247  
                               

(1)
All share and per share numbers have been adjusted retroactively to reflect the one-for-six reverse stock split effected on June 1, 2012.

30


Table of Contents

 
  As of September 30,   As of December 31,  
 
  2012   2011   2011   2010   2009   2008   2007  
 
   
   
   
  (in thousands, except per
share data)

   
 

Balance Sheet Data:

                                           

Cash, cash equivalents and short-term investments

  $ 38,049   $ 69,600   $ 57,225   $ 38,155   $ 29,858   $ 14,787   $ 30,655  

Total assets

    43,212     74,891     62,380     44,767     36,437     17,679     31,241  

Total current liabilities (includes short-term convertible senior notes in 2010)

    10,922     11,500     7,228     8,183     3,930     3,853     1,516  

Convertible senior notes, total long-term

        19,242     17,337     17,436     16,676          

Stockholders' equity

    32,290     44,149     37,815     19,147     15,830     13,826     29,725  

(1)
All share and per share numbers have been adjusted retroactively to reflect the one-for-six reverse stock split effected on June 1, 2012.


Selected Historical Financial Data of ANI

        The selected financial data as of December 31, 2011 and 2010 and for the years ended December 31, 2011 and 2010 are derived from ANI's audited financial statements and are included in this joint proxy statement/prospectus beginning on page F-48. The statement of operations data for the nine months ended September 30, 2012 and 2011, as well as the balance sheet data as of September 30, 2012 and 2011 are derived from ANI's unaudited financial statements included in this joint proxy statement/prospectus beginning on page F-84. The financial data should be read in conjunction with "ANI's Management's Discussion and Analysis of Financial Condition and Results of Operations" and ANI's financial statements and related notes appearing elsewhere in this joint proxy statement/prospectus. The historical results are not necessarily indicative of results to be expected in any future period.

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
 
  2012   2011   2011   2010  
 
  (in thousands, except per share data)
 

Statement of Operations Data:

                         

Net revenues

  $ 15,050   $ 11,955   $ 16,515   $ 8,975  

Total operating expenses

    14,075     12,163     16,510     11,806  

Net loss

  $ (351 ) $ (1,768 ) $ (2,428 ) $ (9,273 )
                   

Net loss attributed to common stockholders

  $ (4,782 ) $ (2,642 ) $ (4,914 ) $ (7,810 )
                   

Basic and diluted net loss per common share

  $ (439.32 ) $ (298.31 ) $ (693.61 ) $ (1,673.92 )
                   

 

 
  As of September 30,   As of December 31,  
 
  2012   2011   2011   2010  
 
  (in thousands)
 

Balance Sheet Data:

                         

Cash, cash equivalents and short-term investments, including restricted cash and investments

  $ 148   $ 27   $   $  

Total assets

    13,559     11,646     12,676     10,514  

Total current liabilities

    6,368     5,876     6,161     5,955  

Other long-term obligations, excluding current portion

        15,182     16,582     12,202  

Redeemable convertible preferred stock

    46,155     23,722     24,216     35,808  

Accumulated deficit

    (40,048 )   (34,126 )   (35,370 )   (44,444 )

Total stockholders' deficit

    (38,964 )   (33,134 )   (34,284 )   (43,452 )

31


Table of Contents


Summary Unaudited Pro Forma Condensed Combined Financial Data of BioSante and ANI

        The following summary unaudited pro forma condensed combined financial data is intended to show how the merger might have affected historical financial statements if the merger had been completed on January 1, 2011 for the purposes of the statements of operations and September 30, 2012 for the purposes of the balance sheet, and was prepared based on the historical financial results reported by BioSante and ANI. The following should be read in conjunction with the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 239, the audited and unaudited historical financial statements of BioSante and ANI and the notes thereto beginning on pages F-1 and F-47, respectively, the sections entitled "BioSante's Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 193 and "ANI's Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 222, and the other information contained in this joint proxy statement/prospectus. The following information does not give effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described in BioSante Proposal No. 2.

        The merger will be accounted for as a reverse acquisition under the accounting rules for business combinations. Under the reverse acquisition method of accounting, ANI will be treated as the accounting acquiror and BioSante will be treated as the "acquired" company for financial reporting purposes because, immediately upon completion of the merger, ANI stockholders prior to the merger will hold a majority of the voting interest of the combined company. In addition, the seven member board of directors of the combined company will be comprised of five of the current members of the ANI board of directors; and therefore, ANI's current board of directors will possess majority control of the board of directors of the combined company. Members of the current management of ANI will be responsible for the management of the combined company and the majority of the combined company's activities will be activities related to ANI's current business.

        The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC. The pro forma adjustments reflecting the completion of the merger are based upon the acquisition method of accounting in accordance with GAAP, and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements.

        The summary unaudited pro forma condensed combined balance sheet as of September 30, 2012 combines the historical balance sheets of BioSante and ANI as of September 30, 2012 and gives pro forma effect to the merger as if it had been completed on September 30, 2012.

        The summary unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 combine the unaudited historical statements of operations of BioSante and ANI for their respective nine-month periods ended September 30, 2012 and gives pro forma effect to the merger as if it had been completed on January 1, 2011. The summary unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 combine the historical statements of operations of BioSante and ANI for their respective year ended December 31, 2011 and gives pro forma effect to the merger as if it had been completed on January 1, 2011.

        The historical financial data has been adjusted to give pro forma effect to events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on management's estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition and certain other adjustments.

32


Table of Contents

        The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the entities been combined during the periods presented. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements (see the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 239), the preliminary acquisition-date fair value of the identifiable assets acquired and liabilities assumed reflected in the unaudited pro forma condensed combined financial statements is subject to adjustment and may vary from the actual amounts that will be recorded upon completion of the merger.

 
  For the
Year Ended
December 31, 2011
  For the
Nine Months Ended
September 30, 2012
 
 
  (in thousands)
 

Unaudited Pro Forma Condensed Combined Statements of Operations Data:

             

Revenue

  $ 16,950   $ 15,383  

Operating Expenses:

             

Cost of sales (excluding depreciation and amortization)

    6,861     6,292  

Salaries and benefits

    12,586     8,318  

Freight

    253     243  

Research and development

    39,123     11,738  

Selling, general and administrative

    8,318     6,327  

Licensing expense

    50      

Depreciation and amortization

    3,123     2,345  

Total operating expenses

    70,314     35,263  

Net loss

  $ (56,479 ) $ (25,399 )

Net loss from continuing operations available to common shareholders

  $ (56,685 ) $ (25,503 )

 

 
  As of
September 30, 2012
 
 
  (in thousands)
 

Unaudited Pro Forma Condensed Combined Balance Sheet Data:

       

Cash and cash equivalents

  $ 38,197  

Total assets

    76,306  

Accounts payable

    3,301  

Accrued compensation

    4,364  

Other accrued expenses

    4,429  

Returned goods reserve

    388  

Borrowing under line of credit

    3,429  

Convertible senior notes

    7,593  

Interest on convertible senior notes

    108  

Current liabilities of discontinued operations

    378  

Accumulated deficit

    (47,302 )

Stockholders' equity

    52,316  

33


Table of Contents


COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

        The following table sets forth certain historical, unaudited pro forma condensed combined and pro forma condensed combined equivalent financial information and reflects:

        The following information does not give effect to the proposed reverse stock split of BioSante common stock described in BioSante Proposal No. 2. You should read the table below in conjunction with the audited and unaudited financial statements of BioSante and ANI beginning on pages F-1 and F-47, respectively, of this joint proxy statement/prospectus, and the related notes thereto. You also are urged to read the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 239.

 
  As of and For the
Year Ended
December 31, 2011
  As of and For the
Nine Months Ended
September 30, 2012
 
 
  (in thousands)
 

BioSante Historical Data:

             

Basic and diluted net loss per common share

  $ (3.15 ) $ (1.14 )

Book value per share

         

ANI Historical Data:

             

Basic and diluted net loss per common share

  $ (693.61 ) $ (439.32 )

Book value per share

      $  

Combined Company Pro Forma Data:

             

Basic and diluted net loss per common share

  $ (1.28 ) $ (0.52 )

Book value per share

      $ 1.00  

ANI Pro Forma Equivalent Data*:

             

Basic and diluted net loss per series D preferred share

  $ (13.25 ) $ (5.38 )

Book value per series D preferred share

      $ 10.35  

*
In comparison, if the ANI Pro Forma Equivalent Data were calculated by multiplying the unaudited pro forma combined company data by 0.53, which represents the percentage of ownership of the combined company expected to be held by the current ANI stockholders as of immediately following the completion of the merger (without taking into account any shares of BioSante common stock held by ANI stockholders prior to the completion of the merger), as determined pursuant to the exchange ratios, and assuming BioSante's net cash is $18.0 million as of the determination date, the basic and diluted net loss per common share as of and for the year ended December 31, 2011 would have been $(0.68) and the basic and diluted net loss per common share for the nine months ended September 30, 2012 and the book value per share as of September 30, 2012 would have been $(0.28) and $0.53, respectively.

34


Table of Contents


MARKET PRICE AND DIVIDEND INFORMATION

BioSante

        The table below sets forth, for the calendar quarters indicated, the high and low daily sales prices per share of BioSante common stock, which trades on The NASDAQ Global Market under the symbol "BPAX", as reported by The NASDAQ Global Market. There is no established public trading market for BioSante class C special stock. BioSante's fiscal year ends on December 31st.


BioSante Common Stock

Fiscal Year Ended December 31, 2011
  High   Low  

First Quarter

  $ 15.24   $ 9.72  

Second Quarter

    19.20     11.58  

Third Quarter

    24.12     12.12  

Fourth Quarter

    16.56     2.28  

 

Fiscal Year Ended December 31, 2012
  High   Low  

First Quarter

  $ 7.38   $ 2.64  

Second Quarter

    4.56     2.00  

Third Quarter

    2.62     1.21  

Fourth Quarter

    1.97     1.08  

 

Fiscal Year Ended December 31, 2013
  High   Low  

First Quarter (through January 15, 2013)

  $ 1.48   $ 1.25  

        As of January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, BioSante had 453 holders of record of BioSante common stock and six record holders of BioSante class C special stock.

        BioSante never has declared or paid cash dividends on its capital stock and does not intend to pay any cash dividends in the foreseeable future. Holders of BioSante class C special stock are not eligible to receive dividends. Any future determination to pay cash dividends will be at the discretion of the BioSante board of directors and will depend upon BioSante's financial condition, operating results, capital requirements, deployment of resources and ability to engage in strategic transactions, whether or not the merger is consummated, and such other factors as the BioSante board of directors deems relevant.

        On October 3, 2012, the last trading day prior to announcement of the merger, the last reported sale price of BioSante common stock was $1.80, for an aggregate market value of BioSante of $44.0 million. On January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, the last reported sale price of BioSante common stock was $1.36, for an aggregate market value of BioSante of $33.2 million. Assuming the issuance on such date of an aggregate of 27.9 million shares of BioSante common stock based on an exchange ratio of 10.3502 for the ANI series D preferred stock and an exchange ratio of zero for all other shares of ANI capital stock, if the merger was completed on such date, the market value attributable to the ANI common stock in the aggregate, or approximately 53 percent of the outstanding shares of the combined company, would equal $38.0 million.

        The following table sets forth information concerning the beneficial ownership of:

35


Table of Contents

        The pre-merger percentage of beneficial ownership is calculated in relation to the 24,422,240 shares of BioSante common stock that were outstanding as of December 31, 2012 and the post-merger percentage of beneficial ownership is calculated in relation to an estimated 52,337,228 shares of common stock of the combined company outstanding upon completion of the merger, assuming that the exchange ratio to be used in connection with the merger is approximately 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock and zero for each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock (without giving effect to the proposed reverse stock split described elsewhere in this joint proxy statement/prospectus but giving effect to the anticipated issuance of an estimated 321,737 shares of ANI series D preferred stock to ANI's executive officers and an additional ANI employee in connection with the transaction bonus arrangements as described elsewhere in this joint proxy statement/prospectus). Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options and warrants currently exercisable or that become exercisable within 60 days of December 31, 2012 are outstanding for the purpose of computing the percentage of capital stock owned by such person or group. However, such unissued shares of capital stock are not deemed to be outstanding for calculating the percentage of capital stock owned by any other person. Except as otherwise indicated and subject to the voting agreements described under the section entitled "Voting and Other Ancillary Agreements," BioSante believes that the beneficial owners of its capital stock listed in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable.

 
  Pre-Merger   Post-Merger  
Name of Beneficial Owner
  BioSante
Common
Stock and
Common
Stock
Equivalents
  Percent of
Class
  BioSante
Common
Stock and
Common
Stock
Equivalents
  Percent
of Class
 

Louis W. Sullivan, M.D. 

    52,147     *     52,147     *  

Stephen M. Simes

    275,652     1.1 %   275,652     *  

Fred Holubow

    34,372     *     34,372     *  

Ross Mangano

    418,397     1.7 %   418,397     *  

Edward C. Rosenow, III, M.D. 

    27,586     *     27,586     *  

John T. Potts, Jr., M.D. 

    8,636     *     8,636     *  

Stephen A. Sherwin, M.D. 

    41,890     *     41,890     *  

Robert E. Brown, Jr. 

    0     *     14,248,043     27.2 %

Arthur S. Przybyl

    0     *     0     *  

Tracy L. Marshbanks, Ph.D. 

    0     *     4,085,016     7.8 %

Thomas T. Penn

    0     *     14,248,043     27.2 %

Robert Schrepfer

    0     *     0     *  

All current BioSante directors and executive officers as a group (nine persons)

    1,042,589     4.2 %   18,785,828     35.8 %

*
Represents beneficial ownership of less than one percent.

        For detailed information regarding the beneficial ownership of certain stockholders of BioSante, ANI and the combined company upon completion of the merger, see the sections entitled "Principal Stockholders of BioSante," Principal Stockholders of ANI" and "Principal Stockholders of Combined Company" in this joint proxy statement/prospectus.

36


Table of Contents

        Because the market price of BioSante common stock is subject to fluctuation, the market value of the shares of BioSante common stock that holders of ANI capital stock will receive in the merger may increase or decrease. The foregoing information reflects only historical information. This information may not provide meaningful information to ANI stockholders in determining whether to approve ANI Proposal No. 1. ANI stockholders are urged to obtain current market quotations for BioSante common stock and to review carefully the other information contained in this joint proxy statement/prospectus or referenced in this joint proxy statement/prospectus. Historical stock prices are not indicative of future stock prices.

        Following completion of the merger and assuming the successful reapplication to The NASDAQ Global Market for initial inclusion of BioSante common stock on the NASDAQ Global Market, the BioSante common stock of BioSante, including the shares of BioSante common stock issued to ANI stockholders in connection with the merger, will continue to be listed on The NASDAQ Global Market.


ANI

        As of January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, ANI had 11 holders of record of ANI series D preferred stock, 12 holders of record of ANI series C preferred stock, 12 holders of record of ANI series B preferred stock, five holders of record of ANI series A preferred stock and 10 holders of record of ANI common stock.

        Other than a one-time dividend on the ANI series A preferred stock declared and paid in additional shares of ANI series A preferred stock in 2006, ANI has never paid a dividend on its capital stock. Any determination to pay dividends to holders of ANI capital stock in the future will be at the discretion of the ANI board of directors and will depend on many factors, including ANI's financial condition, results of operations, general business conditions, and any other factors the ANI board of directors deems relevant.

        ANI is a private company and shares of its capital stock are not publicly traded.

37


Table of Contents


RISK FACTORS

        In addition to the other information included in this joint proxy statement/prospectus, BioSante and ANI stockholders should consider carefully the following risk factors before deciding whether to vote in favor of the adoption of the merger agreement and the approval of the transactions contemplated thereby, including the merger. If any of the risks described below actually occurs, the respective businesses, operating results, financial condition or stock prices of BioSante, ANI or the combined company could be materially adversely affected.


Risks Related to the Merger

         The issuance of shares of BioSante common stock to ANI stockholders in connection with the merger will dilute substantially the voting power of current BioSante stockholders.

        Pursuant to the terms of the merger agreement, it is anticipated that BioSante will issue shares of BioSante common stock to ANI stockholders representing approximately 53 percent of the outstanding shares of common stock of the combined company as of immediately following completion of the merger, assuming BioSante's net cash is $18.0 million as of the determination date. After such issuance, the shares of BioSante common stock outstanding immediately prior to completion of the merger will represent approximately 47 percent of the outstanding shares of common stock of the combined company as of immediately following completion of the merger. These ownership percentages may change depending upon the amount of BioSante's net cash as of a determination date prior to completion of the merger. Accordingly, the issuance of shares of BioSante common stock to ANI stockholders in connection with the merger will reduce significantly the relative voting power of each share of BioSante common stock held by current BioSante stockholders. Consequently, the BioSante stockholders as a group will have significantly less influence over the management and policies of the combined company after the merger than prior to the merger.

         The exchange ratios in the merger agreement are dependent upon not only the terms of the merger agreement, but also the terms of ANI's certificate of incorporation, which contains provisions that give preference to holders of shares of ANI series D preferred stock and, to a lesser extent, holder of shares of other series of ANI preferred stock. As a result of such provisions, it is likely that holders of shares of other series of ANI preferred stock or ANI common stock will not receive any shares of BioSante common stock in connection with the merger.

        Subject to the terms and conditions of the merger agreement, at the effective time of and as a result of the merger, each share of ANI capital stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. Pursuant to the terms of ANI's certificate of incorporation, before any amounts are paid to the holders of shares of any other series of ANI preferred stock or ANI common stock, the holders of shares of ANI series D preferred stock are entitled to receive an amount per share equal to $30.00 (subject to adjustment as provided in ANI's certificate of incorporation) plus all declared but unpaid dividends. The exchange ratios in the merger agreement reflect these preferential payments. As a result of such provisions, it is likely that holders of shares of other series of ANI preferred stock or ANI common stock will not receive any shares of BioSante common stock in connection with the merger.

38


Table of Contents

         The exchange ratios in the merger agreement are subject to adjustment based on BioSante's net cash as of a determination date prior to completion of the merger, which could dilute further the ownership of either the BioSante or ANI stockholders in the combined company.

        Subject to the terms and conditions of the merger agreement, at the effective time of and as a result of the merger, each share of ANI capital stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger. If BioSante has more than $18.0 million of net cash as of the determination date, then the percentage ownership of the current BioSante stockholders will be increased on a pro rata basis by 0.6 percent for each $1.0 million of net cash excess, which would dilute further the ownership of the current ANI stockholders in the combined company. If BioSante has less than $18.0 million of net cash as of the determination date, then the percentage ownership of current BioSante stockholders will be decreased on a pro rata basis by 0.6 percent for each $1.0 million of net cash shortfall, which would dilute further the ownership of the current BioSante stockholders in the combined company. In no event, however, will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. In addition, one of the conditions to ANI's obligations to complete the merger is BioSante's net cash as of the closing date being no less than $17.0 million as calculated and as adjusted pursuant to the provisions of the merger agreement.

        The items that will constitute BioSante's net cash at the determination date set forth in the merger agreement are subject to a number of factors, some of which are outside the control of BioSante and many of which are outside the control of ANI. For a more detailed discussion of the calculation of BioSante's net cash at the determination date set forth in the merger agreement and to view a table that illustrates how changes in BioSante's net cash at the determination date will affect the exchange ratios, see "The Merger Agreement—Merger Consideration and Adjustment" and "The Merger Agreement—Determination of BioSante's Net Cash" beginning on page 156 and page 158, respectively.

         The exchange ratios are not adjustable based on the market price of BioSante common stock and if the market price of BioSante common stock fluctuates, the market value of the shares of BioSante common stock to be received by the ANI stockholders in connection with the merger is subject to change prior to completion of the merger.

        The aggregate number of shares of BioSante common stock to be issued to ANI stockholders is expected to represent approximately 53 percent of the outstanding shares of common stock of the combined company as of immediately following completion of the merger, assuming BioSante's net cash is $18.0 million as of the determination date. The exchange ratios, as such ratios are calculated pursuant to the formulas set forth in the merger agreement, are based on the number of shares of BioSante common stock and ANI capital stock outstanding as of immediately prior to completion of the merger, and in the case of BioSante, a certain percentage of the number of certain warrants to purchase shares of BioSante common stock outstanding as of such date, and will not be determined until that time. The exchange ratios will be adjusted upward or downward only as a result of changes to the outstanding capital stock of either or both of BioSante and ANI as of immediately prior to completion of the merger and changes to BioSante's net cash as of a determination date prior to completion of the merger. No adjustments to the exchange ratios will be made based on changes in the trading price of BioSante common stock or the value of ANI capital stock prior to completion of the merger. Changes in the trading price of BioSante common stock or the value of ANI capital stock may

39


Table of Contents

result from a variety of factors, including, among others, general market and economic conditions, changes in BioSante's or ANI's respective businesses, operations and prospects, market assessment of the likelihood that the merger will be completed as anticipated or at all, and regulatory considerations. Many of these factors are beyond BioSante's or ANI's control. As a result, the value of the shares of BioSante common stock issued to ANI stockholders in connection with the merger could be substantially less or substantially more than the current market value of BioSante common stock.

         The exchange ratios are not adjustable based on issuances by BioSante of additional shares of BioSante common stock either upon the exercise of options or warrants or the conversion of convertible securities or otherwise, which issuances would result in additional dilution to the BioSante stockholders.

        As of December 31, 2012, BioSante had outstanding options to purchase an aggregate of approximately 1.1 million shares of BioSante common stock, warrants to purchase an aggregate of approximately 4.7 million shares of BioSante common stock, an aggregate of 65,211 shares of BioSante class C special stock that are convertible into 65,211 shares of BioSante common stock and an aggregate of $8.3 million in aggregate principal amount of 3.125% convertible senior notes due May 1, 2013 that are convertible into an aggregate of 370,871 shares of BioSante common stock. BioSante is not prohibited under the terms of the merger agreement from issuing additional equity securities under certain circumstances, including securities issued pursuant to the exercise of outstanding options or warrants or the conversion or exchange of outstanding convertible senior notes. It is possible that prior to completion of the merger BioSante may issue additional equity securities. The exchange ratios in the merger agreement, which are designed to result in the issuance by BioSante of shares of BioSante common stock to ANI stockholders representing approximately 53 percent of the outstanding shares of common stock of the combined company as of immediately following completion of the merger, assuming BioSante's net cash is $18.0 million as of the determination date, are not adjustable based on issuances by BioSante of additional shares of BioSante common stock. Therefore, any such issuances by BioSante would result in additional dilution to the BioSante stockholders.

         The announcement and pendency of the merger could have an adverse effect on the trading price of BioSante common stock and/or the business, financial condition, results of operations or business prospects for BioSante and/or ANI.

        While there have been no significant adverse effects to date, the announcement and pendency of the merger could disrupt BioSante's and/or ANI's businesses in the following ways, among others:

        Should they occur, any of these matters could adversely affect the trading price of BioSante common stock or harm the financial condition, results of operations or business prospects of BioSante, ANI and/or the combined company.

40


Table of Contents

         Failure to complete the merger could negatively impact BioSante's and ANI's respective businesses, financial condition or results of operations or the trading price of BioSante common stock.

        The completion of the merger is subject to a number of conditions and there can be no assurance that the conditions to the completion of the merger will be satisfied. If the merger is not completed, BioSante and/or ANI, as applicable, will be subject to several risks, including:

        If the merger is not completed, these risks may materialize and affect materially and adversely either or both companies' respective businesses, financial condition, results of operations, or, in the case of BioSante, the trading price of BioSante common stock.

         BioSante and ANI have incurred and will continue to incur significant transaction costs in connection with the merger, some of which will be required to be paid even if the merger is not completed.

        BioSante and ANI have incurred and will continue to incur significant transaction costs in connection with the merger. These costs are primarily associated with the fees of their respective attorneys and accountants and BioSante's financial advisor. Most of these costs will be paid by the party incurring the costs even if the merger is not completed. In addition, if the merger agreement is terminated due to certain triggering events specified in the merger agreement, BioSante may be required to pay ANI a termination fee of $1.0 million or ANI may be required to pay BioSante a termination fee of $750,000. The merger agreement also provides that under specified circumstances, BioSante may be required to reimburse ANI up to $500,000 for its expenses in connection with the transaction. If the merger is completed, the combined company will bear the transaction costs of both BioSante and ANI in connection with the merger, including financial advisor, legal and accounting fees and expenses.

41


Table of Contents

         Because the merger will be completed after the date of the BioSante and ANI special meetings of stockholders, it is possible that at the time of your special meeting, you will not know the exact number of shares of BioSante common stock that the ANI stockholders will receive upon completion of the merger.

        Subject to the terms of the merger agreement, at the effective time of the merger, each share of ANI capital stock issued and outstanding immediately prior to the merger will be canceled, extinguished and automatically converted into the right to receive that number of shares of BioSante common stock as determined pursuant to the exchange ratios described in the merger agreement. The exchange ratios depend on the net cash of BioSante as of a determination date prior to completion of the merger. The determination date is defined as the date that is 14 days prior to the date of the BioSante special meeting as set forth in this joint proxy statement/prospectus, subject to extension for adjournment of the BioSante special meeting and subject to a dispute resolution provisions in the event there is a dispute between BioSante and ANI as to the amount of net cash of BioSante as of the determination date. Under the merger agreement, BioSante's "net cash" is defined as generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger. In the event of a dispute regarding the amount of net cash of BioSante as of the determination date, it is possible that the exact number of shares of BioSante common stock that the ANI stockholders will receive upon completion of the merger may not be available at the time of the BioSante special meeting or the ANI special meeting.

         Some of the directors and executive officers of BioSante and ANI have interests in the merger that are different from, or in addition to, those of the other BioSante and ANI stockholders.

        When considering the recommendation by the BioSante board of directors that the BioSante stockholders vote "for" each of the proposals being submitted to the BioSante stockholders at the BioSante special meeting and the recommendation by the ANI board of directors that the ANI stockholders vote "for" each of the proposals being submitted to the ANI stockholders at the ANI special meeting, the BioSante and ANI stockholders should be aware that certain of the directors and executive officers of BioSante and ANI have arrangements that provide them with interests in the merger that are different from, or in addition to, those of the stockholders of BioSante and ANI.

        For instance, in connection with the merger, Fred Holubow and Ross Mangano, each a current member of the BioSante board of directors, will continue to serve as a director of the combined company following completion of the merger and will receive cash and equity compensation in consideration for such service. The employment of each of BioSante's three executive officers will terminate immediately following completion of the merger and they will be entitled to receive severance benefits ranging from approximately $571,400 to $1,578,000 in connection with such termination.

        All of the current directors of ANI will serve as directors of the combined company following completion of the merger and will receive certain cash and equity compensation in consideration for such service. Likewise, all of the executive officers of ANI will continue to serve as executive officers of the combined company following completion of the merger and will receive cash and equity compensation in consideration for such service. In addition, the executive officers of ANI will receive special transaction bonus payments upon closing of the merger ranging, for each officer, from approximately $707,705 to $3,309,410 (assuming BioSante's net cash as of the determination date is $18.0 million) payable in shares of ANI series D preferred stock, which shares will convert into shares of BioSante common stock in the merger, as described in more detail under "Management of the Combined Company Following the Merger—Certain Relationships and Related Transactions." In addition, certain of ANI's executive officers and directors are expected to own a significant number of shares of common stock of the combined company following completion of the merger. See "Principal Stockholders of Combined Company."

42


Table of Contents

        The directors and executive officers of BioSante and ANI also have certain rights to indemnification and to directors' and officers' liability insurance that will be provided by the combined company following completion of the merger. See the sections entitled "The Merger—Interests of BioSante's Directors and Executive Officers in the Merger" and "The Merger—Interests of ANI's Directors and Officers in the Merger" beginning on pages 143 and 148, respectively.

        The board of directors of each of BioSante and ANI were aware of these potential interests and considered them in making their respective recommendations to approve the proposals being submitted to the BioSante stockholders at the BioSante special meeting, with respect to the BioSante stockholders, and to approve the proposals being submitted to the ANI stockholders at the ANI special meeting, with respect to the ANI stockholders.

         The merger agreement and the voting agreements contain provisions that could discourage or make it difficult for a third party to acquire BioSante or ANI prior to completion of the merger.

        The merger agreement contains provisions that make it difficult for BioSante or ANI to entertain a third-party proposal for an acquisition of BioSante or ANI. These provisions include:

        See the sections entitled "The Merger Agreement—No Solicitation", "The Merger Agreement—Meetings of Stockholders; Change in Board Recommendation" and "The Merger Agreement—Termination Fees and Expenses" beginning on pages 160, 162 and 165, respectively.

        Pursuant to the voting agreements entered into between (i) BioSante and certain stockholders of ANI and (ii) ANI and the directors, executive officers and certain stockholders of BioSante, each such director, executive officer and applicable stockholder has agreed not to take any actions that BioSante or ANI, as applicable, is prohibited from taking pursuant to the no-solicitation restrictions contained in the merger agreement. In addition, holders of shares representing approximately 85 percent of the shares of the outstanding ANI capital stock, calculated on an as-converted basis, and approximately 86 percent of the outstanding shares of the ANI series D preferred stock, as of October 3, 2012 are subject to a voting agreement, pursuant to which the holders of such shares have agreed to vote in favor of the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger, and ANI is required under the terms of the merger agreement to convene and hold the ANI special meeting regardless of any change in the recommendation of the ANI board of directors. Likewise, holders of shares representing approximately two percent of the outstanding capital stock of BioSante as of October 3, 2012 are subject to a voting agreement, pursuant to which the holders of such shares have agreed to vote in favor of the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of the shares of BioSante common stock, and the approval of the BioSante charter amendments, and BioSante is required under the terms of the merger agreement to convene and hold the BioSante

43


Table of Contents

special meeting regardless of any change in the recommendation of the BioSante board of directors. See the section entitled "Voting and Other Ancillary Agreements" beginning on page 168.

        These provisions might discourage an otherwise interested third party from considering or proposing an acquisition of BioSante or ANI, even one that may be deemed of greater value than the merger to BioSante stockholders or ANI stockholders, as applicable. Furthermore, even if a third party elects to propose an acquisition, the concept of a termination fee or payment of the other party's expenses may result in that third party offering a lower value to BioSante stockholders or ANI stockholders, as applicable, than such third party might otherwise have offered.

         Because the lack of a public market for shares of ANI capital stock makes it difficult to evaluate the fairness of the merger, ANI stockholders may receive consideration in the merger that is greater than or less than the fair value of the shares of capital stock of ANI.

        ANI is privately held and its outstanding capital stock is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair value of ANI or its shares of capital stock. Since the percentage of BioSante's equity to be issued to the ANI stockholders was determined based on negotiations between the parties, it is possible that the value of the BioSante common stock to be issued in connection with the merger will be greater than the fair value of ANI. Alternatively, it is possible that the value of the shares of BioSante common stock to be issued in connection with the merger will be less than the fair value of ANI.

         The vote to approve the merger with BioSante is effectively controlled by the holders of ANI series D preferred stock.

        In order to approve the merger agreement and transactions contemplated under the merger agreement, ANI requires the vote of (i) the majority of the outstanding shares of ANI capital stock entitled to vote, calculated on an as-converted basis and voting as a single class, and (ii) 65 percent of the outstanding shares of ANI series D preferred stock entitled to vote. On an as-converted basis, the number of ANI series D preferred stock represents 90.8 percent of the total number of shares of ANI capital stock outstanding and entitled to vote. As a result, assuming that holders of more than 65% of the ANI series D preferred stock all vote such stock for (or against) the merger, both votes described in (i) and (ii) above would be decided, and holders of ANI common stock, or series A, B or C preferred stock, would be unable to affect the outcome of the vote.

         If the merger does not qualify as a reorganization under Section 368(a) of the Code, ANI and the ANI stockholders may be required to pay substantial U.S. federal income taxes as a result of the merger.

        BioSante and ANI intend, and will be relying on the opinion of their respective tax counsel, that the merger will qualify as a "reorganization" under Section 368(a) of the Code. BioSante and ANI currently anticipate that neither ANI nor, generally, the U.S. holders of shares of ANI capital stock will recognize taxable gain or loss as a result of the merger. However, neither BioSante nor ANI has requested, or intends to request, a ruling from the Internal Revenue Service (IRS) with respect to the tax consequences of the merger, and there can be no assurance that the companies' position or the opinion of either company's respective tax counsel would be sustained if challenged by the IRS. Accordingly, if there is a final determination that the merger does not qualify as a "reorganization" under Section 368(a) of the Code and is taxable for U.S. federal income tax purposes (i) ANI would recognize taxable gain on its deemed receipt of BioSante common stock in exchange for the sale of substantially all of ANI's assets and assumption of ANI liabilities to the extent the fair market value of the BioSante common stock deemed received plus the ANI liabilities assumed by BioSante in the merger exceed ANI's adjusted tax basis in its assets deemed sold to BioSante, with such gain offset by available net operating losses and other tax attributes of ANI, if any, and (ii) ANI stockholders generally would recognize taxable gain or loss on their receipt of BioSante common stock in connection

44


Table of Contents

with the merger in an amount equal to the difference between such stockholder's adjusted tax basis in their shares of ANI capital stock and the fair market value of the BioSante common stock and cash received in lieu of fractional shares, if any. Any unpaid ANI tax liability incurred if the merger does not qualify as a reorganization would be assumed by BioSante in the merger. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled "Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 172.

         The shares of BioSante common stock to be received by ANI stockholders as a result of the merger will have different rights from shares of ANI preferred stock or ANI common stock.

        Following completion of the merger, ANI stockholders will no longer be stockholders of ANI, but will be stockholders of BioSante. There will be important differences between your current rights as an ANI stockholder and the rights to which you will be entitled as a BioSante stockholder. See "Comparison of Rights of Holders of BioSante Stock and ANI Stock" beginning on page 286 for a discussion of the different rights associated with BioSante common stock and ANI preferred stock and ANI common stock.

         BioSante may not issue CVRs to holders of BioSante common stock prior to the merger and, even if issued, the CVRs will not be certificated or transferable and may not result in any cash payments to holders of CVRs.

        Although BioSante currently plans to enter into the contingent value rights agreement and issue CVRs to holders of BioSante common stock, there is no assurance that the CVRs will be issued at all or based on the terms currently set forth in the form of the contingent value rights agreement. See "Contingent Value Rights" for more information on the terms of the CVRs and the contingent value rights agreement. BioSante currently has not entered into the contingent value rights agreement and the BioSante board of directors may determine in its sole discretion not to issue the CVRs based on, among other things, the anticipated tax impact of the distribution and issuance of the CVRs to the holders of BioSante common stock. Furthermore, if BioSante and ANI agree, the terms of the contingent value rights agreement as currently contemplated may be changed prior to BioSante entering into the contingent value rights agreement.

        Even if CVRs are issued, they will not be certificated or transferable and may not result in any cash payments to holders of CVRs. Under the contingent value rights agreement, the combined company will not have any obligation, other than an obligation to act in good faith to pursue, engage in, negotiate, enter into or consummate an actual or potential LibiGel transaction (as such term is defined in the contingent value rights agreement).

         BioSante and ANI may waive one or more of the conditions to the merger without resoliciting stockholder approval for the merger.

        Certain conditions to BioSante's and ANI's obligations to complete the merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of BioSante and ANI. In the event of a waiver of a condition, the boards of directors of BioSante and ANI will evaluate the materiality of any such waiver to determine whether amendment of this joint proxy statement/prospectus and resolicitation of proxies is necessary. In the event that the board of directors of BioSante or ANI determines any such waiver is not significant enough to require resolicitation of stockholders, it will have the discretion to complete the merger without seeking further stockholder approval. The conditions requiring the approval of each company's stockholders cannot, however, be waived.

45


Table of Contents


Risks Related to the Combined Company if the Merger is Completed

         If any of the events described in "Risks Related to BioSante" or "Risks Related to ANI" occur, those events could cause the potential benefits of the merger not to be realized.

        Following completion of the merger, the combined company will be susceptible to many of the risks described in the sections herein entitled "Risks Related to BioSante," "Risks Related to ANI" and "Risks Related to the Combined Company." To the extent any of the events in the risks described in those sections occur, those events could cause the potential benefits of the merger not to be realized and the market price of the combined company's common stock to decline.

         The success of the merger will depend, in large part, on the ability of the combined company following completion of the merger to realize the anticipated benefits from combining the businesses of BioSante and ANI.

        The merger involves the integration of two companies that previously have operated independently with principal offices in two distinct locations. Due to legal restrictions, BioSante and ANI are able to conduct only limited planning regarding the integration of the two companies prior to completion of the merger. Significant management attention and resources will be required to integrate the two companies after completion of the merger. The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company's failure to achieve some or all of the anticipated benefits of the merger.

        Potential difficulties that may be encountered in the integration process include the following:

        Delays in the integration process could adversely affect the combined company's business, financial results, financial condition and stock price following the merger. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

         The merger will result in changes to the BioSante board of directors and the combined company may pursue different strategies than either BioSante or ANI may have pursued independently.

        If BioSante and ANI complete the merger, the composition of the BioSante board of directors will change in accordance with the merger agreement. Following completion of the merger, the combined company's board of directors will consist of seven members, including two of the current directors of BioSante and five of the current directors of ANI. Currently, it is anticipated that the combined company will continue to advance the product development efforts and business strategies of ANI primarily. However, because the composition of the board of directors of the combined company will

46


Table of Contents

consist of directors from both BioSante and ANI, the combined company may determine to pursue certain business strategies that neither ANI nor BioSante would have pursued independently.

         Ownership of the combined company's common stock may be highly concentrated, and it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause the combined company's stock price to decline.

        Upon completion of the merger, ANI's directors and executive officers continuing with the combined company, together with their respective affiliates, are expected to beneficially own or control approximately 41 percent of the combined company (see the sections entitled "Principal Stockholders of ANI" beginning on page 276 and "Principal Stockholders of Combined Company" beginning on page 280 for more information on the estimated ownership of the combined company following the merger). Accordingly, these directors, executive officers and their affiliates, acting individually or as a group, will have substantial influence over the outcome of a corporate action of the combined company requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the combined company's assets or any other significant corporate transaction. These stockholders also may exert influence in delaying or preventing a change in control of the combined company, even if such change in control would benefit the other stockholders of the combined company. In addition, the significant concentration of stock ownership may affect adversely the market value of the combined company's common stock due to investors' perception that conflicts of interest may exist or arise.

         Future results of the combined company may differ materially from the unaudited pro forma financial statements presented in this joint proxy statement/prospectus and the financial forecasts prepared by ANI in connection with discussions concerning the merger.

        The future results of the combined company may be materially different from those shown in the unaudited pro forma condensed combined financial statements presented in this joint proxy statement/prospectus, which show only a combination of the historical results of BioSante and ANI, and the financial forecasts prepared by ANI in connection with discussions concerning the merger. BioSante and ANI expect to incur significant costs associated with completion of the merger and combining the operations of the two companies. The exact magnitude of these costs is not yet known, but is estimated to be approximately $3.1 million. Furthermore, these costs may decrease the capital that the combined company could use for continued development of the combined company's business in the future or may cause the combined company to seek to raise new capital sooner than expected.

         The combined company's ability to utilize BioSante's or ANI's net operating loss and tax credit carryforwards in the future is subject to substantial limitations and may be further limited as a result of the merger.

        Under Section 382 of the Code, if a corporation undergoes an "ownership change" (generally defined as a greater than 50 percent change (by value) in its equity ownership over a three-year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Further, if the historic business of BioSante is not treated as being continued by the combined entity for the two-year period beginning on the date of the merger (referred to as the "continuity of business requirement"), the pre-transaction net operating loss carryforward deductions become substantially reduced or unavailable for use by the surviving corporation in the transaction. In 2009, an "ownership change" occurred with respect to BioSante, and it is expected that the merger with ANI will result in another "ownership change" of BioSante. Accordingly, the combined company's ability to utilize BioSante's net operating loss and tax credit carryforwards may be substantially limited. These limitations, in turn, could result in increased

47


Table of Contents

future tax payments for the combined company, which could have a material adverse effect on the business, financial condition or results of operations of the combined company.

        Under Section 384 of the Code, available net operating loss carryovers of BioSante or ANI may not be available to offset certain gains arising after the merger from assets held by the other corporation at the effective time of the merger. This limitation will apply to the extent that the gain is attributable to an unrealized built-in-gain in the assets of BioSante or ANI existing at the effective time of the merger. To the extent that any such gains are recognized in the five year period after the merger upon the disposition of any such assets, the net operating loss carryovers of the other corporation will not be available to offset such gains (but the net operating loss carryovers of the corporation that owned such assets will not be limited by Section 384 although they may be subject to other limitations under Section 382 as described above).

         The price of BioSante common stock after the merger is completed may be affected by factors different from those currently affecting the price of BioSante common stock.

        Upon completion of the merger, holders of ANI capital stock who receive shares of BioSante common stock in connection with the merger will become holders of BioSante common stock. The business of BioSante differs significantly from the business of ANI; and, accordingly, the results of operations of the combined company and the trading price of BioSante common stock following completion of the merger may be affected significantly by factors different from those currently affecting the independent results of operations of BioSante. For a discussion of the businesses of BioSante and ANI and of certain factors to consider in connection with those businesses, see the sections entitled "BioSante's Business," "BioSante's Management's Discussion and Analysis of Financial Condition and Results of Operations," "ANI's Business," "ANI's Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited and unaudited historical financial statements of BioSante and ANI, including the notes thereto, which are included elsewhere in this joint proxy statement/prospectus, and the other information contained in this joint proxy statement/prospectus.

         The NASDAQ Global Market considers the anticipated merger of BioSante and ANI to be a business combination with a non-NASDAQ entity, resulting in a change in control of BioSante; and therefore, has required that BioSante submit a new initial listing application, which requires certain actions on the part of the combined company which may not be successful and, if unsuccessful, could make it more difficult for holders of shares of the combined company to sell their shares.

        The NASDAQ Global Market considers the merger proposed in this joint proxy statement/prospectus to be a business combination with a non-NASDAQ entity, resulting in a change in control of BioSante and has required that BioSante submit a new initial listing application. The NASDAQ Global Market may not approve BioSante's new initial listing application for The NASDAQ Global Market on a timely basis, or at all. If this occurs and the merger is still completed, you may have difficulty converting your investments into cash effectively.

        Additionally, as part of the new initial listing application, BioSante will be required to submit, among other things, a plan for the combined company to effect a reverse stock split. A reverse stock split likely would increase the per share trading price by an as yet undetermined multiple. The change in share price may affect the volatility and liquidity of the combined company's stock, as well as the marketplace's perception of the stock. As a result, the relative price of the combined company's stock may decline and/or fluctuate more than in the past, and you may have trouble converting your investments in the combined company into cash effectively.

48


Table of Contents

         The combined company's management will be required to devote substantial time to comply with public company regulations.

        As a public company, the combined company will incur significant legal, accounting and other expenses that ANI did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as rules implemented by the SEC and The NASDAQ Global Market, impose various requirements on public companies, including those related to corporate governance practices. The combined company's management and other personnel will need to devote a substantial amount of time to these requirements. Certain members of ANI's management, which will continue as the management of the combined company, do not have significant experience in addressing these requirements. Moreover, these rules and regulations will increase the combined company's legal and financial compliance costs relative to those of ANI and will make some activities more time consuming and costly.

        The Sarbanes-Oxley Act requires, among other things, that the combined company maintain effective internal control for financial reporting and disclosure controls and procedures. In particular, the combined company must perform system and process evaluation and testing of its internal control over financial reporting to allow management and the combined company's independent registered public accounting firm to report on the effectiveness of its internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. The combined company's compliance with these requirements will require that it incur substantial accounting and related expenses and expend significant management efforts. The combined company will need to hire additional accounting and financial staff to satisfy the ongoing requirements of Section 404 of the Sarbanes-Oxley Act. The costs of hiring such staff may be material and there can be no assurance that such staff will be immediately available to the combined company. Moreover, if the combined company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if the combined company or its independent registered public accounting firm identifies deficiencies in its internal control over financial reporting that are deemed to be material weaknesses, investors could lose confidence in the accuracy and completeness of the combined company's financial reports, the market price of the combined company's common stock could decline and the combined company could be subject to sanctions or investigations by The NASDAQ Global Market, the SEC or other regulatory authorities.

         After completion of the merger, the combined company will possess not only all of the assets but also all of the liabilities of both BioSante and ANI. Discovery of previously undisclosed or unknown liabilities could have an adverse effect on the combined company's business, operating results and financial condition.

        Acquisitions involve risks, including inaccurate assessment of undisclosed, contingent or other liabilities or problems. After completion of the merger, the combined company will possess not only all of the assets, but also all of the liabilities of both BioSante and ANI. Although BioSante conducted a due diligence investigation of ANI and its known and potential liabilities and obligations, and ANI conducted a due diligence investigation of BioSante and its known and potential liabilities and obligations, it is possible that undisclosed, contingent or other liabilities or problems may arise after completion of the merger, which could have an adverse effect on the combined company's business, operating results and financial condition.

         BioSante and ANI do not expect the combined company to pay cash dividends.

        BioSante and ANI anticipate that the combined company will retain its earnings, if any, for future growth and therefore not pay any cash dividends in the foreseeable future. Investors seeking cash dividends should not invest in the combined company's common stock for that purpose.

49


Table of Contents

         Anti-takeover provisions in the combined company's charter and bylaws may prevent or frustrate attempts by stockholders to change the board of directors or management and could make a third-party acquisition of the combined company difficult.

        The combined company's certificate of incorporation and bylaws, as amended, will contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could limit the price that investors might be willing to pay in the future for shares of the combined company's common stock.

         The sale or availability for sale of a substantial number of shares of common stock of the combined company after the merger and after expiration of the lock-up period could adversely affect the market price of such shares after the merger.

        Sales of a substantial number of shares of common stock of the combined company in the public market after the merger or after expiration of the lock-up period, or the perception that these sales could occur, could adversely affect the market price of such shares and could materially impair the combined company's ability to raise capital through equity offerings in the future. BioSante and ANI are unable to predict what effect, if any, market sales of securities held by significant stockholders, directors or officers of the combined company or the availability of these securities for future sale will have on the market price of the combined company's common stock after the merger.


Risks Related to BioSante

Risks Related to BioSante's Financial Condition and Future Capital Requirements

         BioSante has not generated significant revenues and does not expect to in the near future. BioSante has a history of operating losses, expects continuing losses and may never become profitable.

        Substantially all of BioSante's revenue to date has been derived from upfront and milestone payments earned on licensing transactions, revenue earned from subcontracts and royalty revenue. In order to generate new and significant revenues, BioSante must develop and commercialize successfully its own products or enter into strategic partnering agreements with others who can develop and commercialize them successfully, or acquire additional new products that generate or have the potential to generate revenues. Because of the numerous risks and uncertainties associated with BioSante's and its strategic partners' product development programs and BioSante's ability to acquire additional new products, BioSante is unable to predict when it will be able to generate significant revenue or become profitable, if at all. BioSante incurred a net loss of $51.6 million for the year ended December 31, 2011 and a net loss of $23.7 million for the nine months ended September 30, 2012. As of September 30, 2012, BioSante's accumulated deficit was $241.0 million. BioSante expects to continue to incur substantial and continuing losses for the foreseeable future. These losses will increase if BioSante decides to pursue the two new LibiGel Phase III efficacy trials or in-license additional new products that require further development. Even if BioSante's approved products, products in development or any additional new products BioSante may acquire or in-license are introduced commercially, BioSante may never achieve market acceptance and it may never generate sufficient revenues or receive sufficient license fees or royalties on its licensed products and technologies in order to achieve or sustain future profitability.

50


Table of Contents

         Because BioSante has no source of significant recurring revenue, BioSante must depend on financing or partnering to sustain its operations. BioSante likely will need to raise substantial additional capital or enter into strategic partnering agreements to fund its operations and BioSante may be unable to raise such funds or enter into strategic partnering agreements when needed and on acceptable terms.

        Developing products requires substantial amounts of capital. BioSante estimates that the cost of the two new LibiGel Phase III efficacy trials will be approximately $15 to $18 million each, or a combined $30 to $36 million spread over 18 months. No assurance can be provided, however, that BioSante's cost estimates will be correct. It is possible that the two new LibiGel Phase III efficacy trials will cost more than BioSante anticipates. If BioSante decides to pursue the two new LibiGel Phase III efficacy trials or in-license additional new products that require further development, BioSante will need to raise substantial additional capital or enter into strategic partnering agreements to fund its operations and it may be unable to raise such funds or enter into strategic partnering agreements when needed and on acceptable terms.

        BioSante's future capital requirements will depend upon numerous factors, including:

        BioSante's future capital requirements and projected expenditures are based upon numerous assumptions and subject to many uncertainties, and actual requirements and expenditures may differ

51


Table of Contents

significantly from its projections. To date, BioSante has relied primarily upon proceeds from sales of its equity securities to finance its business and operations. BioSante likely will need to raise additional capital to fund its operations. As of September 30, 2012, BioSante had $38.0 million of cash and cash equivalents. BioSante does not have any existing credit facilities under which it may borrow funds. Absent the receipt of any additional licensing income or financing, BioSante expects its cash and cash equivalents balance to decrease as it continues to use cash to fund its operations, including in particular the two new LibiGel Phase III efficacy trials if BioSante decides to pursue them. As of September 30, 2012, BioSante has $8.3 million in principal amount of convertible senior notes outstanding that mature on May 1, 2013. Assuming the merger is completed during the first quarter of 2013 and BioSante decides not to commence the two new efficacy trials for LibiGel, BioSante expects its cash equivalents as of September 30, 2012 to meet its liquidity requirements through at least its anticipated closing of the merger, including the closing condition under the merger agreement to have at least $17.0 million of "net cash," as defined in the merger agreement, available upon the closing of the merger. If the merger is not completed, BioSante will need to reevaluate its strategic alternatives, which may include continuing to operate its business as an independent, stand-along company, a sale of the company, liquidation of the company or other strategic transaction. BioSante's liquidity position will be dependent upon the strategic alternative selected; however, assuming BioSante does not enter into another strategic transaction, and assuming BioSante decides not to commence the two new efficacy trials for LibiGel, BioSante expects its cash and cash equivalents as of September 30, 2012 will be sufficient to meet its liquidity requirements for at least the next three to five years. Additional financing would be required should BioSante decide to commence the two new efficacy trials for LibiGel. These estimates may prove incorrect or BioSante, nonetheless, may choose to raise additional financing earlier in order to create a "cash cushion" and take advantage of favorable financing conditions.

        The December 2011 announcement of the results of BioSante's prior completed LibiGel Phase III efficacy trials has significantly depressed the trading price of BioSante common stock and harmed BioSante's ability to raise additional capital. BioSante can provide no assurance that additional financing, if needed, will be available on terms favorable to BioSante, or at all. This is particularly true if investors are not confident in BioSante's LibiGel Phase III development program, the future value of the company and/or if economic and market conditions deteriorate. BioSante has on file effective shelf registration statements that allow it to raise up to an aggregate of $102.4 million from the sale of common stock, preferred stock, warrants or units comprised of the foregoing. However, under applicable SEC rules, if BioSante has a public float of less than $75.0 million, it can only offer to sell under the registration statement up to one-third of its public float during any 12-month period. BioSante can provide no assurance that additional financing, if needed, will be available on terms favorable to it, or at all. If adequate funds are not available or are not available on acceptable terms when BioSante needs them, BioSante may need to make changes to its operations to reduce costs. As an alternative to raising additional financing, BioSante may choose to license LibiGel, Elestrin (outside the territories already licensed) or another product, e.g., GVAX cancer vaccines, to a third party who may finance a portion or all of the continued development and, if approved, commercialization of that licensed product, sell certain assets or rights BioSante has under its existing license agreements or decide or be forced to explore other strategic alternatives, such as selling or merging the company or winding down its operations and liquidating the company. In such case, the BioSante stockholders could lose some or all of their investment.

52


Table of Contents

         Raising additional funds by issuing additional equity securities may cause dilution to existing BioSante stockholders, raising additional funds by issuing additional debt financing may restrict BioSante's operations and raising additional funds through licensing arrangements may require BioSante to relinquish proprietary rights.

        If BioSante raises additional funds through the issuance of additional equity or convertible debt securities, the percentage ownership of its stockholders could be diluted significantly, and these newly issued securities may have rights, preferences or privileges senior to those of its existing stockholders. In addition, the issuance of any equity securities could be at a discount to the market price.

        If BioSante incurs additional debt financing, the payment of principal and interest on such indebtedness may limit funds available for its business activities, and BioSante could be subject to covenants that restrict its ability to operate its business and make distributions to its stockholders. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of BioSante's assets, as well as prohibitions on the ability of BioSante to create liens, pay dividends, redeem its stock or make investments. There is no assurance that any equity or debt financing transaction will be available on terms acceptable to BioSante, or at all.

        As an alternative to raising additional financing by issuing additional equity or debt securities, BioSante may choose to license one or more of its products or technologies to a third party who may finance a portion or all of the continued development and, if approved, commercialization of that licensed product, sell certain assets or rights under BioSante's existing license agreements or enter into other business collaborations or combinations, including a possible sale or merger of its company. If BioSante raises additional funds through licensing arrangements, BioSante may be required to relinquish greater or all rights to BioSante's products at an earlier stage of development or on less favorable terms than BioSante otherwise would choose.

         BioSante has substantial indebtedness, in the form of convertible senior notes, which notes BioSante may not be able to pay when they become due and payable on May 1, 2013, or earlier if BioSante experiences a "fundamental change" or an "event of default" under the indenture governing such notes.

        As of December 31, 2012, BioSante had $8.3 million in aggregate principal amount of convertible senior notes outstanding. The annual interest payment on these notes is approximately $259,000. At maturity, on May 1, 2013, the entire then remaining aggregate outstanding principal amount of the convertible senior notes will become due and payable. In addition, upon the occurrence of a "fundamental change", holders of the convertible senior notes may require BioSante to purchase their notes prior to the May 1, 2013 maturity date. A fundamental change includes a significant change in BioSante's ownership; the first day the majority of its board of directors does not consist of continuing directors; the consummation of certain recapitalizations, reclassifications, or changes of common stock, share exchanges or consolidations or mergers; or the termination of trading of its common stock (which will be deemed to have occurred if its common stock is neither listed for trading on a United States national securities exchange nor any United States system of automated dissemination of quotations of securities prices or traded in over-the-counter securities markets). The proposed merger between BioSante and ANI will not amount to a "fundamental change" under the indenture. Additionally, the aggregate principal amount of the outstanding convertible senior notes will become due and payable upon an uncured or unwaived event of default. Although BioSante believes it will be able to pay the aggregate outstanding principal amount of its convertible senior notes plus accrued interest when the notes mature on May 1, 2013, it is possible that BioSante may not have sufficient funds to pay the aggregate principal amount of its then outstanding convertible senior notes when they mature on May 1, 2013, or become due and payable earlier if BioSante were to experience a "fundamental change" or an "event of default" under the indenture governing such notes.

53


Table of Contents

         The indentures governing BioSante's convertible senior notes contains covenants, which if not complied with, could result in an event of default and the acceleration of all amounts due under the notes.

        The indenture governing BioSante's convertible senior notes contains covenants, such as the requirement to pay accrued interest on May 1 and November 1 of each year, the requirement to repurchase the notes upon a "fundamental change," as defined in the indenture, if a note holder so elects and the requirement to file periodic reports electronically with the SEC. If BioSante does not comply with the covenants in the indenture, an event of default could occur and all amounts due under the notes could become immediately due and payable. Upon the occurrence of an event of default under the indenture, the trustee has available a range of remedies customary in these circumstances, including declaring all such indebtedness, together with accrued and unpaid interest thereon, to be due and payable. Although it is possible BioSante could negotiate a waiver with the trustee and the holders of the notes, such a waiver likely would involve significant costs. It also is possible that BioSante could refinance or restructure its obligations under the notes; however, such a refinancing or restructuring also likely would involve significant costs and likely would result in higher interest rates than the current 3.125% annual interest rate on the notes.

         Future purchases, exchanges or restructurings of BioSante's outstanding convertible senior notes could dilute the percentage ownership of the BioSante stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of BioSante's existing stockholders and/or decrease its cash balance.

        In February 2012, BioSante entered into privately-negotiated securities exchange agreements with one of the holders of its convertible senior notes pursuant to which BioSante issued an aggregate of 1,868,055 shares of its common stock, as adjusted to reflect its one-for-six reverse stock split effected on June 1, 2012, to the note holder in exchange for the cancellation of an aggregate of $9.0 million principal amount of BioSante's convertible senior notes, including accrued and unpaid interest. In July 2012, BioSante entered into a privately-negotiated securities exchange agreement with two of the holders of its convertible senior notes pursuant to which BioSante issued an aggregate of 1,784,070 shares of its common stock to the note holder in exchange for the cancellation of an aggregate of $3.5 million principal amount of BioSante's convertible senior notes and accrued and unpaid interest of $20,686. As a result of these exchanges, an aggregate of $8.3 million principal amount of the convertible senior notes remained outstanding as of September 30, 2012. From time-to-time, BioSante again may purchase, exchange or restructure its outstanding convertible senior notes through cash purchases and/or exchanges for other equity securities of its company, in open market purchases, privately negotiated transactions and/or a tender offer. Such additional purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, the trading price and volume of BioSante common stock, the willingness of the note holders to sell, exchange or restructure their notes, BioSante's available cash and cash equivalents, its liquidity requirements, regulatory limitations, contractual restrictions and other factors. Such future purchases, exchanges or restructurings could dilute the percentage ownership of the BioSante stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of existing BioSante stockholders and/or decrease BioSante's cash balance. A significant decrease in BioSante's cash balance may impair its ability to execute strategic alternatives, including the proposed merger with ANI, or leave BioSante without sufficient cash remaining for operations.

         BioSante is subject to pending purported securities class action and shareholder derivative litigation, which could divert management's attention, harm its business and/or reputation and result in significant liabilities, as well as harm its ability to raise additional financing and execute certain strategic alternatives.

        BioSante is subject to pending purported securities class action and shareholder derivative litigation.

54


Table of Contents

        On February 3, 2012, a purported class action lawsuit was filed in the United States District Court for the Northern District of Illinois under the caption Thomas Lauria, on behalf of himself and all others similarly situated v. BioSante Pharmaceuticals, Inc. and Stephen M. Simes naming BioSante and its President and Chief Executive Officer, Stephen M. Simes, as defendants. The complaint alleges that certain of BioSante's disclosures relating to the efficacy of LibiGel and its commercial potential were false and/or misleading and that such false and/or misleading statements had the effect of artificially inflating the price of BioSante's securities resulting in violations of Section 10(b) of the Securities Exchange Act of 1934, as amended, Rule 10b-5 and Section 20(a) of the Exchange Act. Although a substantially similar complaint was filed in the same court on February 21, 2012, such complaint was voluntarily dismissed by the plaintiff in April 2012. The plaintiff seeks to represent a class of persons who purchased BioSante's securities between February 12, 2010 and December 15, 2011, and seeks unspecified compensatory damages, equitable and/or injunctive relief, and reasonable costs, expert fees and attorneys' fees on behalf of such purchasers. BioSante believes the action is without merit and intends to defend the action vigorously. On November 6, 2012, the plaintiff filed a consolidated amended complaint. BioSante and Mr. Simes filed motions to dismiss the consolidated amended complaint on December 28, 2012.

        On May 7, 2012, Jerome W. Weinstein, a purported stockholder of BioSante filed a shareholder derivative action in the United States District Court for the Northern District of Illinois under the caption Weinstein v. BioSante Pharmaceuticals, Inc. et al., naming BioSante's directors as defendants and BioSante as a nominal defendant. A substantially similar complaint was filed in the same court on May 22, 2012 and another substantially similar complaint was filed in the Circuit Court for Cook County, Illinois, County Department, Chancery Division, on June 27, 2012. The suits generally related to the same events that are the subject of the class action litigation described above. The complaints allege breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment as causes of action occurring from at least February 2010 through December 2011. The complaints seek unspecified damages, punitive damages, costs and disbursements and unspecified reform and improvements in BioSante's corporate governance and internal control procedures. On September 24, 2012, the District Court consolidated the two cases before it and on November 20, 2012 plaintiffs filed their consolidated amended complaint. On January 11, 2013, the defendants filed a motion to dismiss this complaint. On November 27, 2012, the plaintiff in the action pending in Illinois state court filed an amended complaint. On January 11, 2013, the defendants filed a motion to dismiss this complaint.

        The lawsuits are in their early stages; and, therefore, BioSante is unable to predict the outcome of the lawsuits and the possible loss or range of loss, if any, associated with their resolution or any potential effect the lawsuits may have on BioSante's operations. Depending on the outcome or resolution of these lawsuits, they could have a material effect on BioSante's operations, including its financial condition, results of operations, or cash flows.

        BioSante is not involved in any other legal actions, however, from time to time may be subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time.

Risks Related to BioSante's Business

         BioSante's two pivotal LibiGel Phase III efficacy trials did not meet the co-primary and secondary endpoints, and it is possible that the two new LibiGel Phase III efficacy trials, if BioSante decides to pursue them, will not meet the co-primary and secondary endpoints, which could harm BioSante's business and further disappoint BioSante stockholders and cause the trading price of BioSante common stock to decrease.

        BioSante's lead near term product in development is LibiGel for the treatment of FSD, specifically HSDD, in postmenopausal women, for which there is no FDA-approved product. In June 2012,

55


Table of Contents

BioSante announced a plan to initiate two new LibiGel Phase III efficacy trials. This decision was based on an extensive analysis of previous efficacy data, consultation with key opinion leaders in FSD, testosterone therapy and placebo effects, as well as a meeting with the FDA. The protocol for the two new efficacy trials is in development. BioSante intends to apply for an FDA Special Protocol Assessment (SPA) agreement prior to initiating the two new efficacy trials. Currently, it is expected that the efficacy trials will include the same FDA-required efficacy endpoints as prior Phase III efficacy trials: an increase in the number of satisfying sexual events and sexual desire, and decreased distress associated with low desire.

        The initiation of the two new LibiGel Phase III efficacy trials involves risk, especially since BioSante's prior LibiGel Phase III efficacy trials failed to meet the co-primary or secondary endpoints. Although the results indicated that LibiGel performed as predicted based on previous experience with testosterone products for female sexual dysfunction, the placebo response in the two efficacy trials was greater than expected; and therefore, LibiGel's results were not shown to be statistically different from placebo. No assurance can be provided that BioSante will be able to design the two new LibiGel Phase III efficacy trials to minimize sufficiently the placebo effect and meet the co-primary and secondary endpoints for the trials. In addition, BioSante can provide no assurance that it will be able to obtain an FDA SPA agreement for such trials or that BioSante will initiate or complete the trials on a timely basis, or ever. Any of these possible results could harm BioSante's business and further disappoint BioSante stockholders and cause the trading price of BioSante common stock to decrease.

         Although BioSante's male testosterone gel is approved by the FDA, BioSante is uncertain as to when Teva will begin to market and sell the male testosterone gel and thus when or if BioSante would begin to receive royalties from such sales in light of Teva's settlement agreement with a subsidiary of Abbott Laboratories.

        BioSante's male testosterone gel initially was developed by BioSante, and then licensed by BioSante to Teva for late stage clinical development. Teva submitted a New Drug Application, which NDA was approved by the FDA in February 2012. Subsequent to Teva submitting the NDA, in April 2011, a subsidiary of Abbott Laboratories, a marketer of a testosterone gel for men, filed a complaint against Teva alleging patent infringement. The Teva/Abbott Laboratories patent infringement litigation was settled in December 2011; however, the terms of the settlement agreement are confidential and have not been publicly disclosed. In light of the settlement agreement, BioSante is uncertain as to when or if Teva will begin to market and sell its male testosterone gel and thus when or if BioSante would begin to receive royalties from such sales.

         Several of BioSante's products are in the clinical development stages and, depending on the product, likely will not be approved by regulatory authorities or introduced commercially for at least several years and likely more, if at all.

        Several of BioSante's products are in the clinical development stages and will require further development, preclinical and clinical testing and investment prior to obtaining required regulatory approvals and commercialization in the United States and abroad. Other than Elestrin and BioSante's male testosterone gel, none of BioSante's products have been approved by the FDA or other regulatory authorities; and accordingly, none of BioSante's products have been introduced commercially and most are not expected to be for several years and likely more, if at all. BioSante cannot assure you that any of its products in clinical development will:

56


Table of Contents

         If BioSante fails to obtain regulatory approval to manufacture commercially or sell any of its future products, or if approval is delayed or withdrawn, BioSante will be unable to generate revenue from the sale of its products.

        BioSante must obtain regulatory approval to sell any of its products in the United States and abroad. In the United States, BioSante must obtain the approval of the FDA for each product or drug that BioSante intends to commercialize. The FDA approval process typically is very lengthy and expensive, and approval never is certain. Products to be commercialized abroad are subject to similar foreign government regulation.

        Generally, only a very small percentage of newly discovered pharmaceutical products that enter preclinical development eventually are approved for sale. Because of the risks and uncertainties in biopharmaceutical development, BioSante's products could take a significantly longer time to gain regulatory approval than BioSante expects or may never gain approval. If regulatory approval is delayed or never obtained, the credibility of BioSante's management, the value of BioSante and its operating results and liquidity would be affected adversely. Even if a product gains regulatory approval, the product and the manufacturer of the product may be subject to continuing regulatory review and BioSante may be restricted or prohibited from marketing or manufacturing a product if previously unknown problems with the product or its manufacture of the product subsequently are discovered. The FDA also may require BioSante to commit to perform lengthy post-approval studies, for which BioSante would have to expend significant additional resources, which could have an adverse effect on its operating results and financial condition.

        To obtain regulatory approval to market many of BioSante's products, costly and lengthy human clinical trials are required, and the results of the studies and trials are highly uncertain. As part of the FDA approval process, BioSante must conduct, at its own expense or the expense of current or potential licensees or other entities, clinical trials in human subjects on each of BioSante's products. BioSante expects the number of human clinical trials that the FDA will require will vary depending on the product, the disease or condition the product is being developed to address and regulations applicable to the particular product. Depending on the stage of development, BioSante may need to perform multiple pre-clinical studies using various doses and formulations before BioSante can begin human clinical trials, which could result in delays in BioSante's ability to market its products. Furthermore, even if BioSante obtains favorable results in pre-clinical studies on animals, the results in humans may be different.

        In order to receive regulatory approval for commercial sale, BioSante must demonstrate that its products are safe and effective for use in the target human population. The data obtained from pre-clinical and human clinical testing are subject to varying interpretations that could delay, limit or prevent regulatory approval. BioSante faces the risk that the results of its clinical trials in later phases of clinical trials may be inconsistent with those obtained in earlier phases. As an example, BioSante's prior two pivotal LibiGel Phase III efficacy trials did not meet the co-primary endpoints of an increase in satisfying sexual events and an increase in desire and the secondary endpoint of a decrease in distress compared to placebo even though treatment with LibiGel in BioSante's Phase II clinical trial significantly increased satisfying sexual events compared to placebo. A number of companies in the

57


Table of Contents

biopharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal or human testing. Adverse or inconclusive human clinical results would prevent BioSante from submitting for regulatory approval of its products.

        Additional factors that can cause delay or termination of BioSante's human clinical trials include:

        Delays in BioSante's clinical trials could allow its competitors additional time to develop or market competing products and thus can be extremely costly in terms of lost sales opportunities and increased clinical trial costs.

         The process for obtaining FDA approval of an NDA is time consuming, subject to unanticipated delays and costs, and requires the commitment of substantial resources.

        BioSante's products in development will require the submission and approval of an NDA in order to obtain required approval by the FDA to commercially market the product. The FDA conducts in-depth reviews of NDAs to determine whether to approve products for commercial marketing for the indications proposed. If the FDA is not satisfied with the information provided, the FDA may refuse to approve an NDA or may require a company to perform additional studies or provide other information in order to secure approval. The FDA may delay, limit or refuse to approve an NDA for many reasons, including:

        If the FDA determines that the clinical studies submitted for a product candidate in support of an NDA are not conducted in full compliance with the applicable protocols for these studies, as well as with applicable regulations and standards, or if the FDA does not agree with a company's interpretation of the results of such studies, the FDA may reject the data that resulted from such studies. The rejection of data from clinical studies required to support an NDA could affect negatively a company's ability to obtain marketing authorization for a product and would have a material adverse effect on a company's business and financial condition. In addition, an NDA may not be approved, or approval may be delayed, as a result of changes in FDA policies for drug approval during development or the review period.

58


Table of Contents

         BioSante may not achieve projected goals and objectives in the time periods that BioSante anticipates or announce publicly, which could have an adverse effect on its business and could cause the price of BioSante common stock to decline.

        BioSante sets goals and objectives for, and makes public statements regarding, the timing of certain accomplishments and milestones regarding its business, such as the initiation and completion of clinical studies, the completion of enrollment for clinical studies, the submission of applications for regulatory approvals, the receipt of regulatory approvals and other developments and milestones. The actual timing of these events can vary dramatically due to a number of factors including without limitation delays or failures in BioSante's current clinical studies, the amount of time, effort and resources committed to its programs by BioSante and its current and potential future strategic partners and the uncertainties inherent in the clinical studies and regulatory approval process. As a result, there can be no assurance that clinical studies involving BioSante's products in development will advance or be completed in the time periods that BioSante or its strategic partners announce or expect, that BioSante or its current and potential future strategic partners will make regulatory submissions or receive regulatory approvals as planned or that BioSante or its current and potential future strategic partners will be able to adhere to its current schedule for the achievement of key milestones under any of its development programs. If BioSante or any of its strategic partners fail to achieve one or more of these milestones as planned, BioSante's business could be affected adversely and materially and the trading price of BioSante common stock could decline. As an example, prior to BioSante's receipt of the results from its prior two pivotal LibiGel Phase III efficacy trials in December 2011, its objective with respect to LibiGel was to submit an NDA in 2012. This is obviously no longer an objective of BioSante's in light of the fact that unexpectedly BioSante's two pivotal LibiGel Phase III efficacy trials did not meet the co-primary and secondary endpoints.

        BioSante also discloses from time-to-time projected financial information, including its cash position and anticipated cash burn rate and other expenditures, for future periods. These financial projections are based on management's current expectations and may not contain any margin of error or cushion for any specific uncertainties, or for the uncertainties inherent in all financial forecasting.

         If the market opportunities for BioSante's products are smaller than BioSante anticipates, then its future revenues and business may be affected adversely.

        From time-to-time, BioSante discloses estimated market opportunity data for its products and products in development. Although BioSante believes it has a reasonable basis for its market opportunity estimates, BioSante estimates may prove to be incorrect. If the market opportunities for BioSante's products are smaller than BioSante anticipates, its anticipated revenues from the sales or licensure of such products will be lower than BioSante anticipates.

         Uncertainties associated with the impact of published studies regarding the adverse health effects of certain forms of hormone therapy could adversely affect the market for BioSante's hormone therapy products and the trading price of BioSante common stock.

        The market for hormone therapy products has been affected negatively by the Women's Health Initiative (WHI) study and other studies that have found that the overall health risks from the use of certain hormone therapy products may exceed the benefits from the use of those products among postmenopausal women. In July 2002, the National Institutes of Health (NIH) released data from its WHI study on the risks and benefits associated with long-term use of oral hormone therapy by women. The NIH announced that it was discontinuing the arm of the study investigating the use of oral estrogen/progestin combination hormone therapy products after an average follow-up period of 5.2 years because the product used in the study was shown to cause an increase in the risk of invasive breast cancer. The study also found an increased risk of stroke, heart attacks and blood clots and concluded that overall health risks exceeded benefits from use of combined estrogen plus progestin for

59


Table of Contents

an average of 5.2 year follow-up among postmenopausal women. Also, in July 2002, results of an observational study sponsored by the National Cancer Institute on the effects of estrogen therapy were announced. The main finding of the study was that postmenopausal women who used estrogen therapy for 10 or more years had a higher risk of developing ovarian cancer than women who never used hormone therapy. In October 2002, a significant hormone therapy study being conducted in the United Kingdom also was halted. BioSante's products differ from the products used in the WHI study and the primary products observed in the National Cancer Institute and United Kingdom studies. In March 2004, the NIH announced that the estrogen-alone study was discontinued after nearly seven years because the NIH concluded that estrogen alone does not affect (either increase or decrease) heart disease, the major question being evaluated in the study. The findings indicated a slightly increased risk of stroke as well as a decreased risk of hip fracture and breast cancer. Preliminary data from the memory portion of the WHI study suggested that estrogen alone may possibly be associated with a slight increase in the risk of dementia or mild cognitive impairment.

        Researchers continue to analyze data from both arms of the WHI study and other studies. Some reports indicate that the safety of estrogen products may be affected by the age of the woman at initiation of therapy. There currently are no studies published comparing the safety of BioSante's products against other hormone therapies. The markets for female hormone therapies for menopausal symptoms declined as a result of these published studies, although the market now seems to have stabilized. The release of any follow-up or other studies that show adverse effects from hormone therapy, including in particular, hormone therapies similar to BioSante's products, also could adversely affect BioSante's business and decrease the trading price of BioSante common stock.

         If clinical studies for BioSante's products are terminated, prolonged or delayed, it may be difficult for BioSante to find a strategic partner to assist it in the development and commercialization of its non-partnered products or commercialize such products on a timely basis, which would require BioSante to incur additional costs and delay or prevent its receipt of any revenue from potential product sales or licenses.

        BioSante may encounter problems with its completed, ongoing or planned clinical studies for its products that may cause it or the FDA to delay, suspend or terminate those studies or delay the analysis of data derived from them. A number of events, including any of the following, could delay the completion of, or cause BioSante to suspend or terminate its ongoing and planned clinical studies for its products and negatively impact BioSante's ability to obtain regulatory approval or enter into strategic partnerships for, or market or sell, a particular product:

        Regulatory authorities, clinical investigators, institutional review boards, data safety monitoring boards and the sites at which BioSante's clinical studies are conducted all have the power to stop or recommend stopping its clinical studies prior to completion. BioSante's clinical studies for its products in development may not begin as planned, may need to be amended, suspended or terminated and may not be completed on schedule, if at all. This is particularly true if BioSante no longer believes it can

60


Table of Contents

obtain regulatory approval for a particular product or if BioSante no longer has the financial resources to dedicate to a clinical development program for a particular product.

         BioSante relies on third parties to assist it in certain aspects of its clinical studies. If these third parties do not perform as required contractually or expected, BioSante's clinical studies may be extended, delayed or terminated or may need to be repeated, and BioSante may not be able to obtain regulatory approval for or commercialize the product being tested in such studies.

        BioSante relies on third parties, such as medical institutions, academic institutions, clinical investigators and contract laboratories, to assist it in certain aspect of its clinical studies. BioSante is responsible for confirming that BioSante's studies are conducted in accordance with applicable regulations and that each of its clinical trials is conducted in accordance with its general investigational plan and protocol. The FDA requires BioSante to comply with regulations and standards, commonly referred to as good clinical practices for conducting, monitoring, recording and reporting the results of clinical trials, to assure that data and reported results are accurate and that the clinical trial participants are adequately protected. BioSante's reliance on these few third parties does not relieve it of these responsibilities. If the third parties assisting BioSante with certain aspects of its clinical studies do not perform their contractual duties or obligations, do not meet expected deadlines, fail to comply with the FDA's good clinical practice regulations, do not adhere to BioSante's protocols or otherwise fail to generate reliable clinical data, BioSante may need to enter into new arrangements with alternative third parties and its clinical studies may be extended, delayed or terminated or may need to be repeated, and BioSante may not be able to obtain regulatory approval for or commercialize the product being tested in such studies. In addition, if a third party fails to perform as agreed, BioSante's ability to collect damages may be limited contractually.

         BioSante's products will remain subject to ongoing regulatory review even if BioSante receives marketing approval. If BioSante fails to comply with continuing regulations, BioSante could lose these approvals, and the sale of any future products could be suspended.

        Even if BioSante receives regulatory approval to market a particular product in development, the FDA or a foreign regulatory authority could condition approval on conducting additional costly post-approval studies or could limit the scope of BioSante's approved labeling or could impose burdensome post-approval obligations under a Risk Evaluation and Mitigation Strategy (REMS). If required, a REMS may include various elements, such as publication of a medication guide, a patient package insert, a communication plan to educate healthcare providers of the drug's risks, limitations on who may prescribe or dispense the drug or other measures that the FDA deems necessary to assure the safe use of the drug. Moreover, the product may later cause adverse effects that limit or prevent its widespread use, result in more restrictive labeling than originally approved, force BioSante to withdraw it from the market, cause the FDA to impose additional REMS obligations or impede or delay BioSante's ability to obtain regulatory approvals in additional countries. In addition, BioSante will continue to be subject to FDA review and periodic inspections to ensure adherence to applicable regulations. After receiving marketing approval, the FDA imposes extensive regulatory requirements on the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the product.

        If BioSante fails to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities or previously unknown problems with any future products, suppliers or manufacturing processes are discovered, BioSante could be subject to administrative or judicially imposed sanctions, including:

61


Table of Contents

         BioSante may enter into additional strategic relationships with third parties to help develop and commercialize its products in development. If BioSante does not enter into such relationships, BioSante will need to undertake development and commercialization efforts on its own, which would be costly and could delay BioSante's ability to obtain required approvals for and commercialize its future products.

        A key element of BioSante's business strategy is BioSante's intent to partner selectively with pharmaceutical, biotechnology and other companies to obtain assistance for commercialization and, in some cases, development of its products. For example, BioSante has a strategic relationship with Meda Pharmaceuticals, Inc. with respect to Elestrin, with Teva with respect to BioSante's male testosterone gel, with Pantarhei Science with respect to The Pill Plus and with several third parties with respect to BioSante's GVAX cancer vaccines. BioSante currently does not have a strategic partner for LibiGel.

        BioSante may enter into additional strategic relationships with third parties to develop, and if regulatory approval is obtained commercialize, its products in development, including LibiGel, and any additional new products BioSante may acquire or in-license. BioSante faces significant competition in seeking appropriate strategic partners, and these strategic relationships can be intricate and time consuming to negotiate and document. BioSante may not be able to negotiate additional strategic relationships on acceptable terms, or at all. BioSante is unable to predict when, if ever, it will enter into any additional strategic relationships because of the numerous risks and uncertainties associated with establishing such relationships. If BioSante is unable to negotiate additional strategic relationships for its products, BioSante may be forced to curtail the development of a particular product, reduce, delay or terminate its development program or one or more of its other development programs, delay its potential commercialization, reduce the scope of anticipated sales or marketing activities or undertake development or commercialization activities at BioSante's own expense. In addition, BioSante would then bear all the risk related to the development and commercialization of that product. If BioSante elects to increase its expenditures to fund development or commercialization activities on its own, BioSante may need to obtain additional capital, which may not be available to BioSante on acceptable terms, or at all. If BioSante does not have sufficient funds, BioSante will not be able to bring its products in development and any additional new products BioSante may acquire or in-license if they receive regulatory approvals to market and generate product revenue.

         If BioSante is unable to partner with a third party and obtain assistance for the potential commercialization of its products, if approved for commercial sale, BioSante would need to establish its own sales and marketing capabilities, which involves risk.

        BioSante does not have an internal sales and marketing organization and has limited experience in the sales, marketing and distribution of pharmaceutical products. There are risks involved with establishing BioSante's own sales capabilities and increasing its marketing capabilities, as well as entering into arrangements with third parties to perform these services. Developing an internal sales force is expensive and time consuming and could delay any product launch. On the other hand, if

62


Table of Contents

BioSante enters into arrangements with third parties to perform sales, marketing and distribution services, revenues from sales of the product or the profitability of these product revenues are likely to be lower than if BioSante markets and sells any products that BioSante develops itself.

        Although BioSante's preferred alternative would be to engage a pharmaceutical or other healthcare company with an existing sales and marketing organization and distribution systems to sell, market and distribute its products, if approved for commercial sale, if BioSante is unable to engage such a sales and marketing partner, BioSante may need to establish its own specialty sales force. Factors that may inhibit BioSante's efforts to commercialize any future products without strategic partners or licensees include:

        Because the establishment of sales and marketing capabilities depends on the progress towards commercialization of BioSante's products and because of the numerous risks and uncertainties involved with establishing its own sales and marketing capabilities, BioSante is unable to predict when, if ever, BioSante will establish its own sales and marketing capabilities. If BioSante is not able to partner with additional third parties and are unsuccessful in recruiting sales and marketing personnel or in building a sales and marketing infrastructure, BioSante will have difficulty commercializing its products, which would harm its business and financial condition.

         BioSante's current strategic relationships and any future additional strategic relationships it may enter into involve risks with respect to the development and commercialization of its products.

        A key element of BioSante's business strategy is to selectively partner with pharmaceutical, biotechnology and other companies to obtain assistance for commercialization and, in some cases, development of BioSante's products. For example, BioSante has strategic relationships with Meda Pharmaceuticals, Inc. with respect to Elestrin, with Teva with respect to its male testosterone gel and with Pantarhei Science with respect to The Pill Plus and several third parties with respect to its GVAX cancer vaccines.

        BioSante's current strategic relationships and any future additional strategic relationships BioSante may enter into involve a number of risks, including:

63


Table of Contents

         Although BioSante maintains the right to receive sales-based milestones of up to $140 million, its ability to receive these milestones is dependent upon Meda Pharmaceuticals, Inc.'s ability to market and sell Elestrin, and based on Elestrin sales to date, BioSante believes it is unlikely that it will receive any sales-based milestone payments from Meda Pharmaceuticals in the foreseeable future, or at all.

        Meda Pharmaceuticals, Inc. (which acquired Jazz Pharmaceuticals, Inc.'s women's health business, and which in turn had acquired BioSante's original licensee, Azur Pharma International II Limited (Azur)), is marketing Elestrin in the U.S. In December 2009, BioSante entered into an amendment to its original licensing agreement with Azur pursuant to which BioSante received $3.16 million in non-refundable payments in exchange for the elimination of all remaining future royalty payments and certain milestone payments that could have been paid to BioSante related to sales of Elestrin. BioSante continues to recognize certain royalty revenue from sales of Elestrin; however, such revenue is offset by its corresponding obligation to pay royalties to Antares, from whom BioSante licensed the technology underlying its Elestrin product. BioSante maintains the right to receive up to $140 million in sales-based milestone payments from Meda Pharmaceuticals if Elestrin reaches certain predefined sales per calendar year. BioSante can provide no assurance that Meda Pharmaceuticals will be successful in marketing Elestrin, Elestrin will be accepted widely in the marketplace or that Meda Pharmaceuticals will remain focused on the commercialization of Elestrin, especially if Meda Pharmaceuticals does not experience significant Elestrin sales. Based on current sales of Elestrin, BioSante believes it is unlikely that BioSante will receive any sales-based milestone payments from Meda Pharmaceuticals in the near term, if at all.

         If BioSante's products in development receive FDA approval and are introduced commercially, they may not achieve expected levels of market acceptance, which could harm BioSante's business, financial position and operating results and could cause the trading price of BioSante common stock to decline.

        The commercial success of BioSante's products in development, if BioSante receives the required FDA or other regulatory approvals, and the commercial success of its male testosterone gel, which is FDA approved, but not yet commercially launched, are dependent upon acceptance by physicians, patients, third-party payors and the medical community. Levels of market acceptance for such products,

64


Table of Contents

if approved for commercial sale with respect to BioSante's products in development, could be affected by several factors, including:

        Some of these factors are not within BioSante's control, especially if BioSante has transferred all of the marketing rights associated with the product, as BioSante has with the U.S. marketing rights to Elestrin to Meda Pharmaceuticals, and the U.S. development and marketing rights to its male testosterone gel to Teva. BioSante's products may not achieve expected levels of market acceptance.

        Additionally, continuing studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by other companies, government agencies and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the use, safety and efficacy of previously marketed products. In some cases, these studies have resulted, and in the future may result, in the discontinuance of product marketing. These situations, should they occur, could harm BioSante's business, financial position and results of operations, and the trading price of BioSante common stock could decline.

         Even if BioSante or its strategic partners successfully develop, obtain required regulatory approvals and commercialize any of its products under development, BioSante faces uncertainty with respect to pricing, third-party reimbursement and healthcare reform, all of which could affect adversely the commercial success of BioSante's products.

        BioSante's ability to collect significant revenues from sales of its products, if approved and commercialized, may depend on its ability, and the ability of any current or potential future strategic partners or customers, to obtain adequate levels of coverage and reimbursement for such products from third-party payers such as:

        Third-party payers increasingly are challenging the prices charged for medical products and services. For example, third-party payers may deny coverage or offer inadequate levels of reimbursement if they determine that a prescribed product has not received appropriate clearances

65


Table of Contents

from the FDA, or foreign equivalent, or other government regulators, is not used in accordance with cost-effective treatment methods as determined by the third-party payer, or is experimental, unnecessary or inappropriate. Prices also could be driven down by health maintenance organizations that control or significantly influence purchases of healthcare services and products. If third-party payers deny coverage or offer inadequate levels of reimbursement, BioSante or any of its strategic partners may not be able to market its products effectively or it may be required to offer its products at prices lower than anticipated.

        In both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect BioSante's ability to sell its products profitably. Some of these proposed and implemented reforms could result in reduced reimbursement rates for BioSante's products, which could affect adversely its business strategy, operations and financial results. For example, in March 2010, President Obama signed into law a legislative overhaul of the U.S. healthcare system, known as the Patient Protection and Affordable Care Act of 2010, as amended by the Healthcare and Education Affordability Reconciliation Act of 2010, which is referred to as the PPACA. This legislation may have far reaching consequences for life science companies like BioSante. As a result of this new legislation, substantial changes could be made to the current system for paying for healthcare in the United States, including changes made in order to extend medical benefits to those who currently lack insurance coverage. Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, drugs and devices. These structural changes could entail modifications to the existing system of private payors and government programs, such as Medicare and Medicaid, creation of a government-sponsored healthcare insurance source, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the United States could impact the reimbursement for prescribed drugs, biopharmaceuticals and medical devices. If reimbursement for BioSante's products, if approved, is substantially less that BioSante expects in the future, its business could be affected materially and adversely.

        The cost-containment measures that healthcare providers are instituting and the results of healthcare reforms such as the PPACA may prevent BioSante from maintaining prices for its products that are sufficient for BioSante to realize profits and may otherwise significantly harm its business, financial condition and operating results. In addition, to the extent that BioSante's approved products are marketed outside of the United States, foreign government pricing controls and other regulations may prevent BioSante from maintaining prices for such products that are sufficient for BioSante to realize profits and may otherwise significantly harm its business, financial condition and operating results.

         BioSante and its licensees depend on third-party manufacturers to produce its products and if these third parties do not manufacture successfully these products BioSante's business would be harmed.

        BioSante has no manufacturing experience or manufacturing capabilities for the production of its products for its clinical studies or, if approved, commercial sale. In order to continue to develop products, apply for regulatory approvals and commercialize BioSante's products following approval, if obtained, BioSante or its licensees must be able to manufacture or contract with third parties to manufacture its products in clinical and commercial quantities, in compliance with regulatory requirements, at acceptable costs and in a timely manner. The manufacture of BioSante's products may be complex, difficult to accomplish and difficult to scale-up when large-scale production is required. Manufacture may be subject to delays, inefficiencies and poor or low yields of quality products. The cost of manufacturing BioSante's products may make them prohibitively expensive. If supplies of any of BioSante's products become unavailable on a timely basis or at all or are contaminated or otherwise lost, BioSante's clinical studies could be seriously delayed or compromised, and with respect to its

66


Table of Contents

approved products, its future revenue from royalties and milestone payments could be affected adversely.

         To the extent that BioSante or its licensees enter into manufacturing arrangements with third parties, BioSante and such licensees will depend upon these third parties to perform its obligations in a timely and effective manner and in accordance with government regulations. Contract manufacturers may breach their manufacturing agreements because of factors beyond BioSante's control or may terminate or fail to renew a manufacturing agreement based on their own business priorities at a time that is costly or inconvenient for BioSante.

        BioSante's existing and future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store and distribute BioSante's products. If a natural disaster, business failure, strike or other difficulty occurs, BioSante may be unable to replace these contract manufacturers in a timely or cost-effective manner and the production of its products would be interrupted, resulting in delays and additional costs. Switching manufacturers or manufacturing sites would be difficult and time-consuming because the number of potential manufacturers is limited. In addition, before a product from any replacement manufacturer or manufacturing site can be commercialized, the FDA must approve that site. This approval would require regulatory testing and compliance inspections. A new manufacturer or manufacturing site also would have to be educated in, or develop substantially equivalent processes for, production of BioSante's products. It may be difficult or impossible to transfer certain elements of a manufacturing process to a new manufacturer or for BioSante to find a replacement manufacturer on acceptable terms quickly, or at all, either of which would delay or prevent its ability to develop and commercialize its products.

        If third-party manufacturers fail to perform their obligations, BioSante's competitive position and ability to generate revenue may be affected adversely in a number of ways, including:

        In addition, if a third-party manufacturer fails to perform as agreed, BioSante's ability to collect damages may be contractually limited.

         If BioSante reallocates its resources to other products and technologies in its current product portfolio or any additional new products and technologies that BioSante may acquire or in-license, BioSante may not be successful in developing such products and technologies and BioSante will be subject to all the risks and uncertainties associated with research and development of products and technologies.

        BioSante has explored the possibility of reallocating its resources towards other products and technologies in its current product portfolio or any additional new products and technologies that BioSante may acquire or in-license. It BioSante decides to reallocate its resources towards other products and technologies in its current product portfolio or any additional new products and technologies that BioSante may acquire or in-license, BioSante cannot guarantee that any such allocation would result in the identification and successful development of one or more approved and

67


Table of Contents

commercially viable products. The development of products and technologies is subject to a number of risks and uncertainties, including:

         BioSante has very limited staffing and is dependent upon key employees and the limited use of independent contractors, the loss of some of which could affect adversely its operations.

        BioSante's success is dependent upon the efforts of a relatively small management team and staff. BioSante also has engaged independent contractors from time-to-time on an as needed, project by project, basis. In January 2012, in order to reduce BioSante's operating expenses, BioSante terminated several of its independent contractor arrangements and reduced its total employee headcount. In December 2012, BioSante terminated the remaining independent contractor arrangements and in January 2013 reduced its total employee headcount further. Such reductions in force, combined with BioSante's future business prospects and financial condition, put BioSante at risk of losing key personnel who BioSante will need going forward to implement its business strategies. BioSante has no redundancy of personnel in key development areas, including clinical, regulatory, strategic planning and finance. BioSante has employment arrangements in place with its executive and other officers, but none of these executive and other officers is bound legally to remain employed with BioSante for any specific term. BioSante does not have key man life insurance policies covering its executive and other officers or any of its other employees. If key individuals leave BioSante, its business could be affected adversely if suitable replacement personnel are not recruited quickly. There is competition for qualified personnel in the biotechnology and biopharmaceutical industry in the suburban Chicago, Illinois area in all functional areas, which makes it difficult to retain and attract the qualified personnel necessary for the development and growth of BioSante's business. BioSante's financial condition and recent reductions in force and expense reductions may make it difficult for BioSante to retain current personnel and attract qualified employees and independent contractors in the future.

         If plaintiffs bring product liability lawsuits against BioSante, BioSante may incur substantial liabilities and may be required to delay development or limit commercialization of any of BioSante's products approved for commercial sale.

        BioSante faces an inherent risk of product liability as a result of the clinical testing of its products in development and the commercial sale of its products that have been or will be approved for

68


Table of Contents

commercial sale. BioSante may be held liable if any product it develops causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, liability claims may result in decreased demand for BioSante's products, injury to its reputation, withdrawal of clinical studies, costs to defend litigation, substantial monetary awards to clinical study participants or patients, loss of revenue and the inability to commercialize any products that BioSante develops.

        BioSante currently maintains limited product liability insurance. BioSante may not have sufficient resources to pay for any liabilities resulting from a personal injury or other claim excluded from, or beyond the limit of, BioSante's insurance coverage. BioSante's insurance does not cover third parties' negligence or malpractice, and its clinical investigators and sites may have inadequate insurance or none at all. In addition, in order to conduct BioSante's clinical studies or otherwise carry out its business, BioSante may have to assume liabilities contractually for which it may not be insured. If BioSante is unable to look to its own or a third party's insurance to pay claims against them, BioSante may have to pay any arising costs and damages themselves, which may be substantial. Even if BioSante ultimately is successful in product liability litigation, the litigation likely would consume substantial amounts of its financial and managerial resources and may create adverse publicity, all of which likely would impair BioSante's ability to generate sales of the affected product and its other products. Moreover, product recalls may be issued at BioSante's discretion or at the direction of the FDA, other governmental agencies or other companies having regulatory control for its product sales. Product recalls generally are expensive and often have an adverse effect on the reputation of the products being recalled and of the product's developer or manufacturer.

        BioSante may be required to indemnify third parties against damages and other liabilities arising out of its development, commercialization and other business activities, which could be costly and time-consuming and distract management. If third parties that have agreed to indemnify BioSante against damages and other liabilities arising from their activities do not fulfill their obligations, then BioSante may be held responsible for those damages and other liabilities.

         Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the trading price of BioSante common stock.

        Section 404 of the Sarbanes-Oxley Act of 2002 requires BioSante's management to assess the effectiveness of its internal control over financial reporting and to provide a report by its registered independent public accounting firm addressing the effectiveness of BioSante's internal control over financial reporting. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. If BioSante is unable to assert that its internal control over financial reporting is effective or if BioSante's registered independent public accounting firm is unable to express an opinion on the effectiveness of the internal controls or identifies one or more material weaknesses in BioSante's internal control over financial reporting, BioSante could lose investor confidence in the accuracy and completeness of its financial reports, which in turn could have an adverse effect on the trading price of BioSante common stock. If BioSante fails to maintain the adequacy of its internal controls, BioSante may not be able to ensure that it can conclude on an ongoing basis that BioSante has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain effective internal control over financial reporting could have an adverse effect on the trading price of BioSante common stock.

         BioSante's business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could affect adversely its business and financial results.

        BioSante is subject to changing rules and regulations of federal and state governments as well as the stock exchange on which BioSante common stock is listed. These entities, including the SEC and

69


Table of Contents

The NASDAQ Stock Market, continue to issue new requirements and regulations in response to laws enacted by Congress. In July 2010, the Dodd-Frank Wall Street Reform and Protection Act (the Dodd-Frank Act) was enacted. There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that require the SEC and The NASDAQ Stock Market to adopt additional rules and regulations in these areas. BioSante's efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management's time from its other business activities.

         BioSante's operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.

        BioSante's principal executive office and its only business location is in Lincolnshire, Illinois, which is a suburb of Chicago. Natural disasters or other catastrophic events could disrupt BioSante's operations or those of its strategic partners, contractors and vendors. Even though BioSante believes it carries commercially reasonable business interruption and liability insurance, and its contractors may carry liability insurance that protect BioSante in certain events, BioSante might suffer losses as a result of business interruptions that exceed the coverage available under its and its contractors' insurance policies or for which it or its contractors do not have coverage. Any natural disaster or catastrophic event could have a significant negative impact on BioSante's operations and financial results, and could delay its efforts to identify and execute any strategic opportunities.


Risks Related to BioSante's Industry

Because BioSante's industry is very competitive, BioSante may not succeed in bringing certain of its products to market and any products BioSante or its strategic partners introduce commercially may not be successful.

        Competition in the pharmaceutical industry is intense. Potential competitors in the United States and abroad are numerous and include pharmaceutical and biotechnology companies, most of which have substantially greater capital resources and more experience in research and development, manufacturing and marketing than BioSante. Academic institutions, hospitals, governmental agencies and other public and private research organizations also are conducting research and seeking patent protection and may develop and commercially introduce competing products or technologies on their own or through joint ventures. BioSante cannot assure you that its potential competitors, some of whom are BioSante's strategic partners, will not succeed in developing similar technologies and products more rapidly than it does, commercially introducing such technologies and products to the marketplace prior to BioSante, or that these competing technologies and products will not be more effective or successful than any of those that BioSante currently is developing or will develop.

         Because the pharmaceutical industry is heavily regulated, BioSante faces significant costs and uncertainties associated with its efforts to comply with applicable regulations. Should BioSante fail to comply, it could experience material adverse effects on its business, operating results and financial position, and the trading price of BioSante common stock could decline.

        The pharmaceutical industry is subject to regulation by various federal authorities, including principally the FDA and, to a lesser extent, the U.S. Drug Enforcement Administration, and state governmental authorities. The U.S. Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act of 1970 and other federal statutes and regulations govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of BioSante's products. Noncompliance with applicable legal and regulatory requirements can have a broad range of consequences, including warning letters, fines, seizure of products, product recalls, total or partial suspension of production and distribution, refusal to approve NDAs or other applications or revocation of approvals previously granted, withdrawal of product from marketing, injunction, withdrawal of licenses or registrations necessary to conduct business, disqualification from supply contracts with the government, civil penalties, debarment and criminal prosecution.

70


Table of Contents

        In addition to compliance with "current good manufacturing practice" regulations, commonly referred to as "cGMP" regulations and requirements, drug manufacturers must register each manufacturing facility with the FDA and list their drugs with the FDA. Manufacturers and distributors of prescription drug products also are required to be registered in the states where they are located and in certain states that require registration by out-of-state manufacturers and distributors. Manufacturers also must be registered with the U.S. Drug Enforcement Administration and similar applicable state and local regulatory authorities if they handle controlled substances, and also must comply with other applicable U.S. Drug Enforcement Administration and state requirements.

        Despite BioSante's efforts at compliance, there is no guarantee that BioSante may not be deemed to be deficient in some manner in the future. If BioSante was deemed to be deficient in any significant way, its business, financial position and results of operations could be materially affected and the trading price of BioSante common stock could decline.

         The trend towards consolidation in the pharmaceutical and biotechnology industries may affect BioSante adversely.

        There is a trend towards consolidation in the pharmaceutical and biotechnology industries. This consolidation trend may result in the remaining companies in these industries having greater financial resources and technological capabilities, thus intensifying competition in these industries. This trend also may result in fewer potential strategic partners or licensees for BioSante's products and technology. Also, if a consolidating company is already doing business with its competitors, BioSante may lose existing licensees or strategic partners as a result of such consolidation. This trend may affect adversely BioSante's ability to enter into strategic arrangements for the development and commercialization of its products, and as a result may harm its business.

Risks Related to BioSante's Intellectual Property

         BioSante licenses rights to the technology underlying LibiGel and many of its other products and technologies from third parties. The loss of these rights, including in particular, BioSante's rights underlying LibiGel, could have an adverse effect on its business and future prospects and could cause the trading price of BioSante common stock to decline.

        BioSante licenses rights to certain technology underlying its gel products, including LibiGel, but not its male testosterone gel, from Antares Pharma, Inc., its GVAX cancer vaccines from The Johns Hopkins University and The Whitehead Institute for Biomedical Research, and The Pill Plus from Wake Forest University Health Sciences. BioSante may lose its rights to these technologies if BioSante breaches its obligations under the license agreements. Although BioSante intends to use commercially reasonable efforts to meet these obligations and to cause its sublicensees to meet these obligations, if BioSante violates or fails to perform any term or covenant of the license agreements, the other party to these agreements under certain circumstances may terminate these agreements or certain projects contained in these agreements. The termination of these agreements, however, will not relieve BioSante of its obligation to pay any royalty or license fees owed at the time of termination. In addition, it is possible that the licensors of the technology licensed by BioSante will not continue to maintain certain patents and other intellectual property rights, breach the agreements or take actions inconsistent with BioSante's license rights, which could harm BioSante's business.

71


Table of Contents

         BioSante has licensed some of its products to third parties and any breach by these parties of their obligations under these license agreements or a termination of these license agreements by these parties could affect adversely the development and marketing of its licensed products. In addition, these third parties also may compete with BioSante with respect to some of its products.

        BioSante has licensed some of its products to third parties, including Meda Pharmaceuticals, Teva Pharmaceuticals USA, Inc., Pantarhei Bioscience B.V., Valeant Pharmaceuticals, Aduro BioTech, Inc. and The John P. Hussman Foundation. All of these parties, except for Meda Pharmaceuticals, have agreed to be responsible for continued development, regulatory filings and manufacturing and marketing associated with the products, except for Valeant Pharmaceuticals, which has not agreed to be responsible for manufacturing the products. In addition, in the future BioSante may enter into additional similar license agreements. BioSante's products that it has licensed to others thus are subject to not only customary and inevitable uncertainties associated with the drug development process, regulatory approvals and market acceptance of products, but also depend on the respective licensees for timely development, obtaining required regulatory approvals, commercialization and otherwise continued commitment to the products. BioSante's current and future licensees may have different and, sometimes, competing priorities. BioSante cannot assure you that its strategic partners or any future third party to whom it may license its products will remain focused on the development and commercialization of its partnered products or will not otherwise breach the terms of its agreements with them, especially since these third parties also may compete with BioSante with respect to some of its products. Any breach of BioSante's agreements by its strategic partners or any other third party of their obligations under these agreements or a termination of these agreements by these parties could harm development of the partnered products in these agreements if BioSante is unable to license the products to another party on substantially the same or better terms or continue the development and future commercialization of the products itself. As an example, BioSante's male testosterone gel initially was developed by BioSante, and then licensed to Teva for late stage clinical development and commercialization. Teva submitted an NDA for BioSante's male testosterone gel that was approved by the FDA in February 2012. Subsequent to Teva's NDA submission, in April 2011, a subsidiary of Abbott Laboratories, a marketer of a testosterone gel for men, filed a complaint against Teva alleging patent infringement. The Teva/Abbott Laboratories patent infringement litigation was settled in December 2011; however, the terms of the settlement agreement are confidential and have not been disclosed publicly. In light of the settlement agreement, BioSante is uncertain as to when or if Teva will begin to market and sell its male testosterone gel and thus when or if BioSante would begin to receive royalties from such sales.

         If BioSante is unable to protect its proprietary technology, it may not be able to compete as effectively.

        The pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. BioSante's success will depend, in part, upon its ability to obtain, enjoy and enforce protection for any products it develops or acquires under United States and foreign patent laws and other intellectual property laws, preserve the confidentiality of its trade secrets and operate without infringing the proprietary rights of third parties. BioSante relies on patent protection, as well as a combination of copyright and trademark laws and nondisclosure, confidentiality and other contractual arrangements to protect its proprietary technology. These legal means, however, afford only limited protection and may not adequately protect BioSante's rights or permit BioSante to gain or keep any competitive advantage.

        Where appropriate, BioSante seeks patent protection for certain aspects of its technology. BioSante owned and licensed patents and patent applications, however, may not ensure the protection of its intellectual property for a number of other reasons:

72


Table of Contents

        BioSante also relies on unpatented proprietary technology. It is unclear whether efforts to secure BioSante's trade secrets will provide useful protection. BioSante relies on the use of registered trademarks with respect to the branded names of some of its products. BioSante also relies on common law trademark protection for some branded names, which are not protected to the same extent as its rights in the use of its registered trademarks. BioSante cannot assure you that it will be able to meaningfully protect all of its rights in its unpatented proprietary technology or that others will not independently develop and obtain patent protection substantially equivalent proprietary products or processes or otherwise gain access to its unpatented proprietary technology. BioSante seeks to protect its know-how and other unpatented proprietary technology, in part with confidentiality agreements and intellectual property assignment agreements with BioSante's employees and consultants. Such agreements, however, may not be enforceable or may not provide meaningful protection for BioSante's proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements or in the event that its competitors discover or independently develop similar or identical designs or other proprietary information. Enforcing a claim that someone else illegally obtained and is using BioSante's trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.

73


Table of Contents

         The patent protection for BioSante's products may expire before BioSante is able to maximize their commercial value which may subject BioSante to increased competition, inhibit its ability to find strategic partners and reduce or eliminate its opportunity to generate product revenue.

        The patents for BioSante's commercialized products and products in development have varying expiration dates and, when these patents expire, BioSante may be subject to increased competition and it may not be able to recover its development costs. For example, the U.S. patents covering the formulations used in Elestrin and LibiGel which BioSante licenses from Antares Pharma are scheduled to expire in June 2022 and the U.S. patent covering the "method of use" of LibiGel for treating FSD and HSDD will expire in December 2028. Although BioSante has filed additional U.S. patent applications covering LibiGel, it can provide no assurance that such applications will be granted and that the patent applications will issue. In addition to patents, BioSante may receive three years of marketing exclusivity in the United States for LibiGel under the Hatch-Waxman Act and an additional six months of pediatric exclusivity, if BioSante decides to pursue regulatory approval for LibiGel. Depending upon if and when BioSante receives regulatory approval for LibiGel and its other products in development and the then expiration dates of the patents underlying LibiGel and such other products, BioSante may not have sufficient time to recover its development costs prior to the expiration of such patents and consequently it may be difficult to find a strategic partner for such products.

         Claims by others that BioSante's products infringe their patents or other intellectual property rights could adversely affect BioSante's operating results and financial condition.

        The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Patent applications are maintained in secrecy in the United States and outside the United States until the application is published. Accordingly, BioSante cannot determine whether its technology would infringe on patents arising from these unpublished patent applications of others. Any claims of patent infringement asserted by third parties would be time-consuming and could likely:

        Although patent and intellectual property disputes in the pharmaceutical industry often have been settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and often require the payment of ongoing royalties, which could hurt BioSante's potential gross margins. In addition, BioSante cannot be sure that the necessary licenses would be available to BioSante on satisfactory terms, or that it could redesign its products or processes to avoid patent infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent BioSante from developing, manufacturing and selling some of its products, which could harm its business, financial condition and operating results. With respect to products which BioSante has licensed to others, BioSante's licensees may be responsible for the defense of any patent infringement claims, which would result in its dependence upon them to defend its intellectual property rights.

74


Table of Contents

Risks Related to BioSante Common Stock

         The trading price of BioSante common stock has been volatile, and your investment in BioSante common stock or convertible senior notes could decline in value.

        The price of BioSante common stock has fluctuated in the past and it is likely that the price of BioSante common stock will continue to fluctuate in the future. Since January 1, 2011 through December 31, 2012, the sale price of BioSante common stock ranged from $1.08 per share to $24.12 per share. These prices reflect the one-for-six reverse stock split of BioSante's common stock that was effective at the close of business on June 1, 2012. The securities of small capitalization, biopharmaceutical companies, including BioSante, from time-to- time experience significant price fluctuations, often unrelated to the operating performance of these companies. In addition, as BioSante's convertible senior notes are convertible into shares of BioSante common stock, volatility or depressed prices of BioSante common stock could have a similar effect on the trading price of the notes. Interest rate fluctuations also can affect the price of BioSante's convertible senior notes. In particular, the market price of BioSante common stock and its convertible senior notes may fluctuate significantly due to a variety of factors, including:

75


Table of Contents

        In addition, the occurrence of any of the risks described in this report or in subsequent reports BioSante files with or submits to the SEC from time to time could have a material and adverse impact on the market price of BioSante common stock. Securities class action litigation is sometimes brought against a company following periods of volatility in the market price of its securities or for other reasons. BioSante currently is subject to such litigation. Securities litigation, whether with or without merit, could result in substantial costs and divert management's attention and resources, which could harm BioSante's business and financial condition, as well as the market price of BioSante common stock.

         Provisions in BioSante's charter documents and Delaware law could discourage or prevent a takeover, even if an acquisition would be beneficial to BioSante stockholders.

        Provisions of BioSante's certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire BioSante, even if doing so would be beneficial to its stockholders. These provisions include:

         BioSante does not intend to pay any cash dividends in the foreseeable future; and, therefore, any return on an investment in BioSante common stock must come from increases in the fair market value and trading price of BioSante common stock.

        BioSante does not intend to pay any cash dividends in the foreseeable future; and, therefore, any return on an investment in BioSante common stock must come from increases in the fair market value and trading price of BioSante common stock.

76


Table of Contents


Risks Related to ANI

        In determining whether to approve the merger, you should read carefully the following risk factors. BioSante and ANI anticipate that immediately following the merger the business of the combined company will primarily be the business conducted by ANI immediately prior to the merger. You therefore should read carefully and consider the risks associated with the business of ANI because these risks also relate to the combined company following completion of the merger.

         ANI has a history of losses and negative cash flow, expects losses and negative cash flow to continue for the foreseeable future and cannot offer any assurances that it will ever achieve profitability.

        ANI has never been profitable, has an accumulated deficit of $35.4 million as of December 31, 2011 and $40.0 million as of September 30, 2012, and other than during the nine months ended September 30, 2012, has not generated positive cash flows from operations. To bridge the gap between revenues and operating and capital needs, ANI has been dependent on a variety of financing sources, including the issuance of equity securities and convertible notes, and revolving lines of credit.

        ANI cannot guarantee that it will achieve sufficient revenues for profitability. Even if it achieves profitability, it cannot guarantee that it can sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow more slowly than anticipated, or if operating expenses exceed ANI's expectations or cannot be adjusted accordingly, then ANI's business, results of operations, financial condition and cash flows will be materially and adversely affected.

         ANI's future capital requirements will depend on a variety of factors, many of which are beyond its control, and ANI can offer no assurances that it will be successful in obtaining sufficient financing to cover such requirements on commercially reasonable terms or at all.

        ANI's future capital requirements will depend on many factors, including, but not limited to:

        Many of these factors will depend on circumstances beyond ANI's control. For example, ANI's net revenues are concentrated among three customers representing 21 percent, 16 percent and 16 percent of net revenues, respectively, during the year ended December 31, 2011, and 24 percent, 21 percent and 12 percent of net revenues, respectively, during the nine months ended September 30, 2012. As of September 30, 2012, accounts receivable from these three customers totaled $3.6 million, or approximately 64 percent of ANI's net accounts receivable. As a result, negotiated payment terms with these customers have a material impact on ANI's liquidity and working capital.

        In addition, two of ANI's generic pharmaceutical products, Opium Tincture and Fluvoxamine Maleate tablets, account for approximately 30 percent of ANI's net revenues. As a result, regulatory actions with respect to these products, market pricing for these products, combined with the costs of raw materials and payment terms with suppliers, have a material impact on ANI's liquidity and working capital.

77


Table of Contents

        If ANI continues to incur losses and is not able to raise adequate funds to cover those losses, it may be required to curtail its activities, which could have a material adverse effect on its business, financial condition and/or results of operations. The continuing global economic uncertainty, exacerbated by the European debt crisis and the "fiscal cliff" in the United States, has resulted in extreme volatility in the capital markets and is threatening to once again tighten the credit markets. As a result, there can be no assurances that ANI would be successful in obtaining sufficient financing on commercially reasonable terms or at all. To the extent that ANI raises additional capital through the sale of securities, the issuance of those securities or shares underlying such securities would result in dilution that could be substantial to its and the combined company's stockholders. In addition, if ANI incurs additional debt financing, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for business activities. If adequate funds are not available, ANI's business, financial condition and/or results of operations could be materially and adversely affected.

         ANI's anticipated revenue growth and profitability, if achieved, is dependent upon ANI's ability to develop and/or license, or otherwise acquire, and introduce new products on a timely basis in relation to its competitors' product introductions, and to navigate the regulatory hurdles before, during and after the introduction of its new products. ANI's failure to do so successfully could have a material adverse effect on its business, financial position and results of operations.

        ANI's future revenues and profitability will depend, to an extent, upon its ability to successfully develop, license or otherwise acquire, and commercialize, branded and generic pharmaceutical products in a timely manner. Product development is inherently risky and time-consuming. Likewise, product licensing involves inherent risks including uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to the supply of product meeting specifications and terms such as license scope or termination rights. The development and commercialization process also requires substantial time, effort and financial resources. ANI may not be successful in commercializing products on a timely basis, if at all, which could adversely affect its business, financial position and results of operations.

        Before any new prescription drug product can be marketed in the United States, marketing authorization approval is required by the FDA. The process of obtaining regulatory approval to manufacture and market branded and generic pharmaceutical products is rigorous, time consuming, costly and largely unpredictable. ANI may be unable to obtain requisite approvals on a timely basis for branded or generic products that it may develop, license or otherwise acquire. Moreover, if ANI obtains regulatory approval for a drug, it may be limited with respect to the indicated uses and delivery methods for which the drug may be marketed, which in turn could restrict its potential market for the drug. Also, for products pending approval, ANI may obtain raw materials or produce batches of inventory to be used in bioequivalence testing, as well as in anticipation of the product's launch. In the event that regulatory approval is denied or delayed, ANI could be exposed to the risk of this inventory becoming obsolete. The timing and cost of obtaining regulatory approvals could adversely affect ANI's product introduction plans, business, financial position and results of operations.

        The approval process for generic pharmaceutical products often results in the FDA granting simultaneous final approval to a number of generic pharmaceutical products at the time a patent claim for a corresponding branded product or other market exclusivity expires. This often forces a generic firm to face immediate competition when it introduces a generic product into the market. Additionally, further generic approvals often continue to be granted for a given product subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices, as well as reduced margins, for generic products compared to branded products. New generic market entrants generally cause continued price and margin erosion over the generic product life cycle.

78


Table of Contents

        The Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act), provides for a period of 180 days of generic marketing exclusivity for each abbreviated new drug application (ANDA) applicant that is first-to-file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to a reference drug product, commonly referred to as a Paragraph IV certification. During this exclusivity period, which under certain circumstances may be required to be shared with other applicable ANDA sponsors with Paragraph IV certifications, the FDA cannot grant final approval to other ANDA sponsors holding applications for the same generic equivalent. If an ANDA containing a Paragraph IV certification is successful and the applicant is awarded exclusivity, the applicant generally enjoys higher market share, net revenues and gross margin for that product than otherwise would be the case. However, an ANDA sponsor's ability to obtain 180 days of generic marketing exclusivity may be dependent upon its ability to obtain FDA approval or tentative approval within 30 months of the FDA's acceptance of its ANDA. If ANI is unable to obtain approval or tentative approval within that time period, it may risk forfeiture of such marketing exclusivity. Even if ANI obtains FDA approval for its generic drug products, if it is not the first ANDA applicant to challenge a listed patent for such a product, it may lose significant advantages to a competitor that filed its ANDA containing such a challenge. The same would be true in situations where ANI is required to share its exclusivity period with other ANDA sponsors with Paragraph IV certifications. Such situations could have a material adverse effect on ANI's ability to market that product profitably and on its business, financial position and results of operations.

        If ANI is unable to navigate its products through all of the regulatory hurdles it faces in a timely manner, its product introduction plans, business, financial position and results of operations could be materially adversely affected.

        The FDA regulates and monitors all promotion advertising and of prescription drugs after approval. All promotion must be consistent with the conditions of approval and submitted to the agency. Failure to adhere to FDA promotional requirements can result in enforcement letters, warning letters, changes to existing promotional material, and corrective notices to healthcare professionals. Promotion of a prescription drug for uses not approved by the FDA can have serious consequences and result in lawsuits by private parties, state governments and the federal government, significant civil and criminal penalties, and compliance agreements that require the company to change current practices and prevent unlawful activity in the future.

         ANI's operating results and financial condition may fluctuate.

        ANI's operating results and financial condition may fluctuate from quarter to quarter and year to year for a number of reasons. The following events or occurrences, among others, could cause fluctuations in ANI's financial performance from period to period:

79


Table of Contents

        As a result, ANI believes that period-to-period comparisons of ANI's results of operations are not necessarily meaningful, and these comparisons should not be relied upon as an indication of future performance. The above factors may cause ANI's operating results to fluctuate and adversely affect ANI's financial condition and results of operations.

80


Table of Contents

         ANI's obligations under its line of credit are secured by substantially all of its assets. If ANI defaults under the line of credit, the lender may take immediate possession of the collateral and dispose of it.

        Under its line of credit with Alostar Bank of Commerce, ANI may borrow on a revolving basis, based on a percentage of eligible accounts receivable and inventory, up to a maximum of $5.0 million. The loan agreement bears interest daily at the greater of (i) LIBOR plus 5 percent or (ii) 6 percent. The line of credit is secured by substantially all of ANI's assets. The principal is repayable at the termination date, unless accelerated as a result of certain events of default. If ANI generates any proceeds from the collateral securing the line of credit, such proceeds must be paid to the lender up to the amount of any outstanding balance. Interest is due and payable on the first of every month and at the termination date, unless accelerated as a result of an event of default. In addition, a usage fee equal to 0.375 percent per annum of the unused amounts under the facility and a management fee equal to $18,000 per annum are assessed monthly. The revolving loan agreement expires in June 2015, but can be terminated early in the following circumstances: (a) automatically upon the commencement of insolvency proceedings by or against ANI, (b) at the option of the lender without notice upon any other event of default, and (c) at the option of ANI upon ten business days' prior written notice.

        In the event of early termination, whether effected by ANI, the lender or automatically, ANI is obligated to pay an amount corresponding to a percentage of $5.0 million, with such percentage being: 3 percent if termination occurs in the first year, 2 percent if termination occurs in the second year and 1 percent if termination occurs after the second year but prior to the last day of the term. The loan agreement contains customary representations, warranties and covenants. As of September 30, 2012, approximately $3.4 million was outstanding under the loan agreement, at an effective interest rate of 6.0 percent.

        Events of default under the agreement include, but are not limited to: (i) liquidation, bankruptcy or similar events; (ii) failure to pay any debts due on a timely basis; (iii) failure to observe any covenant or condition under the loan agreement, which failure, in most cases, is not cured within 30 days of written notice by lender; (iv) material misrepresentations; (v) ANI is restrained by court order from continuing to conduct all or any material part of ANI's business; (vi) certain money judgments are entered against ANI; and (vii) ANI challenges the validity or enforceability of the loan agreement in any proceeding. Remedies for events of default include acceleration of amounts owing under the loan agreement and taking immediate possession of, and selling, any collateral securing the loan, which would have a material adverse effect on ANI's profitability, business, financial position and results of operations.

         ANI's approved products may not achieve expected levels of market acceptance, which could have a material adverse effect on its profitability, business, financial position and results of operations.

        Even if ANI is able to obtain regulatory approvals for its pharmaceutical products, the success of those products is dependent upon market acceptance. Levels of market acceptance for products could be impacted by several factors, including but not limited to:

        Some of these factors are not within ANI's control. Additionally, continuing studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others. Such studies, which increasingly employ sophisticated methods and

81


Table of Contents

techniques, can call into question the utilization, safety and efficacy of previously marketed products. In some cases, studies have resulted, and in the future may result, in the discontinuance of product marketing or other risk management programs such as the need for a patient registry. These situations, should they occur, could have a material adverse effect on ANI's profitability, business, financial position and results of operations.

         Certain of ANI's generic products are marketed without approved NDAs or ANDAs and ANI can offer no assurances that the FDA will not require ANI to seek approval for these products or withdraw them from the market. In either case, ANI's business, financial position and results of operations could be materially adversely affected.

        Certain of ANI's generic products are marketed without approved NDAs or ANDAs, specifically, Esterified Estrogen with Methyltestosterone and Opium Tincture. During the nine months ended September 30, 2012 and 2011, combined net revenues for these products were $3.6 million and $2.2 million, respectively and during the years ended December 31, 2011 and 2010, combined net revenues for these products were $3.5 million and $95,000, respectively.

        The FDA's policy with respect to the continued marketing of unapproved products appears in the FDA's September 2011 Compliance Policy Guide, titled "Marketed New Drugs without Approved NDAs or ANDAs." Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against marketing of such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack evidence of effectiveness. While ANI believes that so long as it complies with applicable manufacturing and labeling standards, it will not be targeted for enforcement under the FDA's current enforcement policy, it can offer no assurances that the FDA will continue this policy or not take a contrary position with any individual product or group of products.

        In October 2012, ANI received a telephone call requesting a meeting with the FDA representatives from the Minneapolis district of the FDA to discuss continued manufacturing and distribution of Opium Tincture, which is an unapproved product. That meeting was held on October 25, 2012 by conference telephone call and included FDA representatives from the Office of Compliance at the Center for Drug Evaluation and Research (CDER). Discussions with CDER are continuing. If, as a result of such discussions or otherwise, the FDA were to make a determination that ANI could not continue to sell Opium Tincture as an unapproved product, ANI would be required to seek FDA approval for such product or withdraw such product from the market. If ANI determined to withdraw the product from the market, ANI's net revenues for generic pharmaceutical products would decline materially, and if ANI decided to seek FDA approval, it would face increased expenses and might need to suspend sales of the product until such approval is obtained, and there are no assurances that ANI would receive such approval.

        In addition, one group of products that ANI manufactures on behalf of a contract customer, and based on the sale of which ANI receives royalties, is marketed by that customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market, which could materially adversely affect ANI's contract manufacturing and royalty revenue. ANI's contract manufacturing revenue for this group of products for the nine months ended September 30, 2012 and 2011 was $775,000 and $1.1 million, respectively. ANI's royalties on the net sales of these products for the nine months ended September 30, 2012 and 2011 were $220,000 and $249,000, respectively. ANI's contract manufacturing revenue for the group of unapproved products for the years ended December 31, 2011 and 2010 was $1.3 million and $623,000, respectively. ANI's royalties on the net sales of these unapproved products for the years ended December 31, 2011 and 2010 were $320,000 and $118,000, respectively.

82


Table of Contents

        ANI's manufacture and distribution of drugs without approved NDAs or ANDAs could also result in legal actions by private parties, state governments or the federal government. These entities may allege that ANI has misrepresented the regulatory status of Esterified Estrogen with Methyltestosterone and Opium Tincture resulting in the submission of false claims to federal and state health care programs. Such legal actions could result in fines, penalties, reimbursement, and legal settlements that could bind the company going forward and materially affect ANI's ability to market these products as well as the profitability of ANI's business, financial position and results of operations.

         ANI began its own product development program in 2011 and expects to spend a significant amount of resources on research and development efforts that may not lead to successful product introductions. Failure to successfully introduce products into the market could have a material adverse effect on its business, financial position and results of operations.

        ANI conducts research and development primarily to enable it to manufacture and market approved pharmaceuticals in accordance with applicable regulations. As ANI develops new products, its research expenses likely will increase. Because of the inherent risk associated with research and development efforts in the industry, ANI's research and development expenditures may not result in the successful introduction of new pharmaceutical products approved by the FDA. Also, after ANI submits a marketing authorization application for a generic product, the FDA may change standards and/or request that ANI conduct additional studies and, as a result, ANI may incur total research and development costs to develop a particular product in excess of what it anticipated. Finally, ANI cannot be certain that any investment made in developing products will be recovered, even if it is successful in commercialization. To the extent that ANI spends significant resources on research and development efforts and is not able, ultimately, to introduce successful new products as a result of those efforts, its business, financial position and results of operations may be materially adversely affected.

         ANI is entirely dependent on periodic approval by the DEA for the supply of the active pharmaceutical ingredient needed to make Opium Tincture and inability to obtain such approval would reduce or eliminate revenues from the sale of Opium Tincture. In addition, ANI is subject to strict regulation by the DEA and is subject to sanctions if it is unable to comply with related regulatory requirements.

        The Drug Enforcement Administration (DEA) regulates certain drug products containing controlled substances, such as opium, pursuant to the U.S. Controlled Substances Act (CSA). The CSA and DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including registration, recordkeeping, reporting, storage, security and distribution. Recordkeeping requirements include accounting for the amount of product received, manufactured, stored and distributed. Companies handling controlled substances also are required to maintain adequate security and to report suspicious orders, thefts and significant losses. The DEA periodically inspects facilities for compliance with the CSA and its regulations. Failure to comply with current and future regulations of the DEA could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.

        In addition, each year, ANI must submit a request to the DEA for a quota to purchase the amount of active pharmaceutical ingredient needed to manufacture Opium Tincture. Without an approved quota from DEA, ANI would not be able to purchase this ingredient from its supplier. As a result, ANI is entirely dependent upon the DEA to approve, on an annual basis, a quota of active pharmaceutical ingredient that is sufficiently large to support the continued manufacture of Opium Tincture at levels that would maximize ANI's revenues or profits.

83


Table of Contents

         ANI may have to engage in litigation, which could result in substantial cost or distraction, to enforce or defend its proprietary rights and which, if ANI did not prevail, could harm its business and make it more vulnerable to competition.

        In the future, ANI may have to engage in litigation to enforce or defend its proprietary rights, for example, its rights of market exclusivity with respect to certain of its products, or any trademarks it owns for its branded products, such as Cortenema® and Reglan®. In the branded pharmaceutical industry, the majority of an innovative product's commercial value is usually realized during the period in which the product has market exclusivity. In the United States and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there often can be very substantial and rapid declines in the branded product's sales; however, following patent expiration, branded products often continue to have market viability based upon the goodwill of the product name, which typically benefits from trademark protection. ANI believes that sales of its branded products have and will continue to benefit from the goodwill of the product name. ANI, therefore, considers market exclusivity and its trademark names to be of material value and acts to protect these rights from infringement.

         ANI may in the future be accused of infringing intellectual property rights of third parties and may have to engage in litigation to determine the scope and validity of third party patents and proprietary rights, which, if it does not prevail, could harm its business, results of operations, financial condition, cash flow and future prospects.

        Third parties in the future may file patent applications and obtain patents relating to ANI's products and technologies. Regardless of their ultimate merit, any infringement or other intellectual property claims against ANI's products and technologies may be expensive and time-consuming to litigate and may divert management attention. If any such claim were successful, ANI could be required to obtain licenses to a third party's technologies, patents or other proprietary rights or to their biological or chemical reagents in order to develop and market ANI's products. Moreover, ANI may choose to voluntarily seek such a license in order to avoid the expense and uncertainty of fully defending its position. In either event, such a license may not be available to ANI on acceptable terms or at all, and ANI may have to discontinue that portion of its business. In addition, to the extent ANI licenses its intellectual property to other parties, ANI may incur expenses as a result of contractual agreements in which ANI indemnifies those licensing its technologies against losses incurred if practicing its intellectual property infringes upon the proprietary rights of others. The failure to license any technologies or biological or chemical reagents required to develop or commercialize ANI's technologies or products at reasonable cost may harm ANI's business, results of operations, financial condition, cash flow and future prospects.

         ANI does not own or license any patents associated with its products, and its ability to protect and control unpatented trade secrets, know-how and other technological innovation is limited.

        Generally, the branded pharmaceutical business relies upon patent protection to ensure market exclusivity for the life of the patent. ANI does not own or license any patents associated with its products and therefore does not enjoy the same level of intellectual property protection with respect to such products as would a pharmaceutical manufacturer that markets a patented product. ANI has a limited ability to protect and control trade secrets, know-how and other technological innovation, all of which are unpatented. Others independently may develop similar or better proprietary information and techniques and disclose them publicly. Also, others may gain access to ANI's trade secrets, and ANI may not be able to meaningfully protect its rights to its unpatented trade secrets. In addition, confidentiality agreements and other measures may not provide meaningful protection for ANI's trade secrets in the event of unauthorized use or disclosure of such information. Failure to protect and

84


Table of Contents

control such trade secrets, know-how and innovation could harm the value of ANI's trade secrets, know-how and other technological innovation.

         ANI faces vigorous competition from other pharmaceutical manufacturers that threatens the commercial acceptance and pricing of its products. Such competition could have a material adverse effect on its business, financial position and results of operations and cash flows.

        The generic pharmaceutical industry is highly competitive. ANI faces competition from many U.S. and foreign manufacturers, some of whom are significantly larger than ANI. Its competitors may be able to develop products and processes competitive with or superior to ANI's for many reasons, including but not limited to the possibility that they may have:

        Any of these factors and others could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

         The use of legal, regulatory and legislative strategies by competitors, both branded and generic, including "authorized generics" and citizen's petitions, as well as the potential impact of proposed legislation, may increase ANI's costs associated with the introduction or marketing of ANI's generic products, could delay or prevent such introduction and/or could reduce significantly ANI's profit potential. These factors could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        ANI's competitors, both branded and generic, often pursue strategies to prevent or delay competition from generic alternatives to branded products. These strategies include, but are not limited to:

85


Table of Contents

        In the United States, some companies have lobbied Congress for amendments to the Hatch-Waxman Act that would give them additional advantages over generic competitors. For example, although the term of a company's drug patent can be extended to reflect a portion of the time an NDA is under regulatory review, some companies have proposed extending the patent term by the full amount of time spent in clinical trials rather than by only one half of the time that is currently permitted.

        If proposals like these were to become effective, ANI's entry into the market and its ability to generate revenues associated with new products may be delayed, reduced or eliminated, which could have a material adverse effect on its business, financial position, results of operations and cash flows.

         ANI faces significant uncertainty with respect to the litigation brought against it and other manufacturers of metoclopramide and cannot provide assurances that the outcome of the matter will not have an adverse effect on its financial position, results of operations and/or cash flows from operations. In addition, ANI may be exposed to other product liability claims in the future.

        In February 2009, the FDA mandated a "black box" warning for the drug metoclopramide, specifically highlighting the risks of patients developing tardive dyskinesia, a movement disorder, when taking metoclopramide for longer than 12 weeks. As a result, numerous state-level lawsuits were brought against pharmaceutical manufacturers, both branded and generic, who ever had manufactured and/or sold metoclopramide. Among the defendants is ANI, which manufactures the generic version and since 2011 has been manufacturing the branded version under the name Reglan®. The plaintiffs in these lawsuits claim to have incurred bodily injuries as a result of ingestion of metoclopramide or Reglan® prior to the FDA's black box warning requirement. The allegations involve a failure, based on various state-level consumer protection laws, to adequately warn patients and doctors about the risks of using metoclopramide for longer than 12 weeks as evidenced by the FDA's mandate to strengthen the labeled warning. ANI has been named and served in 79 separate complaints between December 2009 and November 2012, including three in Pennsylvania, nine in New Jersey, and 67 in California, covering 2,921 plaintiffs in total. In August 2012, ANI was dismissed with prejudice as a defendant in all of the cases brought in New Jersey.

        As the state-level litigation progressed, the generic pharmaceutical defendants appealed to the U.S. Supreme Court arguing that generic companies could not comply with state laws that required them to strengthen their labels because generic companies are prohibited by federal law from making any changes except those adopted by the brand or mandated by FDA for all manufacturers, e.g. federal pre-emption. The U.S. Supreme Court decided in favor of the generic companies in June 2011 in what is known now as the Mensing decision. While many cases since have been dismissed by state courts, several judges, including in Pennsylvania and California, have allowed the plaintiffs to resubmit their complaints.

        At the present time, ANI's management is unable to assess the likely outcome of the remaining cases. ANI's insurance company has assumed the defense of this matter. In addition, ANI's insurance company renewed ANI's product liability insurance on September 1, 2011 and 2012 with absolute exclusions for claims related to Reglan® and metoclopramide. ANI cannot provide assurances that the outcome of these matters will not have an adverse effect on its business, results of operations, financial

86


Table of Contents

condition and cash flow. Furthermore, like all pharmaceutical manufacturers, ANI in the future may be exposed to other product liability claims, which could harm its business, results of operations, financial condition and cash flow.

         ANI may experience declines in the sales volume and prices of its products as the result of the continuing trend toward consolidation of certain customer groups, such as the wholesale drug distribution and retail pharmacy industries, as well as the emergence of large buying groups. These developments could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        Consolidation among wholesale distributors, chain drug stores, and group purchasing organizations, has resulted in a smaller number of companies each controlling a larger share of pharmaceutical distribution channels. For example, ANI's net revenues are concentrated among three customers representing 24 percent, 21 percent and 12 percent of net revenues, respectively, during the nine months ended September 30, 2012. As of September 30, 2012, accounts receivable from these three customers totaled $3.6 million, or approximately 64 percent of ANI's net accounts receivable. Drug wholesalers and retain pharmacy chains, which represent an essential part of the distribution chain of generic pharmaceutical products, have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing ANI's business. Additionally, the emergence of large buying groups representing independent retail pharmacies and the prevalence and influence of managed care organizations and similar institutions potentially enable those groups to extract price discounts on ANI's products. The result of these developments may have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

         Uncertainties associated with the impact of published studies regarding the adverse health effects of certain forms of hormone therapy could affect adversely the market for ANI's hormone products.

        The market for hormone therapy products has been affected negatively by the Women's Health Initiative (WHI) study and other studies that have found that the overall health risks from the use of certain hormone therapy products may exceed the benefits from the use of those products among postmenopausal women. In July 2002, the NIH released data from its WHI study on the risks and benefits associated with long-term use of oral hormone therapy by women. The NIH announced that it was discontinuing the arm of the study investigating the use of oral estrogen/progestin combination hormone therapy products after an average follow-up period of 5.2 years because the product used in the study was shown to cause an increase in the risk of invasive breast cancer. The study also found an increased risk of stroke, heart attacks and blood clots and concluded that overall health risks exceeded benefits from use of combined estrogen plus progestin for an average of 5.2 year follow-up among postmenopausal women. Also, in July 2002, results of an observational study sponsored by the National Cancer Institute on the effects of estrogen therapy were announced. The main finding of the study was that postmenopausal women who used estrogen therapy for 10 or more years had a higher risk of developing ovarian cancer than women who never used hormone therapy. In October 2002, a significant hormone therapy study being conducted in the United Kingdom also was halted. In March 2004, the NIH announced that the estrogen-alone study was discontinued after nearly seven years because the NIH concluded that estrogen alone does not affect (either increase or decrease) heart disease, the major question being evaluated in the study. The findings indicated a slightly increased risk of stroke as well as a decreased risk of hip fracture and breast cancer. Preliminary data from the memory portion of the WHI study suggested that estrogen alone may possibly be associated with a slight increase in the risk of dementia or mild cognitive impairment.

        Researchers continue to analyze data from both arms of the WHI study and other studies. Some reports indicate that the safety of estrogen products may be affected by the age of the woman at initiation of therapy. The markets for female hormone therapies for menopausal symptoms declined as

87


Table of Contents

a result of these published studies, although the market now seems to have stabilized. The release of any follow-up or other studies that show adverse effects from hormone therapy, including in particular, hormone therapies similar to ANI's products, also could affect adversely ANI's business.

         ANI has a limited number of manufacturing facilities producing a substantial portion of its products. Production at any one of these facilities could be interrupted, which could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        A substantial portion of ANI's capacity as well as its current production is attributable to a limited number of manufacturing facilities and certain third party suppliers. During the nine months ended September 30, 2012, ANI purchased approximately 43 percent of total costs of goods sold from two suppliers. A significant disruption at any one of the facilities within ANI's internal supply chain, even on a short-term basis, whether due to a labor strike, failure to reach acceptable agreement with labor and unions, adverse quality or compliance observation, act of God, civil or political unrest, or other events could impair ANI's ability to produce and ship products to the market on a timely basis and, among other consequences, could subject ANI to exposure to claims from customers. Any of these events could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        Virtually all contracts for the supply of pharmaceutical products by ANI to customers contain "failure to supply" clauses. Under these clauses, if ANI is unable to supply the requested quantity of product within a certain period after receipt of a customer's purchase order, the customer is entitled to procure a substitute product elsewhere and ANI must reimburse its customer for the difference between ANI's contract price and the price the customer was forced to pay to procure the substitute product. This difference can be substantial because of the much higher spot price at which the customer must cover its requirements, and can be far in excess of the revenue that ANI would otherwise have received on the sale of its own product. The ability to produce and ship a sufficient quantity of product is therefore critical to ANI.

         ANI depends on a limited number of suppliers for active pharmaceutical ingredients.

        ANI's ability to manufacture and distribute drug products is dependent, in part, upon ingredients and components supplied by others, including entities based outside the United States. Any disruption in the supply of these ingredients or components or any problems in their quality could materially affect ANI's ability to manufacture and distribute drug product and could result in legal liabilities that could materially affect ANI's ability to realize profits or otherwise harm ANI's business, financial, and operating results. ANI sources the raw materials for its products, including active pharmaceutical ingredients (API) from both domestic and international suppliers. Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second source of supply. Changes in API suppliers must usually be approved through a Prior Approval Supplement by the FDA. As the API typically comprises the majority of a product's manufactured cost, and qualifying an alternative is costly and time-consuming, API suppliers must be selected carefully based on quality, reliability of supply and long-term financial stability.

        As described above, virtually all contracts for the supply of pharmaceutical products by ANI to customers contain "failure to supply" clauses. The ability to source sufficient quantities of active pharmaceutical ingredients for manufacturing is therefore critical to ANI. For Opium Tincture, this ability to source adequate amounts of raw material is in turn dependent on the quota set by the DEA. See also "Risks Related to ANI—ANI is entirely dependent on periodic approval by the DEA for the supply of the active pharmaceutical ingredient needed to make Opium Tincture and inability to obtain such approval would reduce or eliminate revenues from the sale of Opium Tincture. In addition, ANI is subject to strict regulation by the DEA and is subject to sanctions if it is unable to comply with related regulatory requirements."

88


Table of Contents

         Legislative or regulatory programs that may influence prices of pharmaceutical products could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        Current or future federal, state or foreign laws and regulations may influence the prices of drugs and, therefore, could adversely affect the prices that ANI receives for its products. For example, programs in existence in certain states in the U.S. seek to set prices of all drugs sold within those states through the regulation and administration of the sale of prescription drugs. Expansion of these programs, in particular state Medicaid programs, or changes required in the way in which Medicaid rebates are calculated under such programs, could adversely affect the prices ANI receives for its products and could have a material adverse effect on its business, financial position, results of operations and cash flows.

         Healthcare reform legislation could have a material adverse effect on ANI's business, financial position, results of operations and cash flows.

        In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services in the United States, and it is likely that federal and state legislatures and health agencies will continue to focus on health care reform in the future. The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education and Reconciliation Act, which amends the PPACA (collectively the Health Reform Laws), were signed into law in March 2010. While the Health Reform Laws may increase the number of patients who have insurance coverage for ANI's products, they also include provisions such as the assessment of a pharmaceutical manufacturer fee and an increase in the amount of rebates that manufacturers pay for coverage of their drugs by Medicaid programs.

        The cost-containment measures that healthcare providers are instituting and the results of healthcare reforms such as the PPACA may prevent ANI from maintaining prices for its products that are sufficient for ANI to realize profits and may otherwise significantly harm its business, financial condition and operating results. In addition, to the extent that ANI's approved products are marketed outside of the United States, foreign government pricing controls and other regulations may prevent ANI from maintaining prices for such products that are sufficient for ANI to realize profits and may otherwise significantly harm its business, financial condition and operating results.

        ANI is unable to predict the future course of federal or state healthcare legislation. The Health Reform Laws and further changes in the law or regulatory framework that reduce ANI's revenues or increase its costs could have a material adverse effect on its business, financial condition, results of operations and cash flows.

         If third-party payers deny coverage or offer inadequate levels of reimbursement, ANI or any of its strategic partners may not be able to market its products effectively or it may be required to offer its products at prices lower than anticipated.

        Third-party payers increasingly are challenging the prices charged for medical products and services. For example, third-party payers may deny coverage or offer inadequate levels of reimbursement if they determine that a prescribed product has not received appropriate clearances from the FDA, or foreign equivalent, or other government regulators, is not used in accordance with cost-effective treatment methods as determined by the third-party payer, or is experimental, unnecessary or inappropriate. Prices also could be driven down by health maintenance organizations that control or significantly influence purchases of healthcare services and products. If third-party payers deny coverage or offer inadequate levels of reimbursement, ANI or any of its strategic partners may not be able to market its products effectively or it may be required to offer its products at prices lower than anticipated.

89


Table of Contents

         ANI is subject to federal, state and local laws and regulations, and complying with these may cause ANI to incur significant costs.

        The pharmaceutical industry is subject to regulation by various federal authorities, including principally the FDA and, to a lesser extent, the U.S. Drug Enforcement Administration, and state governmental authorities. The U.S. Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act of 1970 and other federal statutes and regulations govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of ANI's products. Noncompliance with applicable legal and regulatory requirements can have a broad range of consequences, including warning letters, fines, seizure of products, product recalls, total or partial suspension of production and distribution, refusal to approve NDAs or other applications or revocation of approvals previously granted, withdrawal of product from marketing, injunction, withdrawal of licenses or registrations necessary to conduct business, disqualification from supply contracts with the government, civil penalties, debarment and criminal prosecution.

        ANI's research, product development and manufacturing activities have involved the controlled use of hazardous materials, and ANI may incur significant costs as a result of the need to comply with numerous laws and regulations. ANI is subject to laws and regulations enforced by the FDA, the DEA, and other regulatory statutes including the Occupational Safety and Health Act (OSHA), the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current and potential federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal of ANI's products, materials used to develop and manufacture such products, and resulting waste products. For example, certain of ANI's products, including Esterified Estrogen with Methyltestosterone, must be manufactured in a fully contained environment due to their potency and/or toxicity, and compliance with related OSHA requirements is costly.

        ANI cannot completely eliminate the risk of contamination or injury, by accident or as the result of intentional acts from these materials. In the event of an accident, ANI could be held liable for any damages that result, and any resulting liability could exceed its resources. ANI may also be required to incur significant costs to comply with environmental laws and regulations in the future. ANI is also subject to laws generally applicable to businesses, including but not limited to, federal, state and local regulations relating to wage and hour matters, employee classification, mandatory healthcare benefits, unlawful workplace discrimination and whistle-blowing. Any actual or alleged failure to comply with any regulation applicable to its business or any whistle-blowing claim, even if without merit, could result in costly litigation, regulatory action or otherwise harm ANI's business, results of operations, financial condition, cash flow and future prospects.

90


Table of Contents


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        This joint proxy statement/prospectus contains "forward-looking statements" of BioSante within the meaning of the Private Securities Litigation Reform Act of 1995, which is applicable to BioSante, but not ANI, because BioSante, unlike ANI, is a public company subject to the reporting requirements of the Exchange Act. For this purpose, any statements contained herein regarding BioSante, other than statements of historical fact, may be forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995. In addition, any statements contained herein regarding ANI, other than statements of historical fact, should be considered forward-looking statements. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include words such as "expect," "believe," "will," "may," "might," "anticipate," "continue," "plan," "estimate," "intend," "should," "can," "likely," "could," "predict," "project," "forecast," "potential," "possible" or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this joint proxy statement/prospectus and relate to a variety of matters, including but not limited to:

        These statements are subject to risks and uncertainties, including the risks described in this joint proxy statement/prospectus under the section "Risk Factors," that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements in this joint proxy statement/prospectus. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of management of BioSante and ANI and are subject to a number of factors that could cause actual outcomes and results to be materially different from those projected or anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Except to the extent required by applicable law or regulation, neither BioSante nor ANI undertakes any obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date hereof or the date of the forward-looking statements or to reflect the occurrence of unanticipated events.

91


Table of Contents


THE SPECIAL MEETING OF BIOSANTE STOCKHOLDERS

General

        This joint proxy statement/prospectus is being furnished to stockholders of BioSante on or about January 25, 2013. BioSante is sending this joint proxy statement/prospectus to its stockholders in connection with the solicitation of proxies by the BioSante board of directors for use at the BioSante special meeting and any adjournments or postponements of the meeting.


Date, Time and Place

        The special meeting of BioSante stockholders will be held at 8:00 a.m., local time, on Friday, March 15, 2013, at BioSante's corporate office located at 111 Barclay Boulevard, Lincolnshire, Illinois 60069.


Purposes of the BioSante Special Meeting

        The purposes of the BioSante special meeting are to consider and act upon the following matters:

        BioSante stockholders also will consider and act on any other matters as may properly come before the BioSante special meeting or any adjournment or postponement of the meeting, including any procedural matters incident to the conduct of the meeting.


Recommendations of the BioSante Board of Directors

        The BioSante board of directors has determined and believes that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, is advisable, fair to, and in the best interests of BioSante and its stockholders and unanimously has approved such proposal. The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 1 to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger.

        The BioSante board of directors has determined and believes that the amendment to BioSante's certificate of incorporation to effect a reverse split of BioSante common stock and BioSante class C

92


Table of Contents

special stock at the discretion of BioSante and ANI at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five, as described in this joint proxy statement/prospectus, is advisable, fair to, and in the best interests of BioSante and its stockholders and unanimously has approved such proposal. The BioSante board of directors recommends unanimously that BioSante stockholders vote "FOR" BioSante Proposal No. 2 to approve the amendment to BioSante's certificate of incorporation to effect the reverse stock split.

        The BioSante board of directors has determined and believes that the amendment to BioSante's certificate of incorporation to change the name of BioSante from "BioSante Pharmaceuticals, Inc." to "ANI Pharmaceuticals, Inc.", as described in this joint proxy statement/prospectus, is advisable, fair to, and in the best interests of BioSante and its stockholders and unanimously has approved such proposal. The BioSante board of directors recommends unanimously that BioSante stockholders vote "FOR" BioSante Proposal No. 3 to approve the amendment to BioSante's certificate of incorporation to effect the corporate name change.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 4 to approve, on an advisory (non-binding) basis, the compensation payable to certain executive officers of BioSante under existing arrangements in connection with the merger.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 5 to adjourn the BioSante special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of BioSante Proposals No. 1, 2 and/or 3.


Record Date and Voting Power

        The close of business on January 17, 2013 has been fixed as the BioSante record date for the determination of BioSante stockholders entitled to notice of, and to vote at, the BioSante special meeting or any adjournments or postponements of the meeting. Only holders of record of BioSante common stock and BioSante class C stock at the close of business on the BioSante record date are entitled to notice of, and to vote at, the BioSante special meeting. At the close of business on the record date, BioSante had 24,422,240 shares of common stock and 65,211 shares of class C special stock outstanding and entitled to vote. Each share of BioSante common stock and BioSante class C special stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See "Principal Stockholders of BioSante" for information regarding persons known to management of BioSante to be the beneficial owners of more than five percent of the outstanding shares of BioSante common stock and BioSante class C special stock.


Voting and Revocation of Proxies

        The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the BioSante board of directors for use at the BioSante special meeting. If you are a BioSante stockholder of record as of the record date for the BioSante special meeting, you may vote in person at the BioSante special meeting or vote by proxy over the Internet, by telephone or by using the enclosed proxy card. Whether or not you plan to attend the BioSante special meeting, BioSante urges you to vote by proxy to ensure your vote is counted. You still may attend the BioSante special meeting and vote in person if you already have voted by proxy. BioSante stockholders of record as of the close of business on January 17, 2013 may submit their proxies:

93


Table of Contents

        If your shares are held in "street name," you must request a legal proxy from your nominee as proof of ownership in order to vote in person at the BioSante special meeting. If you hold your shares in "street name," please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

        All properly executed proxies that are not revoked will be voted at the BioSante special meeting and at any adjournments or postponements of the meeting in accordance with the instructions contained in the proxy. If a holder of BioSante capital stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted "FOR" BioSante Proposal No. 1 to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger; "FOR" BioSante Proposal No. 2 to approve an amendment to BioSante's certificate of incorporation to effect the reverse stock split described in this joint proxy statement/prospectus; "FOR" BioSante Proposal No. 3 to approve an amendment to BioSante's certificate of incorporation to effect the corporation name change; "FOR" BioSante Proposal No. 4 to approve on an advisory basis the compensation payable to certain executive officers of BioSante under existing arrangements in connection with the merger; and "FOR" BioSante Proposal No. 5 to adjourn the BioSante special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of BioSante Proposals No. 1, 2 and/or 3 in accordance with the recommendation of the BioSante board of directors.

        Any BioSante stockholder of record voting by proxy, other than those stockholders who have executed a voting agreement and irrevocable proxy, has the right to revoke the proxy at any time before the polls close at the BioSante special meeting by sending a written notice stating that it would like to revoke its proxy to the corporate secretary of BioSante, by voting again over the Internet or by telephone, by providing a duly executed proxy card bearing a later date than the proxy being revoked or by attending the BioSante special meeting and voting in person. Attendance alone at the BioSante special meeting will not revoke a proxy. A beneficial owner of BioSante common stock that holds shares in "street name" must follow directions received from the bank, broker or other nominee that holds the shares to change its voting instructions.


Quorum and Required Vote

        The presence at the BioSante special meeting, in person or by proxy, of the holders of one-third (8,162,484 shares) of the outstanding shares of BioSante capital stock as of the record date will constitute a quorum for the transaction of business at the BioSante special meeting. In general, shares of BioSante common stock and shares of BioSante class C special stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the BioSante special meeting for purposes of determining a quorum. Shares represented by proxies marked "Abstain" or "Withheld" are counted in determining whether a quorum is present. In addition, a "broker non-vote" is considered in determining whether a quorum is present. A "broker non-vote" is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker does not have discretionary authority to vote on behalf of such customer on such matter. If a quorum is not present at the BioSante special meeting, BioSante expects that the BioSante special meeting will be adjourned or postponed to solicit additional proxies.

94


Table of Contents

        A description of the vote required to approve each proposal being submitted to a vote of BioSante stockholders is included with the description of each proposal. For BioSante Proposals No. 1, 2 and 3, a failure to vote by proxy or in person at the BioSante special meeting, or an abstention, vote withheld or "broker non-vote" for such proposals, will have the same effect as a vote against the approval of such proposals. For BioSante Proposals No. 4 and 5, a failure to submit a proxy card or vote at the BioSante special meeting, or an abstention, vote withheld or "broker non-votes" will have no effect on the outcome of such proposals.

        The approval of the merger agreement and the transactions contemplated by it is not conditioned upon approval of the amendments to BioSante's certificate of incorporation to effect the reverse stock split or corporation name change. However, the approval of the amendments to BioSante's certificate of incorporation is conditioned upon approval of the merger agreement. Therefore, the proposals to amend BioSante's certificate of incorporation will only be effected if the merger agreement is approved by the stockholders of BioSante and ANI.

        In connection with the execution of the merger agreement, all of BioSante's directors and officers, who collectively held approximately two percent of the outstanding shares of BioSante capital stock as of October 3, 2012, entered into a voting agreement with ANI, pursuant to which each stockholder agreed to vote all of their shares of BioSante capital stock in favor of adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, in favor of the charter amendments and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transactions contemplated thereby.


Solicitation of Proxies

        In addition to solicitation by mail, the directors, officers, employees and agents of BioSante may solicit proxies from BioSante stockholders by personal interview, telephone, telegram or other electronic means. BioSante will bear the costs of the solicitation of proxies by BioSante from BioSante stockholders. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of BioSante common stock for the forwarding of solicitation materials to the beneficial owners of BioSante common stock and BioSante class C special stock. BioSante will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials. BioSante has retained Phoenix Advisory Partners, a proxy solicitation firm, to assist in the solicitation of proxies for the merger for a fee of approximately $8,000.


Delivery of Proxy Materials to Households Where Two or More Stockholders Reside

        Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements. This means that only one copy of this joint proxy statement/prospectus to any BioSante stockholder may have been sent to multiple stockholders in each household. BioSante will promptly deliver a separate copy of this joint proxy statement/prospectus to any BioSante stockholder upon written or oral request to BioSante's Investor Relations Department, BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext. 120; e-mail: info@biosantepharma.com.


Other Matters

        As of the date of this joint proxy statement/prospectus, the BioSante board of directors does not know of any business to be represented at the BioSante special meeting other than as set forth in the notice accompanying this joint proxy statement/prospectus. If any other matters should properly come before the BioSante special meeting, or any adjournment or postponement of the BioSante special meeting it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the person voting the proxies.

95


Table of Contents


MATTERS BEING SUBMITTED TO A VOTE OF BIOSANTE STOCKHOLDERS

BioSante Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, including the Merger and the Issuance of Shares of BioSante Common Stock in the Merger

General

        At the BioSante special meeting, BioSante stockholders will be asked to adopt the agreement and plan of merger dated as of October 3, 2012 by and between BioSante and ANI, as amended, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger.

        If the merger is completed, ANI will be merged with and into BioSante, with BioSante surviving the merger.

        Pursuant to the terms of the merger agreement, upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. Following completion of the merger, the current ANI stockholders are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and current BioSante stockholders are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company, assuming BioSante's net cash as of the determination date is $18.0 million. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. If the merger had been completed on January 17, 2013, the record date for the BioSante special meeting, an aggregate of approximately 27.9 million shares of BioSante common stock would have been issuable to ANI stockholders upon completion of the merger (as determined prior to an anticipated reverse stock split of BioSante common stock), assuming BioSante's net cash as of the determination date was $18.0 million.

        The terms of, reasons for and other aspects of the merger agreement, the merger and the issuance of shares of BioSante common stock in the merger are described in detail in the other sections of this joint proxy statement/prospectus. The full text of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

Vote Required; Recommendation of BioSante Board of Directors

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, having voting power outstanding on the record date for the BioSante special meeting is required for approval of BioSante Proposal No. 1.

        A failure to submit a proxy card or vote at the BioSante special meeting, or an abstention or "broker non-vote" will have the same effect as a vote against the approval of BioSante Proposal No. 1.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante's Proposal No. 1 to adopt the agreement and plan of merger and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger.

96


Table of Contents


BioSante Proposal No. 2—Approval of Amendment to BioSante's Certificate of Incorporation to Effect a Reverse Split of BioSante Common Stock and Class C Special Stock at the Discretion of BioSante and ANI at a Ratio of Either One-for-Two, One-for-Three, One-for-Four or One-for-Five.

General

        The BioSante board of directors has approved unanimously a proposal to amend BioSante's certificate of incorporation to effect a reverse stock split of the issued and outstanding shares of BioSante common stock and BioSante class C special stock at the discretion of BioSante and ANI at a ratio of either one-for-two, one-for-three, one for-four or one-for-five, with the exact ratio to be determined by BioSante and ANI prior to completion of the merger. The BioSante board of directors has recommended that this proposal be presented to the BioSante stockholders for approval. The text of the form of proposed amendment to BioSante's certificate of incorporation to effect a reverse stock split of the issued and outstanding shares of BioSante common stock and BioSante class C special stock is attached to this joint proxy statement/prospectus as Annex I.

        The proposed amendment to BioSante's certificate of incorporation will effect a reverse stock split of the issued and outstanding shares of BioSante common stock and BioSante class C special stock at the discretion of BioSante and ANI at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five, with the exact ratio to be determined by BioSante and ANI prior to completion of the merger. The BioSante board of directors believes that stockholder approval of an amendment granting this discretion, rather than approval of one specified ratio, provides BioSante and ANI the appropriate flexibility to react to then-current market conditions and, therefore, is in the best interests of BioSante and its stockholders.

        By approving this amendment, BioSante stockholders will (i) approve a series of amendments to BioSante's certificate of incorporation pursuant to which a one-for-two, one-for-three, one-for-four or one-for-five reverse split of BioSante common stock and BioSante class C special stock will be effected, and (ii) authorize the BioSante board of directors to (a) file only one such amendment, as determined immediately prior to completion of the merger in the manner described herein and (b) abandon each amendment not selected. In addition, BioSante may elect not to undertake a reverse stock split.

        If, following approval by the BioSante stockholders, it is determined that an amendment to BioSante's certificate of incorporation to effect a reverse stock split is in the best interests of BioSante and its stockholders, the reverse stock split will become effective upon filing one such amendment with the Secretary of State of the State of Delaware. Such amendment will effect either a one-for-two, one-for-three, one-for-four or one-for-five reverse split of BioSante common stock or BioSante class C special stock.

        If, following approval by the BioSante stockholders, a reverse stock split is undertaken, the number of issued and outstanding shares of BioSante common stock and BioSante class C special stock will be reduced in accordance with a reverse stock split ratio determined by BioSante and ANI immediately prior to completion of the merger. Except for adjustments that may result from the treatment of fractional shares, as described below, each BioSante stockholder will hold the same percentage of BioSante common stock and BioSante class C special stock outstanding immediately following the reverse stock split as such stockholder held immediately prior to the reverse stock split and immediately prior to completion of the merger. The par value of BioSante common stock and BioSante class C special stock will remain unchanged at $0.0001 per share.

Reasons for the Reverse Stock Split

        The BioSante board of directors approved the proposal authorizing the reverse stock split because it believes that a reverse stock split may allow the shares of BioSante common stock to be issued in connection with the merger to become listed on The NASDAQ Global Market or The NASDAQ

97


Table of Contents

Capital Market, which listing is a condition to completion of the merger. In addition, the BioSante board of directors believes that the increased market price of BioSante common stock expected to result from the implementation of a reverse stock split will improve the marketability and liquidity of BioSante common stock.

        BioSante common stock currently is listed on The NASDAQ Global Market. According to the listing rules of The NASDAQ Stock Market, in a transaction in which an issuer combines with a non-NASDAQ entity, resulting in a change of control of the issuer and potentially allowing the non-NASDAQ entity to obtain a NASDAQ listing, the issuer must apply for initial inclusion on the applicable NASDAQ market.

        The merger agreement requires that BioSante use its reasonable best efforts to cause the shares of BioSante common stock to be issued in the merger to be approved, at or prior to completion of the merger, for listing (subject to notice of issuance) on The NASDAQ Global Market or The NASDAQ Capital Market, and the listing of the shares of BioSante common stock issuable pursuant to the merger agreement is a condition to ANI's obligation to complete the merger.

        The listing standards of The NASDAQ Global Market and The NASDAQ Capital Market require, among other things, a $4.00 per share minimum bid upon completion of the merger. As of the date of the mailing of this joint proxy statement/prospectus, BioSante has filed an initial listing application for The NASDAQ Global Market in connection with the merger. The BioSante board of directors expects that a reverse stock split of BioSante common stock will increase the market price of BioSante common stock so that the combined company is able to achieve the initial listing requirements for The NASDAQ Global Market upon completion of the merger and thereafter maintain compliance with the NASDAQ minimum bid price listing standard of $4.00 per share. In determining the exact ratio for the reverse stock split, BioSante and ANI intend to use either a one-for-two, one-for-three, one-for-four or one-for-five ratio that would result in a per share price of greater than $4.00 per share following the reverse stock split. Notwithstanding the foregoing, there can be no assurance that the market price per share following the merger and the reverse stock split will remain in excess of the minimum bid price for a sustained period of time. In addition, there can be no assurance that the BioSante common stock, or the common stock of the combined company following completion of the merger, will not be delisted due to a failure to meet other continued listing requirements even if the market price per share of BioSante common stock on a post-reverse-stock-split basis remains in excess of the minimum bid requirement.

        Additionally, the BioSante board of directors believes that a listing on The NASDAQ Global Market for the shares of common stock of the combined company may provide a broad market for the common stock of the combined company and facilitate the use of the common stock of the combined company in financing and other transactions.

        On January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, the closing sale price of BioSante common stock was $1.36 per share. An investment in BioSante common stock may not appeal to brokerage firms that are reluctant to recommend lower-priced stocks to their clients. Investors also may be dissuaded from purchasing lower-priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. Also, the BioSante board of directors believes that most investment funds are reluctant to invest in lower-priced stocks.

98


Table of Contents

        There are risks associated with the reverse stock split, including that the reverse stock split may not result in an increase in the per share price of BioSante common stock. There is no assurance that (i) the market price per share of BioSante common stock following the reverse stock split will rise in proportion to the reduction in the number of shares of BioSante common stock outstanding before the reverse stock split; (ii) the reverse stock split will result in a market price per share of BioSante common stock that will attract brokers and investors who do not trade in lower-priced stocks; (iii) the market price per share of BioSante common stock will either exceed or remain in excess of the $4.00 minimum bid price as required for initial listing on The NASDAQ Global Market or The NASDAQ Capital Market; or (iv) BioSante otherwise will meet the initial listing requirements for The NASDAQ Global Market or The NASDAQ Capital Market.

        The market price per share of BioSante common stock also will be based on the performance of BioSante and other factors, some of which are unrelated to the number of shares of BioSante common stock outstanding. If the reverse stock split is affected and the market price per share of BioSante common stock declines, the percentage decline as an absolute number and as a percentage of the overall market capitalization of BioSante may be greater than would occur in the absence of a reverse stock split. Furthermore, the liquidity of BioSante common stock could be adversely affected by the reduced number of shares of BioSante common stock that will be outstanding following the reverse stock split.

Effects of the Reverse Stock Split

        If approved and implemented, the principal effects of the reverse stock split would include the following, all of which have been considered by the BioSante board of directors in approving the reverse stock split amendment:

99


Table of Contents

        The following tables show the number of shares of BioSante common stock and BioSante class C special stock that would be (1) issued and outstanding prior to completion of the merger; (2) authorized and reserved for issuance upon the exercise of outstanding stock options and warrants and conversion of convertible senior notes and in the case of BioSante common stock, conversion of the BioSante class C special stock prior to completion of the merger; (3) authorized and unreserved for issuance prior to completion of the merger; and (4) authorized, in each case upon the implementation of the reverse stock split at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five based on BioSante's capitalization at December 31, 2012 but prior to completion of the merger:

BioSante Common Stock

Reverse Stock Split Ratio
  BioSante
Common Stock Issued
and Outstanding
  BioSante
Common Stock
Authorized and
Reserved for Issuance
  BioSante
Common Stock
Authorized and
Unreserved for
Issuance
  Total Shares of
BioSante
Common Stock
Authorized
 

Pre-split

    24,422,240     6,302,837     169,274,923     200,000,000  

1-for-2

    12,211,120     3,151,418     184,637,462     200,000,000  

1-for-3

    8,140,746     2,100,945     189,758,309     200,000,000  

1-for-4

    6,105,560     1,575,709     192,318,731     200,000,000  

1-for-5

    4,884,448     1,260,567     193,854,985     200,000,000  

BioSante Class C Special Stock

Reverse Stock Split Ratio
  BioSante
Class C Special Stock
Issued and
Outstanding
  BioSante
Class C Special Stock
Authorized and
Reserved for Issuance
  BioSante
Class C Special Stock
Authorized and
Unreserved
for Issuance
  Total Shares of
BioSante
Class C Special Stock
Authorized
 

Pre-split

    65,211     0     4,622,473     4,687,684  

1-for-2

    32,605     0     4,655,079     4,687,684  

1-for-3

    21,737     0     4,665,947     4,687,684  

1-for-4

    16,302     0     4,671,382     4,687,684  

1-for-5

    13,042     0     4,674,642     4,687,684  

100


Table of Contents

        In addition, if approved and implemented, other possible effects of the reverse stock split include the following, all of which have been considered by the BioSante board of directors in approving the reverse stock split amendment:

        BioSante common stock is currently registered under Section 12(b) of the Exchange Act, and BioSante is subject to the periodic reporting and other requirements of the Exchange Act. The reverse stock split will not affect the registration of BioSante common stock under the Exchange Act nor affect BioSante continuing to be subject to the periodic reporting requirements of the Exchange Act. The reverse stock split is not intended as, and will not have the effect of, a "going private transaction" covered by Rule 13e-3 under the Exchange Act. If the reverse stock split is implemented, and the combined company's initial listing application with The NASDAQ Global Market is approved, BioSante common stock will continue to be listed on The NASDAQ Global Market under the symbol "BPAX" (although NASDAQ likely will add the letter "D" to the end of the trading symbol for a period of 20 trading days to indicate that the reverse stock split has occurred). It is expected that following the merger, the combined company will change its name to "ANI Pharmaceuticals, Inc." and that its trading symbol will be changed. ANI has reserved the ticker symbol "ANIP" for this purpose.

        Upon completion of the merger, each share of ANI capital stock will be converted into the right to receive that number of shares of BioSante common stock equal to the applicable exchange ratio. As

101


Table of Contents

of January 15, 2013, the last practicable date before the printing of this joint proxy statement/prospectus, 24,422,240 shares of BioSante common stock were outstanding and 2,375,312 shares of ANI series D preferred stock were outstanding and it is anticipated that an additional 321,737 shares of ANI series D preferred stock will be issued to ANI's executive officers and an additional ANI employee immediately prior to the merger, assuming BioSante's net cash is $18.0 million and an exchange ratio of 10.3502 for each share of ANI series D preferred stock and an exchange ratio of zero for each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock. The exchange ratios depend upon the reverse stock split ratio. If the merger had been completed as of December 31, 2012, assuming a reverse stock split ratio of one-for-two, each share of ANI series D preferred stock would have converted into and been exchanged for the right to receive 5.1751 shares of BioSante common stock and each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock would not have been entitled to receive any payment and would have been cancelled in connection with the merger, which would have resulted in an aggregate issuance of 14.0 million shares of BioSante common stock. If the merger had been completed as of December 31, 2012, assuming a reverse stock split ratio of one-for-five, each share of ANI series D preferred stock would have converted into and been exchanged for the right to receive 2.0700 shares of BioSante common stock and each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock would have been cancelled in connection with the merger, which would have resulted in an aggregate issuance of 5.6 million shares of BioSante common stock.

Procedures for Effecting the Reverse Stock Split and Filing the Reverse Stock Split Amendment

        If the BioSante stockholders approve the reverse stock split amendment and BioSante and ANI subsequently determines that it is in the best interests of BioSante and its stockholders to effect a reverse stock split, BioSante and ANI, in their sole discretion, at any time prior to completion of the merger, will determine the ratio of the reverse stock split to be implemented. BioSante and ANI believe that BioSante stockholder approval of four potential exchange ratios (rather than a single exchange ratio) is in the best interests of BioSante and its stockholders because it provides BioSante and ANI with the flexibility to achieve the desired results of the reverse stock split and because it is not possible to predict market conditions at the time the reverse stock split would be implemented. The ratio to be selected by BioSante and ANI will be either one-for-two, one-for-three, one-for-four or one-for-five and the numbers in the ratio will consist only of whole numbers. The decision of BioSante and ANI as to whether and when to effect the reverse stock split, and the decision of BioSante and ANI regarding the final split ratio will be based, in part, on existing and expected trading prices for BioSante common stock, the combined company's ability to meet the initial listing requirements of The NASDAQ Global Market, and prevailing general market and economic conditions. BioSante and ANI intend to select a reverse split ratio that they believe would be most likely to achieve the anticipated benefits of the reverse stock split as described above.

        After BioSante and ANI determine to effect a reverse stock split and have determined the split ratio, BioSante and ANI will determine the effective date of the reverse stock split and will announce publicly such information. Any such split will become effective upon the filing of the reverse stock split amendment with the Secretary of State of the State of Delaware or such later date as indicated in the reverse stock split amendment. It is currently anticipated that the reverse stock split would be effective on the closing date of the merger, prior to the effectiveness of the merger.

Fractional Shares

        No fractional shares of BioSante common stock or BioSante class C special stock would be issued as a result of the reverse stock split, if any. Each holder of BioSante common stock at the effective time of the reverse stock split, if any, who otherwise would be entitled to a fractional share will, in lieu thereof,

102


Table of Contents

be entitled receive a cash payment equal to: (1) the fractional share amount multiplied by (2) the product of (a) the closing sale price of a share of BioSante common stock as reported on The NASDAQ Global Market or other principal market of BioSante common stock, as applicable, on the effective date of the reverse stock split and (b) the reverse stock split ratio, as determined by BioSante and ANI. Each holder of BioSante class C special stock at the effective time of the reverse stock split, if any, who otherwise would be entitled to a fractional share will, in lieu thereof, be entitled receive a cash payment equal to the cash payment that a holder of BioSante common stock would receive minus $15.00. Except for the right to receive the cash payment in lieu of fractional shares, BioSante stockholders will not have any voting, dividend or other rights with respect to the fractional shares they otherwise would be entitled to receive.

        BioSante stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where BioSante is domiciled, and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective date of the reverse stock split may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by BioSante or the exchange agent concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, BioSante stockholders otherwise entitled to receive such funds will have to seek to obtain them directly from the state to which they were paid.

Exchange of Pre-Reverse Stock Split Shares with Post-Reverse Stock Split Shares

        If the BioSante stockholders approve and BioSante and ANI implement a reverse stock split, BioSante's transfer agent will act as exchange agent for purposes of implementing the exchange of pre-reverse stock split shares of BioSante common stock for post-reverse stock split shares of BioSante common stock, and BioSante will act as exchange agent for purposes of implementing the exchange of pre-reverse stock split shares of BioSante class C special stock for post-reverse stock split shares of BioSante class C special stock.

        Registered Book Entry Stockholder.    Holders of BioSante common stock holding all of their shares electronically in book-entry form with BioSante's transfer agent do not need to take any action (the exchange will be automatic) to receive post-reverse stock split shares.

        Registered Certificated Stockholder.    Some of the holders of BioSante common stock hold their shares in certificate form or a combination of certificate and book-entry form and all of the holders of BioSante class C special stock hold their shares in certificate form. If any of your shares of BioSante common stock are held in certificate form, you will receive a transmittal letter from BioSante's transfer agent as soon as practicable after the effective date of the reverse stock split. The letter of transmittal will contain instructions on how to surrender your certificate(s) representing your pre-reverse stock split shares to the transfer agent. Upon receipt of your pre-reverse stock split certificate(s), you will be issued the appropriate number of shares of BioSante common stock electronically in book-entry form under the Direct Registration System (DRS). No new shares in book-entry form will be reflected until you surrender your outstanding pre-reverse stock split certificate(s), together with the properly completed and executed letter of transmittal, to BioSante's transfer agent. At any time after receipt of your DRS statement, you may request a stock certificate representing your ownership interest. Holders of BioSante class C special stock will receive a transmittal letter from BioSante as soon as practicable after the effective date of the reverse stock split. The letter of transmittal will contain instructions on how to surrender your certificate(s) representing your pre-reverse stock split shares to BioSante and upon receipt of your pre-reverse stock split certificate(s), you will be issued the appropriate number of shares of BioSante class C special stock in certificate form.

BIOSANTE STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO.

103


Table of Contents

Accounting Matters

        The reverse stock split is not expected to affect stockholders' accumulated deficit on BioSante's balance sheet. However, because the par value of BioSante common stock and BioSante class C special stock will remain unchanged on the effective date of the reverse stock split, the components that make up stockholders' accumulated deficit will change by offsetting amounts. The stated common stock and BioSante class C special stock components will be reduced, and the additional paid-in capital component will be increased by the amount by which the stated common stock and BioSante class C special stock component is reduced. The per share net loss and net book value of BioSante common stock and BioSante class C special stock will be increased because there will be fewer shares of BioSante common stock and BioSante class C special stock outstanding. Net loss per share amounts in prior periods will be restated to reflect the reverse stock split. BioSante does not anticipate that any other accounting consequences would arise as result of the reverse stock split.

Potential Anti-Takeover Effect; Possible Dilution

        Because the reverse stock split would increase the number of authorized but unissued shares of BioSante common stock and BioSante class C special stock available for issuance, the reverse stock split could be construed as having an anti-takeover effect, since BioSante could use the increased available shares to frustrate persons seeking to effect a takeover or otherwise gain control of BioSante. For example, BioSante could use the additional authorized but unissued shares to resist or frustrate a third-party transaction providing an above-market premium that is favored by a majority of the BioSante stockholders. The reverse stock split proposal is not being proposed in response to any effort of which BioSante is aware to accumulate shares of BioSante common stock or obtain control of BioSante, other than as contemplated by the merger agreement, nor is it part of a plan by management to recommend a series of similar amendments to the BioSante stockholders.

        In addition to the increased number of shares of BioSante common stock and BioSante class C special stock that would be available for issuance as a result of the reverse stock split, other provisions of BioSante's certificate of incorporation and bylaws could delay or prevent a merger, tender offer or proxy contest to take control of BioSante. Specifically, BioSante's certificate of incorporation and bylaws contain provisions which:

        BioSante's bylaws require advance written notice to BioSante of any stockholder-proposed business or of a stockholder's intention to make a nomination for director at an annual meeting of stockholders and limit the business that may be conducted at any special meeting of stockholders to business brought by the BioSante board of directors.

        The holders of BioSante common stock and BioSante class C special stock do not have preemptive rights to subscribe for additional securities that may be issued by BioSante, which means that current BioSante stockholders do not have a prior right to purchase any additional shares from time to time issued by BioSante. Accordingly, if the BioSante board of directors elects to issue additional shares of BioSante common stock or BioSante class C special stock, such issuance could have a dilutive effect on the earnings (if any) per share, voting power and equity ownership of current BioSante stockholders.

104


Table of Contents

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

        The following discussion describes the anticipated material U.S. federal income tax consequences to "U.S. holders" of BioSante capital stock relating to the reverse stock split. For purposes of this discussion, a "U.S. holder" is an owner of BioSante capital stock who is (i) a citizen or individual resident of the U.S., including an individual who is resident in the U.S. by reason of a physical presence here during the year or by virtue of lawful permanent residence; (ii) a corporation or other entity treated as a corporation which is created or organized under the laws of the U.S., any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax without regard to its source; or (iv) a trust if (A) a court within the U.S. is able to exercise primary supervision over the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust was in existence on August 20, 1996, and has a valid election in effect under applicable Regulations to be treated as a domestic trust for U.S. federal income tax purposes. A holder of BioSante capital stock that is not a U.S. holder is urged to consult his, her or its own tax advisor regarding the U.S. federal income tax consequences of the reverse stock split.

        This discussion is based upon the current provisions of the existing Treasury Regulations promulgated under the Internal Revenue Code of 1986, as amended (Code), and current administration rulings and court decisions, all as currently in effect and all of which are subject to change or differing interpretations, possibly with retroactive effect. BioSante has not obtained, and does not intend to obtain, a ruling from the IRS or an opinion of legal or tax counsel with respect to the tax consequences of the reverse stock split. The following discussion is for information purposes only and is not intended as tax or legal advice.

        This discussion assumes that a U.S. holder holds BioSante capital stock as a capital asset within the meaning of Code Section 1221. This discussion does not address all of the tax consequences that may be relevant to a particular stockholder or to stockholders that are subject to special treatment under U.S. federal income tax laws including, but not limited to, financial institutions, tax-exempt organizations, insurance companies, regulated investment companies, persons that are broker-dealers, traders in securities who elect the mark-to-market method of accounting for their securities, or stockholders holding their shares of BioSante capital stock as part of a "straddle," "hedge," "conversion transaction," or other integrated transaction. This discussion also does not address the tax consequences to BioSante, or to BioSante stockholders that own five percent or more of BioSante capital stock, are affiliates of BioSante, or are not U.S. holders. In addition, this discussion does not address other U.S. federal taxes (such as gift or estate taxes or alternative minimum taxes), the tax consequences of the reverse stock split under state, local or foreign tax laws or certain tax reporting requirements that may be applicable with respect to the reverse stock split. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

        If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a stockholder of BioSante, the tax treatment of a partner in the partnership, or any equity owner of such other entity will generally depend upon the status of the person and the activities of the partnership or other entity treated as a partnership for U.S. federal income tax purposes.

Tax Consequences of the Reverse Stock Split Generally

        BioSante believes that the reverse stock split will qualify as a "reorganization" under Section 368(a)(1)(E) of the Code. Accordingly, provided that the fair market value of the post-reverse stock split shares is equal to the fair market value of the pre-reverse stock split shares surrendered in the reverse stock split:

105


Table of Contents

Cash Received Instead of a Fractional Share

        A U.S. holder who receives cash instead of a fractional share of post-reverse stock split shares will be treated as having received the fractional share of post-reverse stock split shares pursuant to the reverse stock split and then as having exchanged the fractional share of post-reverse stock split shares for cash in a redemption by BioSante. In general, this deemed redemption will be treated as a sale or exchange, provided the redemption is not essentially equivalent to a dividend as discussed below. Gain or loss generally will be recognized based on the difference between the amount of cash received and the portion of the U.S. holder's adjusted tax basis of the pre-reverse stock split shares exchanged in the reverse stock split which is allocable to such fractional share. Such gain or loss generally will be long-term capital gain or loss if the U.S. holder's holding period for such pre-reverse stock split shares is more than one year as of the effective date of the reverse stock split, and otherwise will be short-term capital gain or loss. The deductibility of capital losses is subject to limitations.

        The receipt of cash is "not essentially equivalent to a dividend" if the reduction in a U.S. holder's proportionate interest in BioSante resulting from the reverse stock split (taking into account for this purpose shares of BioSante common stock and BioSante class C special stock which such holder is considered to own under certain attribution rules) is considered a "meaningful reduction" given such U.S. holder's particular facts and circumstances. The IRS has ruled that a small reduction by a minority stockholder whose relative stock interest is minimal and who exercises no control over the affairs of a corporation can satisfy this test. If the receipt of cash in lieu of a fractional share is not treated as capital gain or loss under the test just described, it will be treated first as ordinary dividend income to the extent of a U.S. holder's ratable share of BioSante's current and accumulated earnings and profits, then as a tax-free return of capital to the extent of the portion of the U.S. holder's adjusted tax basis of the pre-reverse stock split shares which is allocable to such fractional share, and any remaining amount will be treated as capital gain.

Information Reporting and Backup Withholding

        Cash payments received by a U.S. holder of BioSante capital stock pursuant to the reverse stock split are subject to information reporting, and may be subject to backup withholding at the applicable rate specified by the IRS (currently at a rate of 28 percent) if the holder fails to provide a valid taxpayer identification number and comply with certain certification procedures or otherwise establish an exemption from backup withholding. Backup withholding is not an additional U.S. federal income tax. Rather, the U.S. federal income tax liability of the person subject to backup withholding will be reduced by the amount of the tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is timely furnished to the IRS.

No Appraisal Rights

        No appraisal rights are available under the Delaware General Corporation Law or under BioSante's certificate of incorporation or bylaws to any BioSante stockholder who dissents from the proposal to approve the amendment to BioSante's certificate of incorporation to effect the reverse stock split.

106


Table of Contents

Discretion to Implement the Reverse Stock Split

        If the proposed reverse stock split is approved by the BioSante stockholders, BioSante and ANI, in their discretion, at any time prior to completion of the merger, may determine to implement the reverse stock split. Notwithstanding the approval of the form of the reverse stock split amendment, BioSante and ANI, in their discretion, may determine not to implement the reverse stock split.

Vote Required; Recommendation of BioSante Board of Directors

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, having voting power outstanding on the record date for the BioSante special meeting is required for approval of BioSante Proposal No. 2.

        A failure to submit a proxy card or vote at the BioSante special meeting, or an abstention or "broker non-vote" will have the same effect as a vote against the approval of BioSante Proposal No. 2.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 2 to approve the amendment to BioSante's certificate of incorporation to effect a reverse split of the issued and outstanding shares of BioSante common stock and BioSante class C special stock at the discretion of the BioSante board of directors at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five.

107


Table of Contents


BioSante Proposal No. 3—Approval of Amendment to BioSante's Certificate of Incorporation to Change Corporate Name

General

        At the BioSante special meeting, BioSante stockholders will be asked to approve an amendment to BioSante's certificate of incorporation to change the name of the corporation from "BioSante Pharmaceuticals, Inc." to "ANI Pharmaceuticals, Inc." immediately following completion of the merger. The full text of the form of proposed amendment is attached to this joint proxy statement/prospectus as Annex J.

        The primary reason for the corporate name change is that ANI's senior management believes this will allow for recognition of the combined company's business following completion of the merger. ANI's senior management believes that the current name will no longer accurately reflect the business of the combined company and the mission of the combined company subsequent to the completion of the merger.

        Insofar as the proposed new corporate name will reflect the combined company's business following completion of the merger, the proposed name change and the amendment to BioSante's certificate of incorporation, even if approved by the BioSante stockholders at the BioSante special meeting, will only be filed with the office of the Secretary of State of the State of Delaware and, therefore become effective, if the merger is completed.

Vote Required; Recommendation of BioSante Board of Directors

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, having voting power outstanding on the record date for the BioSante special meeting is required for approval of BioSante Proposal No. 3.

        A failure to submit a proxy card or vote at the BioSante special meeting, or an abstention or "broker non-vote" will have the same effect as a vote against the approval of BioSante Proposal No. 3.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 3 to approve the amendment to BioSante's certificate of incorporation to change the name of the corporation from "BioSante Pharmaceuticals, Inc." to "ANI Pharmaceuticals, Inc." immediately following completion of the merger.

108


Table of Contents


BioSante Proposal No. 4—Advisory Vote on Golden Parachute Compensation

General

        As required by Section 14A of the Exchange Act and the SEC's rules thereunder, BioSante is asking its stockholders to cast an advisory (non-binding) vote on the compensation that may be payable to its named executive officers under existing agreements in connection with the merger, as described in this joint proxy statement/prospectus under "The Merger—Interests of BioSante's Directors and Officers in Connection with the Merger—Golden Parachute Compensation," including in the associated narrative discussion. In accordance with these requirements, BioSante is asking its stockholders to vote on the adoption of the following resolution:

        "RESOLVED, that the compensation that may be payable to BioSante's named executive officers in connection with the merger, as disclosed in the table captioned "Golden Parachute Compensation" beginning on page 147 of this joint proxy statement/prospectus under "The Merger—Interests of BioSante's Directors and Officers in Connection with the Merger—Golden Parachute Compensation," including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be payable, are hereby APPROVED."

        The vote on the compensation payable in connection with the merger is a vote separate and apart from the votes on the other BioSante proposals described in this joint proxy statement/prospectus. BioSante stockholders may vote to approve this proposal and vote not to approve another proposal, or may vote against this proposal and vote to approve some or all of the other proposals.

        Because the vote on this BioSante Proposal No. 4 is advisory in nature only, it will not be binding on BioSante. Accordingly, because BioSante is obligated contractually to pay the compensation covered by this proposal, such compensation will be payable, subject only to the applicable conditions, if the merger is approved and regardless of the outcome of the advisory vote.

Vote Required; Recommendation of BioSante Board of Directors

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, present in person or represented by proxy at the BioSante special meeting is required for approval of BioSante Proposal No. 4.

        A failure to submit a proxy card or vote at the BioSante special meeting or a "broker non-vote" will have no effect on the outcome of BioSante Proposal No. 4. For purposes of the vote on this BioSante Proposal No. 4, an abstention will have the same effect as a vote "AGAINST" such proposal.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 4 to approve the compensation that may be payable to BioSante's named executive officers in connection with the merger, as disclosed in the table captioned "Golden Parachute Compensation" beginning on page 147 of this joint proxy statement/prospectus under "The Merger—Interests of BioSante's Directors and Officers in Connection with the Merger—Golden Parachute Compensation," including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be payable.

109


Table of Contents


BioSante Proposal No. 5—Approval of Possible Adjournment of the BioSante Special Meeting

General

        BioSante is asking its stockholders to consider and vote upon a proposal to approve one or more adjournments of the BioSante special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of approval of BioSante Proposals No. 1, 2 and/or 3.

        If the number of shares of BioSante capital stock present in person or represented by proxy at the BioSante special meeting voting in favor of BioSante Proposal No. 1, BioSante Proposal No. 2 or BioSante Proposal No. 3 is insufficient to approve one or more of such proposals at the time of the BioSante special meeting, then BioSante may move to adjourn the BioSante special meeting in order to enable the BioSante board of directors to solicit additional proxies in respect of the applicable proposal. In that event, BioSante stockholders will be asked to vote only upon the adjournment proposal, BioSante Proposal No. 5, and not on any other proposal.

        In this proposal, BioSante is asking its stockholders to authorize the holder of any proxy solicited by the BioSante board of directors to vote in favor of granting discretionary authority to the proxy or attorney-in-fact to adjourn the BioSante special meeting one or more times for the purpose of soliciting additional proxies. If BioSante stockholders approve this BioSante Proposal No. 5, BioSante could adjourn the BioSante special meeting and any adjourned session of the BioSante special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from BioSante stockholders that previously have returned properly executed proxies or authorized a proxy by using the Internet or telephone. Among other things, approval of BioSante Proposal No. 5 could mean that, even if BioSante has received proxies representing a sufficient number of votes against the approval of BioSante Proposals No. 1, BioSante Proposal No. 2 or BioSante Proposal No. 3 that such proposal would be defeated, BioSante could adjourn the BioSante special meeting without a vote on such proposal and seek to obtain sufficient votes in favor of such proposal to obtain approval of that proposal.

        BioSante currently does not intend to propose adjournment at the BioSante special meeting if there are sufficient votes to approve BioSante Proposals No. 1, 2 and 3.

Vote Required; Recommendation of BioSante Board of Directors

        The affirmative vote of holders of a majority of the BioSante common stock and BioSante class C special stock, voting together as a single class, present in person or represented by proxy at the BioSante special meeting is required for approval of BioSante Proposal No. 5.

        A failure to submit a proxy card or vote at the BioSante special meeting or a "broker non-vote" will have no effect on the outcome of BioSante Proposal No. 5. For purposes of the vote on this BioSante Proposal No. 5, an abstention will have the same effect as a vote "AGAINST" such proposal.

        The BioSante board of directors unanimously recommends that BioSante stockholders vote "FOR" BioSante Proposal No. 5 to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of BioSante Proposals No. 1, 2 and 3.

110


Table of Contents


THE SPECIAL MEETING OF ANI STOCKHOLDERS

General

        This joint proxy statement/prospectus is being furnished to stockholders of ANI on or about January 25, 2013. ANI is sending this joint proxy statement/prospectus to its stockholders in connection with the solicitation of proxies by the ANI board of directors for use at the ANI special meeting and any adjournments or postponements of the special meeting.


Date, Time and Place

        The special meeting of ANI stockholders will be held at 9:00 a.m., local time, on Friday, March 15, 2013, at the offices of MVP Capital Partners located at 259 N. Radnor-Chester Road, Suite 130, Radnor, Pennsylvania 19087.


Purposes of the ANI Special Meeting

        The purposes of the ANI special meeting are to consider and act upon the following matters:

        ANI stockholders also will consider and act on any other matters as may properly come before the ANI special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.


Recommendations of the ANI Board of Directors

        The ANI board of directors has determined and believes that the merger agreement and the transactions contemplated thereby, including the merger, is advisable, fair to, and in the best interests of ANI and its stockholders and has unanimously approved such proposal. The ANI board of directors recommends unanimously that ANI stockholders vote "FOR" ANI Proposal No. 1 to approve the merger agreement and the transactions contemplated thereby, including the merger.

        The ANI board of directors recommends unanimously that ANI stockholders vote "FOR" ANI Proposal No. 2 to adjourn the ANI special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of ANI Proposal No. 1.


Record Date and Voting Power

        The close of business on January 17, 2013 has been fixed as the ANI record date for the determination of ANI stockholders entitled to notice of, and to vote at, the ANI special meeting or any adjournments or postponements of the ANI special meeting. Only holders of record of ANI capital stock at the close of business on the ANI record date are entitled to notice of, and to vote at, the ANI special meeting. At the close of business on the record date, ANI had 2,375,312 shares of ANI series D preferred stock, 34,810 shares of ANI series C preferred stock, 78,491 shares of ANI series B preferred stock, 102,774 shares of ANI series A preferred stock and 23,613 shares of ANI common stock outstanding and entitled to vote. Each share of ANI series D preferred stock, ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See "Principal

111


Table of Contents

Stockholders of ANI" for information regarding persons known to management of ANI to be the beneficial owners of more than five percent of the outstanding shares of ANI capital stock.


Voting and Revocation of Proxies

        The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the ANI board of directors for use at the ANI special meeting.

        If you are a stockholder of record of ANI as of the applicable record date referred to above, you may vote in person at the ANI special meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the ANI special meeting, ANI urges you to vote by proxy to ensure your vote is counted. You still may attend the ANI special meeting and vote in person if you already have voted by proxy. ANI stockholders of record as of the close of business on January 17, 2013 may submit their proxies by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided or returning it pursuant to the instructions provided in the proxy card.

        All properly executed proxies that are not revoked will be voted at the ANI special meeting and at any adjournments or postponements of the ANI special meeting in accordance with the instructions contained in the proxy. If a holder of ANI capital stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted "FOR" ANI Proposal No. 1 to approve the merger agreement and the transactions contemplated thereby, including the merger; "FOR" ANI Proposal No. 2 to adjourn the ANI special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of ANI Proposal No. 1 in accordance with the recommendation of the ANI board of directors.

        Any ANI stockholder of record voting by proxy, other than those stockholders who have executed a voting agreement and irrevocable proxy, has the right to revoke the proxy at any time before the polls close at the ANI special meeting by sending a written notice stating that it would like to revoke its proxy to the Secretary of ANI, by providing a duly executed proxy card bearing a later date than the proxy being revoked or by attending the ANI special meeting and voting in person. Attendance alone at the ANI special meeting will not revoke a proxy.


Quorum and Required Vote

        The presence at the ANI special meeting, in person or by proxy, of the holders of a majority of the voting power of the issued and outstanding shares of ANI capital stock entitled to vote will constitute a quorum for the transaction of business at the ANI special meeting. In general, shares of ANI capital stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the ANI special meeting for purposes of determining a quorum. Shares represented by proxies marked "Abstain" or "Withheld" are counted in determining whether a quorum is present. If a quorum is not present at the ANI special meeting, ANI expects that the ANI special meeting will be adjourned or postponed to solicit additional proxies.

        A description of the vote required to approve each proposal being submitted to a vote of ANI stockholders is included with the description of each proposal. For ANI Proposal No. 1, a failure to vote by proxy or in person at the ANI special meeting, or an abstention or vote withheld for such proposal, will have the same effect as a vote against the approval of such proposal. For ANI Proposal No. 2, a failure to submit a proxy card or vote at the ANI special meeting, or an abstention or vote withheld will have no effect on the outcome of such proposal.

        In connection with the execution of the merger agreement, Meridian Venture Partners II, L.P., Argentum Capital Partners II, L.P. and four funds affiliated with First Analysis Corp., who in the aggregate held approximately 85 percent of the shares of the outstanding ANI capital stock, calculated on an as-converted basis, and approximately 86 percent of the outstanding shares of the ANI series D

112


Table of Contents

preferred stock, as of October 3, 2012 entered into a voting agreement with BioSante, pursuant to which they agreed to vote their shares of ANI capital stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transaction contemplated by the merger agreement.

        As of the record date for the ANI special meeting, the shares of ANI capital stock owned by all of ANI's directors, executive officers and affiliated entities constituted approximately 92 percent of the outstanding shares of ANI capital stock, on an as-converted basis, and approximately 94 percent of the outstanding shares of the ANI series D preferred stock on that date.


Solicitation of Proxies

        In addition to solicitation by mail, the directors, officers, employees and agents of ANI may solicit proxies from ANI stockholders by personal interview, telephone, telegram or other electronic means. ANI will bear the costs of the solicitation of proxies by ANI from ANI's stockholders. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries who are record holders of ANI capital stock for the forwarding of solicitation materials to the beneficial owners of ANI capital stock. ANI will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.


Other Matters

        As of the date of this joint proxy statement/prospectus, the ANI board of directors does not know of any business to be represented at the ANI special meeting other than as set forth in the notice accompanying this joint proxy statement/prospectus. If any other matters should properly come before the ANI special meeting, or any adjournment or postponement of the ANI special meeting it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the person voting the proxies.

113


Table of Contents


MATTERS BEING SUBMITTED TO A VOTE OF ANI STOCKHOLDERS

ANI Proposal No. 1—Adoption of Agreement and Plan of Merger and the Transactions Contemplated Thereby, Including the Merger

General

        At the ANI special meeting, ANI stockholders will be asked to adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and the transactions contemplated thereby, including the merger.

        If the merger is completed, ANI will be merged with and into BioSante, with BioSante surviving the merger.

        Pursuant to the terms of the merger agreement, upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. Following completion of the merger, the current ANI stockholders are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and current BioSante stockholders are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. If the merger had been completed on January 17, 2013, the record date for the BioSante special meeting, an aggregate of 27.9 million shares of BioSante common stock would have been issuable to ANI stockholders upon completion of the merger, assuming BioSante's net cash is $18.0 million as of the determination date.

        The terms of, reasons for and other aspects of the merger agreement and the merger are described in detail in the other sections of this joint proxy statement/prospectus. The full text of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

Vote Required; Recommendation of ANI Board of Directors

        The affirmative vote of holders of a majority of the shares of ANI capital stock entitled to vote, calculated on an as-converted basis and voting together as a single class, and 65 percent of the shares of ANI series D preferred stock entitled to vote, in each case outstanding on the record date for the ANI special meeting, is required for approval of ANI Proposal No. 1.

        A failure to submit a proxy card or vote at the ANI special meeting, or an abstention will have the same effect as a vote against the approval of ANI Proposal No. 1.

        The ANI board of directors unanimously recommends that ANI stockholders vote "FOR" ANI Proposal No. 1 to adopt the agreement and plan of merger and the transactions contemplated thereby, including the merger.

114


Table of Contents


ANI Proposal No. 2—Approval of Possible Adjournment of the ANI Special Meeting

General

        ANI is asking its stockholders to consider and vote upon a proposal to approve one or more adjournments of the ANI special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of approval of ANI Proposal No. 1.

        If the number of shares of ANI capital stock present in person or represented by proxy at the ANI special meeting voting in favor of ANI Proposal No. 1 is insufficient to approve such proposal at the time of the ANI special meeting, then ANI may move to adjourn the ANI special meeting in order to enable the ANI board of directors to solicit additional proxies in respect of the applicable proposal. In that event, ANI stockholders will be asked to vote only upon the adjournment proposal, ANI Proposal No. 2, and not on any other proposal.

        In this proposal, ANI is asking its stockholders to authorize the holder of any proxy solicited by the ANI board of directors to vote in favor of granting discretionary authority to the proxy or attorney-in-fact to adjourn the ANI special meeting one or more times for the purpose of soliciting additional proxies. If ANI stockholders approve this ANI Proposal No. 2, ANI could adjourn the ANI special meeting and any adjourned session of the ANI special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from ANI stockholders that previously have returned properly executed proxies. Among other things, approval of ANI Proposal No. 2 could mean that, even if ANI has received proxies representing a sufficient number of votes against the approval of ANI Proposal No. 1 that such proposal would be defeated, ANI could adjourn the ANI special meeting without a vote on such proposal and seek to obtain sufficient votes in favor of such proposal to obtain approval of that proposal.

        ANI currently does not intend to propose adjournment at the ANI special meeting if there are sufficient votes to approve ANI Proposal No. 1.

Vote Required; Recommendation of ANI Board of Directors

        The affirmative vote of holders of a majority of the shares of ANI capital stock entitled to vote, calculated on an as-converted basis, present in person or represented by proxy and voting together as a single class is required for approval of ANI Proposal No. 2.

        A failure to submit a proxy card or vote at the ANI special meeting will have no effect on the outcome of ANI Proposal No. 2. For purposes of the vote on ANI Proposal No. 2, an abstention will have the same effect as a vote "AGAINST" such proposal.

        The ANI board of directors unanimously recommends that ANI stockholders vote "FOR" ANI Proposal No. 2 to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of ANI Proposal No. 1.

115


Table of Contents


THE MERGER

        This section and the section entitled "The Merger Agreement" describe the material aspects of the merger, including the merger agreement. While BioSante and ANI believe that this description covers the material terms of the merger and the merger agreement, it may not contain all of the information that is important to you. You should read carefully this entire joint proxy statement/prospectus for a more complete understanding of the merger and the merger agreement, including the attached Annexes, and the other documents to which you are referred herein. See "Where You Can Find More Information."


General

        The merger agreement provides that, at the effective time, ANI will be merged with and into BioSante, with BioSante surviving the merger.

        Pursuant to the terms of the merger agreement, upon completion of the merger, ANI stockholders will have the right to receive, for each share of ANI capital stock they hold, that number of shares of BioSante common stock equal to the applicable exchange ratio, as such ratio is calculated pursuant to the terms of the merger agreement, such that immediately following completion of the merger, the current stockholders of ANI are expected to own approximately 53 percent of the outstanding capital stock of the combined company and current stockholders of BioSante are expected to own approximately 47 percent of the outstanding capital stock of the combined company, assuming BioSante's net cash as of the determination date is $18.0 million.

        BioSante stockholders will continue to own their existing shares of BioSante common stock or BioSante class C special stock after the merger. Each share of BioSante common stock will represent one share of common stock in the combined company, and each share of BioSante class C special stock will represent one share of class C special stock in the combined company, subject to adjustment for any reverse stock split effective immediately prior to the merger.

        The closing of the merger will take place as promptly as practicable after the day on which the last of the conditions to the merger set forth in the merger agreement has been satisfied or waived (if permissible), unless BioSante and ANI agree to a different date. However, because the merger is subject to a number of conditions, neither BioSante nor ANI can predict exactly when the closing will occur or if it will occur at all. See "The Merger Agreement—Conditions to Completion of the Merger" for a more complete description of the conditions that must be satisfied or, if permissible, waived before closing.


Background of the Merger

        As a part of its corporate strategy, BioSante over the past several years actively has sought and implemented strategic alternatives with respect to its products and its company, including licenses, business collaborations and other business combinations or transactions with other pharmaceutical and biotechnology companies.

        In 2008, BioSante engaged a financial advisor to assist BioSante in exploring a possible exclusive license of LibiGel to a third party or a possible sale of BioSante. During 2008, BioSante's then financial advisor contacted approximately 100 public and private companies regarding their interest in licensing LibiGel or acquiring BioSante. Approximately 10 of these companies received management presentations from BioSante and/or performed limited due diligence on BioSante. However, almost all of these companies indicated that they were not interested in licensing LibiGel or acquiring BioSante. Of the companies that indicated an interest, none of them submitted a formal bid. BioSante's management, nonetheless, continued to pursue the companies that indicated informally an interest in licensing LibiGel or acquiring BioSante and other third parties that were subsequently identified by BioSante as possible candidates for a possible business combination, license transaction or other

116


Table of Contents

transaction with BioSante. However, no transaction to license LibiGel or acquire BioSante was ever negotiated or completed.

        In October 2009, BioSante acquired Cell Genesys, Inc., a company that was focused on the development and commercialization of novel biological therapies for patients with cancer. Although the primary purpose of BioSante's acquisition of Cell Genesys was to acquire Cell Genesys's cash to use to fund BioSante's LibiGel clinical development program, BioSante also acquired Cell Genesys's rights to its GVAX cancer vaccine portfolio.

        Subsequent to BioSante's acquisition of Cell Genesys, BioSante continued its development of LibiGel, including its two Phase III efficacy trials and its Phase III cardiovascular events and breast cancer safety study. BioSante also facilitated further studies and commercialization of its GVAX cancer vaccine portfolio in order to bring important cancer therapies to patients in need and maximize the value of the GVAX cancer vaccine portfolio to the BioSante stockholders. BioSante was successful in coordinating the further development of the GVAX cancer vaccine portfolio, including vaccines for the treatment of several different cancers including melanoma, leukemia, pancreatic, breast and prostate cancer, and obtaining FDA orphan drug designations for four of these vaccines—to treat pancreatic cancer, acute myeloid leukemia, chronic myeloid leukemia and melanoma. Currently, there are 17 Phase I and Phase II clinical studies involving BioSante's GVAX cancer vaccines ongoing.

        In an attempt to monetize the GVAX cancer vaccine portfolio, in July 2010, BioSante engaged a consulting and advisory firm that specializes in transactions in the biopharmaceutical and life sciences industries to assist BioSante in exploring strategic alternatives with respect to the GVAX cancer vaccine portfolio. BioSante's management and this consulting and advisory firm contacted over 80 companies to determine their interest in licensing some or all of BioSante's GVAX cancer vaccine portfolio. Through management's efforts, BioSante was successful in implementing licensing transactions during 2011 with Aduro BioTech, Inc. and The John P. Hussman Foundation covering certain aspects of the GVAX cancer vaccine portfolio. BioSante retains rights to substantially all of the GVAX cancer vaccine portfolio, other than those licensed to Aduro BioTech, Inc. and The John P. Hussman Foundation.

        In 2010, BioSante again engaged a management consulting company to assist BioSante in exploring a possible exclusive license of LibiGel to a third party. During 2010 and 2011, BioSante's then advisor contacted over 60 public and private companies regarding their interest in the further development and marketing of LibiGel. Approximately 10 of these companies received management presentations from BioSante and/or performed limited due diligence on BioSante regarding LibiGel. Several of these companies expressed interest in a licensing transaction and potential terms were discussed with at least one of these companies. However, based on the passage of time and the then approaching completion of the LibiGel efficacy trials, all of these companies determined that they would wait until BioSante's receipt of the results from its LibiGel Phase III efficacy trials. Although some companies indicated that they may be interested in LibiGel after BioSante's receipt of the results from its LibiGel Phase III efficacy trials, none of these companies or any other companies indicated any such interest after BioSante's announcement of the results from the LibiGel Phase III efficacy trials in December 2011.

        In December 2011, BioSante announced the results from its two LibiGel Phase III efficacy trials, which showed that the trials did not meet the co-primary or secondary endpoints. Although LibiGel performed as predicted, increasing satisfying sexual events and sexual desire and decreasing distress associated with low desire, the placebo response in the two efficacy trials was greater than expected, and LibiGel's results were not shown to be statistically different from use of placebo.

        Subsequent to BioSante's announcement of the results from its two LibiGel Phase III efficacy trials, BioSante implemented several operating expense reduction measures, explored potential new product development projects through in-licensing and mergers and acquisitions, and analyzed further the data from the LibiGel Phase III efficacy trials in an attempt to understand whether to continue to allocate resources to the development of LibiGel and the LibiGel Phase III safety study.

117


Table of Contents

        In January 2012, in order to reduce its operating expenses and conserve cash, BioSante implemented several cost-saving measures, including reducing substantially the number of its independent contractors, resulting in a 25 percent total reduction in BioSante's personnel.

        In February 2012, in order to reduce its then outstanding debt of approximately $20.8 million in aggregate principal amount, and ongoing interest obligations, BioSante issued an aggregate of 1,868,055 shares of BioSante common stock in exchange for the cancellation of $9.0 million in aggregate principal amount of its 3.125% convertible senior notes due May 1, 2013 and the related accrued and unpaid interest of $79,024. After these securities exchange transactions, BioSante had $11.8 million in aggregate principal amount of its 3.125% convertible senior notes due May 1, 2013 outstanding.

        From mid-December 2011 through May 2012, BioSante's management contacted over 50 public and private companies regarding their interest in a possible strategic transaction with BioSante, including in-licensing transactions and other business combinations or transactions. Of these companies, 12 engaged in management presentations with BioSante and/or limited due diligence investigations with BioSante, and approximately 10 of these companies entered into confidentiality agreements with BioSante, including the companies referred to as Company A, Company B and Company C in this section.

        At the same time, from mid-December 2011 through May 2012, BioSante's management continued to analyze further the data from its LibiGel Phase III efficacy trials, consulted with key opinion leaders in female sexual dysfunction, testosterone therapy and placebo effects, and met with representatives of the FDA in an attempt to understand whether to continue to allocate resources to the development of LibiGel and the LibiGel Phase III safety study. In addition, during such time period, BioSante's management also explored other alternative potential uses for its LibiGel Phase III safety study data.

        On May 30, 2012, the BioSante board of directors held a regular meeting at BioSante's corporate offices in Lincolnshire, Illinois. At this meeting, the BioSante board of directors discussed whether it would be in the best interest of BioSante and its stockholders for BioSante to continue to allocate its resources to the development of LibiGel or allocate its resources to other biopharmaceutical product areas through in-licensing or acquisitions, or combine with or be acquired by a public or private company. After careful consideration of these strategic alternatives, the BioSante board of directors decided to proceed with a plan to continue the development of LibiGel, including continuing the then ongoing LibiGel Phase III safety study and initiating two new LibiGel Phase III efficacy trials. The BioSante board of directors determined that while such a plan was not without risk, it represented the best alternative then available to BioSante and its stockholders. However, the BioSante board of directors also directed BioSante's management to continue its pursuit to seek strategic alternatives and to keep the BioSante board of directors apprised of the status of such efforts so that the BioSante board of directors could revisit from time-to-time as appropriate its decision to continue the development of LibiGel.

        On June 11, 2012, BioSante announced its plan to initiate two new LibiGel Phase III efficacy trials. BioSante subsequently continued to develop a protocol for the two new efficacy trials and to seek an FDA Special Protocol Assessment (SPA) agreement covering aspects of the two new efficacy trials.

        On June 12, 2012, the day after BioSante announced its plan to initiate two new LibiGel Phase III efficacy trials, BioSante received an unsolicited indication of interest from a private specialty pharmaceutical company referred to as Company A to engage in a stock-for-stock transaction pursuant to which 50 percent of the surviving entity would be owned by the BioSante stockholders and the remaining 50 percent of which would be owned by Company A stockholders. The indication of interest contemplated that the surviving entity would be managed by Company A's management and would complete development of and submit new drug applications for two of Company A's drug candidates, and, based on statements in the indication of interest, would not pursue any further development of LibiGel.

118


Table of Contents

        On June 18, 2012, the BioSante board of directors held a special meeting to discuss the receipt of the indication of interest from Company A, to engage possible financial advisors to assist BioSante and the BioSante board of directors in evaluating a response to the indication of interest from Company A and other strategic alternatives that may be available for BioSante, and BioSante's recently announced plan to initiate two new LibiGel Phase III efficacy trials. A representative of BioSante's legal counsel, Oppenheimer Wolff & Donnelly LLP (OWD) summarized the fiduciary duties and responsibilities of the BioSante board of directors both generally and specifically in considering an all-stock transaction of the type proposed by Company A. After extensive discussion, it was the consensus of the BioSante board of directors that although the board remained committed to BioSante's current business plan and strategy, including the plan to initiate two new LibiGel Phase III efficacy trials, the board also was committed to increasing stockholder value for the BioSante stockholders and thus remained open minded as to other strategic alternatives that would increase stockholder value and be in the best interests of the BioSante stockholders. The BioSante board of directors directed BioSante's management to request from Company A additional information, including its business plan and strategy, historical and projected financial information, and valuation information, in order to enable the BioSante board of directors to review and analyze the proposal.

        Subsequent to the BioSante board of directors meeting on June 18, 2012, BioSante's president and chief executive officer, Stephen M. Simes, responded to Company A's June 12, 2012 indication of interest requesting additional information from Company A.

        On June 20, 2012, the president and chief executive officer of Company A requested a meeting with Mr. Simes, and BioSante's senior vice president, finance, chief financial officer and secretary, Phillip B. Donenberg, to discuss Company A's indication of interest, BioSante's corporate strategy and general aspects of a possible transaction between the two companies.

        On June 21, 2012, BioSante's management reiterated to Company A BioSante's need for additional information from Company A in order to enable BioSante to review and analyze Company A's offer.

        On June 27, 2012, the president and chief executive officer of Company A responded that prior to responding to BioSante's information request, he would like to meet with BioSante's management to discuss Company A's indication of interest.

        On July 3, 2012, the president and chief executive officer of Company A visited BioSante's corporate offices in Lincolnshire, Illinois and met with Mr. Simes and Mr. Donenberg. The parties discussed Company A's corporate strategy, BioSante's corporate strategy, Company A's indication of interest and general aspects of a possible transaction between the two companies. Subsequent to July 3, 2012, BioSante commenced a due diligence investigation of Company A, including its proposed products, regulatory matters and intellectual property, and gave access to Company A and its advisors to BioSante's electronic data room, which contained legal, regulatory, financial and other documents relating to BioSante and its business. Also subsequent to July 3, 2012, BioSante's management and Company A's management discussed on several occasions in person and via telephone the status of each other's respective due diligence investigations, the material terms of a possible transaction between the two parties and the status and timing of a possible transaction between the two parties.

        On July 9, 2012, BioSante received a non-binding draft term sheet from a public biopharmaceutical company referred to as Company B proposing a stock-for-stock transaction pursuant to which the exchange ratio would be based on BioSante's market capitalization immediately prior to the signing of a definitive agreement. Under the term sheet, 30 percent of the Company B shares to be issued to the BioSante stockholders in connection with the transaction would be held back and offset against BioSante's transaction expenses, the remaining principal amount of BioSante's convertible senior notes and certain other costs and expenses, and the completion of the transaction would be conditioned upon BioSante having a specified minimum net cash as of closing. The term sheet also provided for

119


Table of Contents

contingent value rights that would entitle the BioSante stockholders to 75 percent of any fees received by Company B from the sale or license of LibiGel and certain milestone payments with respect to products in BioSante's GVAX cancer vaccine portfolio. The term sheet contemplated that Company B's management team would manage the surviving entity and the surviving entity would focus primarily on the further development and commercialization of Company B's products and technologies.

        From July 10, 2012 to July 12, 2012, Mr. Simes and Mr. Donenberg attended the annual JMP Securities 7th Annual Healthcare Conference in New York. During the conference, Mr. Simes and Mr. Donenberg met with five investment banking firms which focused on the biopharmaceutical industry and that BioSante had worked with in the past regarding their interest in acting as a financial advisor for BioSante and assisting BioSante in responding to the indication of interest from Company A and the term sheet from Company B and in raising additional financing to fund the two new LibiGel efficacy trials. In addition, during the conference, Mr. Simes and Mr. Donenberg met with three institutional investors to discuss their interest in a possible equity investment in BioSante to fund the two new LibiGel Phase III efficacy trials.

        Subsequent to BioSante's announcement of the two new LibiGel Phase III efficacy trials, the trading price of BioSante common stock decreased significantly from a closing sale price of $2.58 per share as of June 8, 2012 to a closing sale price of $2.01 as of July 12, 2012, a decrease of over 20 percent.

        In part, as a result of the significant decrease in the trading price of BioSante common stock since the public announcement of the two new LibiGel Phase III efficacy trials, the input from the five investment banking firms and three institutional investors regarding BioSante's ability to raise the additional financing required to fund the two new LibiGel Phase III efficacy trials and the likely terms of such financing, the Listing Rules of The NASDAQ Global Stock Market which limit the ability of NASDAQ listed companies to raise additional financing in discounted equity offerings, the volatility of the stock market in general and the uncertainty of the capital markets environment to raise additional financing, BioSante's management began to recognize the significant risks and uncertainties involved in raising the substantial additional financing that would be required to fund the two new LibiGel efficacy trials. BioSante's management estimated that the two new LibiGel Phase III efficacy trials would cost approximately $15 to $18 million each, or a combined $30 to $36 million spread over 18 months.

        On July 16, 2012, the BioSante board of directors held a special meeting for management to update the board with respect to BioSante's business, including the LibiGel clinical development program, and discuss strategic alternatives. At the meeting, BioSante's management presented financial scenarios of BioSante as an ongoing independent publicly traded company, assuming the continuation of the LibiGel Phase III safety study and the initiation of the two new LibiGel Phase III efficacy trials, but no other clinical development, licensing revenues or equity financings, and assuming a conclusion of the LibiGel Phase III safety study, a decision not to pursue the two new LibiGel Phase III efficacy trials, no other clinical development, licensing revenues or equity financings and certain restructuring activities to downsize BioSante's organization. BioSante's management described analyst and investor response to BioSante's June 2012 announcement of the two new LibiGel Phase III efficacy trials based on management's several meetings with investment banking firms and investors and the significant decrease in the trading price of BioSante common stock since the announcement. BioSante's management informed the board that raising the substantial additional financing required to fund the new LibiGel Phase III efficacy trials would be challenging in light of investor reaction to BioSante's announcement of the new LibiGel Phase III efficacy trials, BioSante's then current stock price and NASDAQ's limitations on discounted offerings. After extensive discussion, the BioSante board of directors authorized BioSante's management to continue to explore whether there were any strategic alternatives available to BioSante that likely would increase stockholder value more than BioSante's current business plan and strategy. In so directing BioSante's management, the BioSante board of directors recognized that since no cash buyers had emerged over the last five years during BioSante's

120


Table of Contents

efforts to seek strategic alternatives, a cash buyer was unlikely to emerge at this time and thus directed BioSante's management not to expend significant time and resources in pursuing a cash sale of BioSante and to focus on those companies that previously had expressed an interest in a potential business combination with BioSante or otherwise would be likely to be interested in a potential business combination with BioSante.

        On July 18, 2012, Mr. Simes contacted the president and chief executive officer of Company B and informed him that BioSante was undertaking a process to evaluate strategic alternatives for BioSante and that he would discuss Company B's term sheet with the BioSante board of directors.

        On July 19, 2012, Mr. Simes, Mr. Donenberg, Michael C. Snabes, M.D., Ph.D., BioSante's Senior Vice President of Medical Affairs, Joanne Zborowski, BioSante's Vice President of Clinical Development, and Jeff Winkelman, Ph.D., BioSante's Vice President of Intellectual Property and Contracts, met with representatives of another private biotechnology company referred to as Company C. At this meeting, the parties discussed each other's businesses and the possible terms of a potential transaction between the two companies.

        On July 19, 2012, BioSante and ANI entered into a mutual confidentiality agreement in order to allow the parties to explore and evaluate a possible transaction and conduct initial due diligence.

        On July 23, 2012, ANI sent an exploratory initial indication of interest letter to BioSante that proposed an acquisition of 100 percent of the equity securities of BioSante for total consideration of up to 50 percent of the equity securities of the combined company and additional contingent cash payments of 66 percent of any net cash payments received in connection with BioSante's LibiGel program, up to an aggregate of $40 million.

        On July 26, 2012, BioSante received a written non-binding initial term sheet from Company C proposing a stock-for-stock transaction pursuant to which BioSante as the surviving company would be owned 51 percent by Company C stockholders and 49 percent by the BioSante stockholders, but would be managed by Company C's management team and focus primarily on Company C's business. The term sheet also provided for contingent value rights that would entitle the BioSante stockholders to 75 percent of any fees received by Company C from the sale or license of LibiGel for a period of two years from the closing date. The term sheet indicated that the transaction would be conditioned upon BioSante having a specified minimum net cash as of closing of the transaction.

        On July 31, 2012, BioSante received a written non-binding letter of intent from Company A proposing a stock-for-stock merger transaction pursuant to which BioSante as the surviving entity would be owned 50 to 60 percent by the Company A stockholders and 40 to 50 percent by the BioSante stockholders, with the exact ownership percentages determined based on BioSante's net cash as of closing. The letter of intent indicated that the board of directors of the surviving entity would be comprised of three members selected by Company A, three members selected by BioSante and one member selected by both Company A and BioSante. The letter of intent contemplated that the surviving entity would focus on Company A's business and terminate all clinical development activities relating to LibiGel. The letter of intent contemplated that BioSante's management team would manage the merged company. The letter of intent stated that it would be valid only if executed by BioSante by August 9, 2012.

121


Table of Contents

        During July 2012, in order to reduce further the outstanding principal amount of its convertible senior notes and ongoing interest obligations, BioSante issued an aggregate of 1,784,070 shares of BioSante common stock in exchange for the cancellation of $3.5 million in aggregate principal amount of its convertible senior notes and the related accrued and unpaid interest of $20,686. After these securities exchange transactions, BioSante had $8.3 million in aggregate principal amount of its convertible senior notes outstanding.

        On August 3, 2012, Mr. Simes and Mr. Donenberg of BioSante met with Arthur S. Pryzbyl, ANI's president and chief executive officer, and Charlotte C. Arnold, ANI's vice president and chief financial officer, and representatives of Oppenheimer & Co. Inc. by telephone to discuss further a potential transaction between BioSante and ANI. Each of ANI's and BioSante's management team gave a corporate presentation on such call.

        On August 7, 2012, the BioSante board of directors held a special meeting for management to update the board with respect to BioSante's business, including the LibiGel clinical development program, and discuss strategic alternatives. At the meeting, BioSante's management presented updated and revised financial scenarios of BioSante as an ongoing independent publicly traded company, assuming the continuation of the LibiGel Phase III safety study and the two new LibiGel Phase III efficacy trials, but no other clinical development, licensing revenues or equity financings, and assuming a conclusion of the LibiGel Phase III safety study, a decision not to pursue the two new LibiGel Phase III efficacy trials, no other clinical development, licensing revenues or equity financings and certain restructuring activities to downsize BioSante's organization. BioSante's management summarized for the board the four indications of interest that BioSante had received to date and the possibility that BioSante may receive additional indications of interest based on discussions between BioSante's management and other parties. BioSante's management described the companies that had submitted indications of interest, their businesses, the status of negotiations with each of the companies, and, at a high level, the likely terms of a possible transaction with BioSante. The BioSante board of directors authorized management to continue to explore whether there were any strategic alternatives available to BioSante that likely would increase stockholder value more than BioSante's current business plan and strategy. BioSante's management also informed the board regarding the various investment banking firms with whom it had met and the material terms of an engagement if BioSante were to engage such firms. The BioSante board of directors authorized BioSante's management to enter into an engagement letter with Oppenheimer & Co. Inc., pursuant to which Oppenheimer & Co. Inc. would act as exclusive financial advisor to BioSante in connection with a possible strategic transaction. The BioSante board of directors selected Oppenheimer & Co. Inc. based on its familiarity with BioSante's business and the biopharmaceutical industry in general, its ability to access companies potentially interested in a transaction with BioSante and the financial terms of the engagement. The BioSante board of directors authorized BioSante's management to direct Oppenheimer & Co. Inc. to solicit indications of interest regarding a possible business combination transaction with BioSante and to focus those efforts on companies in the biopharmaceutical industry with a commercial or near-commercial stage product or products in development that coincide with BioSante's products in development.

        On August 8, 2012, BioSante formally engaged the investment banking firm, Oppenheimer & Co. Inc., in connection with BioSante's evaluation of alternatives.

        On August 8, 2012, the president and chief executive officer of Company A contacted Mr. Simes and indicated that Company A was no longer interested in pursuing a stock-for-stock transaction with BioSante primarily because of BioSante's refusal prior to such time to engage in exclusive negotiations with Company A regarding the transaction proposed by Company A in its July 31, 2012 letter of intent.

        On August 8, 2012, a representative of Oppenheimer & Co. Inc., on behalf of BioSante, contacted Company B and indicated that BioSante was conducting a formal process to seek strategic alternatives and would keep Company B informed as the process continued.

122


Table of Contents

        On August 8, 2012, BioSante received a written indication of interest from a public biotechnology company referred to as Company D to engage in a possible business transaction. Prior to proposing the material terms of such a transaction, Company D insisted that BioSante enter into a written confidentiality agreement and that the parties commence a due diligence review of each other's operations, assets, liabilities, books, records, facilities and capital structure. On August 14, 2012, BioSante and Company D entered into a written confidentiality agreement and subsequently commenced their respective due diligence investigations. In furtherance of Company D's due diligence of BioSante, BioSante gave access to BioSante's electronic data room to Company D and its advisors. Based on conversations between representatives of BioSante and of Oppenheimer & Co. Inc. and representatives of Company D, Company D contemplated a stock-for-stock merger transaction pursuant to which the BioSante stockholders would own up to 50 percent of the parent or surviving entity.

        On August 8, 2012, ANI's management and legal advisors were granted access to BioSante's electronic data room and immediately commenced a due diligence review of BioSante and its business.

        On August 16, 2012, BioSante entered into a placement agent agreement with Rodman & Renshaw, LLC, pursuant to which Rodman & Renshaw, LLC agreed to use its reasonable best efforts to arrange for the sale of shares of BioSante common stock and warrants to purchase shares of BioSante common stock in a registered direct public offering. Later on August 16, 2012, BioSante and a certain institutional investor entered into a securities purchase agreement, pursuant to which BioSante agreed to sell 2,359,932 shares of its common stock and warrants to purchase a total of 1,179,966 shares of its common stock to such investor for gross proceeds of $3.475 million. The common stock and warrants were sold in units, with each unit consisting of one share of BioSante common stock and a warrant to purchase 0.50 of a share of BioSante common stock. The purchase price per unit was $1.4725. On August 20, 2012, BioSante completed the offering.

        On August 22, 2012, BioSante received a revised non-binding written letter of intent from Company B proposing a reverse triangular stock-for-stock merger pursuant to which BioSante would be the surviving entity and a wholly owned subsidiary of Company B and the exchange ratio used to determine the number of Company B shares to be issued to the BioSante stockholders would be based on BioSante's market capitalization immediately prior to the signing of the definitive agreement. Under the letter of intent, 30 percent of the Company B shares to be issued to the BioSante stockholders in connection with the transaction would be held back and offset against BioSante's transaction expenses, the remaining principal amount of BioSante's convertible senior notes and certain other costs and expenses, and completion of the transaction would be conditioned upon BioSante having a specified minimum net cash as of closing. Unlike the initial term sheet provided by Company B to BioSante on July 9, 2012, the letter of intent did not contemplate the issuance of contingent value rights to the BioSante stockholders. The letter of intent contemplated that Company B's management team would manage the surviving entity going forward and the surviving entity would focus primarily on the further development and commercialization of Company B's products and technologies.

        On August 24, 2012, BioSante and a public pharmaceutical oncology company referred to as Company E entered into a mutual confidentiality agreement. Shortly thereafter, BioSante gave access to BioSante's electronic data room to Company E and its advisors. On August 27, 2012 BioSante received from Company E a written non-binding term sheet describing the general terms of a proposed business combination transaction between BioSante and Company E. The term sheet contemplated a reverse triangular stock-for-stock merger pursuant to which Company E would be the surviving entity and the number of Company E shares to be issued to the BioSante stockholders would be based on BioSante's market capitalization at the time of the execution of the definitive merger agreement. The term sheet indicated that the transaction would be conditioned upon BioSante having a specified minimum amount of net cash at closing. Subsequent to August 27, 2012, representatives of BioSante and Company E conducted due diligence on each other and met in person and via telephone and discussed the general terms of a proposed business combination transaction between the two parties.

123


Table of Contents

        During July and August 2012, in addition to the various companies previously mentioned BioSante conducted limited due diligence on a private oncology company and another private pharmaceutical company to decide whether to engage in more formal discussions regarding a potential business combination transaction with such companies. After BioSante's due diligence investigation of the two companies, BioSante's management decided that neither of the two companies would be a good fit for BioSante largely due to the fact that both companies' businesses were at too early a stage of development and would require significant additional investment for the foreseeable future.

        On August 27, 2012, the BioSante board of directors held a special meeting for management to update the board with respect to BioSante's business, including the LibiGel clinical development program, and discuss strategic alternatives. With respect to the LibiGel clinical development program, the BioSante board of directors determined that in light of the independent Data Monitoring Committee's most recent unblinded review of the LibiGel safety study adequate safety data of LibiGel use in menopausal women had been obtained and determined to conclude the safety study. BioSante's management and representatives of Oppenheimer & Co. Inc. summarized for the board management's review and assessment of BioSante's alternatives, including a review of whether it would be in the best interest of BioSante and its stockholders for BioSante to continue as an independent company and continue to allocate its resources to the development of LibiGel or allocate its resources to other biopharmaceutical product areas through in-licensing or acquisitions, combine with or be acquired by a public or private company, sell BioSante's assets or liquidate BioSante. After an extensive discussion on the potential alternatives and the various companies that had submitted indications of interest and remained interested in a transaction with BioSante, it was the consensus of the BioSante board of directors that a combination of BioSante and ANI would create more value for the BioSante stockholders in the long-term than BioSante could create as an independent, stand-alone company, given the anticipated costs, timing and risks associated with continuing the development of LibiGel and other BioSante products in development and/or in-licensing or acquiring additional technologies or product candidates, and the uncertain capital markets, which BioSante historically had relied upon to raise additional financing to fund its product development efforts. In addition, the BioSante board of directors concluded that a potential transaction with ANI was superior to a liquidation of BioSante since ANI's proposal represented a premium to BioSante's estimated cash available to distribute to the BioSante stockholders and also included considerable upside through a continued equity investment in the combined business. The BioSante board of directors directed management to proceed with negotiations with ANI since ANI's proposal appeared to offer the most attractive terms for a transaction with BioSante out of the indications of interest that had been received by BioSante and such a transaction with ANI would give the BioSante stockholders an opportunity to participate in the potential future value of the combined company, including future potential value from ANI's established contract manufacturing operations, niche generic prescription products and products in development, as well as give the BioSante stockholders the right to potentially receive certain future cash payments in the event of a subsequent sale, transfer, license or similar transaction relating to BioSante's LibiGel program. In addition to ANI, the BioSante board of directors also directed management to explore further a potential transaction with Company B, Company D and Company E since discussions with those companies had not matured as quickly as with ANI.

        On August 31, 2012, a representative of Oppenheimer & Co. Inc. sent to ANI's management a draft merger agreement and a due diligence request for purposes of assisting BioSante in performing a due diligence investigation of ANI.

        On August 31, 2012, ANI's management communicated to Oppenheimer & Co. Inc. that ANI was not interested in spending significant resources on a potential transaction without an exclusivity letter and sent a draft exclusivity letter to BioSante's management.

        On September 4, 2012, the representative of Oppenheimer & Co. Inc. informed ANI's management that BioSante would not grant exclusivity to ANI prior to September 14, 2012, the date of

124


Table of Contents

the next regular meeting of the BioSante board of directors, and that in the meantime, the parties should continue to perform their respective due diligence investigations of each other in order to move the transaction forward and enable BioSante's management to present a proposed transaction with ANI to the BioSante board of directors at its meeting on September 14, 2012.

        On September 5, 2012, ANI's management sent to Oppenheimer & Co. Inc. and BioSante's management a draft non-binding letter of intent pursuant to which ANI proposed a merger with BioSante following which the holders of ANI capital stock and in-the-money dilutive securities would hold 55 percent of the issued and outstanding common stock of the combined company and the holders of BioSante common stock and in-the-money dilutive securities would hold 45 percent of the issued and outstanding common stock of the combined company. The letter of intent contemplated contingent cash payments to the BioSante stockholders of 65 percent of any net cash proceeds received for BioSante's LibiGel program, up to a maximum of $40 million in the aggregate. The letter of intent contemplated that the executive officers of ANI would be the executive officers of the combined company and that the board of directors of the combined company would consist of seven individuals, one of whom would be the combined company's chief executive officer, four of whom would be designated by ANI and two of whom would be designated by BioSante. The letter of intent also contained other provisions, including a minimum net cash closing requirement for BioSante, a net cash definition, termination right and fee provisions and a 15-day exclusivity provision

        Between September 5, 2012 and September 14, 2012, representatives of BioSante and ANI exchanged drafts of the letter of intent and negotiated the terms and conditions of the letter of intent, including the post-merger ownership percentages, potential adjustments to the post-merger ownership percentages, the minimum net cash closing requirement for BioSante, the net cash definition, the composition of the board of directors of the combined company, termination right and fee provisions and the term of the exclusivity provision.

        On September 13, 2012, Mr. Pryzbyl and Ms. Arnold and a representative of ANI's outside legal counsel, SNR Denton US LLP (Dentons) met with Mr. Simes and Mr. Donenberg of BioSante and a representative of OWD at BioSante's corporate offices in Lincolnshire, Illinois to engage in further negotiations and discussions regarding the letter of intent and conduct due diligence. By the end of the day on September 13th, the parties had negotiated the terms of the letter of intent, subject to the final approval of the letter of intent by the parties' respective boards of directors.

        On September 14, 2012, a regular meeting of the BioSante board of directors took place at BioSante's corporate offices in Lincolnshire, Illinois. At the meeting, BioSante's management updated the board as to BioSante's business, including the status of the LibiGel clinical development program, and strategic alternatives. The representative of Oppenheimer & Co. Inc. described the process that Oppenheimer & Co. Inc. had engaged in since August 2012 to respond to companies that previously had indicated an interest in a possible strategic transaction with BioSante and to reach out to other companies that may have an interest in a strategic transaction with BioSante. The representative of Oppenheimer & Co. Inc. summarized the six indications of interest received by BioSante, and noted the other three parties that had engaged in discussions regarding a possible strategic business combination transaction with BioSante. The representative of Oppenheimer & Co. Inc. also discussed the potential terms of a transaction with each of these parties as evident by their respective indications of interest and, in some cases, subsequent conversations between representatives of Oppenheimer & Co. Inc. and such companies. The representative of Oppenheimer & Co. Inc. described the management teams, businesses, prospects, operating results and financial position of three of the companies with whom Oppenheimer & Co. Inc. and BioSante's management considered to be the most likely parties to a transaction with BioSante, and in much greater detail, the management team, business, prospects, operating results of ANI. BioSante's management summarized the material terms of the proposed non-binding letter of intent with ANI. After an extensive discussion, the BioSante

125


Table of Contents

board of directors authorized BioSante's management to enter into the non-binding letter of intent with ANI, on substantially the terms as described to the board at the meeting.

        After the meeting of the BioSante board of directors, on September 14, 2012, and after further negotiation regarding the circumstances under which a termination of the merger agreement would give rise to the payment of a termination fee by BioSante, the letter of intent was executed by BioSante and ANI. Pursuant to the terms of the letter of intent, BioSante and ANI agreed to negotiate exclusively with one another until September 28, 2012, unless either party earlier notified the other of its decision to terminate discussions.

        From September 14, 2012 to October 3, 2012, BioSante's and ANI's respective managements performed additional due diligence. During such period, several telephone conference calls were held between BioSante's management and advisors and ANI's management and advisors to discuss various aspects of their respective due diligence investigations.

        On September 19, 2012, ANI's legal counsel sent BioSante's legal counsel a mark-up of the draft merger agreement.

        On September 20, 2012, representatives of OWD and Dentons held a telephone conference call to discuss the terms of the merger agreement, including in particular the definition of net cash, various adjustments to net cash and the effect of potential future payments to BioSante on the determination of net cash for purposes of the merger agreement, certain representations and warranties, and certain covenants, including the non-solicitation covenant, the employee benefit covenant and the ability of BioSante and ANI to take certain actions during the period after the execution of the merger agreement and prior to the closing of the merger, and closing conditions.

        Between September 20, 2012 and September 28, 2012, representatives from OWD and Dentons exchanged drafts of the merger agreement, contingent value rights agreement, form of voting agreements and form of lock-up agreement and continued to negotiate the terms and conditions of the merger agreement, the contingent value rights agreement and the other ancillary agreements.

        On September 28, 2012, representatives of BioSante, ANI, OWD and Dentons held a telephone conference call to discuss the remaining open business terms of the merger agreement, including the definition of net cash, various adjustments to net cash and the effect of potential future payments to BioSante on the determination of net cash for purposes of the merger agreement, the ability of BioSante and ANI to enter into certain agreements during the period after the execution of the merger agreement and the closing of the merger, and certain conditions to the obligation of ANI to close the merger. The parties also discussed the remaining open business terms of the contingent value rights agreement. After such call, although BioSante and ANI did not enter into a written amendment to their letter of intent extending the exclusivity provision beyond September 28, 2012, the parties and their advisors committed to negotiate and finalize the merger agreement, the contingent value rights agreement and the other related ancillary agreements as soon as reasonably practicable.

        Between September 28, 2012 and October 3, 2012, representatives from OWD and Dentons continued to exchange drafts of the merger agreement, the contingent value rights agreement and the other related ancillary agreements and negotiate the terms and conditions of such agreements.

        On October 3, 2012, the BioSante board of directors held a special meeting to consider the proposed transaction with ANI. A representative of OWD reviewed with the BioSante board of directors its fiduciary duties applicable to the proposed transaction. A representative of OWD summarized the principal deal terms focusing, in particular, on changes to those terms since the meeting held by the BioSante board of directors on September 14, 2012 and the letter of intent executed on that date. A draft of the merger agreement and the contingent value rights agreement, a memorandum describing the principal terms of the transaction documents and proposed resolutions were provided to the members of the BioSante board of directors in advance of the meeting. Also at

126


Table of Contents

this meeting, Oppenheimer & Co. Inc. reviewed with the BioSante board of directors its financial analyses and rendered to the BioSante board of directors an oral opinion, which was confirmed by delivery of a written opinion dated October 3, 2012, to the effect that, as of that date and based on and subject to the matters described in the opinion, the exchange ratios provided in the merger agreement were fair, from a financial point of view, to BioSante. A representative of OWD summarized the proposed resolutions for the BioSante board of directors. After an extensive discussion and consideration of the financial and legal aspects of the proposed transaction and the other matters described under "—BioSante Reasons for the Merger" beginning on page 128 of this joint proxy statement/prospectus, the directors unanimously determined that the merger and the other transactions contemplated thereby were fair to, and in the best interests of, BioSante and its stockholders. The directors voted unanimously to approve and adopt all of the resolutions, including the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, the approval of the contingent value rights agreement and other related ancillary agreements and the approval of the amendments to BioSante's certificate of incorporation to effect a reverse split of BioSante common stock and BioSante class C special stock in the discretion of BioSante and ANI at a ratio of either one-to-two, one-to-three, one-to-four or one-to-five and to change the corporate name of BioSante to "ANI Pharmaceuticals, Inc."

        On October 3, 2012, the ANI board of directors held a special meeting to consider the proposed transaction with BioSante. A representative of Dentons summarized the principal deal terms focusing, in particular, on changes to the terms since the letter of intent was executed on September 14, 2012. A draft of the merger agreement and the contingent value rights agreements were provided to the members of the ANI board of directors in advance of the meeting. After an extensive discussion and consideration of the financial and legal aspects of the proposed transaction and the other matters described under "—ANI Reasons for the Merger" beginning on page 132 of this joint proxy statement/prospectus, the directors voted unanimously to approve the merger agreement and the transactions contemplated thereby, including the merger, and related matters.

        During the evening of October 3, 2012, all of BioSante's directors and officers entered into voting agreements with ANI to vote in favor of the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock in the merger, and the approval of the amendments to BioSante's certificate of incorporation. In addition, certain stockholders of ANI entered into a voting agreement with BioSante pursuant to which they agreed to vote in favor of the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger, and one of ANI's stockholders, Meridian Venture Partners II, L.P., agreed in its voting agreement with BioSante to vote in favor of the election of the two directors designated by BioSante at the first annual meeting of stockholders of the combined company following completion of the merger.

        Also during the evening of October 3, 2012, representatives of ANI and Dentons and BioSante and OWD finalized the merger agreement, and BioSante and ANI entered into the merger agreement.

        On October 4, 2012, BioSante and ANI issued a joint news release announcing the proposed merger of ANI and BioSante.

        On November 13, 2012, BioSante and ANI entered into an amendment to the merger agreement to change the date upon which the parties must agree to the amount of the current class action and shareholder derivative litigation reserve for purposes of the net cash definition from November 15, 2012 to November 30, 2012. BioSante and ANI subsequently agreed upon zero as the amount of the current class action and shareholder derivative litigation reserve for purposes of the net cash definition.

127


Table of Contents


BioSante Reasons for the Merger

        In evaluating the merger, the BioSante board of directors consulted with BioSante's management and legal, financial and other advisors and, in reaching its decision to approve the merger and enter into the merger agreement, the BioSante board of directors considered a number of factors, including the following material factors which the BioSante board of directors viewed as generally supporting its decision to approve the merger and the merger agreement.

128


Table of Contents

129


Table of Contents

        The BioSante board of directors weighed the factors described above which the BioSante board of directors viewed generally as supporting its decision to approve the merger and the merger agreement against a number of other factors identified in its deliberations weighing negatively against the merger, including without limitation the following material factors:

130


Table of Contents

131


Table of Contents

        After consideration of these factors, the BioSante board of directors determined that these risks could be mitigated or managed by BioSante or ANI or by the combined company following the merger, were reasonably acceptable under the circumstances or, in light of the anticipated benefits, the risks were unlikely to have a materially adverse impact on the merger or on the combined company following the merger, and that, overall, these risks were significantly outweighed by the potential benefits of the merger.

        Although this discussion of the information and factors considered by the BioSante board of directors is believed to include the material factors considered by the BioSante board of directors, it is not intended to be exhaustive and may not include all of the factors considered by the BioSante board of directors. In reaching its determination to approve the merger and approve and adopt the merger agreement, the BioSante board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger and the merger agreement are advisable and fair to and in the best interests of BioSante and its stockholders. Rather, the BioSante board of directors based its position and determination on the totality of the information presented to and factors considered by it. In addition, individual members of the BioSante board of directors may have given differing weights to different factors.

        In considering the determination by the BioSante board of directors that the merger and the merger agreement are advisable and fair to and in the best interests of BioSante and its stockholders, you should be aware that certain BioSante directors and officers have arrangements that may cause them to have interests in the transaction that are different from, in addition to, or may conflict with the interests of the BioSante stockholders generally. See "—Interests of BioSante's Directors and Officers in the Merger."


ANI Reasons for the Merger

        In addition to its ongoing discussions and negotiations with the BioSante board of directors, the ANI board of directors discussed the potential merger with members of its management team, as well as its legal, financial and other advisors. The ANI board of directors also considered a number of

132


Table of Contents

factors which it believed supported its decision to approve the merger and the merger agreement, including, without limitation, the following:

        The ANI board of directors also considered certain factors that generally weighed against the merger, including, without limitation, the following:

133


Table of Contents

        After considering all of the information, risks and concerns set forth above, the ANI board of directors determined that each of them was manageable or could otherwise be mitigated by ANI, BioSante or the combined company following the merger and that taken as a whole, such risks and concerns were reasonably acceptable when the benefits of the merger also were considered. Overall, the ANI board of directors did not believe that the risks outweighed the significant potential benefits of the merger.

        In reaching its determination to approve the merger and approve and adopt the merger agreement, the ANI board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger and the merger agreement are advisable and fair to and in the best interests of ANI and its stockholders. Rather, the ANI board of directors based its position and determination on the totality of the information presented to and factors considered by it. In addition, individual members of the ANI board of directors may have given differing weights to different factors.

        In considering the determination by the ANI board of directors that the merger and the merger agreement are advisable and fair to and in the best interests of ANI and its stockholders, you should be aware that certain ANI directors and officers have arrangements that may cause them to have interests in the transaction that are different from, in addition to, or may conflict with the interests of the ANI stockholders generally. See "—Interests of ANI's Directors and Officers in the Merger."


Opinion of Oppenheimer & Co. Inc.

        On August 8, 2012, BioSante engaged Oppenheimer & Co. Inc. (Oppenheimer & Co.) as its financial advisor in connection with the merger. In connection with this engagement, the BioSante

134


Table of Contents

board of directors requested that Oppenheimer & Co. evaluate the fairness, from a financial point of view, to BioSante of the exchange ratios, as provided in and as calculated pursuant to the terms of the merger agreement. On October 3, 2012, at a meeting of the BioSante board of directors held to evaluate the merger, Oppenheimer & Co. rendered to the BioSante board of directors an oral opinion, confirmed by delivery of a written opinion dated October 3, 2012, to the effect that, as of that date and based on and subject to the matters described in its opinion, the exchange ratios were fair, from a financial point of view, to BioSante.

        The full text of Oppenheimer & Co.'s written opinion, dated October 3, 2012, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement/prospectus as Annex G and is incorporated by reference in its entirety. Oppenheimer & Co.'s opinion was provided for the use of the BioSante board of directors (in its capacity as such) in connection with its evaluation of the exchange ratios from a financial point of view and did not address any other terms, aspects or implications of the merger, including, without limitation, the form or structure of the merger or any term, aspect or implication of any voting agreements or other agreement, arrangement or understanding entered into in connection with the merger or otherwise. Oppenheimer & Co. expressed no view as to, and its opinion did not address, the underlying business decision of BioSante to proceed with or effect the merger or the relative merits of the merger as compared to any alternative business strategies that might exist for BioSante or the effect of any other transaction in which BioSante might engage. Oppenheimer & Co.'s opinion does not constitute a recommendation to any BioSante or ANI stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger or otherwise. This summary of Oppenheimer & Co.'s opinion is qualified in its entirety by reference to the full text of its opinion.

        In arriving at its opinion, Oppenheimer & Co.:

135


Table of Contents

        In rendering its opinion, Oppenheimer & Co. relied upon and assumed, without independent verification or investigation, the accuracy and completeness of all of the financial and other information publicly available or provided to or discussed with Oppenheimer & Co. by BioSante and ANI and their respective employees, representatives and affiliates or otherwise reviewed by Oppenheimer & Co. With respect to the financial forecasts and estimates relating to BioSante and ANI utilized in Oppenheimer & Co.'s analyses, at the direction of the respective management and with BioSante's consent, Oppenheimer & Co. assumed, without independent verification or investigation, that such forecasts and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the respective managements of BioSante and ANI as to the future financial condition and operating results of BioSante and ANI and the other matters covered thereby and that the financial results reflected in such forecasts and estimates would be achieved at the times and in the amounts projected. Oppenheimer & Co. also assumed, at BioSante's direction, the final terms of the merger agreement would not vary materially from those set forth in the draft reviewed by Oppenheimer & Co. Oppenheimer & Co. further assumed, with BioSante's consent, that the merger would qualify for federal income tax purposes as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. Oppenheimer & Co. also assumed, with the consent of BioSante, that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on BioSante or the contemplated benefits of the merger.

        Oppenheimer & Co. is not a legal, tax, regulatory or accounting advisor and relied on the assessments made by BioSante and its advisors with respect to such issues. The opinion of Oppenheimer & Co. did not constitute a solvency opinion or a fair value opinion, and Oppenheimer & Co. did not evaluate the solvency or fair value of BioSante under any federal or state laws relating to bankruptcy, insolvency or similar matters. Oppenheimer & Co. neither made nor obtained any independent evaluations or appraisals of the assets or liabilities (contingent or otherwise) of BioSante or ANI. Oppenheimer & Co. expressed no view as to, and its opinion did not address, any terms or other aspects or implications of the merger (other than the exchange ratios to the extent expressly specified in its opinion) or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the merger or otherwise, including, without limitation, the fairness of the amount or nature of the compensation resulting from the merger to any individual officers, directors or employees of BioSante, or class of such persons, relative to the exchange ratios. Oppenheimer & Co. also expressed no view as to, and its opinion did not address, the issuance by BioSante of a distribution to the holders of BioSante common stock prior to the consummation of the merger consisting of contingent value rights with respect to certain payments arising from the sale, transfer, license or a similar transaction relating to BioSante's LibiGel program in accordance with the terms of a form of contingent value rights agreement in the form agreed to by BioSante and ANI.

        The opinion of Oppenheimer & Co. was based on the information available to it and general economic, financial and stock market conditions and circumstances as they existed and could be evaluated by Oppenheimer & Co. on the date of delivery of such opinion. Although subsequent developments may affect its opinion, Oppenheimer & Co. does not have any obligation to update, revise or reaffirm its opinion, provided that Oppenheimer & Co. has agreed to deliver one update of its opinion, subject to certain conditions.

        This summary is not a complete description of Oppenheimer & Co.'s opinion or the financial analyses performed and factors considered by Oppenheimer & Co. in connection with its opinion, but is a description of their material terms. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial

136


Table of Contents

analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Oppenheimer & Co. arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. In addition, Oppenheimer & Co. may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described below should not be taken to be Oppenheimer & Co.'s view of the actual value of ANI or BioSante. Accordingly, Oppenheimer & Co. believes that its analyses and this summary must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Oppenheimer & Co.'s analyses and opinion.

        In performing its analyses, Oppenheimer & Co. considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond ANI's control. No company or business used in the analyses is identical to ANI, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies or business segments analyzed.

        The assumptions and estimates contained in Oppenheimer & Co.'s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the assumptions and estimates used in, and the results derived from, Oppenheimer & Co.'s analyses are inherently subject to substantial uncertainty.

        Oppenheimer & Co. was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined through negotiation between BioSante and ANI and was approved by the BioSante board of directors. Oppenheimer & Co. provided advice to BioSante during these negotiations. Oppenheimer & Co. did not, however, recommend any specific consideration to BioSante or the BioSante board of directors or that any specific consideration constituted the only appropriate consideration for the merger. The decision to enter into the merger agreement was solely that of the BioSante board of directors. Oppenheimer & Co.'s opinion and financial analysis were only one of many factors considered by the BioSante board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the BioSante board of directors or management with respect to the merger or the exchange ratios or of whether the BioSante board of directors would have been willing to agree to different consideration.

        The following is a summary of the material financial analyses reviewed with the BioSante board of directors in connection with Oppenheimer & Co.'s opinion dated October 3, 2012. The financial analyses summarized below include information presented in tabular format. In order to fully understand Oppenheimer & Co.'s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Oppenheimer & Co.'s financial analyses.

137


Table of Contents

Implied Equity Value of ANI Based on BioSante's Share Price

        Based on BioSante fully diluted shares outstanding and value of equity implied from the five-day volume-weighted average share price of BioSante common stock of $1.87 as of October 1, 2012, and the 47 percent equity ownership percentage of the combined company to be held by BioSante's equity holders, Oppenheimer & Co. calculated an implied value of the equity of the combined company and an implied value of the equity of ANI of $54 million.

Implied Equity Value of ANI Based on BioSante's Net Cash and Other Assets

        Based on dividing BioSante's estimated net cash and other assets of $39 million to $43 million at the closing of the merger by the 47 percent equity ownership percentage of the combined company to be held by BioSante's equity holders, Oppenheimer & Co. calculated an implied value of the equity of the combined company and an implied value of the equity of ANI in the range of $44 million to $49 million.

Valuation of Net Cash and Other Assets of BioSante

        Net cash and other assets of BioSante range was calculated based on the sum of four following components, each based on information provided by BioSante's management: (i) estimated net cash at the time of closing of the merger of $18 million, (ii) estimated value range of $1.8 million to $3.6 million for BioSante's 10.9 percent equity investment in Ceregene, Inc., (iii) the present value of the estimated free cash flows with respect to BioSante's male testosterone gel, and (iv) the estimated value range of $1.0 million to $2.0 million for BioSante's GVAX assets.

        Oppenheimer & Co. performed a discounted cash flow analysis of BioSante's male testosterone gel by calculating the estimated present value of the after-tax free cash flows that the product was forecasted to generate during fiscal years ending December 31, 2012 through 2019 based on internal estimates of BioSante's management. The cash flows were then discounted to present value as of September 30, 2012 using discount rates ranging from 16.9 percent to 18.9 percent, reflecting estimates of BioSante's weighted average cost of capital calculated using the capital asset pricing model and assuming that the selected companies' average capital structure represents the optimal capital structure. This analysis indicated an implied valuation range for BioSante's male testosterone gel of approximately $18 million to $20 million.

ANI Comparable Company Analysis

        Oppenheimer & Co. performed a comparable company analysis, which attempts to provide a range of implied aggregate values for ANI's equity and the combined company's net cash at the closing of the merger, which is referred to as the implied pro forma equity value for ANI, by comparing it to similar companies. Oppenheimer & Co. reviewed financial information of ANI and the following eight selected publicly-held specialty pharmaceutical companies:

138


Table of Contents

        All multiples were based on closing stock prices on October 1, 2012. Estimated financial data for the selected companies were based on public filings, information available through FactSet, and publicly available equity research analyst estimates. Estimated financial data for ANI were based on ANI management projections.

        For each of the selected companies, Oppenheimer & Co. calculated the following:

        Based on the analysis of the relevant metrics for each of the selected companies, Oppenheimer & Co. selected representative ranges of financial multiples of the selected companies and applied these ranges of multiples to determine the implied equity value of ANI. The median revenue multiple observed for the selected companies for estimated calendar year 2015 was 2.0x and the median EBITDA multiple observed for the selected companies for estimated calendar year 2015 was 7.1x. The selected ranges represent plus and minus 15 percent around each applicable median multiple. Financial data for the selected companies were based on publicly available research analyst estimates, public filings and other publicly available information. Financial data for ANI were based on information provided by the managements of ANI and BioSante. Based on the combined company's expected capitalization as a result of the merger, Oppenheimer & Co. calculated the estimated implied equity value of ANI as of October 1, 2012 as follows:

Financial Statistic
  Selected Company
Representative Multiple Range
  Implied Pro Forma Equity
Value of ANI ($ millions)

2015E Revenue

  1.7x - 2.3x   $82.2 - $112.4

2015E EBITDA

  6.0x - 8.2x   $67.1 - $92.0  

        Oppenheimer & Co. noted that based on BioSante's fully diluted value of equity implied from the five-day volume-weighted average share price of BioSante common stock of $1.87 as of October 1, 2012, the implied value of the equity of ANI is $54 million and based on BioSante's estimated net cash and other assets at the closing of the merger, the implied value of the equity of ANI is in the range of $44 million to $49 million.

        Although the foregoing companies were compared to ANI for purposes of this analysis, Oppenheimer & Co. noted that no company used in the comparable companies analysis is identical to ANI because of differences between the private company/public company nature, business mix, markets served, operations, and other characteristics of ANI and the selected companies. In evaluating the selected companies, Oppenheimer & Co. relied on publicly available research analyst estimates, which estimates are based in part on judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of ANI, such as the impact of competition on the business of ANI, as well as on the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of ANI or the industry or in the markets generally.

139


Table of Contents

ANI Discounted Cash Flow Analysis

        Oppenheimer & Co. performed a discounted cash flow analysis of ANI by calculating the estimated present value of the standalone unlevered, after-tax free cash flows that ANI was forecasted to generate during fiscal years ending December 31, 2012 through 2020 based on internal estimates of ANI's management. Oppenheimer & Co. calculated terminal values for BioSante by applying a range of perpetuity growth rates to BioSante's fiscal year 2020 estimated free cash flow of 2 percent to 4 percent and a range of discount rates of 16.9 percent to 18.9 percent. The cash flows and terminal values were then discounted to present value as of September 30, 2012 using discount rates ranging from 16.9 percent to 18.9 percent, reflecting estimates of ANI's weighted average cost of capital calculated using the capital asset pricing model and assuming that the selected companies' average capital structure represents the optimal capital structure. This analysis indicated an implied equity valuation range for ANI of approximately $99 million to $136 million.

        Oppenheimer & Co. noted that based on BioSante's fully diluted value of equity implied from the five-day volume-weighted average share price of BioSante common stock of $1.87 as of October 1, 2012, the implied value of the equity of ANI is $54 million and based on BioSante's estimated net cash and other assets at the closing of the merger, the implied value of the equity of ANI is in the range of $44 million to $49 million.

Miscellaneous

        In connection with the review by the BioSante board of directors of the merger and the issuance of shares of BioSante common stock to ANI stockholders, Oppenheimer & Co. performed a variety of financial and comparative analyses for purposes of rendering its opinion. Oppenheimer & Co. conducted the analyses described above solely as part of its analysis of the fairness of the exchange ratios pursuant to the merger agreement from a financial point of view to BioSante and in connection with the delivery of its opinion dated October 3, 2012 to the BioSante board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of BioSante common stock might naturally trade. The foregoing summary describes the material analyses performed by Oppenheimer & Co. but does not purport to be a complete description of the analyses performed by Oppenheimer & Co.

        BioSante selected Oppenheimer & Co. to act as its financial advisor in connection with the merger based on Oppenheimer & Co.'s reputation and experience. Oppenheimer & Co. is an internationally recognized investment banking firm and, as a part of its investment banking business, is regularly engaged in valuations of businesses and securities in connection with acquisitions and mergers, underwritings, secondary distributions of securities, private placements and valuations for other purposes. In the ordinary course of business, Oppenheimer & Co. and its affiliates may actively trade securities of BioSante for Oppenheimer & Co.'s and its affiliates' own accounts and for the accounts of customers and, accordingly, at any time may hold a long or short position in such securities. In addition, a senior member of the Oppenheimer & Co. investment banking team assisting BioSante in connection with the merger currently owns approximately 1,400 shares of BioSante common stock, which were acquired in 2009.

        BioSante has agreed to pay Oppenheimer & Co. for its financial advisory services in connection with the merger a customary fee, $500,000 of which was payable upon delivery of Oppenheimer & Co.'s opinion and $100,000 of which is contingent upon consummation of the merger. BioSante also has agreed to reimburse Oppenheimer & Co. for its expenses, including fees and expenses of its legal counsel, and to indemnify Oppenheimer & Co. and related parties against liabilities, including liabilities under the federal securities laws, relating to, or arising out of, its engagement. In the two years prior to the date hereof, Oppenheimer & Co. has provided financial advisory services for BioSante unrelated to the merger and has received fees in the aggregate amount of $100,000 from BioSante in connection

140


Table of Contents

with certain of such services. During the same period, Oppenheimer & Co. provided certain private placement and/or arranger services for ANI unrelated to the merger; however, the related transaction was not consummated and Oppenheimer & Co. did not receive any compensation therefor. Oppenheimer & Co. also may seek to provide financial advisory services to BioSante in the future and expects to receive fees for the rendering of these services.

        The issuance of Oppenheimer & Co.'s opinion was approved by an authorized committee of Oppenheimer & Co. Oppenheimer & Co. has consented to the use of its written opinion in this joint proxy statement/prospectus and such consent is an exhibit to the registration statement of which this joint proxy statement/prospectus is a part.


Certain Financial Forecasts of ANI Used in Connection with the Merger

        ANI does not, as a matter of course, publicly disclose long-term forecasts or internal projections as to future performance, earnings or other results, and ANI is particularly concerned with making such forecasts and projections due to the unpredictability of the underlying assumptions and estimates. In connection with its due diligence process and evaluation of the merger, ANI's management prepared financial forecasts regarding certain items of its projected operating results, including ANI's forecasted revenues and EBITDA for its 2012 through 2020 fiscal years. ANI's financial forecasts were not prepared with a view toward public disclosure. However, ANI has included below a summary of its financial forecasts to provide its stockholders and investors access to certain non-public information that was furnished to third parties in connection with the merger.

        ANI's financial forecasts included assumptions with respect to general business, economic, competitive, regulatory, market and financial conditions, and other future events, as well as matters specific to ANI's business, such as the following, all of which are difficult to predict and many of which are beyond ANI's control:

        ANI's financial forecasts also assume the following:

141


Table of Contents

        ANI's financial forecasts presented below were provided to Oppenheimer & Co. Inc. in connection with its financial analysis of the exchange ratios. In addition, ANI's financial forecasts also were provided to BioSante by Oppenheimer & Co. Inc. and reviewed with the BioSante board of directors and were utilized by BioSante in connection with its financial analysis of the exchange ratios.

        The inclusion of ANI's financial forecasts in this joint proxy statement/prospectus should not be regarded as an indication that ANI or the ANI board of directors considered, or now considers, these forecasts to be material to the ANI or BioSante stockholders or necessarily indicative of actual future results. You should not place undue reliance on the unaudited financial forecasts of ANI contained in this joint proxy statement/prospectus. Please read the information set forth below under the heading "Important Information About ANI's Financial Forecasts."

        The following table presents the financial forecasts of ANI that were provided by ANI to Oppenheimer & Co. Inc.

 
  Projected  
($ in millions)
  2012E   2013E   2014E   2015E   2016E   2017E   2018E   2019E   2020E  

Revenue

  $ 19.9   $ 20.3   $ 26.0   $ 49.8   $ 106.4   $ 143.6   $ 171.3   $ 178.5   $ 181.1  

EBITDA

    1.9     (2.0 )   (2.3 )   11.7     35.6     51.6     62.2     65.1     66.3  

Important Information About ANI's Financial Forecasts

        While ANI's financial forecasts were prepared in good faith, no assurance can be made regarding future events. The estimates and assumptions underlying ANI's financial forecasts involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" beginning on pages 38 and 91, respectively, all of which are difficult to predict and many of which are beyond the control of ANI and/or BioSante and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions will prove to be accurate or that the forecasted results will be realized, and actual results likely will differ, and may differ materially, from those reflected in ANI's financial forecasts, whether or not the merger is completed.

        ANI's financial forecasts summarized in this section were prepared solely for internal use by ANI. This prospective financial information was not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. ANI's management believes the forecasts were prepared in good faith and on a reasonable basis based on the best information available to ANI's management at the time of their preparation. ANI's financial forecasts, however, are not fact and should not be relied upon as being necessarily indicative of actual future results, and readers of this joint proxy statement/prospectus are cautioned not to place undue reliance

142


Table of Contents

on this information. None of ANI's financial forecasts reflects any synergies or costs related to or that may arise from the merger.

        The prospective financial information of ANI included in this section has been prepared by, and is the responsibility of, ANI's management. ANI's independent registered public accounting firm has neither examined, compiled nor performed any procedures with respect to the accompanying ANI prospective financial information and, accordingly, does not express an opinion or any other form of assurance with respect thereto. The report of ANI's independent registered public accounting firm included in this joint proxy statement/prospectus relates to the historical financial information of ANI. It does not extend to the prospective financial information of ANI and should not be read to do so.

        By including in this joint proxy statement/prospectus a summary of ANI's financial forecasts, neither ANI nor any of its representatives has made or makes any representation to any person regarding the ultimate performance of ANI compared to the information contained in ANI's financial forecasts. ANI has made no representation to BioSante, in the merger agreement or otherwise, concerning ANI's financial forecasts. ANI's financial forecasts summarized in this section were prepared during the periods described above and have not been updated to reflect any changes since the date of this joint proxy statement/prospectus or any actual results of operations of ANI, as set forth under the section entitled "Selected Historical Financial Data of ANI" beginning on page 31. Neither ANI, BioSante nor, after completion of the merger, the combined company undertakes any obligation, except as required by law, to update or otherwise revise ANI's financial forecasts to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.

        The foregoing summary of ANI's financial forecasts is not included in this joint proxy statement/prospectus in order to induce any ANI stockholder to vote in favor of ANI Proposal No. 1 to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger, or any other proposals to be voted on at the ANI special meeting or any BioSante stockholder to vote in favor of BioSante Proposal No. 1 to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger and the issuance of BioSante common stock in connection with the merger, or any other proposals to be voted on at the BioSante special meeting.


Interests of BioSante's Directors and Officers in the Merger

        In considering the recommendation of the BioSante board of directors to BioSante stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, and the other matters to be acted upon by BioSante stockholders at the BioSante special meeting, BioSante stockholders should be aware that members of the BioSante board of directors and BioSante's officers have interests in the merger that may be different from, in addition to, or may conflict with the interests of BioSante stockholders. These interests relate to or arise from, among other things:

143


Table of Contents

        The BioSante board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, and to recommend that BioSante stockholders approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock, and related matters. Other than full disclosure of these potential conflicts of interest, the BioSante board of directors did not take any other steps to alleviate such potential conflicts of interest since it did not consider such potential conflicts of interest to be material in connection with its decision to approve the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of BioSante common stock.

Ownership Interests

        As of January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, directors and executive officers of BioSante, together with their respective affiliates, beneficially owned and were entitled to vote 472,335 shares of BioSante common stock and 16,666 shares of BioSante class C special stock, or approximately 1.9 percent of the shares of BioSante common stock and 25.6 percent of the shares of BioSante class C special stock outstanding on that date. Assuming the merger had been completed as of such date, all directors and executive officers of BioSante, together with their respective affiliates, would beneficially own, in the aggregate, less than one percent of the outstanding shares of common stock of the combined company and 25.6 percent of the outstanding shares of BioSante class C special stock of the combined company.

        For a more complete discussion of the ownership interests of the directors and executive officers of BioSante, see the sections entitled "Principal Stockholders of BioSante" and "Principal Stockholders of the Combined Company."

Continuing Directors

        Following completion of the merger, Fred Holubow and Ross Mangano are expected to receive cash and equity compensation in accordance with BioSante's equity compensation policies for non-employee directors. Currently, BioSante provides an annual cash retainer of $25,000 for non-employee board members, pays each non-employee director $2,000 for board meetings attended in person, $1,000 for each board meeting attended by telephone and for each board committee meeting attended in person or by telephone, grants options on an annual basis and enters into indemnification agreements with each director, although these policies are subject to change at any time.

Employment Letter Agreements and Severance and Change in Control Agreements

        Upon completion of the merger and the anticipated termination of their employment on the date following completion of the merger, Mr. Simes, Mr. Donenberg and Dr. Snabes will be entitled to receive certain severance payments and other benefits or payments, as applicable, each as more fully described below. BioSante has adopted a rabbi trust to hold funds to pay the severance amounts owed to Mr. Simes and Mr. Donenberg that are subject to the six-month suspension rule under Section 409A of the Internal Revenue Code of 1986.

144


Table of Contents

        Stephen M. Simes.    In January 1998, BioSante entered into an employment letter agreement with Stephen M. Simes. BioSante and Mr. Simes amended the agreement in July 2008 to ensure compliance with regulations on non-qualified deferred compensation severance benefits as mandated by Code Section 409A and to make certain changes to the change in control provisions. The agreement has not been amended since July 2008.

        As a result of the anticipated termination of his employment immediately after completion of the merger, Mr. Simes will be entitled to receive:

        Phillip B. Donenberg.    In June 1998, BioSante entered into an employment letter agreement with Phillip B. Donenberg. BioSante and Mr. Donenberg amended the agreement in July 2008 to ensure compliance with regulations on non-qualified deferred compensation severance benefits as mandated by Section 409A of the Internal Revenue Code of 1986 and to make certain changes to the change in control provisions. The agreement has not been amended since July 2008.

        As a result of the anticipated termination of his employment immediately after completion of the merger, Mr. Donenberg will be entitled to receive:

        Michael C. Snabes, M.D., Ph.D.    In July 2008, BioSante entered into a change of control and severance agreement with Michael C. Snabes, M.D., Ph.D. However, if Dr. Snabes is terminated without cause or upon a change in control, he will be entitled to certain payments and benefits under the BioSante Pharmaceuticals, Inc. Officer Severance Policy since the severance policy provides for greater severance benefits than Dr. Snabes is currently entitled to receive under his current agreement with BioSante.

        As a result of the anticipated termination of his employment immediately after completion of the merger, Dr. Snabes will be entitled to receive:

145


Table of Contents

Accelerated Vesting of Stock Options

        The terms of the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan and the BioSante Pharmaceuticals, Inc. Third Amended and Restated 2008 Stock Incentive Plan provide that upon the occurrence of certain corporate transactions, including the merger, the vesting of any stock options outstanding under such plans will be accelerated in full at the effective time of such corporate transaction. As a result, the outstanding unvested stock options held by directors and executive officers of BioSante will vest immediately and become exercisable in full upon completion of the merger. However, if the trading price of BioSante common stock does not trade above the respective per share exercise prices of the options held by such individuals during the terms of the respective options, then no BioSante directors or executive officers will receive any benefit as a result of the option acceleration. As of December 31, 2012, the closing sale price of BioSante common stock was $1.23 per share, as reported by The NASDAQ Global Market. In addition, since it is anticipated that the employment or other service of all of the directors and officers named below (except Mr. Holubow and Mr. Mangano) will terminate effective as of completion of the merger, all of the options held by such individuals will terminate, if unexercised, three months (one year, in the case of Mr. Simes and Mr. Donenberg) after completion of the merger. These options likely will terminate unexercised in three months (or one year, in the case of Mr. Simes and Mr. Donenberg) after completion of the merger in light of the fact that the exercise prices range from $4.08 to $220.92 per share.

        The table below sets forth, as of December 31, 2012, information with respect to BioSante stock options held by each of the directors and executive officers of BioSante:

Name
  Aggregate
Number of
Shares of
BioSante
Common Stock
Underlying
Options
  Aggregate
Number of
Shares of
BioSante
Common Stock
Underlying
Vested
Options
  Aggregate
Number of
Shares of
BioSante
Common Stock
Underlying
Unvested
Options
  Per Share
Exercise Prices
  Aggregate
Option
Acceleration
Value
 

Stephen M. Simes

    396,109     173,192     222,917   $ 4.11 - 23.97     $ 0  

Louis W. Sullivan, M.D. 

    33,331     27,498     5,833     4.08 - 26.43       0  

Fred Holubow

    28,329     24,163     4,166     4.08 - 26.43       0  

Ross Mangano

    28,329     24,163     4,166     4.08 - 26.43       0  

John T. Potts, Jr., M.D. 

    12,498     7,707     4,791     4.08 - 11.88       0  

Edward C. Rosenow III, M.D. 

    28,329     24,163     4,166     4.08 - 26.43       0  

Stephen A. Sherwin, M.D. 

    32,221     27,430     4,791     4.08 - 220.92     0  

Phillip B. Donenberg

    180,274     93,468     86,806     4.11 - 23.97       0  

Michael C. Snabes, M.D., Ph.D. 

    84,998     41,109     43,889     4.11 - 26.58       0  

Indemnification and Insurance

        The merger agreement provides that the combined company will continue to indemnify and hold harmless each present and former director or officer of BioSante, with respect to acts or omissions occurring or alleged to have occurred at or prior to completion of the merger, to the fullest extent permitted under applicable law and BioSante's certificate of incorporation or bylaws. The merger agreement also provides that the combined company will honor all indemnification agreements in place with each present and former director or officer of BioSante.

146


Table of Contents

        The merger agreement also provides that, prior to completion of the merger, BioSante will purchase and maintain for a period of six years following completion of the merger, a directors' and officers' liability "tail" insurance policy covering the present and former directors and officers of BioSante for events occurring prior to completion of the merger. Such policy must contain terms no less favorable than the policies maintained by BioSante prior to completion of the merger.

Golden Parachute Compensation

        The following table sets forth the information required by Item 402(t) of Regulation S-K, which requires disclosure of information about compensation for each "named executive officer" of BioSante that is based on or otherwise relates to the merger. This compensation is referred to as "golden parachute" compensation. The "golden parachute" compensation payable to BioSante's named executive officers is subject to a non-binding advisory vote of BioSante stockholders, as described under "Matters Being Submitted to a Vote of BioSante Stockholders—BioSante Proposal No. 4—Advisory Vote on Golden Parachute Compensation" beginning on page 109. Assuming that the merger is completed on January 15, 2013 and the named executive officers are terminated on such date, the executives would receive approximately the amounts set forth in the table below.

        In order for BioSante's executives to receive the payments or benefits set forth in the table below as a result of the merger, there must be a termination event, such as a termination by the combined company for any reason other than for cause or a termination by the executive for good reason. For Mr. Simes and Mr. Donenberg, such termination event must occur either within the period beginning on the date of the merger and ending on the last day of the first full calendar month following the second year anniversary date of the merger or prior to the merger if the termination of employment was either a condition of the merger or was at the request or insistence of a person related to the merger. Dr. Snabes has the ability to terminate his employment for good reason if such termination occurs on the date of the merger and ending on the 12 month anniversary of the date of the merger. For purposes of the change in control provisions for Mr. Simes and Mr. Donenberg, the definition of "good reason" is broader than outside the context of change in control and includes: (1) BioSante's failure to obtain from any successor the assent to assume the employment letter agreements; (2) any purported termination by BioSante of the executive's employment that is not properly effected; (3) a requirement that the executive be based at any office or location that is more than 30 miles further from the office or location thereof immediately preceding the change in control; and (4) any termination by the executive of his employment for any reason during the 13th month after the completion of the change in control. For Dr. Snabes, the definition of "good reason" includes: (1) a material diminution in his authority, duties or responsibilities; (2) a material diminution in his base compensation; (3) a material diminution in the authority, duties or responsibilities of the supervisor to whom he reports; (4) a material change in the geographic location at which the company requires him to be based as compared to the location where he was previously based; and (5) any other action or inaction that constitutes a material breach by us under his agreement.

Name
  Cash(1)   Perquisites/
Benefits(2)
  Total  

Stephen M. Simes

  $ 1,490,100   $ 87,949   $ 1,578,049  

Phillip B. Donenberg

    770,000     74,156     844,156  

Michael C. Snabes, M.D., Ph.D. 

    526,400     44,972     571,372  

(1)
Represents a severance payment under the executive's employment agreement or, in the case of Dr. Snabes, the BioSante Pharmaceuticals, Inc. Officer Severance Policy, which would be paid in one lump sum equal to, in the case of Mr. Simes, the sum of: (a) two times his annual base salary, plus (b) his most recent annual bonus, plus (c) his maximum annual bonus (100 percent of base salary) for the year in which the change in control

147


Table of Contents

(2)
The amounts above include the estimated value of, in the case of Mr. Simes and Mr. Donenberg, substantially the same health, dental, life and disability insurance benefits the executive received prior to his termination for a period of up to 24 months for Mr. Simes, 18 months for Mr. Donenberg, and in the case of Dr. Snabes, 12 months following the termination date, and reimbursement for any costs incurred in securing such continuation coverage that are in excess of costs that would have been incurred by the executive officer immediately prior to his termination date to obtain such coverage. The value of such benefits is estimated to be the following: Mr. Simes, $57,949; Mr. Donenberg, $44,156 and Mr. Snabes, $29,972. In addition, the above amounts include the provision of outplacement services up to a maximum amount of $30,000 in the case of Mr. Simes and Mr. Donenberg and $15,000 in the case of Dr. Snabes. All such benefits are "double trigger" and would only be paid upon completion of the merger and the termination of the executive officer's employment following completion of the merger.


Interests of ANI's Directors and Officers in the Merger

        In considering the recommendation of the ANI board of directors to ANI stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the other matters to be acted upon by the ANI stockholders at the ANI special meeting, ANI stockholders should be aware that members of the ANI board of directors and ANI's officers have interests in the merger that may be different from or in addition to, or may conflict with the interests of ANI stockholders. These interests relate to or arise from, among other things:

148


Table of Contents

        None of ANI's directors or officers has any other interests in the merger that may be different from, or in addition to, the interests of ANI stockholders. The ANI board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, and to recommend that ANI stockholders approve the merger agreement and the transactions contemplated thereby, including the merger. Other than full disclosure of these potential conflicts of interest, the ANI board of directors did not take any other steps to alleviate such potential conflicts of interest since it did not consider such potential conflicts of interest to be material in connection with its decision to approve the merger agreement and the transactions contemplated thereby, including the merger.

Ownership Interests

        As of January 15, 2013, the latest practicable date before the printing of this joint proxy statement/prospectus, directors and executive officers of ANI, together with their respective affiliates, beneficially owned and were entitled to vote 28,239 shares of ANI common stock (including warrants to purchase common stock) and 1,902,877 shares of ANI preferred stock, or approximately 68.6 percent of the shares of ANI common stock (including warrants to purchase common stock) and 73.4 percent of the shares of ANI preferred stock outstanding on that date. Assuming the merger had been completed as of such date, all directors and executive officers of ANI, together with their respective affiliates, would beneficially own, in the aggregate, approximately 36.0 percent of the outstanding shares of common stock of the combined company.

        For a more complete discussion of the ownership interests of the directors and executive officers of ANI, see the sections entitled "ANI Security Ownership of Certain Beneficial Owners and Management" and "Security Ownership of Certain Beneficial Owners and Management of the Combined Company Following the Merger."

Employment Arrangements with Certain Executive Officers of ANI

        Following completion of the merger, the current executive officers of ANI are expected to be the executive officers of the combined company. The employment arrangements between ANI and such executive officers are expected to remain in place and the terms of such arrangements will be assumed by the combined company. For a discussion of the employment arrangements between ANI and the executive officers of ANI that are expected to become executive officers of the combined company see the section entitled "Management of the Combined Company Following the Merger—Executive Compensation."

Transaction Bonus Agreements and Related Arrangements

        Pursuant to transaction bonus agreements between ANI and certain of its executive officers, such officers are entitled to receive a bonus based on the net proceeds to the ANI stockholders from the consummation of a "change of control" transaction. The agreements acknowledge that the merger between BioSante and ANI qualifies as a change of control. The net proceeds of the merger are calculated as the product of (a) the average closing sale price of the BioSante common stock for the

149


Table of Contents

five trading days prior to the announcement of a signed merger agreement with ANI (which announcement occurred on October 4, 2012) and (b) the aggregate number of shares of BioSante common stock to be issued to the ANI stockholders in the merger.

        In connection with the payment of the transaction bonuses to the executive officers of ANI, ANI is required to withhold from such payments amounts sufficient to pay the executives' required tax withholding obligations. ANI and its executive officers expect to enter into arrangements to fund the payment of such withholdings. The transaction bonus agreements and tax withholding arrangements are described in further detail in the section entitled "Management of the Combined Company Following the Merger—Executive Compensation—Transaction Bonus Agreements and Related Arrangements."

Indemnification and Insurance

        The merger agreement provides that the combined company will continue to indemnify and hold harmless each present and former director, officer, or employee of ANI, with respect to acts or omissions occurring or alleged to have occurred at or prior to completion of the merger, including advancing expenses, to the fullest extent allowed by applicable law. In addition, all rights to indemnification with respect to acts or omissions occurring at or prior to completion of the merger existing in favor of each present and former director, officer, or employee of ANI as provided in ANI's certificate of incorporation, ANI's bylaws, or indemnification agreements will remain in effect.

        The merger agreement also provides that, prior to completion of the merger, ANI will purchase and maintain for a period of six years following completion of the merger, a directors' and officers' liability "tail" insurance policy covering the directors and officers of ANI for events occurring prior to completion of the merger. Such policy must contain terms no less favorable than the policies maintained by ANI prior to completion of the merger.

Regulatory Approvals

        Neither BioSante nor ANI is required to make any filings or to obtain approvals or clearances from any antitrust regulatory authorities in the United States or other countries to consummate the merger. In the United States, BioSante must comply with applicable federal and state securities laws in connection with the issuance of shares of BioSante common stock in the merger, including the filing with the SEC of the registration statement of which this joint proxy statement/prospectus is a part. In addition, BioSante must comply with applicable rules of The NASDAQ Stock Market which, as described below, require the preparation and approval of an initial listing application in connection with the transaction.


NASDAQ Listing of BioSante Common Stock

        BioSante common stock currently is listed on The NASDAQ Global Market under the symbol "BPAX". BioSante has agreed to use its reasonable best efforts to cause the shares of BioSante common stock issuable in connection with the merger to be approved, at or prior to completion of the merger, for listing (subject to notice of issuance) on The NASDAQ Global Market, and the listing of the shares of BioSante common stock issuable pursuant to the merger agreement is a condition to ANI's obligation to complete the merger.

        As of the date of the mailing of this joint proxy statement/prospectus, BioSante has filed an initial listing application for The NASDAQ Global Market in connection with the merger. If such application is approved, BioSante anticipates that its common stock will be listed on The NASDAQ Global Market following completion of the merger under the trading symbol "BPAX". It is expected that following the merger, the combined company will change its name to "ANI Pharmaceuticals, Inc." and that its trading symbol will be changed. ANI has reserved the ticker symbol "ANIP" for this purpose.

150


Table of Contents


Restrictions on Sales of BioSante Common Stock Received by ANI Stockholders in the Merger

        Pursuant to the merger agreement, the chief executive officer and chief financial officer of ANI and certain stockholders of ANI have agreed to enter into lock-up agreements with BioSante pursuant to which the shares of BioSante common stock received by ANI stockholders in the merger may not be sold, transferred or encumbered for a 180-day period following completion of the merger, except in limited circumstances.

        In addition, shares of BioSante common stock received by ANI stockholders who become affiliates of BioSante for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act. Persons who may be deemed affiliates of BioSante generally include individuals or entities that control, are controlled by or are under common control with BioSante and may include officers and directors as well as principal stockholders of BioSante. Each director and executive officer of ANI who will serve as a director or executive officer of BioSante following completion of the merger will be deemed an affiliate of BioSante for purposes of Rule 144.


Material U.S. Federal Income Tax Consequences of the Merger

        BioSante and ANI intend the merger to qualify as a "reorganization" within the meaning of Section 368(a) of the Code and have agreed to use reasonable best efforts to structure the merger to qualify as a reorganization and not to take any action that would prevent the merger from qualifying as a reorganization under Section 368(a) of the Code. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled "Material U.S. Federal Income Tax Consequences of the Merger." It is a condition to the completion of the merger that BioSante obtain from Oppenheimer Wolff & Donnelly LLP, and ANI obtain from SNR Denton US LLP, an opinion that the merger will qualify as a "reorganization" within the meaning of Section 368(a) of the Code.


Anticipated Accounting Treatment

        Under U.S. GAAP, the merger will be accounted for as a "reverse acquisition" pursuant to which ANI will be considered the acquiring entity for accounting purposes. As such, ANI will allocate the total purchase consideration to BioSante's tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of the completion of the merger. ANI's historical results of operations will replace BioSante's historical results of operations for all periods prior to the merger; after completion of the merger, the results of operations of both companies will be included in BioSante's financial statements.

        BioSante will account for the merger using the acquisition method of accounting under U.S. GAAP. Accounting Standards Codification 805 "Business Combinations," referred to as "ASC 805," provides guidance for determining the accounting acquiror in a business combination when equity interests are exchanged between two entities. ASC 805 provides that in a business combination effected through an exchange of equity interests, such as the merger, the entity that issues the equity interests is generally the acquiring entity. Commonly, the acquiring entity is the larger entity. However, the facts and circumstances surrounding a business combination sometimes indicate that a smaller entity acquires a larger one. ASC 805 further provides that in identifying the acquiring entity in a combination effected through an exchange of equity interests, all pertinent facts and circumstances must be considered, including the relative voting rights of the stockholders of the constituent companies in the combined entity, the composition of the board of directors and senior management of the combined company and the terms of the exchange of equity securities in the business combination, including payment of any premium.

151


Table of Contents

        Based on the relative voting interests of BioSante and ANI in the combined company whereby the ANI stockholders will have majority voting interest, that the board of directors of the combined entity will be composed of five former-ANI board members and two former-BioSante directors and that the chief executive officer and chief financial officer of the combined entity will be the former chief executive officer and former chief financial officer of ANI, ANI is considered to be the acquiror of BioSante for accounting purposes. This means that the total purchase price will be allocated to BioSante's tangible and identifiable intangible assets and liabilities based on their estimated relative fair market values at the date of the completion of the merger. Final valuations of property, plant and equipment, and intangible and other assets have not yet been completed as management is still reviewing the existence, characteristics and useful lives of BioSante's intangible assets. The completion of the valuation work could result in significantly different amortization expenses and balance sheet classifications. After completion of the merger, the results of operations of both companies will be included in the financial statements of BioSante. For further discussion of the accounting treatment, see "Unaudited Pro Forma Condensed Combined Financial Information."


Appraisal Rights

BioSante

        If the merger is completed, BioSante stockholders are not entitled to appraisal rights under Section 262 of the Delaware General Corporation Law (DGCL).

ANI

        If the merger is completed, ANI stockholders who have not waived such rights are entitled to appraisal rights under Section 262 of the DGCL, referred to as Section 262, provided that they comply with the conditions established by Section 262.

        This section is intended to provide a brief summary of the material provisions of the Delaware statutory procedures that a stockholder must follow in order to seek and perfect appraisal rights. However, this summary is not a complete statement of all applicable requirements, and it is qualified in its entirety by reference to the text of the relevant provisions of Delaware law, which are attached to this joint proxy statement/prospectus as Annex H. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that ANI stockholders exercise their appraisal rights under Section 262. Failure to follow precisely any of the statutory procedures set forth in Annex H may result in a termination or waiver of appraisal rights.

        A record holder of shares of ANI capital stock who makes the demand described below with respect to such shares, who continuously holds such shares through the effective time of the merger, who submits a written demand for appraisal to ANI in compliance with the statutory requirements of Section 262, and who does not submit a proxy or vote in favor of the ANI Proposal No. 1 or consent thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery of the fair value of his, her or its shares of ANI capital stock in lieu of the consideration that such stockholder would otherwise be entitled to receive pursuant to the merger agreement. All references in this summary of appraisal rights to a "stockholder" or "holders of shares of ANI capital stock" are to the record holder or holders of shares of ANI capital stock.

        Under Section 262, because the merger agreement is to be submitted for adoption at the ANI special meeting, not fewer than 20 days prior to the meeting, ANI must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in such notice a copy of Section 262. This joint proxy statement/prospectus shall constitute such notice to the record holders of ANI capital stock and a copy of Section 262 is attached to this joint proxy statement/prospectus as Annex H.

152


Table of Contents

        ANI stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. Those conditions include the following:

        ANI stockholders electing to exercise appraisal rights must not submit a proxy or vote "for" the ANI Proposal No. 1. Submitting a proxy or voting "for" the ANI Proposal No. 1 will result in the waiver of appraisal rights. Also, because a submitted proxy not marked "against" or "abstain" will be voted "for" the ANI Proposal No. 1, the submission of a proxy not marked "against" or "abstain" will result in the waiver of appraisal rights.

        A written demand for appraisal of shares of ANI capital stock must be delivered to ANI before the taking of the vote on the ANI Proposal No. 1 at the ANI special meeting. The written demand for appraisal should specify the ANI stockholder's name and mailing address, and that such stockholder is thereby demanding appraisal of his, her or its shares of ANI capital stock. The written demand for appraisal of shares of ANI capital stock is in addition to and separate from a vote against the ANI Proposal No. 1 or an abstention from such vote. Failure to return your proxy, voting against, or abstaining from voting on, the ANI Proposal No. 1 will not satisfy your obligation to make a written demand for appraisal. Failure to make a written demand for appraisal prior to the taking of the vote on the ANI Proposal No. 1 at the ANI special meeting will constitute a waiver of appraisal rights.

        A demand for appraisal must be executed by or for the ANI stockholder of record, fully and correctly, as such stockholder's name appears on the stock certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares of ANI capital stock are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for an ANI stockholder of record. However, the agent must identify such record holder and expressly disclose the fact that, in exercising the demand, he is acting as agent for such record holder. A person having a beneficial interest in ANI capital stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect appraisal rights on behalf of the beneficial owners.

        An ANI stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc., 210 Main Street West, Baudette, Minnesota 56623, Attention: Corporate Treasurer.

        Within 10 days after the effective time of the merger, ANI must provide notice of the effective time of the merger to all ANI stockholders who have complied with Section 262 and have not voted in favor of the ANI Proposal No. 1.

        Within 120 days after the effective time of the merger, either ANI or any ANI stockholder who has complied with the required conditions of Section 262 may file a petition in the Delaware Court of Chancery, with a copy served on ANI in the case of a petition filed by an ANI stockholder, demanding a determination of the fair value of the shares of ANI capital stock held by all ANI stockholders seeking to exercise appraisal rights. There is no present intent on the part of ANI to file an appraisal petition, and ANI stockholders seeking to exercise appraisal rights should not assume that ANI will file such a petition or that ANI will initiate any negotiations with respect to the fair value of such shares. Accordingly, ANI stockholders who desire to have their shares of ANI capital stock appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. Failure to file a petition for appraisal within the time period specified in Section 262 could result in a loss of appraisal rights.

        Within 120 days after the effective time of the merger, any ANI stockholder who has satisfied the requirements of Section 262 will be entitled, upon written request, to receive from ANI a statement setting forth the aggregate number of shares of ANI common stock and ANI preferred stock not voting

153


Table of Contents

in favor of the ANI Proposal No. 1 and with respect to which demands for appraisal were received by ANI and the aggregate number of holders of such shares. Such statement must be mailed within 10 days after the ANI stockholder's request has been received by ANI or within 10 days after the expiration of the period for the delivery of demands as described above, whichever is later.

        If a petition for an appraisal is timely filed and a copy thereof is served upon ANI, ANI will then be obligated, within 20 days after such service, to file in the office of the Register in Chancery (the Register) a duly verified list containing the names and addresses of all ANI stockholders who have demanded an appraisal of their shares of ANI capital stock and with whom agreements as to the value of such shares have not been reached. Upon notice to the ANI stockholders, as required by the Delaware Court of Chancery, at a hearing on such petition, the Delaware Court of Chancery will determine which ANI stockholders are entitled to appraisal rights. The Delaware Court of Chancery may require the ANI stockholders who have demanded an appraisal for their shares of ANI capital stock and who hold such stock represented by certificates to submit their certificates of stock to the Register for notation thereon of the pendency of the appraisal proceedings; and if any ANI stockholder fails to comply with such direction, the Delaware Court of Chancery may dismiss the proceedings as to such stockholder. Where proceedings are not dismissed, the Delaware Court of Chancery will appraise the shares of ANI capital stock owned by such stockholders, determining the fair value of such shares exclusive of any element of value arising from the accomplishment or expectation of the merger. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those stockholders of the certificates representing their shares of ANI capital stock. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5 percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment.

        Although the board of directors of ANI believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as would be determined by the Delaware Court of Chancery, and ANI stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the consideration they would receive pursuant to the merger agreement. Moreover, ANI does not anticipate offering more than the merger consideration to any ANI stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the "fair value" of a share of ANI capital stock is less than the merger consideration. In determining "fair value," the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered and that "fair price obviously requires consideration of all relevant factors involving the value of a company." The Delaware Supreme Court has stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which shed any light on the future prospects of the merged corporation. Section 262 provides that fair value is to be "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a "narrow exclusion that does not encompass known elements of value," but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered." In addition, Delaware courts have decided that the statutory

154


Table of Contents

appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder's exclusive remedy.

        The cost of the appraisal proceeding, which does not include attorneys' or experts' fees, may be determined by the Delaware Court of Chancery and imposed upon the dissenting ANI stockholder(s) and/or ANI as the Delaware Court of Chancery deems equitable under the circumstances. Each dissenting ANI stockholder is responsible for his, her or its attorneys' and expert witness fees and expenses, although, upon application of a dissenting ANI stockholder, the Delaware Court of Chancery may order that all or a portion of the expenses incurred by any dissenting ANI stockholder in connection with the appraisal proceeding, including without limitation reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all shares of ANI capital stock entitled to appraisal.

        Any ANI stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote for any purpose any shares of ANI capital stock subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to ANI stockholders of record at a date prior to the effective time of the merger.

        At any time within 60 days after the effective time of the merger, any ANI stockholder will have the right to withdraw his, her or its demand for appraisal and to accept the terms offered in the merger agreement. After this period, an ANI stockholder may withdraw his, her or its demand for appraisal and receive payment for his, her or its shares as provided in the merger agreement only with the consent of ANI. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the effective time of the merger, or if any ANI stockholder otherwise fails to perfect, successfully withdraws, or loses such holder's appraisal rights, then such stockholders' right to appraisal will cease and such stockholder's shares of ANI capital stock will be deemed to have been converted at the effective time of the merger into the right to receive the consideration that such ANI stockholder would otherwise be entitled to receive pursuant to the merger agreement. Inasmuch as ANI has no obligation to file such a petition, any ANI stockholder who desires a petition to be filed is advised to file it on a timely basis. Any ANI stockholder may withdraw such stockholder's demand for appraisal by delivering to ANI a written withdrawal of his, her or its demand for appraisal and acceptance of the merger consideration, except that (i) any such attempt to withdraw made more than 60 days after the effective time of the merger will require written approval of ANI and (ii) no appraisal proceeding in the Delaware Court of Chancery shall be dismissed as to any ANI stockholder who commenced or joined such proceeding as a named party without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just.

        Failure by any ANI stockholder to comply fully with the procedures described above and set forth in Annex H to this joint proxy statement/prospectus may result in the loss of such stockholder's appraisal rights. In view of the complexity of exercising appraisal rights under Delaware law, any ANI stockholder considering exercising these rights should consult with legal counsel.

155


Table of Contents


THE MERGER AGREEMENT

        BioSante and ANI entered into the merger agreement on October 3, 2012. The full text of this agreement is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. BioSante and ANI urge you to read the merger agreement in its entirety for a more complete description of the terms and conditions of the merger and related matters.

        The representations and warranties described below and included in the merger agreement were made by BioSante and ANI to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the merger agreement and may be subject to important qualifications and limitations agreed to by BioSante and ANI in connection with negotiating the terms of the merger agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders, or may have been used for the purpose of allocating risk between BioSante and ANI rather than establishing matters as facts. The merger agreement is described in this joint proxy statement/prospectus and included as Annex A only to provide you with information regarding the material terms and conditions of the merger agreement, and not to provide any other factual information regarding BioSante, ANI or their respective businesses. Accordingly, you should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts about BioSante or ANI, and you should read the information provided elsewhere in this joint proxy statement/prospectus for information regarding BioSante, ANI and their respective businesses.


Structure of the Merger

        Under the merger agreement, ANI will merge with and into BioSante, with BioSante surviving the merger. At the effective time of the merger, the name of the surviving company will be changed to ANI Pharmaceuticals, Inc., subject to approval of the BioSante stockholders of the amendment to BioSante's certificate of incorporation changing the company's name. The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.


Completion of the Merger

        The completion of the merger will occur at the time that the parties file the certificate of merger with the Secretary of State of the State of Delaware on the closing date of the merger or on such later date as BioSante and ANI may mutually agree (and set forth in the certificate of merger).

        The closing of the merger will take place no later than the second business day after the satisfaction or waiver of the conditions to the completion of the merger contained in the merger agreement, other than the conditions which by their terms can be satisfied only as of the closing of the merger or on such other day as BioSante and ANI may mutually agree. For a more complete discussion of the conditions to the completion of the merger, see the section entitled "The Merger Agreement—Conditions to the Completion of the Merger." Because the completion of the merger is subject to the satisfaction of other conditions, BioSante and ANI cannot predict the exact time at which the merger will become effective and be completed, although it is anticipated to be completed during the first quarter of 2013.


Merger Consideration and Adjustment

        At the effective time of the merger, each outstanding share of capital stock of ANI will be converted into the right to receive that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. No fractional shares of BioSante common stock will be issued in connection with the merger. Instead, each ANI stockholder who otherwise would be entitled to receive

156


Table of Contents

a fractional share of BioSante common stock (after aggregating all fractional shares of BioSante common stock issuable to such holder) will be entitled to receive an amount in cash (rounded to the nearest whole cent), without interest, determined by multiplying such fraction of a share of BioSante common stock by the closing price of a share of BioSante common stock on The NASDAQ Global Market on the day on which the merger is completed.

        Following the consummation of the transactions contemplated by the merger agreement, the current stockholders of ANI are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and current stockholders of BioSante are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company, assuming BioSante's net cash as of the determination date is $18.0 million. BioSante will issue to the current stockholders of ANI the aggregate number of shares of BioSante common stock necessary for the current ANI stockholders to own 53 percent of the outstanding shares of common stock of the combined company, subject to adjustment based on BioSante's net cash, as discussed below.

        The exchange ratio for each share of ANI capital stock will be determined based on the aggregate number of shares of BioSante common stock that BioSante issues in connection with the merger. The aggregate number of shares of BioSante common stock that BioSante issues in connection with the merger will be determined by multiplying 53 percent (subject to adjustment based on BioSante's net cash) multiplied by a fraction the numerator of which is the number of adjusted outstanding shares of BioSante common stock (as described below) and the denominator of which is 47 percent (subject to adjustment based on BioSante's net cash). The number of adjusted outstanding shares of BioSante common stock will be equal to the sum of the total number of shares of BioSante common stock outstanding immediately prior to the merger plus the product of .32 times the number of remaining shares of BioSante common stock that are issuable upon exercise of warrants to purchase an aggregate of 1,039,254 shares of BioSante common stock issued in or around August 2012. Pursuant to the terms of ANI's certificate of incorporation, before any amounts are paid to the holders of shares of any other series of ANI preferred stock or ANI common stock, the holders of shares of ANI series D preferred stock are entitled to receive an amount per share equal to $30.00 (subject to adjustment as provided in ANI's certificate of incorporation) plus all declared but unpaid dividends. As a result of such provisions, it is likely that holders of shares of other series of ANI preferred stock or ANI common stock will not receive any shares of BioSante common stock in connection with the merger. Assuming that only holders of ANI series D preferred stock will receive shares of BioSante common stock in connection with the merger, the exchange ratio for each share of ANI series D preferred stock will be determined by dividing the aggregate number of shares of BioSante common stock issued in connection with the merger by the aggregate number of shares of ANI series D preferred stock outstanding immediately prior to the merger.

        For illustrative purposes only, if the merger had been completed on December 31, 2012, and assuming BioSante's net cash as of such date was $18.0 million, the exchange ratio (without giving effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described elsewhere in this joint proxy statement/prospectus) for the ANI series D preferred stock (including shares that would have been issued to certain executive officers of ANI immediately prior to completion of the merger) would have been approximately 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock and the exchange ratio (without giving effect to the proposed reverse stock split described elsewhere in this joint proxy statement/prospectus) for the ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock would have been zero. Therefore, if the merger had been completed on such date and you owned 1,000 shares of ANI series D preferred stock as of such date, you would have had the right to receive 10,350 shares of BioSante common stock in exchange for your shares of ANI series D preferred stock. If you owned 1,000 shares of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock or ANI common stock as of such date, you would have had the right to receive no

157


Table of Contents

shares of BioSante common stock for such shares of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock or ANI common stock.

        The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger. For a more complete discussion of the determination of BioSante's net cash, see the section entitled "The Merger Agreement—Determination of BioSante's Net Cash." If BioSante has more than $18.0 million of net cash as of the determination date, then the percentage ownership of BioSante's current stockholders will be increased on a pro rata basis by 0.6 percent for each $1.0 million of net cash excess and if BioSante has less than $18.0 million of net cash as of the determination date, then the percentage ownership of BioSante's current stockholders will be decreased on a pro rata basis by 0.6 percent for each $1.0 million of net cash shortfall, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. In addition, one of the conditions to ANI's obligations to complete the merger is BioSante's net cash as of the closing date being no less than $17.0 million as calculated and as adjusted pursuant to the provisions of the merger agreement.

        The following table illustrates the percentage ownership of the combined company by BioSante and ANI current stockholders assuming various amounts of net cash of BioSante as of the determination date.

BioSante's Net Cash as of
Determination Date Calculated
Pursuant to Merger Agreement
  BioSante Stockholder Ownership
of Outstanding Shares of
Combined Company
  ANI Stockholder Ownership
of Outstanding Shares of
Combined Company
 

$23.0 million or more

    49.9 %   50.1 %

22.0 million

    49.4 %   50.6 %

21.0 million

    48.8 %   51.2 %

20.0 million

    48.2 %   51.8 %

19.0 million

    47.6 %   52.4 %

18.0 million

    47.0 %   53.0 %

17.0 million

    46.4 %   53.6 %

        The items that will constitute BioSante's net cash balance at the determination date are subject to numerous factors, many of which are outside of BioSante's control. BioSante will issue a news release after the final determination of the exchange ratios announcing the final exchange ratios and BioSante's net cash balance at the determination date. If BioSante's net cash at the closing date is less than $17.0 million (as calculated and adjusted pursuant to the terms of the merger agreement), based on the manner of calculating net cash pursuant to the merger agreement, BioSante would be unable to satisfy a closing condition for the merger, and ANI could elect to terminate the merger agreement or waive the condition.


Determination of BioSante's Net Cash

        For purposes of determining the exchange ratios, BioSante's net cash will be calculated as of the date that is 14 days prior to the date of the BioSante special meeting as set forth in this joint proxy statement/prospectus, subject to extension for an adjournment of such meeting. For purposes of determining whether BioSante has satisfied the condition to closing that BioSante have no less than $17.0 million in net cash as of the closing date (as calculated and as adjusted pursuant to the terms of the merger agreement), BioSante's net cash will be calculated shortly before the closing date of the merger. The closing of the merger could be delayed if BioSante and ANI are not able agree upon the

158


Table of Contents

amount of BioSante's net cash as of the determination date prior to the BioSante special meeting or as of the closing date.

        Under the merger agreement, BioSante's "net cash" is defined as the amount of its cash and cash equivalents minus the aggregate amount of the following liabilities:


Treatment of ANI Stock Options and Warrants

        All options and warrants to purchase shares of ANI capital stock outstanding immediately prior to the effective time of the merger will terminate and will no longer be outstanding immediately after the merger, except for certain warrants which although not cancelled will not represent the right to acquire any equity or other interest in the combined company after the merger.


Conditions to Completion of the Merger

        The obligations of each of BioSante and ANI to complete the merger are subject to the satisfaction or waiver (if permissible) at or before the effective time of the merger of the following conditions:

159


Table of Contents

        In addition, each party's obligation to complete the merger is further subject to the satisfaction or waiver (if permissible) by that party of the following additional conditions:

        In addition, the obligation of ANI to complete the merger is further subject to the satisfaction or waiver at or before the effective time of the merger of the following additional conditions:


No Solicitation

        Prior to the consummation of the merger or the termination of the merger agreement in accordance with its terms, BioSante and ANI each agreed that, except as described below, they and any of their subsidiaries will not, and will cause any of their respective officers, directors, employees and advisors retained by them or any of their subsidiaries not to, directly or indirectly:

        An "acquisition proposal" is any proposal or offer in a single transaction or series of related transactions, other than pursuant to the merger agreement, with respect to either ANI or BioSante, respectively, involving: (i) any merger, consolidation, share exchange, business combination, issuance of securities, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction pursuant to which a person or group of persons would own 15 percent or

160


Table of Contents

more of the voting power of any class of equity securities of such party; (ii) any issuance of securities representing 15 percent or more of the outstanding shares of any class of voting securities of such party; (iii) any sale, lease, exchange, transfer or other disposition of assets that constitute or represent 15 percent or more of the consolidated net revenue or fair market value of the assets of such party; or (iv) any liquidation or dissolution of such party.

        However, prior to BioSante stockholder adoption of the merger agreement, BioSante is permitted to engage in discussions or negotiations with, and provide information to, any person in response to an unsolicited written acquisition proposal that is a "superior proposal" of the type described below or could reasonably be expected to lead to a superior proposal if:

        In connection with a superior proposal, BioSante may make a change in its board recommendation of the merger and the amendments to BioSante's certificate of incorporation or terminate the merger agreement to enter into such superior proposal concurrent with or immediately following such termination, if:

        A "superior proposal" is an bona fide written acquisition proposal, changing the references to 15 percent in the definition of "acquisition proposal" above to be references to 50 percent, which the BioSante board of directors determines, after receiving the advice of its advisors, to be reasonably likely to be consummated if accepted and to be more favorable to the BioSante stockholders from a financial point of view than the merger with ANI, after taking into account, among other factors the BioSante board of directors may deem relevant, the various legal, financial and regulatory aspects of the proposal, all the terms and conditions of the proposal and any changes to the terms of the merger agreement offered by ANI in response to such proposal.

        The merger agreement also provides that the parties will keep each other reasonably informed of the status of any negotiations with respect to an acquisition proposal and will provide each other the identity of the person making the proposal and any non-public information provided to any other person in connection with an acquisition proposal.

161


Table of Contents


Meetings of Stockholders; Change in Board Recommendation

        BioSante is obligated under the merger agreement to call and hold the BioSante special meeting for purposes of considering the adoption of the merger agreement, the issuance of BioSante common stock pursuant to the merger and the approval of the amendments to BioSante's certificate of incorporation. The BioSante board of directors has recommended the adoption of the merger agreement and the issuance of BioSante common stock pursuant to the merger and the approval of the amendments to BioSante's certificate of incorporation by the BioSante stockholders and has agreed that it will not change or publicly propose to change, in any manner adverse to ANI, the approval or recommendation by the BioSante board of directors of the merger agreement, the merger or the issuance of BioSante common stock pursuant to the merger or the amendments to BioSante's certificate of incorporation, or take any action inconsistent with its recommendation. However, the BioSante board of directors may make a change in its recommendation prior to the BioSante stockholder approval of the merger agreement and the issuance of BioSante common stock pursuant to the merger and the amendments to BioSante's certificate of incorporation under the circumstances described above under the heading "The Merger Agreement—No Solicitation."

        Unless the merger agreement is otherwise terminated in accordance with its terms, even if the BioSante board of directors has made an adverse recommendation change regarding the merger and the issuance of the BioSante common stock pursuant to the merger and the amendments to BioSante's certificate of incorporation, those proposals must be submitted to the BioSante stockholders at a meeting of the BioSante stockholders called for such purpose.

        ANI is obligated under the merger agreement to call and hold the ANI special meeting for purposes of considering the adoption of the merger agreement. The ANI board of directors has recommended the adoption of the merger agreement by the ANI stockholders and has agreed that it will not change or publicly propose to change, in any manner adverse to BioSante, the approval or recommendation by the ANI board of directors of the merger agreement or merger, or take any action inconsistent with its recommendation. However, the ANI board of directors may make a change in its recommendation prior to the ANI stockholder approval of the merger and the merger agreement, if:

        Unless the merger agreement is otherwise terminated in accordance with its terms or the BioSante board of directors changes its recommendation as described above, even if the ANI board of directors has made an adverse recommendation change regarding the merger, the proposal to adopt the merger agreement must be submitted to the ANI stockholders at a meeting of the ANI stockholders called for such purpose.


Covenants; Conduct of Business Pending the Merger

        BioSante and ANI each agreed to certain restrictions on their respective businesses until the later of either the effective time of the merger or the date the merger agreement is terminated. In general, BioSante and ANI must conduct their operations in the ordinary course of business and use their reasonable best efforts to preserve intact their business and keep available the services of their officers and employees. Each of BioSante and ANI also agreed that, subject to certain limited exceptions

162


Table of Contents

described in the merger agreement, without the consent of the other party, it would not, during the period prior to the closing of the merger:

        In addition, BioSante agreed that it will, during the period prior to the closing of the merger, make all required filings with the SEC in a timely manner and take all such actions as may be necessary or advisable to effect a conclusion of its LibiGel product clinical trials and safety study in accordance with a budget agreed upon with ANI.


Other Agreements

        Each of BioSante and ANI has agreed:

163


Table of Contents

        BioSante and ANI also agreed that:


Termination

        The merger agreement may be terminated at any time before the completion of the merger, whether before or after the required stockholder approvals to complete the merger have been obtained as set forth below:

164


Table of Contents


Termination Fees and Expenses

        BioSante must pay ANI up to $500,000 of ANI's fees and expenses incurred in connection with the merger if:

        In addition, BioSante must pay ANI a termination fee equal to $1.0 million, less the amount of any expenses already paid, if any one of the following occurs:

165


Table of Contents

        ANI must pay BioSante a termination fee of $750,000 if BioSante terminates the merger agreement because an uncured ANI breach of the merger agreement that causes the conditions to closing of the merger to not be satisfied.

        These termination fees would be the exclusive remedy of the parties for any damages suffered as a result of the failure of the merger to be consummated.


Representations and Warranties

        The merger agreement contains customary representations and warranties of ANI and BioSante related to, among other things:

166


Table of Contents

        The merger agreement contains additional representations and warranties made of BioSante to ANI related to:

        The representations and warranties are, in many respects, qualified by materiality and knowledge, and will not survive the merger, but their accuracy forms the basis of one of the conditions to the obligations of BioSante and ANI to complete the merger.


Amendments

        The merger agreement may be amended by the parties at any time, except that after the merger agreement has been adopted (and, in the case of BioSante, the issuance of BioSante common stock and amendments to its certificate of incorporation have been approved) by either the ANI stockholders or the BioSante stockholders, no amendment that by law requires further approval of the ANI stockholders or BioSante stockholders, as applicable, may be made without such further approval.

167


Table of Contents


VOTING AND OTHER ANCILLARY AGREEMENTS

ANI Voting Agreements

        Concurrently and in connection with the execution of the merger agreement, Meridian Venture Partners II, L.P., Argentum Capital Partners II, L.P. and four funds affiliated with First Analysis Corp., who in the aggregate held approximately 85 percent of the shares of the outstanding ANI capital stock, calculated on an as-converted basis, and approximately 86 percent of the outstanding shares of the ANI series D preferred stock, as of October 3, 2012 entered into a voting agreement with BioSante, pursuant to which they agreed to vote their shares of ANI capital stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transaction contemplated by the merger agreement. The form of ANI voting agreement is attached as Annex B to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. BioSante and ANI urge you to read the form of ANI voting agreement carefully and in its entirety.

        In addition, one of ANI's stockholders, Meridian Venture Partners II, L.P., has agreed in its voting agreement with BioSante to vote in favor of the election of the two directors designated by BioSante at the first annual meeting of stockholders of the combined company following completion of the merger. As of October 3, 2012, Meridian Venture Partners II, L.P. held approximately 57 percent of the outstanding shares of ANI capital stock, approximately 60 percent of the outstanding shares of ANI common stock on an as-converted basis and 58 percent of the outstanding shares of ANI series D preferred stock, and is expected to hold approximately 27 percent of the outstanding shares of capital stock of the combined company immediately after completion of the merger. The voting agreement between BioSante and Meridian Venture Partners II, L.P. is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. BioSante and ANI urge you to read the voting agreement between BioSante and Meridian Venture Partners II, L.P. carefully and in its entirety.

        The ANI voting agreements will terminate upon the earlier of the consummation of the merger or the termination of the merger agreement, except that, if the merger is completed, the obligation of Meridian Venture Partners II, L.P. to vote in favor of the two directors designated by BioSante under its voting agreement with BioSante will terminate upon the completion of the first annual meeting of stockholders of the combined company following completion of the merger. In addition, the ANI voting agreements will terminate if (1) the BioSante board of directors changes its recommendation that the BioSante stockholders vote in favor of the adoption of the merger agreement and the issuance of BioSante common stock pursuant to the merger and the approval of the amendments to BioSante's certificate of incorporation or (2) if BioSante has engaged in discussions or negotiations with, or provided information to, any person in response to a superior acquisition proposal.


BioSante Voting Agreements

        All of BioSante's directors and officers entered into voting agreements with ANI, pursuant to which each stockholder agreed to vote its shares of BioSante capital stock in favor of adoption of the merger agreement and the merger and the other transactions contemplated by the merger agreement, including the approval of the merger and the issuance of shares of BioSante common stock in the merger, and in favor of the two proposed amendments to BioSante's certificate of incorporation as described in this joint proxy statement/prospectus, and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transactions contemplated by the merger agreement. As of October 3, 2012, such BioSante stockholders collectively held approximately two percent of the outstanding shares of BioSante capital stock. The form of the BioSante voting agreement is attached as Annex D to this joint proxy statement/prospectus and is incorporated by

168


Table of Contents

reference into this joint proxy statement/prospectus. BioSante and ANI urge you to read the form of BioSante voting agreement carefully and in its entirety.

        The BioSante voting agreements will terminate upon the earlier of the consummation of the merger or the termination of the merger agreement.


Lock-Up Agreements

        Concurrently and in connection with the execution of the merger agreement, ANI's chief executive officer and chief financial officer, both of whom are entitled to receive shares of ANI series D preferred stock prior to completion of the merger as described under the heading "Interests of ANI's Directors and Officers in the Merger," and each of the ANI stockholders that entered into voting agreements with BioSante in connection with the execution of the merger agreement, entered into lock-up agreements with BioSante pursuant to which the shares of BioSante common stock received by those ANI stockholders in the merger may not be sold, transferred or encumbered for a 180-day period following completion of the merger, except in limited circumstances. The form of the lock-up agreement is attached as Annex E to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus.

169


Table of Contents


CONTINGENT VALUE RIGHTS

General

        Under the terms of the merger agreement, BioSante has the right in its sole discretion to distribute and issue contingent value rights (CVRs), to holders of BioSante common stock as of immediately prior to completion of the merger. As of the date of this joint proxy statement/prospectus, BioSante plans to distribute and issue CVRs to holders of record of BioSante common stock as of March 15, 2013. BioSante expects that one CVR will be issued for each share of BioSante common stock outstanding as of the record date for the distribution of the CVRs. Since shares of BioSante class C special stock are not entitled to receive any distributions or dividends, holders of BioSante class C special stock will not be entitled to receive any CVRs, if CVRs are issued.


Contingent Value Rights Agreement

        BioSante plans to enter into a contingent value rights agreement with Computershare Inc., as rights agent, for the purpose of establishing the terms and conditions of the CVRs and the procedures by which payments, if any, will be made to the CVR holders. The form of the contingent value rights agreement is attached as Annex F to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. BioSante and ANI urge you to read the form of the contingent value rights agreement carefully and in its entirety.


Material Terms of the CVRs

        The CVRs will not be certificated and will not be attached to the shares of BioSante common stock. The CVRs will be nontransferable, subject to certain limited exceptions as set forth in the contingent value rights agreement. The CVRs will not represent an equity or ownership interest in the combined company or otherwise, and CVR holders will have no voting or dividend rights. The rights of CVR holders will be limited to those rights expressly set forth in the contingent value rights agreement.

        Pursuant to the contingent value rights agreement, CVR holders, under certain circumstances, may have rights to receive a portion of the net cash proceeds actually received by the combined company in connection with a LibiGel transaction. A "LibiGel transaction" for purposes of the contingent value rights agreement means a full or partial sale, license, transfer or other disposition entered into by the combined company with respect to the LibiGel assets. The "LibiGel assets" for purposes of the contingent value rights agreement mean the intellectual property rights and know-how and related assets, that currently are or have been used in the research, development and manufacture of BioSante's LibiGel product, a proprietary transdermal testosterone formulation subject to a license agreement with Antares Pharma Inc., including all BioSante generated regulatory filings, clinical and non-clinical safety, efficacy and pharmacokinetic data, compiled by or on behalf of BioSante in connection with the development of the LibiGel product.

        Subject to the terms and conditions of the contingent value rights agreement, if the combined company consummates a LibiGel transaction within the 10-year period following completion of the merger, CVR holders will be entitled to receive cash payments equal to such holder's pro rata portion of 66 percent of the net cash proceeds actually received by the combined company in connection with such LibiGel transaction during the 10-year period following completion of the merger, up to an aggregate of $40.0 million. If the combined company does not consummate a LibiGel transaction during the 10-year period following completion of the merger, no cash payment will be payable to CVR holders.

        Under the contingent value rights agreement, the combined company's only obligation will be to act in good faith in connection with: (1) any continued operation of, development of or investment in

170


Table of Contents

the LibiGel assets; (2) pursuing, negotiating or entering into one or more LibiGel transactions; and (3) the terms and conditions of any LibiGel transaction.


Discretion of BioSante to Issue CVRs

        Although BioSante currently plans to enter into the contingent value rights agreement and issue CVRs to holders of BioSante common stock, there is no assurance that BioSante will distribute and issue the CVRs at all or based on the terms currently set forth in the form of contingent value rights agreement attached as Annex F to this joint proxy statement/prospectus. As of the date of this joint proxy statement/prospectus, BioSante has not entered into the contingent value rights agreement and it is possible that the BioSante board of directors may determine in its sole discretion not to issue the CVRs based on, among other things, the tax impact to the holders of BioSante common stock of the distribution and issuance of the CVRs. Furthermore, if BioSante and ANI agree, the terms of the contingent value rights agreement as currently contemplated may be changed prior to BioSante entering into the contingent value rights agreement.

171


Table of Contents


MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

        The following discussion summarizes the material U.S. federal income tax consequences of the merger. This summary is based upon current provisions of the Code, existing Treasury Regulations promulgated thereunder and current administrative rulings and court decisions, all of which are subject to change and to differing interpretations, possibly with retroactive effect. Any change could alter the tax consequences to BioSante, ANI or ANI stockholders, as described in this summary. This summary is not binding on the IRS, and there can be no assurance that the IRS (or a court, in the event of an IRS challenge) will agree with the conclusions stated herein.

        This discussion does not address all of the U.S. federal income tax consequences of the merger that may be relevant to ANI stockholders and BioSante stockholders in light of their particular circumstances and does not apply to stockholders that are subject to special treatment under U.S. federal income tax laws, including, without limitation:

        In addition, the following discussion does not address:

172


Table of Contents

        Accordingly, ANI stockholders are advised and expected to consult their own tax advisors regarding the U.S. federal income tax consequences of the merger in light of their personal circumstances and the consequences of the merger under U.S. federal non-income tax laws and state, local and foreign tax laws.

        The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Code. BioSante and ANI have agreed to use reasonable best efforts to structure the merger to qualify as a "reorganization" and not to take any action that would prevent the merger from qualifying as a reorganization under Section 368(a) of the Code. Further, as a condition to the completion of the merger, Oppenheimer Wolff & Donnelly LLP must render a tax opinion to BioSante that the merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code and SNR Denton US LLP must render a tax opinion to ANI that the merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code. Neither BioSante nor ANI presently intends to waive these conditions. The tax opinions discussed in this section will be conditioned upon certain assumptions and qualifications stated in the tax opinions and will be based on the truth, accuracy, and completeness, as of the completion of the merger, of certain representations and other statements made by each of BioSante and ANI, as applicable, in letters delivered to counsel rendering such opinions.

        Neither BioSante nor ANI will request a ruling from the IRS regarding the tax consequences of the merger. The opinions of counsel do not bind the IRS or courts of law and thus do not prevent the IRS from asserting a contrary position, or a court from upholding any such assertion. In addition, if any of the representations or assumptions upon which the opinions are based are inconsistent with the actual facts, the tax consequences of the merger and the vitality of the opinions could be adversely affected.

        It is expected that Oppenheimer Wolff & Donnelly LLP and SNR Denton US LLP, subject to the qualifications described above, will each deliver an opinion that the merger will be treated for U.S. federal income tax purposes as a "reorganization" within the meaning of Section 368(a) of the Code. Assuming that the merger will qualify as a "reorganization" within the meaning of Section 368(a) of the Code, the following material U.S. federal income tax consequences should result:

173


Table of Contents

        There will be no material U.S. federal income tax consequences of the merger for BioSante stockholders whether or not the merger qualifies as a "reorganization" within the meaning of Section 368(a) of the Code.

        The discussion above does not apply to ANI stockholders who properly perfect appraisal rights with respect to such stockholder's shares of ANI capital stock. Generally, an ANI stockholder who perfects appraisal rights and receives cash in exchange for such stockholder's ANI capital stock will recognize capital gain or loss measured by the difference between the amount of cash received and such stockholder's adjusted tax basis in those shares. Such gain or loss will generally be long-term capital gain or loss, provided the shares of ANI capital stock were held for more than one year before the disposition of the shares. The deductibility of capital losses is subject to limitations.

        Generally, non-corporate ANI stockholders may be subject to information reporting and backup withholding (currently at a rate of 28 percent) with respect to cash received in lieu of a fractional share interest in BioSante common stock or cash received for perfecting appraisal rights. However, backup withholding will not apply to an ANI stockholder who furnishes a valid taxpayer identification number and complies with certain certification procedures or otherwise establishes an exemption from backup withholding. Backup withholding is not an additional U.S. federal income tax. Any amounts so withheld will be allowed as a refund or credit against the ANI stockholder's U.S. federal income tax liability (if any), provided that the ANI stockholder timely furnishes the required information to the IRS.

        The foregoing summary of material U.S. federal income tax consequences is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. In addition, the summary does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, the summary does not address any U.S. federal non-income tax or any foreign, state or local tax consequences of the merger, nor any tax consequences of any transaction other than the merger. Accordingly, each ANI stockholder is strongly urged to consult his, her or its own tax advisor to determine the particular federal, state, local, or foreign income or other tax consequences of the merger to such ANI stockholder.

174


Table of Contents


BIOSANTE'S BUSINESS

Overview

        BioSante is a specialty pharmaceutical company focused on developing products for female sexual health and oncology.

        BioSante's products, either approved or in clinical development, include:

        BioSante's corporate strategy is to develop high value medically-needed pharmaceutical products. As a part of BioSante's corporate strategy, BioSante seeks to implement strategic alternatives with respect to its products and its company, including licenses, business collaborations and other business combinations or transactions with other pharmaceutical and biotechnology companies. Therefore, as a matter of course, from time to time, BioSante may engage in discussions with third parties regarding the licensure, sale or acquisition of its products and technologies, with the goal of maximizing stockholder value.

        BioSante's lead product in development is LibiGel for the treatment of FSD, specifically HSDD, in postmenopausal women, for which there is no FDA-approved pharmaceutical product. For the past several years, BioSante has focused its efforts on two Phase III LibiGel efficacy trials and a LibiGel Phase III cardiovascular and breast cancer safety study. In December 2011, BioSante announced results from its two Phase III LibiGel efficacy trials, which showed that the trials did not meet the co-primary or secondary endpoints. Although LibiGel performed as predicted, increasing satisfying sexual events and sexual desire and decreasing distress associated with low desire, the placebo response in the two efficacy trials was greater than expected, and LibiGel's results were not shown to be statistically different from the placebo.

        Beginning in December 2011, BioSante analyzed the data from its Phase III LibiGel efficacy trials, consulted with key opinion leaders in female sexual dysfunction, testosterone therapy and placebo effects, and met with representatives of the FDA. As a result of this process, in June 2012 BioSante announced a plan to initiate two new LibiGel Phase III efficacy trials.

        BioSante is in the process of developing a protocol for the two new efficacy trials and applying for an FDA Special Protocol Assessment (SPA) agreement covering aspects of the two new efficacy trials. BioSante expects that any potential new LibiGel Phase III efficacy trials would include the same FDA-required efficacy endpoints as its prior Phase III efficacy trials: an increase in the number of satisfying sexual events and sexual desire, and decreased distress associated with low desire. BioSante estimates that the cost of the two new LibiGel Phase III efficacy trials would be similar to the cost of the previous trials, approximately $15 to $18 million each, or a combined $30 to $36 million spread

175


Table of Contents

over approximately 18 months. No assurance can be provided that these cost estimates will be correct or that BioSante, if it decides to pursue the trials, will be able to obtain the necessary working capital to fund the trials. In addition, no assurance can be provided that BioSante will be able to design the two new efficacy trials to the FDA's satisfaction or to minimize sufficiently the placebo effect and meet the co-primary and secondary endpoints for the trials.

        With respect to BioSante's LibiGel Phase III safety study, in September 2012, BioSante announced that the independent Data Monitoring Committee (DMC) completed its ninth unblinded review of the LibiGel Phase III cardiovascular events and breast cancer safety study and recommended that the LibiGel safety study should continue as per the FDA-agreed protocol, without modifications. Given this latest review during which no specific or general safety issues were raised, and after extensive consideration, BioSante announced in September 2012 the conclusion of the LibiGel Phase III safety study effective immediately. Prior to the initiation of the LibiGel safety study in 2008, the FDA had advised BioSante that subjects in the cardiovascular event and breast cancer safety study were required to have a minimum average exposure in the safety study of 12 months prior to submitting a LibiGel new drug application (NDA), and prior to a potential FDA approval of LibiGel. As of the date of the conclusion of the safety study, subjects had been in the study for an average time of 24.8 months; more than 3,200 subjects had been in the study for more than one year and over 1,850 subjects had been enrolled for more than two years. With this ninth unblinded review of the study by the DMC, and over 7,400 women-years of exposure, BioSante believes that adequate safety data of LibiGel use in menopausal women has been obtained.

        Elestrin is BioSante's first FDA approved product and now is one of BioSante's two FDA approved products. Meda Pharmaceuticals, Inc. (which acquired Jazz Pharmaceuticals, Inc.'s women's health business and which in turn acquired Azur Pharma International II Limited (Azur), BioSante's prior licensee), is marketing Elestrin in the U.S. In December 2009, BioSante entered into an amendment to its original licensing agreement with Azur pursuant to which BioSante received $3.16 million in non-refundable payments in exchange for the elimination of all remaining future royalty payments and certain milestone payments that could have been paid to BioSante related to sales of Elestrin. BioSante maintains the right to receive up to $140 million in sales-based milestone payments from Meda Pharmaceuticals if Elestrin reaches certain predefined sales per calendar year; although, based on current sales levels, BioSante believes its receipt of such payments unlikely in the near term, if at all.

        BioSante's male testosterone gel is its second FDA approved product. This product initially was developed by BioSante, and then licensed by BioSante to Teva for late stage clinical development. Teva submitted an NDA to the FDA in the beginning of 2011, which was approved by the FDA in February 2012. Subsequent to Teva submitting the NDA, in April 2011, a subsidiary of Abbott Laboratories, a marketer of a testosterone gel for men, filed a complaint against Teva alleging patent infringement. This litigation was settled in December 2011; however, the terms of the settlement agreement are confidential and have not been disclosed publicly. No launch date for this product has been announced by Teva.

        BioSante's GVAX cancer vaccines, which are designed to stimulate a patient's immune system to fight effectively the patient's own cancer, are in development for the treatment of several different types of cancer including melanoma, leukemia, pancreatic, breast and prostate cancer. Four of these vaccines—to treat pancreatic cancer, acute myeloid leukemia, chronic myeloid leukemia and melanoma—have been granted FDA orphan drug designation. Currently, there are 17 Phase I and Phase II clinical studies involving BioSante's GVAX cancer vaccines ongoing. The studies are being funded by various sources, including certain foundations and BioSante's licensees. BioSante's objective with respect to its GVAX cancer vaccines is to help facilitate further studies and commercialization in order to bring important cancer therapies to patients in need and to maximize the value of BioSante's GVAX cancer vaccine portfolio to its stockholders. This objective includes monetizing the entire

176


Table of Contents

portfolio or seeking additional licensees to fund, develop and eventually commercialize the cancer vaccines. BioSante currently is negotiating the terms of a potential transation with an unidentified third party pursunt to which, if completed, BioSante would sell all of its assets related to its GVAX cancer vaccine portfolio in exchange for a $1.0 million up front cash payment plus the potential for future royalty, milestone and sublicense payments.


BioSante's Primary Product Portfolio

GRAPHIC


Description of BioSante's Female Sexual Health, Menopause, Contraception and Male Hypogonadism Products

        Overview.    BioSante's products for female sexual health, menopause, contraception and male hypogonadism include its gel formulations of estradiol or testosterone and combinations of estrogen, progestogen and androgen.

        BioSante's gel products are designed to be quickly absorbed through the skin after application on the upper arm for the women's products, delivering the active component to the bloodstream evenly and in a non-invasive, painless manner. The gels are formulated to be applied once per day and to be absorbed into the skin without a trace of residue and to dry in under one to two minutes. BioSante believes its gel products have a number of benefits over competitive products, including the following:

        BioSante licenses the technology underlying LibiGel and Elestrin, but not its male testosterone gel, from Antares Pharma, Inc. (Antares). BioSante's male testosterone gel was developed by BioSante and

177


Table of Contents

licensed to Teva. BioSante licenses the technology underlying The Pill Plus from Wake Forest University Health Sciences and Cedars-Sinai Medical Center.

        LibiGel.    BioSante's lead product in development is LibiGel, a once daily transdermal testosterone gel designed to treat FSD, specifically HSDD in postmenopausal women.

        Although generally thought of as being limited to men, testosterone also is important to women and its deficiency has been found to cause low libido or sex drive. Studies have shown that testosterone therapy in women can boost sexual desire, sexual activity and pleasure, increase bone density, raise energy levels and improve mood. According to a study published in the Journal of the American Medical Association, 43 percent of American women between the ages of 18 to 59, or about 40 million women, experience some degree of impaired sexual function. Among the more than 1,400 women surveyed, 32 percent lacked interest in sex (low sexual desire). Furthermore, according to a study published in the New England Journal of Medicine, 43 percent of American women between the ages of 57 to 85 experience low sexual desire. Importantly, according to IMS data, approximately two million testosterone prescriptions were written off-label for women in the U.S. in 2010. In addition, according to independent primary market research, approximately two million additional prescriptions of compounded testosterone were written for women in the U.S. in 2010. Female sexual dysfunction is defined as a consistent lack of sexual desire, arousal or pleasure. The majority of women with FSD are postmenopausal, experiencing symptoms due to hormonal changes that occur with aging or following surgical menopause.

        Although treatment with LibiGel in BioSante's Phase II clinical trial significantly increased satisfying sexual events in surgically menopausal women suffering from FSD, the Phase III efficacy trials did not meet the co-primary endpoints of increase in satisfying sexual events or increase in sexual desire or the secondary endpoint of decrease in sexual distress. The Phase II trial results showed LibiGel significantly increased the number of satisfying sexual events by 238 percent versus baseline; this increase also was significant versus placebo. In this trial, the effective dose of LibiGel produced testosterone blood levels within the normal range for pre-menopausal women and had a safety profile similar to that observed in the placebo group. In addition, no serious adverse events and no discontinuations due to adverse events occurred in any subject receiving LibiGel. The Phase II clinical trial was a double-blind, placebo-controlled trial, in surgically menopausal women distressed by their low sexual desire and activity.

        The Phase III safety and efficacy trials were randomized, double-blind, placebo-controlled, multi-center trials of a total of 1,172 menopausal women, exposed to LibiGel or placebo for six months. Subjects in the first trial, called BLOOM-1, who were treated with LibiGel showed an increase of 1.47 days with a satisfying sexual event compared to baseline, while those receiving placebo gel showed an increase of 1.26 days with a satisfying sexual event compared to baseline. The difference between these increases demonstrated a p value of 0.463. (The smaller the p value, the stronger the statistical significance. A p-value of .05 or less is typically used to represent statistical significance of trial results.) In BLOOM 1, there was an increase in the total number of satisfying sexual events of 3.87 from baseline (an increase of 83 percent) in the LibiGel group and in the placebo group there was an increase of 3.52 satisfying sexual events from baseline (an increase of 65 percent) for a p value of 0.698. Subjects in BLOOM-2 who were treated with LibiGel showed an increase of 1.0 day with a satisfying sexual event compared to baseline, while those receiving placebo gel showed an increase of 1.28 days with a satisfying sexual event compared to baseline. The difference between these increases demonstrated a p value of 0.214. Subjects in BLOOM-1 showed an increase in mean sexual desire of 0.03 over placebo, a p value of 0.672, while subjects in BLOOM-2 demonstrated an increase in mean sexual desire of 0.03 compared to placebo, a p value of 0.48. Subjects in both trials demonstrated a decrease in sexual distress when treated with LibiGel (p=0.569 and p=0.26) compared to baseline.

178


Table of Contents

        As seen in previous pharmacokinetic data, the LibiGel groups in both Phase III efficacy trials showed an increase in free testosterone levels compared to baseline and placebo. In BLOOM-1, mean free testosterone at baseline was approximately 1.19 picograms per milliliter (pg/ml) and 1.10 pg/ml in the placebo and LibiGel groups, respectively. In month six of the trial, free testosterone levels were approximately 1.35 pg/ml and 4.01 pg/ml in the placebo and LibiGel groups, respectively. In BLOOM-2, mean free testosterone at baseline was approximately 1.06 pg/ml and 1.19 pg/ml in the placebo and LibiGel group, respectively. In month six of the trial, free testosterone levels were approximately 1.09 pg/ml and 3.70 pg/ml in the placebo and LibiGel groups, respectively.

        Results of the two Phase III efficacy trials were announced on December 14, 2011. Subsequently, BioSante continued to analyze the data from the Phase III LibiGel efficacy trials, consulted with key opinion leaders in female sexual dysfunction, testosterone therapy and placebo effects, and met with representatives of the FDA. As a result of this process, in June 2012 BioSante announced a plan to initiate two new LibiGel Phase III efficacy trials.

        In September 2012, BioSante announced that the independent DMC completed its ninth unblinded review of the LibiGel Phase III cardiovascular events and breast cancer safety study and recommended that the LibiGel safety study should continue as per the FDA-agreed protocol, without modifications. At the time of the DMC review, there were 53 adjudicated CV events, with a lower than anticipated event rate of approximately 0.72 percent. In the same population of subjects, there were 27 breast cancers reported, a rate of approximately 0.37 percent, which is in line with the expected rate based on the ages of the subjects enrolled in the study. Given this latest review during which no specific or general safety issues were raised, and after extensive consideration, BioSante announced in September 2012 the conclusion of the LibiGel Phase III safety study effective immediately. Prior to the initiation of the LibiGel safety study in 2008, the FDA had advised BioSante that subjects in the safety study were required to have a minimum average exposure in the safety study of 12 months prior to submitting a LibiGel new drug application (NDA), and prior to a potential FDA approval of LibiGel. As of the date of the conclusion of the safety study, subjects had been in the study for an average time of 24.8 months; more than 3,200 subjects had been in the study for more than one year and over 1,850 subjects had been enrolled for more than two years. With this ninth positive unblinded review of the study by the DMC, and over 7,400 women-years of exposure, BioSante believes that adequate safety data of LibiGel use in menopausal women has been obtained. BioSante remains blinded as to whether the CV events and breast cancers are experienced by subjects in the LibiGel arm or the placebo arm of the study.

        BioSante is continuing to develop a protocol for the two new LibiGel efficacy trials and will seek an FDA Special Protocol Assessment (SPA) agreement covering aspects of the two new efficacy trials.

        Male Testosterone Gel.    BioSante's once daily transdermal testosterone gel indicated for the treatment of hypogonadism, or testosterone deficiency, in men is BioSante's second FDA approved product.

        Testosterone deficiency in men is known as hypogonadism. Low levels of testosterone may result in lethargy, depression, decreased sex drive, impotence, low sperm count and increased irritability. Men with severe and prolonged reduction of testosterone also may experience loss of body hair, reduced muscle mass, osteoporosis and bone fractures due to osteoporosis. Testosterone therapy has been shown to restore levels of testosterone with minimal side effects.

        There are currently several products on the market for the treatment of low testosterone levels in men. As opposed to estrogen therapy products, oral administration of testosterone is currently not possible as the hormone is, for the most part, rendered inactive in the liver making it difficult to achieve adequate levels of the compound in the bloodstream. Current methods of administration include testosterone injections, patches and gels. Testosterone injections require large needles, are often painful and not effective for maintaining adequate testosterone blood levels throughout the day.

179


Table of Contents

Delivery of testosterone through transdermal patches was developed primarily to promote the therapeutic effects of testosterone therapy without the often painful side effects associated with testosterone injections. Transdermal patches, however, similar to estrogen patches, have a physical presence, can fall off and can result in skin irritation. Testosterone gel formulated products for men are designed to deliver testosterone without the pain of injections and the physical presence, skin irritation and discomfort associated with transdermal patches. BioSante is aware of four gel testosterone products for men currently on the market in the United States.

        Unlike LibiGel and Elestrin, BioSante's male testosterone gel was developed by BioSante and therefore BioSante has no royalty or milestone obligations to any other party. BioSante's male testosterone gel is subject to a development and license agreement with Teva Pharmaceuticals USA, Inc., a wholly-owned subsidiary of Teva Pharmaceutical Industries Ltd. Under the development and license agreement, Teva has agreed to market the male testosterone gel for the U.S. market and is responsible for any and all manufacturing and marketing associated with the product. The financial terms of the development and license agreement included a $1.5 million upfront payment by Teva, which was paid to BioSante in December 2002, and an obligation by Teva to pay BioSante certain milestones and royalties on sales of the product in exchange for rights to develop and market the product, as described in more detail below. Teva is entitled to deduct the amount of any legal expenses incurred by Teva in connection with associated patent litigation against Teva from the net sales of the product. The term of the development and license agreement will expire 10 years from the date on which Teva makes its first commercial sale of the male testosterone gel to an unrelated third party in an arms-length transaction in the United States. The parties may terminate the development and license agreement upon the occurrence of certain events, including a material breach of the agreement by the other party. BioSante may terminate the agreement if Teva files a petition in bankruptcy, enters into an arrangement with its creditors or makes an assignment for the benefit of creditors or a receiver or trustee is appointed or if Teva suffers or permits the entry of an order adjudicating it to be bankrupt or insolvent. Teva may terminate the agreement if Teva determines that the continued development and/or marketing of the male testosterone gel is no longer commercially viable.

        In October 2012, BioSante and Teva entered into an amendment to the development and license pursuant to which Teva made a $1.0 million payment to BioSante upon the signing of the amendment and agreed to make the following milestone based payments to BioSante: (1) $500,000 if the FDA authorizes marketing of the licensed male testosterone gel as an "AB-rated" equivalent to AndroGel®; (2) $750,000 upon the earlier to occur of (a) December 31, 2012 and (b) five business days after Teva's submission to the FDA of a final report regarding a "washing" clinical study required by the FDA; and (3) $500,000 upon the earlier to occur of (a) December 31, 2013 and (b) five business days after Teva's commencement of commercial manufacture of the licensed product for sale in the United States. In addition, Teva has agreed to pay BioSante $4.0 million in the event Teva is the sole marketer in the United States of a generic 1% testosterone gel AB-rated to AndroGel® for at least 180 days immediately following the launch date of the licensed product in the United States. The royalty rate to be paid by Teva to BioSante under the agreement is five percent of net sales; provided, however, that during the period of time that Teva markets the licensed product and is the sole marketer of a generic 1% testosterone gel that is AB-rated to AndroGel® in the United States, the royalty rate will be seven and one half percent of net sales. Additionally, pursuant to the terms of the October 2012 amendment, the parties agreed to release each other from certain liabilities.

        Teva submitted an NDA to the FDA in the beginning of 2011, which was approved by the FDA in February 2012. Subsequent to Teva submitting the NDA, in April 2011, a subsidiary of Abbott Laboratories, a marketer of a testosterone gel for men, filed a complaint against Teva alleging patent infringement. This litigation was settled in December 2011; however, the terms of the settlement agreement are confidential and have not been disclosed publicly. No launch date for this product has been announced by Teva.

180


Table of Contents

        The Pill-Plus.    The Pill-Plus is based on three issued U.S. patents claiming triple component therapy via any route of administration (the combination use of estrogen plus progestogen plus androgen, e.g. testosterone). The Pill-Plus adds a third component, an androgen, to the normal two component (estrogen and progestogen) oral contraceptive to prevent testosterone deficiency which can result from the estrogen and progestogen components and which often leads to a decrease in sexual desire, sexual activity and mood changes. In a completed Phase II double-blind randomized clinical trial, the addition of an oral androgen resulted in restoration of testosterone levels to the normal and physiological range for healthy women. Paradoxically, many women who use oral contraceptives have reduced sexual desire, arousabilty and activity due to the estrogen and progestogen in normal oral contraceptives. The Pill-Plus is designed to avoid or to improve the symptoms of female sexual dysfunction in oral contraceptive users.

        BioSante has an exclusive license from Wake Forest University Health Sciences (formerly known as Wake Forest University) and Cedars-Sinai Medical Center for the three issued U.S. patents for triple component contraception. The financial terms of the license include an upfront payment, regulatory milestone payments, maintenance payments and royalty payments by BioSante if a product incorporating the licensed technology gets approved and subsequently is marketed.

        The Pill-Plus is subject to a sublicense agreement with Pantarhei Bioscience B.V. (Pantarhei), a Netherlands-based pharmaceutical company. Pantarhei is responsible under the agreement for all expenses to develop and market the product. BioSante may receive certain development and regulatory milestones for the first product developed under the license. In addition, BioSante will receive royalty payments on any sales of the product in the U.S., if and when approved and marketed. If the product is sublicensed by Pantarhei to another company, BioSante will receive a percentage of any and all payments received by Pantarhei for the sublicense from a third party. BioSante has retained all rights under its licensed patents to the transdermal delivery of triple component contraceptives.

        Elestrin.    Elestrin is BioSante's first FDA approved product. Elestrin is a once daily transdermal gel that delivers estrogen without the skin irritation associated with, and the physical presence of, transdermal patches, and to avoid the effects of oral estrogen. Elestrin contains estradiol versus conjugated equine estrogen contained in the most commonly prescribed oral estrogen.

        Elestrin is indicated for the treatment of moderate-to-severe vasomotor symptoms (hot flashes) associated with menopause. Elestrin is administered using a metered dose applicator. Two doses of Elestrin were approved by the FDA.

        Meda Pharmaceuticals Inc. is marketing Elestrin in the U.S. In December 2009, BioSante entered into an amendment to its original licensing agreement with Azur (which was acquired by Jazz Pharmaceuticals, Inc. which subsequently sold its women's health business to Meda Pharmaceuticals) pursuant to which BioSante received $3.16 million in non-refundable payments in exchange for the elimination of all remaining future royalty payments and certain milestone payments that could have been paid to BioSante related to sales of Elestrin. BioSante maintains the right to receive up to $140 million in sales-based milestone payments from Meda Pharmaceuticals if Elestrin reaches certain predefined sales per calendar year, although based on current sales levels, BioSante believes its receipt of such payments unlikely in the near term, if at all.

        Elestrin also is subject to an exclusive agreement with Valeant Pharmaceuticals International, Inc. (which acquired PharmaSwiss SA) for the marketing of Elestrin in Israel. Valeant Pharmaceuticals will be responsible for regulatory and marketing activities in Israel. Israeli authorities have approved Elestrin, but the product has not been launched.

        Other Products.    Marketing rights to BioSante's gel products in Canada are subject to an agreement with Paladin Labs Inc. In exchange for the sublicense, Paladin agreed to make an initial investment in BioSante's company, make future milestone payments and pay royalties on sales of the

181


Table of Contents

products in Canada. The milestone payments are required to be in the form of a series of equity investments by Paladin in BioSante's common stock at a 10 percent premium to the market price of its stock at the time the equity investment is made. No recent investments have been made and none are expected in the foreseeable future.


Description of BioSante's GVAX Cancer Vaccines and Other Technologies

        GVAX Cancer Vaccine Technology.    BioSante's GVAX cancer vaccines are designed to stimulate the patient's immune system to effectively fight cancer. BioSante's cancer vaccines are comprised of tumor cells that are genetically modified to secrete an immune-stimulating cytokine known as granulocyte-macrophage colony-stimulating factor (GM-CSF), and are then irradiated for safety. Since BioSante's cancer vaccines consist of whole tumor cells, the cancer patient's immune system can be activated against multiple tumor cell components, or antigens, potentially resulting in greater clinical benefit than if the vaccine consisted of only a single tumor cell component. Additionally, the secretion of GM-CSF by the modified tumor cells can enhance greatly the immune response by recruiting and activating dendritic cells at the injection site, a critical step in the optimal response by the immune system to any immunotherapy product. The antitumor immune response which occurs throughout the body following administration of BioSante's cancer vaccine potentially can result in the destruction of tumor cells that persist or recur following surgery, radiation therapy or chemotherapy treatment.

        BioSante's cancer vaccines can be administered conveniently in an outpatient setting as an injection into the skin, a site where immune cells, including in particular dendritic cells, can be optimally accessed and activated. These cancer vaccines are being tested primarily as non patient-specific, or allogeneic, vaccines. BioSante's GVAX cancer vaccines are in development for the treatment of several different types of cancer including melanoma, leukemia, pancreatic, breast and prostate cancer. Four of these vaccines—to treat pancreatic cancer, acute myeloid leukemia, chronic myeloid leukemia and melanoma—have been granted FDA orphan drug designation. Currently, there are 17 Phase I and Phase II clinical studies involving BioSante's GVAX cancer vaccines ongoing. The studies are being funded by various sources, including certain foundations and BioSante's licensees.

        In March 2011, BioSante licensed aspects of its GVAX pancreas cancer vaccine and GVAX prostate cancer vaccine to Aduro BioTech, Inc., a clinical-stage immunotherapy company, solely for use in combination with Aduro's proprietary vaccine platform based on Listeria monocytogenes (Lm). Under the agreement, BioSante is entitled to receive milestone and royalty payments upon the commercialization of combination cancer vaccines using its GVAX cancer vaccine technology in combination with Aduro's vaccines.

        In July 2011, BioSante announced an exclusive worldwide license of its melanoma vaccine to The John P. Hussman Foundation (Hussman Foundation), in exchange for its receipt of an upfront license fee, milestone payments, royalties on any sales and a percentage of any sublicense fees. Additionally, the Hussman Foundation has committed up to approximately $11 million in GVAX melanoma vaccine Phase I and Phase II clinical development funding.

        BioSante's objective with respect to its GVAX cancer vaccines is to help facilitate further studies and commercialization in order to bring important cancer therapies to patients in need and to maximize the value of BioSante's GVAX cancer vaccine portfolio to the BioSante stockholders. This objective includes monetizing the entire portfolio or seeking additional licensees to fund, develop and eventually commercialize the cancer vaccines. BioSante currently is negotiating the terms of a potential transation with an unidentified third party pursunt to which, if completed, BioSante would sell all of its assets related to its GVAX cancer vaccine portfolio in exchange for a $1.0 million up front cash payment plus the potential for future royalty, milestone and sublicense payments.

        Oncolytic Virus Technology.    In November 2010, BioSante entered into an assignment and technology transfer agreement with Cold Genesys, Inc. pursuant to which BioSante sold to Cold

182


Table of Contents

Genesys exclusive, worldwide rights to develop and commercialize its oncolytic virus technology. The oncolytic virus technology uses replication-competent adenoviruses derived from Adenovirus type 5, a common "cold" virus that replicate in and selectively kill tumor cells. The replication of the virus is controlled by replacing the promoter of a gene required for replication with a promoter that is preferentially expressed only in tumor cells. Furthermore, the virus may optionally include a gene encoding a cytokine, which enhances immune stimulation to the tumor, thereby providing a dual mechanism of action for killing targeted cancer cells by direct cell lysis as well as via cellular and humoral immune responses to the tumor. The oncolytic virus technology includes CG0070, a replication-competent adenovirus that has completed a Phase I clinical trial for treatment of superficial bladder cancer. In exchange for the technology, BioSante received an initial 19.9 percent ownership position in Cold Genesys and a $95,000 upfront cash payment and is eligible to receive future milestone and royalty payments.


Sales and Marketing

        BioSante currently has no sales and marketing personnel to sell any of its products on a commercial basis. Under BioSante's license agreements, its licensees have agreed to market the products covered by the agreements in certain countries. For example, under BioSante's license agreement with Meda Pharmaceuticals, Meda Pharmaceuticals has agreed to use commercially reasonable efforts to manufacture, market, sell and distribute Elestrin for commercial sale and distribution throughout the United States, and under BioSante's agreement with Teva, Teva has agreed to use commercially reasonable efforts to market its male testosterone gel in the United States. If and when BioSante is ready to launch commercially a product not covered by its license agreements, BioSante will either contract with or hire qualified sales and marketing personnel or seek a joint marketing partner or licensee to assist BioSante with this function.


Research and Product Development

        BioSante historically has spent a significant amount of its financial resources on product development activities, with the largest portion being spent on clinical studies for LibiGel. BioSante spent approximately $44.2 million in 2011, $39.7 million in 2010 and $13.7 million in 2009 on research and product development activities. BioSante spent an average of approximately $3.7 million per month on its research and product development activities during 2011, the substantial majority of which was spent on its LibiGel Phase III clinical studies. BioSante incurred expenses of $14.5 million on research and development activities during the nine months ended September 30, 2012, the substantial majority of which was spent on its LibiGel Phase III cardiovascular events and breast cancer study, and which is a 61 percent decrease compared to the same period in 2011, primarily as a result of the conclusion of BioSante's prior two LibiGel Phase III efficacy trials at the end of 2011. BioSante anticipates that its research and development expenses for 2013 will consist primarily of expenses associated with the conclusion of the safety study and the planning for the two new LibiGel Phase III efficacy trials.


Manufacturing

        BioSante does not have any facilities suitable for manufacturing on a commercial scale basis any of its products nor does it have any experience in volume manufacturing. BioSante currently uses third-party current Good Manufacturing Practices (cGMP), manufacturers to manufacture its products in development in accordance with FDA and other appropriate regulations.


Patents, Licenses and Proprietary Rights

        BioSante's success depends and will continue to depend in part upon its ability to maintain its exclusive licenses, to obtain and maintain patent protection for its products and processes, to preserve its proprietary information, trademarks and trade secrets and to operate without infringing the

183


Table of Contents

proprietary rights of third parties. BioSante's policy is to attempt to protect its technology by, among other things, filing patent applications or obtaining license rights for technology that BioSante considers important to the development of its business.

        Gel Products.    BioSante licensed the technology underlying LibiGel and Elestrin, but not its male testosterone gel, from Antares Pharma, Inc. Under the agreement, Antares granted BioSante an exclusive license to certain patents and patent applications covering these gel products, including rights to sublicense, in order to develop and market the products in certain territories, including the U.S., Canada, New Zealand, South Africa, Israel, Mexico, China (including Hong Kong) and Indonesia. BioSante is the exclusive licensee in certain territories for issued U.S. patents for these products and additional patent applications have been filed for this licensed technology in the U.S. and several foreign jurisdictions. Under the agreement, BioSante is required to pay Antares certain development and regulatory milestone payments and royalties based on net sales of any products BioSante or its sub-licensees sell incorporating the in-licensed technology. Specifically, BioSante is obligated to pay Antares 25 percent of all upfront and milestone payments related to a license and a 4.5 percent royalty on net sales of product by BioSante or a licensee.

        BioSante and Antares may terminate the license agreement upon the occurrence of certain events, including a material breach of the agreement by the other party or if the other party goes into liquidation or bankruptcy or makes an assignment for the benefit of creditors or a receiver is appointed. Antares may terminate the agreement with respect to certain products or territories if BioSante does not continue development, seeking regulatory approval or marketing of such products in the covered territories. BioSante may terminate the agreement with respect to certain products or territories if, for technical, scientific or regulatory reasons, it is not likely that the product will gain required regulatory approvals in a territory, if regulatory approvals in a territory are not obtained or if BioSante determines that it is not economically viable to continue development or marketing of a product in a territory.

        The patents covering the formulations used in these gel products are expected to expire in 2022, although with respect to LibiGel, a new U.S. patent covering the "method of use" of LibiGel for treating FSD and HSDD was issued, which will expire in December 2028. In addition, BioSante has other patents pending, which, if issued, may expire later than 2028. BioSante's male testosterone gel was developed by BioSante and not covered under the Antares license.

        GVAX Cancer Vaccine Technology.    BioSante owns development and commercialization rights to its GVAX cancer vaccine technology as a result of its merger with Cell Genesys in October 2009. The patent estate covering BioSante's cancer vaccine technology is licensed exclusively to BioSante from Johns Hopkins University and The Whitehead Institute for Biomedical Research. In addition, BioSante owns several patents and patent applications that build upon its in-licensed technology, and provides for significant additional patent term.

        BioSante's cancer vaccine patent estate broadly covers its cancer vaccine products and pipeline. The cancer vaccine patent estate includes 17 patent families, comprising over 50 issued US and foreign patents, directed to various aspects of BioSante's cancer vaccine technology. The patents expire between 2012 and 2026.

        Under the various agreements, BioSante is required to pay Johns Hopkins University and The Whitehead Institute for Biomedical Research certain development and regulatory milestone payments and royalties based on net sales of any products BioSante or its sub-licensees sell incorporating the in-licensed technology. BioSante currently is negotiating the terms of a potential transation with an unidentified third party pursunt to which, if completed, BioSante would sell all of its assets related to its GVAX cancer vaccine portfolio in exchange for a $1.0 million up front cash payment plus the potential for future royalty, milestone and sublicense payments.

184


Table of Contents

        The Pill Plus.    BioSante licensed the technology underlying its triple component contraceptives, or The Pill Plus, from Wake Forest University Health Sciences and Cedars-Sinai Medical Center. The financial terms of this license include regulatory milestone payments, maintenance payments and royalty payments by BioSante if a product incorporating the licensed technology gets approved and subsequently is marketed. The patents covering the technology underlying The Pill Plus expire in 2016.

        Trademarks and Trademark Applications/Registrations.    BioSante owns trademark registrations in the U.S. and/or in certain foreign jurisdictions for several marks, including BIOSANTE® and LIBIGEL®. In addition, BioSante has filed trademark applications for several other marks including ELESTRIN™ (pursuant to a license agreement regarding Elestrin, the Elestrin trademark in the U.S. is now owned by Meda Pharmaceuticals). In addition, BioSante owns common law rights to several trademarks, including BIOSANTE®, LIBIGEL®, GVAX™, THE PILL-PLUS™ and ELESTRIN™. For those trademarks for which registration has been sought, registrations have issued for some of those trademarks in certain jurisdictions and others currently are in the application/prosecution phase.

        Confidentiality and Assignment of Inventions Agreements.    BioSante requires its employees, consultants and advisors having access to its confidential information to execute confidentiality agreements upon commencement of their employment or consulting relationships with BioSante. These agreements generally provide that all confidential information BioSante develops or makes known to the individual during the course of the individual's employment or consulting relationship with BioSante must be kept confidential by the individual and not disclosed to any third parties. BioSante also requires all of its employees and consultants who perform research and development for BioSante to execute agreements that generally provide that all inventions and works-for-hire conceived by these individuals during their employment by BioSante will be BioSante's property.


Competition

        There is intense competition in the biopharmaceutical industry. Potential competitors in the United States are numerous and include major pharmaceutical and specialized biotechnology companies, universities and other institutions. In general, competition in the pharmaceutical industry can be divided into four categories: (1) corporations with large research and developmental departments that develop and market products in many therapeutic areas; (2) companies that have moderate research and development capabilities and focus their product strategy on a small number of therapeutic areas; (3) small companies with limited development capabilities and only a few product offerings; and (4) university and other research institutions. Many of BioSante's competitors have longer operating histories, greater name recognition, substantially greater financial resources and larger research and development staffs than BioSante does, as well as substantially greater experience than BioSante in developing products, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products. A significant amount of research is carried out at academic and government institutions. These institutions are aware of the commercial value of their findings and are aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for use of technology that they have developed.

        There are several firms currently marketing or developing products that may be competitive with BioSante's gel products. They include Upsher-Smith Laboratories, Inc., Noven Pharmaceuticals, Inc. (a subsidiary of Hisamitsu Pharmaceutical Co., Inc.), Auxilium Pharmaceuticals, Inc., Ascend Therapeutics, Inc., Watson Pharmaceuticals, Inc. and Abbott Laboratories. Competitor products include oral tablets, transdermal patches, a spray and gels. BioSante expects its FDA-approved products, Elestrin and its male testosterone gel, and its other products, if and when approved for sale, to compete primarily on the basis of product efficacy, safety, patient convenience, reliability and patent position and potentially on cost. In addition, the first product to reach the market in a therapeutic or preventative area is often at a significant competitive advantage relative to later entrants in the market and may result in certain marketing exclusivity as per federal legislation. Acceptance by physicians and other health care providers, including managed care groups, also is critical to the success of a product versus competitor products.

185


Table of Contents

        With regard to BioSante's GVAX cancer vaccine technology and other related technologies, BioSante faces substantial competition in the development of products for cancer and other diseases. This competition from other manufacturers is expected to continue in both U.S. and international markets. Cancer vaccines are evolving areas in the biotechnology industry and are expected to undergo many changes in the coming years as a result of technological advances. BioSante currently is aware of a number of groups that are developing cancer vaccines including early-stage and established biotechnology companies, pharmaceutical companies, academic institutions, government agencies and research institutions. Examples in the cancer vaccine area include Dendreon Corporation, which has an FDA approved vaccine for prostate cancer.


Governmental Regulation

        Pharmaceutical companies are subject to extensive regulation by national, state and local agencies in countries in which they do business. Pharmaceutical products intended for therapeutic use in humans are governed by extensive FDA regulations in the United States and by comparable regulations in foreign countries. Any products developed by BioSante will require FDA approvals in the United States and comparable approvals in foreign markets before they can be marketed.

        The U.S. Federal Food, Drug, and Cosmetic Act (FDCA) and other federal and state statutes and regulations govern or influence, among other things, the development, testing, manufacture, safety, labeling, storage, recordkeeping, approval, advertising, promotion, sale, import, export and distribution of pharmaceutical products in the United States. Pharmaceutical manufacturers also are subject to certain record-keeping and reporting requirements, establishment registration and product listing, and FDA inspections.

        Manufacturers of controlled substances also must comply with the federal Controlled Substances Act of 1970 (CSA) and regulations promulgated by the U.S. Drug Enforcement Administration (DEA), as well as similar state and local regulatory requirements for manufacturing, distributing, testing, importing, exporting and handling controlled substances.

        Noncompliance with applicable legal and regulatory requirements can have a broad range of consequences, including warning letters, fines, seizure of products, product recalls, total or partial suspension of production and distribution, refusal to approve NDAs or other applications or revocation of approvals previously granted, withdrawal of product from marketing, injunction, withdrawal of licenses or registrations necessary to conduct business, disqualification from supply contracts with the government, and criminal prosecution.

        Product development and approval within the FDA regulatory framework take a number of years, involve the expenditure of substantial resources, and are uncertain. Many products ultimately do not reach the market because they are not found to be safe or effective or cannot meet the FDA's other regulatory requirements. After a product is approved, the FDA may revoke or suspend the product approval if compliance with post-market regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-market studies or evidence of safety concerns. Further, the current regulatory framework may change and additional regulatory or approval requirements may arise at any stage of BioSante's product development that may affect approval, delay the submission or review of an application or require additional expenditures by BioSante. BioSante may not be able to obtain necessary regulatory clearances or approvals on a timely basis, if at all, for any of its products under development. Delays in receipt or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or failure to comply with existing or future regulatory requirements could have a material adverse effect on BioSante's business.

186


Table of Contents

        New Product Development and Approval.    All applications for FDA approval must contain information relating to product formulation, raw material suppliers, stability, product testing, manufacturing processes, manufacturing facilities, packaging, labeling, quality control, and evidence of safety and effectiveness for intended uses. For a generic drug product, instead of safety and effectiveness data, an application must demonstrate that the proposed product is the same as the branded drug in several key characteristics. There are two types of applications used for obtaining FDA approval of new non-biological drug products, other than a generic product:

        The process by which a product, other than a generic product, is approved for marketing in the United States can take from three to more than 10 years, and generally involves the following:

        To the extent that a 505(b)(2) NDA applicant can rely on a previously approved application or published literature, it may not be required to conduct some or all laboratory and preclinical tests or human clinical studies.

        Pre-Clinical Studies and Clinical Trials.    Typically, preclinical studies are conducted in the laboratory and in animals to gain preliminary information on a product's uses and physiological effects and harmful effects, if any, and to identify any potential safety problems that would preclude testing in humans. The results of these studies, together with the general investigative plan, protocols for specific human studies and other information, are submitted to the FDA as part of the IND application. The FDA regulations do not, by their terms, require FDA approval of an IND. Rather, they allow a clinical

187


Table of Contents

investigation to commence if the FDA does not notify the sponsor to the contrary within 30 days of receipt of the IND. As a practical matter, however, FDA approval is often sought before a company commences clinical investigations. That approval may come within 30 days of IND receipt but may involve substantial delays if the FDA requests additional information. BioSante's submission of an IND, or those of its collaboration partners, may not result in FDA authorization to commence a clinical trial.

        A separate submission to an existing IND also must be made for each successive clinical trial conducted during product development. Depending on its significance, the FDA also must approve changes to an existing IND. Further, an independent institutional review board (IRB) for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center and it must monitor the study until completed. Alternatively, a central IRB may be used instead of individual IRBs. The FDA, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical Practice requirements and regulations for informed consent.

        The sponsor of a drug product typically conducts human clinical trials in three sequential phases, but the phases may overlap or not all phases may be necessary. The initial phase of clinical testing, which is known as Phase I, is conducted to evaluate the metabolism, uses and physiological effects of the experimental product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence of possible effectiveness. Phase I studies can also evaluate various routes, dosages and schedules of product administration. These studies generally involve a small number of healthy volunteer subjects, but may be conducted in people with the disease the product is intended to treat. The total number of subjects is generally in the range of 20 to 80. A demonstration of therapeutic benefit is not required in order to complete Phase I trials successfully. If acceptable product safety is demonstrated, Phase II trials may be initiated.

        Phase II trials are designed to evaluate the effectiveness of the product in the treatment of a given disease and involve people with the disease under study. These trials often are well controlled, closely monitored studies involving a relatively small number of subjects, usually no more than several hundred. The optimal routes, dosages and schedules of administration are determined in these studies. If Phase II trials are completed successfully, Phase III trials are often commenced, although Phase III trials are not always required.

        Phase III trials are expanded, controlled trials that are performed after preliminary evidence of the effectiveness of the experimental product has been obtained. These trials are intended to gather the additional information about safety and effectiveness that is needed to evaluate the overall risk/benefit relationship of the experimental product and provide the substantial evidence of effectiveness and the evidence of safety necessary for product approval. Phase III trials are usually conducted with several hundred to several thousand subjects.

        A clinical trial may combine the elements of more than one phase and typically two or more Phase III studies are required. A company's designation of a clinical trial as being of a particular phase is not necessarily indicative that the trial will be sufficient to satisfy the FDA requirements of that phase because this determination cannot be made until the protocol and data have been submitted to and reviewed by the FDA. In addition, a clinical trial may contain elements of more than one phase notwithstanding the designation of the trial as being of a particular phase. The FDA closely monitors the progress of the phases of clinical testing and may, at its discretion, re-evaluate, alter, suspend or terminate the testing based on the data accumulated and its assessment of the risk/benefit ratio to patients. It is not possible to estimate with any certainty the time required to complete Phase I, II and III studies with respect to a given product.

        Success in early-stage clinical trials does not necessarily assure success in later-stage clinical trials. Data obtained from clinical activities are not always conclusive and may be subject to alternative

188


Table of Contents

interpretations that could delay, limit or even prevent regulatory approval. Regulations require the posting of certain details about active clinical trials on government (i.e., www.clinicaltrials.gov) or independent websites, and subsequently a limited posting of the results of those trials. This helps prospective patients find out about trials they may wish to enroll in, but also provides some competitive intelligence to other companies working in the field. Failure to post the trial or its results in a timely manner can result in civil penalties and the rejection of the drug application.

        New Drug Applications.    The results of the product development, including preclinical studies, clinical studies, and product formulation and manufacturing information, are then submitted to the FDA as part of the NDA.

        The FDA reviews each submitted application before accepting it for filing, and may refuse to file the application if it does not appear to meet the minimal standards for filing. If the FDA refuses to file an application and requests additional information, the application must be resubmitted with the requested information. Once the submission is accepted for filing, the FDA begins an in-depth review of the application to determine, among other things, whether a product is safe and effective for its intended use. As part of this review, the FDA may refer the application to an appropriate FDA-advisory committee of outside experts, typically a panel of clinicians, for review, evaluation and a recommendation. Under the policies agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA), the FDA has 10 months in which to complete its initial review of a standard NDA and respond to the applicant. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months of the PDUFA goal date. Following its review of an NDA, the FDA invariably raises questions or requests additional information. The NDA approval process can, accordingly, be very lengthy, and there is no assurance that the FDA will ultimately approve an NDA.

        Acceptance for filing of an application does not assure FDA approval for marketing. The FDA has substantial discretion in the approval process and may disagree with an applicant's interpretation of the submitted data, which could delay, limit, or prevent regulatory approval. If it concludes that the application does not satisfy the regulatory criteria for approval, the FDA typically issues a "complete response" letter communicating the agency's decision not to approve the application and outlining the deficiencies in the submission. The complete response letter may request additional information, including additional preclinical testing or clinical trials. Even if such information and data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

        If the FDA approves the application, the agency may require post-marketing studies, also known as Phase IV studies, as a condition to approval. These studies may involve continued testing of a product and development of data, including clinical data, about the product's effects in various populations and any side effects associated with long-term use. After approval, the FDA also may require post-marketing studies or clinical trials if new safety information develops.

        The FDA also may conclude that as part of the NDA or the 505(b)(2) NDA, the sponsor must develop a risk evaluation and mitigation strategy (REMS) to ensure that the benefits of the drug outweigh the risks. A REMS may have different components, including a package insert directed to patients, a plan for communication with healthcare providers, restrictions on a drug's distribution, or a medication guide to provide better information to consumers about the drug's risks and benefits.

        Special Protocol Assessments.    The special protocol assessment process generally involves FDA evaluation of a proposed Phase III clinical trial protocol and a commitment from the FDA that the design and analysis of the trial are adequate to support approval of an NDA, if the trial is performed according to the SPA and meets its endpoints. The FDA's guidance on the SPA process indicates that SPAs are designed to evaluate individual clinical trial protocols primarily in response to specific questions posed by the sponsors. In practice, the sponsor of a product candidate may request an SPA

189


Table of Contents

for proposed Phase III trial objectives, designs, clinical endpoints and analyses. A request for an SPA is submitted in the form of a separate amendment to an IND, and the FDA's evaluation generally will be completed within a 45-day review period under applicable PDUFA goals, provided that the trials have been the subject of discussion at an end-of-Phase II and pre-Phase III meeting with the FDA, or in other limited cases.

        If an agreement is reached, the FDA will reduce the agreement to writing and make it part of the administrative record. While the FDA's guidance on SPAs states that documented SPAs should be considered binding on the review division, the FDA has the latitude to change its assessment if certain exceptions apply. Exceptions include identification of a substantial scientific issue essential to safety or efficacy testing that later comes to light, a sponsor's failure to follow the protocol agreed upon, or the FDA's reliance on data, assumptions or information that are determined to be wrong.

        The Hatch-Waxman Act.    The Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act (Hatch-Waxman), established an abbreviated process for obtaining FDA approval for generic versions of approved branded drug products. In addition to establishing a shorter, less expensive pathway for approval of generic drugs, Hatch-Waxman provides incentives for the development of new branded products and innovations to approved products by means of marketing exclusivities and extension of patent rights. Under the Hatch-Waxman Act, newly-approved drugs and new conditions of use may benefit from a statutory period of non-patent marketing exclusivity. The Hatch-Waxman Act provides five years of marketing exclusivity if the product's active ingredient is a new chemical entity not previously approved. The Hatch-Waxman Act provides three years of marketing exclusivity for the approval of new and supplemental NDAs for, among other things, new indications, dosages or strengths of a drug containing a previously approved active ingredient, if new clinical investigations that were conducted or sponsored by the applicant are essential to the approval of the application. This three-year marketing exclusivity period protects against the approval of abbreviated new drug applications and 505(b)(2) NDAs for the innovation that required clinical data; it does not prohibit the FDA from accepting or approving abbreviated new drug application or 505(b)(2) applications for other products containing the same active ingredient. The five- and three-year marketing exclusivity periods apply equally to patented and non-patented drug products. It is under this provision that BioSante received three years marketing exclusivity for Elestrin.

        Orphan Drug Exclusivity.    The Orphan Drug Act was enacted by Congress to provide financial incentives for the development of drugs for rare conditions (affecting less than 200,000 individuals per year) in the United States. The orphan designation is granted for a combination of a drug entity and an indication and therefore it can be granted for an existing drug with a new (orphan) indication. Applications are made to the Office of Orphan Products Development at the FDA and a decision or request for more information is rendered in 60 days. NDAs for designated orphan drugs may be exempt from application fees, obtain additional clinical protocol assistance, are eligible for tax credits up to 50 percent of research and development costs, and are granted a seven-year period of exclusivity upon approval. The FDA cannot approve the same drug for the same condition during this period of exclusivity, except in certain circumstances where a new product demonstrates superiority to the original treatment.

        Other Regulatory Requirements.    Regulations continue to apply to pharmaceutical products after FDA approval occurs. Post-marketing safety surveillance is required in order to continue to market an approved product. The FDA also may, in its discretion, require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any approvals that could restrict the commercial applications of these products.

        All facilities and manufacturing techniques used to manufacture products for clinical use or sale in the United States must be operated in conformity with "current good manufacturing practice"

190


Table of Contents

regulations, commonly referred to as "cGMP" regulations, which govern the production of pharmaceutical products. BioSante currently does not have any manufacturing capability.

        The FDA regulates and monitors all promotion advertising and of prescription drugs after approval. All promotion must be consistent with the conditions of approval and submitted to the agency. Failure to adhere to FDA promotional requirements can result in enforcement letters, warning letters, changes to existing promotional material, and corrective notices to healthcare professionals. Promotion of a prescription drug for uses not approved by the FDA can have serious consequences and result in lawsuits by private parties, state governments and the federal government, significant civil and criminal penalties, and compliance agreements that require the company to change current practices and prevent unlawful activity in the future.

        U.S. Drug Enforcement Administration.    The DEA regulates certain drug products containing controlled substances, such as testosterone, pursuant to the U.S. Controlled Substances Act. The CSA and DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including registration, recordkeeping, reporting, storage, security and distribution. Recordkeeping requirements include accounting for the amount of product received, manufactured, stored and distributed. Companies handling controlled substances also are required to maintain adequate security and to report suspicious orders, thefts and significant losses. The DEA periodically inspects facilities for compliance with the CSA and its regulations. Failure to comply with current and future regulations of the DEA could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.

        Foreign Regulation.    Products marketed outside of the United States are subject to regulatory approval requirements similar to those in the United States, although the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until an appropriate application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In certain European and other countries (i.e., Canada, Australia and Japan), the sales price of a product also must be approved. The pricing review period often begins after market approval is granted. BioSante intends to seek and utilize foreign partners to apply for foreign approvals of its products.


Employees

        As of September 30, 2012, BioSante had 45 employees, including 33 in product development and 12 in management or administrative positions. None of BioSante's employees is covered by a collective bargaining agreement. BioSante also engages independent contractors from time to time on an as needed, project by project, basis.


Properties

        BioSante's principal executive office is located in a leased facility in Lincolnshire, Illinois, where BioSante leases approximately 20,000 square feet of office space for approximately $20,000 per month. BioSante's lease for this space expires in February 2014. Management of BioSante's company considers its leased properties suitable and adequate for its current and foreseeable needs.


Legal Proceedings

        On February 3, 2012, a purported class action lawsuit was filed in the United States District Court for the Northern District of Illinois under the caption Thomas Lauria, on behalf of himself and all others similarly situated v. BioSante Pharmaceuticals, Inc. and Stephen M. Simes naming BioSante and its President and Chief Executive Officer, Stephen M. Simes, as defendants. The complaint alleges that

191


Table of Contents

certain of BioSante's disclosures relating to the efficacy of LibiGel and its commercial potential were false and/or misleading and that such false and/or misleading statements had the effect of artificially inflating the price of BioSante's securities resulting in violations of Section 10(b) of the Securities Exchange Act of 1934, as amended, Rule 10b-5 and Section 20(a) of the Exchange Act. Although a substantially similar complaint was filed in the same court on February 21, 2012, such complaint was voluntarily dismissed by the plaintiff in April 2012. The plaintiff seeks to represent a class of persons who purchased BioSante's securities between February 12, 2010 and December 15, 2011, and seeks unspecified compensatory damages, equitable and/or injunctive relief, and reasonable costs, expert fees and attorneys' fees on behalf of such purchasers. BioSante believes the action is without merit and intends to defend the action vigorously. On November 6, 2012, the plaintiff filed a consolidated amended complaint. BioSante and Mr. Simes filed motions to dismiss the consolidated amended complaint on December 28, 2012.

        On May 7, 2012, Jerome W. Weinstein, a purported stockholder of BioSante filed a shareholder derivative action in the United States District Court for the Northern District of Illinois under the caption Weinstein v. BioSante Pharmaceuticals, Inc. et al., naming BioSante's directors as defendants and BioSante as a nominal defendant. A substantially similar complaint was filed in the same court on May 22, 2012 and another substantially similar complaint was filed in the Circuit Court for Cook County, Illinois, County Department, Chancery Division, on June 27, 2012. The suits generally related to the same events that are the subject of the class action litigation described above. The complaints allege breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment as causes of action occurring from at least February 2010 through December 2011. The complaints seek unspecified damages, punitive damages, costs and disbursements and unspecified reform and improvements in BioSante's corporate governance and internal control procedures. On September 24, 2012, the District Court consolidated the two cases before it and on November 20, 2012 plaintiffs filed their consolidated amended complaint. On January 11, 2013, the defendants filed a motion to dismiss this complaint. On November 27, 2012, the plaintiff in the action pending in Illinois state court filed an amended complaint. On January 11, 2013, the defendants filed a motion to dismiss this complaint.

        The lawsuits are in their early stages; and, therefore, BioSante is unable to predict the outcome of the lawsuits and the possible loss or range of loss, if any, associated with their resolution or any potential effect the lawsuits may have on BioSante's operations. Depending on the outcome or resolution of these lawsuits, they could have a material effect on BioSante's operations, including its financial condition, results of operations, or cash flows.

        BioSante is not involved in any other legal actions, however, from time to time may be subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time.


Available Information

        BioSante is a Delaware corporation that was initially formed as a corporation organized under the laws of the Province of Ontario in 1996. BioSante's principal executive offices are located at 111 Barclay Boulevard, Lincolnshire, Illinois 60069. BioSante's telephone number is (847) 478-0500, and its Internet web site address is www.biosantepharma.com. The information contained on BioSante's web site or connected to its web site is not incorporated by reference into and should not be considered part of this joint proxy statement/prospectus.

        BioSante makes available, free of charge and through its Internet web site, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after BioSante electronically files such material with, or furnishes it to, the SEC. BioSante also makes available, free of charge and through its Internet web site, to any stockholder who requests, its corporate governance guidelines, the charters of its board committees and its Code of Conduct and Ethics. Requests for copies can be directed to Investor Relations at (847) 478-0500, extension 120, or by e-mail at info@biosantepharma.com.

192


Table of Contents


BIOSANTE'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of financial condition and results of operations together with the "Selected Historical Financial Data of BioSante" section of this joint proxy statement/prospectus and BioSante's financial statements and the related notes included in this joint proxy statement/prospectus. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. BioSante's actual results could differ materially from those anticipated by the forward-looking statements due to important factors including, but not limited to, those set forth in the "Risk Factors—Risks Related to BioSante" section of this joint proxy statement/prospectus.


Business Overview

        BioSante is a specialty pharmaceutical company focused on developing products for female sexual health and oncology.

        BioSante's products, either approved or in clinical development, include:

        BioSante's corporate strategy is to develop high value medically-needed pharmaceutical products. As a part of its corporate strategy, BioSante seeks to implement strategic alternatives with respect to its products and company, including licenses, business collaborations and other business combinations or transactions with other pharmaceutical and biotechnology companies. Therefore, as a matter of course, from time to time, BioSante may engage in discussions with third parties regarding the licensure, sale or acquisition of its products and technologies or a merger or sale of our company, with the goal of maximizing stockholder value.


Proposed Merger with ANI

Agreement and Plan of Merger

        On October 3, 2012, BioSante entered into an agreement and plan of merger with ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. The merger agreement provides that, subject to the terms and conditions set forth in the merger agreement, ANI will merge with and into BioSante, with BioSante continuing as the surviving company. At the effective time of the merger, each outstanding share of capital stock of ANI will be converted into the right to receive that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation. All options, warrants or

193


Table of Contents

other rights to purchase shares of capital stock of ANI, will be canceled at the effective time of the merger without any consideration in exchange, except for certain warrants which although not cancelled will not represent the right to acquire any equity or other interest in the combined company after the merger. No fractional shares of BioSante common stock will be issued in connection with the merger, and holders of ANI capital stock will be entitled to receive cash in lieu thereof. Following completion of the transactions contemplated by the merger agreement, the current ANI stockholders are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and current BioSante stockholders are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company, assuming BioSante's net cash as of the determination date is $18.0 million. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of BioSante's "net cash," as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger, but in no event will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. The merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

        The merger agreement provides that, immediately following the effective time of the merger, the board of directors of the combined company will consist of five former directors of ANI and two former directors of BioSante, and ANI's current executive officers are expected to serve as executive officers of the combined company. In connection with the merger, BioSante will seek to amend its certificate of incorporation to: (i) effect a reverse split of BioSante common stock at a ratio of either one-for-two, one-for-three, one-for-four or one-for-five, as determined by BioSante and ANI, which is intended to ensure that the listing requirements of The NASDAQ Global Market or The NASDAQ Capital Market are satisfied; and (ii) change the name of the company to "ANI Pharmaceuticals, Inc." or another name as designated by ANI (together, the charter amendments).

        Completion of the merger is subject to a number of conditions, including, but not limited to (i) the adoption and approval of the merger agreement and the transactions contemplated thereby by both the BioSante and ANI stockholders and the approval of the charter amendments by the BioSante stockholders; (ii) the effectiveness of a Form S-4 registration statement to be filed by BioSante with the Securities and Exchange Commission to register the shares of BioSante common stock to be issued in connection with the merger, which will contain a joint proxy statement/prospectus; (iii) approval for the listing of shares of BioSante common stock to be issued in the merger on The NASDAQ Global Market or The NASDAQ Capital Market; (iv) written opinions of counsel that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; and (v) other customary closing conditions. In addition, the obligation of ANI to effect the merger is subject to a condition that BioSante's net cash, after deducting all remaining liabilities, as calculated and as adjusted pursuant to the terms of the merger agreement, be no less than $17.0 million immediately prior to the effective time of the merger. No fractional shares of BioSante common stock will be issued in connection with the reverse split and holders of BioSante common stock will be entitled to receive cash in lieu thereof.

        Each of BioSante and ANI have made customary representations, warranties and covenants in the merger agreement, including among others, covenants that (i) each party will conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the merger agreement and the consummation of the merger; (ii) each party will not engage in certain kinds of transactions or take certain actions during such period; (iii) ANI will convene and hold a meeting of its stockholders for the purpose of considering the adoption and approval of the merger agreement and the transactions contemplated thereby and the board of directors of ANI will recommend that the ANI stockholders adopt and approve the merger agreement, subject to certain exceptions; and (iv) BioSante will convene and hold a meeting of the BioSante stockholders for the purpose of considering the

194


Table of Contents

adoption and approval of the merger agreement and the transactions contemplated thereby and the approval of the charter amendments and the BioSante board of directors will recommend that the BioSante stockholders adopt and approve the merger agreement and approve the charter amendments, subject to certain exceptions. Each of BioSante and ANI also has agreed not to solicit proposals relating to alternative business combination transactions or enter into discussions or an agreement concerning any proposals for alternative business combination transactions, subject to exceptions for BioSante in the event of its receipt of a "superior proposal."

        The merger agreement contains certain termination rights in favor of each of ANI and BioSante in certain circumstances. If the merger agreement is terminated due to certain triggering events specified in the merger agreement, BioSante will be required to pay ANI a termination fee of up to $1.0 million or ANI will be required to pay BioSante a termination fee of up to $750,000. The merger agreement also provides that under specified circumstances, BioSante may be required to reimburse ANI up to $500,000 for ANI's expenses in connection with the transaction. Any expenses paid by BioSante will be credited against the $1.0 million termination fee if the termination fee subsequently becomes payable by BioSante.

Voting Agreements

        Concurrently and in connection with the execution of the merger agreement, certain ANI stockholders, who collectively held approximately 90 percent of the outstanding shares of ANI common stock on an as-converted basis and approximately 86 percent of the outstanding shares of ANI series D preferred stock as of October 3, 2012, entered into voting agreements with BioSante, pursuant to which each ANI stockholder agreed to vote its shares of ANI capital stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transaction contemplated by the merger agreement. In addition, one of the ANI stockholders, who held approximately 57 percent of the outstanding shares of ANI capital stock as of October 3, 2012, has agreed to vote in favor of the election of the two directors designated by BioSante at the first annual meeting of BioSante stockholders following completion of the merger.

        In addition, all of BioSante's directors and officers, who collectively held approximately two percent of the outstanding shares of BioSante capital stock as of October 3, 2012, entered into voting agreements with ANI, pursuant to which each BioSante stockholder agreed to vote its shares of BioSante capital stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and the charter amendments, and against certain transactions or certain actions that would delay, prevent or nullify the merger or the transaction contemplated by the merger agreement.

Lock-Up Agreements

        Concurrently and in connection with the execution of the merger agreement, ANI's chief executive officer and chief financial officer and certain ANI stockholders, who collectively held approximately 85 percent of the outstanding shares of ANI common stock, on an as-converted basis, as of October 3, 2012, entered into lock-up agreements with BioSante, pursuant to which each ANI stockholder will be subject to a six-month lock-up on the sale of shares of BioSante common stock received in the merger.

Contingent Value Rights Agreement

        BioSante has the right in its sole discretion to issue contingent value rights (each, a CVR and collectively, the CVRs) to holders of BioSante common stock as of immediately prior to completion of the merger. BioSante expects that one CVR will be issued for each share of BioSante common stock outstanding as of the record date to be set at a date prior to completion of the merger. However, the

195


Table of Contents

CVRs will not be certificated and will not be attached to the shares of BioSante common stock. Each CVR will be a non-transferable (subject to certain limited exceptions) right to potentially receive certain cash payments in the event BioSante receives net cash payments during the ten-year period after the distribution of the rights as a result of the sale, transfer, license or similar transaction relating to BioSante's LibiGel program, upon the terms and subject to the conditions set forth in a contingent value rights agreement to be entered into between BioSante and its transfer agent, as rights agent. The aggregate cash payments to be distributed to the holders of the CVRs, if any, will be equal to 66 percent of the net cash payments received by the combined company as a result of the sale, transfer, license or similar transaction relating to BioSante's LibiGel program, as determined pursuant to the CVR agreement, and will not exceed $40 million in the aggregate.

Financial Overview

        BioSante's lead product in development is LibiGel for the treatment of FSD, specifically HSDD, in postmenopausal women, for which there is no FDA-approved pharmaceutical product. For the past several years, BioSante has focused its efforts on two Phase III LibiGel efficacy trials and its LibiGel Phase III cardiovascular and breast cancer safety study. In December 2011, BioSante announced results from its two Phase III LibiGel efficacy trials, which showed that the trials did not meet the co-primary or secondary endpoints. Although LibiGel performed as predicted, increasing satisfying sexual events and sexual desire and decreasing distress associated with low desire, the placebo response in the two efficacy trials was greater than expected, and LibiGel's results were not shown to be statistically different from the placebo.

        Beginning in December 2011, BioSante analyzed the data from its Phase III LibiGel efficacy trials, consulted with key opinion leaders in female sexual dysfunction, testosterone therapy and placebo effects, and met with representatives of the FDA. As a result of this process, in June 2012 BioSante announced a plan to initiate two new LibiGel Phase III efficacy trials.

        In September 2012, BioSante announced that the independent Data Monitoring Committee (DMC) completed its ninth unblinded review of the LibiGel Phase III cardiovascular events and breast cancer safety study and recommended that the LibiGel safety study should continue as per the FDA-agreed protocol, without modifications. At the time of the DMC review, there were 53 adjudicated CV events, with a lower than anticipated event rate of approximately 0.72 percent. In the same population of subjects, there were 27 breast cancers reported, a rate of approximately 0.37 percent, which is in line with the expected rate based on the ages of the subjects enrolled in the study. Given this latest review during which no specific or general safety issues were raised, and after extensive consideration, BioSante also announced in September 2012 the conclusion of the LibiGel Phase III safety study effective immediately. Prior to the initiation of the LibiGel safety study in 2008, the FDA advised BioSante that subjects in the cardiovascular event and breast cancer safety study were required to have a minimum average exposure in the safety study of 12 months prior to submitting a LibiGel new drug application (NDA), and prior to a potential FDA approval of LibiGel. As of the date of the conclusion of the safety study, subjects had been in the study for an average time of 24.5 months; more than 3,200 subjects had been in the study for more than one year and over 1,700 subjects had been enrolled for more than two years. With this ninth positive unblinded review of the study by the DMC, and over 7,400 women-years of exposure, BioSante believes that adequate safety data of LibiGel use in menopausal women has been obtained.

        BioSante is continuing to develop a protocol for the two new LibiGel efficacy trials and will seek an FDA SPA agreement covering aspects of the two new efficacy trials.

        Elestrin was BioSante's first FDA approved product and now is one of BioSante's two FDA approved products. Meda Pharmaceuticals, Inc. (which acquired Jazz Pharmaceuticals, Inc.'s women's health business and which in turn had acquired Azur Pharma International II Limited (Azur),

196


Table of Contents

BioSante's prior licensee), is marketing Elestrin in the U.S. In December 2009, BioSante entered into an amendment to its original licensing agreement with Azur pursuant to which BioSante received $3.16 million in non-refundable payments in exchange for the elimination of all remaining future royalty payments and certain milestone payments that could have been paid to BioSante related to sales of Elestrin. BioSante maintains the right to receive up to $140 million in sales-based milestone payments from Meda Pharmaceuticals if Elestrin reaches certain predefined sales per calendar year; although, based on current sales levels, BioSante believes its receipt of such payments unlikely in the near term, if at all.

        BioSante's male testosterone gel is its second FDA approved product. This product initially was developed by BioSante, and then licensed by BioSante to Teva for late stage clinical development. Teva submitted an NDA to the FDA in the beginning of 2011, which was approved by the FDA in February 2012. Subsequent to Teva submitting the NDA, in April 2011, a subsidiary of Abbott Laboratories, a marketer of a testosterone gel for men, filed a complaint against Teva alleging patent infringement. This litigation was settled in December 2011; however, the terms of the settlement agreement are confidential and have not been disclosed publicly. No launch date for this product has been announced by Teva.

        Under BioSante's development and license agreement with Teva, Teva has agreed to market the male testosterone gel for the U.S. market and is responsible for any and all manufacturing and marketing associated with the product. The financial terms of the development and license agreement included a $1.5 million upfront payment by Teva, which was paid to BioSante in December 2002, and an obligation by Teva to pay BioSante certain milestones and royalties on sales of the product in exchange for rights to develop and market the product, as described in more detail below. Teva is entitled to deduct the amount of any legal expenses incurred by Teva in connection with associated patent litigation against Teva from the net sales of the product. The term of the development and license agreement will expire 10 years from the date on which Teva makes its first commercial sale of the male testosterone gel to an unrelated third party in an arms-length transaction in the United States. The parties may terminate the development and license agreement upon the occurrence of certain events, including a material breach of the agreement by the other party. BioSante may terminate the agreement if Teva files a petition in bankruptcy, enters into an arrangement with its creditors or makes an assignment for the benefit of creditors or a receiver or trustee is appointed or if Teva suffers or permits the entry of an order adjudicating it to be bankrupt or insolvent. Teva may terminate the agreement if Teva determines that the continued development and/or marketing of the male testosterone gel is no longer commercially viable.

        In October 2012, BioSante entered into an amendment to its agreement with Teva pursuant to which Teva made a $1.0 million payment to BioSante upon the signing of the amendment and agreed to make the following milestone based payments to BioSante: (1) $500,000 if the FDA authorizes marketing of the licensed male testosterone gel as an "AB-rated" equivalent to AndroGel®; (2) $750,000 upon the earlier to occur of (a) December 31, 2012 and (b) five business days after Teva's submission to the FDA of a final report regarding a "washing" clinical study required by the FDA; and (3) $500,000 upon the earlier to occur of (a) December 31, 2013 and (b) five business days after Teva's commencement of commercial manufacture of the licensed product for sale in the United States. In addition, Teva has agreed to pay BioSante $4.0 million in the event Teva is the sole marketer in the United States of a generic 1% testosterone gel AB-rated to AndroGel® for at least 180 days immediately following the launch date of the licensed product in the United States. The royalty rate to be paid by Teva to BioSante under the agreement is five percent of net sales; provided, however, that during the period of time that Teva markets the licensed product and is the sole marketer of a generic 1% testosterone gel that is AB-rated to AndroGel® in the United States, the royalty rate will be seven and one half percent of net sales. Additionally, pursuant to the terms of the October 2012 amendment, the parties agreed to release each other from certain liabilities.

197


Table of Contents

        BioSante licenses the technology underlying certain of its gel products, including LibiGel and Elestrin, but not the male testosterone gel, from Antares Pharma, Inc. The patents covering the formulations used in the gel products covered under the license agreement are expected to expire in 2022, although with respect to LibiGel, a new U.S. patent covering the "method of use" of LibiGel for treating FSD and HSDD was issued, which will expire in December 2028. BioSante's license agreement with Antares requires BioSante to pay Antares certain development and regulatory milestone payments and royalties based on net sales of any products BioSante or its licensees sell incorporating the licensed technology. Specifically, BioSante is obligated to pay Antares 25 percent of all upfront and milestone payments related to a license and a 4.5 percent royalty on net sales of product by BioSante or a licensee. Since entering into the agreement and through September 30, 2012, BioSante has paid Antares an upfront payment of $1.0 million, an aggregate of $5.1 million in milestone payments and an aggregate of $100,000 in royalties. Aggregate potential milestone payments to be paid by BioSante to Antares under the agreement include 25 percent of the potential $140 million in sales-based milestone payments, or $35 million from Meda Pharmaceuticals if Elestrin reaches certain predefined sales per calendar year; although, based on current sales levels, BioSante believes its receipt of such payments unlikely in the near term, if at all.

        The term of BioSante's license agreement with Antares will expire on a country-by-country and product-by-product basis when the royalties expire (at patent expiration), at which time BioSante will have a fully paid-up exclusive license regarding the applicable product in such country. BioSante and Antares may terminate the license agreement upon the occurrence of certain events, including a material breach of the agreement by the other party or if the other party goes into liquidation or bankruptcy or makes an assignment for the benefit of creditors or a receiver is appointed. Antares may terminate the agreement with respect to certain products or territories if BioSante does not continue development, seeking regulatory approval or marketing of such products in the covered territories. BioSante may terminate the agreement with respect to certain products or territories if, for technical, scientific or regulatory reasons, it is not likely that the product will gain required regulatory approvals in a territory, if regulatory approvals in a territory are not obtained or if BioSante determines that it is not economically viable to continue development or marketing of a product in a territory.

        BioSante licenses the technology underlying The Pill Plus from Wake Forest University Health Sciences and Cedars-Sinai Medical Center. The financial terms of this license include regulatory milestone payments, maintenance payments and royalty payments by BioSante if a product incorporating the licensed technology gets approved and subsequently is marketed.

        BioSante's GVAX cancer vaccines, which are designed to stimulate a patient's immune system to fight effectively the patient's own cancer, are in development for the treatment of several different types of cancer including melanoma, leukemia, pancreatic, breast and prostate cancer. Four of these vaccines—to treat pancreatic cancer, acute myeloid leukemia, chronic myeloid leukemia and melanoma—have been granted FDA orphan drug designation. Currently, there are 17 Phase I and Phase II clinical studies involving our GVAX cancer vaccines ongoing. The studies are being funded by various sources, including certain foundations and our licensees. BioSante's objective with respect to its GVAX cancer vaccines is to help facilitate further studies and commercialization in order to bring important cancer therapies to patients in need and to maximize the value of the GVAX cancer vaccine portfolio to the BioSante stockholders. This objective includes monetizing the entire portfolio or seeking additional licensees to fund, develop and eventually commercialize the cancer vaccines. BioSante currently is negotiating the terms of a potential transation with an unidentified third party pursunt to which, if completed, BioSante would sell all of its assets related to its GVAX cancer vaccine portfolio in exchange for a $1.0 million up front cash payment plus the potential for future royalty, milestone and sublicense payments.

198


Table of Contents

Financial Overview

        Substantially all of BioSante's revenue to date has been derived from upfront, milestone and royalty payments earned on licensing and sublicensing transactions and from subcontracts. BioSante's business operations to date have consisted primarily of licensing and research and development activities and if BioSante does not complete its proposed merger with ANI, BioSante would expect this to continue for the immediate future. To date, BioSante has used primarily equity financings, and to a lesser extent, licensing income, interest income and the cash received from its 2009 merger with Cell Genesys, Inc., to fund its ongoing business operations and short-term liquidity needs.

        As of September 30, 2012, BioSante had $38.0 million of cash and cash equivalents and had outstanding $8.3 million in aggregate principal amount of our 3.125% convertible senior notes due May 1, 2013. Absent the receipt of any additional licensing income or financing, BioSante expects its cash and cash equivalents balance to decrease as it continues to use cash to fund its operations. Assuming the proposed merger between BioSante and ANI is completed, BioSante expects its cash and cash equivalents as of September 30, 2012 to meet its liquidity requirements through at least its anticipated closing of the merger, including the requirement under the merger agreement to have at least $17 million of "net cash," as defined in the merger agreement, available upon the closing of the merger. If the proposed merger between BioSante and ANI is not completed, BioSante will need to reevaluate its strategic alternatives, which may include continuing as an independent, stand-alone business, a sale of the company, liquidation of the company or other strategic transaction. BioSante's liquidity position will be dependent upon the strategic alternative selected; however, assuming BioSante does not enter into another strategic transaction, and assuming BioSante decides not to commence the two new efficacy trials for LibiGel, BioSante expects its cash and cash equivalents as of September 30, 2012 will be sufficient to meet its liquidity requirements for at least the next three to five years. Additional financing would be required should BioSante decide to commence the two new efficacy trials for LibiGel. These estimates may prove incorrect or BioSante, nonetheless, may choose to raise additional financing earlier.

        BioSante incurred expenses of $14.5 million on research and development activities during the nine months ended September 30, 2012, which is a 61 percent decrease compared to the same period in 2011, primarily as a result of the conclusion of the two LibiGel Phase III efficacy trials at the end of 2011. BioSante anticipates that its research and development expenses for the remainder of 2012 and 2013 will consist primarily of expenses associated with the conclusion of the safety study and continuing to develop a protocol for the two new LibiGel Phase III efficacy trials. BioSante currently expects to spend approximately $1.1 million per month on research and development activities during the remainder of 2012, which is based on the assumption that BioSante does not in-license additional products and technologies requiring additional development.

        General and administrative expenses for the nine months ended September 30, 2012 increased 1.3 percent compared to the same period in 2011 due primarily to an increase in professional fees and other administrative expenses. BioSante's general and administrative expenses generally fluctuate from year-to-year and quarter-to-quarter depending upon the amount of non-cash, stock-based compensation expense and the amount of legal, public and investor relations, accounting, corporate governance and other general and administrative fees and expenses incurred.

        BioSante recognized an income tax benefit based on the receipt of an income tax credit for the nine months ended September 30, 2012 of $121,791 compared to the recognition of no income tax benefit for the nine months ended September 30, 2011. The income tax benefit was a result of an election to accelerate research and development credits in lieu of receiving bonus depreciation on certain property under Section 168(k)(4) of the Internal Revenue Code of 1986, as amended.

        BioSante recognized a net loss for the nine months ended September 30, 2012 of $23.7 million compared to a net loss of $45.0 million for the nine months ended September 30, 2011. This decrease

199


Table of Contents

was primarily a result of the conclusion of the prior two LibiGel Phase III efficacy trials at the end of 2011 and in September 2012 the conclusion of the LibiGel Phase III safety study, and was offset in part by an increase in the non-cash fair value adjustment relating to the cancellation of $12.5 million in aggregate principal amount of its convertible senior notes. BioSante recognized a net loss per share for the nine months ended September 30, 2012 of $1.14 compared to a net loss per share of $2.86 for the nine months ended September 30, 2011. This decrease in net loss per share was the result of the significantly higher weighted average number of shares outstanding, partially offset by the lower net loss described above.


Results of Operations

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

        The following table sets forth BioSante's results of operations for the nine months ended September 30, 2012 and 2011.

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   $ Change   % Change  

Revenue

  $ 333,163   $ 320,787   $ 12,376     3.9 %

Expenses

                         

Research and development

    14,454,258     37,480,873     (23,026,615 )   (61.4 )%

General and administrative

    5,327,711     5,257,853     69,858     1.3 %

Other expense—Convertible note fair value adjustment

    (4,037,797 )   (1,929,000 )   2,108,797     109.3 %

Other expense—Interest expense

    (283,348 )   (516,000 )   (232,652 )   (45.1 )%

Other income—Interest income

    5,300     6,472     (1,172 )   (18.1 )%

Income tax benefit

    121,791         121,791     100.0 %

Net loss

  $ (23,730,408 ) $ (44,959,682 ) $ (21,229,274 )   (47.2 )%

Net loss per common share (basic and diluted)

  $ (1.14 ) $ (2.86 ) $ 1.72     (60.1 )%

Weighted average number of common shares and common equivalent shares outstanding

    20,841,417     15,744,738     5,096,679     32.4 %

        The only revenue recognized during the nine months ended September 30, 2012 consisted of royalty revenue from Jazz Pharmaceuticals for Elestrin sales, which royalty revenue is offset by BioSante's corresponding obligation to pay Antares royalties representing the same amount. BioSante's corresponding obligation to pay Antares a portion of the royalties received, which equaled $333,163 during the nine months ended September 30, 2012 and $220,787 during the nine months ended September 30, 2011, is recorded within general and administrative expenses in BioSante's condensed statements of operations. In addition, during the nine months ended September 30, 2011, BioSante recognized an additional $100,000 in revenue from its receipt of an upfront non-refundable licensing fee from The John P. Hussman Foundation.

        Research and development expenses for the nine months ended September 30, 2012 decreased 61 percent compared to the nine months ended September 30, 2011 primarily as a result of the completion of BioSante's two LibiGel Phase III efficacy trials at the end of 2011 and the conclusion of the safety study in September 2012.

        General and administrative expenses for the nine months ended September 30, 2012 increased 1.3 percent compared to the nine months ended September 30, 2011 primarily as a result of an increase in professional fees and other administrative expenses.

        The fair value adjustment on BioSante's convertible senior notes for the nine months ended September 30, 2012 was $4.0 million compared to $1.9 million for the nine months ended

200


Table of Contents

September 30, 2011. The increase in the expense for the nine months ended September 30, 2012 was primarily as a result of $3,157,151 non-cash fair value adjustment (expense) recorded upon cancellation of $12.5 million in aggregate principal amount of BioSante's convertible senior notes in February and July 2012. The convertible fair value adjustment for the nine months ended September 30, 2011 increased the recorded liability and corresponding expense by $1,929,000 and included the 2011 and 2013 Notes.

        Interest expense was $283,348 and $516,000 for the nine months ended September 30, 2012 and 2011, respectively, as a result of BioSante's convertible senior notes. Interest expense decreased during the most recent current year period as a result of the repayment of BioSante's 3.125% convertible senior notes due November 1, 2011 during the fourth quarter of 2011 and the cancellation of $12.5 million in aggregate principal amount of BioSante's 3.125% convertible senior notes due May 1, 2013, including accrued and unpaid interest, during the first and third quarter of 2012 in exchange for the issuance of 3,652,125 shares of BioSante common stock.

        Interest income decreased $1,172 for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 as a result of lower cash balances and lower average interest rates during the nine months ended September 30, 2012.

        BioSante recognized an income tax benefit based on the receipt of an income tax credit for the nine months ended September 30, 2012 of $121,791 compared to the recognition of no income tax benefit for the nine months ended September 30, 2011. The income tax benefit was a result of an election to accelerate research and development credits in lieu of receiving bonus depreciation on certain property under Section 168(k)(4) of the Internal Revenue Code of 1986, as amended.

Years Ended December 31, 2011, 2010 and 2009

        The following table sets forth, for the periods indicated, BioSante's results of operations.

 
  Year Ended December 31,  
 
  2011   2010   2009  

Revenue

  $ 435,160   $ 2,474,237   $ 1,258,054  

Expenses

                   

Research and development

    44,182,260     39,705,502     13,680,573  

General and administrative

    6,981,490     5,940,360     5,373,945  

Acquired in-process research and development

            9,000,000  

Excess consideration paid over fair value

            20,192,194  

Licensing expense

    50,000     268,750     299,616  

Total expenses

    51,361,990     46,082,598     48,683,608  

Other (expense) income—Convertible note fair value adjustment

    (23,427 )   (1,870,916 )   33,163  

Other expense—Investment impairment charge

        (286,000 )    

Other expense—Interest expense

    (681,573 )   (688,083 )   147,025  

Other income

    15,000     244,479      

Other income—Interest income

    8,326     12,665     11,648  

Net loss

  $ (51,608,504 ) $ (46,196,216 ) $ (47,527,768 )

Net loss per common share (basic and diluted)

  $ (3.15 ) $ (4.21 ) $ (8.40 )

Weighted average number of common shares and common equivalent shares outstanding

    16,397,618     10,985,291     5,658,609  

201


Table of Contents

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

        Revenue decreased $2.0 million, or 82.4 percent in 2011 compared to 2010, primarily as a result of the recognition of royalty revenue during 2010 resulting primarily from the receipt of $2.3 million in non-refundable upfront payments from Azur, partially offset by BioSante's receipt during 2011 of $100,000 in a non-refundable upfront licensing fee from the Hussman Foundation relating to an exclusive worldwide license of BioSante's melanoma vaccine. The $2.3 million payment from Azur in 2010 was in exchange for the elimination of all remaining future royalty payments that BioSante is not required to pay Antares under a separate agreement and certain future milestone payments due BioSante under the terms of the original license, as permitted by the amendment to BioSante's license agreement signed in December 2009. The only other revenue recognized during 2011 consisted of royalty revenue from Jazz Pharmaceuticals for Elestrin sales, which royalty revenue is offset by a corresponding obligation of BioSante to pay Antares royalties representing the same amount.

        Research and development expenses for 2011 increased 11.3 percent compared to 2010 primarily as a result of the conduct of the three LibiGel Phase III clinical studies, particularly the safety study.

        General and administrative expenses for 2011 increased 17.5 percent compared to 2010 primarily as a result of an increase in personnel-related costs and, to a lesser extent, increases in professional fees and other administrative expenses during 2011.

        The fair value adjustment on BioSante's convertible senior notes for 2011 was $23,427 compared to $1.9 million for 2010 as the fair value of the debt did not change significantly between December 31, 2010 and 2011.

        Interest expense for 2011 was $681,573 compared to $688,083 for 2010. BioSante expects interest expense to decrease in 2012 compared to 2011 as a result of the repayment of $1.2 million in aggregate principal amount of BioSante's 3.125% convertible senior notes due November 1, 2011 and the cancellation of $9.0 million in aggregate principal amount of BioSante's 3.125% convertible senior notes previously due May 1, 2013, which were exchanged for shares of common stock as previously discussed.

        During 2010, BioSante recorded an investment impairment loss of $286,000 based on BioSante's determination that an other-than-temporary loss had occurred with respect to BioSante's investment in Ceregene, Inc. based on a third-party investment in Ceregene in 2010.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

        Revenue increased $1.2 million in 2010 compared to 2009 primarily as a result of an increase in royalty and licensing revenue during 2010 compared to 2009. Of the $2.3 million in royalty revenue during 2010, $2.2 million resulted from BioSante's receipt of non-refundable upfront payments from Jazz Pharmaceuticals as a result of the December 2009 amendment to BioSante's license agreement. Pursuant to a separate agreement with Antares and related to the December 2009 amendment, BioSante paid Antares an aggregate of $268,750 in February 2010. In addition, during 2010, BioSante recorded royalty revenue of $152,228 and a corresponding amount of royalty expense, which is recorded within general and administrative expenses in BioSante's statements of operations, to reflect the Antares portion of the Elestrin royalty revenues, which revenues were not eliminated as a result of the December 2009 Jazz Pharmaceuticals license amendment. In October 2010, BioSante received $244,479, the maximum per project, after LibiGel qualified for a grant under the Qualifying Therapeutic Discovery Project Program which was created in March 2010 as part of the Patient Protection and Affordability Care Act.

        Research and development expenses increased 190 percent in 2010 compared to 2009 primarily as a result of the conduct of the three LibiGel Phase III clinical studies.

202


Table of Contents

        General and administrative expenses increased 11 percent in 2010 compared to 2009 primarily as a result of an increase in personnel-related costs and, to a lesser extent, increases in professional fees and other administrative expenses in 2010.

        BioSante recognized total additional non-cash expenses of $29.2 million in 2009 related to its merger with Cell Genesys, consisting of $9.0 million related to the write-off of acquired in-process research and development, and $20.2 million related to transaction related expenses and additional charges related to the excess of merger consideration over fair values of the net assets acquired. No similar expense was recognized in 2010.

        BioSante recognized licensing expense of $268,750 related to its payment to Antares as a result of the December 2009 Jazz Pharmaceuticals license amendment compared to licensing expense of $299,616 in 2009 as a result of expenses associated with the Jazz Pharmaceuticals licensing agreement and the termination of BioSante's prior licensing agreement for Elestrin.

        The fair value adjustment on BioSante's convertible senior notes to increase the recorded liability and corresponding expense was $1.9 million in 2010 compared to a fair value adjustment to decrease the recorded liability and corresponding expense of $33,163 in 2009.

        BioSante recorded an investment impairment charge of $286,000 in 2010 based on its determination that an other-than-temporary impairment had occurred with respect to its investment in Ceregene, Inc. based on a third-party investment in Ceregene in 2010. No similar investment impairment charge was recognized in 2009.

        Interest expense increased $541,058, or 368 percent, in 2010 compared to 2009 as a result of BioSante's convertible senior notes, which BioSante assumed during the fourth quarter of 2009.

        Interest income increased $1,017, or 9 percent, in 2010 compared to 2009 primarily as a result of higher cash balances and cash being in a U.S. Treasury portfolio for a portion of 2010 compared to cash being in a non-interest bearing checking account for the majority of 2009.


Liquidity and Capital Resources

Working Capital

        Since its inception, BioSante has incurred significant operating losses resulting in an accumulated deficit of $241.0 million as of September 30, 2012. To date, BioSante has used primarily equity financings, and to a lesser extent, licensing income, interest income and the cash received from its 2009 merger with Cell Genesys, to fund its ongoing business operations and short-term liquidity needs.

        As of September 30, 2012, BioSante had $38.0 million of cash and cash equivalents and $8.3 million in aggregate principal amount of its 3.125% convertible senior notes due May 1, 2013 outstanding. Absent the receipt of any additional licensing income or financing, BioSante expects its cash and cash equivalents balance to decrease as it continues to use cash to fund its operations. Assuming the proposed merger between BioSante and ANI is completed during the first quarter of 2013, BioSante expects its cash and cash equivalents as of September 30, 2012 to meet its liquidity requirements through at least the anticipated closing of the merger, including the requirement under the merger agreement to have at least $17 million of "net cash" as defined in the merger agreement available upon closing of the merger. If the proposed merger between BioSante and ANI is not completed, BioSante will need to reevaluate its strategic alternatives, which may include continuing as an independent, stand-alone company, a sale of the company, liquidation of the company or other strategic transaction. BioSante's liquidity position will be dependent upon the strategic alternative selected; however, assuming BioSante does not enter into another strategic transaction, and assuming BioSante decides not to commence the two new efficacy trials for LibiGel, BioSante expects its cash and cash equivalents as of September 30, 2012 will be sufficient to meet its liquidity requirements for at

203


Table of Contents

least the next three to five years. Substantial additional financing would be required should BioSante decide to commence the two new efficacy trials for LibiGel. These estimates may prove incorrect or BioSante, nonetheless, may choose to raise additional financing earlier.

        BioSante's future capital requirements will depend upon numerous factors, including:

        BioSante does not have any existing credit facilities under which it could borrow funds. In the event that BioSante would require additional working capital to fund future operations, it could seek to acquire such funds through additional equity or debt financing arrangements. If BioSante raises additional funds by issuing equity securities, its stockholders may experience dilution. Debt financing, if available, may involve covenants restricting BioSante's operations or its ability to incur additional debt. There is no assurance that any financing transaction will be available on terms acceptable to BioSante, or at all. As an alternative to raising additional financing, BioSante may choose to license one or more of its products or technologies to a third party who may finance a portion or all of the continued

204


Table of Contents

development and, if approved, commercialization of that licensed product, or sell certain assets or rights under its existing license agreements. In addition, from time to time, BioSante may purchase, exchange or restructure its outstanding convertible senior notes through cash purchases and/or exchanges for other equity securities of BioSante, in open market purchases, privately negotiated transactions and/or a tender offer. In February 2012, BioSante issued an aggregate of 1,868,055 shares of its common stock to one of the holders of its convertible senior notes in exchange for the cancellation of $9.0 million in aggregate principal amount of such notes, including accrued and unpaid interest of $79,024, and in July 2012, BioSante issued an aggregate of 1,784,070 shares of its common stock to two of the holders of BioSante's convertible senior notes in exchange for the cancellation of $3.5 million in aggregate principal amount of such notes and accrued and unpaid interest of $20,686. Such additional purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, the trading price and volume of BioSante common stock, the willingness of the note holders to sell, exchange or restructure their notes, BioSante's available cash and cash equivalents, its liquidity requirements, regulatory limitations, contractual restrictions and other factors. Such future purchases, exchanges or restructurings could dilute the percentage ownership of the BioSante stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of existing BioSante stockholders and/or decrease BioSante's cash balance. A significant decrease in BioSante's cash balance, together with an inability to raise additional financing when needed, may impair BioSante's ability to execute strategic alternatives or leave it without sufficient cash remaining for operations.

        BioSante is subject to pending purported class action and shareholder derivative litigation, which litigation is described elsewhere in this joint proxy statement/prospectus. Such litigation could divert management's attention, harm BioSante's business and/or reputation and result in significant liabilities, as well as harm BioSante's ability to raise additional financing and execute certain strategic alternatives.

        BioSante can provide no assurance that additional financing, if needed, will be available on terms favorable to BioSante, or at all. This is particularly true if investors are not confident in the success of the proposed merger between BioSante and ANI, BioSante's LibiGel development program, the future value of BioSante and/or economic and market conditions deteriorate. If BioSante does not complete the proposed merger between BioSante and ANI and if adequate funds are not available or are not available on acceptable terms when BioSante needs them, BioSante may need to reduce its operating costs further or it may be forced to explore other strategic alternatives, such as other business combination transactions or winding down its operations and liquidating the company. In such case, BioSante stockholders could lose some or all of their investment.

Uses of Cash and Cash Flow

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

        Net cash used in operating activities was $22.1 million for the nine months ended September 30, 2012 compared to net cash used in operating activities of $36.9 million for the nine months ended September 30, 2011. Net cash used in operating activities for the nine months ended September 30, 2012 was primarily the result of the net loss for that period which was lower compared to the prior year period due to lower clinical trial related expenses primarily as a result of the completion of BioSante's two LibiGel Phase III efficacy trials at the end of 2011 and the conclusion of the safety study in September 2012. Net cash used in operating activities for the nine months ended September 30, 2011 was primarily the result of the net loss for that period.

        Net cash used in investing activities was $536,697 for the nine months ended September 30, 2012 compared to net cash used in investing activities of $645,603 for the nine months ended September 30, 2011. Net cash used in investing activities for each of the nine months ended September 30, 2012 and 2011 was due primarily to the purchase of fixed assets.

205


Table of Contents

        Net cash provided by financing activities was $3.5 million for the nine months ended September 30, 2012 compared to net cash provided by financing activities of $69 million for the nine months ended September 30, 2011. Net cash provided by financing activities for the nine months ended September 30, 2012 was the result of BioSante's August 2012 registered direct offering, which resulted in net proceeds of $3.3 million, after deduction of placement agent fees and offering expenses. Net cash provided by financing activities for the nine months ended September 30, 2011 was the result of BioSante's August 2011 underwritten public offering and March 2011 registered direct offering, which resulted in net proceeds of $45.1 million and $23.9 million, respectively, after deduction of underwriting discounts and commissions or placement agent fees and offering expenses.

Years Ended December 31, 2011, 2010 and 2009

        Net cash used in operating activities was $47.9 million for the year ended December 31, 2011 compared to net cash used in operating activities of $40.1 million for the year ended December 31, 2010 and net cash used in operating activities of $18.4 million for the year ended December 31, 2009. Net cash used in operating activities for 2011 was primarily the result of the net loss for that period which was higher compared to 2010 due to higher LibiGel Phase III clinical study related expenses, partially offset by a decrease in prepaid expenses and other assets and an increase in accounts payable and accrued liabilities and the non-cash mark-to-market expense for BioSante's convertible senior notes. Net cash used in operating activities for 2010 was primarily the result of the net loss for that period, which was slightly higher compared to the prior year period due primarily to higher LibiGel Phase III clinical study related expenses, partially offset by an increase in accounts payable and accrued liabilities and a decrease in prepaid expenses and other assets. Net cash used in operating activities for 2009 was primarily the result of the net loss for that period. Technology and transaction related expenses and charges of $29.2 million were incurred as a result of BioSante's merger with Cell Genesys in 2009 but did not result in an operating cash payment by BioSante as it issued shares of its common stock as consideration for the transaction and cash payments for transaction costs were classified as a financing activity based on the nature of the transaction.

        Net cash used in investing activities was $719,925 for the year ended December 31, 2011 compared to net cash provided by investing activities of $60,366 for the year ended December 31, 2010 and net cash provided by investing activities of $2.9 million for the year ended December 31, 2009. The increase in net cash used in investing activities for 2011 compared to 2010 was due to a significant increase in the purchase of fixed assets, including in particular machinery, computers and furniture. The machinery purchased during 2011 relates to new BioSante-owned machinery for LibiGel product manufacturing at its contract manufacturer and the increased amounts spent on computers and furniture during 2011 was due primarily to its increased number of personnel compared to 2010. Net cash used in investing activities for 2011 and 2010 was primarily for the purchase of capital assets.

        Net cash provided by financing activities was $67.7 million for the year ended December 31, 2011 compared to $48.5 million for the year ended December 31, 2010 and $33.7 million for the year ended December 31, 2009. Net cash provided by financing activities in 2011 resulted from the net proceeds to BioSante, after deducting placement agent fees, underwriters' discounts, commissions and other offering expenses, from the completion of BioSante's March 2011 registered direct offering and August 2011 underwritten public offering, partially offset by the repayment of the 3.125% convertible senior notes due November 1, 2011 of $1.2 million. Net cash provided by financing activities in 2010 resulted from the net proceeds to BioSante, after deducting placement agent fees and offering expenses, from the completion of BioSante's March, June and December 2010 registered direct offerings. Net cash provided by financing activities for 2009 resulted from a combination of recognizing $24.7 million in cash acquired as a result of BioSante's merger with Cell Genesys and $11.4 million in net proceeds to BioSante, after deducting placement agent fees and offering expenses, from the completion of

206


Table of Contents

BioSante's August 2009 registered direct offering, partially offset by $2.4 million in cash paid for Cell Genesys acquisition-related costs.

3.125% Convertible Senior Notes Due May 1, 2013

        As a result of BioSante's merger with Cell Genesys in 2009, BioSante assumed $1.2 million in aggregate principal amount of 3.125% convertible senior notes due November 1, 2011 and $20.8 million in aggregate principal amount of 3.125% convertible senior notes due May 1, 2013 issued by Cell Genesys. Prior to the November 1, 2011 maturity date, BioSante repaid in its entirety the outstanding aggregate principal amount of the 2011 Notes and all accrued and unpaid interest thereon through such date. During the nine months ended September 30, 2012, BioSante issued an aggregate of approximately 3.7 million shares of BioSante common stock to holders of the 3.125% convertible senior notes due May 1, 2013 in exchange for cancellation of $12.5 million in aggregate principal amount of such notes, including accrued and unpaid interest.

        Contractual interest payments on the convertible senior notes are due on May 1 and November 1 of each year through maturity. Annual interest on the remaining convertible senior notes is approximately $259,000.

        The remaining outstanding convertible senior notes are convertible into an aggregate of approximately 370,871 shares of BioSante common stock at a conversion price of $22.32 per share, subject to adjustments for stock dividends, stock splits and other similar events. The convertible senior notes are general, unsecured obligations of BioSante, ranking equally with all of BioSante's existing and future unsubordinated, unsecured indebtedness and senior in right of payment to any subordinated indebtedness, but are effectively subordinated to all of BioSante's existing and future secured indebtedness to the extent of the value of the related collateral, and structurally subordinated to all existing and future liabilities and other indebtedness of any subsidiaries of BioSante. The convertible senior notes are subject to repurchase by BioSante at each holder's option, if a fundamental change (as defined in the indenture) occurs, at a repurchase price equal to 100 percent of the principal amount of the convertible senior notes, plus accrued and unpaid interest on the repurchase date and are subject to redemption for cash by BioSante, in whole or in part, at a redemption price equal to 100 percent of the principal amount of such notes plus accrued and unpaid interest to the redemption date, if the closing price of BioSante common stock has exceeded 150 percent of the conversion price then in effect with respect to such notes for at least 20 trading days in any period of 30 consecutive trading days ending on the trading day prior to the mailing of the notice of redemption. As of September 30, 2012, the convertible senior notes were not eligible for redemption. The indenture governing the convertible senior notes, as supplemented by the supplemental indenture, does not contain any financial covenants and does not restrict us from paying dividends, incurring additional debt or issuing or repurchasing other securities of BioSante. In addition, the indenture, as supplemented by the supplemental indenture, does not protect the holders of the convertible senior notes in the event of a highly leveraged transaction or a fundamental change of BioSante except in certain circumstances specified in the indenture.

        In addition, from time to time, BioSante may purchase, exchange or restructure its outstanding convertible senior notes through cash purchases and/or exchanges for other equity securities of BioSante, in open market purchases, privately negotiated transactions and/or a tender offer. The amounts involved may be material. Such additional purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, BioSante's available cash and cash equivalents, its liquidity requirements, contractual restrictions and other factors. Such future purchases, exchanges or restructurings could dilute the percentage ownership of the BioSante stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of the existing BioSante stockholders and/or decrease BioSante's cash balance. A

207


Table of Contents

significant decrease in BioSante's cash balance may impair its ability to execute strategic alternatives or leave it without sufficient cash remaining for operations.

        BioSante has elected to record the convertible senior notes at fair value in order to simplify the accounting for the convertible debt, inclusive of the redemption, repurchase and conversion adjustment features which otherwise would require specialized valuation, bifurcation and recognition. Accordingly, BioSante has adjusted the carrying value of the convertible senior notes to their fair value as of September 30, 2012, with changes in the fair value of the convertible senior notes occurring since December 31, 2011 reflected in convertible note fair value adjustment in BioSante's statement of operations for the nine months ended September 30, 2012. The fair value of the convertible senior notes are based on Level 2 inputs according to the fair value hierarchy required under GAAP, which means fair value of the convertible senior notes is based on observable prices that are based on inputs not quoted on active markets, but corroborated by market data. The aggregate recorded fair value of the convertible senior notes of $7.6 million as of September 30, 2011 differs from their total stated principal amount of $8.3 million as of September 30, 2012 by $0.7 million. The aggregate recorded fair value of the convertible senior notes of $17.3 million as of December 31, 2011 differs from their total stated principal amount of $20.8 million as of such date by $3.5 million.

Commitments and Contractual Obligations

        BioSante did not have any material commitments for capital expenditures as of September 30, 2012. BioSante has a purchase obligation relating to a gel packaging machine of $40,608. This obligation is due upon the shipment, assembly and calibration of the machine at a location designated by BioSante. In light of the proposed merger between BioSante and ANI, BioSante is evaluating the future plans for this gel packaging machine. BioSante also have several financial commitments, including its convertible senior notes, product development milestone payments to the licensors of certain of its products, payments under its license agreements with Johns Hopkins University and Wake Forest University Health Sciences, as well as minimum annual lease payments.

        The following table summarizes the timing of these future contractual obligations and commitments as of September 30, 2012:

 
  Payments Due by Period  
 
  Total   Less than
1 Year
  1 - 3
Years
  3 - 5
Years
  More than
5 Years
 

Convertible senior notes

  $ 8,277,850   $ 8,277,850   $ 0   $ 0   $ 0  

Interest payment obligations related to convertible senior notes

    150,898     150,898     0     0     0  

Operating lease

    350,413     246,119     104,295     0     0  

Commitments under license agreements with Johns Hopkins University

    320,000     45,000     135,000     90,000     50,000  

Commitments under license agreement with Massachusetts Institute of Technology

    100,000     50,000     50,000     0     0  

Commitments under license agreement with University of California

    300,000     20,000     60,000     40,000     180,000  

Commitments under license agreement with Wake Forest

    360,000     80,000     200,000     80,000     40,000  
                       

Total contractual cash obligations

  $ 9,859,162   $ 8,869,867   $ 549,295   $ 210,000   $ 230,000  
                       

208


Table of Contents

Off-Balance Sheet Arrangements

        BioSante does not have any off-balance sheet arrangements that have or reasonably are likely to have a material effect on BioSante's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, BioSante is not exposed materially to any financing, liquidity, market or credit risk that could arise if BioSante had engaged in these arrangements.


Critical Accounting Policies

        BioSante's significant accounting policies are described in Note 2 to its financial statements for the year ended December 31, 2011, included in this joint proxy statement/prospectus. The discussion and analysis of BioSante's financial statements and results of operations are based upon BioSante's financial statements, which have been prepared in accordance with GAAP. The preparation of BioSante's financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The SEC has defined a company's most critical accounting policies as those that are most important to the portrayal of its financial condition and results of operations, and which requires BioSante to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, BioSante has identified the critical accounting policy described below. Although BioSante believes that its estimates and assumptions are reasonable, they are based upon information available when they are made. Actual results may differ significantly from these estimates under different assumptions or conditions.

Accounting for Convertible Senior Notes Assumed in Connection with the Cell Genesys Acquisition

        On October 14, 2009, BioSante completed a legal merger with Cell Genesys, as a result of which BioSante acquired all of the assets and liabilities of Cell Genesys. Concurrently with the merger, the common stock of Cell Genesys was converted into common stock of BioSante, and Cell Genesys ceased to exist. The primary reason BioSante merged with Cell Genesys was BioSante's need at that time for additional funding to continue its Phase III clinical studies for LibiGel and the lack of other available acceptable alternatives for BioSante to access capital prior to and at the time the merger agreement was entered into by BioSante and Cell Genesys in June 2009, especially in light of the then state of the markets for equity offerings, which historically had been BioSante's primary method for raising additional financing. BioSante has accounted for this transaction with Cell Genesys under GAAP as an acquisition of the net assets of Cell Genesys, whereby BioSante has recorded the individual assets and liabilities of Cell Genesys as of the completion of the merger based on their estimated fair values. As Cell Genesys had ceased operations, the acquisition was not considered to be a business combination, and the allocation of the purchase price did not result in recognition of goodwill. As a result of this treatment, during the fourth quarter of 2009, BioSante recognized a non-cash expense of approximately $20.2 million representing the excess of the consideration and costs of the transaction over the fair value of assets and liabilities received.

        BioSante assumed $22.0 million in aggregate principal amount of convertible senior notes in connection with the Cell Genesys acquisition, including $1.2 million in aggregate principal amount of 3.125% convertible senior notes due November 1, 2011, which were repaid prior to the November 1, 2011 maturity date, and $20.8 million in aggregate principal amount of 3.125% convertible senior notes due May 1, 2013, which were outstanding as of December 31, 2011. As of September 30, 2012, $8.3 million in aggregate principal amount of convertible senior notes remained outstanding following the exchange transactions previously discussed.

        BioSante elected to apply the fair value option to the debt at the time of the acquisition, with recognition of subsequent changes in the fair value of the convertible senior notes recognized in

209


Table of Contents

BioSante's statements of operations immediately. As a result of this election, BioSante periodically must estimate the fair value of its convertible senior notes, which requires BioSante to make certain judgments and estimates about appropriate discount rates, BioSante's creditworthiness, and assumptions regarding potential conversion of the notes. BioSante believes that its estimates and assumptions are reasonable; however, changes in these estimates and assumptions could result in significant differences in the carrying value of the convertible senior notes. The most sensitive of these assumptions is the discount rate used in the fair value estimate, which was 18.5 percent at December 31, 2011, and is based on the median yield to maturity of Ca and Caa3 rated debt instruments as of December 31, 2011. A one percentage point increase or decrease in the discount rate would cause the recorded value of the convertible senior notes to decrease or increase by approximately $191,000 and $194,000, respectively.


Recently Issued Accounting Pronouncements

        BioSante does not expect the adoption of any recent accounting pronouncements to have a material effect on its financial position, results of operations or cash flows.


Quantitative and Qualitative Disclosures About Market Risk

        BioSante is exposed to interest rate sensitivity on its cash equivalents in money market funds and its outstanding fixed rate debt. The objective of BioSante's investment activities is to preserve principal, while at the same time maximizing yields without significantly increasing risk. To achieve this objective, BioSante invests in highly liquid U.S. Treasury money market funds. BioSante's investments in U.S. Treasury money market funds are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, BioSante invests in short-term securities and its goal is to maintain an average maturity of less than one year. As of the date of this proxy statement/prospectus, all of BioSante's cash equivalents are only invested in a U.S. Treasury money market fund and a certificate of deposit.

        The following table provides information about BioSante's financial instruments that are sensitive to changes in interest rates.


Interest Rate Sensitivity
Principal Amount by Expected Maturity and Average Interest Rate

As of September 30, 2012
  2012   2013   Total   Fair Value
September 30,
2012
 

Total cash equivalents

  $ 36,957,469           $ 36,957,469  

Average interest rate

    0.04 %            

Fixed interest rate convertible senior notes

   
 
$

8,277,850
 
$

8,277,850
 
$

7,593,216
 

Average interest rate

    3.125 %   3.125 %   3.125 %      

 

As of December 31, 2011
  2012   2013   Total   Fair Value
December 31,
2011
 

Total cash equivalents

  $ 55,465,507           $ 55,465,507  

Average interest rate

    0.02 %            

Fixed interest rate convertible senior notes

   
 
$

20,782,000
 
$

20,782,000
 
$

17,336,760
 

Average interest rate

    3.125 %   3.125 %   3.125 %      

210


Table of Contents


ANI'S BUSINESS

Overview

        ANI is a fully integrated specialty pharmaceutical company developing, manufacturing and marketing branded and generic prescription pharmaceuticals. In two facilities with combined manufacturing, packaging and laboratory capacity totaling 173,000 square feet, ANI manufactures oral solid dose products, as well as liquids and topicals, including narcotics and those that must be manufactured in a fully contained environment due to their potency and/or toxicity. ANI also performs contract manufacturing for other pharmaceutical companies. ANI's targeted areas of product development include narcotics, anti-cancers and hormones (potent compounds) and extended release niche generic prescription product opportunities.

        ANI was organized as a Delaware corporation in March 2004 and is headquartered in Baudette, Minnesota. The address of ANI's main office is 210 Main Street West, Baudette, Minnesota, 56623, and the telephone number is (218) 634-3500.

        ANI acquired its two facilities in May 2007 from Solvay Pharmaceuticals, Inc. (Solvay). Solvay in turn had acquired the facilities in 1986 through its purchase of Atlanta-based Reid-Rowell, Inc., after which the facilities served as Solvay's sole U.S.-based manufacturing facilities for hormone, steroid and other prescription products.

        In March 2009, ANI's leadership transitioned from founding management to a new team focused initially on stabilizing the business and then developing and executing a strategy based on ANI's prescription pharmaceutical manufacturing assets and capabilities. To that end, since the first quarter of 2009, ANI's new management team has:


Operations

        ANI's two facilities have highly specialized manufacturing capabilities as a result of capital investments by Solvay during its ownership. ANI's Baudette-based manufacturing and product development teams have successfully developed and manufactured liquid, powder and oral solid dose

211


Table of Contents

products, including those requiring containment. The plants have sufficient capacity, including analytical and stability laboratories, to expand production and substantially grow revenues. ANI can offer no assurances that it will in fact be successful in growing revenues, as multiple other factors, including those discussed in "Risk Factors—Risks Related to ANI" may impair its ability to do so.

        In addition to laboratories that support all of the requirements of raw material, finished product and stability testing, ANI has a 1,000 square foot pilot laboratory offering liquid, suspension and solid dose development capabilities. This pilot laboratory offers a full range of analytical capabilities including method development, validation and de-formulation, and is licensed by the Drug Enforcement Administration (DEA). In addition, a separate development suite located within ANI's high-potency manufacturing facility offers additional capabilities for product development.

        ANI has filed three ANDAs for products and has eight ANDAs in progress—three internal and five with development partner RiconPharma LLC (RiconPharma). RiconPharma, an experienced pharmaceutical development firm, shares in the development costs, which enables ANI to expand and diversify beyond its own suite of products. See "—Research and Development."

        Over the previous ten years, ANI has had six general inspections by the Food and Drug Administration, resulting in two 483 observations, which are observations in which, in the investigator's judgment, the observed conditions or practices indicate that an FDA-regulated product may be in violation of FDA's requirements. In addition, ANI is regularly audited by its contract manufacturing customers, including but not limited to Abbott Laboratories, JDS/Noven, MEDA Pharmaceuticals and County Line Pharmaceuticals, LLC.


Mission and Strategy

        ANI's mission is to use its manufacturing assets to develop and market niche generic pharmaceuticals, focusing on opportunities in pain management (narcotics), anti-cancer (oncolytics), women's health (hormones and steroids), as well as complex formulations including extended release and combination products.

        ANI considers a variety of criteria in determining which products to develop, all of which influence the level of competition upon product launch. These criteria include:


Government Regulation

Generic Pharmaceutical Products

        Prescription pharmaceutical products in the United States are generally marketed as either branded or generic drugs. Branded products are marketed under brand names through marketing programs that are designed to generate physician and consumer loyalty. Branded products are generally patent protected, which provides a period of market exclusivity during which time they are sold with

212


Table of Contents

little or no competition for the compound, although typically there are other products in the same therapeutic area. Additionally, branded products may benefit from additional periods of non-patent market exclusivity. Exclusivity ordinarily provides branded products with the ability to maintain their profitability for relatively long periods of time, and branded products typically continue to play a significant role in the market after the end of patent protection or other market exclusivities due to physician and consumer loyalties.

        Generic pharmaceutical products are the chemical and therapeutic equivalents of reference branded drugs. A reference branded drug is an approved drug product listed in the FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, popularly known as the "Orange Book." The Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) provides that generic drugs may enter the market after the approval of an ANDA, which requires that bioequivalence to a reference branded product be demonstrated, and the expiration, invalidation or circumvention of any patents on the corresponding reference branded drug, or the end of any other relevant market exclusivity periods related to the reference branded drug. Generic drugs are bioequivalent to their reference branded name counterparts. Bioequivalence compares the bioavailability of one drug product with that of the referenced drug product containing the same active ingredient. Bioavailability indicates the rate and extent to which the active ingredients or active moiety is absorbed from a drug product and becomes available at the site of action. When established, bioequivalence confirms the absence of a significant difference in the rate and extent to which the active ingredient or active moiety in pharmaceutical equivalents or pharmaceutical alternatives becomes available at the site of drug action when administered at the same molar dose under similar conditions in an appropriately designed study. Accordingly, generic products provide a safe, effective and cost-efficient alternative to users of these reference branded products. Growth in the generic pharmaceutical industry has been driven by the increased market acceptance of generic drugs, as well as the number of branded drugs for which patent terms and/or other market exclusivities have expired.

        All applications for FDA approval must contain information relating to product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling and quality control. Information to support the bioequivalence of generic drug products or the safety and effectiveness of new drug products for their intended use is also required to be submitted. There are generally two types of applications used for obtaining FDA approval of new products:

        The ANDA development process is generally less time-consuming and less complex than the NDA development process. It typically does not require new preclinical and clinical studies, because it relies on the studies establishing safety and efficacy conducted for the reference branded drug previously approved through the NDA process. The ANDA process, however, typically requires one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved referenced branded drug.

        Generic products are generally introduced to the marketplace after the expiration of patent protection for the branded product and after the end of a period of non-patent market exclusivity. However, if an ANDA applicant files an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed in the Orange Book with respect to the

213


Table of Contents

reference branded drug product, that generic equivalent may be able to be marketed prior to the expiration of patent protection for the branded product. Such patent certification is commonly referred to as a Paragraph IV certification. If the holder of the NDA sues, claiming patent infringement, within 45 days of notification by the applicant, the FDA may not approve the ANDA until the earlier of the rendering of a court decision favorable to the ANDA applicant or the expiration of 30 months. An ANDA applicant that is first to file a Paragraph IV certification is eligible for a period of generic marketing exclusivity. This exclusivity, which under certain circumstances may be required to be shared with other applicable ANDA sponsors with Paragraph IV certifications, lasts for 180 days, during which the FDA cannot grant final approval to other ANDA sponsors holding applications for a generic equivalent to the same reference branded drug.

        In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent market exclusivity, during which the FDA cannot approve an application for a generic version product. If the reference drug is a new chemical entity, the FDA may not accept an ANDA for a generic product for up to five years following approval of the NDA for the new chemical entity. If it is not a new chemical entity, but the holder of the NDA conducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA may not approve an ANDA for reference NDA product before the expiration of three years. Certain other periods of exclusivity may be available if the referenced drug is indicated for treatment of a rare disease or is studied for pediatric indications.

        Prior Approval Supplements are required for approval of various types of changes to an approved ANDA, and these supplements may be under review for six months or more. In addition, certain types of changes may only be approved once new bioequivalence studies are conducted or other requirements are satisfied.

        One requirement for FDA approval of NDAs and ANDAs is that ANI's manufacturing procedures and operations conform to FDA requirements and guidelines, generally referred to as cGMP. The requirements for FDA approval encompass all aspects of the production process, including validation and recordkeeping, the standards around which are continuously changing and evolving.

        Facilities, procedures, operations and/or testing of products are subject to periodic inspection by the FDA, the DEA and other authorities. In addition, the FDA conducts pre-approval and post-approval reviews and plant inspections to determine whether ANI's systems and processes are in compliance with cGMP and other FDA regulations. ANI's suppliers are subject to similar regulations and periodic inspections.

        ANI has filed three ANDAs for products for which FDA approvals are expected beginning in 2014; however, ANI can offer no assurances that it in fact will be able to obtain such approvals. In addition, ANI has eight ANDAs in progress—three internal and five with a development partner. ANI expects to file an ANDA for one of these products in 2012, and the remaining seven ANDAs in 2013, with approvals expected beginning in 2015; however, there can be no assurances that the filing of these ANDAs will not be delayed or abandoned and no assurances that approval will be obtained. Further, ANI's pipeline of future development candidates includes products in each area of strategic focus, i.e., pain management (narcotics), anti-cancer (oncolytics), women's health (hormones and steroids), as well as complex formulations including extended release and combination products.

Generic Drug User Fee Amendment

        The Generic Drug User Fee Amendment of 2012 (GDUFA) to the FDA Safety and Innovation Act gives the FDA the authority to collect user fees from the generic pharmaceutical industry to fund reviews of generic drugs. GDUFA is designed to speed access to safe and effective generic drugs to the public. The law requires generic industry participants to pay user fees to supplement the costs of reviewing generic drug applications and inspecting facilities. The FDA believes these additional resources will enable it to reduce a current backlog of pending ANDA applications and cut the average

214


Table of Contents

time required to review generic drug applications for safety. For FDA's fiscal year 2013, the user fee rates are $51,520 for new ANDAs, $25,760 for Prior Approval Supplements, and $17,434 for each ANDA already on file at FDA. ANI also will have to pay a facility user fee, the amount of which has not yet been established by the FDA.

        During 2012, ANI paid $68,954 for its two ANDAs on file at the FDA and $51,520 for a new ANDA filing.

Unapproved Pharmaceutical Products

        Certain of ANI's generic products are marketed without approved NDAs or ANDAs, specifically, Esterified Estrogen with Methyltestosterone and Opium Tincture. During the nine months ended September 30, 2012 and 2011, combined net revenues for these products were $3.6 million and $2.2 million, respectively and during the years ended December 31, 2011 and 2010, combined net revenues for these products were $3.5 million and $95,000, respectively.

        The FDA's policy with respect to the continued marketing of unapproved products is stated in the FDA's September 2011 Compliance Policy Guide, titled "Marketed New Drugs without Approved NDAs or ANDAs." Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against marketing of such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack evidence of effectiveness. ANI believes that so long as it complies with applicable manufacturing and labeling standards, it will not be targeted for enforcement under the FDA's current enforcement policy. There can be no assurance, however, that the FDA will continue this policy or not take a contrary position with any individual product or group of products.

        In October 2012, ANI received a telephone call requesting a meeting with the FDA representatives from the Minneapolis district of the FDA to discuss continued manufacturing and distribution of Opium Tincture, which is an unapproved product. That meeting was held on October 25, 2012 by conference telephone call and included FDA representatives from the Office of Compliance at the Center for Drug Evaluation and Research (CDER). Discussions with CDER are continuing. If, as a result of such discussions or otherwise, the FDA were to make a determination that ANI could not continue to sell Opium Tincture as an unapproved product, ANI would be required to seek FDA approval for such product or withdraw such product from the market. If ANI determined to withdraw the product from the market, ANI's net revenues for generic pharmaceutical products would decline materially, and if ANI decided to seek FDA approval, it would face increased expenses and might need to suspend sales of the product until such approval is obtained, and there are no assurances that ANI would receive such approval.

        In addition, one group of products that ANI manufactures on behalf of a contract customer, and based on the sale of which ANI receives royalties, is marketed by that customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market, which could materially adversely affect ANI's contract manufacturing and royalty revenue. ANI's contract manufacturing revenue for this group of products for the nine months ended September 30, 2012 and 2011 was $775,000 and $1.1 million, respectively. ANI's royalties on the net sales of these products for the nine months ended September 30, 2012 and 2011 were $220,000 and $249,000, respectively. ANI's contract manufacturing revenue for the group of unapproved products for the years ended December 31, 2011 and 2010 was $1.3 million and $623,000, respectively. ANI's royalties on the net sales of these unapproved products for the years ended December 31, 2011 and 2010 were $320,000 and $118,000, respectively.

215


Table of Contents

        See also "Risk Factors—Risks Related to ANI—Certain of ANI's generic products are marketed without approved NDAs or ANDAs and ANI can offer no assurances that the FDA will not require ANI to seek approval for these products or withdraw them from the market. In either case, ANI's business, financial position, results of operations and cash flows could be materially adversely affected."

Controlled Substances

        U.S. Drug Enforcement Administration.    The DEA regulates certain drug products containing controlled substances, such as opium, pursuant to the U.S. Controlled Substances Act (CSA). The CSA and DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including registration, recordkeeping, reporting, storage, security and distribution. Recordkeeping requirements include accounting for the amount of product received, manufactured, stored and distributed. Companies handling controlled substances also are required to maintain adequate security and to report suspicious orders, thefts and significant losses. The DEA periodically inspects facilities for compliance with the CSA and its regulations. Failure to comply with current and future regulations of the DEA could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.

        In addition, each year, ANI must submit a request to the DEA for a quota to purchase the amount of active pharmaceutical ingredient (opium) needed to manufacture Opium Tincture. Without an approved quota from DEA, ANI would not be able to purchase this ingredient from its supplier. As a result, ANI is dependent upon the DEA to approve, on an annual basis, a quota of active pharmaceutical ingredient that is sufficiently large to support the continued manufacture of Opium Tincture.

Medicaid/Medicare

        Medicaid, a U.S. federal health care program, requires all pharmaceutical manufacturers to pay rebates to state Medicaid agencies. The rebates are based on the volume of drugs that are reimbursed by the states for Medicaid beneficiaries. The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education and Reconciliation Act of 2010, which amends the PPACA, raised the rebate percentages for both generic and branded pharmaceuticals effective January 1, 2010. The required rebate is currently 13 percent of the average manufacturer's price for sales of Medicaid-reimbursed products marketed under ANDAs, up from 11 percent for periods prior to 2010. Sales of Medicaid-reimbursed products marketed under NDAs require manufacturers to rebate the greater of approximately 23 percent (up from 15 percent) of the average manufacturer's price or the difference between the average manufacturer's price and the best price during a specific period. ANI believes that federal or state governments may continue to enact measures aimed at reducing the cost of drugs to the public.

        Under Part D of the Medicare Modernization Act, Medicare beneficiaries are eligible to obtain discounted prescription drug coverage from private sector providers. As a result, usage of pharmaceuticals has increased, which is a trend that ANI believes will continue to benefit the generic pharmaceutical industry. However, such potential sales increases may be offset by increased pricing pressures, due to the enhanced purchasing power of the private sector providers that are negotiating on behalf of Medicare beneficiaries.

        Under the Patient Protection and Affordable Care Act, pharmaceutical companies are required to provide discounts to Medicare Part D beneficiaries for the cost of branded prescription drugs. Under the Medicare Coverage Gap Discount Program authorized by PPACA, any pharmaceutical product marketed under an NDA, regardless of whether the product is marketed as a "generic," is subject to the rebate. ANI's generic hydrocortisone enema and fluvoxamine maleate tablets, while marketed as "generics", are actually the subject of approved NDAs and, therefore, are subject to the rebate.

216


Table of Contents


Research and Development

        ANI obtains new generic products through a combination of internal development and in partnership with other firms. Additionally, ANI licenses and co-develops products through arrangements with other companies.

        To accelerate its product development pipeline, ANI entered into a relationship with RiconPharma. Under the parties' master product development and collaboration agreement from July 2011, ANI and RiconPharma have agreed to collaborate in a cost, asset and profit sharing arrangement for the development, manufacturing, regulatory approval and marketing of pharmaceutical products in the United States. The specific terms and conditions of each new product collaboration, including a description of the product, estimated cost of development and percentage allocation of costs and profits, are included in amending exhibits to the agreement. Unless otherwise set forth in the amending exhibit, RiconPharma is responsible for developing the products and ANI is responsible for manufacturing, sales, marketing and distribution of the products. The parties are jointly responsible for directing any bioequivalence studies. ANI is responsible for obtaining and maintaining all necessary regulatory approval, including the preparation of all ANDAs. Under the agreement and unless otherwise specified in the amending exhibit, the parties will own equally all the rights, title and interest in the products. To the extent permitted by applicable law, ANI will be identified on the product packaging as the manufacturer and labeler/distributor of the product. During the term of the agreement, both parties are prohibited from developing, manufacturing, selling or distributing any products that are identical or bioequivalent to products covered under the agreement. The master product development and collaboration agreement and any amending exhibit may be terminated as a result of uncured material breach upon 30 days' prior written notice, subject to a 30-day extension. The terminating party may not develop, manufacture, market, distribute or sale any covered product or a bioequivalent product for five years after termination. In addition, either party may terminate an amending exhibit upon 30 to 60 days' prior written notice.

        During the years ended December 31, 2011 and 2010, ANI's research and development expenses were $799,302 and $84,762, respectively.


Patents, Trademarks and Licenses

        ANI owns the trademark names for each of its branded products, Cortenema® and Reglan®. Generally, the branded pharmaceutical business relies upon patent protection to ensure market exclusivity for the life of the patent. ANI does not own or license any patents associated with these products. Further, patent protection and market exclusivity for these products have long-since expired. Therefore, ANI considers the trademark names to be of material value and acts to protect these rights from infringement. However, ANI's business is not dependent upon any single trademark. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and may be renewed indefinitely.

        In the branded pharmaceutical industry, the majority of an innovative product's commercial value is usually realized during the period in which the product has market exclusivity. In the United States and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product's sales. The rate of this decline varies by country and by therapeutic category; however, following patent expiration, branded products often continue to have market viability based upon the goodwill of the product name, which typically benefits from trademark protection. ANI believes that sales of its branded products have and will continue to benefit from the goodwill of the product name.

        ANI has licensed the right to manufacture and market an authorized generic version, fluvoxamine maleate, of Luvox® IR from Jazz Pharmaceuticals, which in turn acquired the rights to Luvox® IR from Solvay Pharmaceuticals, Inc. This license is in addition to a manufacturing and supply agreement with

217


Table of Contents

Jazz Pharmaceuticals, under which ANI manufactures and supplies Jazz Pharmaceuticals' requirements for Luvox® IR. Under the license agreement, Jazz Pharmaceuticals transferred responsibility for the related NDA to ANI. The license agreement may be terminated by Jazz Pharmaceuticals if the Solvay license agreement is terminated, if ANI breaches or defaults in the performance or observance of any material provisions of the agreement or the related supply agreement and such breach or default is not cured within 60 days after written notice is received, in the case of voluntary or involuntary bankruptcy filings by/against ANI, if ANI does not make royalty payments when due, or in the event ANI receives an adverse finding letter from the FDA relating to the NDA and is either not able to cure or provide evidence of a reasonable plan to cure within 30 days of receipt by ANI of such adverse finding letter, among other events. ANI may terminate the agreement with the consent of Jazz Pharmaceuticals, such consent not to be unreasonably withheld.


Customers

        ANI's products are sold by four major retail pharmacy chains, Walgreens, CVS, RiteAid and Wal-Mart, and are included in the source programs of four major national wholesalers, Cardinal, McKesson, AmerisourceBergen and Morris Dickson. In addition, ANI's customers include national mail order houses and group purchasing organizations.

        Abbott Laboratories, formerly Solvay Pharmaceuticals, is one of ANI's largest ongoing contract manufacturing customers, the loss of whom would have a material adverse effect on ANI's business. For 2011 and 2010, sales to Abbott represented 15.6 percent and 41.6 percent of net revenues, respectively. The written agreement under which ANI performed contract manufacturing services for Abbott Laboratories expired in April 2012 and has not been renewed. ANI currently conducts its contract manufacturing services for Abbott Laboratories based on periodic individual purchase orders submitted by Abbott Laboratories to ANI, and there can be no assurances that Abbott Laboratories will continue submitting such orders and not choose another contract manufacturer for its products.

        Consistent with industry practice, ANI maintains a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date. Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date. See "ANI's Management's Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Policies and Estimates" for a discussion of several of ANI's revenue recognition provisions.


Markets

        ANI's target markets have limited competition due to complexities in formulation, active pharmaceutical ingredient sourcing, material handling and manufacturing, and regulatory hurdles.

Hormone and Steroidal Drugs

        The market for hormone and steroidal drugs includes hormone therapy to alleviate menopausal symptoms in women, contraceptives, testosterone replacement therapies for men, and therapies for treating hormone-sensitive and other cancers.

        Hormone Therapy (HT) has been an accepted medical treatment for alleviating the symptoms of menopause since the 1930s, with formal FDA approval for that use granted in 1942. In the beginning, HT consisted of estrogen only, but has evolved to include combination therapies of estrogen, progesterone and androgens. In 2000, the FDA approved the use of estrogen for prevention of osteoporosis. ANI targets niche products in the HT and steroidal products market for several reasons:

218


Table of Contents

Oncolytics

        ANI is positioned to develop and manufacture niche oncolytic (anti-cancer) drugs due to the capabilities of the ANI's containment facility and its expertise in manufacturing segregation. In particular, ANI is targeting products subject to priority review by the FDA, those with no blocking patents, and those with no generic competition. In addition to one such product already under development, ANI has identified six additional priority review opportunities in oncolytics.

Narcotics

        ANI's main manufacturing facility in Baudette, Minnesota is licensed by the DEA for the manufacture and distribution of Schedule II narcotics, i.e., drugs considered to have a high abuse risk but that also have safe and accepted medical uses in the United States. In addition to its existing pipeline of three ANDAs (and five additional ANDAs with a development partner), ANI has identified additional product development opportunities in this segment.

Contract Manufacturing

        Contract manufacturers are experiencing significant growth as both branded and generic companies are outsourcing some or all of their production to contract manufacturing organizations (CMOs) for the following reasons:

        ANI considers contract manufacturing to be an important component of its ongoing business strategy. Given its highly specialized manufacturing capabilities, ANI is focused on attracting niche contract manufacturing opportunities that fill idle capacity and offer higher margins.


Marketing and Distribution

        ANI's products are distributed through the following channels:

219


Table of Contents


Competition

        The U.S. pharmaceutical industry is highly competitive. ANI's primary competitors include other generic companies (both major multinational and regional companies) and branded drug companies that continue to sell or license branded pharmaceutical products after patent and other statutory expirations.

        The primary means of competition among generic companies are pricing and contract terms, service levels, and supplier reliability. To compete effectively, ANI establishes active working relationships with each of its customers, continually gathers important market information in order to respond successfully to requests for proposals, maintains sufficient inventories to assure high service levels, and works to reduce product costs by sourcing and qualifying alternative suppliers whenever possible and rebidding product components on a routine basis.

        ANI's sales can be impacted by new studies that indicate that a competitor's product has greater efficacy for treating a disease or particular form of a disease than one of ANI's products. If competitors introduce new products and processes with therapeutic or cost advantages, ANI's products can be subject to progressive price reductions and/or decreased volume of sales.

        Principal competitors for the types of drugs in which ANI transacts business are as follows:

        Hormones and Steroids.    Competition for hormone and steroidal drugs is limited because of the small number of plants in the United States capable of safely manufacturing these high-potency compounds. Key generic participants in hormone and steroidal drugs include Amneal Pharmaceuticals, Creekwood Pharmaceuticals, Endo Pharmaceuticals, Glenmark Pharmaceuticals, Watson Pharmaceuticals and Teva Pharmaceuticals USA.

        Oncolytics.    Competitors for oncolytic products include both top-tier generic pharmaceutical companies as well as niche players. Key market participants include Mylan, Par Pharmaceutical Companies, Sandoz, the generic pharmaceuticals division of Novartis AG, Watson Pharmaceuticals and Teva Pharmaceuticals USA.

        Narcotics.    Although market share in narcotic products is concentrated among two principal companies, i.e., Purdue Pharma and Mallinckrodt, several other companies with material market share in specific product categories within narcotics include Endo Pharmaceuticals, Roxane Laboratories and Watson Pharmaceuticals.


Product Liability

        Product liability litigation represents an inherent risk to firms in the pharmaceutical industry. ANI utilizes traditional third-party insurance policies with regard to its product liability claims. Such insurance coverage at any given time reflects market conditions, including cost and availability, existing at the time the policy is written, and the decision to obtain commercial insurance coverage or to self-insure varies accordingly.

        In February 2009, the FDA mandated a "black box" warning for the drug metoclopramide, specifically highlighting the risks of patients developing tardive dyskinesia, a movement disorder, when taking metoclopramide for longer than 12 weeks. As a result, numerous state-level lawsuits were brought against pharmaceutical manufacturers, both branded and generic, who had ever manufactured and/or sold metoclopramide. Among the defendants is ANI, which manufactures the generic version and since 2011 has been manufacturing the branded version under the name Reglan®. The plaintiffs in these lawsuits claim to have incurred bodily injuries as a result of ingestion of metoclopramide or Reglan® prior to the FDA's black box warning requirement. The allegations involve a failure, based on various state-level consumer protection laws, to adequately warn patients and doctors about the risks of using metoclopramide for longer than 12 weeks as evidenced by the FDA's mandate to strengthen the

220


Table of Contents

labeled warning. ANI has been named and served in 79 separate complaints between December 2009 and November 2012, including three in Pennsylvania, nine in New Jersey, and 67 in California, covering 2,921 plaintiffs in total. In August 2012, ANI was dismissed with prejudice as a defendant in all of the cases brought in New Jersey.

        As the state-level litigation progressed, the generic pharmaceutical defendants appealed to the US Supreme Court arguing that generic companies could not comply with state laws that required them to strengthen their labels because generic companies are prohibited by federal law from making any changes except those adopted by the brand or mandated by FDA for all manufacturers, e.g. federal pre-emption. The US Supreme Court decided in favor of the generic companies in June 2011 in what is known now as the Mensing decision. While many cases have since been dismissed by state courts, several judges, including in Pennsylvania and California, have allowed the plaintiffs to resubmit their complaints.

        At the present time, ANI's management is unable to assess the likely outcome of the remaining cases. ANI's insurance company has assumed the defense of this matter. In addition, ANI's insurance company renewed ANI's product liability insurance on September 1, 2011 and 2012 with absolute exclusions for claims related to Reglan® and metoclopramide. ANI cannot provide assurances that the outcome of these matters will not have an adverse effect on its business, results of operations, financial condition and cash flow. Furthermore, like all pharmaceutical manufacturers, ANI in the future may be exposed to other product liability claims, which could harm its business, results of operations, financial condition and cash flow.


Suppliers and Raw Materials

        ANI sources the raw materials for its products, including active pharmaceutical ingredients (API) from both domestic and international suppliers. Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second source of supply. Changes in API suppliers must usually be approved through a Prior Approval Supplement by the FDA. As the API typically comprises the majority of a product's manufactured cost, and qualifying an alternative is costly and time-consuming, API suppliers must be selected carefully based on quality, reliability of supply and long-term financial stability. ANI's principal API suppliers include Mallinckrodt, Symbiotech Pharmalab, Johnson Matthey and Pfizer Centersource.

        In addition, each year, ANI must submit a request to the Drug Enforcement Agency (DEA) for a quota to purchase the amount of active pharmaceutical ingredient needed to manufacture Opium Tincture. Without an approved quota from DEA, ANI would not be able to purchase this ingredient from its supplier. As a result, ANI is dependent upon the DEA to approve, on an annual basis, a quota of active pharmaceutical ingredient that is sufficiently large to support the continued manufacture of Opium Tincture.


Employees

        ANI's workforce includes 69 full-time employees, including 36 salaried employees, and a flexible direct labor pool of 18 experienced pharmaceutical manufacturing and packaging staff. Of the full-time employees, 44 are in selling, general and administrative, 20 in production and five in research and development.

221


Table of Contents


ANI'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of financial condition and results of operations should be read together with ANI's financial statements and condensed financial statements and accompanying notes appearing elsewhere in this joint proxy statement/prospectus. This discussion contains forward-looking statements, based on current expectations and related to future events and ANI's future financial performance, that involve risks and uncertainties. ANI's actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under "Risk FactorsRisks Related to ANI" and "Risk FactorsRisks Related to the Combined Company" and elsewhere in this joint proxy statement/prospectus.


Overview

        ANI is a fully integrated specialty branded and generic pharmaceutical company developing, manufacturing and marketing branded and generic prescription pharmaceuticals. In two facilities with combined manufacturing, packaging and laboratory capacity totaling 173,000 square feet, ANI manufactures oral solid dose products, as well as liquids and topicals, including narcotics and those that must be manufactured in a fully contained environment due to their potency and/or toxicity. ANI also performs contract manufacturing for other pharmaceutical companies.

        ANI's established product portfolio consists of both branded and generic pharmaceuticals, including:

Generic Products
 
Branded Products
Opium Tincture   Cortenema®
Fluvoxamine Maleate Tablets   Reglan® Tablets
Esterified Estrogen with Methyltestosterone Tablets    
Hydrocortisone Enema    
Metoclopramide Syrup    

        ANI's business strategy is to utilize its manufacturing assets to develop and market niche generic pharmaceuticals, focusing on products in pain management (narcotics), anti-cancer (oncolytics), women's health (hormones and steroids), as well as complex formulations, including extended release and combination products. These areas of focus reflect ANI's specialized manufacturing experience and capabilities and offer a large number of attractive niche generic product opportunities.

        ANI considers a variety of criteria in determining which products to develop, all of which influence the level of competition upon product launch. These criteria include:

222


Table of Contents


Recent Developments

        In October 2012, ANI entered into a definitive merger agreement with BioSante pursuant to which the companies are to merge in an all-stock transaction. Under the terms of the agreement, upon completion of the merger, BioSante will issue to ANI stockholders shares of BioSante common stock such that the ANI stockholders will own approximately 53 percent of the combined company's shares outstanding, and the BioSante stockholders will own approximately 47 percent, subject to adjustment as provided in the merger agreement. In addition, immediately prior to the merger, BioSante plans to distribute to its then current stockholders contingent value rights (CVR) providing payment rights arising from a future sale, transfer, license or similar transaction(s) involving BioSante's LibiGel® (female testosterone gel). Upon completion of the merger, the combined company will be renamed ANI Pharmaceuticals, Inc. and will operate under the leadership of ANI's management team. The board of directors of the combined company is expected to have two directors from BioSante and five directors from ANI. The merger, which is subject to normal closing conditions including approval of the stockholders of both BioSante and ANI, is expect to close during the first quarter of 2013. Completion of the merger is subject to the number of customary conditions, including, but not limited to, the approval of the merger agreement by the BioSante and ANI stockholders. If any of the conditions to the merger are not satisfied or, where waiver is permissible not waived, the merger will not be consummated. For further details, please refer to the sections entitled "The Merger" and "The Merger Agreement" in this joint proxy statement/prospectus.


Critical Accounting Policies and the Use of Estimates

        This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on ANI's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires ANI to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, ANI evaluates these estimates and assumptions, including those described below. ANI bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

        Some of the estimates and assumptions ANI has to make under GAAP require difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, actual results could differ from those estimates. Due to the estimation processes involved, the following summarized accounting policies and their application are considered to be critical to understanding ANI's business operations, financial condition and results of operations.

Revenue Recognition

        Revenue is recognized for product sales upon shipment and when estimates of discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments are reasonably determinable, collection is reasonably assured and ANI has no further performance obligations. These estimates reduce gross revenues to net revenues in the statements of operations, or are presented as current liabilities or reductions in accounts receivable in the balance sheets.

Accruals for Chargebacks, Returns and Other Allowances

        ANI's generic and branded product revenues are typically subject to agreements with customers allowing chargebacks, product returns, administrative fees, and other rebates and prompt payment discounts. ANI accrues for these items at the time of sale based on the estimates and methodologies

223


Table of Contents

described below. In the aggregate, these gross-to-net accruals exceed 65 percent of generic and branded gross product sales and reduce gross revenues to net revenues in the statements of operations, or are presented as current liabilities or reductions in accounts receivable in the balance sheets. ANI continually monitors and re-evaluates the accruals as additional information becomes available, which includes, among other things, updates to trade inventory levels and customer product mix. ANI makes adjustments to the accruals at the end of each reporting period, to reflect any such updates to the relevant facts and circumstances.

        Chargebacks, primarily from wholesalers, are the most significant of ANI's accruals. Chargebacks result from arrangements ANI has with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler. Alternatively, ANI may pre-authorize wholesalers to offer specified contract pricing to other indirect customers. Under either arrangement, ANI provides a chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler's invoice price, typically Wholesale Acquisition Cost (WAC).

        Chargeback credits are calculated as follows:

        Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price (ASP) for each product. This calculation is performed by product by wholesaler. ASPs can be affected by several factors such as:

        As necessary, ANI adjusts ASPs based on anticipated changes in the factors above.

        The difference between ASP and WAC is recorded at the same time ANI recognizes revenue from the product sale as a reduction in both gross revenues and accounts receivable.

        To evaluate the adequacy of its chargeback accruals, ANI obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the chargeback amount, the difference between ASP and WAC, to arrive at total expected future chargebacks, which is then compared to the chargeback accruals. ANI continually monitors chargeback activity and adjusts ASPs when it believes that actual selling prices will differ from current ASPs.

        Consistent with industry practice, ANI maintains a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date. Generally, product may be returned for a period beginning six months prior to its expiration date until up to one year after its expiration date. ANI's product returns are settled through the issuance of a credit to the customer. ANI's estimate for returns is based upon its historical experience with actual returns. While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns. ANI continually monitors its estimates for returns and makes adjustments when it believes that actual product returns may differ from the established accruals.

224


Table of Contents

        Administrative fees or rebates are offered to wholesalers, group purchasing organizations and indirect customers, consistent with pharmaceutical industry practice. ANI accrues for fees and rebates, by product by wholesaler, at the time of sale based on contracted rates and ASPs.

        To evaluate the adequacy of its administrative fee accruals, ANI obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the ASPs to arrive at total expected future sales, which is then multiplied by contracted rates. The result is then compared to the administrative fee accruals. ANI continually monitors administrative fee activity and adjusts its accruals when it believes that actual administrative fees will differ from the accruals.

        Sales discounts are granted for prompt payment. The reserve for sales discounts is based on invoices outstanding. ANI assumes based on past experience that 100 percent of available discounts will be taken.

        The following table summarizes activity in the balance sheet for accruals and allowances for the nine months ended September 30, 2012 and fiscal years ended December 31, 2011 and 2010:

 
  Accruals for Chargebacks, Returns and Other Allowances  
 
  Chargebacks   Returns   Administrative
Fees and Other
Rebates
  Prompt Payment
Discounts
 

Balance at December 31, 2009

  $ 439,176   $   $   $  

Accruals/Adjustments

    1,975,853     80,067     114,727     25,000  

Credits Taken Against Reserve

    (1,664,571 )       (55,125 )    
                   

Balance at December 31, 2010

  $ 750,458   $ 80,067   $ 59,602   $ 25,000  

Accruals/Adjustments

    13,005,579     356,364     672,882     446,187  

Credits Taken Against Reserve

    (10,075,199 )   (184,386 )   (494,289 )   (304,748 )
                   

Balance at December 31, 2011

  $ 3,680,838   $ 252,045   $ 238,195   $ 166,439  

Accruals/Adjustments

    15,996,550     486,844     925,488     522,812  

Credits Taken Against Reserve

    (15,348,165 )   (351,274 )   (892,370 )   (481,435 )
                   

Balance at September 30, 2012

  $ 4,329,223   $ 387,615   $ 271,313   $ 207,816  
                   

Accounts Receivable

        ANI extends credit to customers on an unsecured basis. ANI utilizes the allowance method to provide for doubtful accounts based on management's evaluation of the collectability of accounts receivable. ANI provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. ANI's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. ANI determines trade receivables to be delinquent when greater than 30 days past due. Receivables are written off when it is determined that amounts are uncollectible. ANI determined that no allowance for doubtful accounts was necessary as of September 30, 2012 or December 31, 2011 and 2010.


Recently Issued Accounting Standards

        In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification 220 and requires entities to report

225


Table of Contents

components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 did not change the items that must be reported in other comprehensive income. ANI adopted the provisions of ASU 2011-05 in the first quarter of 2012. As ANI's net loss is the same as comprehensive loss, ANI did not present a statement of comprehensive loss.


General

        The following table sets forth, for all periods indicated, the percentage relationship that items in ANI's Statements of Operations bear to net revenues.

 
  Nine Months
Ended
September 30,
  Years Ended
December 31,
 
 
  2012   2011   2011   2010  

Net revenues

    100.0 %   100.0 %   100.0 %   100.0 %
                   

Operating expenses

                         

Cost of sales (exclusive of depreciation and amortization)

    41.8 %   40.8 %   41.5 %   38.5 %

Salaries and benefits

    23.4 %   27.1 %   26.5 %   49.4 %

Freight

    1.6 %   1.5 %   1.5 %   1.5 %

Research and development

    4.2 %   6.1 %   4.8 %   0.9 %

Selling, general and administrative

    19.7 %   23.0 %   22.5 %   35.8 %

Depreciation and amortization

    2.8 %   3.3 %   3.2 %   5.4 %
                   

Operating income (loss) from continuing operations

    6.5 %   (1.8 )%   0.0 %   (31.5 )%

Interest expense

    8.2 %   13.4 %   13.6 %   13.1 %

Other expense

    1.3 %   2.1 %   2.3 %   1.5 %
                   

Net loss from continuing operations

    (3.0 )%   (17.3 )%   (15.9 )%   (46.1 )%

Gain (loss) on discontinued operation

    0.7 %   2.4 %   1.2 %   (57.1 )%
                   

Net loss

    (2.3 )%   (14.9 )%   (14.7 )%   (103.2 )%
                   

        The following table summarizes ANI's results of operations for the nine months ended September 30, 2012 and 2011 and the years ended December 31, 2011 and 2010.

 
  Nine Months Ended
September 30,
  Years Ended December 31,  
 
  2012   2011   2011   2010  

Net revenues

  $ 15,049,619   $ 11,954,985   $ 16,514,579   $ 8,974,818  

Operating expenses

                         

Cost of sales (exclusive of depreciation and amortization)

    6,292,377     4,875,692     6,860,551     3,456,999  

Salaries and benefits

    3,516,427     3,245,637     4,352,250     4,425,012  

Freight

    242,814     178,499     253,394     137,837  

Research and development

    636,726     726,960     799,302     84,762  

Selling, general and administrative

    2,961,649     2,744,334     3,711,669     3,214,706  

Depreciation and amortization

    425,238     391,917     532,768     486,315  
                   

Operating income (loss) from continuing operations

  $ 974,388   $ (208,054 ) $ 4,645   $ (2,830,813 )
                   

Interest expense

    1,239,137     1,597,156     2,253,794     1,179,431  

Other expense

    190,605     254,006     384,555     138,061  
                   

Net loss from continuing operations

  $ (455,354 ) $ (2,059,216 ) $ (2,633,704 ) $ (4,148,305 )

Gain (loss) on discontinued operation

    104,120     291,096     205,545     (5,124,805 )
                   

Net loss

  $ (351,234 ) $ (1,768,120 ) $ (2,428,159 ) $ (9,273,110 )
                   

226


Table of Contents


Results of Operations for the Nine Months Ended September 30, 2012 and 2011

Net Revenues

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   Change   % Change  

ANI generic pharmaceutical products

  $ 7,401,002   $ 4,974,433   $ 2,426,569     48.8 %

ANI branded pharmaceutical products

    1,320,480     599,582     720,898     120.2 %

Contract manufacturing

    5,701,893     5,884,512     (182,619 )   (3.1 )%

Contract services and other income

    626,244     496,458     129,786     26.1 %
                   

Total net revenues

  $ 15,049,619   $ 11,954,985   $ 3,094,634     25.9 %
                   

        ANI has historically derived substantially all of its revenues from sales of generic and branded pharmaceutical products, contract manufacturing and contract services, which includes product development services for potential contract customers, laboratory services for existing contract customers where those services are billed separately from contract manufacturing and royalties on net sales of certain contract manufactured products. Revenue for the nine months ended September 30, 2012 was $15.0 million compared to $12.0 million for the nine months ended September 30, 2011.

        Revenue for the nine months ended September 30, 2012 increased $3.1 million, or 25.9 percent, compared to revenue for the nine months ended September 30, 2011, primarily as a result of the following factors:

227


Table of Contents

Cost of Sales (Exclusive of Depreciation and Amortization)

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   Change   % Change  

Cost of sales (exclusive of depreciation and amortization)

  $ 6,292,377   $ 4,875,692   $ 1,416,685     29.1 %

        Cost of sales consists of direct labor, including manufacturing and packaging, active pharmaceutical ingredients, excipients and packaging components. Cost of sales does not include depreciation and amortization expense, which is reported as a separate component of operating expenses on ANI's statements of operations.

228


Table of Contents

        For the nine months ended September 30, 2012, cost of sales increased to $6.3 million from $4.9 million for the corresponding 2011 period, an increase of $1.4 million or 29.1 percent, primarily as a result of an increase in sales of ANI generic and branded pharmaceutical products. Cost of sales as a percentage of net revenues increased to 41.8 percent during the nine months ended September 30, 2012 from 40.8 percent for the corresponding 2011 period, primarily as a result of the following factors:

        ANI sources the raw materials for its products, including active pharmaceutical ingredients (API), from both domestic and international suppliers. Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second source of supply. Changes in API suppliers usually must be approved by the FDA, which approval can take 18 months or longer. As a result, ANI is dependent upon its current vendors to supply reliably the API required for ongoing product manufacturing. During the nine months ended September 30, 2012, ANI purchased approximately 43 percent of total costs of sales from two suppliers. As of September 30, 2012, amounts payable to these suppliers totaled $159,705.

        Each year, ANI must submit a request to the Drug Enforcement Agency (DEA) for a quota to purchase the amount of API needed to manufacture Opium Tincture. Without an approved quota from DEA, ANI would not be able to purchase API from its supplier. As a result, ANI is dependent upon the DEA to annually approve a sufficient quota of API to support the continued manufacture of Opium Tincture.

Other Operating Expenses

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   Change   % Change  

Salaries and benefits

  $ 3,516,427   $ 3,245,637   $ 270,790     8.3 %

Freight

    242,814     178,499     64,315     36.0 %

Research and development

    636,726     726,960     (90,234 )   (12.4 )%

Selling, general and administrative

    2,961,649     2,744,334     217,315     (7.9 )%

Depreciation and amortization

    425,238     391,917     33,321     8.5 %
                   

Total other operating expenses

  $ 7,782,854   $ 7,287,347   $ 495,507     6.8 %
                   

        Other operating expenses consist of salaries and benefits, outbound freight, research and development costs, selling, general and administrative expenses, and depreciation and amortization. ANI expects other operating expenses to continue to increase in the future due to anticipated hiring of additional employees to support the activities associated with being a public company, assuming ANI's pending merger with BioSante is completed and to support anticipated additional revenue growth, as well as from anticipated additional research and product development costs.

        For the nine months ended September 30, 2012, other operating expenses increased to $7.8 million from $7.3 million for the corresponding 2011 period, an increase of approximately $496,000 or 6.8 percent, primarily as a result of the following factors:

229


Table of Contents

        Other operating expenses as a percentage of net revenues decreased to 51.7 percent during the nine months ended September 30, 2012 from 61.0 percent for the corresponding 2011 period, primarily as a result of ANI controlling these costs while increasing net revenues by $3.1 million during the same period.

Other Expenses

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   Change   % Change  

Interest expense

  $ 1,239,137   $ 1,597,156   $ (358,019 )   (22.4 )%

Other expense

    190,605     254,006     (63,401 )   (25.0 )%
                   

Total other expenses

  $ 1,429,742   $ 1,851,162   $ (421,420 )   (22.8 )%
                   

        Other expenses consist of interest expense associated with ANI's revolving line of credit and secured subordinated convertible notes, and other non-operating expenses including monitoring and advisory fees totaling $200,000 annually to certain of ANI's investors. See "Management of the Combined Company Following the Merger-Certain Relationships and Related Transactions" for further details.

Gain on Discontinued Operation

 
  Nine Months Ended
September 30,
   
   
 
 
  2012   2011   Change   % Change  

Gain on discontinued operation

  $ 104,120   $ 291,096   $ (186,976 )   (64.2 )%

230


Table of Contents

        Gain on discontinued operation consists of revenue and expenses associated with ANI's over-the-counter pharmaceutical products operation in Gulfport, Mississippi. This operation was sold in September 2010.

        For the nine months ended September 30, 2012, gain on discontinued operation decreased to approximately $104,000 from $291,000 for the corresponding 2011 period, primarily as a result of a recovery of bad debt and increased settlement activity with suppliers in 2011.


Results of Operations for the Years Ended December 31, 2011 and 2010

Net Revenues

 
  Years Ended December 31,    
   
 
 
  2011   2010   Change   % Change  

ANI generic pharmaceutical products

  $ 6,852,338   $ 1,394,006   $ 5,458,332     391.6 %

ANI branded pharmaceutical products

    952,439     233,567     718,872     307.8 %

Contract manufacturing

    7,945,704     6,443,272     1,502,432     23.3 %

Contract services and other income

    764,098     903,973     (139,875 )   (15.5 )%
                   

Total net revenues

  $ 16,514,579   $ 8,974,818   $ 7,539,761     84.0 %
                   

        Revenue for the year ended December 31, 2011 increased to $16.5 million from $9.0 million in 2010, an increase of $7.5 million or 84.0 percent, primarily as a result of the following factors:

231


Table of Contents

Cost of Sales (Exclusive of Depreciation and Amortization)

 
  Years Ended December 31,    
   
 
 
  2011   2010   Change   % Change  

Cost of sales (exclusive of depreciation and amortization)

  $ 6,860,551   $ 3,456,999   $ 3,403,552     98.5 %

        For the year ended December 31, 2011, cost of sales increased to $6.9 million from $3.5 million in 2010, an increase of $3.4 million or 98.5 percent, primarily as a result of an increase in sales of ANI generic and branded pharmaceutical products. Cost of sales does not include depreciation and amortization expense, which is reported as a separate component of operating expenses on ANI's statements of operations.

        Cost of sales as a percentage of net revenues increased to 41.5 percent during year ended December 31, 2011 from 38.5 percent for the corresponding 2010 period, primarily as a result of a higher percentage of net revenues comprised of ANI's generic pharmaceutical products, which generally produce lower margins than contract manufacturing. Please refer to "—Results of Operations for the Nine Months Ended September 30, 2012 and 2011—Cost of Sales" for a description of material uncertainties faced by pharmaceutical manufacturers, including ANI, with respect to their suppliers.

Other Operating Expenses

 
  Years Ended December 31,    
   
 
 
  2011   2010   Change   % Change  

Salaries and benefits

  $ 4,352,250   $ 4,425,012   $ (72,762 )   (1.6 )%

Freight

    253,394     137,837     115,557     83.8 %

Research and development

    799,302     84,762     714,540     843.0 %

Selling, general and administrative

    3,711,669     3,214,706     496,963     15.5 %

Depreciation and amortization

    532,768     486,315     46,453     9.6 %
                   

Total other operating expenses

  $ 9,649,383   $ 8,348,632   $ 1,300,751     15.6 %
                   

        For the year ended December 31, 2011, other operating expenses increased to $9.6 million from $8.3 million in 2010, an increase of $1.3 million or 15.6 percent, primarily as a result of the following factors:

232


Table of Contents

Other Expenses

 
  Years Ended December 31,    
   
 
 
  2011   2010   Change   % Change  

Interest expense

  $ 2,253,794   $ 1,179,431   $ 1,074,363     91.1 %

Other expense

    384,555     138,061     246,494     178.5 %
                   

Total other expenses

  $ 2,638,349   $ 1,317,492   $ 1,320,857     100.3 %
                   

        For the year ended December 31, 2011, other expenses increased to $2.6 million from $1.3 million in 2010, an increase of $1.3 million or 100.3 percent, primarily as a result of the following factors:

Gain (Loss) on Discontinued Operation

 
  Years Ended December 31,    
   
 
 
  2011   2010   Change   % Change  

Gain (loss) on discontinued operation

  $ 205,545   $ (5,124,805 ) $ 5,330,350     104.0 %

        For the year ended December 31, 2011, gain (loss) on discontinued operation was a gain of approximately $206,000 versus a loss of $5.1 million in 2010. Upon the sale in October 2010 of the Gulfport, Mississippi operation, ANI recognized a loss for the difference between the consideration received from the sale and the carrying value of the operation's net assets on the date of sale. The gain in 2011 resulted from a recovery of bad debt and increased settlement activity with suppliers.

233


Table of Contents


Liquidity and Capital Resources

        The following table highlights selected liquidity and working capital information from ANI's balance sheets.

 
   
  December 31,  
 
  September 30,
2012
 
 
  2011   2010  

Cash and cash equivalents

  $ 148,331   $   $  

Accounts receivable, net

    5,622,997     5,104,568     1,689,203  

Inventories

    2,494,635     2,107,463     2,361,990  

Prepaid expenses

    402,335     224,618     978,408  
               

Total current assets

  $ 8,668,298   $ 7,436,649   $ 5,029,601  

Accounts payable

  $ 1,296,220   $ 1,208,323   $ 1,638,226  

Accrued expenses

    876,712     824,011     338,422  

Returned goods reserve

    387,615     252,045     80,067  

Borrowing under line of credit

    3,428,776     3,064,414     1,722,678  

Current maturities of long-term debt

            400,000  

Notes payable

        300,000     275,000  

Current liabilities of discontinued operation

    378,565     512,275     1,500,693  
               

Total current liabilities

  $ 6,367,888   $ 6,161,068   $ 5,955,086  
               

        At September 30, 2012, ANI had approximately $148,000 in cash, cash equivalents and short-term investments and unused availability under its line of credit of approximately $1.6 million. At December 31, 2011, ANI had zero cash, cash equivalents and short-term investments and approximately $36,000 of unused availability under its then-existing line of credit.

        ANI's primary cash requirements are to fund operations, including research and development programs, and support general and administrative activities. ANI's future capital requirements will depend on many factors, including, but not limited to:

        Consolidation among wholesale distributors, chain drug stores and group purchasing organizations has resulted in a smaller number of companies each controlling a larger share of pharmaceutical distribution channels. ANI's net revenues are concentrated among three customers representing 24 percent, 21 percent and 12 percent of net revenues, respectively, during the nine months ended September 30, 2012. As of September 30, 2012, accounts receivable from these three customers totaled $3.6 million, or approximately 64 percent of ANI's net accounts receivable. ANI's net revenues for those same three customers were 21 percent, 16 percent and 16 percent for the year ended December 31, 2011 and six percent, four percent and 42 percent for the year ended December 31, 2010. As of December 31, 2011 and 2010, accounts receivable from these three customers totaled $3.2 million or approximately 63 percent of net accounts receivable, and $840,000 or approximately 50 percent of net accounts receivable, respectively. As a result, negotiated payment terms with these customers have a material impact on ANI's liquidity and working capital.

234


Table of Contents

        Two of ANI's generic pharmaceutical products, Opium Tincture and Fluvoxamine Maleate tablets, account for approximately 30 percent of ANI's net revenues. As a result, market pricing for these products, combined with the costs of raw materials and payment terms with suppliers, have a material impact on ANI's liquidity and working capital.

        Other than during the nine months ended September 30, 2012, ANI has not generated positive cash flows from operations. To bridge the gap between revenues and operating and capital needs, ANI has relied on a variety of financing sources, including the issuance of equity securities and convertible notes and revolving lines of credit. Based on projected revenue and expenses for the next twelve months, ANI anticipates that current cash on hand and borrowing availability under its revolving line of credit will be sufficient to meet ongoing expenses and capital requirements at least through December 31, 2013, assuming the pending merger with BioSante is not completed. Assuming the merger is completed, ANI anticipates that its current resources, combined with the additional cash, expected future licensing revenues, and other assets of BioSante, will be sufficient to meet ongoing expenses and capital requirements at least through December 31, 2015. If ANI's assumptions underlying estimated revenue and expenses prove to be wrong or if its cash requirements change materially as a result of shifts in its business and strategy, ANI or the combined company, as the case may be, may require additional financing to fund operating and capital requirements, and may require such financing prior to the dates specified above.

        The continuing global economic uncertainty, exacerbated by the European debt crisis and the "fiscal cliff" in the United States, has resulted in extreme volatility in the capital markets and is threatening to once again tighten the credit markets. As a result, there can be no assurance that future funding will be available to ANI on reasonably acceptable terms, or at all.

        ANI has incurred cumulative net losses and expects to incur additional losses in conducting further research and development activities. ANI has relatively limited capital resources. ANI's plans with regard to these matters include raising additional capital through the issuance of equity securities, debt securities, or both, increasing net revenues through product acquisitions, new product launches, reducing manufacturing costs and completion of the planned merger with BioSante. Although ANI continues to pursue these plans, there is no assurance that sufficient future financing will be available on commercially reasonable terms or at all, that ANI will be able to generate sufficient revenue or that ANI will be able to lower its manufacturing costs. ANI's consolidated financial statements have been prepared on a basis that assumes that it will continue as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. These statements do not include any adjustments that might result if the carrying amount of recorded assets and liabilities are not realized.

Sources and Uses of Cash

Debt Financing

        ANI utilizes a revolving line of credit to finance its operations. Under the line of credit in place at December 31, 2011, ANI's borrowings were based on a percentage of eligible accounts receivable and inventory, up to a maximum of $3.5 million. Without considering the $3.5 million limit, but applying the applicable percentage to eligible accounts receivable and inventory, ANI could have borrowed up to $4.9 million at December 31, 2011. As a result of the loan limit restriction and other factors, on June 6, 2012, ANI refinanced its line of credit with a new lender, Alostar Bank of Commerce.

        Under the new arrangement, ANI may borrow on a revolving basis, based on a percentage of eligible accounts receivable and inventory, up to a maximum of $5.0 million. The loan agreement bears interest daily at the greater of (i) LIBOR plus 5 percent or (ii) 6 percent. The line of credit is secured by substantially all of ANI's assets. The principal is repayable at the termination date, unless accelerated as a result of certain events of default. If ANI generates any proceeds from the collateral

235


Table of Contents

securing the line of credit, such proceeds must be paid to the lender up to the amount of any outstanding balance. Interest is due and payable on the first of every month and at the termination date, unless accelerated as a result of an event of default. In addition, a usage fee equal to 0.375 percent per annum of the unused amounts under the facility and a management fee equal to $18,000 per annum are assessed monthly. The revolving loan agreement expires in June 2015, but can be terminated early in the following circumstances: (a) automatically upon the commencement of insolvency proceedings by or against ANI, (b) at the option of the lender without notice upon any other event of default, and (c) at the option of ANI upon ten business days' prior written notice.

        In the event of early termination, whether effected by ANI, the lender or automatically, ANI is obligated to pay an amount corresponding to a percentage of $5.0 million, with such percentage being: 3 percent if termination occurs in the first year, 2 percent if termination occurs in the second year and 1 percent if termination occurs after the second year but prior to the last day of the term.

        The loan agreement contains customary representations, warranties and covenants.

        ANI must maintain a minimum fixed charge coverage ratio of 1.1 to 1.0, calculated by dividing (a) (i) Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) less (ii) unfinanced capital expenditures, by (b) the sum of cash paid for (i) interest and (ii) monitoring and advisory fees (See "Management of the Combined Company Following the Merger—Certain Relationships and Related Transactions.") Also, ANI must generate at least $800,000 in EBITDA, measured on a trailing four-quarter basis. Restrictive covenants apply to, among other things, research and development expenditures, incurrence of additional indebtedness, prepayment of other indebtedness, additional liens, acquisitions, mergers or consolidations and sales of assets.

        The representations, warranties and covenants contained in the loan agreement were made only for purposes of such agreement and as of a specific date or specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the loan agreement.

        Events of default under the agreement include, but are not limited to: (i) liquidation, bankruptcy or similar events; (ii) failure to pay any debts due on a timely basis; (iii) failure to observe any covenant or condition under the loan agreement, which failure, in most cases, is not cured within 30 days of written notice by lender; (iv) material misrepresentations; (v) ANI is restrained by court order from continuing to conduct all or any material part of ANI's business; (vi) certain money judgments are entered against ANI; and (vii) ANI challenges the validity or enforceability of the loan agreement in any proceeding. Remedies for events of default include acceleration of amounts owing under the loan agreement and taking immediate possession of, and selling, any collateral securing the loan.

        As of September 30, 2012, approximately $3.4 million was outstanding under the loan agreement, at an effective interest rate of 6.0 percent. ANI was in compliance with all of the covenants under the loan agreement as of September 30, 2012 and expects to remain in compliance with such covenants during the remainder of 2012.

        At September 30, 2012, ANI had approximately $148,000 in cash, cash equivalents and short-term investments and unused availability under its line of credit of approximately $1.6 million. At December 31, 2011, ANI had zero cash, cash equivalents and short-term investments and approximately $36,000 of unused availability under its then-existing line of credit.

Equity Financing

        In 2009, ANI issued $2,502,814 of secured subordinated convertible notes, referred to as the 2009 convertible notes. The 2009 convertible notes, which bore interest at 10 percent per annum, were due

236


Table of Contents

on September 3, 2011. Interest on the 2009 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2009 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on ANI's ability to enter into certain transactions while the 2009 convertible notes were outstanding.

        In 2010, ANI issued $8,474,952 of secured subordinated convertible notes, referred to as the 2010 convertible notes. The 2010 convertible notes, which bore interest at 14 percent per annum, were due on September 3, 2011. Interest on the 2010 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2010 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on ANI's ability to enter into certain transactions while the 2010 convertible notes were outstanding.

        In 2011, ANI issued $2,694,295 of secured subordinated convertible notes, referred to as the 2011 convertible notes, and consolidated all of the outstanding 2009 and 2010 convertible notes into 2011 convertible notes, which are collectively referred to as the consolidated 2011 convertible notes. The consolidated 2011 convertible notes, which bore interest at 14 percent per annum, were due on December 31, 2012. Interest on the consolidated 2011 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The consolidated 2011 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on ANI's ability to enter into certain transactions while the consolidated 2011 convertible notes were outstanding.

        On June 6, 2012, the holders converted all of the outstanding 2011 convertible notes and accrued interest into shares of ANI series D preferred stock. As of September 30, 2012, no convertible notes remained outstanding.

Net Cash Provided by (Used in) Operating Activities

        Net cash provided by operating activities was approximately $422,000 for the nine months ended September 30, 2012 compared to $1.9 million used in operating activities during the nine months ended September 30, 2011, an increase of $2.3 million between the periods. This increase was due to changes in current assets and current liabilities and changes in net loss. Increases in current assets and decreases in current liabilities (in each case a use of cash) for the nine months ended September 30, 2012 totaled $680,000 compared to $1.9 million for the nine months ended September 30, 2011, a decrease of approximately $1.2 million between the periods. Also, ANI's net loss from continuing operations, after adjusting for non-cash interest relating to convertible debt, decreased by $1.1 million between the periods.

        Net cash used in operating activities was $3.1 million for the year ended December 31, 2011 compared to $2.9 million for the year ended December 31, 2010, an increase of approximately $193,000 between the periods. This increase was due to changes in current assets and current liabilities and changes in net loss. Increases in current assets and decreases in current liabilities (in each case a use of cash) in 2011 totaled $3.0 million compared to approximately $225,000 in 2010, an increase of $2.7 million between the periods. Offsetting this increase was a $2.5 million decrease in ANI's net loss from continuing operations, after adjusting for non-cash interest relating to convertible debt, between the periods.

Net Cash Used in Investing Activities

        Net cash used in investing activities was approximately $77,000 for the nine months ended September 30, 2012, which related primarily to capital expenditures. Net cash used in investing

237


Table of Contents

activities was approximately $259,000 for the nine months ended September 30, 2011, which included capital expenditures and the acquisition in mid-2011 of Reglan® tablets.

        Net cash used in investing activities was approximately $288,000 for the year ended December 31, 2011 compared to approximately $434,000 for the year ended December 31, 2010. Net cash used in investing activities decreased by approximately $146,000 primarily due to decreases in capital equipment purchases, partially offset by an increase related to the acquisition in mid-2011 of Reglan® tablets.

Net Cash Provided by Financing Activities

        Net cash used in financing activities was approximately $196,000 for the nine months ended September 30, 2012, which included approximately $364,000 in increased borrowings under ANI's revolving line of credit, net of payment of debt issuance costs of approximately $261,000 and approximately $300,000 in note payable repayments. Net cash provided by financing activities was $2.2 million for the nine months ended September 30, 2011, which included approximately $950,000 in increased borrowings under ANI's revolving line of credit and $1.8 million from the issuance of convertible notes, net of approximately $575,000 in term loan repayments.

        Net cash provided by financing activities was $3.4 million for the year ended December 31, 2011, which included $1.3 million in increased borrowings under ANI's revolving line of credit, $2.7 million from the issuance of convertible notes, and approximately $25,000 in notes payable issuances, net of approximately $633,000 in term loan repayments. Net cash provided by financing activities was $3.4 million for the year ended December 31, 2010, which included $8.5 million from the issuance of convertible notes and approximately $275,000 from the issuance of notes payable, net of $2.4 million in decreased borrowings under ANI's revolving line of credit and $3.0 million in term loan repayments.


Off-Balance Sheet Arrangements

        As of September 30, 2012 and 2011, and December 31, 2011 and 2010, ANI did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

238


Table of Contents


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

        The following unaudited pro forma condensed combined financial data is intended to show how the merger might have affected historical financial statements if the merger had been completed on January 1, 2011 for the purposes of the statements of operations and September 30, 2012 for the purposes of the balance sheet, and was prepared based on the historical financial results reported by BioSante and ANI. The following should be read in conjunction with the audited and unaudited historical financial statements of each of BioSante and ANI and the notes thereto beginning on pages F-1 and F-47, respectively, and the sections entitled "BioSante's Management's Discussion and Analysis of Financial Condition and Results of Operations" and "ANI's Management's Discussion and Analysis of Financial Condition and Results of Operations", and the other information contained in this joint proxy statement/prospectus. The following information does not give effect to the reverse stock split of BioSante common stock and BioSante class C special stock described in BioSante Proposal No. 2.

        The merger will be accounted for as a reverse acquisition under the accounting rules for business combinations. Under the reverse acquisition method of accounting, ANI will be treated as the accounting acquiror and BioSante will be treated as the "acquired" company for financial reporting purposes because, immediately upon completion of the merger, ANI stockholders prior to the merger will hold a majority of the voting interest of the combined company. In addition, the seven member board of directors of the combined company will be comprised of five of the current members of the ANI board of directors; and therefore, ANI's current board of directors will possess majority control of the board of directors of the combined company. Members of the current management of ANI will be responsible for the management of the combined company and the majority of the combined company's activities will be activities related to ANI's current business.

        The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC. The pro forma adjustments reflecting the completion of the merger are based upon the reverse acquisition method of accounting in accordance with GAAP, and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements.

        The unaudited pro forma condensed combined balance sheet as of September 30, 2012 combines the historical balance sheets of BioSante and ANI as of September 30, 2012 and gives pro forma effect to the merger as if it had been completed on September 30, 2012.

        The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 combine the unaudited historical statements of operations of BioSante and ANI for their respective nine-month periods ended September 30, 2012 and gives pro forma effect to the merger as if it had been completed on January 1, 2011. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 combine the historical statements of operations of BioSante and ANI for their respective twelve months ended December 31, 2011 and gives pro forma effect to the merger as if it had been completed on January 1, 2011.

        The historical financial data has been adjusted to give pro forma effect to events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on management's estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition and certain other adjustments.

        The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the

239


Table of Contents

entities been combined during the periods presented. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements, the preliminary acquisition-date fair value of the identifiable assets acquired and liabilities assumed reflected in the unaudited pro forma condensed combined financial statements is subject to adjustment and may vary from the actual amounts that will be recorded upon completion of the merger.

240


Table of Contents


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

 
  As of September 30, 2012  
 
  BioSante
Historical
  ANI
Historical
  Pro Forma
Adjustments
  Pro Forma
Combined
 
 
  (in thousands)
 

ASSETS

                         

CURRENT ASSETS

                         

Cash and cash equivalents

  $ 38,049   $ 148   $   $ 38,197  

Accounts receivable, net

        5,623         5,623  

Inventories, net

        2,495         2,495  

Prepaid expenses

    534     402         936  
                   

    38,583     8,668         47,251  

PROPERTY AND EQUIPMENT, NET

    1,185     4,793         5,978  
                   

OTHER ASSETS

                         

Investments

    3,414             3,414  

Deposits

    30             30  

Intangible assets, net

        98     19,535   (B)   19,633  
                   

  $ 43,212   $ 13,559     19,535     76,306  
                   

LIABILITIES AND STOCKHOLDERS' EQUITY

                         

CURRENT LIABILITIES

                         

Accounts payable

  $ 2,005   $ 1,296   $   $ 3,301  

Accrued compensation

    464         3,900   (F)   4,364  

Other accrued expenses

    752     877     2,800   (E)   4,429  

Returned goods reserve

        388         388  

Borrowings under line of credit

        3,429         3,429  

Convertible senior notes

    7,593             7,593  

Interest due on convertible senior notes

    108             108  

Current liabilities of discontinued operations

        378         378  
                   

TOTAL LIABILITIES

    10,922     6,368     6,700     23,990  
                   

Redeemable convertible preferred stock

        46,155     (46,155) (D)    

STOCKHOLDERS' EQUITY

                         

Capital stock

                         

Issued and outstanding:

                       

Class C common stock

                       

Common stock

    273,260     2     (2) (C)      

                46,155   (D)      

                (225,951) (A)      

                6,154   (K)      

Additional paid in capital

          1,082     (1,082) (C)    
                   

    273,260     1,084     (174,726 )   99,618  

Accumulated deficit

    (240,970 )   (40,048 )   240,970   (A)   (47,302 )

                (1,100) (E)      

                (6,154) (K)      
                   

TOTAL STOCKHOLDERS' EQUITY

    32,290     (38,964 )   58,990     52,316  
                   

  $ 43,212   $ 13,559   $ 19,535   $ 76,306  
                   

241


Table of Contents


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

 
  BioSante
Historical
  ANI
Historical
  Pro Forma
Adjustments
  Pro Forma
Combined
 
 
  (in thousands)
 

REVENUE

                         

Licensing revenue

  $   $   $   $  

Royalty revenue

    333             333  

Product revenues

        15,050         15,050  
                   

    333     15,050           15,383  
                   

OPERATING EXPENSES

                         

Cost of sales (excluding depreciation and amortization)

        6,292         6,292  

Salaries and benefits

    4,802     3,516         8,318  

Freight

        243         243  

Research and development

    11,101     637         11,738  

Selling, general and administrative

    3,879     2,962     (514) (E)   6,327  

Licensing expense

                 

Depreciation and amortization

    88     425     1,832 (G)   2,345  
                   

    19,870     14,075     1,318     35,263  
                   

OTHER

                         

Convertible note fair value adjustment

    (4,037 )           (4,037 )

Interest expense

    (283 )   (1,239 )       (1,522 )

Other income (expense)

        (191 )       (191 )

Interest income

    5             5  
                   

NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT

    (23,852 )   (455 )   (1,318 )   (25,625 )

Income tax benefit

    122         (I)   122  
                   

NET LOSS FROM CONTINUING OPERATIONS

    (23,730 )   (455 )   (1,318 )   (25,503 )

DISCONTNIUED OPERATIONS

                         

Gain on discontinued operations

        104         104  
                   

NET LOSS

  $ (23,730 ) $ (351 ) $ (1,318 ) $ (25,399 )
                   

NET LOSS FROM CONTINUING OPERATIONS

  $ (23,730 ) $ (455 ) $ (1,318 ) $ (25,503 )

PREFERRED STOCK DIVIDENDS

        (4,327 )   4,327 (J)    
                   

NET LOSS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS

  $ (23,730 ) $ (4,782 ) $ 3,009   $ (25,503 )
                   

BASIC AND DILUTED NET LOSS PER SHARE

  $ (1.14 )             $ (0.52 )
                   

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

    20,841           27,915 (H)   48,756  
                   

242


Table of Contents


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011

 
  BioSante
Historical
  ANI
Historical
  Pro Forma
Adjustments
  Pro Forma
Combined
 
 
  (in thousands)
 

REVENUE

                         

Licensing revenue

  $ 100   $   $   $ 100  

Royalty revenue

    335             335  

Product revenues

        16,515         16,515  
                   

    435     16,515         16,950  
                   

OPERATING EXPENSES

                         

Cost of sales (excluding depreciation and amortization)

        6,861         6,861  

Salaries and benefits

    8,234     4,352         12,586  

Freight

        253         253  

Research and development

    38,324     799         39,123  

Selling, general and administrative

    4,606     3,712         8,318  

Licensing expense

    50             50  

Depreciation and amortization

    148     533     2,442 (G)   3,123  
                   

    51,362     16,510     2,442     70,314  
                   

OTHER

                         

Convertible note fair value adjustment

    (23 )           (23 )

Interest expense

    (682 )   (2,254 )       (2,936 )

Other income (expense)

    15     (385 )       (370 )

Interest income

    8             8  
                   

NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT

    (51,609 )   (2,634 )   (2,442 )   (56,685 )

Income tax benefit

            (I)    
                   

NET LOSS FROM CONTINUING OPERATIONS

    (51,609 )   (2,634 )   (2,442 )   (56,685 )

DISCONTNIUED OPERATIONS

                         

Gain on discontinued operations

        206         206  
                   

NET LOSS

  $ (51,609 ) $ (2,428 ) $ (2,442 ) $ (56,479 )
                   

NET LOSS FROM CONTINUING OPERATIONS

  $ (51,609 ) $ (2,634 ) $ (2,442 ) $ (56,685 )

PREFERRED STOCK DIVIDENDS

        (2,280 )   2,280 (J)    
                   

NET LOSS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS

  $ (51,609 ) $ (4,914 ) $ (162 ) $ (56,685 )
                   

BASIC AND DILUTED NET LOSS PER SHARE

  $ (3.15 )             $ (1.28 )
                   

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

    16,398           27,915 (H)   44,313  
                   

243


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION

1. Description of Transaction and Basis of Presentation

        On October 3, 2012, BioSante entered into the merger agreement with ANI. Pursuant to the terms and subject to the conditions set forth in the merger agreement, ANI will be merged with and into BioSante, and BioSante will survive as the continuing entity.

        At the effective time of the merger, each outstanding share of capital stock of ANI will be converted into the right to receive that number of shares of BioSante common stock, if any, as determined pursuant to the exchange ratios described in the merger agreement and the provisions of ANI's certificate of incorporation, and all options, warrants or other rights to purchase shares of capital stock of ANI, will be canceled without consideration therefor, except for certain warrants which although not cancelled will not represent the right to acquire any equity or other interest in the combined company after the merger. No fractional shares of BioSante common stock will be issued in connection with the merger, and holders of ANI capital stock will be entitled to receive cash in lieu thereof.

        Upon completion of the merger, ANI stockholders are expected to receive shares of BioSante common stock representing an aggregate of approximately 53 percent of the outstanding shares of common stock of the combined company. The exchange ratios are subject to potential adjustment as described in the merger agreement depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger, and thus will not be determined until that time. If BioSante has more than $18.0 million of net cash as of the determination date, then the percentage ownership of the current BioSante stockholders will be increased on a pro rata basis by 0.6 percent for each $1.0 million of net cash excess, which would dilute further the ownership of the current ANI stockholders in the combined company. If BioSante has less than $18.0 million of net cash as of the determination date, then the percentage ownership of current BioSante stockholders will be decreased on a pro rata basis by 0.6 percent for each $1.0 million of net cash shortfall, which would dilute further the ownership of the current BioSante stockholders in the combined company. In no event, however, will the current ANI stockholders own less than 50.1 percent (or the current BioSante stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. In addition, one of the conditions to ANI's obligations to complete the merger is BioSante's net cash as of the closing date being no less than $17.0 million as calculated and as adjusted pursuant to the provisions of the merger agreement.

        Pursuant to the terms of ANI's certificate of incorporation, (i) before any amounts are paid to the holders of shares of any other series of ANI preferred stock or ANI common stock, the holders of shares of ANI series D preferred stock are entitled to receive an amount per share equal to $30.00 plus all declared but unpaid dividends; (ii) before any amounts are paid to the holders of shares of ANI series B preferred stock, ANI series A preferred stock or ANI common stock, the holders of shares of ANI series C preferred stock are entitled to receive an amount per share equal to $110.00 plus all declared but unpaid dividends; (iii) before any amounts are paid to the holders of shares of ANI series A preferred stock or ANI common stock, the holders of shares of ANI series B preferred stock are entitled to receive an amount per share equal to $110.00 plus all declared but unpaid dividends; (iv) before any amounts are paid to the holders of shares of ANI common stock, the holders of shares of ANI series A preferred stock are entitled to receive an amount per share equal to $100.00 plus all declared but unpaid dividends; and (v) after payments have been made to all holders of ANI preferred

244


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (Continued)

1. Description of Transaction and Basis of Presentation (Continued)

stock, the remaining assets of ANI will be distributed ratably to the holders of ANI common stock, including holders of ANI series C preferred stock, ANI series B preferred stock and ANI series A preferred stock who elect to convert into ANI common stock in lieu of receiving the stated dollar preference amounts described above, and ANI series D preferred stock. The stated value of each series of ANI preferred stock set forth above is subject to adjustment as provided in ANI's certificate of incorporation. The exchange ratios in the merger agreement reflect these preferential payments. As a result of such provisions, it is likely that holders of shares of ANI series A preferred stock, ANI series B preferred stock, ANI series C preferred stock or ANI common stock will not receive any shares of BioSante common stock in connection with the merger.

        The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC and are intended to show how the merger might have affected the historical financial statements if the merger had been completed on January 1, 2011 for the purposes of the statements of operations and September 30, 2012 for the purposes of the balance sheet. The pro forma adjustments reflecting the completion of the merger are based upon the accounting rules for business combinations, specifically, the reverse acquisition method of accounting in accordance with GAAP, and upon the assumptions set forth herein. Based on the terms of the merger, ANI is deemed to be the accounting acquiror.

        Under the reverse acquisition method of accounting, the identifiable assets acquired and liabilities assumed of BioSante will be recorded at the acquisition date fair values and added to those of ANI. The pro forma adjustments are preliminary and based on management's estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition. These estimates are based on the most recently available information. To the extent there are significant changes to the combined company's business following completion of the merger, the assumptions and estimates set forth in the unaudited pro forma condensed combined financial statements could change significantly. The allocation is dependent upon certain valuation and other studies that will not be completed until following the merger. Accordingly, the pro forma purchase price adjustments are subject to further adjustments as additional information becomes available and as additional analyses and final valuations are conducted following completion of the merger. There can be no assurances that these additional analyses and final valuations will not result in material changes to the estimates of fair value set forth below under Note 2.

        The unaudited pro forma condensed combined balance sheet as of September 30, 2012 combines the historical balance sheets of BioSante and ANI as of September 30, 2012 and gives pro forma effect to the merger as if it had been completed on September 30, 2012.

        The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 combine the historical statements of operations of BioSante and ANI for their respective nine month periods ended September 30, 2012 and gives pro forma effect to the merger as if it had been completed on January 1, 2011. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 combine the historical statements of operations of BioSante and ANI for their respective year ended December 31, 2011 and gives pro forma effect to the merger as if it had been completed on January 1, 2011.

245


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (Continued)

1. Description of Transaction and Basis of Presentation (Continued)

        The unaudited pro forma condensed combined financial statements assume that BioSante's net cash, as defined in the merger agreement, will be $18.0 million as of the determination date and an exchange ratio of 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock and an exchange ratio of zero shares of BioSante common stock for each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock. Such exchange ratios do not give any effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described elsewhere in this joint proxy statement/prospectus but take into account shares of ANI series D preferred stock to be issued to certain of ANI's executive officers immediately prior to completion of the merger.

        The exchange ratios, as such ratios are calculated pursuant to the formulas set forth in the merger agreement, are based on the number of shares of BioSante common stock and ANI capital stock outstanding as of immediately prior to completion of the merger, and in the case of BioSante, a certain percentage of the number of certain warrants to purchase shares of BioSante common stock outstanding as of such date, and will not be determined until that time. The exchange ratios will be adjusted upward or downward only as a result of changes to the outstanding capital stock of either or both of BioSante and ANI as of immediately prior to completion of the merger and changes to BioSante's net cash as of a determination date prior to completion of the merger. No adjustments to the exchange ratios will be made based on changes in the trading price of BioSante common stock or the value of ANI capital stock prior to completion of the merger. As a result, the value of the shares of BioSante common stock issued to ANI stockholders in connection with the merger could be substantially less or substantially more than the current market value of BioSante common stock. The following information does not give effect to the reverse stock split of BioSante common stock and BioSante class C special stock described in BioSante Proposal No. 2.

2. Purchase Price

        A preliminary estimate of the purchase price is as follows (table in thousands):

Fair value of BioSante shares outstanding

  $ 46,158  

Estimated fair value of vested BioSante stock options

    67  
       

Estimated purchase price

  $ 46,225  
       

        For pro forma purposes, the fair value of the BioSante common stock used in determining the purchase price was $1.89 per share based on the closing price of BioSante common stock on September 30, 2012. The fair value of the BioSante stock options was determined by using the Black-Scholes option pricing model with the following assumption: (i) stock price of $1.89, which is the value ascribed to the BioSante common stock in determining the purchase price, (ii) volatility of 90 percent; risk-free interest rate of 0.21 percent, and (iii) a weighted average expected life of 1.37 years. All outstanding BioSante options will fully vest upon completion of the merger. The combined company will expense all transaction costs as incurred.

246


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (Continued)

2. Purchase Price (Continued)

        The estimated acquired tangible and intangible assets and liabilities assumed based on their estimated fair values as of September 30, 2012 comprises (table in thousands):

Cash and cash equivalents

  $ 38,049  

Receivables and other current assets

    534  

Intangible assets

    19,535  

Other assets

    4,629  

Convertible senior notes, including interest

    (7,701 )

Other assumed liabilities

    (8,821 )
       

Total

  $ 46,225  
       

        The allocation of the purchase price is preliminary. The final determination of the purchase price allocation will be based on the fair values of assets, including identifiable intangible assets, acquired, and the fair values of liabilities assumed as of the date that the merger is completed. BioSante and ANI believe that the historical values of BioSante's current assets and current liabilities, excluding the convertible senior notes, approximate their fair value based on the short term nature of such items. The convertible senior notes historically have been recorded at fair value; and accordingly, no adjustment to the historical recorded value of the convertible senior notes is necessary. BioSante and ANI believe that the historical value of BioSante's investments represents fair value based upon current information known to BioSante and ANI, and the valuation performed by BioSante in 2011 when an impairment charge was recorded on BioSante's investment in Ceregene. BioSante's property and equipment consists substantially of a new asset, not yet put into use; and therefore, its historical cost is deemed to be its fair value. The only identifiable intangible assets are BioSante's developed technology, which consists primarily of its intellectual property related to BioSante's male testosterone gel and the GVAX cancer vaccines. The estimated fair values of the assets acquired and liabilities assumed will remain preliminary until the combined company completes a valuation of significant identifiable intangible assets acquired and determines the fair values of other assets and liabilities acquired. Based on such valuation, any excess of the purchase price over the fair value of assets and liabilities acquired will be allocated to goodwill, although at this time, based on preliminary valuation estimates, BioSante and ANI do not believe there will be any goodwill resulting from the merger. The final determination of the fair values is expected to be completed as soon as practicable after completion of the merger. The final amounts could differ from the amounts presented in the unaudited pro forma condensed combined financial statements, because the amounts allocated will not be determined until the date of the merger.

3. Pro Forma Adjustments

        The pro forma adjustments are as follows:

247


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (Continued)

3. Pro Forma Adjustments (Continued)

248


Table of Contents


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION (Continued)

3. Pro Forma Adjustments (Continued)

249


Table of Contents


MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER

Directors and Executive Officers of the Combined Company Following the Merger

        Pursuant to the terms of the merger agreement, the board of directors of the combined company will consist of five directors of ANI and two directors of BioSante, ANI's chairman of the board will serve as chairman of the board of the combined company and ANI's current executive officers will serve as executive officers of the combined company. Accordingly, the following five of BioSante's current seven directors will resign effective upon completion of the merger: Louis W. Sullivan, M.D., Edward C. Rosenow, III, M.D., John T. Potts, Jr., M.D., Stephen M. Simes and Stephen A. Sherwin, M.D. In addition, all of BioSante's current executive officers will resign from their respective positions at BioSante effective upon completion of the merger.

        The following table lists the names and ages as of December 31, 2012 and positions of the individuals who are expected to serve as directors and executive officers of the combined company upon completion of the merger:

Name
  Age   Title

Robert E. Brown, Jr. 

    62   Chairman of the Board

Arthur S. Przybyl

    55   President, Chief Executive Officer and Director

Tracy L. Marshbanks, Ph.D. 

    49   Director

Thomas T. Penn

    66   Director

Robert Schrepfer

    41   Director

Fred Holubow

    73   Director

Ross Mangano

    67   Director

Charlotte C. Arnold

    47   Vice President and Chief Financial Officer

James G. Marken

    50   Vice President, Operations

Robert J. Jamnick

    55   Vice President, Quality and Product Development

        Robert E. Brown, Jr. has been a director of ANI since July 2010. Mr. Brown has been active in the venture capital and private equity business for over 30 years and has been the sole stockholder, director and President of MVP Management Company (MVP Management) since 2000. MVP Management conducts business as MVP Capital Partners (MVP Capital), and is the investment management company for Meridian Venture Partners II, L.P. (MVP II), a mid-sized venture capital and private equity firm focused on expansion capital and microcap buyout investments, and the owner of 12,477 shares of ANI common stock, 67,599 shares of ANI series A preferred stock, 13,638 shares of ANI series B preferred stock, 11,364 shares of ANI series C preferred stock and 1,376,596 shares of ANI series D preferred stock, representing approximately 57 percent of ANI capital stock. Mr. Brown is the Managing Partner of MVP II and the President and sole stockholder and sole director of Meridian Venture Partners II Co., the corporate general partner of the general partner of MVP II. Mr. Brown serves on the ANI board of directors as MVP II's designee. Mr. Brown co-founded MVP II in 2000 and its predecessor fund, Meridian Venture Partners, in 1987. Prior to 1987, Mr. Brown was a principal in a merchant banking firm active in both private equity and investment banking. Mr. Brown began his professional career as a certified public accountant with Arthur Andersen & Co. Subsequently, he worked for a subsidiary of The Penn Central Corporation as a financial analyst, and after graduation from law school, practiced corporate tax law at the firm of Morgan, Lewis & Bockius in Philadelphia. In his role at MVP Capital, Mr. Brown has served on the board of directors of numerous privately-held portfolio companies, including several healthcare related companies such as Implex Corporation, Dorland Data Networks, Omega Health Systems, Air Medical Group Holdings, and MCMC LLC. Mr. Brown holds an A.B. degree from Princeton University, an M.B.A. from the Wharton School of the University of Pennsylvania, and a J.D. from the Law School of the University of Pennsylvania.

250


Table of Contents

        Arthur S. Przybyl joined ANI in March 2009 as President and Chief Executive Officer. Mr. Przybyl is an experienced healthcare executive in a career that spans over 25 years and includes the management of both specialty pharmaceutical and medical device companies. Prior to joining ANI, Mr. Przybyl served as President and Chief Executive Officer of Akorn, Inc., a NASDAQ-listed specialty pharmaceutical company that manufactures and markets ophthalmic, liquid and lyophilized injectable, and vaccine drug products from August 2002 through January 2009. Prior to Akorn, Mr. Przybyl was President of privately-held Hearing Innovations, Inc. and President and Chief Operating Officer of NASDAQ-listed company Bioject, Inc., both medical device companies. During his career, Mr. Przybyl has held several sales and marketing management positions, including Senior Vice President, Sales and Marketing for International Medication Systems, Inc. and Director Corporate Marketing and National Accounts for LyphoMed, Inc., both specialty pharmaceutical companies. Mr. Przybyl was chosen to serve on the board of directors of the combined company because of his extensive experience as an executive in the healthcare industry, including as President and Chief Executive Officer of ANI. As a member of the executive team of the combined company, Mr. Przybyl will serve a vital function in the link between management and the board of directors of the combined company, enabling the board of directors to perform its oversight function with the benefits of management's perspective on the business.

        Tracy L. Marshbank, Ph.D. has been a director of ANI since 2006, serving on both the Audit and Compensation Committees of the ANI board of directors during that period. Dr. Marshbanks is a Managing Director of First Analysis Corp. (First Analysis), a financial services firm, where he has been employed since 1999. First Analysis manages First Analysis Venture Operations and Research, L.L.C. (FAVOR), the indirect owner of 3,810 shares of ANI common stock, 30,762 shares of ANI series B preferred stock, 8,237 shares of ANI series C preferred stock and 394,680 shares of ANI series D preferred stock, representing an aggregate of approximately 17 percent of ANI capital stock. In his role at First Analysis, Dr. Marshbanks focuses on growth equity investments in private companies in the healthcare and the cleantech/environmental sectors and serves as an analyst having followed public companies within the chemical, life science tools, and medical technology industries. Prior to First Analysis, he was employed by Amoco Corp. in a number of positions ranging from Research and Development to Marketing. He has served on the boards of directors of other privately-held companies within healthcare, including manufacturers of medical devices and diagnostic tests. Dr. Marshbanks earned a B.S. and Ph.D. in Chemical Engineering from Colorado State University and Purdue University, respectively, in addition to an M.B.A., with a finance concentration, from the University of Chicago. Dr. Marshbanks holds Series 7 and 63 Securities Licenses as well as a Research Analyst Qualification (Series 86 & 87). Dr. Marshbanks was chosen to serve on the board of directors of the combined company because he brings investor and financial analyst experience and perspective to the board. In addition, he has exposure to the broader healthcare market and technical expertise related to manufacturing and process industries.

        Thomas T. Penn has been a director of ANI since 2009. Mr. Penn is employed by MVP Management, of which he serves as Vice President. MVP Management conducts business as MVP Capital Partners. MVP Management is the investment management company for MVP II, of which Mr. Penn is a Partner and which is the owner of 12,477 shares of ANI common stock, 67,599 shares of ANI series A preferred stock, 13,638 shares of ANI series B preferred stock, 11,364 shares of ANI series C preferred stock and 1,376,596 shares of ANI series D preferred stock, representing approximately 57 percent of ANI capital stock. Mr. Penn serves on the ANI's board as MVP II's designee. Mr. Penn is also managing director at and 50 percent owner of Penn Venture I LLC, the general partner for Penn Venture Partners, L.P., an investment fund focused on investments in Central Pennsylvania, holding the managing director position since 2007. Previously, Mr. Penn served as chief executive officer of Tektagen, Inc. and as director of several privately held life sciences and healthcare companies. Mr. Penn was chosen to serve on the board of directors of the combined company primarily because of his significant experience as a director and executive officer in the life sciences industry.

251


Table of Contents

        Robert Schrepfer has been a director of ANI since July 2010. Since 2005, Mr. Schrepfer has served as Assistant Portfolio Manager at Healthcare Value Capital, LLC, an SEC-registered healthcare investment firm. Mr. Schrepfer co-manages the firm's private equity portfolio and oversees investments in healthcare services, devices and specialty pharmaceuticals. In addition, he is principal and founder of National Healthcare Analysis Group, LLC and serves as Chief Financial Officer of National Healthcare Analysis Partners 1, LP, a partnership that seeks to identify and pursue healthcare fraud. Between 2003 and 2005, Mr. Schrepfer was Managing Director at Bear Stearns & Co. Inc., providing sell side research coverage of the pharmaceuticals industry. Mr. Schrepfer served as Clinical Director and Director of Outcomes and Research at the Centers for Aquatic Rehabilitation from 1997 to 2001. Mr. Schrepfer received an M.B.A. in Finance and Health Sector Management from Duke University and an M.S. in Physical Therapy from the University of Indianapolis. He is currently a member of the Health Sector Advisory Council at Duke University. Mr. Schrepfer is a previous holder of Series 7 and 63 Securities Licenses as well as a Research Analyst Qualification (Series 86 & 87). Mr. Schrepfer was chosen to serve on the board of directors of the combined company because of his experience managing investments in specialty pharmaceuticals and other healthcare services companies and providing research coverage of the pharmaceuticals industry.

        Fred Holubow has been a director of BioSante since 1999. Mr. Holubow is the Principal of Petard Risk Analysis and a General Partner of Starbow Partners, an investor in early stage healthcare ventures, a position he has held since January 2012. From 2001 to December 2011, Mr. Holubow served as a Managing Director of William Harris Investors, Inc., a registered investment advisory firm. From 1982 to 2001, Mr. Holubow served as Vice President of Pegasus Associates, a registered investment advisory firm he co-founded. He specializes in analyzing and investing in pharmaceutical and biotechnology companies. Mr. Holubow previously served on the boards of directors of the following public companies: Micrus Endovascular Corporation, ThermoRetec Corporation, Savient Pharmaceuticals, Inc. (formerly Bio-Technology General Corp.), Gynex Pharmaceuticals, Inc. and Unimed Pharmaceuticals, Inc.

        BioSante believes Mr. Holubow's qualifications to serve as a member of the board of directors of the combined company include his significant experience of analyzing and investing in pharmaceutical and biotechnology companies both in his current position as a Principal of Petard Risk Analysis and a General Partner of Starbow Partners and in his prior positions as a Managing Director of William Harris Investors and Vice President of Pegasus Associates. In addition, through his experience of serving on the boards of directors and more specifically the audit committees of several other public companies, Mr. Holubow has developed a substantial financial and accounting expertise with pharmaceutical and biotechnology companies, which he contributes to the BioSante board of directors, and more specifically, to the Audit and Finance Committee in his role as Chair of the Audit and Finance Committee.

        Ross Mangano has been a director of BioSante since 1999. Mr. Mangano has been the President and a director of Oliver Estate, Inc., a management company specializing in investments in public and private companies, since 1971. Mr. Mangano in the past has served on the boards of directors of Cerprobe Corporation, Tower Federal Savings & Loan, Cypress Communications, Inc. and Mego Financial Corp.

        BioSante believes Mr. Mangano's qualifications to serve as a member of the board of directors of the combined company include his significant general business experience as President of Oliver Estate, Inc. and his significant experience analyzing and investing in public and private companies. In addition, BioSante believes Mr. Mangano provides the board of directors of the combined company valuable business, leadership and management experience and insights into many aspects of the combined company's business.

252


Table of Contents

        Charlotte C. Arnold has served as ANI's Vice President and Chief Financial Officer since May 2009. In that role, Ms. Arnold leads ANI's finance and accounting department as well as information technology. Between March 2004 and May 2009, Ms. Arnold served as director of ANI. Ms. Arnold has more than 20 years of experience in finance, corporate development and operations. Before becoming ANI's Chief Financial Officer, Ms. Arnold was a Founding Partner at Laurel Capital, a growth equity and microcap buyout private equity firm, from October 2007 to March 2009. Prior to Laurel, Ms. Arnold was an employee and Vice President of MVP Management, where she was responsible for four platform investments, including the initial acquisition of ANI. Previously, Ms. Arnold was a Director with Ben Franklin Technology Partners, a nationally-known economic development organization and worked in the Entrepreneurial Services assurance practice of PricewaterhouseCoopers in Philadelphia. Ms. Arnold holds a B.A. degree from UCLA, an MBA from the Wharton School of Business, and is a certified public accountant.

        James G. Marken serves as Vice President, Operations, a position he has held since March 2009. Mr. Marken joined ANI in March 2007 as General Manager of the Minnesota facilities. As Vice President, Operations, Mr. Marken has been principally responsible for the following areas: warehousing, pharmaceutical manufacturing, packaging, engineering/maintenance, calibrations and purchasing. Mr. Marken brings over 20 years of pharmaceutical industry experience to the combined company. Prior to joining ANI in March 2007, he worked for Solvay Pharmaceuticals as plant manager and in various departments including quality control, validation and manufacturing. Mr. Marken holds a B.S. degree in Chemistry from Bemidji State University.

        Robert J. Jamnick serves as Vice President, Quality and Product Development, a position he has held since July 2010. Mr. Jamnick joined ANI in May 2007 as Director Quality Assurance/Quality Control for the Baudette facilities. Mr. Jamnick came to ANI after a career spanning over 25 years at Solvay Pharmaceuticals, where he held various technical and managerial positions in quality assurance, quality control, technical services and research and development. Form March 2009 to July 2010, Mr. Jamnick served as Executive Director Global Quality of ANI. In his current position, Mr. Jamnick is responsible for quality control, quality assurance, product development, regulatory affairs and technical services. Mr. Jamnick holds a Bachelor's degree in Chemistry and Biology from Bemidji State University.


Director Independence

        Prior to completion of the merger, the BioSante board of directors will affirmatively determine which of the seven individuals that will serve as directors of the combined company is an "independent director" as defined under the Listing Rules of The NASDAQ Stock Market. The Listing Rules of The NASDAQ Stock Market provide a list of disqualifying criteria for the independence determination. For example, under these rules, a director who is, or during the past three years was, employed by the company or by any parent or subsidiary of the company, other than prior employment as an interim chairman or interim chief executive officer, would not be considered independent. No director qualifies as independent unless the board of directors affirmatively determines that the director does not have a material relationship with the listed company that would interfere with the exercise of independent judgment. Based on information provided by the directors and by BioSante and ANI with regard to each of the seven individuals expected to serve as a member of the board of directors of the combined company and such individual's business and personal activities as they may relate to BioSante, ANI, the combined company and their respective management, it is anticipated that all of the seven individuals that will serve as directors of the combined company will be "independent" other than Mr. Przybyl, Mr. Brown and Mr. Penn.

253


Table of Contents


Board Committees of the Combined Company

        The board of directors of the combined company will have the same committee structure as BioSante prior to the merger and therefore will have an Audit and Finance Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these committees will operate under a charter that has been previously approved by the board of directors of BioSante and will have the composition and responsibilities described below. The board of directors of the combined company from time to time may establish other committees to facilitate the management of the company and may change the composition and the responsibilities of the existing committees.

        The table below summarizes the anticipated membership of each of the three standing board committees of the combined company after the merger.

Director
  Audit and Finance   Compensation   Nominating and
Corporate Governance

Tracy L. Marshbanks, Ph.D. 

  Chair   Chair   Member

Robert Schrepfer

  Member   Member   Chair

Fred Holubow

  Member    

Ross Mangano

    Member   Member

Audit and Finance Committee

        The primary responsibilities of the Audit and Finance Committee of the combined company will include:

        The Audit and Finance Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

        It is anticipated that the Audit and Finance Committee of the combined company will consist of Mr. Holubow, Dr. Marshbanks and Mr. Schrepfer. It is expected that the board of directors of the combined company will determine that each anticipated member of the Audit and Finance Committee will qualify as "independent" for purposes of membership on audit committees pursuant to the Listing Rules of The NASDAQ Stock Market and the rules and regulations of the SEC and is "financially

254


Table of Contents

literate" as required by the Listing Rules of The NASDAQ Stock Market. In addition, it is expected that the board of directors of the combined company will determine that Mr. Holubow qualifies as an "audit committee financial expert" as defined by the rules and regulations of the SEC and meets the qualifications of "financial sophistication" under the Listing Rules of The NASDAQ Stock Market as a result of his Masters in Business Administration in Finance, and his previous experience as an investment analyst and portfolio manager for over 40 years and as a former member of an audit committee of another public company.

Compensation Committee

        The primary responsibilities of the Compensation Committee of the combined company will include:

        The Compensation Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

        It is anticipated that the Compensation Committee of the combined company will consist of Dr. Marshbanks, Mr. Mangano and Mr. Schrepfer.

Nominating and Corporate Governance Committee

        The primary responsibilities of the Nominating and Corporate Governance Committee of the combined company will include:

255


Table of Contents

        The Nominating and Corporate Governance Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

        It is anticipated that the Nominating and Corporate Governance Committee of the combined company will consist of Mr. Schrepfer, Mr. Mangano and Dr. Marshbanks.


Certain Relationships and Related Transactions

        It is anticipated that the policies and procedures of the combined company with respect to the review, approval or ratification of related-person transactions will be substantially similar to BioSante's current policies and procedures on such matters.

BioSante Related Transactions

        The BioSante board of directors has delegated to the Audit and Finance Committee, pursuant to the terms of a written policy, the authority to review, approve and ratify related party transactions. If it is not feasible for the Audit and Finance Committee to take an action with respect to a proposed related party transaction, the BioSante board of directors or another committee of the BioSante board of directors, may approve or ratify it. No member of the BioSante board of directors or any committee may participate in any review, consideration or approval of any related party transaction with respect to which such member or any of his or her immediate family members is the related party.

        BioSante's policy defines a "related party transaction" as a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which BioSante (including any of its subsidiaries) were, are or will be a participant and in which any related party had, has or will have a direct or indirect interest.

        Prior to entering into or amending any related party transaction, the party involved must provide notice to BioSante's finance department of the facts and circumstances of the proposed transaction, including:

256


Table of Contents

        If BioSante's finance department determines the proposed transaction is a related party transaction and the amount involved will or may be expected to exceed $10,000 in any calendar year, the proposed transaction is submitted to the Audit and Finance Committee for its prior review and approval or ratification. In determining whether to approve or ratify a proposed related party transaction, the Audit and Finance Committee will consider, among other things, the following:

        Related party transactions that involve $10,000 or less must be disclosed to the Audit and Finance Committee but are not required to be approved or ratified by the Audit and Finance Committee.

        BioSante also produces quarterly reports to the Audit and Finance Committee of any amounts paid or payable to, or received or receivable from, any related party. These reports allow BioSante to identify any related party transactions that were not previously approved or ratified. In that event, the transaction will be promptly submitted to the Audit and Finance Committee for consideration of all the relevant facts and circumstances, including those considered when a transaction is submitted for pre-approval. Under BioSante's policy, certain related party transactions as defined under the policy, such as certain transactions not requiring disclosure under the rules of the SEC, will be deemed to be pre-approved by the Audit and Finance Committee and will not be subject to these procedures.

        There were no related party transactions for BioSante during 2011, and as of the latest practicable date before the printing of this joint proxy statement/prospectus, there were no related party transaction for BioSante during 2012.

ANI Related Transactions

        ANI does not have a formal policy on related party transactions, but it conducts a review of all related party transactions for potential conflict of interest situations on an ongoing basis and all such transactions relating to directors and executive officers must be approved by the independent and disinterested members of the ANI board of directors. There were no related party transactions for ANI during 2009, 2010, 2011, and as of the latest practicable date before the printing of this joint proxy statement/prospectus, there were no related party transaction for ANI during 2012, except as described below:

        Please see "Management of the Combined Company Following the Merger—Director Compensation" and "—Executive Compensation" for information regarding the compensation of ANI's directors and those of its executive officers who will continue as executive officers of the combined company and for information regarding employment, bonus and other agreements ANI has in place with such directors and/or executive officers.

257


Table of Contents

        In 2009, ANI issued $2,502,814 of secured subordinated convertible notes (the 2009 convertible notes) and related warrants. The 2009 convertible notes, which bore interest at 10 percent per annum, were due on September 3, 2011. Interest on the 2009 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2009 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on ANI's ability to enter into certain transactions while the 2009 convertible notes were outstanding. Among the investors in the 2009 convertible notes were the following:


2009 Convertible Notes

 
   
   
  Shares of ANI
Series D Preferred
Stock Issued upon
Conversion of:
   
 
   
  Principal
Amount(1)
   
Investor
  Affiliations with ANI   Principal   Interest   Warrants Issued

MVP II

  Owns 56.7 percent of ANI capital stock     1,591,100     211,941     16,085   Common stock
warrants: 12,477

 

ANI directors Robert E. Brown, Jr. and Thomas T. Penn are affiliated with MVP II(2)

                   

Series D
preferred stock
warrants: 2,235

  

                         

First Analysis

  Owns 16.7 percent of ANI capital stock     319,443     42,522     15,315   Common stock warrants: 3,809

 

ANI director Tracy L. Marshbanks, Ph.D. is managing director of First Analysis Corporation(3)

                     

  

                         

Healthcare Value
Master
Fund, Ltd. 

  Owns 1.6 percent of ANI capital stock     152,172     20,275     7,380   Common stock
warrants: 1,841

 

ANI director Robert Schrepfer is employed by the investment advisor to HVMF but is not deemed to be an affiliate of ANI(4)

                     

  

                         

Argentum Capital
Partners II, L.P. 

  Owns 11.3 percent of ANI capital stock.     301,159     40,111     14,304   Common stock
warrants: 2,693

                       

Series D
preferred stock
warrants: 300


(1)
Represents the largest aggregate principal amount outstanding since issuance.

(2)
The notes were held by Meridian Venture Partners II, L.P. (MVP II). MVP II GP, L.P. (GP) is the general partner of MVP II. Meridian Venture Partners II, Co. (MVP Corp.), is the general partner of GP. MVP Management Company (MVP Management) d/b/a MVP Capital Partners, is the

258


Table of Contents

(3)
The notes were held by FA Private Equity Fund IV, L.P. (FAPEF IV), FA Private Equity Fund IV GmbH & Co. Beteiligungs KG (GmbH), The Productivity Fund IV, L.P. (Productivity Fund) and The Productivity Fund IV Advisors Fund, L.P. (Advisors Fund).

FA Private Equity Management IV, L.L.C. (FAPEM IV) is the sole general partner of FAPEF IV. FAVOR is the ultimate managing member of FAPEM IV and, in that capacity, exercises voting and dispositive control over the shares held by FAPEF IV. Tracy L. Marshbanks, Ph.D., a director of ANI, is a managing director of First Analysis Corporation, which manages FAVOR.

FAPEM IV is the managing limited partner of GmbH. FAVOR is the ultimate managing member of FAPEM IV and, in that capacity, exercises voting and dispositive control over the shares held by GmbH. Dr. Marshbanks is a managing director of First Analysis Corporation, which manages FAVOR.

First Analysis Management Company IV, L.L.C. (FAMC IV) is the sole general partner of Productivity Fund. FAVOR is the managing member of FAMC IV and, in that capacity, exercises voting and dispositive control over the shares held by Productivity Fund. Dr. Marshbanks is a managing director of First Analysis Corporation, which manages FAVOR.

FAMC IV is the sole general partner of Advisors Fund. FAVOR is the managing member of FAMC IV and, in that capacity, exercises voting and dispositive control over the shares held by Advisors Fund. Dr. Marshbanks is a managing director of First Analysis Corporation, which manages FAVOR.

(4)
The notes were held by Healthcare Value Master Fund, Ltd. (HVMF). Mr. Schrepfer is an employee of Healthcare Value Capital, LLC (HVC), the investment adviser to HVMF, but has no ownership interest in and does not serve as general partner or managing member of HVC or its affiliates. Therefore, Mr. Schrepfer is not deemed beneficially to own the securities of ANI held by HVMF. HVC has been receiving advisory fees from ANI and will receive a fee at the closing of the merger, as further described below.

259


Table of Contents

        In 2010, ANI issued $8,474,952 of secured subordinated convertible notes (the 2010 convertible notes) and related warrants. The 2010 convertible notes, which bore interest at 14 percent per annum, were due on September 3, 2011. Interest on the 2010 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2010 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on ANI's ability to enter into certain transactions while the 2010 convertible notes were outstanding. Among the investors in the 2010 convertible notes were the following:


2010 Convertible Notes

 
   
   
  Shares of ANI
Series D Preferred
Stock Issued upon
Conversion of:
   
 
 
   
  Principal
Amount(1)
  Warrants
Issued
 
Investor
  Affiliations with ANI   Principal   Interest  

MVP II

  Owns 56.7 percent of ANI capital stock     4,774,832     535,944     295,278     11,603  

 

ANI directors Robert E. Brown, Jr. and Thomas T. Penn are affiliated with MVP II(2)

                         

First Analysis

 

Owns 16.7 percent of ANI capital stock

   
1,453,599
   
193,813
   
61,906
   
5,280
 

 

ANI director Tracy L. Marshbanks, Ph.D. is managing director of First Analysis Corporation(3)

                         

Healthcare Value Master Fund, Ltd. 

 

Owns 1.6 percent of ANI capital stock

   
673,223
   
89,763
   
28,268
   
1,475
 

 

ANI director Robert Schrepfer is employed by the investment advisor to HVMF but is not deemed to be an affiliate of ANI(4)

                         

Argentum Capital Partners II, L.P. 

 

Owns 11.3 percent of ANI capital stock

   
927,135
   
123,618
   
38,405
   
2,725
 

(1)
Please refer to footnote (1) to the table "2009 Convertible Notes."

(2)
Please refer to footnote (2) to the table "2009 Convertible Notes."

(3)
Please refer to footnote (3) to the table "2009 Convertible Notes."

(4)
Please refer to footnote (4) to the table "2009 Convertible Notes."

        In 2011, ANI issued $2,694,295 of secured subordinated convertible notes (the 2011 convertible notes) and consolidated all of the outstanding 2009 and 2010 convertible notes into 2011 convertible notes (collectively the consolidated 2011 convertible notes). The consolidated 2011 convertible notes, which bore interest at 14 percent per annum, were due on December 31, 2012. Interest on the consolidated 2011 convertible notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The consolidated 2011 convertible notes were secured by a second lien on substantially all of ANI's assets and included financial covenants and limitations on

260


Table of Contents

ANI's ability to enter into certain transactions while the consolidated 2011 convertible notes were outstanding. Among the investors in the 2011 convertible notes were the following:


2011 Convertible Notes

 
   
   
  Shares of ANI
Series D Preferred
Stock Issued upon
Conversion of:
   
 
 
   
  Principal Amount(1)   Warrants
Issued
 
Investor
  Affiliations with ANI   Principal   Interest  

MVP II

  Owns 56.7 percent of ANI capital stock     1,590,649     212,087     31,425      

 

ANI directors Robert E. Brown, Jr. and Thomas T. Penn are affiliated with MVP II(2)

                         

First Analysis

 

Owns 16.7 percent of ANI capital stock

   
493,637
   
65,819
   
10,025
   
 

 

ANI director Tracy L. Marshbanks, Ph.D. is managing director of First Analysis Corporation(3)

                         

Healthcare Value Master Fund, Ltd. 

 

Owns 1.6 percent of ANI capital stock

   
230,815
   
30,775
   
4,703
   
 

 

ANI director Robert Schrepfer is employed by the investment advisor to HVMF but is not deemed to be an affiliate of ANI(4)

                         

Argentum Capital Partners II, L.P. 

 

Owns 11.3 percent of ANI capital stock.

   
343,480
   
45,797
   
6,979
   
 

(1)
Please refer to footnote (1) to the table "2009 Convertible Notes."

(2)
Please refer to footnote (2) to the table "2009 Convertible Notes."

(3)
Please refer to footnote (3) to the table "2009 Convertible Notes."

(4)
Please refer to footnote (4) to the table "2009 Convertible Notes."

        In addition, under the related note purchase agreement, dated as of January 28, 2011, among ANI, Meridian Venture Partners II, L.P. and the other lenders party thereto, ANI agreed to pay to MVP Management an annual fee of $160,000 for monitoring and advisory services and to HVC an annual fee of $40,000 for advisory services. In 2011, ANI paid no such fees to MVP Management or HVC. In 2012, ANI paid $240,000 in such fees to MVP Management and $60,000 to HVC. The obligation of ANI to continue to pay such fees under the note purchase agreement will terminate upon the closing of the merger. However, upon closing of the merger, certain additional fees are payable to MVP and HVC, as further described under "—Monitoring and Advisory Fee Agreements" below.

        On June 6, 2012, all of the then outstanding convertible notes and accrued interest were converted into shares of ANI series D preferred stock. As of September 30, 2012, no convertible notes remained outstanding.

261


Table of Contents

        In contemplation of the merger, ANI entered into separate agreements with MVP Management and HVC as of October 3, 2012. ANI refers to these agreements as the monitoring and advisory fee agreements.

        Under the monitoring and advisory fee agreements, ANI agreed to make the following payments at the closing of the merger:


Director Compensation

        It is anticipated that at least initially the compensation to be paid to the combined company's directors after the merger will be substantially similar to the compensation currently paid to members of the BioSante board of directors. It is anticipated, however, that the cash and equity non-employee director compensation policies described below will be reviewed by the Nominating and Corporate Governance Committee of the board of directors of the combined company following completion of the merger and may be subject to change.

        The principal elements of BioSante's director compensation program currently include:

        BioSante does not compensate directors who are employees of BioSante separately for serving on the BioSante board of directors. BioSante does, however, reimburse each member of the BioSante board of directors, including directors who are employees of BioSante, for out-of-pocket expenses incurred in connection with attending board and board committee meetings.

        Currently, ANI reimburses its directors for all reasonable and necessary travel and other incidental expenses incurred in connection with their attendance at meetings of the ANI board of directors. ANI's directors do not receive compensation in connection with their board or committee service or attendance at meetings. Any board compensation to be received by Messrs. Brown and Penn after completion of the merger, under the terms of the MVP II limited partnership agreement, will be turned over to MVP Management, which in turn will forward in excess of 50 percent of that amount to MVP II or credit it against future management fees owed by MVP II to MVP Management. Similarly, any board compensation to be received by Dr. Marshbanks will be credited against any management fees paid by the First Analysis funds.

262


Table of Contents

Cash Compensation

        Under current arrangements, the cash compensation paid to BioSante's non-employee directors consists of the following described annual board and board committee cash retainers and meeting fees.

Description
  Annual
Cash Retainer
 

Board Member

  $ 25,000  

Chairman of the Board (in addition to Board member retainer)

    22,500  

Audit and Finance Committee Chair

    15,000  

Compensation Committee Chair

    10,000  

Nominating and Corporate Governance Committee Chair

    7,000  

Audit and Finance Committee Member (other than Chair)

    7,500  

Compensation Committee Member (other than Chair)

    5,000  

Nominating and Corporate Governance Committee Member (other than Chair)

    3,500  

 

Description
  Meeting Fees  

Board Meeting (in person)

  $ 2,000  

Board Meeting (telephonic)

    1,000  

Board Committee (in person or telephonic)

    1,000  

        The annual cash retainers are paid on a quarterly basis in the beginning of each calendar quarter. For example, the retainers paid in the beginning of the first calendar quarter are for the period from January 1 through March 31. The meeting fees are paid in arrears after the end of each calendar quarter.

Stock Options

        Under certain circumstances, each of BioSante's non-employee directors receives an automatic grant of options to purchase shares of BioSante common stock upon the director's initial election to the BioSante board of directors and on an annual basis on the last business day of March each year. In addition, BioSante's chairman of the board receives an additional automatic option grant. The options have a ten-year term and an exercise price equal to the fair market value of the BioSante common stock on the grant date. The initial options vest and become exercisable in four equal annual installments and the annual options vest and become exercisable in full on the one-year anniversary of the grant date. The table below sets forth the number of options granted to each of BioSante's non-employee directors as initial and annual grants and the additional option grant to BioSante's chairman of the board:

Description
  Number of Shares
Underlying
Option Grants
 

New Board Member (initial grant)

    50,000  

Board Member (annual basis)

    25,000  

Chairman of the Board (annual basis)

    10,000  

        Any options to be received by Messrs. Brown and Penn after completion of the merger will be held for the benefit of MVP Management.

Indemnification Agreements

        BioSante has entered into, and it is anticipated that the combined company will enter into, agreements with all of its directors under which the combined company will be required to indemnify

263


Table of Contents

them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he or she is or was one of the combined company's directors. The combined company will be obligated to pay these amounts only if the director acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the combined company. With respect to any criminal proceeding, the combined company will be obligated to pay these amounts only if the director had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification.

Director Compensation Table: Combined Company Directors from BioSante

        The table below sets forth the compensation paid to BioSante's directors who will continue as directors for the combined company for their service in 2012. All share and per share amounts have been retroactively adjusted to reflect the one-for-six reverse stock split effected on June 1, 2012.

Name
  Fees Earned or
Paid in Cash ($)
  Option
Awards ($)(1)(2)
  All Other
Compensation ($)
  Total ($)  

Fred Holubow

  $ 68,500   $ 12,790   $ 0   $ 81,290  

Ross Mangano

    68,000     12,790     0     80,790  

(1)
Amounts reported in the "Option Awards" column represent the aggregate grant date fair value for option awards granted to each director in 2012 computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The grant date fair value is determined based on BioSante's Black-Scholes option pricing model. The grant date fair value per share for the options granted on March 30, 2012 was $3.07 and was determined using the following specific assumptions: risk free interest rate: 1.04 percent; expected life: 5.5 years; expected volatility: 97.20 percent; and expected dividend yield: 0 percent.

(2)
The following table provides information regarding the aggregate number of options to purchase shares of BioSante common stock outstanding at December 31, 2012 and held by each of the directors listed in the table:

Name
  Aggregate Number
of Securities
Underlying Options
  Exercisable/
Unexercisable
  Range of
Exercise Price(s)
  Range of
Expiration Date(s)
 

Fred Holubow

    28,329     24,163/4,166   $ 4.08 - 26.43     03/15/2016 - 03/29/2022  

Ross Mangano

    28,329     24,163/4,166     4.08 - 26.43     03/15/2016 - 03/29/2022  

Director Compensation Table: Combined Company Directors from ANI

        ANI's directors did not receive any compensation in connection with their board or committee service or attendance at meetings during the year ended December 31, 2012. It is ANI's policy, however, to reimburse directors for travel expenses incurred in connection with traveling to and from board meetings and related lodging.

        As described in further detail under "—Certain Relationships and Related Transactions," under the note purchase agreement, dated as of January 28, 2011, among ANI, Meridian Venture Partners II, L.P. and the other lenders party thereto, ANI agreed to pay to MVP Management an annual fee of $160,000 for monitoring and advisory services and to HVC an annual fee of $40,000 for advisory services. In 2011, ANI paid no such fees to MVP Management or HVC. In 2012, ANI paid $240,000 in such fees to MVP Management and $60,000 to HVC. As described under "—Certain Relationships and Related Transactions," ANI directors Robert E. Brown, Jr. and Thomas T. Penn are affiliated with MVP Management and ANI director Robert Schrepfer is employed by HVC but is not

264


Table of Contents

deemed to be an affiliate of ANI. The obligations of ANI to continue to pay such fees under the note purchase agreement will terminate upon the closing of the merger.

        In contemplation of the merger, ANI entered into the monitoring and advisory fee agreements with MVP Management and HVC as of October 3, 2012. Under the monitoring and advisory fee agreements, ANI agreed to make the following payments at the closing of the merger:


Executive Compensation

        It is anticipated that at least initially the compensation to be paid to the combined company's executive officers after the merger will be substantially similar to the compensation currently paid to such individuals by ANI. It is anticipated, however, that the compensation to be paid to the executive officers of the combined company after the merger will be reviewed by the Compensation Committee of the board of directors of the combined company following completion of the merger and may be subject to change.

Summary Compensation Table

        The table below provides summary information concerning all compensation awarded to, earned by or paid to ANI's principal executive officer, principal financial officer and other executive officers during the years ended December 31, 2012 and 2011. Except as indicated below, these individuals are expected to serve the combined company in the same capacities following completion of the merger.

Name and Principal Position
  Year   Salary   Bonus(1)   All Other
Compensation(2)
  Total  
Arthur S. Przybyl     2012   $ 370,364   $ 187,688   $ 10,887   $ 568,939  

President and Chief Executive Officer

    2011     350,863         10,850     361,713  

Charlotte C. Arnold

 

 

2012

 

 

239,376

 

 

97,020

 

 

887

 

 

337,283

 

Vice President and Chief Financial Officer

    2011     225,750         850     226,600  

James G. Marken

 

 

2012

 

 

242,784

 

 

88,036

 

 

887

 

 

331,707

 

Vice President, Operations

    2011     234,300         850     235,150  

Robert J. Jamnick

 

 

2012

 

 

207,929

 

 

63,202

 

 

887

 

 

272,018

 

Vice President, Quality and Product Development

    2011     191,066         821     191,887  

(1)
On April 5, 2012, the ANI board, after considering, among other things, the fact that ANI's executive officers did not receive bonuses for 2010 and 2011, resolved to pay special bonuses in the form of interests in the proceeds of an exit transaction. The terms of such bonuses, which are not included in the table above, were memorialized in the transaction bonus agreements described below. The bonus amounts for Mr. Marken do not include $33,800 he received in 2011 and $12,450 he received in 2012, as part of a bonus awarded to him in 2008.

265


Table of Contents

(2)
The amounts shown in the "All Other Compensation" column for 2012 include the following with respect to each named executive officer:

Name
  Insurance
Premiums(a)
  Auto
Allowance
 

Arthur S. Przybyl

  $ 887   $ 10,000  

Charlotte C. Arnold

    887      

James G. Marken. 

    887      

Robert J. Jamnick. 

    887      

(a)
Includes premiums paid by ANI on behalf of the named executive officer for short- and long-term disability insurance, accident, death and disability insurance and basic life insurance.

        Mr. Przybyl currently serves as ANI's Chief Executive Officer. In February 2009, ANI entered into an employment letter agreement with Mr. Przybyl commencing on March 9, 2009. The term of the agreement is open-ended; therefore, Mr. Przybyl is free to resign for any reason or for no reason and ANI is free to conclude the at-will employment relationship with Mr. Przybyl at any time, with or without cause, subject to certain severance provisions described below.

        Under the agreement, Mr. Przybyl's original annual base salary was $325,000, subject to a 10 percent increase on the first anniversary of the letter agreement if ANI achieves positive earnings before interest, depreciation and amortization (EBITDA) during the first year of the letter agreement. Mr. Przybyl's current annual base salary is $375,375. In addition to his salary, Mr. Przybyl receives an automobile allowance of $10,000 per year, payable in equal monthly installments. Mr. Przybyl is also eligible for an annual cash bonus, the target of which is up to 50 percent of his base salary, based on the achievement of certain individual and corporate objectives, as determined by the ANI board of directors.

        Pursuant to the agreement, as of March 9, 2009, Mr. Przybyl was to receive an option under ANI's 2005 Stock Option Plan to purchase 17,005 shares of ANI common stock at an exercise price of $110.00 per share. The number of shares issuable upon exercise of the option and the exercise price have been adjusted for the one-for-ten reverse stock split in January 2011. This option was never granted.

        The employment agreement also specifies that Mr. Przybyl was entitled to a one-time bonus upon a sale of ANI; however, Mr. Przybyl forfeited this one-time bonus in connection with the execution of the transaction bonus agreement described below.

        Under the terms of the employment agreement, if Mr. Przybyl is terminated by ANI other than for cause, upon the receipt from him of a release in form and substance satisfactory to ANI, he is entitled to receive, in addition to unpaid salary and expenses and payment of accrued incentive compensation amounts, (i) an amount equal to his base salary for a period of 12 months, which amount may be paid, at ANI's election, either in a lump sum or by salary continuation, and a prorated portion of his targeted annual bonus to the extent that the corresponding objectives are achieved prior to the termination of employment and (ii) amounts or reimbursements for the premiums to continue health insurance coverage as in effect at the time of the termination of employment for a period of 12 months under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

266


Table of Contents

        Ms. Arnold currently serves as ANI's Vice President and Chief Financial Officer. In May 2009, ANI entered into an employment letter agreement with Ms. Arnold commencing on May 14, 2009. The term of the agreement is as described above under "—Arthur S. Przybyl."

        Under the agreement, Ms. Arnold's original annual base salary was $210,000. Ms. Arnold's current annual base salary is $242,550. Ms. Arnold is eligible for an annual cash bonus, the target of which is up to 40 percent of her base salary, based on the achievement of certain individual and corporate objectives, as determined by the ANI board of directors.

        Pursuant to the agreement, as of May 14, 2009, Ms. Arnold was to receive an option under ANI's 2005 Stock Option Plan to purchase 3,250 shares of ANI common stock at an exercise price of $110.00 per share. The number of shares issuable upon exercise of the option and the exercise price have been adjusted for the 1-for-10 reverse stock split in January 2011. This option was never granted.

        The employment agreement furthermore specifies that Ms. Arnold was entitled to a one-time bonus upon a sale of ANI; however, Ms. Arnold forfeited this one-time bonus in connection with the execution of the transaction bonus agreement described below.

        Under the terms of the employment agreement, if Ms. Arnold is terminated by ANI other than for cause, upon the receipt from her of a release in form and substance satisfactory to ANI, she is entitled to receive, in addition to unpaid salary and expenses and payment of accrued incentive compensation amounts, (i) an amount equal to her base salary for a period of 12 months, which amount may be paid, at ANI's election, either in a lump sum or by salary continuation, and a prorated portion of her targeted annual bonus to the extent that the corresponding objectives are achieved prior to the termination of employment and (ii) amounts or reimbursements for the premiums to continue health insurance coverage as in effect at the time of the termination of employment for a period of 12 months under COBRA.

        Mr. Marken currently serves as ANI's Vice President, Operations. On May 1, 2007 ANI entered into an employment agreement with Mr. Marken, for the period commencing on May 1, 2007 and ending on the second anniversary of such date. The term of the agreement is automatically extended for an additional year on each anniversary unless 90 days' prior written notice of non-extension is provided by either party.

        Under the agreement, Mr. Marken's original annual base salary was $147,000. Mr. Marken's current annual base salary is $246,015. Mr. Marken is also eligible for an annual cash bonus, the target of up to 35 percent of his base salary, based on the achievement of certain corporate objectives. The corporate objectives will be determined by the Chief Executive Officer in consultation with Mr. Marken, while the achievement of such objectives will be determined by the Compensation Committee of the ANI board of directors.

        Pursuant to the agreement, as of May 1, 2007, Mr. Marken was granted an option, under ANI's 2005 Stock Option Plan, as amended, to purchase 1,750 shares of ANI common stock at an exercise price of $110.00 per share. The number of shares issuable upon exercise of the option and the exercise price have been adjusted for the one-for-ten reverse stock split in January 2011. The option, which has a term of ten years, vested monthly over 60 months. Mr. Marken forfeited this option in connection with the execution of the transaction bonus agreement described below.

        Under the terms of the employment agreement, if Mr. Marken is terminated by ANI other than for cause or he resigns for good reason, he is entitled to receive, in addition to unpaid salary and expenses and payment of accrued incentive compensation amounts, (1) severance payments in the form

267


Table of Contents

of a continuation of his base salary in effect immediately prior to the termination for a period of 12 months following the termination in exchange for a release of claims he may have against ANI, (2) any earned (with respect to his prior full year of employment), but unpaid bonus, and a prorated portion of the current year's bonus, determined by ANI in the ordinary course consistent with past practice; (3) continuing his participation through the severance period in any health benefits in which he was participating on the effective date of such termination; and (4) providing him any other benefits that have accrued or vested but have not been paid as of the effective date of such termination, all of which are payable in consideration for and only after he executes a mutual release of claims. If ANI elects not to renew Mr. Marken's employment agreement upon the expiration of the third renewal term after the expiration of the initial term or any successive renewal term, it shall be under no obligation to provide severance benefits. The third renewal term has passed.

        Termination "with good reason" is defined as a termination by Mr. Marken for (1) any substantial diminution in his position or status, duties or authority with ANI; (2) any reduction in his base salary; (3) the relocation of ANI's principal office outside of a 50 mile radius of Baudette, Minnesota or ANI requiring Mr. Marken to be based at any place other than within a 50 mile radius of Baudette, Minnesota, except, in each instance, for reasonably required business travel from time to time; and (4) any material breach by ANI of any agreement or covenant made in the employment agreement, which breach is not cured within 30 days of written notice to ANI or is incapable of cure.

        Termination "for good cause" is defined as a termination for (1) willful misconduct or gross negligence in the performance or intentional nonperformance of any of employee's material duties and responsibilities; (2) employee's continued and willful refusal promptly to follow any lawful direction of the Chief Executive Officer or the ANI board of directors; (3) employee's willful misconduct or gross negligence in the performance or intentional nonperformance of numerous of his duties and responsibilities (regardless of materiality), which in the aggregate, constitute material nonperformance; (4) employee's willful misrepresentation, fraud, alcohol or illegal drug abuse, or material misconduct with respect to the business or affairs of ANI, which materially and adversely affects the operations, prospects or reputation of ANI; (5) employee's conviction of a felony or other crime involving moral turpitude; (6) employee's material breach of any fiduciary duty owed to ANI or breach of the non-competition provisions or material breach of confidential information and trade secret provisions, which breach is not cured within thirty (30) days of written notice or is incapable of cure; or (7) any other willful and material breach that is not cured within thirty (30) days of written notice or is incapable of cure.

        ANI did not execute an employment letter agreement with Robert J. Jamnick.

        Pursuant to a transaction bonus agreement, dated September 22, 2012, as amended on December 28, 2012, between ANI and Mr. Przybyl, Mr. Przybyl is entitled to receive a bonus based on the net proceeds to the ANI stockholders from the consummation of a "change of control" transaction.

        As defined in the agreement, a change of control occurs in connection with (a) any merger involving ANI where the holders of a majority of the issued and outstanding equity of the surviving entity are third parties; (b) the sale or transfer of a majority of ANI's equity interests to one or more third parties; (c) the sale or transfer of all or substantially all of ANI's assets to a third party; (d) completion of an initial public offering of ANI's stock, or (e) ANI becoming a publicly traded company through any other transaction, in each case with the result that net proceeds are available for distribution to the ANI stockholders.

268


Table of Contents

        Under the agreement, Mr. Przybyl agreed to forfeit any stock options or other equity right granted to him by ANI prior to the date of the agreement, including, without limitation, the transaction bonus issuable pursuant to his employment letter agreement, as described above.

        Under the agreement, the aggregate transaction bonus payable to Mr. Przybyl by ANI will be as follows, based on the net proceeds (including contingency proceeds, if applicable) available for distribution to ANI stockholders: (i) if the net proceeds are between $6,500,000 and $16,499,999, the transaction bonus payment will equal 6 percent of the net proceeds, (ii) if the net proceeds are between $16,500,000 and $26,499,999, the transaction bonus payment will be $600,000 plus 7.722 percent of the net proceeds over $16,499,999 to $26,499,999, and (iii) if the net proceeds are greater than $26,499,999, the transaction bonus payment will be $1,372,200 plus 7.722 percent of the net proceeds in excess of $26,500,000.

        The agreement originally provided that ANI would pay Mr. Przybyl's transaction bonus in two parts, as follows: (a) 100 percent of the closing date bonus would be paid within five days following the closing date of the change of control transaction and (b) 100 percent of the contingency bonus, if any, would be paid within five days following the 24-month anniversary of the closing date. In the current merger transaction, the bonus will be paid in shares of ANI series D preferred stock, which will automatically be converted into BioSante common stock at the completion of the merger. For Mr. Przybyl and Ms. Arnold, the agreements were amended on December 28, 2012 to provide for revised timing of the payout as described under "—Tax Withholding Arrangements" below.

        Under the terms of the agreement, if Mr. Przybyl is discharged involuntarily, without cause (as defined in the agreement), or resigns from employment for good reason (as defined in the agreement), within 180 days prior to the closing date of the change of control transaction, he is still entitled to receive the transaction bonus payment.

        The agreement acknowledges that the merger between BioSante and ANI qualifies as a change of control. The net proceeds of the merger are calculated as the product of (a) the average closing sale price of the BioSante common stock for the five trading days prior to the announcement of a signed merger agreement with ANI (which announcement occurred on October 4, 2012) and (b) the aggregate number of shares of BioSante common stock to be issued to the ANI stockholders in the merger.

        The agreement and the right to receive a transaction bonus automatically terminates and is voided upon the earlier of (a) Mr. Przybyl's separation from service of ANI for any reason other than as specifically permitted in the agreement, and (b) the occurrence of a bankruptcy event (as defined in the agreement).

        Pursuant to a transaction bonus agreement, dated September 22, 2012, as amended on December 28, 2012, between ANI and Ms. Arnold, Ms. Arnold is entitled to receive a bonus based on the net proceeds raised in connection with the consummation of a "change of control" transaction, including the proposed merger between BioSante and ANI.

        Under the agreement, the aggregate transaction bonus payable to Mrs. Arnold by ANI will be as follows, based on the net proceeds (or contingency proceeds, if applicable) available for distribution to ANI stockholders: (i) if the net proceeds are between $6,500,000 and $16,499,999, the transaction bonus payment will equal 1.5 percent of the net proceeds, (ii) if the net proceeds are between $16,500,000 and $26,499,999, the transaction bonus payment will be $150,000 plus 2.478 percent of the net proceeds over $16,499,999 to $26,499,999, and (iii) if the net proceeds are greater than $26,499,999, the transaction bonus payment will be $397,800 plus 2.478 percent of the net proceeds in excess of $26,500,000.

269


Table of Contents

        The remaining terms of Ms. Arnold's agreement are substantially identical to the terms of Mr. Przybyl's agreement described above.

        Pursuant to a transaction bonus agreement, dated September 22, 2012, between ANI and Mr. Marken, Mr. Marken is entitled to receive a bonus based on the net proceeds raised in connection with the consummation of a "change of control" transaction, including the proposed merger between BioSante and ANI.

        Under the agreement, the aggregate transaction bonus payable to Mr. Marken by ANI will be as follows, based on the net proceeds (or contingency proceeds, if applicable) available for distribution to ANI stockholders: (i) if the net proceeds are between $6,500,000 and $16,499,999, the transaction bonus payment will equal 1 percent of the net proceeds, (ii) if the net proceeds are between $16,500,000 and $26,499,999, the transaction bonus payment will be $100,000 plus 1.855 percent of the net proceeds over $16,499,999 to $26,499,999, and (iii) if the net proceeds are greater than $26,499,999, the transaction bonus payment will be $285,000 plus 1.855 percent of the net proceeds in excess of $26,500,000.

        The remaining terms of Mr. Marken's agreement are substantially identical to the terms of Mr. Przybyl's agreement described above, with the timing of the bonus payout in the current merger transaction to be as described under "—Tax Withholding Arrangements" below.

        Pursuant to a transaction bonus agreement, dated September 22, 2012, between ANI and Mr. Jamnick, Mr. Jamnick is entitled to receive a bonus based on the net proceeds raised in connection with the consummation of a "change of control" transaction, including the proposed merger between BioSante and ANI.

        Under the agreement, the aggregate transaction bonus payable to Mr. Jamnick by ANI will be as follows, based on the net proceeds (or contingency proceeds, if applicable) available for distribution to ANI stockholders: (i) if the net proceeds are between $6,500,000 and $16,499,999, the transaction bonus payment will equal 1 percent of the net proceeds, (ii) if the net proceeds are between $16,500,000 and $26,499,999, the transaction bonus payment will be $100,000 plus 1.732 percent of the net proceeds over $16,499,999 to $26,499,999, and (iii) if the net proceeds are greater than $26,499,999, the transaction bonus payment will be $273,200 plus 1.732 percent of the net proceeds in excess of $26,500,000.

        The remaining terms of Mr. Jamnick's agreement are substantially identical to the terms of Mr. Przybyl's agreement described above, with the timing of the bonus payout in the current merger transaction to be as described under "—Tax Withholding Arrangements" below.

        As described above, certain executive officers of ANI will be paid transaction bonuses at the closing of the merger. Even though the bonuses are to be paid in stock, the combined company will have to withhold amounts sufficient to meet its various state and federal tax withholding obligations, which are paid in cash. ANI and its executive officers expect to enter into the following arrangements to enable the combined company to make such withholdings:

        Immediately prior to closing of the merger, all of the shares of ANI series D preferred stock payable to Mr. Przybyl and Ms. Arnold pursuant to the transaction bonus arrangements referenced

270


Table of Contents

above will be placed into a rabbi trust, which will remain in place until the expiration of the lock-up period that applies to Mr. Przybyl and Ms. Arnold. As a result of completion of the merger, those shares of ANI series D preferred stock will automatically convert into shares of BioSante common stock. There will be no taxes payable on the shares until they are released from the rabbi trust. The rabbi trust will provide that following the expiration of the lock-up period until at the latest March 5, 2014, shares will be released ratably on a weekly basis to a broker/dealer, who would, pursuant to a trading plan to be entered into by the executive and the broker/dealer pursuant to Rule 10b5-1 under the Exchange Act prior to closing of the merger, promptly sell a sufficient number of shares of BioSante common stock to pay the required tax withholding amounts on the released shares (expected to be one half of such shares). The combined company will calculate the amount of required tax withholding (including the employee portion of FICA, as well as income taxes) on the released shares on a weekly basis (based on the then current fair market value of such shares). After completing each sale, the broker/dealer will transfer sufficient sale proceeds to the combined company to satisfy the executive's tax withholding obligations and transfer any remaining released shares to or as directed by the executive. All such sales pursuant to the rabbi trust and such 10b5-1 plan must be completed by March 15, 2014. All such sales by the rabbi trust will be sold pursuant to Rule 144 under the Securities Act, including the applicable volume limitations.

        Immediately prior to closing of the merger, Messrs. Marken and Jamnick, who are not subject to a lock-up period, will receive shares of ANI series D preferred stock payable pursuant to the transaction bonus arrangements referenced above. As a result of the merger, those shares of ANI series D preferred stock will automatically convert into shares of BioSante common stock. All of these shares will be delivered to a broker/dealer who would, pursuant to a trading plan to be entered into by the executive and the broker/dealer pursuant to Rule 10b5-1 under the Exchange Act prior to closing of the merger, promptly sell a sufficient number of shares of BioSante common stock to pay the required tax withholding amounts on the released shares. The combined company will calculate the amount of required tax withholding (including the employee portion of FICA, as well as income taxes) on the released shares on a weekly basis (based on the then current fair market value of such shares). After completing each sale, the broker/dealer will transfer sufficient sale proceeds to the combined company to satisfy the executive's tax withholding obligations and transfer any remaining released shares to or as directed by the executive. All such sales will be sold pursuant to Rule 144 under the Securities Act, including the applicable volume limitations.

        The following tables show, for each of the ANI executives, that number of shares of BioSante common stock corresponding to (i) an estimated gross bonus amount, (ii) an estimated amount of taxes to be withheld and (iii) an estimated net bonus amount to be delivered to the executive, in each case assuming $1.848 per share market value of BioSante common stock and assuming (a) an exchange ratio of 10.5948 shares of BioSante common stock for each share of ANI series D preferred stock (corresponding to BioSante net cash of $17.0 million), (b) an exchange ratio of 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock (corresponding to BioSante net cash of $18.0 million) and (c) an exchange ratio of 9.4095 shares of BioSante common stock for each share of ANI series D preferred stock (corresponding to BioSante net cash of $23.0 million or more). The assumed exchange ratios in the tables below do not give effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described elsewhere in this joint proxy statement/prospectus. As explained in "The Merger Agreement—Merger Consideration and Adjustment", the exchange ratios are subject to potential adjustment depending upon the amount of "net cash" of BioSante, as defined in the merger agreement and generally consisting of BioSante's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the merger and thus will not be determined until that time.

271


Table of Contents

        Assumed Exchange Ratio of 10.5948 Shares of BioSante Common Stock for Each Share of ANI Series D Preferred Stock

Executive
  Estimated Gross
Bonus Amount
  Estimated Amount of
Taxes to be Withheld
  Estimated Net
Bonus Amount
 

Arthur S. Przybyl

    1,843,399 shares     734,722 shares     1,108,677 shares  

Charlotte C. Arnold

    568,529 shares     219,102 shares     349,427 shares  

James G. Marken

    418,945 shares     154,172 shares     264,772 shares  

Robert J. Jamnick

    394,754 shares     145,693 shares     249,060 shares  

        Assumed Exchange Ratio of 10.3502 Shares of BioSante Common Stock for Each Share of ANI Series D Preferred Stock

Executive
  Estimated Gross
Bonus Amount
  Estimated Amount of
Taxes to be Withheld
  Estimated Net
Bonus Amount
 

Arthur S. Przybyl

    1,790,806 shares     712,423 shares     1,078,383 shares  

Charlotte C. Arnold

    551,652 shares     211,203 shares     340,449 shares  

James G. Marken

    406,310 shares     149,743 shares     256,567 shares  

Robert J. Jamnick

    382,957 shares     141,588 shares     241,399 shares  

        Assumed Exchange Ratio of 9.2508 Shares of BioSante Common Stock for Each Share of ANI Series D Preferred Stock

Executive
  Estimated Gross
Bonus Amount
  Estimated Amount of
Taxes to be Withheld
  Estimated Net
Bonus Amount
 

Arthur S. Przybyl

    1,554,438 shares     612,203 shares     942,235 shares  

Charlotte C. Arnold

    475,801 shares     182,238 shares     293,563 shares  

James G. Marken

    349,529 shares     129,842 shares     219,687 shares  

Robert J. Jamnick

    329,941 shares     122,976 shares     206,965 shares  

        BioSante has entered into, and it is anticipated that the combined company will enter into, agreements with all of its officers under which the combined company will be required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he or she is or was one of the combined company's officers. The combined company will be obligated to pay these amounts only if the officer acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the combined company. With respect to any criminal proceeding, the combined company will be obligated to pay these amounts only if the officer had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification.

272


Table of Contents

Outstanding Equity Awards at Fiscal Year End

        The table below provides information regarding outstanding equity awards held by the named executive officers of ANI as of December 31, 2012, including the value of the option awards.

 
  Option Awards(1)  
Name
  Number of Securities
Underlying
Unexercised Options
(#) Exercisable
  Number of Securities
Underlying
Unexercised Options
(#) Unexercisable
  Option
Exercise
Price ($)
  Option
Expiration
Date
 

Arthur S. Przybyl
President and Chief Executive Officer

                 

Charlotte C. Arnold
Vice President and Chief Financial Officer

   
   
   
   
 

James G. Marken
Vice President, Operations

   
   
   
   
 

Robert J. Jamnick
Vice President, Quality and Product Development

   
   
   
   
 

(1)
All options shown were cancelled in connection with the execution of the transaction bonus agreements. Under the terms of the options, vesting occurred in 60 equal monthly installments. Upon the occurrence of a change in control, the options would have accelerated and become fully vested and immediately exercisable as of the date of the change in control. Option exercise prices and number of shares issuable upon exercise of the options have been adjusted to reflect ANI's one-for-ten reverse stock split on January 28, 2011.


Compensation Committee Interlocks and Insider Participation

        It is anticipated that the compensation committee of the combined company will consist of Dr. Marshbanks, Mr. Mangano and Mr. Schrepfer. Each member of the compensation committee is an "outside" director as that term is defined in Section 162(m) of the Code and a "non-employee" director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act. None of the combined company's executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who will serve on the combined company's board of directors or compensation committee following the merger.

273


Table of Contents


PRINCIPAL STOCKHOLDERS OF BIOSANTE

        The following table sets forth information known to BioSante with respect to the beneficial ownership of each class of BioSante capital stock as of December 31, 2012 for:

        The number of shares beneficially owned by a person includes shares subject to options held by that person that are currently exercisable or that become exercisable within 60 days of December 31, 2012. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options currently exercisable or that become exercisable within 60 days of December 31, 2012 are outstanding for the purpose of computing the percentage of BioSante capital stock owned by such person or group. However, such unissued shares of BioSante capital stock are not deemed to be outstanding for calculating the percentage of BioSante capital stock owned by any other person. Except as otherwise indicated and subject to the voting agreements described under the section entitled "Voting and Other Ancillary Agreements," BioSante believes that the beneficial owners of BioSante capital stock listed in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise indicated in the notes below, the address for each of the stockholders in the table below is c/o BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069.

 
  Shares Beneficially Owned(1)(2)  
 
 

BioSante
Common Stock
 

BioSante Class C
Special Stock
  BioSante
Common
Stock and
Common
Stock
Equivalents
   
 
 
  Percent
of Total
Voting
Power(3)
 
Name and Address of Beneficial Owner
  Number   Percent   Number   Percent  

Louis W. Sullivan, M.D. 

    35,481     *     16,666     25.6 %   52,147     *  

Stephen M. Simes

    275,652 (4)   1.1 %           275,652     1.1 %

Fred Holubow

    34,372     *             34,372     *  

Ross Mangano

    418,397 (5)   1.7 %           418,397     1.7 %

Edward C. Rosenow, III, M.D. 

    27,586     *             27,586     *  

John T. Potts, Jr., M.D. 

    8,636 (6)   *             8,636     *  

Stephen A. Sherwin, M.D. 

    41,890     *             41,890     *  

Phillip B. Donenberg

    129,563     *             129,563     *  

Michael C. Snabes, M.D., Ph.D. 

    54,373     *             54,373     *  

Hans Michael Jebsen(7)

    12,500     *     16,666     25.6 %   29,166     *  

Marcus Jebsen(8)

    4,166     *     8,333     12.8 %   12,499     *  

Angela Ho(9)

    1,219     *     16,666     25.6 %   17,885     *  

All directors and executive officers as a group (9 persons)

    1,025,923 (10)   4.1 %   16,666     25.6 %   1,042,589     4.2 %

*
Represents beneficial ownership of less than one percent.

274


Table of Contents

(1)
Includes for the persons listed below the following shares of BioSante common stock subject to options held by such persons that are currently exercisable or become exercisable within 60 days of December 31, 2012:

Name
  Shares of BioSante
Common Stock
Underlying
Stock Options
 

Directors

       

Louis W. Sullivan, M.D. 

    27,498  

Stephen M. Simes

    241,942  

Fred Holubow

    24,163  

Ross Mangano

    24,163  

Edward C. Rosenow, III, M.D. 

    24,163  

John T. Potts, Jr., M.D

    7,707  

Stephen A. Sherwin, M.D. 

    27,430  

Named Executive Officers

       

Stephen M. Simes

    241,942  

Phillip B. Donenberg

    122,149  

Michael C. Snabes, M.D., Ph.D. 

    54,373  
       

All directors and executive officers as a group (9 persons)

    553,588  
       
(2)
Includes shares of BioSante common stock held by the following persons in securities brokerage accounts, which in certain circumstances under the terms of the standard brokerage account form may involve a pledge of such shares as collateral: Dr. Sullivan (1,666 shares), Mr. Simes (15,788 shares), Mr. Holubow (10,209 shares), Mr. Mangano (11,133 shares), Dr. Rosenow (3,333 shares), Dr. Sherwin (14,460 shares) and Mr. Donenberg (7,387 shares).

(3)
In calculating the percent of total voting power, the voting power of shares of BioSante common stock and shares of BioSante class C special stock is combined.

(4)
Mr. Simes's beneficial ownership includes 33,694 shares of BioSante common stock held by a trust and 16 shares of BioSante common stock held by Mr. Simes's child.

(5)
Mr. Mangano's beneficial ownership includes: (a) 321,610 shares of common stock held by JO & Co., of which Mr. Mangano is President; (b) 5,000 shares of common stock held by Oliver & Co., of which Mr. Mangano is the trustee; and (c) an aggregate of 39,998 shares of common stock held in various accounts, of which Mr. Mangano is an advisor and/or a trustee. Mr. Mangano has sole voting and investment power over these shares.

(6)
Includes 487 shares of BioSante common stock held in irrevocable trusts for Dr. Potts's children, as to which Dr. Potts disclaims any beneficial ownership.

(7)
The address of Hans Michael Jebsen is c/o Jebsen & Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway Bay, Hong Kong, China.

(8)
The address of Marcus Jebsen is c/o MF Jebsen International Ltd., 24/F Caroline Centre, 28 Yun Ping Road, Causeway Bay, Hong Kong.

(9)
The address of Angela Ho address is c/o Jet Asia Ltd., 39/F Shun Tak Center, 200 Connaught Road Central, Hong Kong, China.

(10)
The amount beneficially owned by all current directors and executive officers as a group includes 486,227 shares of BioSante common stock issuable upon the exercise of stock options held by these individuals, 62,513 shares of BioSante common stock held in trusts and 16 shares of BioSante common stock held by immediate family members of the directors and executive officers. See notes (1), (4), (5) and (6) above.

275


Table of Contents


PRINCIPAL STOCKHOLDERS OF ANI

        The following table sets forth information known to ANI with respect to the beneficial ownership of each class of ANI capital stock as of December 31, 2012 for:

        The number of shares beneficially owned by a person includes shares subject to options or warrants held by that person that are currently exercisable or that become exercisable within 60 days of December 31, 2012. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options or warrants currently exercisable or that become exercisable within 60 days of December 31, 2012 are outstanding for the purpose of computing the percentage of ANI capital stock owned by such person or group. However, such unissued shares of ANI capital stock are not deemed to be outstanding for calculating the percentage of ANI capital stock owned by any other person. Except as otherwise indicated in the footnotes below and subject to the voting agreements described under the section entitled "Voting and Other Ancillary Agreements," ANI believes that the beneficial owners of ANI capital stock listed in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise indicated in the notes below, the address for each of the ANI stockholders in the table below is c/o ANIP Acquisition Company, 210 Main Street West, Baudette, Minnesota 56623.

 
  Shares Beneficially Owned(1)  
 
   
   
  ANI Series A, B
and C
Preferred
Stock(2)
   
   
   
   
 
 
  ANI Common
Stock
  ANI Series D
Preferred Stock
  ANI Common
Stock and
Common
Stock
Equivalents
   
 
 
  Percent of
Total
Voting
Power(3)
 
Name and Address of Beneficial Owner
  Number   Percent   Number   Percent   Number   Percent  

Robert E. Brown, Jr.(4)

    24,429     68.7 %   92,600     42.9 %   1,376,596     58.0 %   1,493,625     56.9 %

Arthur S. Przybyl

                                 

Tracy L. Marshbanks, Ph.D.(5)

    3,810     16.1 %   39,001     18.0 %   394,680     16.6 %   437,491     16.7 %

Thomas A. Penn(4)

    24,429     68.7 %   92,600     42.9 %   1,376,596     58.0 %   1,493,625     56.9 %

Robert Schrepfer(6)

                                 

Charlotte C. Arnold

                                 

James G. Marken

                                 

Robert J. Jamnick

                                 

Argentum Capital Partners II, L.P.(7)

    2,788     11.8 %   20,289     9.4 %   272,239     11.5 %   295,316     11.3 %

Bannon Private Equity Fund Ltd.(8)

    449     1.95 %   7,293     3.4 %           7,742     *  

First Analysis Funds(9)

    3,810     16.1 %   39,001     18.0 %   394,680     16.6 %   437,491     16.7 %

Healthcare Value Partners(10)

    1,866     7.9 %   13,661     6.3 %   182,640     7.7 %   198,167     7.6 %

Liberty(11)

    5,846     20.6 %   34,651     16.0 %   124,008     5.2 %   164,505     6.3 %

Meridian Venture Partners II, L.P.(12)

    24,429     68.7 %   92,600     42.9 %   1,376,596     58.0 %   1,493,625     56.9 %

All directors and executive officers as a group (8 persons)(13)

    28,239     79.4 %   131,601     60.9 %   1,771,276     74.6 %   1,931,116     73.5 %

*
Represents beneficial ownership of less than one percent.

276


Table of Contents

(1)
Includes for the persons listed below the following shares of ANI common stock subject to warrants held by such persons that are currently exercisable or become exercisable within 60 days of December 31, 2012:

Name
  Shares of ANI
Common
Stock
Underlying
Warrants
 

Bannon Private Equity Fund Ltd. 

    449  

Liberty

    4,831  

Meridian Venture Partners II, L.P. 

    11,951  
(2)
Includes for the persons listed below the following shares of ANI preferred stock held by such persons as of December 31, 2012:

Name
  Shares of ANI
Series A
Preferred
Stock
  Shares of ANI
Series B
Preferred
Stock
  Shares of ANI
Series C
Preferred
Stock
 

Argentum Capital Partners II, L.P. 

        16,004     4,285  

Bannon Private Equity Fund Ltd. 

    5,088     925     1,280  

First Analysis Funds

        30,763     8,238  

Healthcare Value Partners

        9,116     4,545  

Liberty

    28,354     3,260     3,037  

Meridian Venture Partners II, L.P

    67,598     13,638     11,364  
(3)
In calculating the percent of total voting power, the voting power of shares of ANI common stock, shares of ANI series A preferred stock, ANI series B preferred stock and ANI series C preferred stock and shares of ANI series D preferred stock is combined.

(4)
These shares are held by Meridian Venture Partners II, L.P. (MVP II). MVP II GP, L.P. (GP) is the general partner of MVP II. Meridian Venture Partners II, Co. (MVP Corp.) is the general partner of GP. MVP Management Company (MVP Management) d/b/a MVP Capital Partners, is the management company for MVP II and also renders financial and business advisory services to several of the companies in which MVP II has invested. Robert E. Brown, Jr., a director of ANI, is the President, sole stockholder and sole director of MVP Corp, the sole stockholder, director and President of MVP Management, as well as a limited partner of GP and one of two principals of MVP II that are licensed by the Small Business Administration (SBA). SBA-licensed principals are charged with approving all investment-related decisions on behalf of small business investment companies licensed by the SBA, such as MVP II. Thomas T. Penn, a director of ANI, is a Vice President of MVP Corp, a Vice President and employee of MVP Management, a limited partner of GP and one of the two SBA-licensed principals of MVP II. As such, both Mr. Brown and Mr. Penn may be deemed to share voting and dispositive power with respect to the shares that are held of record by MVP II. Messrs. Brown and Penn disclaim beneficial ownership in such shares of capital stock except to the extent of their respective pecuniary interests therein. See footnote (12) below.

(5)
These shares are held by FA Private Equity Fund IV, L.P. (FAPEF IV), FA Private Equity Fund IV GmbH & Co. Beteiligungs KG (GmbH), The Productivity Fund IV, L.P. (Productivity Fund) and The Productivity Fund IV Advisors Fund, L.P. (Advisors Fund). We refer to these funds collectively as the First Analysis Funds.

FA Private Equity Management IV, L.L.C. (FAPEM IV) is the sole general partner of FAPEF IV. First Analysis Venture Operations and Research, L.L.C. (FAVOR) is the ultimate managing member of FAPEM IV and, in that capacity, exercises voting and dispositive control over the shares held by FAPEF IV. Tracy L. Marshbanks, Ph.D., a director of ANI, is a managing director of First Analysis Corporation, which manages FAVOR.

FAPEM IV is the managing limited partner of GmbH. FAVOR is the ultimate managing member of FAPEM IV and, in that capacity, exercises voting and dispositive control over the shares held by GmbH. Dr. Marshbanks is a managing director of First Analysis Corporation, which manages FAVOR.

First Analysis Management Company IV, L.L.C. (FAMC IV) is the sole general partner of Productivity Fund. FAVOR is the managing member of FAMC IV and, in that capacity, exercises voting and dispositive control over the shares held by Productivity Fund. Dr. Marshbanks is a managing director of First Analysis Corporation, which manages FAVOR.

277


Table of Contents

(6)
Does not include shares held by Healthcare Value Master Fund Ltd. (HVMF). While Mr. Schrepfer is an employee of Healthcare Value Capital, LLC (HVC), the investment adviser to HVMF, he does not have an ownership interest in, and does not serve as general partner or managing member of, HVC or its affiliates. Therefore, Mr. Schrepfer is not deemed to share voting or dispositive power with respect to the shares held by HVMF. See footnote (10) below.

(7)
Includes 2,788 shares of ANI common stock, 16,004 shares of ANI series B preferred stock and 4,285 shares of ANI series C preferred stock held by Argentum Capital Partners II, L.P. (ACP II). Argentum Investments, LLC is the managing member of Argentum Partners II, LLC, which is the general partner of ACP II. Walter H. Barandiaran and Daniel Raynor are co-managing members of Argentum Investments, LLC. Each of Messrs. Barandiaran and Raynor, and Argentum Investments, LLC and Argentum Partners II, LLC, may be deemed to beneficially own the shares of common stock held by ACP II. Each of Messrs. Barandiaran and Raynor disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The business address of ACP II is 60 Madison Avenue, Suite 701, New York, NY 10010.

(8)
Includes 5,088 shares of ANI series A stock, 925 shares of ANI series B preferred stock and 1,280 shares of ANI series C preferred stock held by Bannon Private Equity Fund Ltd. (Bannon). See also footnote (1) for shares issuable upon exercise of warrants. Bannon is wholly-owned by Mercury Holdings LLC (Mercury). Arthur F. Bell, Jr. is the managing member of Mercury. The business address of Bannon, Mercury and Mr. Bell is 201 International Circle, Suite 400, Hunt Valley, Maryland 21030.

(9)
Includes: (i) 339 shares of ANI common stock, 9,874 shares of ANI series B preferred stock and 2,644 shares of ANI series C preferred stock held by Productivity Fund, (ii) 13 shares of ANI common stock, 381 shares of ANI series B preferred stock and 104 shares of ANI series C preferred stock held by Advisors Fund; (iii) 3,319 shares of ANI common stock, 19,688 shares of ANI series B preferred stock and 5,272 shares of ANI series C preferred stock held by FA PE Fund; and (iv) 138 shares of ANI common stock, 820 shares of ANI series B preferred stock and 220 shares of ANI series C preferred stock held by GmbH (collectively, the First Analysis Funds). FAMC UV is the sole general partner of each of Productivity Fund and Advisors Fund. FAVOR is the managing member of FAMC IV and, in that capacity, exercises voting and dispositive control over the shares held by Productivity Fund and Advisors Fund. FAPEM IV is the general partner of FAPEF IV and the managing limited partner of GmbH and, in those capacities, exercises voting and dispositive control over the shares held by FAPEF IV and GmbH. FAVOR, in turn, is the managing member of FAPEM UV. First Analysis Corporation is the manager of FAVOR and, in that capacity, may be deemed to share voting and dispositive power with respect to the shares that may be deemed to be beneficially owned by FAVOR. The business address for the First Analysis Funds, FAVOR, FAPEM IV and First Analysis Corporation is c/o First Analysis, 1 S. Wacker Drive, Suite 3900, Chicago, Illinois 60606.

(10)
Includes 9,116 shares of ANI series B stock and 4,545 shares of ANI series C preferred stock held by Healthcare Value Master Fund, Ltd. (HVMF), a Cayman Islands limited company. The investment advisor to HVMF is Healthcare Value Capital, LLC (HVC). Healthcare Value Capital General Partner, LLC (HVCGP) is the manager of HVMF. The managing members of HVCGP are Joseph Riccardo and Scott Shevick. The business address of HVMF, HVC, HVCGP and Messrs. Riccardo and Shevick is 400 Madison Avenue, Suite 10A, New York, New York 10017.

(11)
Includes: (i) 966 shares of ANI common stock, 27,730 shares of ANI series A preferred stock, 2,348 shares of ANI series B preferred stock and 2,885 shares of ANI series C preferred stock held by Liberty Ventures II, L.P. (LBII) and (ii) 49 shares of ANI common stock, 624 shares of ANI series A preferred stock, 913 shares of ANI series B preferred stock and 152 shares of ANI series C preferred stock held by Liberty Advisors, Inc. (LA). See also footnote (1) for shares issuable upon exercise of warrants. Liberty Venture Partners II, LLC (LLC) is the general partner of LBII and Thomas Morse, Carl Kopfinger and Maria Hahn are the managing members of LLC. The directors and officers of LA are Thomas Morse and Maria Hahn. Thomas Morse is the principal shareholder of LA. The business address of Liberty, LLC, LA and their respective control persons is 2001 Market Street, Suite 3820, Philadelphia, Pennsylvania 19103.

(12)
Includes 12,477 shares of common stock, 67,598 shares of ANI series A preferred stock, 13,638 shares of ANI series B preferred stock and 11,364 shares of ANI series C preferred stock held by Meridian Venture Partners

278


Table of Contents

(13)
The amount beneficially owned by all current directors and executive officers as a group includes 11,951 shares of ANI common stock issuable upon the exercise of warrants. See notes above.

279


Table of Contents


PRINCIPAL STOCKHOLDERS OF COMBINED COMPANY

        The following table sets forth information as of December 31, 2012 with respect to the beneficial ownership of each class of capital stock of the combined company upon completion of the merger for:

        Percentage of beneficial ownership is calculated based on 24,422,240 shares of BioSante common stock outstanding and 65,211 shares of BioSante class C special stock outstanding and 2,615,001 shares of ANI capital stock outstanding as of December 31, 2012. The percent of common stock and class C special stock of the combined company is based on 52,337,228 shares of common stock and 65,211 shares of class C special stock of the combined company outstanding upon completion of the merger and assumes that the exchange ratio for the ANI series D preferred stock is 10.3502 shares of BioSante common stock for each share of ANI series D preferred stock and the exchange ratio for the ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock is zero shares of BioSante common stock for each share of ANI series C preferred stock, ANI series B preferred stock, ANI series A preferred stock and ANI common stock (without giving effect to the proposed reverse stock split of BioSante common stock and BioSante class C special stock described elsewhere in this joint proxy statement/prospectus but giving effect to the anticipated issuance of an estimated 321,737 shares of ANI series D preferred stock to ANI's executive officers and an additional ANI employee in connection with the transaction bonus arrangements as described elsewhere in this joint proxy statement/prospectus).

        The number of shares beneficially owned by a person includes shares subject to options and warrants held by that person that are currently exercisable or that become exercisable within 60 days of December 31, 2012. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options and warrants currently exercisable or that become exercisable within 60 days of December 31, 2012 are outstanding for the purpose of computing the percentage of capital stock of the combined company owned by such person or group. However, such unissued shares of capital stock are not deemed to be outstanding for calculating the percentage of capital stock owned by any other person. Except as otherwise indicated and subject to the voting agreements described under the section entitled "Voting and Other Ancillary Agreements," BioSante and ANI believe that the beneficial owners of capital stock listed in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise indicated in the notes below, the address

280


Table of Contents

for each of the stockholders in the table below is c/o ANIP Acquisition Company, 210 Main Street West, Baudette, Minnesota 56623.

 
  Shares Beneficially Owned  
 
   
   
  Class C Special
Stock
  Common
Stock and
Common
Stock
Equivalents
   
 
 
  Common Stock   Percent
of Total
Voting
Power
 
Name and Address of Beneficial Owner
  Number   Percent   Number   Percent  

Five Percent Stockholders

                                     

Meridian Venture Partners II, L.P.(1)

    14,248,043     27.2 %           14,248,043     27.2 %

First Analysis Funds(2)

    4,085,016     7.8 %           4,085,016     7.8 %

Argentum Capital Partners II, L.P.(3)

    2,817,728     5.4 %           2,817,728     5.4 %

Louis W. Sullivan, M.D. 

    35,481     *     16,666     25.6 %   52,147     *  

Hans Michael Jebsen(4)

    12,500     *     16,666     25.6 %   29,166     *  

Marcus Jebsen(5)

    4,166     *     8,333     12.8 %   12,499     *  

Angela Ho(6)

    1,219     *     16,666     25.6 %   17,885     *  

Ross Mangano(7)

    418,397     *             418,397     *  

Fred Holubow

    34,372     *             34,372     *  

Directors and Named Executive Officers

                                     

Robert E. Brown, Jr.(8)

    14,248,043     27.2 %           14,248,043     27.2 %

Arthur S. Przybyl

                         

Tracy L. Marshbanks, Ph.D.(9)

    4,085,016     7.8 %           4,085,016     7.8 %

Thomas A. Penn(10)

    14,248,043     27.2 %           14,248,043     27.2 %

Robert Schrepfer(11)

                         

Fred Holubow

    34,372     *             34,372     *  

Ross Mangano(7)

    418,397     *             418,397     *  

Charlotte C. Arnold

                         

James G. Marken

                         

Robert J. Jamnick

                         

All directors and executive officers as a group (10 persons)

    18,785,828     35.9 %           18,785,828     35.8 %

*
Represents beneficial ownership of less than one percent.

(1)
See footnote 12 in the section entitled "Principal Stockholders of ANI."

(2)
See footnote 9 in the section entitled "Principal Stockholders of ANI."

(3)
See footnote 7 in the section entitled "Principal Stockholders of ANI."

(4)
See footnote 7 in the section entitled "Principal Stockholders of BioSante."

(5)
See footnote 8 in the section entitled "Principal Stockholders of BioSante."

(6)
See footnote 9 in the section entitled "Principal Stockholders of BioSante."

(7)
See footnote 5 in the section entitled "Principal Stockholders of BioSante."

(8)
See footnote 4 in the section entitled "Principal Stockholders of ANI."

(9)
See footnote 5 in the section entitled "Principal Stockholders of ANI."

(10)
See footnote 4 in the section entitled "Principal Stockholders of ANI."

(11)
See footnote 6 in the section entitled "Principal Stockholders of ANI."

281


Table of Contents


DESCRIPTION OF BIOSANTE CAPITAL STOCK

Authorized and Outstanding Capital Stock

        BioSante currently is authorized to issue 200.0 million shares of common stock, $0.0001 par value per share, 4,687,684 shares of BioSante class C special stock, $0.0001 par value per share, and 10.0 million shares of undesignated preferred stock, $0.0001 par value per share. BioSante is seeking stockholder approval pursuant to this joint proxy statement/prospectus to effect a reverse stock split of BioSante's issued and outstanding common stock and class C special stock, pursuant to which any whole number of outstanding shares between and including two and five would be combined and reclassified into one share of BioSante common stock or BioSante class C special stock, as applicable (with the exact reverse stock split ratio within such range to be determined by BioSante and ANI prior to completion of the merger).

        As of December 31, 2012, BioSante had 24.4 million shares of BioSante common stock outstanding. As of December 31, 2012, BioSante had an aggregate of 1.1 million shares of BioSante common stock reserved for issuance upon the exercise of outstanding stock options granted under the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan and the BioSante Pharmaceuticals, Inc. Amended and Restated 2008 Stock Incentive Plan and an additional 1.0 million shares of BioSante common stock reserved for issuance pursuant to future grants under the BioSante Pharmaceuticals, Inc. Amended and Restated 2008 Stock Incentive Plan. As of December 31, 2012, BioSante had an aggregate of 4.7 million shares of BioSante common stock reserved for issuance upon the exercise of outstanding warrants. As of December 31, 2012, BioSante had an aggregate of 370,871 shares of BioSante common stock reserved for issuance upon the conversion of its outstanding convertible senior notes.

        As of December 31, 2012, BioSante had 65,211 shares of BioSante class C special stock outstanding. Each share of BioSante class C special stock entitles its holder to one vote per share. Each share of BioSante class C special stock is exchangeable, at the option of the holder, for one share of BioSante common stock, at an exchange price of $15.00 per share, subject to adjustment upon certain capitalization events. Holders of BioSante class C special stock are not entitled to receive dividends. Holders of BioSante class C special stock are not entitled to participate in the distribution of BioSante's assets upon any liquidation, dissolution or winding-up of BioSante. The holders of BioSante class C special stock have no cumulative voting, preemptive, subscription, redemption or sinking fund rights.

        As of the date of this joint proxy statement/prospectus, BioSante does not have any shares of preferred stock outstanding.


Common Stock

        For all matters submitted to a vote of BioSante stockholders, each holder of BioSante common stock is entitled to one vote for each share registered in the holder's name on BioSante's books. BioSante common stock does not have cumulative voting rights. The holders of a majority of the shares of BioSante common stock and BioSante class C special stock entitled to vote in any election of directors, voting together as a single class, can elect all of the directors standing for election, if they so choose. Subject to limitations under Delaware law and preferences that may be applicable to any then outstanding preferred stock, holders of BioSante common stock are entitled to receive ratably those dividends, if any, as may be declared by the BioSante board of directors out of legally available funds. Upon the liquidation, dissolution or winding up of BioSante, the holders of BioSante common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of BioSante's debts and other liabilities, subject to the prior rights of any preferred stock then outstanding. All shares of outstanding BioSante common stock are fully paid and nonassessable. Holders of BioSante common stock do not have preemptive or subscription rights, and

282


Table of Contents

they have no right to convert their BioSante common stock into any other securities. There are no redemption or sinking fund provisions applicable to the BioSante common stock. The rights, preferences and privileges of the holders of BioSante common stock are subject to the rights of the holders of any series of preferred stock which BioSante may designate in the future. BioSante's certificate of incorporation and bylaws do not restrict the ability of a holder of BioSante common stock to transfer the holder's shares of BioSante common stock.


Class C Special Stock

        Each share of BioSante class C special stock entitles its holder to one vote per share. Each share of BioSante class C special stock is exchangeable, at the option of the holder, for one share of BioSante common stock, at an exchange price of $15.00 per share, subject to adjustment upon certain capitalization events. Holders of BioSante class C special stock are not entitled to receive dividends. Holders of BioSante class C special stock are not entitled to participate in the distribution of BioSante's assets upon any liquidation, dissolution or winding-up of BioSante. There are six record holders of BioSante class C special stock and they have no cumulative voting, preemptive, subscription, redemption or sinking fund rights.


Preferred Stock

        The BioSante board of directors is authorized, without approval of BioSante stockholders subject to any limitations prescribed by law and imposed by the Listing Rules of The NASDAQ Global Market, to issue up to an aggregate of 10.0 million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences. The rights of the holders of BioSante common stock and BioSante class C special stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. The BioSante board of directors could authorize the issuance of shares of preferred stock with terms and conditions more favorable than the BioSante common stock or BioSante class C special stock and with rights that could adversely affect the voting power or other rights of holders of the BioSante common stock or BioSante class C special stock. Prior to issuance of shares of each series of undesignated preferred stock, the BioSante board of directors is required by the Delaware General Corporate Law and BioSante's certificate of incorporation to adopt resolutions and file a Certificate of Designations with the Secretary of State of the State of Delaware, fixing for each such series the designations, powers, preferences, rights, qualifications, limitations and restrictions of the shares of such series. Issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of BioSante. BioSante has no present plans to issue any shares of preferred stock.


Anti-Takeover Effects of Provisions of BioSante's Certificate of Incorporation and Bylaws and Delaware Law

        Some provisions of BioSante's certificate of incorporation and bylaws and Delaware law contain provisions that could make the following transactions more difficult: an acquisition of BioSante by means of a tender offer; an acquisition of BioSante by means of a proxy contest or otherwise; or removal of BioSante's incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that BioSante stockholders may otherwise consider to be in their best interest or in BioSante's best interests, including transactions that might result in a premium over the market price for BioSante's shares.

        These provisions, summarized below, are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions also are designed to encourage persons seeking to acquire

283


Table of Contents

control of BioSante to first negotiate with the BioSante board of directors. The BioSante board of directors believes that the benefits of increased protection of its potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure BioSante outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Certificate of Incorporation and Bylaws

        The following provisions in BioSante's certificate of incorporation and bylaws could delay or discourage transactions involving an actual or potential change in control or change in BioSante's management, including transactions that the BioSante stockholders may otherwise consider to be in their best interest or in BioSante's best interests, including transactions that might result in a premium over the market price for BioSante's shares.

Delaware Anti-Takeover Law

        As a Delaware corporation, BioSante is subject to Section 203 of the Delaware General Corporation Law. This law prohibits a publicly-held Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless:

284


Table of Contents

        Section 203 defines "business combination" to include:


Limitation of Liability and Indemnification

        BioSante's certificate of incorporation contains certain provisions permitted under the Delaware General Corporation Law relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in circumstances involving wrongful acts, such as the breach of a director's duty of loyalty or acts or omissions that involve intentional misconduct or a knowing violation of law.

        In addition, BioSante's certificate of incorporation contains provisions to indemnify BioSante's directors and officers to the fullest extent permitted by the Delaware General Corporation Law.


Listing of BioSante Common Stock

        BioSante common stock is listed on The NASDAQ Global Market under the symbol "BPAX." The combined company expects to have its shares of common stock listed on The NASDAQ Global Market or The NASDAQ Capital Market under the symbol "ANIP."


Transfer Agent and Registrar

        The transfer agent and registrar for BioSante common stock is Computershare Investor Services, LLC.

285


Table of Contents


COMPARISON OF RIGHTS OF HOLDERS OF BIOSANTE STOCK AND ANI STOCK

        Both BioSante and ANI are incorporated under the laws of the State of Delaware. Any differences, therefore, in the rights of BioSante stockholders and ANI stockholders arise primarily from differences in their respective certificates of incorporation and bylaws. Upon completion of the merger, the certificate of incorporation and bylaws of the combined company will be identical in all respects to BioSante's pre-merger certificate of incorporation, as amended to reflect the amendments described in this joint proxy statement/prospectus, which is referred to as the amended BioSante charter, and BioSante's bylaws, which are referred to as the BioSante bylaws. Consequently, after the effective time of the merger, the rights of the former ANI stockholders will be determined by reference to the amended BioSante charter and the BioSante bylaws. The following table compares the material differences between the current rights of ANI stockholders under ANI's certificate of incorporation and bylaws, which are referred to as the ANI charter and ANI bylaws, respectively, and the current rights of BioSante stockholders under BioSante's current certificate of incorporation, which is referred to as the BioSante charter, and BioSante bylaws, as well as the rights that those stockholders will have as stockholders of the combined company under the amended BioSante charter and BioSante bylaws following completion of the merger.

        BioSante has filed copies of the BioSante charter and the BioSante bylaws with the SEC and the proposed amendments to the BioSante charter are attached as annexes to this joint proxy statement/prospectus. In addition, copies of the BioSante charter, the amended BioSante charter, the BioSante bylaws, the ANI charter and the ANI bylaws will be sent to holders of BioSante common stock or ANI common stock upon request. See "Where You Can Find More Information." Because this summary does not provide a complete description of these documents, BioSante and ANI urge you to read each of their charters and bylaws as well as the amended BioSante charter in their entirety.

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS
Corporate Governance
 

Before the merger.    The rights of ANI stockholders currently are governed by Delaware law and the ANI charter and the ANI bylaws.

 

Before the merger.    The rights of BioSante stockholders currently are governed by Delaware law and the BioSante charter and the BioSante bylaws.

After the merger.    Upon completion of the merger, the rights of ANI stockholders who become BioSante stockholders in the merger will be governed by Delaware law, the amended BioSante charter and the BioSante bylaws.

 

After the merger.    Upon completion of the merger, the rights of BioSante stockholders will be governed by Delaware law, the amended BioSante charter and the BioSante bylaws.

286


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Authorized Capital
 

The authorized capital stock of ANI is 3,700,000 shares of common stock, $0.10 par value per share, and 108,494 shares of series A convertible preferred stock, $0.10 par value per share, 118,915 shares of series B convertible preferred stock, $0.10 par value per share, 37,956 shares of series C convertible preferred stock, $0.10 par value per share, and 3,400,000 shares of series D preferred stock, $0.10 par value per share.

 

The authorized capital stock of BioSante, including a description of the preferential rights of the undesignated preferred stock, is set forth under "Description of BioSante Capital Stock—Authorized and Outstanding Capital Stock."

The BioSante charter provides, and upon completion of the merger the amended BioSante charter will provide, that the rights of the holders of BioSante common stock and BioSante class C special stock are subject to the rights and preferences of the BioSante preferred stock as the same may be designated from time to time by the BioSante board of directors. See "Description of BioSante Capital Stock—Preferred Stock."

 
Dividends
 

Under Delaware law, except as set forth in the certificate of incorporation, a corporation is generally permitted to declare and pay dividends out of surplus (defined as the excess, if any, of net assets over capital) or, if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. However, the directors of a corporation may not pay any dividends out of net profits if the capital of the corporation has been reduced to an amount less than the aggregate amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets.

 

Under Delaware law, except as set forth in the certificate of incorporation, a corporation is generally permitted to declare and pay dividends out of surplus (defined as the excess, if any, of net assets over capital) or, if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. However, the directors of a corporation may not pay any dividends out of net profits if the capital of the corporation has been reduced to an amount less than the aggregate amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets.

287


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

The ANI charter provides for cumulative and accruing cash dividends to be paid as follows (i) to holders of ANI series D preferred stock at a rate of 10 percent of the stated per share value per annum in preference and priority to dividends paid to holders of other classes of ANI preferred stock or ANI common stock, (ii) to holders of ANI series C preferred stock at a rate of 12 percent of the stated per share value per annum in preference and priority to dividends paid to holders of ANI series B preferred stock, ANI series A preferred stock or common stock, (iii) to holders of ANI series B preferred stock at a rate of 10 percent of the stated per share value per annum in preference and priority to dividends paid to holders of ANI series A preferred stock or ANI common stock, and (iv) to holders of ANI series A preferred stock at a rate of 10 percent of the stated per share value per annum in preference and priority to dividends paid to holders of common stock. The holders of ANI series A preferred stock, ANI series B preferred stock and ANI series C preferred stock waived the right to any dividends accrued prior to January 28, 2011.

 

The BioSante bylaws provide the BioSante board of directors may declare that the holders of shares of BioSante capital stock are entitled to receive, out of the assets of BioSante which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock.

The BioSante charter provides, and the amended BioSante charter upon completion of the merger will provide, the holders of common stock shall be entitled to receive dividends if and when declared by the board of directors and that the holders of BioSante class C special stock shall not be entitled to receive any dividends.

Subject to the preferential rights of the preferred stock, the holders of common stock are entitled to receive, if and when declared by the board of directors, dividends out of the assets of the company payable in either cash, other property or shares of capital stock, equally among the holders of common stock on a pro rata basis.

 

 

288


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Rights on Liquidation
 

The ANI charter provides upon any liquidation, dissolution, or winding up of ANI, unless waived by a majority of the issued and outstanding preferred stock, that (i) before any amounts are paid to the holders of any other class of preferred stock or common stock, the holders of ANI series D preferred stock are entitled to receive an amount per share equal to $30.00 (subject to adjustment) plus all declared but unpaid dividends, (ii) before any amounts are paid to the holders of ANI series B preferred stock, ANI series A preferred stock or ANI common stock, the holders of ANI series C preferred stock are entitled to receive an amount per share equal to $110.00 (subject to adjustment) plus all declared but unpaid dividends, (iii) before any amounts are paid to the holders of ANI series A preferred stock or ANI common stock, the holders of ANI series B preferred stock are entitled to receive an amount per share equal to $110.00 (subject to adjustment) plus all declared but unpaid dividends, (iv) before any amounts are paid to the holders of common stock, the holders of ANI series A preferred stock are entitled to receive an amount per share equal to $100.00 (subject to adjustment) plus all declared but unpaid dividends and (v) after payments have been made to all holders of preferred stock, the remaining assets of ANI will be distributed ratably to the holders of ANI common stock and ANI series D preferred stock. If ANI's assets are insufficient to make payment in full to any class of preferred stock as set forth above, such assets should be distributed ratably in proportion to the preferential amount such holder of a class of preferred stock is otherwise entitled to receive.

 

The BioSante charter provides that upon a voluntary or involuntary liquidation, dissolution or winding up of BioSante, holders of common stock are entitled to receive all assets of BioSante available for distribution subject to any preferential liquidation right on any then outstanding preferred stock. The BioSante charter also sets forth that the BioSante board of directors may designate preferred stock and in connection with such designation fix liquidation rights.

289


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Conversion Rights
 

The ANI charter provides that each share of ANI preferred stock is convertible at the option of the holder into one share of ANI common stock, subject to adjustment for additional issuances or deemed issuances of ANI common stock. In addition, the ANI charter provides that each share of ANI preferred stock will be converted into ANI common stock at the then effective applicable conversion rate (i) upon the closing of a firmly underwritten public offering of ANI common stock by ANI which generates not less than $50,000,000 of gross proceeds and imputes a valuation of ANI of not less than $100,000,000, (ii) with respect to each series of ANI preferred stock, upon the vote of at least the applicable percentage of holders of the then outstanding shares of such series, which percentage is 60 percent for the ANI series A preferred stock, 50 percent for the ANI series B preferred stock, 55 percent for the ANI series C preferred stock and 65 percent for the ANI series D preferred stock or (iii) on the date that all shares of ANI series D preferred stock are mandatorily converted into ANI common stock.

 

The BioSante charter sets forth that the BioSante board of directors may designate preferred stock and in connection with such designation fix conversion rights.

290


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Voting Rights
 

Subject to the exceptions described below, the ANI charter provides that the preferred stock and common stock vote as a single class on an as converted to common stock basis.

The ANI charter provides that, for as long as 1,000,000 shares of ANI series D preferred stock remain outstanding, the following corporate actions require separate approval of at least 65 percent of the then outstanding shares ANI series D preferred stock: (i) issuance of new securities of any kind, (ii) amendments to the ANI charter or ANI bylaws that adversely affect the rights or privileges of the ANI series D preferred stock, (iii) any increase or decrease in the number of shares of authorized ANI preferred stock, (iv) stock repurchases in excess of $50,000, (v) declaration and/or payment of dividends, (vi) liquidation or dissolution, other than a change in control transaction, and (viii) a change in control transaction.

Any change in control transaction that is not approved by at least 65 percent of the ANI series D preferred stock must be approved by at least 50 percent of each of the ANI series C preferred stock, ANI series B preferred stock and ANI series A preferred stock, each voting as a separate class for so long as the requisite number of ANI series C preferred stock, ANI series B preferred stock and ANI series A preferred stock remain outstanding.

 

The BioSante common stock and BioSante class C special stock are the only outstanding classes of BioSante voting securities and will be the only outstanding classes of BioSante voting securities upon completion of the merger. Under Delaware law and the BioSante charter, and upon the completion of the merger, under the amended BioSante charter, each share of BioSante common stock and BioSante class C special stock will be entitled to one vote on all matters submitted to stockholders.

Generally, under Delaware law, the approval of any merger or consolidation or a sale of all or substantially all of a corporation's assets requires the affirmative vote of a majority of the total votes represented by the outstanding stock of the corporation entitled to vote on such matter.

Under Delaware law, the BioSante charter, and upon completion of the merger the amended BioSante charter, may be amended by the adoption of a resolution of the BioSante board of directors, followed by the vote of a majority of the outstanding voting power entitled to vote thereon and a majority of the outstanding stock of each class entitled to vote thereon as a separate class. The BioSante charter provides, and upon completion of the merger the amended BioSante charter will provide, that charter amendments may be made in accordance with the default positions of Delaware law.

291


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

The ANI charter provides that, for as long as 18,977.50 shares of ANI series C preferred stock remain outstanding, the holders of at least 55 percent of the then outstanding shares of ANI series C preferred stock must approve any amendment to the ANI charter or ANI bylaws that adversely affect the rights and privileges of the ANI series C preferred stock or any reclassification of the ANI common stock, ANI series A preferred stock or ANI series B preferred stock to be senior or equal to the ANI series C preferred stock . The ANI charter also provides the holders of ANI series C preferred stock the right to vote as a separate class on the following corporate actions, for so long as 18,977.50 shares of ANI series C preferred stock remain outstanding, if such actions were not approved by at least 65 percent of the then outstanding shares of ANI series D preferred stock : (i) the issuance of any new securities senior or equal to the ANI series C preferred stock, (ii) any increase or decrease in the number of shares of authorized ANI preferred stock, (iii) stock repurchases in excess of $50,000, (iv) declaration and/or payment of dividends, and (v) liquidation or dissolution, other than a change in control transaction.

 

 

The ANI charter provides that the holders of at least 50 percent of the then outstanding shares of ANI series B preferred stock must approve any amendment to the ANI charter or ANI bylaws that adversely affect the rights and privileges of the ANI series B preferred stock or any reclassification of the common stock or ANI series A preferred stock to be senior or equal to the ANI series B preferred stock. The ANI charter also provides the holders of ANI series B preferred stock the right to vote as a separate class on the following corporate actions, for so long as 40,381.30 shares of ANI series B preferred stock remain outstanding, if such actions were not approved by at least 65 percent of the then outstanding shares of ANI series D preferred stock: (i) the issuance of any new securities senior or equal to the ANI series B preferred stock, (ii) stock repurchases in excess of $50,000, (iii) declaration and/or payment of dividends, and (iv) liquidation or dissolution, other than a change in control transaction.

 

 

292


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

No ANI corporate action requires a separate class vote of the ANI common stock.

 

 

 
Number of Directors
 

The ANI bylaws provide that the number of directors will fixed, from time to time, as determined by action of the ANI board of directors or stockholders. The ANI board of directors currently consists of five directors.

 

The BioSante bylaws provide that the number of directors will not be less than one, as determined by action of the BioSante board of directors or BioSante stockholders at an annual or special meeting. The BioSante board of directors currently consists of seven directors.

 
Classification of Board of Directors
 

The ANI bylaws provide for one class of directors, meaning each director stands for election on an annual basis.

 

The BioSante bylaws provide for one class of directors, meaning each director stands for election on an annual basis.

 
Removal of Directors
 

The ANI bylaws provides that a director may be removed from office with or without cause upon the affirmative vote of the holders of at least a majority of the total voting power of the then outstanding shares of ANI capital stock entitled to vote.

 

The BioSante bylaws provides that a director may be removed from office with or without cause upon the affirmative vote of the holders of at least a majority of the total voting power of the then outstanding shares of BioSante capital stock entitled to vote.

 
Vacancies on the Board of Directors
 

The ANI bylaws provide that vacancies occurring on the board of directors may be filled by the vote of a majority of the ANI stockholders. Any director chosen in accordance with the preceding sentence will hold office until his or her successor has been elected and qualified.

The ANI stockholders' agreement provides that the ANI board shall consist of two directors designated by Meridian Venture Partners II, L.P., one director designated by First Analysis Corporation, one director designated by Healthcare Value Master Fund Ltd. and ANI's chief executive officer.

 

The BioSante bylaws provide that a vacancy occurring on the board of may be filled by the affirmative vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. Any director chosen in accordance with the preceding sentence will hold office until the next election of directors or until such director's successor has been duly elected and qualified, or until such director's earlier resignation or removal.

 
Board Quorum
 

The ANI bylaws provide that a majority of the entire ANI board of directors will constitute a quorum for the transaction of business, but if at any meeting of the ANI board of directors there is less than a quorum present, the majority of those present may adjourn the meeting from time to time, until a quorum is present.

 

The BioSante bylaws provide that a majority of the authorized number of directors will constitute a quorum for the transaction of business, but if at any meeting of the BioSante board of directors there is less than a quorum present, the majority of those present may adjourn the meeting from time to time, until a quorum is present.

293


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Stockholder Quorum
 

The ANI bylaws provide that the presence in person or by proxy at a meeting of the holders of shares representing a majority of the voting power of the issued and outstanding stock entitled to vote thereat constitutes a quorum. In the absence of a quorum, the stockholders so present or represented by proxy may vote to adjourn the meeting from time to time until a quorum is present.

 

The BioSante bylaws provide that the presence in person or by proxy at a meeting of the holders of shares representing one-third of the capital stock issued and outstanding and entitled to vote thereat constitutes a quorum. In the absence of a quorum, the chairman of the board or the stockholders so present may adjourn the meeting from time to time until a quorum is present.

 
Stockholder Action by Written Consent
 

The ANI bylaws provide that any action required or permitted to be taken at a meeting of ANI stockholders may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by the holders of outstanding stock having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

The BioSante bylaws provide that any action required or permitted to be taken at a meeting of BioSante stockholders may be taken without a meeting, without prior notice and without a vote, if the holders of outstanding stock having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting entitled to vote thereon were present and voted.

 
Special Meetings of Stockholders
 

Under Delaware law, a special meeting of ANI stockholders may be called by the ANI board of directors or by any other person authorized to do so in the ANI charter or bylaws and the written notice of the special meeting must set forth the purpose or purposes for which the meeting is called. The ANI bylaws provide that special meetings of ANI stockholders may be called by the ANI board of directors or chairman of the board of directors.

 

Under Delaware law, a special meeting of BioSante stockholders may be called by the BioSante board of directors or by any other person authorized to do so in the BioSante charter or bylaws and the written notice of the special meeting must set forth the purpose or purposes for which the meeting is called. The BioSante bylaws provide that special meetings of stockholders may be called by the chairman of the board, the president and chief executive officer, the chief financial officer, or the BioSante board of directors. The business to be transacted at a special meeting of BioSante stockholders must be limited to the purposes stated in the notice of meeting.

294


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Stockholder Proposals
 

The ANI bylaws provide that the order of business at all meetings of the stockholders will be determined by the chairman of the meeting.

 

The BioSante bylaws provide that a BioSante stockholder wishing to bring business before the annual BioSante stockholders' meeting must provide timely written notice to BioSante's corporate secretary. To be timely, the notice must delivered to or mailed and received by BioSante not less than 90 days nor more than 120 days before the one year anniversary of the date on which BioSante first mailed its proxy statement to BioSante stockholders in connection with the previous year's annual meeting. However, if the date of the annual meeting has changed by more than 30 days from the anniversary date of the prior year's meeting, notice by the BioSante stockholder to be timely must be received not later than the 10th day following the date on which the first public announcement of the date of the annual meeting was made.

 

 

A BioSante stockholder's notice to BioSante regarding the proposal of business to be brought before an annual meeting must contain certain required information as described in the BioSante bylaws, including, among other things:

 

a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting;

 

a description of any material interest of the BioSante stockholder in such business;

 

the name and address of the BioSante stockholder making the proposal;

 

the class and number of shares owned beneficially or of record by such BioSante stockholder; and

 

a representation that the BioSante stockholder intends to appear in person or by proxy at the meeting to bring the proposed business before the meeting.

295


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Stockholder Nominations
 

The ANI charter or bylaws do not provide guidelines for the submission of stockholder nominations and proposals by ANI stockholders.

 

The BioSante bylaws provide that BioSante stockholders wishing to nominate candidates for election to the BioSante board of directors at an annual meeting must give proper and timely written notice to BioSante's corporate secretary. To be timely, the notice must be delivered to or mailed and received by BioSante within the timeframe described under "Stockholder Proposals" above with respect to the submission of BioSante stockholder proposals.

 

 

A BioSante stockholder's notice to BioSante regarding director nominations must contain certain required information as described in the BioSante bylaws, including, among other things:

 

the name, age, business address and residence address of the nominee;

 

the principal occupation or employment of the nominee;

 

the class and number of shares of capital stock of BioSante owned beneficially or of record by the nominee;

 

any other information concerning the nominee that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of such nominee; and

 

as to the stockholder giving the notice, the name and record address of the stockholder, the class and number of shares of BioSante which are owned beneficially or of record by such BioSante stockholder, a description of all arrangements between such stockholder and the nominee, and a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person named in its notice.


 
Amendment of Bylaws
 

The ANI bylaws may be amended or repealed or new bylaws may be adopted by the ANI stockholders at any annual or special meeting or, if the certificate of incorporation so provides, by the board of directors. Any bylaw made by the board of directors may be amended or repealed by the stockholders at any annual or special meeting of stockholders.

 

The BioSante bylaws may be rescinded, altered, amended or repealed by BioSante board of directors, but BioSante stockholders may rescind, alter, amend or repeal any bylaws made by the board of directors, and may enact bylaws.

296


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Limitation of Liability
 
The ANI charter provides that no director will be personally liable to the corporation or ANI stockholders for monetary damages for breaches of fiduciary duty as a director, except for a director's acts or omissions that:

were in breach of the director's duty of loyalty to the corporation or ANI stockholders;

were not in good faith or involved intentional misconduct or a knowing violation of the law;

resulted in a violation of section 174 of the Delaware General Corporation Law for unlawful payment of a dividend or unlawful stock purchases or redemptions; or

involved transactions from which the director derived an improper personal benefit.

  The BioSante charter provides, and the amended BioSante charter upon completion of the merger will provide, that no director will be personally liable to the corporation or BioSante stockholders for monetary damages for breach of fiduciary duty as a director, except for a director's acts or omissions that:

were in breach of the director's duty of loyalty to the corporation or BioSante stockholders;

were not in good faith or involved intentional misconduct or a knowing violation of the law;

resulted in a violation of section 174 of the Delaware General Corporation Law for unlawful payment of a dividend or unlawful stock purchases or redemptions; or

involved transactions from which the director derived an improper personal benefit.


 

 

The BioSante charter further provides, and the amended BioSante charter upon completion of the merger will provide, that if Delaware law is amended to authorize corporations to further eliminate or limit the liability of a director, then the liability of a director will be eliminated or limited to the fullest extent permitted by Delaware law, as amended.

 
Indemnification
 

The ANI charter and bylaws collectively provide that the corporation will indemnify its directors, officers, employees or agents for any proceedings in which they are involved by reason of the fact that they are or were a director or officer of corporation to the fullest extent permitted by Delaware law.

In addition, the ANI bylaws provide that ANI may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any expense, liability or loss incurred by such person in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under the bylaws.

 

The BioSante charter provides, and the amended BioSante charter upon completion of the merger will provide, that the corporation will indemnify its directors and officers, or any person serving at the request of BioSante as a director, officer, employee or agent of any other company or enterprise for any proceedings in which they are involved by reason of the fact that they are or were a director or officer of corporation to the fullest extent permitted by Delaware law.

As described above under "The Merger Agreement—Certain Covenants," BioSante has agreed to provide, for a period of six years after the effective date of the merger, officers' and directors' liability insurance covering acts or omissions occurring before the effective time of the merger by each officer or director of BioSante or its subsidiaries covered by BioSante's current officers' and directors' liability insurance policy.

297


Table of Contents

ANI STOCKHOLDER RIGHTS   BIOSANTE STOCKHOLDER RIGHTS

Certain Business Combinations / Anti-takeover Provisions
 

Under Delaware law, a privately held corporation is not subject to section 203 of the DGCL, which generally protects publicly held Delaware corporations from unfair transactions and tactics by persons who acquire large blocks of stock without prior board approval, unless its certificate of incorporation otherwise provides. ANI has not made this election and is therefore not subject to the restrictions of section 203 of the DGCL.

 

Under Delaware law, a corporation can elect not to be governed by section 203 of the DGCL, which generally protects publicly held Delaware corporations from unfair transactions and tactics by persons who acquire large blocks of stock without prior board approval. BioSante has not made this election and is therefore subject to the restrictions of section 203 of the DGCL.
    In general, section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested" stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination or the transaction by which the person became an interested stockholder is approved in a prescribed manner. A "business combination" includes certain mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to exceptions, an "interested" stockholder is a person who, alone or together with his affiliates and associates, owns 15 percent or more of the corporation's voting stock. These provisions could have the effect of delaying, deferring or preventing a change in control of BioSante or reducing the price that certain investors might be willing to pay in the future for BioSante common stock.

298


Table of Contents


LEGAL MATTERS

        The validity of the shares of BioSante common stock offered by this joint proxy statement/prospectus has been passed upon for BioSante by Oppenheimer Wolff & Donnelly LLP. The material U.S. federal income tax consequences of the merger have been passed upon for BioSante by Oppenheimer Wolff & Donnelly LLP and for ANI by SNR Denton US LLP.


EXPERTS

        The financial statements of BioSante Pharmaceuticals, Inc. as of December 31, 2011 and 2010, and for each of the three years in the period ended December 31, 2011, included in the joint proxy statement/prospectus, which is part of this registration statement, and the effectiveness of BioSante Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2011, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein. Such financial statements have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

        The financial statements of ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. at December 31, 2011 and 2010, and for each of the two years in the period ended December 31, 2011 included in this registration statement of BioSante and the related joint proxy statement/prospectus of BioSante and ANI have been audited by Stout, Causey & Horning, P.A., independent registered public accounting firm, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.


FUTURE BIOSANTE STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

BioSante Stockholder Proposals

        Stockholder proposals intended to be presented in BioSante's proxy materials relating to its next annual meeting of stockholders must have been received by BioSante on or before December 12, 2012, unless the date of the meeting is delayed by more than 30 calendar days, and must satisfy the requirements of the proxy rules promulgated by the SEC.

        Any other stockholder proposals to be presented at BioSante's next annual meeting of stockholders must be given in writing to BioSante's Corporate Secretary and received at BioSante's principal executive offices not later than January 10, 2013 nor earlier than December 11, 2012. The proposal must contain specific information required by BioSante's bylaws, a copy of which may be obtained by writing to BioSante's Corporate Secretary or accessing the SEC's EDGAR filing database at www.sec.gov. If a proposal is not timely and properly made in accordance with the procedures set forth in BioSante's bylaws, it will be defective and may not be brought before the meeting. If the proposal nonetheless is brought before the meeting and the Chair of the meeting does not exercise the power and duty to declare the proposal defective, the persons named in the proxy may use their discretionary voting with respect to the proposal.


BioSante Director Nominations

        In accordance with procedures set forth in BioSante's bylaws, BioSante stockholders may propose nominees for election to the BioSante board of directors only after providing timely written notice to BioSante's Corporate Secretary. To be timely, a BioSante stockholder's notice to BioSante's Corporate Secretary must have been delivered to or mailed and received at BioSante's principal executive offices on or before January 7, 2013 but not earlier than December 8, 2012; provided, however, that in the event that the annual meeting of stockholders is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders, notice by the BioSante stockholder in order to be timely must be so received not later than the close of business on

299


Table of Contents

the 10th day following the day on which such notice of the date of the annual meeting of stockholders was mailed or such public disclosure of the date of the annual meeting of stockholders was made, whichever first occurs.

        The notice must set forth, among other things:

        Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be considered. The Nominating and Corporate Governance Committee will consider only those stockholder recommendations whose submissions comply with these procedural requirements. The Nominating and Corporate Governance Committee will evaluate candidates recommended by stockholders in the same manner as those recommended by others.


WHERE YOU CAN FIND MORE INFORMATION

        BioSante is a public company and files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document BioSante files at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. BioSante's SEC filings are also available to the public at the SEC's web site at http://www.sec.gov.

        BioSante's common stock is listed on The NASDAQ Global Market. Reports and other information concerning BioSante also may be inspected at the offices of the NASDAQ OMX Group, Inc., 9600 Blackwell Road, Rockville, MD 20850 or on the NASDAQ OMX Group, Inc. website at http://www.nasdaq.com.

        BioSante also files annual audited and interim unaudited financial statements, proxy statements and other information with the Ontario, Alberta and British Columbia Securities Commissions. Copies of these documents that are filed through the System for Electronic Document Analysis and Retrieval "SEDAR" of the Canadian Securities Administrators are available at its web site http://www.sedar.com.

        In addition, BioSante maintains a website that contains information, including copies of reports, proxy statements and other information it files with the SEC. The address of BioSante's website is www.biosantepharma.com. Information contained on BioSante's website or that can be accessed through BioSante's website does not constitute a part of this joint prospectus/prospectus. BioSante has included its website addresses only as inactive textual references and does not intend it to be an active link to its website.

        BioSante has filed a registration statement on Form S-4 with the SEC for the common stock offered under this joint proxy statement/prospectus. This joint proxy statement/prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information that is not contained in this joint proxy statement/prospectus. Whenever BioSante makes reference in this joint proxy statement/prospectus to

300


Table of Contents

any of its contracts, agreements or other documents, you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. You may:

        You should rely only on the information contained in this joint proxy statement/prospectus to vote your shares at the special meetings. Neither BioSante nor ANI has authorized anyone to provide you with information that differs from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated January 22, 2013. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date, and neither the mailing of this joint proxy statement/prospectus to stockholders nor the issuance of shares of BioSante common stock in the merger shall create any implication to the contrary.

301


Table of Contents


INDEX TO BIOSANTE'S FINANCIAL STATEMENTS

BIOSANTE FINANCIAL STATEMENTS

       

Reports of Independent Registered Public Accounting Firm

   
F-2 - F-3
 

Balance Sheets as of December 31, 2011 and 2010

    F-4  

Statements of Operations for the years ended December 31, 2011, 2010 and 2009

    F-5  

Statements of Stockholders' Equity for the years ended December 31, 2011, 2010 and 2009

    F-6  

Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009

    F-7  

Notes to the Financial Statements for the years ended December 31, 2011, 2010 and 2009

    F-8 - F-31  

BIOSANTE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

       

Condensed Balance Sheet as of September 30, 2012

   
F-32
 

Condensed Statements of Operations for the nine months ended September 30, 2012 and 2011

    F-33  

Condensed Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

    F-34  

Notes to the Condensed Financial Statements

    F-35 - F-46  

F-1


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
BioSante Pharmaceuticals, Inc.
Lincolnshire, Illinois

        We have audited the internal control over financial reporting of BioSante Pharmaceuticals, Inc. (the "Company") as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2011 of the Company and our report dated March 13, 2012 (December 11, 2012 as to the effects of the reverse stock split described in Note 2) expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

Chicago, Illinois
March 13, 2012

F-2


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
BioSante Pharmaceuticals, Inc.
Lincolnshire, Illinois

        We have audited the accompanying balance sheets of BioSante Pharmaceuticals, Inc. (the "Company") as of December 31, 2011 and 2010, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such financial statements present fairly, in all material respects, the financial position of BioSante Pharmaceuticals, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Chicago, Illinois
March 13, 2012 (December 11, 2012 as to the effects of the reverse stock split described in Note 2)

F-3


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Balance Sheets

December 31, 2011 and 2010

 
  December 31,
2011
  December 31,
2010
 

ASSETS

             

CURRENT ASSETS

             

Cash and cash equivalents

  $ 57,225,234   $ 38,155,251  

Prepaid expenses and other assets

    801,147     2,469,879  
           

    58,026,381     40,625,130  

PROPERTY AND EQUIPMENT, NET

    861,364     635,776  
           

OTHER ASSETS

             

Investments

    3,405,807     3,405,807  

Deposits

    86,203     99,937  
           

  $ 62,379,755   $ 44,766,650  
           

LIABILITIES AND STOCKHOLDERS' EQUITY

             

CURRENT LIABILITIES

             

Accounts payable

  $ 3,150,677   $ 4,864,217  

Accrued compensation

    1,597,329     526,022  

Other accrued expenses

    2,479,697     1,681,956  

Current portion of Convertible Senior Notes

        1,111,132  
           

    7,227,703     8,183,327  

Long-term Convertible Senior Notes

    17,336,760     17,436,201  
           

TOTAL LIABILITIES

    24,564,463     25,619,528  
           

STOCKHOLDERS' EQUITY

             

Capital stock

             

Issued and outstanding

             

2011—65,214; 2010—65,214 Class C special stock

    391     391  

2011—18,269,754; 2010—13,565,188 Common stock

    224,387,346     154,110,672  
           

    224,387,737     154,111,063  

Accumulated deficit

    (217,239,148 )   (165,630,644 )
           

    7,148,589     (11,519,581 )
           

  $ 31,713,052   $ 14,099,947  
           

   

See accompanying notes to the financial statements.

F-4


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Statements of Operations

Years ended December 31, 2011, 2010 and 2009

 
  Year Ended December 31,  
 
  2011   2010   2009  

REVENUE

                   

Licensing revenue

  $ 100,000   $ 115,807   $  

Grant revenue

        51,870     116,389  

Royalty revenue

    335,160     2,306,560     1,141,665  
               

    435,160     2,474,237     1,258,054  
               

EXPENSES

                   

Research and development

    44,182,260     39,705,502     13,680,573  

General and administration

    6,981,490     5,940,360     5,373,945  

Acquired in-process research and development

            9,000,000  

Excess consideration paid over fair value

            20,192,194  

Licensing expense

    50,000     268,750     299,616  

Depreciation and amortization

    148,240     167,986     137,280  
               

    51,361,990     46,082,598     48,683,608  
               

OTHER

                   

Convertible note fair value adjustment

    (23,427 )   (1,870,916 )   33,163  

Investment impairment charge

        (286,000 )    

Interest expense

    (681,573 )   (688,083 )   (147,025 )

Other income

    15,000     244,479      

Interest income

    8,326     12,665     11,648  
               

NET LOSS

  $ (51,608,504 ) $ (46,196,216 ) $ (47,527,768 )
               

Loss per common share:

                   

Basic

  $ (3.15 ) $ (4.21 ) $ (8.40 )

Diluted

  $ (3.15 ) $ (4.21 ) $ (8.40 )
               

Weighted average number of common and common equivalent shares outstanding:

                   

Basic

    16,397,618     10,985,291     5,658,608  

Diluted

    16,397,618     10,985,291     5,658,608  
               

   

See accompanying notes to the financial statements.

F-5


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Statements of Stockholders' Equity

Years ended December 31, 2011, 2010 and 2009

 
  Class C
Special Shares
   
   
   
   
 
 
  Common Stock    
   
 
 
  Accumulated
Deficit
   
 
 
  Shares   Amount   Shares   Amount   Total  

Balance, January 1, 2009

    65,214   $ 391     4,507,127   $ 85,732,688   $ (71,906,660 ) $ 13,826,419  
                           

Issuance of common shares

                                     

Stock option expense

                1,254,503         1,254,503  

Stock warrant expense

                64,103         64,103  

Registered direct offering of common shares and warrants, net

            1,000,000     11,352,751         11,352,751  

Issuance of common shares pursuant to Cell Genesys, Inc. transaction

            3,369,967     6,133,340         6,133,340  

Credit equity financing facility

                60,343         60,343  

Net loss

                    (47,527,768 )   (47,527,768 )
                           

Balance, December 31, 2009

    65,214   $ 391     8,877,094   $ 104,597,728   $ (119,434,428 ) $ (14,836,309 )
                           

Issuance of common shares

                                     

Stock option exercise

            222     2,014         2,014  

Stock option expense

                992,757         992,757  

Stock warrant expense

                65,529         65,529  

Registered direct offerings of common shares and warrants, net

            4,687,871     48,452,644         48,452,644  

June 1, 2012 Fractional Share Adjustment

            1              

Net loss

                    (46,196,216 )   (46,196,216 )
                           

Balance, December 31, 2010

    65,214   $ 391     13,565,188   $ 154,110,672   $ (165,630,644 ) $ (11,519,581 )
                           

Issuance of common shares

                                     

Stock option exercise

            3,194     32,442         32,442  

Warrant exercises—various

            1,458     24,062         24,062  

Stock option expense

                1,177,683         1,177,683  

Stock warrant expense

                204,980         204,980  

Underwritten offering of common shares, net

            2,666,666     44,961,137         44,961,137  

Registered direct offering of common shares and warrants, net

            2,033,247     23,876,370         23,876,370  

June 1, 2012 Fractional Share Adjustment

            1              

Net loss

                    (51,608,504 )   (51,608,504 )
                           

Balance, December 31, 2011

    65,214   $ 391     18,269,754   $ 224,387,346   $ (217,239,148 ) $ 7,148,589  
                           

   

See accompanying notes to the financial statements.

F-6


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Statements of Cash Flows

Years ended December 31, 2011, 2010 and 2009

 
  Year Ended December 31,  
 
  2011   2010   2009  

CASH FLOWS (USED IN) OPERATING ACTIVITIES

                   

Net loss

  $ (51,608,504 ) $ (46,196,216 ) $ (47,527,768 )

Adjustments to reconcile net loss to net cash (used in) operating activities

                   

Acquired in-process research and development

            9,000,000  

Excess consideration paid over fair value

            20,192,194  

Depreciation and amortization

    148,240     167,986     137,280  

Employee and director stock-based compensation

    1,177,683     992,757     1,254,503  

Stock warrant expense—noncash

    204,980     65,529     64,103  

Loss on disposal of equipment

    367,502     4,583      

Investment impairment charge

        286,000      

Other non-cash items

        (65,807 )   60,739  

Convertible note fair value adjustment

    23,427     1,870,916     (33,163 )

Changes in assets and liabilities affecting cash flows from operations

                   

Prepaid expenses and other assets

    1,682,466     (365,332 )   (30,263 )

Accounts payable and accrued liabilities

    134,103     3,142,078     (1,548,535 )
               

Net cash used in operating activities

    (47,870,103 )   (40,097,506 )   (18,430,910 )
               

CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES

                   

Redemption of short term investments

            3,026,334  

Proceeds from sale of fixed assets

        3,075      

Purchase of fixed assets

    (719,925 )   (63,441 )   (165,724 )
               

Net cash (used in) provided by investing activities

    (719,925 )   (60,366 )   2,860,610  
               

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

                   

Cash paid for transaction related costs

            (2,431,252 )

Cash received in transaction

            24,746,346  

Cash paid for convertible note repayment

    (1,234,000 )        

Proceeds from common stock option exercises

    32,442     2,014      

Proceeds from common stock warrant exercises

    24,062          

Proceeds from issuance of common stock by underwritten offering

    44,961,137          

Proceeds from issuance of common stock by registered direct offering

    23,876,370     48,452,644     11,352,751  
               

Net cash provided by financing activities

    67,660,011     48,454,658     33,667,845  
               

NET INCREASE IN CASH AND CASH EQUIVALENTS

    19,069,983     8,296,786     18,097,545  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    38,155,251     29,858,465     11,760,920  
               

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 57,225,234   $ 38,155,251   $ 29,858,465  
               

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION

                   

Interest paid, including acquired accrued interest

  $ 688,000   $ 688,000   $ 248,388  

Noncash Investing and Financing Activities:

                   

Investment—non-cash

  $   $ 65,807   $  

Liabilities acquired through Cell Genesys transaction

  $   $   $ 18,487,298  

Shares issued for Cell Genesys transaction

  $   $   $ 36,800,043  

Investment aquired through Cell Genesys transaction

  $   $   $ 3,486,000  

Other assets acquired in Cell Genesys transaction

  $   $   $ 293,658  

Purchase of fixed assets on account, non-cash investing activity

  $ 21,405   $   $  
               

   

See accompanying notes to the financial statements.

F-7


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements

December 31, 2011

1. DESCRIPTION OF BUSINESS

        BioSante Pharmaceuticals, Inc. (the Company) is a specialty pharmaceutical company focused on developing products for female sexual health and oncology. The Company's products, either approved or in human clinical development, include: (1) LibiGel, once daily transdermal testosterone gel in Phase III clinical development for the treatment of female sexual dysfunction (FSD), specifically hypoactive sexual desire disorder (HSDD); (2) a once daily transdermal testosterone gel approved by the U.S. Food and Drug Administration (FDA) indicated for the treatment of hypogonadism, or testosterone deficiency in men, and licensed to Teva Pharmaceuticals USA, Inc. (Teva); (3) GVAX cancer vaccines, a portfolio of cancer vaccines, four of which have been granted FDA orphan drug designation, and are currently in 17 Phase I and Phase II clinical trials for the treatment of various cancers; (4) The Pill-Plus (triple component contraceptive), once daily use of various combinations of estrogens, progestogens and androgens in Phase II development; and (5) Elestrin, once daily transdermal estradiol (estrogen) gel approved by the FDA indicated for the treatment of moderate-to-severe vasomotor symptoms (hot flashes) associated with menopause and marketed in the U.S. by Jazz Pharmaceuticals, Inc. (Jazz Pharmaceuticals), our licensee.

        The Company's lead product in development has been LibiGel for the treatment of FSD, specifically HSDD, in postmenopausal women, for which there is no FDA-approved pharmaceutical product. The Company continues to analyze the data from the two pivotal LibiGel Phase III efficacy trials first reported on December 14, 2011. Initial analysis of the efficacy data from these trials shows that the trials did not meet the co-primary or secondary endpoints. Although there were no statistical differences from placebo, results indicated that LibiGel performed as predicted based on previous experience with testosterone products for FSD. However, the placebo response in the two efficacy trials was overwhelming and unpredictable; and therefore, LibiGel's results were not shown to be statistically different from placebo. The LibiGel Phase III safety study, which completed enrollment in June 2011, continues and will continue during further analysis of the LibiGel efficacy data and until a final strategic decision has been made. It is the Company's objective to meet with the FDA to determine the best path forward, and to make a decision during the second quarter of 2012 whether to continue the LibiGel Phase III safety study.

        The Company's corporate strategy always has included product development of high value medically-needed pharmaceutical products. In light of recently announced top-line results from the Company's two pivotal LibiGel Phase III efficacy trials, the Company is assessing its corporate strategy. The Company is determining LibiGel's path forward and potential alternative strategies to utilize the continuing LibiGel Phase III cardiovascular events and breast cancer safety study. The Company also has expanded its efforts to explore new product development projects through in-licensing and mergers and acquisitions. In addition, a full review of the Company's GVAX cancer vaccine portfolio is underway.

        On January 31, 2012, the Company received a notice from the Listing Qualifications Department of The NASDAQ Stock Market indicating that, for the last 30 consecutive business days, the bid price for the Company's common stock had closed below the minimum $1.00 per share required for continued inclusion on The NASDAQ Global Market under NASDAQ Listing Rule 5450(a)(1). The notification letter stated that pursuant to NASDAQ Listing Rule 5810(c)(3)(A), the Company will be afforded 180 calendar days, or until July 30, 2012, to regain compliance with the minimum bid price requirement. In order to regain compliance, shares of the Company's common stock must maintain a

F-8


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

1. DESCRIPTION OF BUSINESS (Continued)

minimum bid closing price of at least $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance by July 30, 2012, the Company may transfer its common stock listing to The NASDAQ Capital Market and be eligible for an additional 180-day grace period if the Company meets the market value of publicly held shares requirement for continued listing and all other initial inclusion requirements for listing on The NASDAQ Capital Market, other than the minimum bid price requirement. In order to be afforded the additional 180-day compliance period, the Company also would need to provide NASDAQ written notice of its intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not indicate its intent to cure the deficiency or if it does not appear to NASDAQ that it is possible for the Company to cure the deficiency, the Company will not be eligible for the second 180-day grace period and its common stock will be subject to delisting, which delisting determination the Company may appeal to a hearings panel at that time.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        These financial statements are expressed in U.S. dollars. The Company is organized into one operating and one reporting segment.

        The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company does not have items of other comprehensive income for years ended December 31, 2011, 2010 or 2009; and therefore, has not presented comprehensive income.

        On June 1, 2012, the Company effected a one-for-six reverse split of its outstanding common stock and class C special stock. All share and per share numbers have been adjusted retroactively to reflect the one-for-six reverse stock split effected on June 1, 2012.

        On October 14, 2009, the Company acquired 100 percent of the common stock of Cell Genesys, Inc. (Cell Genesys) in a direct merger transaction, with the Company being the surviving corporation. The primary reason the Company merged with Cell Genesys was the Company's need for additional funding to continue its Phase III clinical studies for LibiGel and the lack of other available acceptable alternatives for the Company to access capital prior to and at the time the merger agreement was entered into by the parties in June 2009, especially in light of the then state of the markets for equity offerings, which historically had been the Company's primary method for raising additional financing. Effective October 14, 2009, the balance sheet and net loss of the Company reflect the purchase price allocation and charges resulting from the purchase price allocation related to the merger, which included adjustments to carrying values of the acquired net assets based on their estimated fair values as of that date.

F-9


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Certain amounts in the 2010 and 2009 financial statements have been reclassified to conform to their presentation in the 2011 financial statements. Specifically, in the statement of cash flows, the changes related to Accounts receivable in the amounts of $64,645 and $285,838 for the years ended December 31, 2010 and 2009, respectively, have been combined into the Prepaid expenses and other assets line item within the net cash used in operating activities section.

        The Company generally considers all instruments with original maturities of three months or less to be cash equivalents. Interest income on invested cash balances is recognized on the accrual basis as earned.

        As of December 31, 2011, all of the Company's cash and cash equivalents resided in a 100 percent FDIC-insured non-interest bearing checking account, a U.S. Treasury money market fund or a certificate of deposit. As of December 31, 2010, all of the Company's cash and cash equivalents resided in a 100 percent FDIC-insured non-interest bearing checking account in order to ensure maximum safety of principal.

        The carrying value of certain of the Company's financial instruments, including cash equivalents, accounts receivable and accounts payable, approximate fair value due to their short maturities. Other information about the Company's assets and liabilities recorded at fair value is included in Note 14, "Fair Value Measurements."

        Property and equipment that currently is being used in the Company's operations is stated at cost less accumulated depreciation and amortization. Depreciation is computed primarily on a straight line basis over the estimated useful lives of the respective assets, typically five and seven years for software and computer equipment and 10 years for non-computer equipment.

        Long-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets may not be recoverable. If such a review indicates an impairment, the carrying amount of such assets is reduced to estimated recoverable value.

        The Company assumed two series of 3.125% convertible senior note obligations with an aggregate principal balance of $22,016,000, which contain certain redemption, repurchase and conversion adjustment features as a result of its transaction with Cell Genesys. The Company made an irrevocable election to account for these convertible senior notes at fair value commencing from the date of the merger, resulting in recognition of a single liability for the convertible senior notes which are reported

F-10


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

at fair value at each reporting date. Subsequent changes in the carrying value of the convertible senior notes are reflected in fair value adjustment in the accompanying statements of operations.

        Research and development costs are charged to expense as incurred. Direct government grants are recorded as an offset to the related research and development costs when the Company has complied with the conditions attached to the grant and there is reasonable assurance that the funds will be received.

        For ongoing matters, legal costs are charged to expense as incurred.

        The basic and diluted net loss per share is computed based on the weighted average number of the shares of common stock and class C special stock outstanding, all being considered as equivalent of one another. Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares outstanding for the reporting period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The computation of diluted loss per share does not include the Company's stock options, warrants or convertible debt as such securities have an antidilutive effect on loss per share.

        The Company recognizes stock-based compensation expense granted to employees generally on a straight-line basis over the estimated service period of the award, or when certain performance-based vesting provisions occur, for awards that contain these features. The Company also has granted options to non-employees in exchange for services. Expense related to such grants is recognized within the Company's statements of operations in accordance with the nature of the service received by the Company.

        Warrants issued to non-employees as compensation for services rendered are valued at their fair value on the date of issue and are re-measured until the counterparty's performance under the arrangement is complete.

        The Company has entered into various licensing agreements that have generated license revenue or other upfront fees and which also may involve subsequent milestone payments earned upon completion of development milestones by the Company or upon the occurrence of certain regulatory actions, such as the filing of a regulatory application or the receipt of a regulatory approval. Non-refundable license fees are recognized as revenue when the Company has a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the

F-11


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

license agreement. Non-refundable license fees that meet these criteria and are due to the Company upon execution of an agreement are recognized as revenue immediately.

        Milestones, in the form of additional license fees, typically represent non-refundable payments to be received in conjunction with the achievement of a specific event identified in the contract, such as completion of specified clinical development activities and/or regulatory submissions and/or approvals, or as sales-based milestone payments. Revenues from milestone payments that meet the criteria in the preceding paragraph are recognized when the milestone is achieved.

        Additionally, royalty revenue based upon sales of products under license is recorded when such royalties are earned and are deemed collectible, which is generally in the quarter when the related products are sold.

        Deferred tax assets or liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities, as measured by enacted tax rates. A valuation allowance is provided against deferred income tax assets in circumstances where management believes the recoverability of a portion of the assets is not more likely than not. The Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2011 and 2010.

        The investments balance of $3,405,807 as of December 31, 2011 and 2010 consists of the Company's investments that are recorded using the cost method, and substantially represents the Company's investment in Ceregene, Inc., a privately held biotechnology company (Ceregene). As a result of the Company's merger with Cell Genesys, the Company acquired a minority investment in Ceregene. The Company has recorded its investment using the cost method, as no active market exists for this investment, and the Company does not possess significant influence over operating and financial policies of Ceregene, although the Company by virtue of its stock ownership of Ceregene has the right to designate one member on the Ceregene board of directors. During 2010, the Company recorded a $286,000 impairment on this investment. Such impairment was based on a third-party investment in Ceregene in 2010.

        The valuation of investments accounted for under the cost method is based on all available financial information related to the investee, including valuations based on recent third party equity investments in the investee. If an unrealized loss on any investment is considered to be other-than-temporary, the loss is recognized in the period the determination is made. All investments are reviewed for changes in circumstances or occurrence of events that suggest the investment may not be recoverable. The fair value of the cost method investments are not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments and it is not practicable to estimate the fair value of the investments.

        In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure

F-12


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS)." This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This pronouncement is effective for reporting periods beginning on or after December 15, 2011, with early adoption prohibited. The new guidance will require prospective application. The Company will adopt this guidance at the beginning of its first quarter of 2012. Adoption of this guidance is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

3. LIQUIDITY AND CAPITAL RESOURCES

        Substantially all of the Company's revenue to date has been derived from upfront, milestone and royalty payments earned on licensing transactions and from subcontracts. The Company's business operations to date have consisted mostly of licensing and research and development activities and the Company expects this to continue for the immediate future. The Company has not introduced commercially any products. If and when the Company's products for which it has not entered into marketing relationships receive FDA approval, the Company may begin to incur other expenses, including sales and marketing related expenses if it chooses to market the products itself.

        During 2011, the Company raised approximately $68.9 million in net proceeds, after deducting placement agent fees, underwriters' discounts, commissions and other offering expenses, through the sale of common stock in an underwritten public offering and common stock and warrants in a registered direct offering, as more fully described in Note 9, "Stockholders' Equity."

        As of December 31, 2011, the Company had $57.2 million of cash and cash equivalents. Absent the receipt of any additional licensing income or financing, the Company expects its cash and cash equivalents balance to decrease as the Company continues to use cash to fund its operations, including in particular its LibiGel Phase III safety study if the Company decides to continue such study. As of March 12, 2012, the Company has $11.8 million in aggregate principal amount of 3.125% convertible senior notes due May 1, 2013 outstanding. In February 2012, the Company issued an aggregate of approximately 1.9 million shares of its common stock to one of the holders of the Company's 3.125% convertible senior notes due May 1, 2013 in exchange for cancellation of $9.0 million in aggregate principal amount of such notes, including accrued and unpaid interest. Assuming the Company continues its LibiGel Phase III safety study, the Company expects its cash and cash equivalents as of December 31, 2011 to meet its liquidity requirements through mid 2013. If the Company terminates its LibiGel Phase III safety study and assuming that the Company does so during the second quarter of 2012 and assuming no other corporate product development and activities, the Company expects its cash and cash equivalents to meet its liquidity requirements through late 2014. These estimates may prove incorrect or the Company, nonetheless, may choose to raise additional financing earlier.

        The Company's future capital requirements will depend upon numerous factors, including:

F-13


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

3. LIQUIDITY AND CAPITAL RESOURCES (Continued)

        The Company does not have any existing credit facilities under which the Company could borrow funds. In the event that the Company would require additional working capital to fund future operations, the Company could seek to acquire such funds through additional equity or debt financing arrangements. If the Company raises additional funds by issuing equity securities, the Company's stockholders may experience dilution. Debt financing, if available, may involve covenants restricting the Company's operations or the Company's ability to incur additional debt. There is no assurance that any financing transaction will be available on terms acceptable to the Company, or at all. As an alternative to raising additional financing, the Company may choose to license one or more of its products or technologies to a third party who may finance a portion or all of the continued development and, if approved, commercialization of that licensed product, sell certain assets or rights under the Company's existing license agreements or enter into other business collaborations or combinations, including the possible sale of the Company. In addition, from time to time, the Company may purchase, exchange or restructure its outstanding convertible senior notes through cash purchases and/or exchanges for other

F-14


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

3. LIQUIDITY AND CAPITAL RESOURCES (Continued)

equity securities of the Company, in open market purchases, privately negotiated transactions and/or a tender offer. Such additional purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, the Company's available cash and cash equivalents, the Company's liquidity requirements, contractual restrictions and other factors. Such future purchases, exchanges or restructurings could dilute the percentage ownership of the Company's stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of the Company's existing stockholders and/or decrease the Company's cash balance. A significant decrease in the Company's cash balance may impair the Company's ability to execute strategic alternatives or leave the Company without sufficient cash remaining for operations.

        The announcement of the results of the Company's LibiGel Phase III efficacy trials has significantly depressed the trading price of the Company's common stock and if the Company terminates its LibiGel Phase III safety study, the trading price of the Company's common stock could be depressed further and affect adversely the Company's ability to raise additional capital. The decrease in the trading price of the Company's common stock has resulted in the bid price for the Company's common stock failing to meet the minimum $1.00 per share required for continued inclusion on The NASDAQ Global Market. The Company has until July 30, 2012 to regain compliance with the minimum bid price requirement. In order to regain compliance, shares of the Company's common stock must maintain a minimum bid closing price of at least $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance by July 30, 2012, the Company may transfer its common stock listing to The NASDAQ Capital Market and be eligible for an additional 180-day grace period if the Company meets the market value of publicly held shares requirement for continued listing and all other initial inclusion requirements for listing on The NASDAQ Capital Market, other than the minimum bid price requirement. In order to be afforded the additional 180-day compliance period, the Company also would need to provide NASDAQ written notice of the Company's intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company does not indicate its intent to cure the deficiency or if it does not appear to NASDAQ that it is possible for the Company to cure the deficiency, the Company will not be eligible for the second 180-day grace period and its common stock will be subject to delisting, which delisting determination the Company may appeal to a hearings panel at that time. A delisting of the Company's common stock from NASDAQ or even the transfer of the Company's common stock listing to The NASDAQ Capital Market could result in further decreases in the trading price of the Company's common stock and, among other things, could harm the Company's ability to raise financing.

        In addition, the announcement of the results of the Company's LibiGel Phase III efficacy trials has resulted in pending purported class action litigation of which the Company, along with its President and Chief Executive Officer, are defendants, which litigation is described in more detail in Note 13, "Commitments and Contingencies". While the Company believes the actions are without merit and intends to defend the actions vigorously, such litigation could divert management's attention, harm the Company's business and/or reputation and result in significant liabilities, as well as harm the Company's ability to raise financing.

F-15


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

3. LIQUIDITY AND CAPITAL RESOURCES (Continued)

        The Company can provide no assurance that additional financing, if needed, will be available on terms favorable to the Company, or at all. This is particularly true if investors are not confident in the future value of the Company, the Company loses the NASDAQ listing of its common stock and/or economic and market conditions deteriorate. If adequate funds are not available or are not available on acceptable terms when the Company needs them, the Company may need to cut its operating costs further or the Company may be forced to explore other strategic alternatives, such as selling or merging the Company or winding down its operations and liquidating the Company. In such case, the Company's stockholders could lose some or all of their investment.

4. ACQUISITION OF NET ASSETS OF CELL GENESYS

        On October 14, 2009, the Company acquired 100 percent of the common stock of Cell Genesys in a direct merger transaction. The merger was accounted as an acquisition of the net assets of Cell Genesys, whereby the individual assets and liabilities of Cell Genesys were recorded by the Company as of the completion of the merger based on their estimated fair values. As Cell Genesys had ceased substantially its operations prior to the date of the transaction, the merger was not considered to be a business combination, and the allocation of the purchase price did not result in recognition of goodwill. The total purchase price is allocated to the acquired assets and assumed liabilities of Cell Genesys based on their estimated relative fair values as of the merger closing date. The table below displays the purchase price of the merger.

Fair value of BioSante common stock issued (3,369,967 shares)

  $ 36,800,043  

Transaction costs of BioSante

    2,431,252  
       

Total purchase price

  $ 39,231,295  
       

        The total purchase price was allocated as follows:

Cash

  $ 24,746,346  

Investment in Ceregene

    3,486,000  

In-process research and development

    9,000,000  

Receivables, equipment and other assets

    293,658  

Accounts payable and accrued liabilities

    1,777,323  

Convertible senior notes

    16,709,580  
       

Total net assets acquired

  $ 19,039,101  
       

        In addition to the $24.7 million in cash acquired, the Company obtained, as a result of the merger, the rights to all in-process research and development of Cell Genesys, which included a portfolio of cancer vaccines and other technologies. The $9.0 million value attributed to this portfolio was expensed as of the date of the acquisition as acquired in-process technology, as it was considered to have no alternative future use. The $20.2 million representing the premium of the total value of consideration in excess of fair values of the net assets acquired also was expensed as of the date of the acquisition.

        In addition, as a result of the merger, the Company assumed $1.2 million in aggregate principal amount of 3.125% convertible senior notes due November 1, 2011 and $20.8 million in aggregate

F-16


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

4. ACQUISITION OF NET ASSETS OF CELL GENESYS (Continued)

principal amount of 3.125% convertible senior notes due May 1, 2013 issued by Cell Genesys. As a result of the merger and in accordance with the terms of the indentures governing the 3.125% convertible senior notes due May 1, 2013 as supplemented by supplemental indentures entered into between the Company and the trustees thereunder, such notes became convertible into an aggregate of 931,093 shares of the Company's common stock at a conversion price of $22.32 per share, in each case subject to adjustments for stock dividends, stock splits, and other similar events. For more details see Note 7, "Convertible Senior Notes."

5. LICENSE AGREEMENTS

        The Company licensed the technology underlying LibiGel and Elestrin, but not its male testosterone gel, from Antares Pharma, Inc. (Antares). Under the agreement, Antares granted the Company an exclusive license to certain patents and patent applications covering these gel products, including rights to sublicense, in order to develop and market the products in certain territories. Under the agreement, the Company is required to pay Antares certain development and regulatory milestone payments and royalties based on net sales of any products the Company or any sub-licensee sells incorporating the in-licensed technology. The patents covering the formulations used in these gel products are expected to expire in 2022 and 2028. The Company's male testosterone gel was developed and is fully-owned by the Company and is not covered under the Antares license.

        The Company owns development and commercialization rights to its GVAX cancer vaccine technology as a result of its transaction with Cell Genesys. The original core patent applications covering the cancer vaccine technology were licensed exclusively to Cell Genesys from Johns Hopkins University and The Whitehead Institute for Biomedical Research in 1992. Rights to additional patents and patent applications were licensed from Johns Hopkins University in 2001. The patents are expected to expire between 2012 and 2026. Under the various agreements, the Company is required to pay Johns Hopkins University and The Whitehead Institute for Biomedical Research certain development and regulatory milestone payments and royalties based on net sales of any products the Company or any sub-licensee sells incorporating the in-licensed technology.

        The Company licensed the technology underlying its triple component contraceptive, or The Pill Plus, from Wake Forest University Health Sciences and Cedars-Sinai Medical Center. The financial terms of this license include regulatory milestone payments, maintenance payments and royalty payments by the Company if a product incorporating the licensed technology gets approved and subsequently is marketed. The patents covering the technology underlying The Pill Plus are expected to expire in 2016.

F-17


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

5. LICENSE AGREEMENTS (Continued)

        The Company has entered into several other license agreements in which the Company has out-licensed certain of the rights and technologies the Company has licensed. Under these agreements, the Company typically is entitled to receive royalty payments on any sales of the products and, in some cases, may be entitled to receive certain development and regulatory milestones.

6. PROPERTY AND EQUIPMENT

        Property and equipment, net of accumulated depreciation at December 31, 2011 and 2010 consists of the following:

 
  2011   2010  

Computer equipment

  $ 520,647   $ 417,840  

Office equipment

    388,659     163,653  

Equipment

    378,147     500,130  
           

    1,287,453     1,081,623  

Accumulated depreciation and amortization

    (426,089 )   (445,847 )
           

  $ 861,364   $ 635,776  
           

        There was no construction in progress as of December 31, 2011 or December 31, 2010.

7. CONVERTIBLE SENIOR NOTES

        As a result of the Company's merger with Cell Genesys, the Company assumed liabilities related to two series of convertible senior notes of Cell Genesys—$1,234,000 aggregate principal amount of 3.125% convertible senior notes due November 1, 2011 (the 2011 Notes) and $20,782,000 aggregate principal amount of 3.125% convertible senior notes due May 1, 2013 (the 2013 Notes and collectively with the 2011 Notes, the Notes). The conversion features of the Notes were adjusted for the exchange ratio used in the merger, as described in Note 9, "Stockholders' Equity."

        Immediately prior to November 1, 2011, the Company repaid in its entirety the outstanding aggregate principal amount of the 2011 Notes and all accrued interest thereon through such date. As of December 31, 2011, the 2013 Notes remained outstanding. In February 2012, the Company issued 1.9 million shares of its common stock to one of the holders of the 2013 Notes in exchange for cancellation of an aggregate of $9.0 million principal amount of such notes, including accrued and unpaid interest. The $11.8 million principal amount of the remaining 2013 Notes are exchangeable at the option of the holder or upon certain specified events into an aggregate of approximately 0.5 million shares of the Company's common stock at a conversion price of $22.32 per share. The 2013 Notes are our general, unsecured obligations, ranking equally with all of the Company's existing and future unsubordinated, unsecured indebtedness and senior in right of payment to any subordinated indebtedness, but are effectively subordinated to all of the Company's existing and future secured indebtedness to the extent of the value of the related security, and structurally subordinated to all existing and future liabilities and other indebtedness of the Company's subsidiaries. The 2013 Notes are subject to repurchase by the Company at each holder's option, if a fundamental change (as defined in

F-18


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

7. CONVERTIBLE SENIOR NOTES (Continued)

the indenture) occurs, at a repurchase price equal to 100 percent of the principal amount of the 2013 Notes, plus accrued and unpaid interest on the repurchase date and are subject to redemption for cash by the Company, in whole or in part, at a redemption price equal to 100 percent of the principal amount of such notes plus accrued and unpaid interest to the redemption date, if the closing price of the Company's common stock has exceeded 150 percent of the conversion price then in effect with respect to such notes for at least 20 trading days in any period of 30 consecutive trading days ending on the trading day prior to the mailing of the notice of redemption. As of December 31, 2011, the 2013 Notes were not eligible for redemption. The indenture governing the 2013 Notes, as supplemented by the supplemental indenture, does not contain any financial covenants and does not restrict the Company from paying dividends, incurring additional debt or issuing or repurchasing the Company's other securities. In addition, the indenture, as supplemented by the supplemental indenture, does not protect the holders of the 2013 Notes in the event of a highly leveraged transaction or a fundamental change of the Company except in certain circumstances specified in the indenture.

        From time to time, the Company may purchase, exchange or restructure its outstanding 2013 Notes through cash purchases and/or exchanges for other equity securities of the Company, in open market purchases, privately negotiated transactions and/or a tender offer. Such additional purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, the Company's available cash and cash equivalents, the Company's liquidity requirements, contractual restrictions and other factors. Such future purchases, exchanges or restructurings could dilute the percentage ownership of the Company's stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of the Company's existing stockholders and/or decrease the Company's cash balance. A significant decrease in the Company's cash balance may impair the Company's ability to execute strategic alternatives or leave the Company without sufficient cash remaining for operations.

        The Company has elected to record the Notes at fair value in order to simplify the accounting for the convertible debt, inclusive of the redemption, repurchase and conversion adjustment features which would otherwise require specialized valuation, bifurcation and recognition. Accordingly, the Company has adjusted the carrying value of the Notes to their fair value as of December 31, 2011, with changes in the fair value of the Notes occurring since December 31, 2010, reflected in fair value adjustment in the statements of operations. The fair value of the Notes is based on Level 2 inputs. The recorded fair value of the Notes of an aggregate of $17,336,760 as of December 31, 2011 differs from their total stated principal amount of $20,782,000 by $3,445,240. The recorded value of the Notes of an aggregate of $18,547,333 as of December 31, 2010 differs from their total stated principal amount of $22,016,000 by $3,468,667. The Company recorded fair value adjustments of $(23,427) and $(1,870,916) related to the Notes for the years ended December 31, 2011 and 2010, respectively, to increase its recorded liability and corresponding expense in 2011 and 2010.

        For the year ended December 31, 2010, approximately $184,000 of the fair value adjustment was attributable to the change in instrument specific credit risk. There was no significant change in the fair value of the convertible senior notes due to a change in instrument specific credit risk for the years ended December 31, 2011 or 2009. The change in the aggregate fair value of the Notes due to instrument specific credit risk was estimated by calculating the difference between the December 31, 2010 fair value of the Notes as recorded and what the fair value of the convertible notes would have

F-19


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

7. CONVERTIBLE SENIOR NOTES (Continued)

been on December 31, 2010 if the December 31, 2009 discount rate continued to be used in the calculation. The instrument specific credit risk for the year ended December 31, 2010 has increased the fair value of the Notes as market borrowing rates have decreased for similarly rated companies and are estimated to have decreased for the Company as well, indicating a lower credit spread assuming no significant changes in the risk-free borrowing rate.

        The Company establishes the value the convertible senior notes based upon contractual terms of the notes, as well as certain key assumptions.

        The assumptions as of December 31, 2011 were:

 
  2013 Notes  

Average risk-free rate

    0.19 %

Volatility of BioSante common stock

    77.4 %

Discount rate for principal payments in cash

    18.5 %

        The assumptions as of December 31, 2010 were:

 
  2013 Notes   2011 Notes  

Average risk-free rate

    0.82 %   0.29 %

Volatility of BioSante common stock

    78.7 %   61.0 %

Discount rate for principal payments in cash

    17.0 %   17.0 %

        The discount rate is based on observed yields as of the measurement date for debt securities of entities having a Ca and Caa3 rating for long-term corporate obligations as assigned by Moody's Investors Service. Volatility is based on the historical fluctuations in the Company's stock price for a period of time equal to the remaining time until the debt maturity. The risk-free rate is based on observed yields as of the measurement date of one-year, two-year and three-year U.S. Treasury Bonds.

        The following table represents the scheduled maturities of required principal payments by year related to the convertible senior notes at December 31, 2011:

2012

  $  

2013

    20,782,000  
       

Total

  $ 20,782,000  
       

8. INCOME TAXES

        The Company has analyzed its filing positions in all significant federal and state jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The Company's U.S. and state tax returns remain subject to examination for the year ended 1998 and all subsequent periods due to the availability of tax loss and credit carryforwards. The Company determined there are no uncertain tax positions existing as of December 31, 2011 or 2010.

F-20


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

8. INCOME TAXES (Continued)

        The components of the Company's net deferred tax asset at December 31, 2011 and 2010 were as follows:

 
  2011   2010  

Net operating loss carryforwards

  $ 63,969,813   $ 46,071,206  

Tax basis in intangible assets

    4,095,269     4,452,360  

Deferred financing costs for tax

    7,010,462     7,001,619  

Research & development credits

    8,266,610     5,796,148  

Stock option expense

    2,754,981     2,310,405  

Other

    448,140     25,955  
           

    86,545,275     65,657,693  

Valuation allowance

    (86,545,275 )   (65,657,693 )
           

  $   $  
           

        The Company has no current tax provision due to its current and accumulated losses, which result in net operating loss carryforwards. At December 31, 2011, the Company had approximately $169,456,000 of net operating loss carryforwards that are available to reduce future taxable income for a period of up to 20 years. The net operating loss carryforwards expire in the years 2018-2031 and their utilization in future years may be limited as prescribed by Section 382 of the United States Internal Revenue Code. The net operating loss carryforwards as well as amortization of various intangibles, principally acquired in-process research and development, and other items have generated deferred tax benefits, which have been recorded as deferred tax assets and are entirely offset by a tax valuation allowance. The valuation allowance has been provided at 100% to reduce the deferred tax assets to zero, which is the amount management believes is more likely than not to be realized. Additionally, the Company has provided a full valuation allowance against $8,266,610 of research and development credits, which are available to reduce future income taxes, if any in the future. The research and development credits expire in the years 2018-2031.

        The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34.5% to pre-tax income as follows:

 
  2011   2010   2009  

Tax at U.S. federal statutory rate

  $ (17,804,934 ) $ (15,937,695 ) $ (16,397,080 )

State taxes, net of federal benefit

    (1,677,276 )   (1,501,377 )   (1,544,652 )

Research and development credits

    (1,537,863 )   (966,941 )   (515,235 )

Other, net

    132,491     133,932     17,718  

Change in valuation allowance

    20,887,582     18,272,081     18,439,249  
               

  $   $   $  
               

F-21


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

9. STOCKHOLDERS' EQUITY

        The Company is authorized to issue 200,000,000 shares of common stock, $0.0001 par value per share, 4,687,684 shares of class C special stock, $0.0001 par value per share, and 10,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

        No shares of preferred stock were outstanding as of December 31, 2011 or 2010.

        There were 65,214 shares of class C special stock issued and outstanding as of December 31, 2011 and 2010. Each share of class C special stock entitles its holder to one vote per share. Each share of class C special stock is exchangeable, at the option of the holder, for one share of the Company's common stock, at an exchange price of $15.00 per share, subject to adjustment upon certain capitalization events. Holders of class C special stock are not entitled to receive dividends or to participate in the distribution of the Company's assets upon any liquidation, dissolution or winding-up of the Company. The holders of class C special stock have no cumulative voting, preemptive, subscription, redemption or sinking fund rights.

        There were 18,269,754 and 13,565,188 shares of common stock issued and outstanding as of December 31, 2011 and 2010, respectively. The Company has presented the par values of its common stock and the related additional paid in capital on a combined basis for all periods presented.

        On August 2, 2011, the Company completed an underwritten public offering of an aggregate of 2.7 million shares of its common stock at a purchase price of $18.00 per share, resulting in net proceeds of approximately $45.0 million, after underwriters' discounts, commissions and offering expenses.

        On March 8, 2011, the Company completed a registered direct offering of 2,033,247 shares of its common stock and warrants to purchase an aggregate of 711,636 shares of its common stock at a purchase price of $12.3678 per share to institutional investors for gross proceeds of $25.1 million. The offering resulted in net proceeds to the Company of $23.9 million, after deducting placement agent fees and offering expenses. The warrants are exercisable immediately and continuing for a period of three years, at an exercise price of $13.50 per share. In connection with the offering, the Company issued the placement agent warrants to purchase an aggregate of 40,665 shares of the Company's common stock at an exercise price of $15.48 per share, which warrants are exercisable immediately and will expire on June 9, 2014.

        On March 8, 2010, the Company completed a registered direct offering of an aggregate of 1,734,104 shares of its common stock and warrants to an aggregate of 867,052 shares of its common stock, at a purchase price of $10.38 per share to funds affiliated with two institutional investors resulting in net proceeds to the Company of approximately $17.5 million, after deducting placement agent fees and other offering expenses. The warrants are exercisable beginning on September 9, 2010, have an exercise price of $12.48 per share and will expire on September 8, 2015. In connection with the offering, the Company issued the placement agent warrants to purchase an aggregate of 34,682 shares

F-22


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

9. STOCKHOLDERS' EQUITY (Continued)

of the Company's common stock at an exercise price of $12.96 per share, which warrants are exercisable beginning on September 8, 2010 and will expire on June 9, 2014.

        On June 23, 2010, the Company completed a registered direct offering of 1,189,061 shares of its common stock and warrants to purchase an aggregate of 594,530 shares of its common stock at a purchase price of $12.615 per share to funds affiliated with certain institutional investors for gross proceeds of $15.0 million. The offering resulted in net proceeds to the Company of approximately $14.1 million, after deducting placement agent fees and offering expenses. The warrants are exercisable immediately, have an exercise price of $14.70 per share and will expire on June 23, 2015. In connection with the offering, the Company issued the placement agent warrants to purchase an aggregate of 35,671 shares of the Company's common stock at an exercise price of $15.78 per share, which warrants are exercisable immediately and will expire on June 9, 2015.

        On December 31, 2010, the Company completed a registered direct offering of 1,764,706 shares of its common stock and warrants to purchase an aggregate of 882,353 shares of its common stock at a purchase price of $10.20 per share to funds affiliated with certain institutional investors for gross proceeds of $18.0 million. The offering resulted in net proceeds to the Company of approximately $16.9 million, after deducting placement agent fees and offering expenses. The warrants are exercisable immediately, have an exercise price of $12.00 per share and expire on December 30, 2015. In connection with the offering, the Company issued the placement agent warrants to purchase an aggregate of 52,941 shares of the Company's common stock at an exercise price of $12.75, which warrants are exercisable immediately and will expire on June 9, 2015.

        In October 2009, the Company acquired Cell Genesys in a direct merger. As a result of the merger, each share of common stock of Cell Genesys issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.0305 of a share of the Company's common stock. In the aggregate, the Company issued approximately 3.4 million shares of its common stock to former Cell Genesys stockholders in connection with the merger. All options to purchase shares of Cell Genesys common stock, other than certain designated options held by certain of Cell Genesys's former officers (Assumed Options), became fully vested and exercisable until immediately prior to the effective time of the merger. At the effective time of the merger, such unexercised options other than the Assumed Options terminated. The Assumed Options were assumed by the Company and will remain outstanding following the merger, but converted into and became options to purchase shares of the Company's common stock on terms substantially identical to those in effect prior to the merger, except for adjustments to the underlying number of shares and the exercise price based on the 0.0305 exchange ratio. As a result of the merger, the Assumed Options converted into options to purchase an aggregate of 39,071 shares of the Company's common stock at a weighted average exercise price of $118.38 per share. All warrants to purchase shares of Cell Genesys common stock which by their terms survived the merger (Assumed Warrants) were assumed by the Company, but were converted into and became warrants to purchase shares of the Company's common stock on terms substantially identical to those in effect prior to the merger, except for adjustments to the underlying number of shares and the exercise price based on the 0.0305 exchange ratio. As a result of the merger,

F-23


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

9. STOCKHOLDERS' EQUITY (Continued)

these Assumed Warrants converted into warrants to purchase an aggregate of 65,874 shares of the Company's common stock at a weighted average exercise price of $235.62 per share.

        For additional discussion regarding the merger with Cell Genesys and the assets and liabilities acquired, see Note 4, "Acquisition of Net Assets of Cell Genesys."

        See Note 7, "Convertible Senior Notes" for information regarding the convertible senior notes assumed in the Cell Genesys merger.

        As of December 31, 2011, warrants to purchase an aggregate of 3,794,741 shares of the Company's common stock were outstanding and exercisable as of December 31, 2011:

Issue Date
  Number of
Underlying
Shares
Of Common
Stock
  Per Share
Exercise Price
  Expiration Date  

December 15, 2008

    50,000   $ 24.00     June 14, 2014  

July 21, 2009

    30,000   $ 12.00     July 20, 2012  

August 13, 2009

    400,000   $ 15.00     August 12, 2014  

August 13, 2009

    40,000   $ 15.00     June 9, 2014  

October 14, 2009

    65,874   $ 235.62     April 1, 2012  

March 8, 2010

    867,052   $ 12.48     September 8, 2015  

March 8, 2010

    34,682   $ 12.96     June 9, 2014  

June 23, 2010

    594,530   $ 14.70     June 23, 2015  

June 23, 2010

    35,671   $ 15.78     June 9, 2015  

November 22, 2010

    30,000   $ 12.00     November 21, 2013  

December 30, 2010

    882,353   $ 12.00     December 30, 2015  

December 30, 2010

    52,941   $ 12.75     June 9, 2015  

March 8, 2011

    670,971   $ 13.50     March 8, 2014  

March 8, 2011

    40,665   $ 15.48     June 9, 2014  

        During 2011, the Company issued warrants to purchase an aggregate of 711,636 shares of the Company's common stock in connection with the March 2011 registered direct offering as described above. During 2011, warrants to purchase an aggregate of 1,458 shares of common stock were exercised and warrants to purchase an aggregate of 151,868 shares of the Company's common stock expired unexercised.

        During 2010, the Company issued warrants to purchase an aggregate of 2,467,230 shares of the Company's common stock in connection with registered direct offerings as described above, and warrants to purchase 30,000 shares of the Company's common stock as compensation for investor relations services as described below. During 2010, no warrants were exercised and warrants to purchase an aggregate of 127,291 shares of the Company's common stock expired unexercised.

F-24


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

9. STOCKHOLDERS' EQUITY (Continued)

        During 2009, the Company issued warrants to purchase an aggregate of 440,000 shares of the Company's common stock in connection with a registered direct offering, warrants to purchase an aggregate of 65,874 shares of the Company's common stock in connection with the Cell Genesys merger, and warrants to purchase 30,000 shares of the Company's common stock as compensation for investor relations services as described below. During 2009, no warrants were exercised and warrants to purchase an aggregate of 89,166 shares of the Company's common stock expired unexercised.

        In 2011, 2010 and 2009, the Company issued warrants to purchase 0, 30,000 and 30,000 shares of the Company's common stock, respectively, in consideration for various investor relations services. The warrants became exercisable on a ratable basis over a twelve-month period from the date of grant. The Company uses the Black-Scholes pricing model to value these types of warrants and remeasures the awards each quarter until the measurement date is established. For the years ended December 31, 2011, 2010 and 2009, the Company recorded $204,980, $65,529 and $64,103, respectively, in non-cash general and administrative expense pertaining to consultant warrants.

10. STOCK-BASED COMPENSATION

        The Company has two stockholder-approved equity-based compensation plans under which stock options have been granted—the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan (1998 Plan) and the BioSante Pharmaceuticals, Inc. Second Amended and Restated 2008 Stock Incentive Plan (2008 Plan) (collectively, the Plans). The 2008 Plan replaced the 1998 Plan except with respect to options outstanding under the 1998 Plan. As of December 31, 2011, the number of shares of the Company's common stock authorized for issuance under the 2008 Plan, subject to adjustment as provided in the 2008 Plan, was 1,000,000 plus the number of shares subject to options outstanding under the 1998 Plan as of the effective date of the 2008 Plan but only to the extent that such outstanding options are forfeited, expire or otherwise terminate without the issuance of such shares. Of such authorized shares, 3,416 shares had been issued and 587,666 shares were subject to outstanding stock options as of December 31, 2011.

        Outstanding employee stock options generally vest over a period of three or four years and have 10-year contractual terms. Upon exercise of an option, the Company issues new shares of its common stock. From time to time, the Company grants employee stock options that have performance condition-based vesting provisions which result in expense when such performance conditions are probable of being achieved. None of these options were outstanding as of December 31, 2011. The non-cash, stock-based compensation cost that was incurred by the Company in connection with the 1998 Plan and the 2008 Plan was $1,177,683, $992,757 and $1,254,503 for the years ended December 31, 2011, 2010 and 2009, respectively. No income tax benefit was recognized in the Company's statements of operations for stock-based compensation arrangements due to the Company's net loss position.

        The weighted average fair value of the options at the date of grant for options granted during 2011, 2010 and 2009 was $7.32, $6.66 and $6.24 per share, respectively. The fair value of each option

F-25


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

10. STOCK-BASED COMPENSATION (Continued)

grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

 
  2011   2010   2009  

Expected option life (years)

  5.5 - 6.25     6.00     6.00  

Risk-free interest rate

  1.175% - 2.57%     2.42 %   2.74 %

Expected stock price volatility

  69.07% - 72.16%     76.05 %   76.75 %

Dividend yield

           

        The Company uses the simplified method to estimate the life of options. The risk-free interest rate used is the yield on a United States Treasury note as of the grant date with a maturity equal to the estimated life of the option. The Company calculated a volatility rate based on the closing price for its common stock at the end of each calendar month as reported by the NASDAQ Global Market. The Company has not in the past issued a cash dividend nor does it have any current plans to do so in the future; and therefore, an expected dividend yield of zero was used.

        The following table summarizes the stock option compensation expense for employees and non-employees recognized in the Company's statements of operations for each period:

 
  2011   2010   2009  

Research and development

  $ 423,925   $ 325,208   $ 361,773  

General and administrative

    753,758     667,549     892,730  
               

Total stock-based compensation expense

  $ 1,177,683   $ 992,757   $ 1,254,503  
               

        A summary of activity under the Plans during the year ended December 31, 2011 is presented below:

Options
  Option
Shares
  Weighted
Average
Exercise Price
  Weighted
Average
Remaining
Term
  Aggregate
Intrinsic
Value
 

Outstanding December 31, 2010

    619,572   $ 22.14     6.74   $ 162,892  

Granted

    346,541   $ 11.40              

Exercised

    3,194   $ 10.14              

Forfeited or expired

    56,059   $ 17.70              
                       

Outstanding December 31, 2011

    906,860   $ 18.36     6.97   $ 0  
                       

Exercisable at December 31, 2011

    474,671   $ 25.14     5.40   $ 0  
                       

Vested or expected to vest at December 31, 2011

    879,777   $ 18.36     6.95   $ 0  
                       

        There is no aggregate intrinsic value of the Company's outstanding and exercisable options as of December 31, 2011.

        As of December 31, 2011, there was $2,089,729 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Plans. The cost is expected to be recognized over a weighted-average period of 2.76 years.

F-26


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

10. STOCK-BASED COMPENSATION (Continued)

        The intrinsic value of options exercised during the year ended December 31, 2011 and 2010 was $22,106 and $974, respectively. The Company did not receive a tax benefit related to the exercise of these options because of its net operating loss position. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was $667,171, $764,921 and $788,461, respectively.

11. RETIREMENT PLAN

        The Company offers a discretionary 401(k) Plan to all of its employees. Under the 401(k) Plan, employees may defer income on a tax-exempt basis, subject to limitations under the Internal Revenue Code of 1986, as amended. Under the 401(k) Plan, the Company may make discretionary matching contributions. Company contributions expensed in 2011, 2010 and 2009 totaled $211,494, $179,349 and $117,969, respectively.

12. LEASE ARRANGEMENTS

        The Company has entered into lease commitments for rental of its office space which expires in 2014. The future minimum lease payments during 2012, 2013 and 2014 are $236,747, $248,632 and $41,718, respectively.

        Rent expense amounted to $424,294, $338,588 and $325,093 for the years ended December 31, 2011, 2010 and 2009, respectively.

13. COMMITMENTS AND CONTINGENCIES

        The Company's license agreement with Antares Pharma, Inc. requires the Company to fund the development of the licensed products, make milestone payments and pay royalties on the sales of products related to this license. In 2011, 2010 and 2009, the Company paid or accrued $335,160, $152,228 and $63,749, respectively, to Antares as a result of royalties generated by Elestrin revenues. Pursuant to a separate agreement with Antares and related to the December 2009 license amendment with Azur Pharma International II Limited (now known as Jazz Pharmaceuticals, in light of Jazz Pharmaceuticals' acquisition of Azur), the Company paid Antares an aggregate of $268,750 in February 2010, which is recorded in licensing expense.

        In April 2002, the Company exclusively in-licensed from Wake Forest University Health Sciences and Cedars-Sinai Medical Center three issued U.S. patents claiming triple component therapy (the combination use of estrogen plus progestogen plus androgen, e.g. testosterone) and obtained an option to license the patents for triple component contraception. The financial terms of the license include an upfront payment by the Company in exchange for exclusive rights to the license and regulatory milestone payments, maintenance payments and royalty payments by the Company if a product incorporating the licensed technology gets approved and subsequently marketed. In July 2005, the Company exercised the option for an exclusive license for the three U.S. patents for triple component contraception. The financial terms of this license include an upfront payment, regulatory milestone

F-27


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

13. COMMITMENTS AND CONTINGENCIES (Continued)

payments, maintenance payments and royalty payments by the Company if a product incorporating the licensed technology gets approved and subsequently marketed.

        Future minimum maintenance payments due under this agreement are as follows:

Year
  Minimum
Amount Due
 

2012

  $ 80,000  

2013

    80,000  

2014

    80,000  

2015

    80,000  

2016

    40,000  

Thereafter

    80,000  

        Under the terms of the license agreement with the Wake Forest University Health Sciences and Cedars-Sinai Medical Center, the Company has the right to terminate the license at any time.

        The Company has agreed to indemnify, hold harmless and defend Wake Forest University Health Sciences and Cedars-Sinai Medical Center against any and all claims, suits, losses, damages, costs, fees and expenses resulting from or arising out of exercise of the license agreement, including but not limited to, any product liability claims. The Company has not recorded any liability in connection with this obligation as no events occurred that would require indemnification.

        The Company currently has a commitment with Aptar Pharma to purchase a gel filling machine for $842,740. As of December 31, 2011, the Company has paid $337,096 resulting in a remaining obligation of $505,644.

        On February 3, 2012, a purported class action lawsuit was filed in the United States District Court for the Northern District of Illinois under the caption Thomas Lauria, on behalf of himself and all others similarly situated v. BioSante Pharmaceuticals, Inc. and Stephen M. Simes naming the Company and the Company's President and Chief Executive Officer, Stephen M. Simes, as defendants. The complaint alleges that certain of the Company's disclosures relating to the efficacy of LibiGel and its commercial potential were false and/or misleading and that such false and/or misleading statements had the effect of artificially inflating the price of the Company's securities resulting in violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (Exchange Act), Rule 10b-5 and Section 20(a) of the Exchange Act. A substantially similar complaint was filed in the same court on February 21, 2012. The plaintiffs seek to represent a class of persons who purchased the Company's securities between February 8, 2010 and December 15, 2011, and seek unspecified compensatory damages, equitable and/or injunctive relief, and reasonable costs, expert fees and attorneys' fees on behalf of such purchasers. BioSante believes the actions are without merit and intends to defend the actions vigorously. Additional lawsuits may be filed and, at this time, because the litigation is in its early stages, the Company is unable to predict the outcome of these lawsuits, the possible loss or range of loss, if

F-28


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

13. COMMITMENTS AND CONTINGENCIES (Continued)

any, associated with their resolution or any potential effect they may have on BioSante's operations. Failure by the Company to obtain a favorable resolution of the lawsuits, however, could have a material effect on the Company's financial condition, results of operations, cash flows or its operations.

14. FAIR VALUE MEASUREMENTS

        The Company accounts for its convertible senior notes and U.S. Treasury money market fund at fair value. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

        In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk.

        Financial assets and liabilities recorded at fair value on a recurring basis as of December 31, 2011 and 2010 are classified in the table below in one of the three categories described above:

Description
  December 31,
2011 Balance
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant
Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
 

Assets:

                         

Money market fund

  $ 55,465,507       $ 55,465,507      
                   

Total assets

  $ 55,465,507       $ 55,465,507      
                   

Liabilities:

                         

2013 Notes

  $ 17,336,760       $ 17,336,760      
                   

Total liabilities

  $ 17,336,760       $ 17,336,760      
                   

F-29


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

14. FAIR VALUE MEASUREMENTS (Continued)


Description
  December 31,
2010 Balance
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant
Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
 

Assets:

                         

Money market fund

  $ 21,729,230       $ 21,729,230      
                   

Total assets

  $ 21,729,230       $ 21,729,230      
                   

Liabilities:

                         

2011 Notes

  $ 1,111,132       $ 1,111,132      

2013 Notes

    17,436,201         17,436,201      
                   

Total liabilities

  $ 18,547,333       $ 18,547,333      
                   

        The Company made an election to record the values of the 2011 Notes and 2013 Notes at fair value with gains and losses related to fluctuations in the value of these financial liabilities recorded in earning immediately pursuant to ASC 825. The fair values of the 2011 Notes and 2013 Notes are estimated based on the risk-free borrowing rate, the volatility of the Company's stock, and the current borrowing rates for similar companies. See Note 7, "Convertible Senior Notes" for more information and disclosures regarding key assumptions used in this fair value determination.

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

        Selected quarterly data for 2011 and 2010 is as follows:

 
  2011  
 
  First   Second   Third   Fourth  

Revenue

  $ 57,000   $ 81,003   $ 182,784   $ 114,373  

Research and development expenses

    14,864,420     11,116,323     11,500,053     6,701,465  

General and administrative expenses

    1,593,557     1,989,103     1,675,268     1,723,562  

Licensing expense

    0     0     50,000     0  
                   

Operating loss

    (16,442,921 )   (13,064,942 )   (13,028,207 )   (8,340,710 )
                   

Net loss

    (17,250,676 )   (14,975,231 )   (12,733,691 )   (6,648,906 )
                   

Loss per share:

                         

Basic and diluted

  $ (1.20 ) $ (0.96 ) $ (0.72 ) $ (0.36 )
                   

F-30


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Notes to the Financial Statements (Continued)

December 31, 2011

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)

 

 
  2010  
 
  First   Second   Third   Fourth  

Revenue

  $ 2,279,874   $ 0   $ 51,331   $ 143,032  

Research and development expenses

    9,426,870     8,657,606     9,716,091     11,904,935  

General and administrative expenses

    1,498,252     1,540,200     1,534,417     1,367,491  

Licensing expense

    268,750     0     0     0  

Operating loss

    (8,959,419 )   (10,240,352 )   (11,240,177 )   (13,168,413 )
                   

Net loss

    (10,540,419 )   (10,794,351 )   (11,589,711 )   (13,271,735 )
                   

Loss per share:

                         

Basic and diluted

  $ (1.14 ) $ (1.02 ) $ (0.96 ) $ (1.08 )
                   

F-31


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Condensed Balance Sheets

Septbember 30, 2012 (Unaudited)

 
  September 30,
2012
 

ASSETS

       

CURRENT ASSETS

       

Cash and cash equivalents

  $ 38,049,095  

Prepaid expenses and other assets

    534,037  
       

    38,583,132  

PROPERTY AND EQUIPMENT, NET

   
1,184,764
 
       

OTHER ASSETS

       

Investments

    3,413,762  

Deposits

    30,088  
       

  $ 43,211,746  
       

LIABILITIES AND STOCKHOLDERS' EQUITY

       

CURRENT LIABILITIES

       

Accounts payable

  $ 2,004,814  

Accrued compensation

    463,942  

Other accrued expenses

    860,094  

Current portion of convertible senior notes

    7,593,216  
       

    10,922,066  

Long-term convertible senior notes

   
 
       

TOTAL LIABILITIES

    10,922,066  
       

STOCKHOLDERS' EQUITY

       

Capital stock

       

Issued and outstanding

       

2012—65,211 Class C special stock

    65  

2012—24,422,240 Common stock

    273,259,171  
       

    273,259,236  

Accumulated deficit

   
(240,969,556

)
       

TOTAL STOCKHOLDERS' EQUITY

    32,289,680  
       

  $ 43,211,746  
       

   

See accompanying notes to the condensed financial statements.

F-32


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Condensed Statements of Operations

Nine Months Ended September 30, 2012 and 2011 (Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2012   2011  

REVENUE

             

Licensing revenue

  $   $ 100,000  

Royalty revenue

    333,163     220,787  
           

    333,163     320,787  
           

EXPENSES

             

Research and development

    14,454,258     37,480,873  

General and administration

    5,327,711     5,257,853  

Depreciation and amortization

    87,548     118,132  
           

    19,869,517     42,856,858  
           

OTHER

             

Convertible note fair value adjustment

    (4,037,797 )   (1,929,000 )

Interest expense

    (283,348 )   (516,000 )

Other income

        15,000  

Interest income

    5,300     6,472  
           

LOSS BEFORE INCOME TAX BENEFIT

    (23,852,199 )   (44,959,599 )

Income tax benefit

    121,791      
           

NET LOSS

  $ (23,730,408 ) $ (44,959,599 )
           

BASIC AND DILUTED NET LOSS PER SHARE

  $ (1.14 ) $ (2.86 )
           

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

    20,841,417     15,744,738  
           

   

See accompanying notes to the condensed financial statements.

F-33


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

Nine Months Ended September 30, 2012 and 2011 (Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2012   2011  

CASH FLOWS (USED IN) OPERATING ACTIVITIES

             

Net loss

  $ (23,730,408 ) $ (44,959,599 )

Adjustments to reconcile net loss to net cash (used in) operations

             

Depreciation and amortization

    87,548     118,132  

Loss on disposal of fixed assets

    117,794     367,274  

Employee & director stock-based compensation

    852,468     886,564  

Stock warrant expense—noncash

        180,759  

Convertible note fair value adjustment

    4,037,797     1,929,000  

Changes in other assets and liabilities affecting cash flows from operations

             

Prepaid expenses, deposits and other assets

    323,225     1,539,903  

Accounts payable and accrued liabilities

    (3,807,074 )   2,993,059  
           

Net cash (used in) operating activities

    (22,118,650 )   (36,944,908 )
           

CASH FLOWS (USED IN) INVESTING ACTIVITIES

             

Purchase of investment

    (7,955 )    

Purchase of fixed assets

    (528,742 )   (645,603 )
           

Net cash (used in) investing activities

    (536,697 )   (645,603 )
           

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

             

Fractional share payout

    (658 )    

Proceeds from common stock option exercises

        32,442  

Proceeds from warrants exercised

    211,068     24,063  

Proceeds from issuance of common stock by underwritten public offering          

        45,102,584  

Proceeds from issuance of common stock by registered direct offerings

    3,268,798     23,876,370  
           

Net cash provided by financing activities

    3,479,208     69,035,459  
           

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

    (19,176,139 )   31,444,948  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    57,225,234     38,155,251  
           

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 38,049,095   $ 69,600,199  
           

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION

             

Interest paid

  $ 184,094   $ 344,000  

Noncash investing and financing activities

             

Shares issued for convertible senior notes and accrued interest

  $ 13,881,052   $  

Unpaid costs associated with registered direct offering

  $ 7,933   $  

Unpaid costs associated with underwritten public offering

  $   $ 141,447  

Purchase of fixed assets on account, non-cash investing activity

  $   $ 59,016  
           

   

See accompanying notes to the condensed financial statements.

F-34


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

        The corporate strategy of BioSante Pharmaceuticals, Inc. (the Company) is to develop high value medically-needed pharmaceutical products and to implement strategic alternatives with respect to its products and the Company, including licenses, business collaborations and other business combinations or transactions with other pharmaceutical and biotechnology companies.

        The Company's products, either approved or in clinical development, include: (1) LibiGel, once daily transdermal testosterone gel in Phase III clinical development for the treatment of female sexual dysfunction (FSD), specifically hypoactive sexual desire disorder (HSDD); (2) a once daily transdermal testosterone gel approved by the U.S. Food and Drug Administration (FDA) indicated for the treatment of hypogonadism, or testosterone deficiency in men, and licensed to Teva Pharmaceuticals USA, Inc. (Teva); (3) GVAX cancer vaccines, a portfolio of cancer vaccines, four of which have been granted FDA orphan drug designation, and which are currently in 17 Phase I and Phase II clinical trials for the treatment of various cancers; (4) The Pill-Plus (triple component contraceptive), once daily use of various combinations of estrogens, progestogens and androgens in Phase II development; and (5) Elestrin, once daily transdermal estradiol (estrogen) gel approved by the FDA indicated for the treatment of moderate-to-severe vasomotor symptoms (hot flashes) associated with menopause and marketed in the U.S. by Meda Pharmaceuticals Inc. (Meda), the Company's licensee.

2. BASIS OF PRESENTATION

        In the opinion of management, the accompanying unaudited condensed financial statements contain all necessary adjustments, which are of a normal recurring nature, to present fairly the financial position of the Company as of September 30, 2012, the results of operations for the nine months ended September 30, 2012 and 2011, and the cash flows for the nine months ended September 30, 2012 and 2011, in conformity with accounting principles generally accepted in the United States of America (GAAP). Operating results for the nine month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012. The Company does not have items of other comprehensive income for the nine month period ended September 30, 2012 or 2011; and therefore, has not presented comprehensive income.

        These unaudited interim condensed financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2011, 2010 and 2009 and related notes contained elsewhere in this joint proxy statement/prospectus.

        On June 1, 2012, the Company effected a one-for-six reverse split of its outstanding common stock and class C special stock. These unaudited interim condensed financial statements give retroactive effect to the reverse stock split.

3. LIQUIDITY AND CAPITAL RESOURCES

        Substantially all of the Company's revenue to date has been derived from upfront, milestone and royalty payments earned on licensing transactions and from subcontracts. The Company's business operations to date have consisted mostly of licensing and research and development activities. The Company itself has not introduced commercially any products. To date, the Company has used primarily equity financings, and to a lesser extent, licensing income, interest income and the cash

F-35


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. LIQUIDITY AND CAPITAL RESOURCES (Continued)

received from its 2009 merger with Cell Genesys, Inc. (Cell Genesys), to fund its ongoing business operations and short-term liquidity needs.

        As of September 30, 2012, the Company had $38,049,095 of cash and cash equivalents. As of September 30, 2012, the Company had outstanding $8,277,850 in aggregate principal amount of its 3.125% convertible senior notes due May 1, 2013. In August 2012, the Company completed an offering of an aggregate of 2,359,932 shares of the Company's common stock and warrants to purchase an aggregate of 1,179,966 shares of the Company's common stock, resulting in net proceeds of $3,268,798, after deducting placement agent fees and other offering expenses. See Note 7, "Stockholders' Equity," for additional discussion regarding the August 2012 registered direct offering.

        Absent the receipt of any additional licensing income or financing, the Company expects its cash and cash equivalents balance to decrease as the Company continues to use cash to fund its operations. Assuming the Company's pending merger with ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. (ANI) is completed during the first quarter of 2013 (see Note 10, "Subsequent Events"), the Company expects its cash and cash equivalents as of September 30, 2012 to meet the Company's liquidity requirements through at least the Company's anticipated closing of the merger, including the requirement under our merger agreement to have at least $17 million of net cash (as defined in the merger agreement) available upon the closing of the merger. If the Company's pending merger with ANI is not completed, the Company will need to reevaluate its strategic alternatives, which may include a sale of the company, liquidation of the company or other strategic transaction. The Company's liquidity position will be dependent upon the strategic alternative selected; however, assuming the Company does not enter into another strategic transaction, and assuming the Company decides not to commence the two new efficacy trials for LibiGel, the Company expects its cash and cash equivalents as of September 30, 2012 will be sufficient to meet the Company's liquidity requirements for at least the next 3-5 years. Additional financing would be required should the Company decide to commence the two new efficacy trials for LibiGel. These estimates may prove incorrect or the Company, nonetheless, may choose to raise additional financing earlier.

        The Company does not have any existing credit facilities under which the Company could borrow funds. In the event that the Company would require additional working capital to fund future operations, the Company could seek to acquire such funds through additional equity or debt financing arrangements. If the Company raises additional funds by issuing equity securities, the Company's stockholders may experience dilution. Debt financing, if available, may involve covenants restricting the Company's operations or the Company's ability to incur additional debt. There is no assurance that any financing transaction will be available on terms acceptable to the Company, or at all. As an alternative to raising additional financing, the Company may choose to attempt to license one or more of its products or technologies to a third party who may finance a portion or all of the continued development and, if approved, commercialization of that licensed product, sell certain assets or rights under the Company's existing license agreements. In addition, from time to time, the Company may purchase, exchange or restructure its outstanding convertible senior notes through cash purchases and/or exchanges for other equity securities of the Company, in open market purchases, privately negotiated transactions and/or a tender offer. Such purchases, exchanges or restructurings, if any, will depend on prevailing market conditions, the Company's available cash and cash equivalents, the Company's liquidity requirements, contractual restrictions and other factors. Such purchases, exchanges

F-36


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. LIQUIDITY AND CAPITAL RESOURCES (Continued)

or restructurings could dilute the percentage ownership of the Company's stockholders, result in the issuance of securities at a discount to market price or that may have rights, preferences or privileges senior to those of the Company's existing stockholders and/or decrease the Company's cash balance. A significant decrease in the Company's cash balance, together with an inability to raise additional financing when needed, may impair the Company's ability to complete its proposed merger with ANI, execute other strategic alternatives or leave the Company without sufficient cash remaining for operations.

        The Company can provide no assurance that additional financing, if needed, will be available on terms favorable to the Company, or at all. This is particularly true if investors are not confident in the Company's business and future prospects, the future value of the Company and/or economic and market conditions deteriorate. In addition, the Company's ability to raise additional financing is limited by the terms of its agreement and plan of merger with ANI. See Note 10, "Subsequent Events." If adequate funds are not available or are not available on acceptable terms when the Company needs them, the Company may need to reduce its operating costs or the Company may be forced to complete other strategic alternatives, such as winding down its operations and liquidating the Company. In such case, the Company's stockholders could lose some or all of their investment.

4. BASIC AND DILUTED NET LOSS PER SHARE

        The basic and diluted net loss per share is computed based on the weighted average number of shares of common stock and class C special stock outstanding, all being considered as equivalent of one another. Basic net loss per share is computed by dividing the net loss by the weighted average number of shares outstanding for the reporting period. Diluted net loss per share is intended to reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Because the Company has incurred net losses from operations in each of the periods presented, the Company's outstanding options, warrants and convertible debt are antidilutive; accordingly, such securities are excluded from the computation of diluted net loss per share and there is no difference between basic and diluted net loss per share amounts.

5. CONVERTIBLE SENIOR NOTES

        The Company has outstanding 3.125% convertible senior notes due May 1, 2013 (the 2013 Notes). The aggregate principal amount of the 2013 Notes outstanding at September 30, 2012 was $8,277,850. In February 2012, the Company issued 1,868,055 shares of its common stock to one of the holders of the 2013 Notes in exchange for the cancellation of $9,000,000 in aggregate principal amount of such notes and the related accrued and unpaid interest of $79,024. In July 2012, the Company issued an aggregate of 1,784,070 shares of its common stock to two of the holders of the 2013 Notes in exchange for the cancellation of $3,504,150 in aggregate principal amount of such notes and accrued and unpaid interest of $20,686. Non-cash fair value adjustments of $(2,545,530) and $(611,621) were recorded during the first and third quarters of 2012 as a result of the cancellation of such notes. The fair value adjustment recorded upon the cancellation of the 2013 Notes is primarily attributable to the time value effect of settling these obligations at a date prior to the stated maturity of the 2013 Notes.

        The remaining $8,277,850 aggregate principal amount of the 2013 Notes are exchangeable at the option of the holder or upon certain specified events into an aggregate of approximately 370,871 shares

F-37


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. CONVERTIBLE SENIOR NOTES (Continued)

of the Company's common stock at a conversion price of $22.32 per share. The 2013 Notes are general, unsecured obligations of the Company and are described in Note 7 to the Company's financial statements for the year ended December 31, 2011. As of September 30, 2012, the 2013 Notes were not eligible for redemption. The indenture governing the 2013 Notes, as supplemented by the supplemental indenture, does not contain any financial covenants and does not restrict the Company from paying dividends, incurring additional debt or issuing or repurchasing the Company's other securities. In addition, the indenture, as supplemented by the supplemental indenture, does not protect the holders of the 2013 Notes in the event of a highly leveraged transaction or a fundamental change of the Company except in certain circumstances specified in the indenture.

        As described in Note 3, "Liquidity and Capital Resources," from time to time, the Company may purchase, exchange or restructure its outstanding 2013 Notes through cash purchases and/or exchanges for other equity securities of the Company, in open market purchases, privately negotiated transactions and/or a tender offer.

        The Company has elected to record the 2013 Notes at fair value in order to simplify the accounting for the convertible debt, inclusive of the redemption, repurchase and conversion adjustment features which otherwise would require specialized valuation, bifurcation and recognition. Accordingly, the Company has adjusted the carrying value of the 2013 Notes to their fair value as of September 30, 2012, with changes in the fair value of the 2013 Notes occurring since December 31, 2011, reflected in fair value adjustment in the unaudited condensed statements of operations. As described in Note 9, "Fair Value Measurements," the fair value of the 2013 Notes is based on Level 2 inputs. The recorded fair value of the 2013 Notes of an aggregate of $7,593,216 as of September 30, 2012 differs from their total stated aggregate principal amount of $8,277,850 as of such date by $684,634. During the nine months ended September 30, 2012, the Company recorded a fair value adjustment of $(4,037,797) related to the 2013 Notes that were converted to common stock during 2012 or that remained outstanding as of September 30, 2012, that for the nine months ended September 30, 2012 increased the recorded liability and corresponding expense. For the nine months ended September 30, 2011, the Company recorded a fair value adjustment of $(1,929,000) that increased the recorded liability and corresponding expense, respectively.

        For the nine months ended September 30, 2012 and 2011, approximately $(41,000) and $230,000, respectively, of the fair value adjustment was attributable to the change in instrument specific credit risk. The change in the aggregate fair value of the 2013 Notes due to instrument specific credit risk for the nine months ended September 30, 2012 was estimated by calculating the difference between the September 30, 2012 fair value of the 2013 Notes as recorded and what the fair value of the 2013 Notes would have been on September 30, 2012 if the December 31, 2011 discount rate continued to be used in the calculation.

        The instrument specific credit risk for both periods has increased the fair value of the 2013 Notes as market borrowing rates have decreased for similarly rated companies and are estimated to have decreased for the Company as well, indicating a lower credit spread assuming no significant changes in the risk-free borrowing rate.

        The Company establishes the value of the 2013 Notes based upon contractual terms of the 2013 Notes, as well as certain key assumptions.

F-38


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. CONVERTIBLE SENIOR NOTES (Continued)

        The assumptions as of September 30, 2012 were:

Average risk-free rate

    0.14 %

Volatility of BioSante common stock

    90.0 %

Discount rate for principal payments in cash

    19.6 %

        The discount rate is based on observed yields as of the measurement date for debt securities of entities having a Ca and Caa3 rating for long-term corporate obligations as assigned by Moody's Investors Service. Volatility is based on the historical fluctuations in the Company's stock price for a period of time equal to the remaining time until the debt maturity. The risk-free rate is based on observed yields as of the measurement date of six month and one-year U.S. Treasury Bonds.

6. STOCK-BASED COMPENSATION

        The Company typically grants options to purchase shares of the Company's common stock to existing employees and non-employee directors on an annual basis during the first quarter of each year and to new employees and non-employee directors throughout the year on or around the date their employment or service with the Company commences. All options are granted under the BioSante Pharmaceuticals, Inc. Amended and Restated 2008 Stock Incentive Plan (the 2008 Plan). As of September 30, 2012, approximately 981,272 shares of the Company's common stock remain available for issuance under the 2008 Plan.

        During the nine months ended September 30, 2012, the Company granted options under the 2008 Plan to purchase an aggregate of 358,582 shares of the Company's common stock to certain employees of the Company and the Company's non-employee directors with a weighted average exercise price of $4.08 per share. Options to purchase an aggregate of 105,781 shares of the Company's common stock expired and were cancelled during the nine months ended September 30, 2012. Options are granted at an exercise price equal to the closing price of the Company's common stock on the date of the grant. No options were exercised during the nine months ended September 30, 2012.

        No warrants were granted during the nine months ended September 30, 2012, other than the warrants issued in conjunction with the Company's August 2012 offering described in Note 7, "Stockholders' Equity".

7. STOCKHOLDERS' EQUITY

        During the nine months ended September 30, 2012, the Company issued an aggregate of 3,652,125 shares of its common stock to holders of the 2013 Notes in exchange for the cancellation of $12,504,150 in aggregate principal amount of such notes and accrued and unpaid interest of $99,710. See Note 5, "Convertible Senior Notes" for information regarding the 2013 Notes.

        In August 2012, the Company completed an offering of 2,359,932 shares of its common stock and warrants to purchase an aggregate of 1,179,966 shares of its common stock at a purchase price of $1.4725 per share to one institutional investor for gross proceeds of $3,475,000. The offering resulted in net proceeds to the Company of $3,268,798, after deducting placement agent fees and offering expenses. The warrants are exercisable immediately and continue for a period of 5 years, at an exercise price of $1.50 per share. The number of shares issuable upon exercise of the warrants and the exercise

F-39


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. STOCKHOLDERS' EQUITY (Continued)

price of the warrants are adjustable in the event of stock splits, combinations and reclassifications, but not in the event of the issuance of additional securities. On September 20, 2012, warrants from the August 2012 offering to purchase an aggregate of 140,712 shares of common stock were exercised resulting in proceeds of $211,068 to the Company.

        On May 30, 2012, the Company's stockholders approved an amendment to the Company's Restated Certificate of Incorporation to effect a reverse split of the Company's outstanding shares of common stock and class C special stock in the discretion of the Company's Board of Directors at an exchange ratio of not less than one-for-two and not more than one-for-ten. On June 1, 2012, the Board of Directors of the Company effected a one-for-six reverse split of the Company's outstanding shares of common stock and class C special stock. No fractional shares were issued as a result of the reverse stock split, and stockholders who otherwise would have been entitled to a fractional share received, in lieu thereof, a cash payment based on the closing sale price of BioSante's common stock on June 1, 2012. The total cash payment for fractional shares was $658. The reverse stock split did not change the number of authorized shares of the Company's common stock or class C special stock or the par value of the Company's common stock or class C special stock, but because the number of authorized shares of the Company's common stock and class C special stock was not affected, the effect of the reverse stock split was to increase the number of authorized but unissued shares of the Company's common stock and class C special stock. The primary purpose of the reverse stock split was to increase the Company's ability to maintain the listing of its common stock on The NASDAQ Global Market.

8. COMMITMENTS AND CONTINGENCIES

        The Company has a commitment with Aptar Pharma to purchase a gel packaging machine for $844,740. As of September 30, 2012, the Company had paid Aptar $804,132. The remaining obligation of $40,608 is due upon the shipment, assembly and calibration of the machine at a location designated by the Company. In light of the Company's pending merger with ANI (see Note 10, "Subsequent Events"), the Company is evaluating the future plans for this gel packaging machine.

        On February 3, 2012, a purported class action lawsuit was filed in the United States District Court for the Northern District of Illinois under the caption Thomas Lauria, on behalf of himself and all others similarly situated v. BioSante Pharmaceuticals, Inc. and Stephen M. Simes naming the Company and the Company's President and Chief Executive Officer, Stephen M. Simes, as defendants. The complaint alleges that certain of the Company's disclosures relating to the efficacy of LibiGel and its commercial potential were false and/or misleading and that such false and/or misleading statements had the effect of artificially inflating the price of the Company's securities resulting in violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (Exchange Act), Rule 10b-5 and Section 20(a) of the Exchange Act. Although a substantially similar complaint was filed in the same court on February 21, 2012, such complaint was voluntarily dismissed by the plaintiff in April 2012. The plaintiff seeks to represent a class of persons who purchased the Company's securities between February 10, 2010 and December 15, 2011, and seeks unspecified compensatory damages, equitable and/or injunctive relief, and reasonable costs, expert fees and attorneys' fees on behalf of such purchasers. The Company

F-40


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8. COMMITMENTS AND CONTINGENCIES (Continued)

believes the action is without merit and intends to defend the action vigorously. On October 10, 2012, the District Court entered an order setting the dates on which the plaintiff's consolidated amended complaint is due and establishing a briefing schedule on the defendants' anticipated motion to dismiss. On November 6, 2012, plaintiff filed a consolidated amended complaint; the Company and Mr. Simes intend to file motions to dismiss the consolidated amended complaint on or before December 21, 2012.

        On May 7, 2012, Jerome W. Weinstein, a purported stockholder of the Company filed a shareholder derivative action in the United States District Court for the Northern District of Illinois under the caption Weinstein v. BioSante Pharmaceuticals, Inc. et al., naming the Company's directors as defendants and the Company as a nominal defendant. A substantially similar complaint was filed in the same court on May 22, 2012 and another substantially similar complaint was filed in the Circuit Court for Cook County, Illinois, County Department, Chancery Division, on June 27, 2012. The suits generally related to the same events that are the subject of the class action litigation described above. The complaints allege breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment as causes of action occurring from at least February 2010 through December 2011. The complaints seek unspecified damages, punitive damages, costs and disbursements and unspecified reform and improvements in the Company's corporate governance and internal control procedures. On September 24, 2012, the District Court consolidated the two cases before it and entered a stipulation and order setting the dates on which the plaintiff's consolidated amended complaint is due and establishing a briefing schedule on defendants' anticipated motions to dismiss. The Company expects a similar scheduling order to be entered in the action pending in Illinois state court.

        The lawsuits are in their early stages; and, therefore, the Company is unable to predict the outcome of the lawsuits and the possible loss or range of loss, if any, associated with their resolution or any potential effect the lawsuits may have on the Company's operations. Depending on the outcome or resolution of these lawsuits, they could have a material effect on the Company's operations, including its financial condition, results of operations, or cash flows.

        The Company is not involved in any other legal actions, however, from time to time may be subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes that are not predictable with reasonable assurance and that may not be known for extended periods of time.

9. FAIR VALUE MEASUREMENTS

        The Company accounts for its convertible debt and U.S. Treasury money market fund at fair value. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

F-41


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9. FAIR VALUE MEASUREMENTS (Continued)

        In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk.

        Financial assets and liabilities recorded at fair value on a recurring basis as of September 30, 2012 are classified in the table below in one of the three categories described above:

Description
  September 30,
2012 Balance
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant
Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
 

Assets:

                         

Money market fund

  $ 36,957,469       $ 36,957,469      
                   

Total assets

  $ 36,957,469       $ 36,957,469      
                   

Liabilities:

                         

2013 Notes

    7,593,216         7,593,216      
                   

Total liabilities

  $ 7,593,216       $ 7,593,216      
                   

        The Company made an election to record the values of the 2013 Notes at fair value with gains and losses related to fluctuations in the value of these financial liabilities recorded in earnings immediately. The fair values of the 2013 Notes are estimated based on the risk-free borrowing rate, the volatility of the Company's stock, and the current borrowing rates for similar companies. See Note 6, "Convertible Senior Notes" for more information and disclosures regarding key assumptions used in this fair value determination.

F-42


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. SUBSEQUENT EVENTS

        On October 3, 2012, the Company entered into an agreement and plan of merger (the Merger Agreement) with ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, ANI will merge with and into the Company, with the Company continuing as the surviving company (the Merger). At the effective time of the Merger, each outstanding share of capital stock of ANI will be converted into the right to receive a number of shares of the Company's common stock, if any, as determined pursuant to the exchange ratios described in the Merger Agreement and the provisions of ANI's certificate of incorporation. All options, warrants or other rights to purchase shares of capital stock of ANI, will be canceled at the effective time of the Merger without any consideration in exchange, except for certain warrants which although not cancelled will not represent the right to acquire any equity or other interest in the combined company after the Merger. No fractional shares of the Company's common stock will be issued in connection with the Merger, and holders of ANI capital stock will be entitled to receive cash in lieu thereof. Following the consummation of the transactions contemplated by the Merger Agreement, the current stockholders of ANI are expected to own approximately 53 percent of the outstanding shares of common stock of the combined company, and current stockholders of the Company are expected to own approximately 47 percent of the outstanding shares of common stock of the combined company. The exchange ratios are subject to potential adjustment as described in the Merger Agreement depending upon the amount of the Company's "net cash", as defined in the Merger Agreement and generally consisting of the Company's cash and cash equivalents less certain expenses and liabilities, as of a determination date prior to the closing date of the Merger, but in no event will the current ANI stockholders own less than 50.1 percent (or the current Company stockholders own more than 49.9 percent) of the outstanding shares of common stock of the combined company. The Merger is intended to qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

        The Merger Agreement provides that, immediately following the effective time of the Merger, the board of directors of the combined company will consist of five former directors of ANI and two former directors of the Company, and ANI's current executive officers are expected to serve as executive officers of the combined company. In connection with the Merger, the Company will seek to amend its certificate of incorporation to: (i) effect a reverse split of its common stock at a ratio between the range of one-for-two and one-for-five, as determined by the Company and ANI, which is intended to ensure that the listing requirements of The NASDAQ Global Market or The NASDAQ Capital Market are satisfied; and (ii) change the name of the Company to "ANI Pharmaceuticals, Inc." or another name as designated by ANI (together, the Charter Amendments). No fractional shares of the Company's common stock will be issued in connection with the reverse split and holders of the Company's common stock will be entitled to receive cash in lieu thereof.

        Consummation of the Merger is subject to a number of conditions, including, but not limited to (i) the adoption and approval of the Merger Agreement and the transactions contemplated thereby by both the Company's and ANI's stockholders and the approval of the Charter Amendments by the Company's stockholders; (ii) the effectiveness of a Form S-4 registration statement to be filed by the Company with the Securities and Exchange Commission to register the shares of the Company's common stock to be issued in connection with the Merger, which will contain a joint proxy statement/

F-43


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. SUBSEQUENT EVENTS (Continued)

prospectus; (iii) approval for the listing of shares of the Company's common stock to be issued in the Merger on The NASDAQ Global Market or The NASDAQ Capital Market; (iv) written opinions of counsel that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; and (v) other customary closing conditions. In addition, the obligation of ANI to effect the Merger is subject to a condition that the Company's net cash, as calculated pursuant to the terms of the Merger Agreement, be no less than $17.0 million immediately prior to the effective time of the Merger.

        Each of the Company and ANI have made customary representations, warranties and covenants in the Merger Agreement, including among others, covenants that (i) each party will conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and the consummation of the Merger; (ii) each party will not engage in certain kinds of transactions or take certain actions during such period; (iii) ANI will convene and hold a meeting of its stockholders for the purpose of considering the adoption and approval of the Merger Agreement and the transactions contemplated thereby and the board of directors of ANI will recommend that its stockholders adopt and approve the Merger Agreement, subject to certain exceptions; and (iv) the Company will convene and hold a meeting of its stockholders for the purpose of considering the adoption and approval of the Merger Agreement and the transactions contemplated thereby and the approval of the Charter Amendments and the Company's board of directors will recommend that the Company's stockholders adopt and approve the Merger Agreement and approve the charter amendments, subject to certain exceptions. Each of the Company and ANI also has agreed not to solicit proposals relating to alternative business combination transactions or enter into discussions or an agreement concerning any proposals for alternative business combination transactions, subject to exceptions for the Company in the event of the Company's receipt of a "superior proposal."

        The Merger Agreement contains certain termination rights in favor of each of ANI and the Company in certain circumstances. If the Merger Agreement is terminated due to certain triggering events specified in the Merger Agreement, the Company will be required to pay ANI a termination fee of up to $1.0 million or ANI will be required to pay the Company a termination fee of up to $750,000. The Merger Agreement also provides that under specified circumstances, the Company may be required to reimburse ANI up to $500,000 for ANI's expenses in connection with the transaction. Any expenses paid by the Company will be credited against the $1.0 million termination fee if the termination fee subsequently becomes payable by the Company.

        Concurrently and in connection with the execution of the Merger Agreement, certain of ANI's stockholders, who collectively hold approximately 90 percent of the outstanding shares of ANI capital stock as of the close of business on October 3, 2012, entered into voting agreements with the Company, pursuant to which each stockholder agreed to vote its shares of ANI capital stock in favor of the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement and against certain transactions or certain actions that would delay, prevent or nullify the Merger or the transaction contemplated by the Merger Agreement. In addition, one of the stockholders of ANI, who holds approximately 57 percent of the outstanding shares of ANI capital stock as of the close of

F-44


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. SUBSEQUENT EVENTS (Continued)

business on October 3, 2012, has agreed to vote in favor of the election of the two directors designated by the Company at the first annual meeting of stockholders following the completion of the Merger.

        In addition, certain of the Company's stockholders, directors and officers, who collectively hold approximately two percent of the outstanding shares of the Company's capital stock as of the close of business on October 3, 2012, entered into voting agreements with ANI, pursuant to which each stockholder agreed to vote its shares of the Company's capital stock in favor of the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement and the charter amendments, and against certain transactions or certain actions that would delay, prevent or nullify the Merger or the transaction contemplated by the Merger Agreement.

        Concurrently and in connection with the execution of the Merger Agreement, ANI's chief executive officer and chief financial officer and certain stockholders of ANI, who collectively hold approximately 85 percent of the outstanding shares of ANI capital stock as of the close of business on October 3, 2012, entered into lock-up agreements with the Company, pursuant to which each stockholder will be subject to a six-month lock-up on the sale of shares of the Company's common stock received in the Merger.

        The Company has the right in its sole discretion to issue contingent value rights (each, a CVR and collectively, the CVRs) to its existing stockholders immediately prior to the completion of the Merger. The Company expects that one CVR will be issued for each share of the Company's common stock outstanding as of the record date to be set at a date prior to the completion of the Merger. However, the CVRs will not be certificated and will not be attached to the shares of the Company's common stock. Each CVR will be a non-transferable (subject to certain limited exceptions) right to potentially receive certain cash payments in the event the Company receives net cash payments during the ten-year period after the distribution of the rights as a result of the sale, transfer, license or similar transaction relating to the Company's LibiGel program, upon the terms and subject to the conditions set forth in a contingent value rights agreement to be entered into between the Company and an as of yet unidentified third party, as rights agent. The aggregate cash payments to be distributed to the holders of the CVRs, if any, will be equal to 66 percent of the net cash payments received by the combined company as a result of the sale, transfer, license or similar transaction relating to the Company's LibiGel program, as determined pursuant to the CVR agreement, and will not exceed $40 million in the aggregate.

        As a result of the conclusion of the Company's LibiGel Phase III cardiovascular events and breast cancer safety study, as announced by the Company in September 2012, and considering the Company's October 4, 2012 announcement of its potential merger with ANI, the Company plans to reduce its workforce during the fourth quarter of 2012. In connection with the announced reduction, the Company will pay approximately $300,000 in aggregate severance costs during the remainder of 2012. The termination of employment of these employees will result in the cessation of any further vesting in

F-45


Table of Contents


BIOSANTE PHARMACEUTICALS, INC.

SEPTEMBER 30, 2012

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. SUBSEQUENT EVENTS (Continued)

certain stock options held by these employees and a reversal of previously recognized non-cash stock-based compensation expense related to such options in a similar amount, thereby offsetting the employee reduction severance costs.

        In October 2012, the Company entered into an amendment to its development and license agreement with Teva pursuant to which Teva made a $1.0 million payment to the Company upon the signing of the amendment and agreed to make the following milestone-based payments to the Company: (1) $500,000 if the FDA authorizes marketing of the licensed male testosterone gel as an "AB-rated" equivalent to AndroGel®; (2) $750,000 upon the earlier to occur of (a) December 31, 2012 and (b) five business days after Teva's submission to the FDA of a final report regarding a "washing" clinical study required by the FDA; and (3) $500,000 upon the earlier to occur of (a) December 31, 2013 and (b) five business days after Teva's commencement of commercial manufacture of the licensed product for sale in the United States. In addition, Teva has agreed to pay the Company $4.0 million in the event Teva is the sole marketer in the United States of a generic 1% testosterone gel AB-rated to AndroGel® for at least 180 days immediately following the launch date of the licensed product in the United States. The royalty rate to be paid by Teva to the Company under the agreement is five percent of net sales; provided, however, that during the period of time that Teva markets the licensed product and is the sole marketer of a generic 1% testosterone gel that is AB-rated to AndroGel® in the United States, the royalty rate will be seven and one half percent of net sales. Additionally, pursuant to the terms of the October 2012 amendment, the parties agreed to release each other from certain liabilities.

F-46


Table of Contents


INDEX TO ANI'S FINANCIAL STATEMENTS

ANI FINANCIAL STATEMENTS

       

Report of Independent Registered Public Accounting Firm

   
F-48
 

Balance Sheets as of December 31, 2011 and 2010

    F-49 - F-50  

Statements of Operations for the years ended December 31, 2011 and 2010

    F-51  

Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Deficit for the years ended December 31, 2011 and 2010

    F-52  

Statements of Cash Flows for the years ended December 31, 2011 and 2010

    F-53  

Notes to Financial Statements

    F-55 - F-83  

ANI CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

       

Condensed Balance Sheets as of September 30, 2012 and December 31, 2011

   
F-84 - F-85
 

Condensed Statements of Operations for the nine months ended September 30, 2012 and 2011

    F-86  

Condensed Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Deficit for the nine months ended September 30, 2012 and 2011

    F-87  

Condensed Statements of Cash Flows for the nine months ended September 30, 2012 and 2010

    F-88  

Notes to Condensed Financial Statements

    F-90 - F-111  

F-47


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of
ANIP Acquisition Company:

        We have audited the accompanying balance sheets of ANIP Acquisition Company (d/b/a ANI Pharmaceuticals, Inc.) ("the Company") as of December 31, 2011 and 2010, and the related statements of operations, changes in redeemable convertible preferred stock and stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2011. The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note 2 to the financial statements, the 2011 and 2010 financial statements have been restated to correct a misstatement.

/s/ Stout, Causey & Horning, P.A.

Sparks, Maryland
November 20, 2012

F-48


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Balance Sheets

As of December 31,
  2011
As Restated
(Note 2)
  2010
As Restated
(Note 2)
 

Assets

             

Current Assets

             

Accounts receivable, net

  $ 5,104,568   $ 1,689,203  

Inventories, net

    2,107,463     2,361,990  

Prepaid expenses

    224,618     978,408  
           

Total Current Assets

    7,436,649     5,029,601  

Property and Equipment

             

Land

    86,949     86,949  

Buildings

    3,682,006     3,682,006  

Machinery, furniture and equipment

    3,445,284     3,354,854  

Construction in progress

    35,660      
           

    7,249,899     7,123,809  

Less: accumulated depreciation and amortization

   
2,145,630
   
1,639,862
 
           

Total Property and Equipment, net

    5,104,269     5,483,947  

Other Assets

             

Intangible assets, net

    135,000      
           

Total Other Assets

    135,000      
           

Total Assets

  $ 12,675,918   $ 10,513,548  
           

   

The accompanying notes are an integral part of these financial statements.

F-49


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Balance Sheets (Continued)

As of December 31,
  2011
As Restated
(Note 2)
  2010
As Restated
(Note 2)
 

Liabilities and Stockholders' Deficit

             

Current Liabilities

             

Accounts payable

  $ 1,208,323   $ 1,638,226  

Accrued expenses

    824,011     338,422  

Returned goods reserve

    252,045     80,067  

Borrowings under line of credit

    3,064,414     1,722,678  

Current maturities of long-term debt

        400,000  

Notes payable

    300,000     275,000  

Current liabilities of discontinued operation

    512,275     1,500,693  
           

Total Current Liabilities

    6,161,068     5,955,086  

Long-term debt, net of current maturities

   
   
233,333
 

Convertible debt

    16,581,933     11,968,603  
           

Total Liabilities

    22,743,001     18,157,022  

Commitments and Contingencies (Note 14)

             

Redeemable Convertible Preferred Stock

             

10% Convertible Preferred Stock, Series A, $0.10 par value, stated value of $100 per share; 108,494 shares authorized, 102,774 and 108,494 issued and outstanding, respectively, including cumulative dividends of $995,557 and $6,802,664, respectively

    10,388,357     16,252,664  

10% Convertible Preferred Stock, Series B, $0.10 par value, stated value of $110 per share; 118,915 shares authorized, 78,491 and 80,773 shares issued and outstanding, respectively, including cumulative dividends of $836,368 and $5,386,525, respectively

    9,559,716     14,134,975  

12% Convertible Preferred Stock, Series C, $0.10 par value, stated value of $110 per share; 37,956 shares authorized, 34,810 and 35,333 shares issued and outstanding, respectively, including cumulative dividends of $448,148 and $1,594,659, respectively

    4,268,412     5,420,676  
           

Total Redeemable Convertible Preferred Stock

    24,216,485     35,808,315  

Stockholders' Deficit

             

Common stock, $0.10 par value, 3,700,000 shares authorized; 1,129 and 7,879 shares issued and outstanding, respectively

    113     788  

Additional paid-in capital

    1,086,461     1,081,911  

Loan receivable from stockholder

        (90,215 )

Accumulated deficit

    (35,370,142 )   (44,444,273 )
           

Total Stockholders' Deficit

    (34,283,568 )   (43,451,789 )
           

Total Liabilities and Stockholders' Deficit

  $ 12,675,918   $ 10,513,548  
           

   

The accompanying notes are an integral part of these financial statements.

F-50


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Statements of Operations

For the Years Ended December 31,
  2011
As Restated
(Note 2)
  2010
As Restated
(Note 2)
 

Net Revenues

  $ 16,514,579   $ 8,974,818  

Operating Expenses

             

Cost of Sales (exclusive of depreciation and amortization)

    6,860,551     3,456,999  

Salaries and benefits

    4,352,250     4,425,012  

Freight

    253,394     137,837  

Research and development

    799,302     84,762  

Selling, general and administrative

    3,711,669     3,214,706  

Depreciation and amortization

    532,768     486,315  
           

Total Operating Expenses

    16,509,934     11,805,631  
           

Operating Income (Loss) from Continuing Operations

    4,645     (2,830,813 )

Other Expense

             

Interest expense

    (2,253,794 )   (1,179,431 )

Other expense

    (384,555 )   (138,061 )
           

Total Other Expenses

    (2,638,349 )   (1,317,492 )
           

Net Loss from Continuing Operations

    (2,633,704 )   (4,148,305 )

Discontinued Operation

             

Gain (Loss) on Discontinued Operation

    205,545     (5,124,805 )
           

Net Loss

  $ (2,428,159 ) $ (9,273,110 )
           

Computation of Loss from Continuing Operations

             

Attributable to Common Stockholders:

             

Net Loss from Continuing Operations

  $ (2,633,704 ) $ (4,148,305 )

Preferred Stock Dividends

    (2,280,073 )   (3,661,254 )
           

Loss from Continuing Operations Attributable to

             

Common Stockholders, basic and diluted

  $ (4,913,777 ) $ (7,809,559 )

Basic and diluted income (loss) per share:

             

Continuing operations

  $ (723.89 ) $ (1,010.68 )

Discontinued operation

    30.28     (663.23 )
           

Basic and diluted loss per share

  $ (693.61 ) $ (1,673.92 )

Basic and diluted weighted-average shares outstanding

   
6,788
   
7,727
 
           

   

The accompanying notes are an integral part of these financial statements.

F-51


Table of Contents

ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Deficit

For the Years Ended December 31, 2011 and 2010

 
  Redeemable Convertible Preferred Stock   Stockholders' Deficit  
 
  10% Convertible
Preferred
Stock, Series A
  10% Convertible
Preferred
Stock, Series B
  12% Convertible
Preferred
Stock, Series C
  Common
Stock
  Additional
Paid-in Capital
  Loan Receivable
from Stockholder
  Accumulated
Deficit
  Total  

Balance, January 1, 2010 As Previously Reported

  $ 14,570,583   $ 12,775,024   $ 4,801,454   $ 750   $ 1,151,556   $ (86,723 ) $ (31,466,475 ) $ (30,400,892 )

Prior Period Adjustment (Note 2)

                    (76,050 )       (43,434 )   (119,484 )
                                   

Balance, January 1, 2010 As Restated (Note 2)

    14,570,583     12,775,024     4,801,454     750     1,075,506     (86,723 )   (31,509,909 )   (30,520,376 )

Issuance of common stock

                38                 38  

Preferred stock dividends

    1,682,081     1,359,951     619,222                 (3,661,254 )   (3,661,254 )

Interest income on loan receivable from stockholder

                        (3,492 )       (3,492 )

Non-cash compensation related to stock options

                    6,405             6,405  

Net loss

                            (9,273,110 )   (9,273,110 )
                                   

Balance, December 31, 2010 As Restated (Note 2)

    16,252,664     14,134,975     5,420,676     788     1,081,911     (90,215 )   (44,444,273 )   (43,451,789 )

Preferred stock dividends forgiven through January 28, 2011

    (6,802,664 )   (5,386,525 )   (1,594,659 )               13,783,848     13,783,848  

Preferred stock dividends

    995,557     836,368     448,148                 (2,280,073 )   (2,280,073 )

Redemption of stock in exchange for forgiveness of loan receivable from stockholder

    (57,200 )   (25,102 )   (5,753 )   (675 )       90,215     (1,485 )   88,055  

Non-cash compensation related to stock options

                    4,550             4,550  

Net loss

                            (2,428,159 )   (2,428,159 )
                                   

Balance, December 31, 2011 As Restated (Note 2)

  $ 10,388,357   $ 9,559,716   $ 4,268,412   $ 113   $ 1,086,461   $   $ (35,370,142 ) $ (34,283,568 )
                                   

The accompanying notes are an integral part of these financial statements.

F-52


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Statements of Cash Flows

For the Years Ended December 31,
  2011
As Restated
(Note 2)
  2010
As Restated
(Note 2)
 

Cash Flows From Operating Activities

             

Net loss from continuing operations

  $ (2,633,704 ) $ (4,148,305 )

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

             

Depreciation and amortization

    532,768     486,315  

Non-cash interest relating to convertible debt

    1,919,036     937,705  

Non-cash compensation expense related to stock option grants

    4,550     6,405  

Interest income on loan receivable from stockholder

        (3,492 )

Changes in operating assets and liabilities:

             

Accounts receivable

    (3,415,365 )   1,740,750  

Inventories

    254,527     205,179  

Prepaid expenses

    753,790     (873,730 )

Accounts payable

    (429,903 )   (3,256,517 )

Accrued expenses

    657,567     (383,660 )
           

Net Cash and Cash Equivalents Used in Continuing Operations

    (2,356,734 )   (5,289,350 )

Net Cash (Used in) Provided by Discontinued Operation

    (782,873 )   2,343,195  
           

Net Cash and Cash Equivalents Used in Operating Activities

    (3,139,607 )   (2,946,155 )

Cash Flows From Investing Activities

             

Acquisition of property and equipment

    (128,090 )   (434,323 )

Acquisition of intangible assets

    (160,000 )    
           

Net Cash and Cash Equivalents Used in Investing Activities

    (288,090 )   (434,323 )

Cash Flows From Financing Activities

             

Issuance of common stock

        38  

Borrowings (repayments) under line of credit, net

    1,341,736     (2,351,625 )

Repayments on long-term debt

    (633,333 )   (3,017,886 )

Repayments of notes payable, net

    25,000     275,000  

Proceeds from convertible debt

    2,694,294     8,474,951  
           

Net Cash and Cash Equivalents Provided by Financing Activities

    3,427,697     3,380,478  
           

Change in Cash and Cash Equivalents

         

Cash and cash equivalents, beginning of year

   
   
 
           

Cash and cash equivalents, end of year

  $   $  
           

Supplemental disclosure for cash flow information:

             

Cash paid for interest

  $ 279,432   $ 326,938  

Supplemental non-cash investing and financing activities:

             

Preferred stock dividends

  $ 2,280,073   $ 3,661,254  

Forgiveness of preferred stock dividends

  $ 13,783,848   $  

Redemption of stock in exchange for forgiveness of loan receivable from stockholder

  $ 90,215   $  
           

   

The accompanying notes are an integral part of these financial statements.

F-53


Table of Contents

ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.




Financial Statements
Together with Report of Independent Registered Public Accounting Firm

For the Years Ended December 31, 2011 and 2010

F-54


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

        ANIP Acquisition Company, d/b/a ANI Pharmaceuticals, Inc. ("the Company") is a specialty pharmaceutical company, developing and marketing generic and branded prescription products. In two facilities located in Baudette, Minnesota, with combined manufacturing, packaging and laboratory capacity totaling 173,000 sq. ft., the Company manufactures oral solid dose products, as well as liquids and topicals, including those that must be manufactured in a fully contained environment due to their potency and/or toxicity. The Company also performs contract manufacturing for other pharmaceutical companies.

        The Company also previously owned an operation in Gulfport, Mississippi that manufactured over-the-counter pharmaceuticals products, which were sold under private-label contracts to retail pharmacy chains. The Gulfport operation was sold in September 2010 and accounted for as a discontinued operation as of December 31, 2011 and 2010 (Note 7). The Company recognized a loss for the difference between the consideration received from the sale of the Gulfport operation and the carrying value of the operation's net assets on the date of sale. This loss is reported as a gain/loss on discontinued operation on the accompanying statements of operations.

        The Company's operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on significant customers, lack of operating history and uncertainty of future profitability and possible fluctuations in financial results. Since inception, the Company has incurred a cumulative loss from operations and has had operating cash flow deficits. Management believes that as a result of the sale of the Gulfport operation, the Company can focus on prescription pharmaceuticals and increase its revenues while controlling operating costs in order to improve operating performance in the future. To date, the Company has funded its cash flow requirements using debt, equity, and equity-linked financings. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations and the ability to generate sufficient cash from operations and potential other funding sources to meet the Company's obligations as they become due. Management believes the going-concern basis is appropriate for the accompanying financial statements based on its current operating plan through December 31, 2013. In addition, management has the intent and ability to take additional actions as necessary to continue as a going concern, including by drawing on available funding sources and/or reducing discretionary operating costs.


Basis of Accounting

        The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).


Use of Estimates

        The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

F-55


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying financial statements, estimates are used for, but not limited to, stock-based compensation, allowance for doubtful accounts, accruals for chargebacks, returns and other allowances, allowance for inventory obsolescence, derivative liabilities, and the depreciable lives of fixed assets. Actual results could differ from those estimates.


Credit Concentration

        The Company's customers are primarily pharmaceutical companies, wholesale distributors, chain drug stores, and group purchasing organizations.

        During the year ended December 31, 2011, three customers represented approximately 21%, 16%, and 16% of net revenues, respectively. As of December 31, 2011, accounts receivable from these customers totaled $3,212,359. During the year ended December 31, 2010, three customers represented approximately 42%, 17% and 7% of net revenues, respectively. As of December 31, 2010, accounts receivable from these customers totaled $883,017.


Vendor Concentration

        During the year ended December 31, 2011, the Company purchased approximately 27% of total costs of goods sold from two suppliers. As of December 31, 2011, amounts payable to these suppliers totaled $205,838. During the year ended December 31, 2010, the Company purchased approximately 21% of total costs of goods sold from two suppliers. There were no amounts payable to these suppliers as of December 31, 2010.


Cash and Cash Equivalents

        Effective January 1, 2011 through December 31, 2012, all non-interest bearing transaction accounts are fully guaranteed by the Federal Deposit Insurance Corporation (FDIC). Such accounts are guaranteed by the FDIC up to $250,000 thereafter. Interest bearing accounts are guaranteed by the FDIC up to $250,000. The Company may maintain cash balances in excess of FDIC coverage. Management considers this to be a normal business risk.


Revenue Recognition

        Revenue is recognized for product sales upon shipment, when estimates of discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments are reasonably determinable, collection is reasonably assured, and the Company has no further performance obligations. These estimates reduce gross revenues to net revenues in the accompanying statements of operations, and are presented as current liabilities or reductions in accounts receivable in the accompanying balance sheets.

F-56


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Accounts Receivable

        The Company extends credit to customers on an unsecured basis. The Company utilizes the allowance method to provide for doubtful accounts based on management's evaluation of the collectability of accounts receivable. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. The Company determines trade receivables to be delinquent when greater than 30 days past due. Receivables are written off when it is determined that amounts are uncollectible. The Company determined that no allowance for doubtful accounts was necessary as of December 31, 2011 and 2010.


Accruals for Chargebacks, Returns and Other Allowances

        The Company's generic and branded product revenues are typically subject to agreements with customers allowing chargebacks, product returns, administrative fees, and other rebates and prompt payment discounts. The Company accrues for these items at the time of sale based on the estimates and methodologies described below. In the aggregate, these gross-to-net accruals exceed 65% of generic and branded gross product sales and reduce gross revenues to net revenues in the accompanying statements of operations, or are presented as current liabilities or reductions in accounts receivable in the accompanying balance sheets. The Company continually monitors and re-evaluates the accruals as additional information becomes available, which includes, among other things, updates to trade inventory levels and customer product mix. The Company makes adjustments to the accruals at the end of each reporting period, to reflect any such updates to the relevant facts and circumstances.

Chargebacks

        Chargebacks, primarily from wholesalers, are the most significant of the Company's accruals. Chargebacks result from arrangements the Company has with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler. Alternatively, the Company may pre-authorize wholesalers to offer specified contract pricing to other indirect customers. Under either arrangement, the Company provides a chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler's invoice price, typically Wholesale Acquisition Cost (WAC).

        Chargeback credits are calculated as follows:

        Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price (ASP) for each product. This calculation is performed by product by wholesaler. ASPs can be affected by several factors such as:

F-57


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        As necessary, the Company adjusts ASPs based on anticipated changes in the factors above.

        The difference between ASP and WAC is recorded, at the same time the Company recognizes revenue from the product sale, as a reduction in both gross revenues and accounts receivable.

        To evaluate the adequacy of its chargeback accruals, the Company obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the chargeback amount, the difference between ASP and WAC, to arrive at total expected future chargebacks, which is then compared to the chargeback accruals. The Company continually monitors chargeback activity and adjusts ASPs when it believes that actual selling prices will differ from current ASPs.

Returns

        Consistent with industry practice, the Company maintains a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date. Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date. The Company's product returns are settled through the issuance of a credit to the customer. The Company's estimate for returns is based upon its historical experience with actual returns. While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns. The Company continually monitors its estimates for returns and makes adjustments when it believes that actual product returns may differ from the established accruals.

Administrative Fees and Other Rebates

        Administrative fees or rebates are offered to wholesalers, group purchasing organizations and indirect customers, consistent with pharmaceutical industry practice. The Company accrues for fees and rebates, by product by wholesaler, at the time of sale based on contracted rates and ASPs.

        To evaluate the adequacy of its administrative fee accruals, the Company obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the ASPs to arrive at total expected future sales, which is then multiplied by contracted rates. The result is then compared to the administrative fee accruals. The Company continually monitors administrative fee activity and adjusts its accruals when it believes that actual administrative fees will differ from the accruals.

Prompt Payment Discounts

        Sales discounts are granted for prompt payment. The reserve for sales discounts is based on invoices outstanding. The Company assumes based on past experience that 100% of available discounts will be taken.

F-58


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The following table summarizes activity in the balance sheet for accruals and allowances for the years ended December 31, 2011 and 2010:

 
  Accruals for Chargebacks, Returns and Other Allowances  
 
  Chargebacks   Returns   Administrative
Fees and Other
Rebates
  Prompt
Payment
Discounts
 

Balance at January 1, 2010

  $ 439,176   $   $   $  

Accruals/Adjustments

    1,975,853     80,067     114,727     25,000  

Credits Taken Against Reserve

    (1,664,571 )       (55,125 )    
                   

Balance at December 31, 2010

    750,458     80,067     59,602     25,000  

Accruals/Adjustments

    13,005,579     356,364     672,882     446,187  

Credits Taken Against Reserve

    (10,075,199 )   (184,386 )   (494,289 )   (304,748 )
                   

Balance at December 31, 2011

  $ 3,680,838   $ 252,045   $ 238,195   $ 166,439  
                   


Inventories

        Inventories are stated at the lower of cost or net realizable value. The Company values inventory at standard cost. The Company reviews and adjusts standard costs periodically and believes its inventory, as valued, approximates weighted average cost.


Property and Equipment

        Property and equipment are recorded at cost. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is recorded on a straight-line basis over estimated useful lives as follows:

Buildings and improvements

    20 - 40 years  

Machinery, furniture and equipment

    3 - 10 years  

        Construction in progress includes the cost of construction and other direct costs attributable to the construction, along with capitalized interest, if any. Depreciation is not recorded on construction in progress until such time as the assets are placed in service. During the years ended December 31, 2011 and 2010, there was no material interest capitalized into construction in progress.

        Depreciation expense for the years ended December 31, 2011 and 2010 totaled $507,768 and $486,315, respectively.

        The Company accounts for the valuation of long-lived assets in accordance with Accounting Standards Codification (ASC) 360, Property, Plant, and Equipment. ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be

F-59


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed are reportable at the lower of the carrying amount or fair value, less costs to sell. Management determined that no assets were impaired and no assets were held for disposal as of December 31, 2011 and 2010.


Research and Development Expenses

        Research and development costs are expensed as incurred and primarily consist of expenses relating to product development. Research and development costs totaled $799,302 and $84,762 for the years ended December 31, 2011 and 2010, respectively, and are included in the accompanying statements of operations.


Stock-Based Compensation

        The Company expenses the estimated fair value of stock-based awards made in exchange for employee services over the requisite employee service period. Stock-based compensation cost for stock options is determined at the grant date using an option pricing model. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee's requisite service period.


Income Taxes

        Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        The Company evaluates and accounts for uncertain income tax positions in accordance with ASC 740, Income Taxes. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In accordance with ASC 740, the Company began accounting for uncertain income tax positions during the year ended December 31, 2009. The Company did not identify any uncertain income tax positions that could have a material impact to the financial statements. The Company is subject to taxation in various jurisdictions and remains subject to examination by taxing jurisdictions for the years 2004 and all subsequent periods due to the availability of net operating loss carryforwards.

        The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties as of December 31, 2011 and 2010.

F-60


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The Company considers potential tax effects resulting from discontinued operations and records intra-period tax allocations, when those effects are deemed material.


Income (Loss) per Share

        Basic income (loss) per share is calculated by dividing net income (loss) less preferred stock dividends by the weighted-average number of shares of common stock outstanding during the period. For periods of net income, and when the effects are dilutive, diluted earnings per share is computed by dividing net income (as adjusted for interest expense on convertible debt, if outstanding) by the weighted-average number of shares of common stock outstanding plus the number of shares that would be outstanding if warrants were exercised for common shares or preferred stock convertible into common shares, using the treasury method, or if convertible debt and convertible preferred stock had been converted into common shares, using the if-converted method. Diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive due to the net losses; accordingly, diluted loss per share is the same as basic loss per share.

        The number of anti-dilutive shares, consisting of common stock options, warrants exercisable for common stock, warrants exercisable for preferred stock, convertible debt, and convertible preferred stock which have been excluded from the computation of diluted loss per share for the years ended December 31, 2011 and 2010, were 2,109,869 and 687,377, respectively.

        Basic and diluted loss per share has been adjusted for a 10:1 reverse stock split effected on January 28, 2011.


Redeemable Preferred Stock

        The carrying value of the Company's redeemable convertible preferred stock is increased by the accretion of any related discounts and accrued but unpaid dividends so that the carrying amount will equal the redemption amount at the dates the stock becomes redeemable. The Company's Series A, B, and C preferred stock is redeemable at the option of the holders, subject to certain additional requirements (Note 11).


Stock Splits and Other Reclassifications

        In January 2011 the Company's Board of Directors approved a resolution to effect a one-for-ten reverse stock split of the Company's common and preferred stock with a corresponding change to the par values. The par values, and all common and preferred share numbers for all periods presented, have been adjusted retrospectively to reflect the change in par value and the one-for-ten reverse stock split.

        The Company historically classified its redeemable convertible preferred stock as "permanent equity" according to accepted practices for private companies. As of December 31, 2011, and for all periods presented, the Company has classified its redeemable convertible preferred stock as "temporary equity" as required by the rules and regulations of the Securities and Exchange Commission.

F-61


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Financial Instruments

        The Company's balance sheets include various financial instruments (primarily cash and cash equivalents, prepaid expenses, accounts receivable, accounts payable, accrued expenses, borrowings under line of credit, notes payable and other current liabilities) that approximate fair value. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. US GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

        See Note 15 for additional information regarding fair value.


Recent Accounting Pronouncements

        In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 did not change the items that must be reported in other comprehensive income. The Company adopted the provisions of ASU 2011-05 in the first quarter of 2012. As the Company's net loss is the same as comprehensive loss, the Company did not present a statement of comprehensive loss.


Subsequent Events

        The Company performed an evaluation of subsequent events through November 20, 2012, the date the accompanying financial statements were available to be issued, and did not identify any material events that warrant disclosure, except as disclosed in Note 16.

2. RESTATEMENT OF 2011 AND 2010 FINANCIAL STATEMENTS

        In connection with certain convertible debt financings in 2010 and 2009, the Company issued stock purchase warrants to the lenders to purchase the Company's preferred stock. The Company allocated fair value to the stock purchase warrants issued in 2010 ($667,021) and 2009 ($76,050) based on management's estimate of fair value. In 2012, in connection with the review of certain equity

F-62


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

2. RESTATEMENT OF 2011 AND 2010 FINANCIAL STATEMENTS (Continued)

transactions, the Company obtained independent third-party valuations of its equity securities and determined that the fair value of the stock purchase warrants issued in 2010 and 2009 (and for all subsequent periods) was de minimis and that the prior allocation should be revised. As a result, the Company has restated its 2011 and 2010 annual financial statements to correctly value the warrants. This correction resulted in changes to the following financial statement line items as of and for the periods indicated:

 
  As Previously
Reported
  Increase
(Decrease)
  As Restated  

Year ended December 31, 2011

                   

Statement of Operations

                   

Interest expense

  $ (2,592,613 ) $ (338,819 ) $ (2,253,794 )

Total other expense

    (2,977,168 )   (338,819 )   (2,638,349 )

Net loss from continuing operations

    (2,972,523 )   (338,819 )   (2,633,704 )

Net loss

    (2,766,978 )   (338,819 )   (2,428,159 )

Statement of Cash Flows

                   

Net loss

  $ (2,766,978 ) $ (338,819 ) $ (2,428,159 )

Non-cash interest relating to convertible debt

    2,257,855     (338,819 )   1,919,036  

As of December 31, 2011

                   

Additional paid-in capital

 
$

1,829,532
 
$

(743,071

)

$

1,086,461
 

Accumulated deficit

    (36,113,213 )   (743,071 )   (35,370,142 )

F-63


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

2. RESTATEMENT OF 2011 AND 2010 FINANCIAL STATEMENTS (Continued)


 
  As Previously
Reported
  Increase
(Decrease)
  As Restated  

Year ended December 31, 2010

                   

Statement of Operations

                   

Interest expense

  $ (1,627,117 ) $ (447,686 ) $ (1,179,431 )

Total other expense

    (1,765,178 )   (447,686 )   (1,317,492 )

Net loss from continuing operations

    (4,595,991 )   (447,686 )   (4,148,305 )

Net loss

    (9,720,796 )   (447,686 )   (9,273,110 )

Statement of Cash Flows

                   

Net loss

  $ (9,720,796 ) $ (447,686 ) $ (9,273,110 )

Non-cash interest relating to convertible debt

    1,385,391     (447,686 )   937,705  

Fair market value of stock purchase warrants issued in connection with convertible debt

    667,021     (667,021 )    

As of December 31, 2010

                   

Convertible debt

 
$

11,629,784
 
$

338,819
 
$

11,968,603
 

Total liabilities

    17,818,203     338,819     18,157,022  

Additional paid-in capital

    1,824,982     (743,071 )   1,081,911  

Accumulated deficit

    (44,848,525 )   (404,252 )   (44,444,273 )

        The effect of the restatement as of January 1, 2010 (the earliest period presented) was a decrease of $76,050 in additional paid-in capital and an increase of $43,434 in accumulated deficit.

3. ACCOUNTS RECEIVABLE

        Accounts receivable consist of the following as of December 31:

 
  2011   2010  

Accounts receivable, gross

  $ 8,991,124   $ 2,439,751  

Adjustments for chargebacks and other allowances

    (3,886,556 )   (750,548 )
           

Accounts receivable, net

  $ 5,104,568   $ 1,689,203  
           

F-64


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

4. INVENTORIES

        Inventories consist of the following as of December 31:

 
  2011   2010  

Raw materials

  $ 836,724   $ 987,169  

Packaging materials

    687,185     290,858  

Work-in-progress

    95,762     40,996  

Finished goods

    501,230     1,067,592  
           

    2,120,901     2,386,615  

Reserve for excess/obsolete inventories

    (13,438 )   (24,625 )
           

Inventories, net

  $ 2,107,463   $ 2,361,990  
           

5. INTANGIBLE ASSETS

        Intangible assets consist of the exclusive rights, including all of the applicable technical data and other relevant information, to produce certain pharmaceutical products which the Company has acquired from various companies during the year ended December 31, 2011. The purchase prices totaled $160,000 and are being amortized, upon product commercialization, on a straight-line basis over the estimated useful life of the products of three years. Amortization expense for the year ended December 31, 2011 totaled $25,000.

6. NOTES PAYABLE

        Notes payable consist of amounts previously owed to suppliers as accounts payable that were subsequently converted to notes payable, as agreed upon by the Company and their respective suppliers. During the year ended December 31, 2009, the Company reached an agreement with a supplier to convert $938,276 of accounts payable to a note payable. Under the terms of the agreement, the Company was required make monthly payments of principal amounts plus interest of 6% per annum. In May 2011, the Company reached an agreement with the supplier to settle all amounts due by the Company in full and final for $175,000. The resulting gain is included as a gain on the discontinued operation in the accompanying statements of operations. Amounts due under this agreement as of December 31, 2011 and 2010 totaled $0 and $275,000, respectively.

        During October 2011, the Company reached a settlement agreement with another supplier in the amount of $450,000. Under the terms of the agreement, the Company is required make monthly payments of $50,000. Amounts due under this agreement totaled $300,000 as of December 31, 2011 and mature on July 1, 2012.

7. DISCONTINUED OPERATION

        On September 17, 2010, the Company sold its operation in Gulfport, Mississippi to a third-party for $2,300,000. This operation manufactured over-the-counter pharmaceuticals products, which were sold under private-label contracts to retail pharmacy chains. The net assets of the Gulfport operation had a carrying value of $5,819,473 on the date of the sale, resulting in a loss of $3,669,245 on disposal

F-65


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

7. DISCONTINUED OPERATION (Continued)

of the discontinued operation. The decision to sell the Gulfport operation was based on its historical underperformance and recurring losses and the anticipated need for continued financing from outside sources to maintain ongoing operations.

        The following liabilities relate to the Gulfport operation's discontinued operation and have been segregated from continuing operations in the accompanying balance sheets as of December 31:

 
  2011   2010  

Liabilities:

             

Accounts payable

  $ 512,275   $ 1,488,211  

Accrued expenses

        12,482  
           

Net Current Liabilities from Discontinued Operation

  $ 512,275   $ 1,500,693  
           

        As of December 31, 2011, accounts payable consisted of balances due to various vendors of the discontinued operation.

        The following revenues and expenses relate to the Gulfport facility's discontinued operation and have been segregated from continuing operations in the accompanying statements of operations for the years ended December 31,:

 
  2011   2010  

Net Revenues

  $   $ 6,286,353  

Operating Expenses

             

Cost of Sales (exclusive of depreciation and amortization)

        4,607,036  

Salaries and benefits

        1,196,134  

Freight

        367,598  

Selling, general and administrative

        930,658  

Depreciation and amortization

        615,113  
           

Total Operating Expenses

        7,716,539  
           

Operating Income (Loss) from Discontinued Operation

        (1,430,186 )

Other Income (Expense)

             

Interest expense

        (166,927 )

Other income

    205,545     141,553  
           

Total Other Income (Expense)

    205,545     (25,374 )
           

Income (Loss) from Discontinued Operation

    205,545     (1,455,560 )

Loss on Disposal of Discontinued Operation

   
   
(3,669,245

)
           

Gain (Loss) on Discontinued Operation

  $ 205,545   $ (5,124,805 )
           

        During the year ended December 31, 2011, the majority of the gain on discontinued operation consisted of a recovery of a previously written-off accounts receivable balance totaling $150,000 and

F-66


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

7. DISCONTINUED OPERATION (Continued)

various other vendor settlements. During the year ended December 31, 2010, interest expense was allocated to the discontinued operation in proportion to the assets of the discontinued operation against which the Company borrowed under the line of credit as well as certain capital leases for equipment specifically used for the discontinued operation.

8. LINE OF CREDIT

        During the years ended December 31, 2011 and 2010, the Company had borrowings under a line of credit agreement with a commercial lender. Due to covenant defaults, the Company entered into a forbearance agreement in May 2010, which was last amended in October 2011. Under the terms of the amended forbearance agreement, the Company could borrow an amount equal to the lesser of the borrowing base, as defined, or $3.5 million. Interest accrued at an annual rate of the Base Rate, as defined, plus 6.0%. The Base Rate as of December 31, 2011 and 2010 was 3.25%. The effective rate as of December 31, 2011 and 2010 was 9.25%. In addition, a usage fee equal to 0.75% per annum of the unused facility and a management fee equal to $9,000 per annum were assessed monthly. The line of credit was secured by substantially all of the Company's assets. The amended forbearance agreement expired in June 2012, however, the Company entered into a new revolver loan agreement with a different commercial bank in June 2012 (Note 16).

        Borrowings under the line of credit plus outstanding checks as of December 31, 2011 and 2010 totaled $3,064,414 and $1,722,678, respectively. The Company was required to meet certain financial covenants under the amended forbearance agreement. The Company was in compliance with all covenants as of December 31, 2011 and 2010.

9. LONG-TERM DEBT

        Long-term debt consisted of the following as of December 31:

 
  2011   2010  

Term note payable to a financial institution, due in monthly installments of $33,333, with interest at a maximum rate of Base Rate, as defined, plus 8% (effective rate was 11.25% at December 31, 2010)

  $   $ 633,333  
           

        633,333  

Less: current maturities

        (400,000 )
           

Long-term debt, net of current maturities

  $   $ 233,333  
           

        The long term debt was secured by substantially all of the Company's assets and included financial covenants and limitations on the Company's ability to enter into certain transactions during the term of the agreements. Due to covenant defaults, the Company entered into a forbearance agreement in May 2010, which was most recently amended in October 2011. The Company was in compliance with all covenants as of December 31, 2010. As of December 31, 2011, the note had been paid in full.

F-67


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

10. CONVERTIBLE DEBT

        In 2009, the Company issued $2,502,814 of Secured Subordinated Convertible Notes ("the 2009 Convertible Notes"). The 2009 Convertible Notes, which bore interest at 10% per annum, were due on September 3, 2011. Interest on the 2009 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2009 Convertible Notes were secured by a second lien on substantially all of the Company's assets and included financial covenants and limitations on the Company's ability to enter into certain transactions while the 2009 Convertible Notes were outstanding.

        In connection with the issuance of the 2009 Convertible Notes, the Company also issued warrants to acquire shares of the Company's common and preferred stock ("the 2009 Warrants"). The 2009 Warrants, accounted for as derivative liabilities, expired on the earlier of the repayment of the 2009 Convertible Notes or a Qualified Public Offering, as defined, and had an exercise price of $0.10 per share. The estimated fair value of the 2009 Warrants upon issuance, based on an independent third-party valuation of the Company's equity securities, was deemed immaterial.

        In 2010, the Company issued $8,474,951 of Secured Subordinated Convertible Notes ("the 2010 Convertible Notes"). The 2010 Convertible Notes, which bore interest at 14% per annum, were due on September 3, 2011. Interest on the 2010 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2010 Convertible Notes were secured by a second lien on substantially all of the Company's assets and included financial covenants and limitations on the Company's ability to enter into certain transactions while the 2010 Convertible Notes were outstanding.

        In connection with the issuance of the 2010 Convertible Notes, the Company also issued warrants to acquire shares of the Company's Series D Preferred stock ("the 2010 Warrants"). The 2010 Warrants, accounted for as derivative liabilities, expired on the earlier of the repayment of the 2010 Convertible Notes or a Qualified Public Offering, as defined, and had an exercise price of $0.10 per share. The estimated fair value of the 2010 Warrants upon issuance, based on an independent third-party valuation of the Company's equity securities, was deemed immaterial.

        Interest expense relating to the 2009 and 2010 Convertible Notes totaled $937,705 during the year ended December 31, 2010. The change in fair value of the derivative liabilities relating to the 2009 Warrants and 2010 Warrants during the year ended December 31, 2010 was not material.

        In 2011, the Company issued $2,694,294 of Secured Subordinated Convertible Notes ("the 2011 Convertible Notes") and consolidated all of the outstanding 2009 and 2010 Convertible Notes into the 2011 Convertible Notes (collectively "the Consolidated 2011 Convertible Notes"). The consolidation of the 2009 and 2010 Convertible Notes was accounted for as a debt modification. The Consolidated 2011 Convertible Notes, which bore interest at 14% per annum, were due on the earliest to occur of: (i) the date of the closing of a merger, consolidation or reorganization of the Company with or into any other entity or a sale of all or substantially all of the assets of the Company, resulting in a change of control, (ii) the date of any dissolution, liquidation or winding up of the Company, or (iii) December 31, 2012. Interest on the Consolidated 2011 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock.

F-68


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

10. CONVERTIBLE DEBT (Continued)

        The Consolidated 2011 Convertible Notes were convertible into equity securities issued in a Qualified Financing, as defined, ("Qualified Financing Securities") or Series D Convertible Preferred Stock of the Company. In the event of the consummation of a Qualified Financing, or upon the election of the holders of at least 65% of the Consolidated 2011 Convertible Notes, or in the event that the Company refinanced its senior credit facility in a manner satisfactory to the holders of at least 65% of the Consolidated 2011 Convertible Notes, then all outstanding principal and accrued but unpaid interest was convertible into such number of shares of the Qualified Financing Securities or Series D Preferred as was obtained by dividing the Conversion Value of the notes by $30.00, subject to adjustment. The Conversion Value was equal to four times (4x) the sum of all outstanding principal and accrued but unpaid interest under the Consolidated 2011 Convertible Notes.

        The Consolidated 2011 Convertible Notes were secured by a second lien on substantially all of the Company's assets and included covenants and limitations on the Company's ability to enter into certain transactions while the Consolidated 2011 Convertible Notes were outstanding.

        Interest expense relating to the Consolidated 2011 Convertible Notes totaled $1,919,036 during the year ended December 31, 2011. The change in fair value of the derivative liabilities relating to the 2009 Warrants and 2010 Warrants during the year ended December 31, 2011 was not material.

        The Company was in compliance with all covenants as of December 31, 2011 and 2010.

        As part of the agreements relating to the Convertible Notes, the Company is required to pay monitoring and advisory fees to two investors totaling $200,000 per annum, which are included in other expense in the accompanying statement of operations for the year ended December 31, 2011. These fees commenced on January 1, 2011 and are paid quarterly in advance on the first business day of each calendar quarter.

        In June 2012, the holders of the Consolidated 2011 Convertible Notes converted all outstanding convertible debt and accrued interest into shares of Series D Preferred (Note 16).

11. CAPITALIZATION

Authorized shares

        The Company is authorized to issue up to 7,300,000 shares of stock of which 3,700,000 are designated as common stock with a $0.10 per share par value and 3,600,000 are designated as preferred stock with a $0.10 par value.

F-69


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)


Series A 10% Convertible Preferred Stock

        The Company has designated 108,494 shares of its authorized preferred stock as Series A 10% Convertible Preferred Stock ("the Series A Preferred"). The Series A Preferred has a stated value of $100 per share. Among the terms and conditions of the Series A Preferred are the following:

Ranking

        The Series A Preferred is senior to the common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series A Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 10% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series A Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $995,557 and $6,802,664 as of December 31, 2011 and 2010, respectively, and are included in Series A Preferred Stock in the accompanying balance sheets.

Conversion

        Each share of Series A Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least 60% of the then issued and outstanding shares of the Series A Preferred, or the date all of the outstanding shares of Series D Preferred Stock are mandatorily converted to shares of common stock, each share of Series A Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series A Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series A Preferred shall have the right to the number of votes it would have obtained had the Series A Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 54,246.7 shares of the Series A Preferred remain outstanding, the vote of a majority of the outstanding shares of Series A Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series A Preferred.

F-70


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series A Preferred shall have the right to receive, prior to any payment to holders of common stock, the greater of (i) the stated value of the Series A Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the common stock if the Series A Preferred was converted to common stock immediately prior to the event.


Series B 10% Convertible Preferred Stock

        The Company has designated 118,915 shares of its authorized preferred stock as Series B 10% Convertible Preferred Stock ("the Series B Preferred"). The Series B Preferred has a stated value of $110 per share. Among the terms and conditions of the Series B Preferred are the following:

Ranking

        The Series B Preferred is senior to the Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series B Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 10% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series B Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $836,368 and $5,386,525 as of December 31, 2011 and 2010, respectively, and are included in Series B Preferred Stock in the accompanying balance sheets.

Conversion

        Each share of Series B Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least the majority of the then issued and outstanding shares of the Series B Preferred, or the date all of the outstanding shares of Series D Preferred Stock are mandatorily converted to shares of common stock, each share of Series B Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series B Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series B Preferred shall have the right to the number of votes

F-71


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)

it would have obtained had the Series B Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 40,381.3 of the shares of the Series B Preferred remain outstanding, the vote of a majority of the outstanding shares of Series B Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series B Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series B Preferred shall have the right to receive, prior to any payment to holders of Series A Preferred and common stock, the greater of (i) the stated value of the Series B Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series A Preferred and common stock if the Series B Preferred was converted to common stock immediately prior to the event.


Series C 12% Convertible Preferred Stock

        The Company has designated 37,956 shares of its authorized preferred stock as Series C 12% Convertible Preferred Stock ("the Series C Preferred"). The Series C Preferred has a stated value of $110 per share. Among the terms and conditions of the Series C Preferred are the following:

Ranking

        The Series C Preferred is senior to the Series B Preferred, Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series C Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 12% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series C Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $448,148 and $1,594,659 as of December 31, 2011 and 2010, respectively, and are included in Series C Preferred Stock in the accompanying balance sheets.

Conversion

        Each share of Series C Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

F-72


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least the majority of the then issued and outstanding shares of the Series C preferred, or the date all of the outstanding shares of Series D Preferred Stock are mandatorily converted to shares of common stock, each share of Series C Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series C Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series C Preferred shall have the right to the number of votes it would have obtained had the Series C Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 18,977.5 shares of the Series C Preferred remain outstanding, the vote of a majority of the outstanding shares of Series C Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series C Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series C Preferred shall have the right to receive, prior to any payment to holders of Series B Preferred, Series A Preferred and common stock, the greater of (i) the stated value of the Series C Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series B Preferred, Series A Preferred and common stock if the Series C Preferred was converted to common stock immediately prior to the event.


Series D 10% Convertible Preferred Stock

        The Company has designated 3,400,000 shares of its authorized preferred stock as Series D 10% Convertible Preferred Stock ("the Series D Preferred"). The Series D Preferred has a stated value of $30 per share. As of December 31, 2011, the Company had not issued any Series D Preferred (Note 16). Among the terms and conditions of the Series D Preferred are the following:

Ranking

        The Series D Preferred is senior to the Series C Preferred, Series B Preferred, Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series D Preferred accrue from the date of issuance, whether or not earned or declared, at the rate of 10% per annum.

F-73


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)

Conversion

        Each share of Series D Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least 65% of the then issued and outstanding shares of the Series D preferred, each share of Series D Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series D Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series D Preferred shall have the right to the number of votes it would have obtained had the Series D Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, in the event that 1,000,000 shares of the Series D Preferred are outstanding, the vote of 65% of the outstanding shares of Series D Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series D Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series D Preferred shall have the right to receive, prior to any payment to holders of Series C Preferred, Series B Preferred, Series A Preferred and common stock, an amount equal to the sum of all accrued but unpaid dividends plus the greater of (i) the Preferred D stated value and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series C Preferred, Series B Preferred, Series A Preferred and common stock if the Series D Preferred was converted to common stock immediately prior to the event.


Warrants

        In connection with the issuance of the Company's Convertible Debt (Note 10), the Company issued warrants for common stock at an exercise price of $0.10 per share and warrants for preferred stock at an exercise price of $0.10 per share. The number of common shares issuable upon exercise of the common warrants was based on accrued interest on the 2009 Convertible Notes. The number of preferred shares issuable upon exercise of the preferred warrants was based on the principal amount of certain of the 2009 Convertible Notes and on 12% of the Conversion Value of certain of the 2010 Convertible Notes. The warrants expired on the earlier of the repayment or conversion of the

F-74


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)

respective convertible debt or a Qualified Public Offering, as defined by the agreement. For the years ended December 31, 2011 and 2010, the common warrants were exercisable for 17,536 and 10,196 common shares, respectively. For the years ended December 31, 2011 and 2010, the preferred warrants were exercisable for 25,910 and 20,659 preferred shares, respectively.

        In June 2012, in conjunction with the conversion of the Consolidated 2011 Convertible Notes, 27,359 Series D Preferred shares were issued from the exercise of the preferred warrants, and 22,484 shares of common stock were issued from the exercise of the common warrants (Note 16).


Stockholders' Agreement

        The Company and its stockholders have entered into an agreement ("the Stockholders' Agreement"). Under the terms of the agreement, the parties have agreed to elect certain individuals, as designated by holders of the Series A Preferred, Series B Preferred, and Series C Preferred and, upon issuance, Series D Preferred, as members of the Company's Board of Directors ("the Board"). In addition, the Stockholders' Agreement requires the approval of the majority of the holders of the Series A Preferred, Series B Preferred, Series C Preferred and Series D Preferred and, in some cases, the approval of 65% of the holders of the Series D Preferred prior to making certain changes to the Company's Charter, By-laws or Board configuration and entering into certain transactions.

        Under the terms of the Stockholders' Agreement, at any time after December 31, 2012, the holders of a majority of Series D Preferred have the right to require the Company to redeem all of the holders' shares of Series D Preferred at a price which is the sum of all accrued but unpaid dividends plus the greater of (i) the fair market value of the Series D Preferred being redeemed or (ii) the holders' pro-rata share, based on the Series D Preferred being redeemed, of the equity value of the Company as determined by a nationally recognized investment bank or a valuation formula as defined in the Stockholders' Agreement. At any time after the holders of a majority of Series D Preferred require the Company to redeem all of the holders' shares of Series D Preferred, the holders of a majority of Series A Preferred and Series B Preferred, and the holders of 55% of the Series C Preferred shall have the right to require the Company to redeem the holders' shares at a price which is the sum of all accrued but unpaid dividends plus the greater of (i) the fair market value of the Series A, Series B, and Series C Preferred being redeemed or (ii) the holders' pro-rata share, based on the Series A, Series B, and Series C Preferred being redeemed, of the equity value of the Company as determined by a nationally recognized investment bank or a valuation formula as defined in the Stockholders' Agreement.

        The Stockholders' Agreement also contains provisions that govern the process a stockholder must follow concerning disposition of shares, the requirements for a stockholder to sell shares in the event of certain approved transactions (drag along rights), the rights of a stockholder to sell shares in the event other stockholders propose to sell their shares (tag along rights) and the rights of the stockholder in the event the Company proposes to sell additional shares (preemptive rights).

F-75


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

11. CAPITALIZATION (Continued)


Loan Receivable from Stockholder

        In connection with the issuance of the Series B Preferred in 2006, a stockholder purchased 18,812 shares of Series B Preferred from the Company at an aggregate purchase price of $200,000. Concurrent with the purchase, the Company loaned the stockholder $200,000 to finance the purchase of the Series B Preferred. In connection with the issuance of the Series C Preferred during the year ended December 31, 2010, the stockholder purchased 5,231 shares of Series C Preferred from the Company at an aggregate purchase price of $57,535. Concurrent with the purchase, the Company loaned the stockholder $57,535 to finance the purchase of the Series C Preferred. The loans bore interest at 5% and were secured by the respective Preferred Stock purchased by the stockholder. The outstanding balance totaled $90,215 as of December 31, 2010 and was recorded as loan receivable from stockholder in the accompanying balance sheet. During the year ended December 31, 2011, the Company canceled the indebtedness from the stockholder in exchange for the surrender of all the stockholder's shares of common and preferred stock in the Company. Accordingly, there was no outstanding balance on the loan receivable from stockholder as of December 31, 2011.

12. STOCK-BASED COMPENSATION

        The Company has adopted the ANIP Acquisition Company 2005 Stock Option Plan ("the Plan"). The maximum number of shares which may be subject to option and sold under the Plan was originally 108,750. During the year ended December 31, 2007, the Board of Directors of the Company amended the Plan and increased the maximum number of shares to issue by an additional 204,000 shares.

        As of December 31, 2011, the Company has granted 17,500 options and has 295,250 shares available for future grants. Under the terms of the Stock Option Plan, stock options are granted at exercise prices not less than the fair value of the stock at the date of grant. The Board establishes the exercise price at the time each option is granted. Unless terminated at an earlier date, options expire on the tenth anniversary of the date of grant. Generally, share options vest over 5 years. The Board determines the effect on an option grant as of the disability, death, or other change in the employment of a participant, and the extent to which the participant, the participant's legal representative, conservator, guardian, or designated beneficiary may exercise rights under the option grant. The Company intends to issue new shares to satisfy share options upon exercise.

        The Company has adopted ASC 718, Compensation—Stock Compensation, which requires that the cost of equity-based service awards be measured based on the grant-date fair value of the award. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award or the requisite service period. The Company recognizes stock-based compensation expense ratably over the vesting periods of options, adjusted for estimated forfeitures. For the years ending December 31, 2011 and 2010, the Company recognized non-cash compensation expense related to stock options of $4,550 and $6,405, respectively.

        The Company values options using the Black-Scholes option-pricing model which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions. Black-Scholes and other option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's stock-based awards

F-76


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

12. STOCK-BASED COMPENSATION (Continued)

have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based awards.

        The following is a summary of option activity for the year ending December 31, 2011:

 
  Number   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
(in years)
  Aggregate
Intrinsic
Value
 

Options outstanding at December 31, 2010

    17,500   $ 11.00     6.2      

Granted

                     

Exercised

                     

Forfeited

                     

Expired

                     
                   

Options outstanding at December 31, 2011

    17,500   $ 11.00     5.2      
                   

Options exercisable at December 31, 2011

    16,680   $ 11.00     4.2      
                   

        The following is a summary of non-vested options for the year ending December 31, 2011:

 
  Number   Weighted
Average
Grant Date
Fair Value
 

Nonvested options outstanding at December 31, 2010

    4,102   $ 1.30  

Granted

         

Vested

    (3,282 )   1.30  

Forfeited

         
           

Nonvested options outstanding at December 31, 2011

    820   $ 1.32  
           

        The total compensation cost related to non-vested awards not yet recognized as of December 31, 2011 totaled $455 and will be recognized over a weighted average period of 0.25 years.

F-77


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

12. STOCK-BASED COMPENSATION (Continued)

        The following is a summary of option activity for the year ending December 31, 2010:

 
  Number   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
(in years)
  Aggregate
Intrinsic
Value
 

Options outstanding at December 31, 2009

    33,625   $ 10.83     6.7      

Granted

                     

Exercised

                     

Forfeited

    (16,125 )   10.65              

Expired

                     
                   

Options outstanding at December 31, 2010

    17,500   $ 11.00     6.2      
                   

Options exercisable at December 31, 2010

    13,398   $ 11.00     5.2      
                   

        The following is a summary of non-vested options for the year ending December 31, 2010:

 
  Number   Weighted
Average
Grant Date
Fair Value
 

Nonvested options outstanding at December 31, 2009

    11,813   $ 1.30  

Granted

         

Vested

    (3,281 )   1.30  

Forfeited

    (4,430 )   0.85  
           

Nonvested options outstanding at December 31, 2010

    4,102   $ 1.30  
           

13. INCOME TAXES

        The Company has no current tax provision due to its current and accumulated losses, which result in net operating loss carryforwards. At December 31, 2011, the Company had approximately $32 million in net operating loss carryforwards, which begin to expire in 2025. The utilization of the net operating loss carryforwards may be limited in future years as prescribed by Section 382 of the United States Internal Revenue Code. The net operating loss carryforwards, as well as other items, have generated deferred tax benefits, which have been recorded as deferred tax assets and are entirely offset by a tax valuation allowance. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Based upon the historical losses and uncertainty of future taxable income, management has established a 100% valuation allowance as of December 31, 2011 and 2010.

F-78


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

13. INCOME TAXES (Continued)

        The components of the deferred tax asset are as follows as of December 31:

 
  2011   2010  

Net operating loss carryforwards

  $ 12,965,000   $ 11,742,000  

Allowance for doubtful accounts

        275,000  

Inventory

    107,000     122,000  

Prepaid expenses

    (49,000 )   (53,502 )

Book vs. tax depreciation

    (289,000 )   (300,000 )

Accrued expenses

    287,000     202,000  

Charitable contributions

    16,000     16,000  

Miscellaneous

    43,000     107,502  
           

Total deferred tax asset, net

    13,080,000     12,111,000  

Valuation allowance

    (13,080,000 )   (12,111,000 )
           

Deferred tax asset, net

  $   $  
           

        The difference between the Company's reported income tax benefit and the income tax benefit that would have resulted from applying Federal statutory tax rates to the pre-tax loss from operations relates primarily to the effect of state income taxes and changes in the valuation allowance.

14. COMMITMENTS AND CONTINGENCIES

Operating Leases

        The Company leases equipment under operating leases that expire in September 2012. Future minimum lease payments due under these leases total $6,284 as of December 31, 2011.

        Rent expense for the years ended December 31, 2011 and 2010 totaled $18,633 and $49,893, respectively.


Government Regulation

        The Company's products and facilities are subject to regulation by a number of Federal and State governmental agencies. The Food and Drug Administration (FDA), in particular, maintains oversight of the formulation, manufacture, distribution, packaging and labeling of all of the Company's products. The Drug Enforcement Administration (DEA) maintains oversight over the Company's products that are considered controlled substances.


Unapproved Products

        Certain of the Company's generic products are marketed without approved New Drug Applications (NDA) or Abbreviated New Drug Applications (ANDA). During the years ended December 31, 2011 and 2010, combined net revenues for these products totaled $3.5 million and $95,000, respectively.

        The FDA's policy with respect to the continued marketing of unapproved products is stated in the FDA's September 2011 compliance policy guide, Marketed New Drugs without Approved NDAs or

F-79


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

14. COMMITMENTS AND CONTINGENCIES (Continued)

ANDAs. Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those marketed as unapproved drugs with potential safety risks or that lack evidence of effectiveness. The Company believes that so long as it complies with applicable manufacturing and labeling standards, it will be in compliance with the FDA's current enforcement policy. There can be no assurance, however, that the FDA will continue this policy or not take a contrary position with any individual product or group of products. If the FDA were to take a contrary position, the Company may be required to seek FDA approval for these products or withdraw such products from the market (Note 16).

        In addition, one group of products that the Company manufactures on behalf of a contract customer is marketed by that customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. The Company's contract manufacturing revenue for the group of unapproved products for the years ended December 31, 2011 and 2010 was $1.3 million and $623,000, respectively.

        The Company receives royalties on the net sales of a group of contract-manufactured products, which are marketed by the contract customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. The Company's royalties on the net sales of these unapproved products for the years ended December 31, 2011 and 2010 were $320,000 and $118,000, respectively.


Other Commitments and Contingencies

        All manufacturers of the drug Reglan® and its generic equivalent metoclopramide, including the Company, are facing allegations from plaintiffs in various states claiming bodily injuries as a result of ingestion of metoclopramide or its brand name Reglan® prior to the FDA's February 2009 Black Box warning requirement. The Company has been named and served in 79 separate complaints, including three in Pennsylvania, nine in New Jersey, and 67 in California, covering 2,921 plaintiffs in total. In August 2012, the Company was dismissed with prejudice from all New Jersey cases. Management considers the Company's exposure to this litigation to be limited due to several factors: (1) the only generic metoclopramide manufactured by the Company prior to the implementation of the FDA's warning requirement was an oral solution introduced after May 28, 2008; (2) the Company's market share for the oral solution was a very small portion of the overall metoclopramide market; and (3) once the Company received a request for change of labeling from the FDA, it submitted its proposed changes within 30 days, and such changes were subsequently approved by the FDA. At the present time, the Company's management is unable to assess the likely outcome of the remaining cases. The Company's insurance company has assumed the defense of this matter. In addition, the Company's insurance company renewed the Company's product liability insurance on September 1, 2011 and 2012 with absolute exclusions for claims related to Reglan® and metoclopramide. The Company cannot provide assurances that the outcome of these matters will not have an adverse effect on its business,

F-80


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

14. COMMITMENTS AND CONTINGENCIES (Continued)

results of operations, financial condition and cash flow. Furthermore, like all pharmaceutical manufacturers, the Company in the future may be exposed to other product liability claims, which could harm its business, results of operations, financial condition and cash flow.

15. FAIR VALUE DISCLOSURES

        Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. US GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.

        The inputs used in measuring the fair value of cash and cash equivalents are considered to be level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the Company's funds. The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses, borrowings under line of credit, notes payable, and other current liabilities) approximate their carrying values because of their short-term nature.

        The Company's stock purchase warrants are classified as derivative liabilities and are measured at fair value using level 3 inputs. The fair value of stock purchase warrants is determined based on the Black-Scholes option pricing model or an equity allocation model. These models require the use of unobservable inputs such as fair value of the Company's common and preferred stock, expected term, anticipated volatility, future interest and interest rates, expected cash flows and the number of outstanding common and preferred shares as of a future date. The Company determined that the fair value of the derivative liabilities, and the changes in such fair value, was immaterial as of and for the years ended December 31, 2011 and 2010 (Note 2). The Company has no other financial assets and liabilities that are measured at fair value. The Company has no nonfinancial assets or liabilities that are measured at fair value.

16. SUBSEQUENT EVENTS

Conversion of Convertible Debt

        In June 2012, the holders of the Consolidated 2011 Convertible Notes converted all outstanding convertible debt and accrued interest into 2,375,312 shares of Series D Preferred, of which 27,359 shares were issued from warrant exercise, and 22,484 shares of common stock, also from warrant exercise (Note 11). Accordingly, the Company has classified all of its outstanding convertible debt as of December 31, 2011 as long-term on the balance sheet as of December 31, 2011.


New Line of Credit

        In June 2012, the Company entered into a new revolver loan agreement with a commercial bank in the amount of $5,000,000. The revolver loan bears interest daily at LIBOR plus 5% and is secured by substantially all of the Company's assets. The revolver loan agreement expires in June 2015.

F-81


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

16. SUBSEQUENT EVENTS (Continued)


Transaction Bonus Agreements

        In September 2012, the Company entered into Transaction Bonus Agreements ("Bonus Agreements") with certain management employees. Under the terms of the Bonus Agreements, the Company will make bonus payments, upon a change of control transaction resulting in Net Proceeds being available for distribution to the Company's shareholders, to certain executives. The bonus payments are based upon the amount of Net Proceeds, as defined in the Bonus Agreements, realized in a change of control transaction. The Company's obligation to make the bonus payments are subject to, among other things, a minimum level of Net Proceeds and continuous employment of the executive. Under the terms of the Bonus Agreements, the BioSante Pharmaceuticals, Inc. ("BioSante") transaction discussed below would be considered a change of control transaction.


Merger Agreement with BioSante

        In October 2012, the Company entered into a definitive merger agreement with BioSante by which the companies will merge in an all-stock transaction. Under the terms of the agreement, upon completion of the merger, BioSante will issue to Company stockholders shares of BioSante common stock such that the former Company stockholders will own approximately 53 percent of the combined company's shares outstanding, and the former BioSante stockholders will own approximately 47 percent, subject to adjustment as provided in the merger agreement. In addition, immediately prior to the merger, BioSante plans to distribute to its then current stockholders contingent value rights (CVR) providing payment rights arising from a future sale, transfer, license or similar transaction(s) involving BioSante's LibiGel® (female testosterone gel). Upon completion of the merger, the combined company will be renamed ANI Pharmaceuticals, Inc. and will operate under the leadership of the Company's management team. The board of directors of the combined company is expected to have two directors from BioSante and five Company directors. Consummation of the merger is subject to a number of customary conditions, including, but not limited to, the approval of the merger agreement by the BioSante and ANI stockholders. If any of the conditions to the merger are not satisfied or, where waiver is permissible but not waived, the merger will not be consummated. The merger is expected to close during the first quarter of calendar 2013.


Opium Tincture

        In October 2012, ANI received a telephone call requesting a meeting with the FDA representatives from the Minneapolis district of the FDA to discuss continued manufacturing and distribution of Opium Tincture, which is a non-NDA product. That meeting was held on October 25, 2012 by conference telephone call and included FDA representatives from the Office of Compliance at the Center for Drug Evaluation and Research (CDER). Discussions with CDER are continuing. If, as a result of such discussions or otherwise, the FDA were to make a determination that ANI could not continue to sell Opium Tincture as an unapproved product, ANI would be required to seek FDA approval for such product or withdraw such product from the market. If ANI determined to withdraw the product from the market, ANI's net revenues for generic pharmaceutical products would decline materially, and if ANI decided to seek FDA approval, it would face increased expenses and might need

F-82


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

For the Years Ended December 31, 2011 and 2010

16. SUBSEQUENT EVENTS (Continued)

to suspend sales of the product until such approval is obtained, and there are no assurances that ANI would receive such approval.

F-83


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Unaudited Condensed Balance Sheets

 
  September 30,
2012
  December 31,
2011
As Restated
(Note 2)
 

Assets

             

Current Assets

             

Cash and cash equivalents

  $ 148,331   $  

Accounts receivable, net

    5,622,997     5,104,568  

Inventories, net

    2,494,635     2,107,463  

Prepaid expenses

    402,335     224,618  
           

Total Current Assets

    8,668,298     7,436,649  

Property and Equipment

             

Land

    86,949     86,949  

Buildings

    3,682,006     3,682,006  

Machinery, furniture and equipment

    3,553,732     3,445,284  

Construction in progress

    4,100     35,660  
           

    7,326,787     7,249,899  

Less: accumulated depreciation and amortization

   
2,533,368
   
2,145,630
 
           

Total Property and Equipment, net

    4,793,419     5,104,269  

Other Assets

             

Intangible assets, net

    97,500     135,000  
           

Total Other Assets

    97,500     135,000  
           

Total Assets

  $ 13,559,217   $ 12,675,918  
           

   

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

F-84


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Unaudited Condensed Balance Sheets (Continued)

 
  September 30,
2012
  December 31,
2011
As Restated
(Note 2)
 

Liabilities and Stockholders' Deficit

             

Current Liabilities

             

Accounts payable

  $ 1,296,220   $ 1,208,323  

Accrued expenses

    876,712     824,011  

Returned goods reserve

    387,615     252,045  

Borrowings under line of credit

    3,428,776     3,064,414  

Notes payable

        300,000  

Current liabilities of discontinued operation

    378,565     512,275  
           

Total Current Liabilities

    6,367,888     6,161,068  

Convertible Debt

   
   
16,581,933
 
           

Total Liabilities

    6,367,888     22,743,001  

Commitments and Contingencies (Note 11)

             

Redeemable Convertible Preferred Stock

             

10% Convertible Preferred Stock, Series A, $0.10 par value, stated value of $100 per share; 108,494 shares authorized, 102,774 shares issued and outstanding including cumulative dividends of $1,875,665 and $995,557 at September 30, 2012 and December 31, 2011, respectively

    11,268,465     10,388,357  

10% Convertible Preferred Stock, Series B, $0.10 par value, stated value of $110 per share; 118,915 shares authorized, 78,491 shares issued and outstanding including cumulative dividends of $1,575,747 and $836,368 at September 30, 2012 and December 31, 2011, respectively

    10,299,095     9,559,716  

12% Convertible Preferred Stock, Series C, $0.10 par value, stated value of $110 per share; 37,956 shares authorized, 34,810 shares issued and outstanding including cumulative dividends of $850,905 and $448,148 at September 30, 2012 and December 31, 2011, respectively

    4,671,169     4,268,412  

10% Convertible Preferred Stock, Series D, $0.10 par value, stated value of $30 per share; 3,400,000 shares authorized, 2,375,312 shares issued and outstanding including cumulative dividends of $2,304,378 at September 30, 2012

    19,916,760      
           

Total Redeemable Convertible Preferred Stock

    46,155,489     24,216,485  

Stockholders' Deficit

             

Common Stock, $0.10 par value, 3,700,000 shares authorized; 23,613 and 1,129 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

    2,361     113  

Additional paid-in capital

    1,081,477     1,086,461  

Accumulated deficit

    (40,047,998 )   (35,370,142 )
           

Total Stockholders' Deficit

    (38,964,160 )   (34,283,568 )
           

Total Liabilities and Stockholders' Deficit

  $ 13,559,217   $ 12,675,918  
           

   

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

F-85


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Unaudited Condensed Statements of Operations

For the Nine-Month Periods Ended September 30,
  2012   2011
As Restated
(Note 2)
 

Net Revenues

  $ 15,049,619   $ 11,954,985  

Operating Expenses

             

Cost of Sales (excluding depreciation and amortization)

    6,292,377     4,875,692  

Salaries and benefits

    3,516,427     3,245,637  

Freight

    242,814     178,499  

Research and development

    636,726     726,960  

Selling, general and administrative

    2,961,649     2,744,334  

Depreciation and amortization

    425,238     391,917  
           

Total Operating Expenses

    14,075,231     12,163,039  
           

Operating Income (Loss) from Continuing Operations

    974,388     (208,054 )

Other Expense

             

Interest expense

    1,239,137     1,597,156  

Other expense

    190,605     254,006  
           

Total Other Expenses

    1,429,742     1,851,162  
           

Net Loss from Continuing Operations

    (455,354 )   (2,059,216 )

Discontinued Operation

             

Gain on Discontinued Operation

    104,120     291,096  
           

Net Loss

  $ (351,234 ) $ (1,768,120 )
           

Computation of Loss from Continuing Operations Attributable to Common Stockholders:

             

Net Loss from Continuing Operations

  $ (455,354 ) $ (2,059,216 )

Preferred Stock Dividends

    (4,326,622 )   (582,293 )
           

Loss from Continuing Operations Attributable to Common Stockholders, basic and diluted

  $ (4,781,976 ) $ (2,641,509 )

Basic and diluted income (loss) per share:

             

Continuing operations

  $ (449.10 ) $ (335.26 )

Discontinued operation

    9.78     36.95  
           

Basic and diluted loss per share

  $ (439.32 ) $ (298.31 )

Basic and diluted weighted-average shares outstanding

   
10,648
   
7,879
 
           

   

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

F-86


Table of Contents

ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Unaudited Condensed Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Deficit

For the Nine-Month Period Ended September 30, 2012

 
  Redeemable Convertible Preferred Stock   Stockholders' Deficit  
 
  10% Convertible
Preferred Stock,
Series A
  10% Convertible
Preferred Stock,
Series B
  12% Convertible
Preferred Stock,
Series C
  10% Convertible
Preferred Stock,
Series D
  Common
Stock
  Additional
Paid-in Capital
  Accumulated
Deficit
  Total  

Balance, January 1, 2012 As Restated (Note 2)

  $ 10,388,357   $ 9,559,716   $ 4,268,412   $   $ 113   $ 1,086,461   $ (35,370,142 ) $ (34,283,568 )

Issuance of common stock upon warrant exercise

                    2,248     (2,248 )        

Issuance of preferred stock upon warrant exercise

                2,736         (2,736 )       (2,736 )

Issuance of preferred stock upon convertible debt conversion

                17,609,646                  

Preferred stock dividends

    880,108     739,379     402,757     2,304,378             (4,326,622 )   (4,326,622 )

Net loss

                            (351,234 )   (351,234 )
                                   

Balance, September 30, 2012

  $ 11,268,465   $ 10,299,095   $ 4,671,169   $ 19,916,760   $ 2,361   $ 1,081,477   $ (40,047,998 ) $ (38,964,160 )
                                   

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

F-87


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Unaudited Condensed Statements of Cash Flows

For the Nine-Month Periods Ended September 30,
  2012   2011
As Restated
(Note 2)
 

Cash Flows From Operating Activities

             

Net loss from continuing operations

  $ (351,234 ) $ (1,768,120 )

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

             

Depreciation and amortization

    425,238     391,917  

Non-cash interest relating to convertible debt

    1,027,713     1,396,641  

Changes in operating assets and liabilities:

             

Accounts receivable

    (518,429 )   (2,128,805 )

Inventories

    (387,172 )   221,839  

Prepaid expenses

    83,031     668,718  

Accounts payable

    87,897     (726,547 )

Accrued expenses

    188,271     559,471  
           

Net Cash and Cash Equivalents Provided By (Used in) Continuing Operations          

    555,315     (1,384,886 )

Net Cash Used in Discontinued Operation

    (133,710 )   (519,611 )
           

Net Cash and Cash Equivalents Provided By (Used in) Operating Activities          

    421,605     (1,904,497 )

Cash Flows From Investing Activities

             

Acquisition of property and equipment, net of disposals

    (76,888 )   (99,254 )

Acquisition of intangible assets

        (160,000 )
           

Net Cash and Cash Equivalents Used in Investing Activities

    (76,888 )   (259,254 )

Cash Flows From Financing Activities

             

Borrowings under line of credit, net

    364,362     949,503  

Repayments on long-term debt

        (299,999 )

Repayments of notes payable, net

    (300,000 )   (275,000 )

Proceeds from convertible debt

        1,816,326  

Payment of debt issuance costs

    (260,748 )    
           

Net Cash and Cash Equivalents (Used in) Provided by Financing Activities          

    (196,386 )   2,190,830  
           

Change in Cash and Cash Equivalents

    148,331     27,079  

Cash and cash equivalents, beginning of period

   
   
 
           

Cash and cash equivalents, end of period

  $ 148,331   $ 27,079  
           

Supplemental disclosure for cash flow information:

             

Cash paid for interest

  $ 211,424   $ 200,515  

Supplemental non-cash investing and financing activities:

             

Preferred stock dividends

  $ 4,326,622   $ 582,293  

Issuance of common and preferred stock upon warrant exercise

  $ 4,984   $  

Forgiveness of preferred stock dividends

  $   $ 13,783,848  

Issuance of preferred stock upon convertible debt conversion

  $ 17,609,646   $  

   

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

F-88


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.




Unaudited Condensed Financial Statements
For the Nine-Month Periods Ended September 30, 2012 and 2011

F-89


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

        ANIP Acquisition Company, d/b/a ANI Pharmaceuticals, Inc. ("the Company") is a specialty pharmaceutical company, developing and marketing generic and branded prescription products. In two facilities located in Baudette, Minnesota, with combined manufacturing, packaging and laboratory capacity totaling 173,000 sq. ft., the Company manufactures oral solid dose products, as well as liquids and topicals, including those that must be manufactured in a fully contained environment due to their potency and/or toxicity. The Company also performs contract manufacturing for other pharmaceutical companies.

        The Company's operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on significant customers, lack of operating history and uncertainty of future profitability and possible fluctuations in financial results. Since inception, the Company has incurred a cumulative loss from operations and has had operating cash flow deficits. Management believes that as a result of the sale of the Gulfport operation (Note 6), the Company can focus on prescription pharmaceuticals and increase its revenues while controlling operating costs in order to improve operating performance in the future. To date, the Company has funded its cash flow requirements using debt, equity, and equity-linked financings. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations and the ability to generate sufficient cash from operations and potential other funding sources to meet the Company's obligations as they become due. Management believes the going-concern basis is appropriate for the accompanying financial statements based on its current operating plan through December 31, 2013. In addition, management has the intent and ability to take additional actions as necessary to continue as a going concern, including by drawing on available funding sources and/or reducing discretionary operating costs.


Basis of Accounting

        The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). In the opinion of management, the accompanying condensed financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company's financial position, results of operations and cash flows. The condensed balance sheet at December 31, 2011, has been derived from audited financial statements as of that date. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the Securities and Exchange Commission. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these condensed financial statements are read in conjunction with the audited financial statements and notes previously distributed.

F-90


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Use of Estimates

        The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying condensed financial statements, estimates are used for, but not limited to, stock-based compensation, allowance for doubtful accounts, accruals for chargebacks, returns and other allowances, allowance for inventory obsolescence, derivative liabilities, and the depreciable lives of fixed assets. Actual results could differ from those estimates.


Credit and Vendor Concentration

        The Company's customers are primarily pharmaceutical companies, wholesale distributors, chain drug stores, and group purchasing organizations. During the nine months ended September 30, 2012, three customers represented approximately 24%, 21%, and 12% of net revenues, respectively. As of September 30, 2012, accounts receivable from these customers totaled $3,562,346. As of December 31, 2011, accounts receivable from these customers totaled $3,212,359.

        During the nine months ended September 30, 2012, the Company purchased approximately 43% of total costs of goods sold from two suppliers. As of September 30, 2012, amounts payable to these suppliers totaled $159,705. As of December 31, 2011, amounts payable to these suppliers totaled $205,838.


Cash and Cash Equivalents

        Cash equivalents consist of investments in low risk, highly liquid securities with original maturities of three months or less at the time of purchase. At times, the Company may maintain cash balances in excess of Federal Deposit Insurance Corporation (FDIC) limits.


Revenue Recognition

        Revenue is recognized for product sales upon shipment, when estimates of discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments are reasonably determinable, collection is reasonably assured, and the Company has no further performance obligations. These estimates reduce gross revenues to net revenues in the accompanying condensed statements of operations, and are presented as current liabilities or reductions in accounts receivable in the accompanying condensed balance sheets.


Accounts Receivable

        The Company utilizes the allowance method to provide for doubtful accounts based on management's evaluation of the collectability of accounts receivable. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts

F-91


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

receivable. The Company determines trade receivables to be delinquent when greater than 30 days past due. Receivables are written off when it is determined that amounts are uncollectible. The Company determined that no allowance for doubtful accounts was necessary as of September 30, 2012 and December 31, 2011.


Accruals for Chargebacks, Returns and Other Allowances

        The Company's generic and branded product revenues are typically subject to agreements with customers allowing chargebacks, product returns, administrative fees, and other rebates and prompt payment discounts. The Company accrues for these items at the time of sale based on the estimates and methodologies described below. In the aggregate, these gross-to-net accruals exceed 65% of generic and branded gross product sales and reduce gross revenues to net revenues in the accompanying condensed statements of operations, and are presented as current liabilities or reductions in accounts receivable in the accompanying condensed balance sheets. The Company continually monitors and re-evaluates the accruals as additional information becomes available, which includes, among other things, updates to trade inventory levels and customer product mix. The Company makes adjustments to the accruals at the end of each reporting period, to reflect any such updates to the relevant facts and circumstances.

Chargebacks

        Chargebacks, primarily from wholesalers, are the most significant of the Company's accruals. Chargebacks result from arrangements the Company has with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler. Alternatively, the Company may pre-authorize wholesalers to offer specified contract pricing to other indirect customers. Under either arrangement, the Company provides a chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler's invoice price, typically Wholesale Acquisition Cost (WAC).

        Chargeback credits are calculated as follows:

        Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price (ASP) for each product. This calculation is performed by product by wholesaler. ASPs can be affected by several factors such as:

        As necessary, the Company adjusts ASPs based on anticipated changes in the factors above.

F-92


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The difference between ASP and WAC is recorded, at the same time the Company recognizes revenue from the product sale, as a reduction in both gross revenues and accounts receivable.

        To evaluate the adequacy of its chargeback accruals, the Company obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the chargeback amount, the difference between ASP and WAC, to arrive at total expected future chargebacks, which is then compared to the chargeback accruals. The Company continually monitors chargeback activity and adjusts ASPs when it believes that actual selling prices will differ from current ASPs.

Returns

        Consistent with industry practice, the Company maintains a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date. Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date. The Company's product returns are settled through the issuance of a credit to the customer. The Company's estimate for returns is based upon its historical experience with actual returns. While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns. The Company continually monitors its estimates for returns and makes adjustments when it believes that actual product returns may differ from the established accruals.

Administrative Fees and Other Rebates

        Administrative fees or rebates are offered to wholesalers, group purchasing organizations and indirect customers, consistent with pharmaceutical industry practice. The Company accrues for fees and rebates, by product by wholesaler, at the time of sale based on contracted rates and ASPs.

        To evaluate the adequacy of its administrative fee accruals, the Company obtains on-hand inventory counts from the wholesalers. This inventory is multiplied by the ASPs to arrive at total expected future sales, which is then multiplied by contracted rates. The result is then compared to the administrative fee accruals. The Company continually monitors administrative fee activity and adjusts its accruals when it believes that actual administrative fees will differ from the accruals.

Prompt Payment Discounts

        Sales discounts are granted for prompt payment. The reserve for sales discounts is based on invoices outstanding. The Company assumes based on past experience that 100% of available discounts will be taken.

F-93


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The following table summarizes activity in the condensed balance sheets for accruals and allowances for the nine months ended September 30, 2012:

 
  Accruals for Chargebacks, Returns and Other Allowances  
 
  Chargebacks   Returns   Administrative
Fees and Other
Rebates
  Prompt
Payment
Discounts
 

Balance at December 31, 2011

  $ 3,680,838   $ 252,045   $ 238,195   $ 166,439  

Accruals/Adjustments

    15,996,550     486,844     925,488     522,812  

Credits Taken Against Reserve

    (15,348,165 )   (351,274 )   (892,370 )   (481,435 )
                   

Balance at September 30, 2012

  $ 4,329,223   $ 387,615   $ 271,313   $ 207,816  
                   


Inventories

        Inventories are stated at the lower of cost or net realizable value. The Company values inventory at standard cost. The Company reviews and adjusts standard costs periodically and believes that its inventory, as valued, approximates weighted average cost.


Property and Equipment

        Property and equipment are recorded at cost. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is recorded on a straight-line basis over estimated useful lives as follows:

Buildings and improvements

  20 - 40 years

Machinery, furniture and equipment

  3 - 10 years

        Construction in progress includes the cost of construction and other direct costs attributable to the construction, along with capitalized interest if any. Depreciation is not recorded on construction in progress until such time as the assets are placed in service. During the nine months ended September 30, 2012 and the year ended December 31, 2011, there was no material interest capitalized into construction in progress.

        Depreciation expense for the nine months ended September 30, 2012 and 2011 totaled $387,738 and $379,419, respectively. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed are reportable at the lower of the carrying amount or fair value, less costs to sell. Management determined that no assets were impaired and no assets were held for disposal as of September 30, 2012 and December 31, 2011.

F-94


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Research and Development Expenses

        Research and development costs are expensed as incurred and primarily consist of expenses relating to product development. Research and development costs totaled $636,726 and $726,960 for the nine months ended September 30, 2012 and 2011, respectively.


Stock-Based Compensation

        The Company expenses the estimated fair value of stock-based awards made in exchange for employee services over the requisite employee service period. Stock-based compensation cost for stock options is determined at the grant date using an option-pricing model. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee's requisite service period.


Income Taxes

        Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        The Company evaluates and accounts for uncertain income tax positions in accordance with Accounting Standards Codification (ASC) 740, Income Taxes. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In accordance with ASC 740, the Company began accounting for uncertain income tax positions during the year ended December 31, 2009. The Company did not identify any uncertain income tax positions that could have a material impact to the financial statements. The Company is subject to taxation in various jurisdictions and remains subject to examination by taxing jurisdictions for the years 2004 and all subsequent periods due to the availability of net operating loss carryforwards.

        The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties as of September 30, 2012 and December 31, 2011.

        The Company considers potential tax effects resulting from discontinued operations and records intra-period tax allocations, when those effects are deemed material.

F-95


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Income (Loss) per Share

        Basic income (loss) per share is calculated by dividing net income (loss) less preferred stock dividends by the weighted-average number of shares of common stock outstanding during the period. For periods of net income, and when the effects are dilutive, diluted earnings per share is computed by dividing net income (as adjusted for interest expense on convertible debt, if outstanding) by the weighted-average number of shares of common stock outstanding plus the number of shares that would be outstanding if warrants were exercised for common shares or preferred stock convertible into common shares, using the treasury method, or if convertible debt and convertible preferred stock had been converted into common shares, using the if-converted method. Diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive due to the net losses; accordingly, diluted loss per share is the same as basic loss per share.

        The number of anti-dilutive shares, consisting of common stock options, warrants exercisable for common stock, warrants exercisable for preferred stock, convertible debt, and convertible preferred stock which have been excluded from the computation of diluted loss per share for the nine months ended September 30, 2012 and 2011, were 2,500,134 and 2,067,330, respectively.

        Basic and diluted loss per share has been adjusted for a 10:1 reverse stock split effected on January 28, 2011.


Redeemable Preferred Stock

        The carrying value of the Company's redeemable convertible preferred stock is increased by the accretion of any related discounts and accrued but unpaid dividends so that the carrying amount will equal the redemption amount at the dates the stock becomes redeemable. The Company's Series A, B, C and D preferred stock is redeemable at the option of the holders, subject to certain additional requirements (Note 9).


Stock Splits and Other Reclassifications

        In January 2011 the Company's Board of Directors approved a resolution to affect a one-for-ten reverse stock split of the Company's common and preferred stock with a corresponding change to the par values. The par values, and all common and preferred share numbers for all periods presented, have been adjusted retrospectively to reflect the change in par value and the one-for-ten reverse stock split.

        The Company historically classified its redeemable convertible preferred stock as "permanent equity" according to accepted practices for private companies. As of December 31, 2011, and for all periods presented, the Company has classified its redeemable convertible preferred stock as "temporary equity" as required by the rules and regulations of the Securities and Exchange Commission.

F-96


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Financial Instruments

        The Company's balance sheets include various financial instruments (primarily cash and cash equivalents, prepaid expenses, accounts receivable, accounts payable, accrued expenses, borrowings under line of credit, notes payable and other current liabilities) that approximate fair value. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

        See Note 12 for additional information regarding fair value.


Recent Accounting Pronouncements

        In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 did not change the items that must be reported in other comprehensive income. The Company adopted the provisions of ASU 2011-05 in the first quarter of 2012. As the Company's net loss is the same as comprehensive loss, the Company did not present a statement of comprehensive loss.


Subsequent Events

        The Company performed an evaluation of subsequent events through December 11, 2012, the date the accompanying condensed financial statements were issued, and did not identify any material events that warrant disclosure, except as disclosed in Note 13.

2. RESTATEMENT OF 2011 FINANCIAL STATEMENTS

        In connection with certain convertible debt financings in 2010 and 2009, the Company issued stock purchase warrants to the lenders to purchase the Company's preferred stock. The Company allocated fair value to the stock purchase warrants issued in 2010 ($667,021) and 2009 ($76,050) based on management's estimate of fair value. In 2012, in connection with the review of certain equity

F-97


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

2. RESTATEMENT OF 2011 FINANCIAL STATEMENTS (Continued)

transactions, the Company obtained independent third-party valuations of its equity securities and determined that the fair value of the stock purchase warrants issued in 2010 and 2009 (and for all subsequent periods) was de minimis and that the prior allocation should be revised. As a result, the Company has restated its 2011 and 2010 annual financial statements to correctly value the warrants. This correction resulted in changes to the following financial statement line items as of and for the periods indicated:

 
  As Previously
Reported
  Increase
(Decrease)
  As Restated  

Nine months ended September 30, 2011

                   

Statement of Operations

                   

Interest expense

  $ (1,935,975 ) $ (338,819 ) $ (1,597,156 )

Total other expense

    (2,189,981 )   (338,819 )   (1,851,162 )

Net loss from continuing operations

    (2,398,035 )   (338,819 )   (2,059,216 )

Net loss

    (2,106,939 )   (338,819 )   (1,768,120 )

Statement of Cash Flows

                   

Net loss

  $ (2,106,939 ) $ (338,819 ) $ (1,768,120 )

Non-cash interest relating to convertible debt

    1,735,460     (338,819 )   1,396,641  

As of December 31, 2011

                   

Additional paid-in capital

 
$

1,829,532
 
$

(743,071

)

$

1,086,461
 

Accumulated deficit

    (36,113,213 )   (743,071 )   (35,370,142 )

3. ACCOUNTS RECEIVABLE

        Accounts receivable consist of the following as of:

 
  September 30,
2012
  December 31,
2011
 

Accounts receivable, gross

  $ 10,196,336   $ 8,991,124  

Adjustments for chargebacks and other allowances

    (4,573,339 )   (3,886,556 )
           

Accounts receivable, net

  $ 5,622,997   $ 5,104,568  
           

F-98


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

4. INVENTORIES

        Inventories consist of the following as of:

 
  September 30,
2012
  December 31,
2011
 

Raw materials

  $ 489,079   $ 836,724  

Packaging materials

    592,530     687,185  

Work-in-progress

    385,294     95,762  

Finished goods

    1,034,924     501,230  
           

    2,510,827     2,120,901  

Reserve for excess/obsolete inventories

    (16,192 )   (13,438 )
           

Inventories, net

  $ 2,494,635   $ 2,107,463  
           

5. NOTES PAYABLE

        Notes payable consist of amounts previously owed to suppliers as accounts payable that were subsequently converted to notes payable, as agreed upon by the Company and the respective suppliers. During the year ended December 31, 2009, the Company reached an agreement with a supplier to convert $938,276 of accounts payable to a note payable. Under the terms of the agreement, the Company was required make monthly payments of principal amounts plus interest of 6% per annum. In May 2011, the Company reached an agreement with the supplier to settle all amounts due by the Company in full and final for $175,000. The resulting gain is included as a gain on the discontinued operation in the accompanying statements of operations. The balance was paid in full in May 2011.

        During October 2011, the Company reached a settlement agreement with another supplier in the amount of $450,000. Under the terms of the agreement, the Company was required to make monthly payments of $50,000. Amounts due under this agreement totaled $300,000 at December 31, 2011. The balance was paid in full in July 2012.

6. DISCONTINUED OPERATION

        On September 17, 2010, the Company sold its operation in Gulfport, Mississippi to a third-party for $2,300,000. This operation manufactured over-the-counter pharmaceutical products, which were sold under private-label contracts to retail pharmacy chains. The net assets of the Gulfport operation had a carrying value of $5,819,473 on the date of the sale, resulting in a loss of $3,669,245 on disposal of the discontinued operation. The decision to sell the Gulfport operation was based on the historical underperformance and recurring losses and the anticipated need for continued financing from outside sources to maintain ongoing operations.

        As of September 30, 2012 and December 31, 2011, total net liabilities associated with discontinued operations were $378,565 and $512,275, respectively, and consisted of balances due to various vendors of the discontinued operation.

F-99


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

7. LINES OF CREDIT

        Prior to June 2012, the Company had borrowings under a line of credit agreement with a commercial lender. Due to covenant defaults, the Company entered into a forbearance agreement in May 2010, which was most recently amended in October 2011. Under the terms of the amended forbearance agreement, the Company could borrow an amount equal to the lesser of the borrowing base, as defined, or $3.5 million. Interest accrued at an annual rate of the Base Rate, as defined, plus 6.0%. In addition, a usage fee equal to 0.75% per annum of the unused facility and a management fee equal to $9,000 per annum were assessed monthly. The line of credit was secured by substantially all of the Company's assets. Borrowings under the line of credit plus outstanding checks as of December 31, 2011 totaled $3,064,414; the line of credit and amended forbearance agreement expired in June 2012 and all amounts borrowed were repaid in full at that time.

        In June 2012, the Company entered into a new revolver loan agreement with a commercial bank in the amount of $5,000,000. The revolver loan agreement bears interest daily at the greater of (i) LIBOR or 1% plus (ii) 5%, and is secured by substantially all of the Company's assets. In addition, a usage fee equal to 0.375% per annum of the unused facility and a management fee equal to $18,000 per annum are assessed monthly. Under the agreement, the Company must maintain a minimum fixed charge coverage ratio of 1.1 to 1.0, calculated by dividing (a) (i) earnings before interest, taxes, depreciation and amortization (EBITDA) less (ii) unfinanced capital expenditures, by the sum of cash paid for (b) (i) interest and (ii) monitoring and advisory fees (Note 8). Also, the Company must generate at least $800,000 in EBITDA measured on a trailing four-quarter basis. Restrictive covenants apply to, among other things, research and development expenditures, additional liens, mergers or consolidations, and sales of assets. The revolver loan agreement expires in June 2015. As of September 30, 2012, $3,428,776 was outstanding on the revolver, at an effective interest rate of 6.0%.

8. CONVERTIBLE DEBT

        In 2009, the Company issued $2,502,814 of Secured Subordinated Convertible Notes ("the 2009 Convertible Notes"). The 2009 Convertible Notes, which bore interest at 10% per annum, were due on September 3, 2011. Interest on the 2009 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2009 Convertible Notes were secured by a second lien on substantially all of the Company's assets and included financial covenants and limitations on the Company's ability to enter into certain transactions while the 2009 Convertible Notes were outstanding.

        In connection with the issuance of the 2009 Convertible Notes, the Company also issued warrants to acquire shares of the Company's common and preferred stock ("the 2009 Warrants"). The 2009 Warrants, accounted for as derivative liabilities, expired on the earlier of the repayment of the 2009 Convertible Notes or a Qualified Public Offering, as defined, and had an exercise price of $0.10 per share. The estimated fair value of the 2009 Warrants upon issuance, based on an independent third-party valuation of the Company's equity securities, was deemed immaterial.

        In 2010, the Company issued $8,474,951 of Secured Subordinated Convertible Notes ("the 2010 Convertible Notes"). The 2010 Convertible Notes, which bore interest at 14% per annum, were due on September 3, 2011. Interest on the 2010 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock. The 2010 Convertible Notes were

F-100


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

8. CONVERTIBLE DEBT (Continued)

secured by a second lien on substantially all of the Company's assets and included financial covenants and limitations on the Company's ability to enter into certain transactions while the 2010 Convertible Notes were outstanding.

        In connection with the issuance of the 2010 Convertible Notes, the Company also issued warrants to acquire shares of the Company's Series D Preferred stock ("the 2010 Warrants"). The 2010 Warrants, accounted for as derivative liabilities, expired on the earlier of the repayment of the 2010 Convertible Notes or a Qualified Public Offering, as defined, and had an exercise price of $0.10 per share. The estimated fair value of the 2010 Warrants upon issuance, based on an independent third-party valuation of the Company's equity securities, was deemed immaterial.

        In 2011, the Company issued $2,694,294 of Secured Subordinated Convertible Notes ("the 2011 Convertible Notes") and consolidated all of the outstanding 2009 and 2010 Convertible Notes into the 2011 Convertible Notes (collectively "the Consolidated 2011 Convertible Notes"). The consolidation of the 2009 and 2010 Convertible Notes was accounted for as a debt modification. The Consolidated 2011 Convertible Notes, which bore interest at 14% per annum, were due on the earliest to occur of: (i) the date of the closing of a merger, consolidation or reorganization of the Company with or into any other entity or a sale of all or substantially all of the assets of the Company, resulting in a change of control, (ii) the date of any dissolution, liquidation or winding up of the Company, or (iii) December 31, 2012. Interest on the Consolidated 2011 Convertible Notes accrued until the outstanding principal and interest was either paid in full or converted into preferred stock.

        The Consolidated 2011 Convertible Notes were convertible into equity securities issued in a Qualified Financing, as defined, ("Qualified Financing Securities") or Series D Convertible Preferred Stock of the Company. In the event of the consummation of a Qualified Financing, or upon the election of the holders of at least 65% of the Consolidated 2011 Convertible Notes, or in the event that the Company refinanced its senior credit facility in a manner satisfactory to the holders of at least 65% of the Consolidated 2011 Convertible Notes, then all outstanding principal and accrued but unpaid interest was convertible into such number of shares of the Qualified Financing Securities or Series D Preferred as was obtained by dividing the Conversion Value of the notes by $30.00, subject to adjustment. The Conversion Value was equal to four times (4x) the sum of all outstanding principal and accrued but unpaid interest under the Consolidated 2011 Convertible Notes.

        The Consolidated 2011 Convertible Notes were secured by a second lien on substantially all of the Company's assets and included covenants and limitations on the Company's ability to enter into certain transactions while the Consolidated 2011 Convertible Notes were outstanding.

        Interest expense relating to the 2009, 2010 and 2011 Convertible Notes totaled $1,027,712 and $1,396,641 for the nine-month periods ended September 30, 2012 and 2011, respectively. The change in fair value of the derivative liabilities relating to the 2009 Warrants and 2010 Warrants during the nine months ended September 30, 2012 and 2011 was not material.

        As part of the agreements relating to the Convertible Notes, the Company is required to pay monitoring and advisory fees to two investors totaling $200,000 per annum. A total of $150,000 is included in other expense in the accompanying condensed statements of operations for the nine months

F-101


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

8. CONVERTIBLE DEBT (Continued)

ended September 30, 2012 and 2011, respectively. These fees commenced on January 1, 2011 and are paid quarterly in advance on the first business day of each calendar quarter.

        In June 2012, the holders of the Consolidated 2011 Convertible Notes converted all outstanding convertible debt and accrued interest into 2,375,312 shares of Series D Preferred, of which 27,359 shares were issued from warrant exercise, and 22,484 shares of common stock, also from warrant exercise (Note 9).

9. CAPITALIZATION

Authorized Shares

        The Company is authorized to issue up to 7,300,000 shares of stock of which 3,700,000 are designated as common stock with a $0.10 per share par value and 3,600,000 are designated as preferred stock with a $0.10 par value.


Series A 10% Convertible Preferred Stock

        The Company has designated 108,494 shares of its authorized preferred stock as Series A 10% Convertible Preferred Stock ("the Series A Preferred"). The Series A Preferred has a stated value of $100 per share. Among the terms and conditions of the Series A Preferred are the following:

Ranking

        The Series A Preferred is senior to the common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series A Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 10% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series A Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $1,875,665 and $995,557 as of September 30, 2012 and December 31, 2011, respectively, and are included in Series A Preferred Stock in the accompanying condensed balance sheets.

Conversion

        Each share of Series A Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least 60% of the then issued and outstanding shares of the Series A Preferred, or the date all of the outstanding shares of Series D Preferred Stock are

F-102


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)

mandatorily converted to shares of common stock, each share of Series A Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series A Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series A Preferred shall have the right to the number of votes it would have obtained had the Series A Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 54,246.7 shares of the Series A Preferred remain outstanding, the vote of a majority of the outstanding shares of Series A Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series A Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series A Preferred shall have the right to receive, prior to any payment to holders of common stock, the greater of (i) the stated value of the Series A Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the common stock if the Series A Preferred was converted to common stock immediately prior to the event.


Series B 10% Convertible Preferred Stock

        The Company has designated 118,915 shares of its authorized preferred stock as Series B 10% Convertible Preferred Stock ("the Series B Preferred"). The Series B Preferred has a stated value of $110 per share. Among the terms and conditions of the Series B Preferred are the following:

Ranking

        The Series B Preferred is senior to the Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series B Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 10% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series B Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $1,575,747 and $836,368 as of September 30, 2012 and December 31, 2011, respectively, and are included in Series B Preferred Stock in the accompanying condensed balance sheets.

F-103


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)

Conversion

        Each share of Series B Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least the majority of the then issued and outstanding shares of the Series B Preferred, or the date all of the outstanding shares of Series D Preferred Stock are mandatorily converted to shares of common stock, each share of Series B Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series B Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series B Preferred shall have the right to the number of votes it would have obtained had the Series B Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 40,381.3 of the shares of the Series B Preferred remain outstanding, the vote of a majority of the outstanding shares of Series B Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series B Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series B Preferred shall have the right to receive, prior to any payment to holders of Series A Preferred and common stock, the greater of (i) the stated value of the Series B Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series A Preferred and common stock if the Series B Preferred was converted to common stock immediately prior to the event.

F-104


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)


Series C 12% Convertible Preferred Stock

        The Company has designated 37,956 shares of its authorized preferred stock as Series C 12% Convertible Preferred Stock ("the Series C Preferred"). The Series C Preferred has a stated value of $110 per share. Among the terms and conditions of the Series C Preferred are the following:

Ranking

        The Series C Preferred is senior to the Series B Preferred, Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series C Preferred accrue from January 28, 2011, whether or not earned or declared, at the rate of 12% per annum. All dividends accrued prior to January 28, 2011 were waived by the Series C Preferred holders. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $850,905 and $448,148 as of September 30, 2012 and December 31, 2011, respectively, and are included in Series C Preferred Stock in the accompanying condensed balance sheets.

Conversion

        Each share of Series C Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least the majority of the then issued and outstanding shares of the Series C preferred, or the date all of the outstanding shares of Series D Preferred Stock are mandatorily converted to shares of common stock, each share of Series C Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series C Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series C Preferred shall have the right to the number of votes it would have obtained had the Series C Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

        In addition to the rights to vote on all matters submitted to the Company's shareholders, for as long as 18,977.5 shares of the Series C Preferred remain outstanding, the vote of a majority of the outstanding shares of Series C Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series C Preferred.

F-105


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series C Preferred shall have the right to receive, prior to any payment to holders of Series B Preferred, Series A Preferred and common stock, the greater of (i) the stated value of the Series C Preferred and all accrued but unpaid dividends and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series B Preferred, Series A Preferred and common stock if the Series C Preferred was converted to common stock immediately prior to the event.


Series D 10% Convertible Preferred Stock

        The Company has designated 3,400,000 shares of its authorized preferred stock as Series D 10% Convertible Preferred Stock ("the Series D Preferred"). The Series D Preferred has a stated value of $30 per share. Among the terms and conditions of the Series D Preferred are the following:

Ranking

        The Series D Preferred is senior to the Series C Preferred, Series B Preferred, Series A Preferred and common stock as to the payment of dividends and the distributions of assets and rights upon liquidation, dissolution or winding up of the Company.

Dividends and Distributions

        Dividends on the Series D Preferred accrue from the date of issuance, whether or not earned or declared, at the rate of 10% per annum. The accrued dividends compound quarterly and are payable in cash. Accrued dividends totaled $2,304,378 as of September 30, 2012 and are included in Series D Preferred Stock in the accompanying condensed balance sheets. No Series D Preferred Stock was outstanding as of December 31, 2011.

Conversion

        Each share of Series D Preferred is initially convertible into one share of common stock of the Company at the option of the holder. The conversion rate is subject to adjustment upon the occurrence of certain events including the issuance of dividends payable in the form of common stock, a recapitalization, reorganization or other similar change in the outstanding common stock, or upon the occurrence of certain dilutive financings, as defined.

        In the event of the consummation of a Qualified Public Offering, as defined, or a date specified by vote or written consent of the holders of at least 65% of the then issued and outstanding shares of the Series D preferred, each share of Series D Preferred shall be mandatorily converted into common stock.

Voting Rights

        Holders of Series D Preferred are entitled to vote on all matters submitted to a vote of the Company's shareholders. Each share of Series D Preferred shall have the right to the number of votes it would have obtained had the Series D Preferred been converted to common stock in accordance with the conversion rate in effect at the time of the vote.

F-106


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)

        In addition to the rights to vote on all matters submitted to the Company's shareholders, in the event that 1,000,000 shares of the Series D Preferred are outstanding, the vote of 65% of the outstanding shares of Series D Preferred is required to approve of certain events including, but not limited to, the sale of the Company or substantially all of its assets, a change in control, the repurchase of any of the Company's outstanding securities or the issuance of equity securities having certain rights equal with or senior to the Series D Preferred.

Liquidation Preference

        Upon the liquidation, dissolution or winding up of the Company, holders of the Series D Preferred shall have the right to receive, prior to any payment to holders of Series C Preferred, Series B Preferred, Series A Preferred and common stock, an amount equal to the sum of all accrued but unpaid dividends plus the greater of (i) the Preferred D stated value and (ii) the distribution amount such holders would be entitled to receive pro rata with the holders of the Series C Preferred, Series B Preferred, Series A Preferred and common stock if the Series D Preferred was converted to common stock immediately prior to the event.


Warrants

        In connection with the issuance of the Company's Convertible Debt (Note 8), the Company issued warrants for common stock at an exercise price of $0.10 per share and warrants for preferred stock at an exercise price of $0.10 per share. The number of common shares issuable upon exercise of the common warrants was based on accrued interest on the 2009 Convertible Notes. The number of preferred shares issuable upon exercise of the preferred warrants was based on the principal amount of certain of the 2009 Convertible Notes and on 12% of the Conversion Value of certain of the 2010 Convertible Notes. The warrants expired on the earlier of the repayment or conversion of the respective convertible debt or a Qualified Public Offering, as defined by the agreement. As of September 30, 2011, the common warrants were exercisable for 15,011 common shares. As of September 30, 2011, the preferred warrants were exercisable for 25,171 preferred shares.

        In June 2012, in conjunction with the conversion of the Consolidated 2011 Convertible Notes, 27,359 Series D Preferred shares were issued from the exercise of the preferred warrants, and 22,484 shares of common stock were issued from the exercise of the common warrants.


Stockholders' Agreement

        The Company and its stockholders have entered into an agreement ("the Stockholders' Agreement"). Under the terms of the agreement, the parties have agreed to elect certain individuals, as designated by holders of the Series A Preferred, Series B Preferred, and Series C Preferred and, upon issuance, Series D Preferred, as members of the Company's Board of Directors ("the Board"). In addition, the Stockholders' Agreement requires the approval of the majority of the holders of the Series A Preferred, Series B Preferred, Series C Preferred and Series D Preferred and, in some cases, the approval of 65% of the holders of the Series D Preferred prior to making certain changes to the Company's Charter, By-laws or Board configuration and entering into certain transactions.

        Under the terms of the Stockholders' Agreement, at any time after December 31, 2012, the holders of a majority of Series D Preferred have the right to require the Company to redeem all of the

F-107


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

9. CAPITALIZATION (Continued)

holders' shares of Series D Preferred at a price which is the sum of all accrued but unpaid dividends plus the greater of (i) the fair market value of the Series D Preferred being redeemed or (ii) the holders' pro-rata share, based on the Series D Preferred being redeemed, of the equity value of the Company as determined by a nationally recognized investment bank or a valuation formula as defined in the Stockholders' Agreement. At any time after the holders of a majority of Series D Preferred require the Company to redeem all of the holders' shares of Series D Preferred, the holders of a majority of Series A Preferred and Series B Preferred, and the holders of 55% of the Series C Preferred shall have the right to require the Company to redeem the holders' shares at a price which is the sum of all accrued but unpaid dividends plus the greater of (i) the fair market value of the Series A, Series B, and Series C Preferred being redeemed or (ii) the holders' pro-rata share, based on the Series A, Series B, and Series C Preferred being redeemed, of the equity value of the Company as determined by a nationally recognized investment bank or a valuation formula as defined in the Stockholders' Agreement.

        The Stockholders' Agreement also contains provisions that govern the process a stockholder must follow concerning disposition of shares, the requirements for a stockholder to sell shares in the event of certain approved transactions (drag along rights), the rights of a stockholder to sell shares in the event other stockholders propose to sell their shares (tag along rights) and the rights of the stockholder in the event the Company proposes to sell additional shares (preemptive rights).

10. STOCK-BASED COMPENSATION

        In 2005, the Company adopted the ANIP Acquisition Company 2005 Stock Option Plan (the "Plan"). In 2007, the Board of Directors of the Company amended the Plan and increased the maximum number of shares issuable to 312,750. As of December 31, 2011, the Company had granted 17,500 options and had 295,250 shares available for future grants. In September 2012, the Company entered into Transaction Bonus Agreements with certain management employees (Note 11). In connection with the Transaction Bonus Agreements, all prior option awards were forfeited and the Plan was terminated.

11. COMMITMENTS AND CONTINGENCIES

Operating Leases

        The Company leases equipment under operating leases that expire in May 2017. Future minimum lease payments due under these leases total $43,982 as of September 30, 2012. Rent expense for the nine-months ended September 30, 2012 and 2011 totaled $6,987 and $6,716, respectively.


Transaction Bonus Agreements

        In September 2012, the Company entered into Transaction Bonus Agreements ("Bonus Agreements") with certain management employees. Under the terms of the Bonus Agreements, the Company will make bonus payments, upon a change of control transaction resulting in Net Proceeds being available for distribution to the Company's shareholders, to certain executives. The bonus payments are based upon the amount of Net Proceeds, as defined in the Bonus Agreements, realized in a change of control transaction. The Company's obligation to make the bonus payments are subject to, among other things, a minimum level of Net Proceeds and continuous employment of the executive.

F-108


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

11. COMMITMENTS AND CONTINGENCIES (Continued)

Under the terms of the Bonus Agreements, the BioSante Pharmaceuticals, Inc. ("BioSante") transaction discussed below would be considered a change of control transaction (Note 13).


Government Regulation

        The Company's products and facilities are subject to regulation by a number of Federal and State governmental agencies. The Food and Drug Administration (FDA), in particular, maintains oversight of the formulation, manufacture, distribution, packaging and labeling of all of the Company's products. The Drug Enforcement Administration (DEA) maintains oversight over the Company's products that are considered controlled substances.


Unapproved Products

        Certain of the Company's generic products are marketed without approved New Drug Applications (NDA) or Abbreviated New Drug Applications (ANDA). During the nine months ended September 30, 2012 and 2011, combined net revenues for these products totaled $3.6 million and $2.2 million, respectively.

        The FDA's policy with respect to the continued marketing of unapproved products is stated in the FDA's September 2011 compliance policy guide, Marketed New Drugs without Approved NDAs or ANDAs. Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those marketed as unapproved drugs with potential safety risks or that lack evidence of effectiveness. The Company believes that so long as it complies with applicable manufacturing and labeling standards, it will be in compliance with the FDA's current enforcement policy. There can be no assurance, however, that the FDA will continue this policy or not take a contrary position with any individual product or group of products. If the FDA were to take a contrary position, the Company may be required to seek FDA approval for these products or withdraw such products from the market (Note 13).

        In addition, one group of products that the Company manufactures on behalf of a contract customer is marketed by that customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. The Company's contract manufacturing revenue for the group of unapproved products for the nine months ended September 30, 2012 and 2011 was $775,000 and $1.1 million, respectively.

        The Company receives royalties on the net sales of a group of contract-manufactured products, which are marketed by the contract customer without an FDA-approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. The Company's royalties on the net sales of these unapproved products for the nine months ended September 30, 2012 and 2011 were $220,000 and $249,000, respectively.

F-109


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

11. COMMITMENTS AND CONTINGENCIES (Continued)


Other Commitments and Contingencies

        All manufacturers of the drug Reglan® and its generic equivalent metoclopramide, including the Company, are facing allegations from plaintiffs in various states claiming bodily injuries as a result of ingestion of metoclopramide or its brand name Reglan® prior to the FDA's February 2009 Black Box warning requirement. The Company has been named and served in 79 separate complaints, including three in Pennsylvania, nine in New Jersey, and 67 in California, covering 2,921 plaintiffs in total. In August 2012, the Company was dismissed with prejudice from all New Jersey cases. Management considers the Company's exposure to this litigation to be limited due to several factors: (1) the only generic metoclopramide manufactured by the Company prior to the implementation of the FDA's warning requirement was an oral solution introduced after May 28, 2008; (2) the Company's market share for the oral solution was a very small portion of the overall metoclopramide market; and (3) once the Company received a request for change of labeling from the FDA, it submitted its proposed changes within 30 days, and such changes were subsequently approved by the FDA. At the present time, the Company's management is unable to assess the likely outcome of the remaining cases. The Company's insurance company has assumed the defense of this matter. In addition, the Company's insurance company renewed the Company's product liability insurance on September 1, 2011 and 2012 with absolute exclusions for claims related to Reglan® and metoclopramide. The Company cannot provide assurances that the outcome of these matters will not have an adverse effect on its business, results of operations, financial condition and cash flow. Furthermore, like all pharmaceutical manufacturers, the Company in the future may be exposed to other product liability claims, which could harm its business, results of operations, financial condition and cash flow.

12. FAIR VALUE DISLCOSURES

        Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. US GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.

        The inputs used in measuring the fair value of cash and cash equivalents are considered to be level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the Company's funds. The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses, borrowings under line of credit, notes payable, and other current liabilities) approximate their carrying values because of their short-term nature.

        The Company's stock purchase warrants are classified as derivative liabilities and are measured at fair value using level 3 inputs. The fair value of stock purchase warrants is determined based on the Black-Scholes option pricing model or an equity allocation model. These models require the use of unobservable inputs such as fair value of the Company's common and preferred stock, expected term, anticipated volatility, future interest and interest rates, expected cash flows and the number of outstanding common and preferred shares as of a future date. The Company determined that the fair value of the derivative liabilities, and the changes in such fair value, was immaterial as of and for the nine months ended September 30, 2012 and 2011 (Note 2). The Company has no other financial assets

F-110


Table of Contents


ANIP ACQUISITION COMPANY
d/b/a ANI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Financial Statements (Continued)

For the Nine-Month Periods Ended September 30, 2012 and 2011

12. FAIR VALUE DISLCOSURES (Continued)

and liabilities that are measured at fair value. The Company has no nonfinancial assets or liabilities that are measured at fair value.

13. SUBSEQUENT EVENTS

Merger Agreement with BioSante

        In October 2012, the Company entered into a definitive merger agreement with BioSante by which the companies will merge in an all-stock transaction. Under the terms of the agreement, upon completion of the merger, BioSante will issue to Company stockholders shares of BioSante common stock such that the former Company stockholders will own approximately 53 percent of the combined company's shares outstanding, and the former BioSante stockholders will own approximately 47 percent, subject to adjustment as provided in the merger agreement. In addition, immediately prior to the merger, BioSante plans to distribute to its then current stockholders contingent value rights (CVR) providing payment rights arising from a future sale, transfer, license or similar transaction(s) involving BioSante's LibiGel® (female testosterone gel). Upon completion of the merger, the combined company will be renamed ANI Pharmaceuticals, Inc. and will operate under the leadership of the Company's management team. The board of directors of the combined company is expected to have two directors from BioSante and five Company directors. Consummation of the merger is subject to a number of customary conditions, including, but not limited to, the approval of the merger agreement by the BioSante and ANI stockholders. If any of the conditions to the merger are not satisfied or, where waiver is permissible but not waived, the merger will not be consummated. The merger is expected to close during the first quarter of calendar 2013.


Opium Tincture

        In October 2012, ANI received a telephone call requesting a meeting with the FDA representatives from the Minneapolis district of the FDA to discuss continued manufacturing and distribution of Opium Tincture, which is a non-NDA product. That meeting was held on October 25, 2012 by conference telephone call and included FDA representatives from the Office of Compliance at the Center for Drug Evaluation and Research (CDER). Discussions with CDER are continuing. If, as a result of such discussions or otherwise, the FDA were to make a determination that ANI could not continue to sell Opium Tincture as an unapproved product, ANI would be required to seek FDA approval for such product or withdraw such product from the market. If ANI determined to withdraw the product from the market, ANI's net revenues for generic pharmaceutical products would decline materially, and if ANI decided to seek FDA approval, it would face increased expenses and might need to suspend sales of the product until such approval is obtained, and there are no assurances that ANI would receive such approval.

F-111


Table of Contents


ANNEX A

AGREEMENT AND PLAN OF MERGER

by and between

BIOSANTE PHARMACEUTICALS, INC.

and

ANIP ACQUISITION COMPANY

Dated as of October 3, 2012

A-1



TABLE OF CONTENTS

 
   
  Page  

ARTICLE I.    The Transactions

    A-9  

1.1

 

The Merger

    A-9  

1.2

 

Effects of the Merger

    A-9  

1.3

 

Closing; Effective Time

    A-10  

1.4

 

Recapitalization of Company Common Stock

    A-10  

1.5

 

Lock-Up Agreements

    A-11  


ARTICLE II.    Conversion and Cancellation of Securities


 

 

A-11

 

2.1

 

Cancellation and Conversion of ANI Securities

    A-11  

2.2

 

Determination of Exchange Ratio

    A-13  

2.3

 

Payment of Consideration

    A-17  

2.4

 

Dissenting Shares

    A-18  

2.5

 

Required Withholdings

    A-18  

2.6

 

Lost Certificates

    A-18  

2.7

 

Adjustments

    A-18  

2.8

 

Tax Consequences

    A-19  


ARTICLE III.    Representations and Warranties of ANI


 

 

A-19

 

3.1

 

Organization, Standing and Power

    A-19  

3.2

 

Capital Structure

    A-20  

3.3

 

Authority; Non-Contravention; Consents and Approvals

    A-21  

3.4

 

Financial Statements; Undisclosed Liabilities

    A-22  

3.5

 

Compliance with Applicable Laws

    A-23  

3.6

 

Legal Proceedings

    A-24  

3.7

 

Taxes

    A-24  

3.8

 

Certain Agreements

    A-25  

3.9

 

Benefit Plans

    A-27  

3.10

 

Subsidiaries

    A-29  

3.11

 

Absence of Certain Changes or Events

    A-29  

3.12

 

Board Approval

    A-29  

3.13

 

Takeover Statutes

    A-30  

3.14

 

Properties

    A-30  

3.15

 

Intellectual Property

    A-30  

3.16

 

Regulatory Matters

    A-33  

3.17

 

Environmental Matters

    A-36  

3.18

 

Labor and Employment Matters

    A-37  

3.19

 

Insurance

    A-37  

3.20

 

Registration Statement; Joint Proxy Statement/Prospectus

    A-38  

3.21

 

Affiliate Transactions

    A-39  

3.22

 

Brokers or Finders

    A-39  

3.23

 

Disclosure

    A-39  


ARTICLE IV.    Representations and Warranties of the Company


 

 

A-39

 

4.1

 

Organization, Standing and Power

    A-39  

4.2

 

Capital Structure

    A-40  

4.3

 

Authority; Non-Contravention; Consent

    A-41  

4.4

 

SEC Documents; Undisclosed Liabilities

    A-42  

4.5

 

Compliance with Applicable Laws

    A-44  

4.6

 

Legal Proceedings

    A-44  

A-2


 
   
  Page  

4.7

 

Taxes

    A-44  

4.8

 

Certain Agreements

    A-45  

4.9

 

Benefit Plans

    A-47  

4.10

 

Absence of Certain Changes or Events

    A-49  

4.11

 

Board Approval

    A-49  

4.12

 

Takeover Statutes

    A-49  

4.13

 

Properties

    A-49  

4.14

 

Intellectual Property

    A-50  

4.15

 

Regulatory Matters

    A-52  

4.16

 

Environmental Matters

    A-55  

4.17

 

Labor and Employment Matters

    A-55  

4.18

 

Insurance

    A-56  

4.19

 

Registration Statement; Joint Proxy Statement/Prospectus

    A-56  

4.20

 

Affiliate Transactions

    A-57  

4.21

 

Brokers or Finders

    A-57  

4.22

 

Exchange Act Registration; NASDAQ Listing

    A-57  

4.23

 

News Releases

    A-57  

4.24

 

Disclosure

    A-57  


ARTICLE V.    Covenants


 

 

A-57

 

5.1

 

Conduct of ANI Business During Interim Period

    A-57  

5.2

 

Conduct of the Company Business During Interim Period

    A-60  

5.3

 

No Solicitation by ANI

    A-62  

5.4

 

No Solicitation by the Company

    A-64  

5.5

 

Access to Information

    A-66  

5.6

 

Registration Statement; Related Matters

    A-66  

5.7

 

ANI Special Meeting; ANI Board Recommendation

    A-67  

5.8

 

Company Special Meeting; Company Board Recommendation

    A-68  

5.9

 

Reasonable Best Efforts

    A-68  

5.10

 

Public Announcements

    A-69  

5.11

 

Notification of Certain Matters

    A-69  

5.12

 

Indemnification of Company Directors and Officers

    A-70  

5.13

 

Indemnification of ANI Directors and Officers

    A-71  

5.14

 

Composition of the Company Board; Officers

    A-72  

5.15

 

Listing of Shares

    A-73  

5.16

 

Convertible Notes

    A-73  

5.17

 

Employee Benefit Matters

    A-73  

5.18

 

Takeover Statutes

    A-75  

5.19

 

Further Assurances

    A-75  

5.20

 

Stockholder Litigation

    A-75  

5.21

 

Net Cash

    A-75  

5.22

 

Amending Party

    A-76  

5.23

 

Asset Letter of Intent

    A-76  

5.24

 

Hart-Scott-Rodino

    A-76  

5.25

 

ANI Warrants

    A-76  


ARTICLE VI.    Conditions Precedent


 

 

A-76

 

6.1

 

Conditions to Each Party's Obligation to Effect the Merger

    A-76  

6.2

 

Conditions to Obligations of ANI

    A-77  

6.3

 

Conditions to Obligations of the Company

    A-78  

A-3


 
   
  Page  


ARTICLE VII.    Termination


 

 

A-78

 

7.1

 

Termination

    A-78  

7.2

 

Notice of Termination; Effect of Termination

    A-80  

7.3

 

Fees and Expenses

    A-80  


ARTICLE VIII.    General Provisions


 

 

A-81

 

8.1

 

Non-Survival of Representations, Warranties, Covenants and Agreements

    A-81  

8.2

 

Amendment and Modification

    A-81  

8.3

 

Waiver of Compliance; Consents

    A-82  

8.4

 

Notices

    A-82  

8.5

 

Assignment; Third-Party Beneficiaries

    A-83  

8.6

 

Governing Law

    A-83  

8.7

 

Other Remedies; Specific Enforcement; Consent to Jurisdiction

    A-83  

8.8

 

Counterparts

    A-83  

8.9

 

Severability

    A-83  

8.10

 

Interpretation

    A-84  

8.11

 

Entire Agreement

    A-85  

8.12

 

Deliveries

    A-85  

8.13

 

Arbitration Concerning Litigation Reserve

    A-85  

8.14

 

WAIVER OF JURY TRIAL

    A-85  

 

Schedules

       
 

Schedule I

 

ANI Stockholders to Sign Voting Agreements

       
 

Schedule II

 

Company Stockholders to Sign Voting Agreements

       
 

Schedule III

 

Company Directors and Officers after Effective Time

       

 


Exhibits


 

 

 

 
 

Exhibit A-1

 

Form of Voting Agreement—Meridian Venture Partners II, L.P.

       
 

Exhibit A-2

 

Form of Voting Agreement—Other Stockholders

       
 

Exhibit B

 

Form of Company Charter Amendments

       
 

Exhibit C

 

Form of Lock-Up Agreement

       

A-4



INDEX OF DEFINED TERMS

 
  Page  

Acquisition Proposal

    A-63  

Action

    A-24  

Adjusted Outstanding Company Shares

    A-13  

Affiliate

    A-39  

Agreement

    A-9  

Amending Party

    A-76  

ANI

    A-9  

ANI Benefit Plan

    A-27  

ANI Board

    A-29  

ANI Board Recommendation

    A-68  

ANI Common Stock

    A-20  

ANI Contracts

    A-27  

ANI Director Designees

    A-72  

ANI Disclosure Schedule

    A-19  

ANI Executives

    A-74  

ANI Indemnified Person

    A-71  

ANI IP

    A-31  

ANI IP Contract

    A-32  

ANI Licensed IP

    A-31  

ANI Percentage

    A-13  

ANI Permits

    A-33  

ANI Permitted Liens

    A-30  

ANI Policies

    A-38  

ANI Preferred Stock

    A-20  

ANI Products

    A-33  

ANI Regulatory Agency

    A-33  

ANI Regulatory Filings

    A-33  

ANI Series A Preferred Stock

    A-11  

ANI Series B Preferred Stock

    A-11  

ANI Series C Preferred Stock

    A-11  

ANI Series D Preferred Stock

    A-11  

ANI Shares

    A-11  

ANI Special Meeting

    A-67  

ANI Stockholder Approval

    A-21  

ANI Termination Fee

    A-80  

ANI Unaudited Interim Balance Sheet

    A-22  

ANI Warrants

    A-20  

Applicable Law

    A-23  

Applicable Period

    A-74  

August Warrants

    A-40  

Business Day

    A-10  

Certificate

    A-11  

Certificate of Merger

    A-10  

Change in ANI Board Recommendation

    A-63  

Change in Company Board Recommendation

    A-65  

Closing

    A-10  

Closing Date

    A-10  

COBRA

    A-28  

A-5


 
  Page  

Code

    A-9  

Company

    A-9  

Company 401(k) Plan

    A-74  

Company Benefit Plan

    A-47  

Company Board

    A-49  

Company Board Recommendation

    A-68  

Company Certificate of Amendment

    A-10  

Company Charter Amendments

    A-10  

Company Class C Special Stock

    A-40  

Company Common Stock

    A-10  

Company Contracts

    A-46  

Company Convertible Notes

    A-40  

Company Director Designees

    A-72  

Company Disclosure Schedule

    A-39  

Company Executives

    A-73  

Company Financial Advisor

    A-57  

Company Financial Statements

    A-43  

Company Indemnified Person

    A-70  

Company IP Contract

    A-51  

Company Licensed IP

    A-50  

Company Notice

    A-65  

Company Owned IP

    A-50  

Company Percentage

    A-13  

Company Permits

    A-52  

Company Permitted Liens

    A-50  

Company Policies

    A-56  

Company Preferred Stock

    A-40  

Company Products

    A-52  

Company Regulatory Agency

    A-52  

Company Regulatory Filings

    A-52  

Company SEC Documents

    A-42  

Company Special Meeting

    A-68  

Company Stockholder Approval

    A-41  

Company Tail Policies

    A-70  

Company Termination Fee

    A-80  

Company Warrant Amount

    A-13  

Confidentiality Agreement

    A-66  

Contingent Value Rights

    A-61  

Contract

    A-25  

CVR Agreement

    A-61  

Damages

    A-70  

Delaware Secretary

    A-10  

Delayed Severance Amounts

    A-74  

Determination Date

    A-13  

DGCL

    A-9  

Dispute

    A-16  

Dispute Notice

    A-16  

Dissenting Shares

    A-18  

Effective Time

    A-10  

Environmental Claim

    A-37  

A-6


 
  Page  

Environmental Laws

    A-37  

Environmental Permits

    A-36  

ERISA

    A-27  

ERISA Affiliate

    A-27  

Evaluation Date

    A-43  

Exchange Ratio

    A-15  

Expenses

    A-80  

FCPA

    A-34  

FDA

    A-22  

FDCA

    A-33  

Federal Health Care Program

    A-35  

GAAP

    A-22  

Government Authority

    A-22  

Hazardous Materials

    A-37  

HIPAA

    A-36  

HSR Act

    A-76  

Indebtedness

    A-26  

Indenture

    A-40  

Independent Accountant

    A-16  

Intellectual Property

    A-30  

Intellectual Property Rights

    A-30  

Interim Period

    A-58  

IRS

    A-28  

Joint Proxy Statement/Prospectus

    A-38  

knowledge

    A-84  

Letter of Intent

    A-76  

Lien

    A-30  

material

    A-19  

Material Adverse Effect

    A-19  

Merger

    A-9  

Merger Consideration

    A-11  

Merger Shares

    A-13  

Minimum Net Cash

    A-78  

NASDAQ

    A-42  

Net Cash

    A-13  

Net Cash Calculation

    A-16  

Net Cash Schedule

    A-16  

Order

    A-24  

Other Parties

    A-81  

Outside Date

    A-78  

Parties

    A-9  

Patents

    A-31  

PBGC

    A-27  

Person

    A-18  

PHSA

    A-33  

Programs

    A-35  

Rabbi Trust

    A-74  

Registered IP

    A-31  

Registration Statement

    A-56  

Representatives

    A-62  

A-7


 
  Page  

Response Date

    A-16  

Reverse Stock Split

    A-10  

SEC

    A-38  

Securities Act

    A-21  

Series A Exchange Ratio

    A-15  

Series B Exchange Ratio

    A-15  

Series B Preference Amount

    A-12  

Series C Exchange Ratio

    A-15  

Series C Preference Amount

    A-12  

Series D Exchange Ratio

    A-15  

Series D Preference Amount

    A-12  

Share Value

    A-12  

Social Security Act

    A-36  

Subsidiary

    A-19  

Superior Proposal

    A-64  

Surviving Corporation

    A-9  

Takeover Statute

    A-30  

Tax

    A-25  

Tax Returns

    A-25  

Taxable

    A-25  

Taxes

    A-25  

Termination Fees

    A-80  

Violation

    A-22  

Voting Agreements

    A-9  

Voting Debt

    A-20  

A-8



AGREEMENT AND PLAN OF MERGER

        This AGREEMENT AND PLAN OF MERGER, dated as of October 3, 2012 (this "Agreement"), is by and between BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and ANIP Acquisition Company (d/b/a ANI Pharmaceuticals), a Delaware corporation ("ANI"). The Company and ANI are sometimes referred to in this Agreement as the "Parties".

        A.    The Company and ANI intend to effect a merger of ANI with and into the Company (the "Merger") in accordance with this Agreement and the General Corporation Law of the State of Delaware (the "DGCL").

        B.    Immediately before the Effective Time of the Merger, and subject to stockholder approval, the Company intends to effect a Reverse Stock Split.

        C.    The board of directors of the Company has approved unanimously and declared advisable the Merger, upon the terms and subject to the conditions set forth herein, has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, the Company and its stockholders, and has determined to recommend that the Company stockholders adopt this Agreement and approve the Company Charter Amendments, the Merger and the issuance of Company Common Stock as contemplated by this Agreement.

        D.    The board of directors of ANI has approved unanimously and declared advisable the Merger, upon the terms and subject to the conditions set forth herein, has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, ANI and its stockholders, and has determined to recommend that ANI stockholders adopt this Agreement and approve the Merger as contemplated by this Agreement.

        E.    It is intended that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").

        F.     In order to induce the Company to enter into this Agreement and to cause the Merger to be consummated, the Company and the stockholders of ANI listed on Schedule I hereto are executing voting agreements and irrevocable proxies in favor of the Company concurrently with the execution and delivery of this Agreement in the forms substantially attached hereto as Exhibit A-1 and Exhibit A-2 (the "Voting Agreements").

        G.    In order to induce ANI to enter into this Agreement and to cause the Merger to be consummated, ANI and the stockholders of the Company listed on Schedule II hereto are executing Voting Agreements in favor of ANI concurrently with the execution and delivery of this Agreement.

        Accordingly, and in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and intending to be legally bound, the Parties agree as follows:


ARTICLE I.
The Transactions

        1.1    The Merger.    At the Effective Time, and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, ANI will be merged with and into the Company, with the Company being the surviving entity. The Company, as the surviving entity of the Merger, is hereinafter sometimes referred to as the "Surviving Corporation". At the Effective Time, and as a result of the approval of the Company Charter Amendments, the name of the Surviving Corporation will be changed to "ANI Pharmaceuticals, Inc."

        1.2    Effects of the Merger.    The effects of the Merger will be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the foregoing, at

A-9


the Effective Time, by virtue of the Merger and in accordance with the DGCL, all of the property, rights, privileges, powers and franchises of ANI will vest in the Surviving Corporation, and all debts, liabilities and duties of ANI will become the debts, liabilities and duties of the Surviving Corporation.

        1.3    Closing; Effective Time.    Unless this Agreement is terminated pursuant to Article VII hereof, the closing of the Merger and the other transactions contemplated hereby (the "Closing") will take place through the remote exchange of electronic copies of executed documents on the second (2nd) Business Day after satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing), or at such other place or on such other date as is mutually agreeable to the parties hereto. The date of the Closing is herein referred to as the "Closing Date". At the Closing, the parties hereto will cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware (the "Delaware Secretary"), in accordance with the relevant provisions of the DGCL (the time of such filing, or such later time as may be agreed to in writing by the parties hereto and specified in the Certificate of Merger, being referred to herein as the "Effective Time"). For the purposes of this Agreement, "Business Day" means each day other than a Saturday, Sunday or any other day when commercial banks in New York, New York are authorized or required by law to close.

        1.4    Recapitalization of Company Common Stock.    

A-10


        1.5    Lock-Up Agreements.    Concurrently with the execution hereof, the chief executive officer and chief financial officer of ANI and each holder of ANI Shares set forth on Schedule I is entering into a Lock-up Agreement in the form attached hereto as Exhibit C.


ARTICLE II.
Conversion and Cancellation of Securities

        2.1    Cancellation and Conversion of ANI Securities.    As of the Effective Time, by virtue of the Merger, and without any action on the part of the holders of any of the shares of capital stock of ANI ("ANI Shares"):

A-11


        For purpose hereof: (x) the "Series D Preference Amount" means the amount the holders of the ANI Series D Preferred Stock are entitled to receive in respect of the liquidation preference of the ANI Series D Preferred Stock described in Article VII, Section 1(a) of the ANI's Certificate of Incorporation; (y) the "Series C Preference Amount" means the amount the holders of the ANI Series C Preferred Stock are entitled to receive in respect of the liquidation preference of the ANI Series C Preferred Stock described in Article VII, Section 1(b) of ANI's Certificate of Incorporation and (z) the "Series B Preference Amount" means the amount the holders of the ANI Series B Preferred Stock are entitled to receive in respect of the liquidation preference of the ANI Series B Preferred Stock described in Article VII, Section 1(c) of ANI's Certificate of Incorporation, the amount of which in each case will be as set forth in a certificate executed by the chief financial officer of ANI immediately prior to the Closing Date.

A-12


        In the event any shares of Company Common Stock are issued to holders of ANI Series C Preferred Stock, Series B Preferred Stock or Series A Preferred Stock in accordance with this clause (f) then it is acknowledged and agreed that all references to ANI Series D Preferred Stock in Sections 2.1(d), 2.2 and 2.3 shall be deemed to also include ANI Series C Preferred Stock and/or ANI Series B Preferred Stock and/or ANI Series A Preferred Stock, as applicable.

        2.2    Determination of Exchange Ratio.    

(ANI Percentage)   ×   Adjusted Outstanding Company Shares
Company Percentage

A-13


A-14


        (b)    Exchange Ratio.    The Exchange Ratio for purposes of the Merger Agreement (the "Exchange Ratio") will equal the applicable ratio set forth below and each Exchange Ratio will be calculated to the nearest 1/10,000 of a share:

A-15


        (c)    Determination of Net Cash.    

A-16


        2.3    Payment of Consideration.    

A-17


        2.4    Dissenting Shares.    Notwithstanding any provision in this Agreement to the contrary, ANI Shares outstanding as of immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has properly demanded appraisal for such shares in accordance with Section 262 of the DGCL ("Dissenting Shares") will not be converted into the right to receive the applicable portion of Merger Consideration. Holders of such Dissenting Shares will instead be entitled to receive payment for the fair value of such Dissenting Shares as determined in accordance with Section 262 of the DGCL; provided, however, that if, after the Effective Time, such holder fails to perfect, withdraws or loses the right to appraisal, such Dissenting Shares will be treated as if they had been converted as of the Effective Time into the right to receive the applicable portion of the Merger Consideration. ANI will give the Company prompt notice of any demands received by ANI for appraisal of shares and withdrawals of any such demand, and any other communications delivered to ANI pursuant to or in connection with Section 262 of the DGCL, and the Company and ANI will jointly have the right to direct all negotiations and proceedings with respect to such demands (including settlement offers). Except with the prior written consent of the other Party, neither Party will not offer to settle or settle or (unless required pursuant to a valid and final Order) make any payment with respect to, any such demands.

        2.5    Required Withholdings.    The Company will be entitled to deduct and withhold from the Merger Consideration such amounts, if any, as may be required to be deducted or withheld therefrom under the Code or any other Applicable Law. To the extent such amounts are so deducted or withheld, such amounts will be treated for all purposes under this Agreement as having been delivered or otherwise paid to the Person to whom such amounts would otherwise have been delivered or otherwise paid pursuant to the Merger and this Agreement.

        2.6    Lost Certificates.    If any Certificate has been lost, stolen or destroyed, upon the making of an affidavit (in form and substance reasonably acceptable to the Company) of that fact by the Person claiming such Certificate to be lost, stolen or destroyed the Company will cause to be issued, in exchange for such lost, stolen or destroyed Certificate, the applicable portion of the Merger Consideration as contemplated by this Article II.

        2.7    Adjustments.    If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of ANI or the Company occurs, as a result of any reclassification, recapitalization, stock split (including any reverse stock split), merger, combination, exchange or readjustment of shares, subdivision or other similar transaction, or any stock dividend thereon with a record date during such period, the Exchange Ratio will be appropriately adjusted to eliminate the effect of such event on the Exchange Ratio or any such other amounts payable pursuant to this Agreement.

A-18


        2.8    Tax Consequences.    For U.S. federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Code. The parties to this Agreement adopt this Agreement as a "plan of reorganization" within the meaning of Section 1.368-2(g) of the United States Treasury Regulations.


ARTICLE III.
Representations and Warranties of ANI

        Except with respect to any subsection of this Article III, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by ANI to the Company concurrently with this Agreement (the "ANI Disclosure Schedule") (it being understood by the Parties that the information disclosed in one subsection of the ANI Disclosure Schedule will be deemed to be included in each other subsection of the ANI Disclosure Schedule in which the relevance of such information thereto would be readily apparent on the face thereof), ANI represents and warrants to the Company as follows:

        3.1    Organization, Standing and Power.    ANI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such other jurisdictions where the failure so to qualify and be in such standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on ANI. The Certificate of Incorporation and By-laws of ANI, copies of which were previously provided to the Company, are true, complete and correct copies of such documents as in effect on the date of this Agreement. The stock records, minute books and other records of ANI are accurate, up to date and complete in all materials respects.

        As used in this Agreement:

A-19


        3.2    Capital Structure.    

A-20


        3.3    Authority; Non-Contravention; Consents and Approvals.    

A-21


        3.4    Financial Statements; Undisclosed Liabilities.    

A-22


        3.5    Compliance with Applicable Laws.    Neither ANI nor any ANI Subsidiary has violated or failed to comply with any Applicable Law material to the operation of ANI's business. For purposes of this Agreement, "Applicable Law" means, with respect to any Person, any U.S. federal, state or local or any foreign law (in each case, statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Government Authority that is binding upon or applicable to that Person. The businesses of ANI and its Subsidiaries are not being and have not

A-23


been conducted in violation of any law, ordinance or regulation of any Government Authority in any material respect.

        3.6    Legal Proceedings.    Except as set forth in Section 3.6 of the ANI Disclosure Schedule, there is no claim, suit, action, litigation, arbitration, investigation or other demand or proceeding (whether judicial, arbitral, administrative or other) (each, an "Action") pending or, to the knowledge of ANI, threatened, against or affecting ANI or any Subsidiary of ANI as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, be material to ANI, nor is there any judgment, decree, injunction, rule, award, settlement, stipulation or order of or subject to any Government Authority or arbitrator (an "Order") outstanding against ANI or any Subsidiary of ANI having or which would reasonably be expected, individually or in the aggregate, to be material to ANI. To the knowledge of ANI, no investigation by any Government Authority with respect to ANI or any of its Subsidiaries is pending or threatened.

        3.7    Taxes.    

A-24


        3.8    Certain Agreements.    

A-25


A-26


        3.9    Benefit Plans.    

A-27


A-28


        3.10    Subsidiaries.    Section 3.10 of the ANI Disclosure Schedule sets forth a true and complete list of all the Subsidiaries of ANI. Each Subsidiary of ANI is a corporation or other entity duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of formation, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary and where the failure so to qualify would have a material effect on ANI. All of the shares of capital stock of each of the Subsidiaries held by ANI or by another ANI Subsidiary are fully paid and nonassessable and are owned by ANI or a Subsidiary of ANI free and clear of any material Lien, except for ANI Permitted Liens. Except for the Subsidiaries set forth in Section 3.10 of the ANI Disclosure Schedule, ANI neither directly nor indirectly, (a) owns or otherwise controls, (b) has agreed to purchase or otherwise acquire or (c) holds any interest convertible into or exchangeable for, any capital stock or other equity interest of any other corporation, partnership, joint venture or other business association or entity.

        3.11    Absence of Certain Changes or Events.    (a) Since December 31, 2011, except as permitted by Section 5.1 in the case of actions taken after the date hereof, there has not been any change, circumstance or event (including any event involving a prospective change) which, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect on ANI, and (b) since December 31, 2011, except as contemplated by this Agreement ANI and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices.

        3.12    Board Approval.    The board of directors of ANI (the "ANI Board"), by resolutions duly adopted at a meeting duly called and held has: (a) approved and adopted, and declared the advisability of, this Agreement and the transactions contemplated hereby, including the Merger; (b) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of ANI and ANI's stockholders; and (c) subject to Section 5.3(d), resolved to make and maintain the ANI Board Recommendation.

A-29


        3.13    Takeover Statutes.    ANI has taken all action necessary to exempt or exclude this Agreement and the transactions contemplated hereby, including the Merger, from: (i) the restrictions on business combinations set forth in Section 203 of the DGCL; and (ii) any other similar antitakeover law, statute or regulation (each, a "Takeover Statute"). Accordingly, no Takeover Statute applies to this Agreement or the transactions contemplated hereby, including the Merger, with respect to ANI. ANI does not have any stockholder rights plan, "poison pill" or similar plan or arrangement in effect.

        3.14    Properties.    Except as set forth in Section 3.14 of the ANI Disclosure Schedule, ANI or one of its Subsidiaries (a) has good and valid title to all of its properties and assets, including those reflected in the ANI Financial Statements as being owned by ANI or one of its Subsidiaries or acquired after the date thereof that are material to ANI's business (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business and as permitted under Section 5.1), free and clear of all claims, liens (statutory or otherwise), charges, security interests, encumbrances or other adverse claims of any nature whatsoever, including mortgages, deeds of trust, pledges, options, conditional sales contracts, assessments, levies, easements, covenants, reservations, restrictions, rights-of-way or encumbrances of any nature whatsoever (each, a "Lien"), except (i) statutory liens securing payments not yet due or liens which are being properly contested by ANI or one of its Subsidiaries in good faith and by proper legal proceedings and for which adequate reserves related thereto are maintained on the ANI Financial Statements, (ii) such imperfections or irregularities of title, claims, liens, charges, security interests, easements, covenants and other restrictions or encumbrances as do not materially affect the use or value of the properties or assets subject thereto or affected thereby or otherwise adversely impair business operations at such properties, (iii) mortgages, or deeds of trust, security interests or other encumbrances on title related to indebtedness reflected in the ANI Financial Statements and which have been or will be satisfied and released at or prior to the Closing Date, and (iv) rights granted to any non-exclusive licensee of any ANI Intellectual Property in the ordinary course of business consistent with past practices (such liens, imperfections and irregularities in clauses (i), (ii), (iii) and (iv), "ANI Permitted Liens"), and (b) has a valid leasehold interest as a lessee of all leasehold estates reflected in the ANI Financial Statements or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to ANI's knowledge, the lessor.

        3.15    Intellectual Property.    

A-30


A-31


A-32


        3.16    Regulatory Matters.    

A-33


A-34


A-35


        3.17    Environmental Matters.    Except as set forth in Section 3.17 of the ANI Disclosure Schedule, (a) ANI and its Subsidiaries hold, and are currently, and at all prior times have been, in continuous compliance with all permits required by Environmental Laws for ANI to conduct its operations ("Environmental Permits"), and are currently, and at all prior times have been, otherwise in

A-36


continuous compliance with all Applicable Laws relating to: (i) protection, preservation or cleanup of the environment or natural resources; (ii) any Release or threatened Release, including control, investigation, study, assessment, testing, monitoring, containment, removal, remediation, cleanup or abatement of such Release or threatened Release; (iii) the management, manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, registration, use, treatment, handling, storage, disposal, transportation, re-use, recycling or reclamation of any Hazardous Material, or (iv) health and safety ("Environmental Laws") and, to the knowledge of ANI, there is no condition that would reasonably be expected to prevent or interfere with compliance with all applicable Environmental Laws and all applicable Environmental Permits in the future, (b) ANI and its Subsidiaries have not received any written notice, claim, demand, action, suit, complaint, proceeding or other communication by any person alleging any violation of, or any actual or potential liability under, any Environmental Laws (an "Environmental Claim"), and ANI has no knowledge of any pending or threatened Environmental Claim, (c) no hazardous, dangerous or toxic substance, including petroleum (including crude oil or any fraction thereof), asbestos and asbestos-containing materials, polychlorinated biphenyls, radon, fungus, mold, urea-formaldehyde insulation or any other material that is regulated or as to which liability or standards of conduct are imposed pursuant to any Environmental Laws or that could result in liability under any Environmental Laws ("Hazardous Materials") has been generated, transported, treated, stored, installed, disposed of, arranged to be disposed of, released or threatened to be released at, on, from or under any of the properties or facilities currently or formerly owned, leased or otherwise used by ANI or its Subsidiaries, in violation of, or in a manner or to a location that could give rise to liability to ANI or its Subsidiaries under Environmental Laws, and (d) ANI and its Subsidiaries have not assumed, contractually or by operation of law, any liabilities or obligations under or relating to any Environmental Laws. For purposes hereof, "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, generating, disposing or dumping of any Hazardous Material at, in, on, into or onto the environment, including the migration of any Hazardous Material through or in the environment.

        3.18    Labor and Employment Matters.    Except as set forth in Section 3.18 of the ANI Disclosure Schedule, (a) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to the knowledge of ANI, threatened against ANI or any of its Subsidiaries, (b) no union, works council or other labor organization represents, or claims to represent, any group of employees with respect to their employment by ANI or any of its Subsidiaries and no union organizing campaign with respect to the employees of ANI or its Subsidiaries is threatened or underway, (c) there is no unfair labor practice charge or complaint against ANI or its Subsidiaries pending or, to the knowledge of ANI, threatened before the National Labor Relations Board or any similar state or foreign agency, (d) there is no grievance pending relating to any collective bargaining agreement or other grievance procedure, (e) no charges with respect to or relating to ANI or its Subsidiaries are pending before the Equal Employment Opportunity Commission or any other state or foreign agency responsible for the prevention of unlawful employment practices; and (f) no employee of ANI or its Subsidiaries is in violation of (and to the knowledge of ANI no written allegation has been made that any employee is in violation of) any term of any restrictive covenant, common law nondisclosure obligation, fiduciary duty, or other obligation to a former employer of any such employee relating (i) to the right of any such employee to be employed by ANI or its Subsidiaries or (ii) to the knowledge or use of trade secrets or proprietary information. Neither ANI nor any of its Subsidiaries is a party to a current conciliation agreement, consent decree, or other agreement or order with any Government Authority with respect to labor or employment practices.

        3.19    Insurance.    

A-37


        3.20    Registration Statement; Joint Proxy Statement/Prospectus.    The information regarding ANI and the ANI Subsidiaries supplied by ANI for inclusion in the Registration Statement (and any amendment or supplement thereto), at the time the Registration Statement (and any amendment or supplement thereto) is filed, at the time the Registration Statement (and any amendment or supplement thereto) is declared effective by the Securities and Exchange Commission (the "SEC") and at the Effective Time, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The information regarding ANI and the ANI Subsidiaries supplied by ANI for inclusion in the joint proxy statement/prospectus to be sent to (a) the Company's stockholders in connection with the solicitation of proxies in favor of (i) the approval of the Company Charter Amendments and (ii) the approval of the issuance of shares of Company Common Stock pursuant to this Agreement (and any amendment or supplement thereto) and (b) ANI's stockholders in connection with the solicitation of proxies in favor of the adoption of this Agreement and the approval of the transactions contemplated by this Agreement, including the Merger (the "Joint Proxy Statement/Prospectus"), in each case, at the date the Joint Proxy Statement/Prospectus (and any amendment or supplement thereto) is first mailed to the Company and ANI stockholders and at the time of the Company Special Meeting and the ANI Special Meeting (or any adjournment or postponement thereof), will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 3.20 will not apply to statements or omissions included in the Joint Proxy Statement/Prospectus (and, in each case, any amendment or supplement thereto) based upon information regarding the Company or any the Company Subsidiary supplied by the Company for use therein. Subject to Section 5.3(d), the Joint Proxy Statement/Prospectus will include the ANI Board Recommendation.

A-38


        3.21    Affiliate Transactions.    Except as set forth in Section 3.21 of the ANI Disclosure Schedule, during the past three (3) years neither ANI nor any of the ANI Subsidiaries has, directly or indirectly, purchased, leased or otherwise acquired any property or obtained any services from, or sold, leased or otherwise disposed of any property or furnished any services to, or otherwise dealt with, in the ordinary course of business or otherwise, any director, officer, Affiliate or associate of any of ANI or any of the ANI Subsidiaries or any shareholder or member of any Affiliate or associate of any ANI or any of the ANI Subsidiaries (except with respect to compensation in the ordinary course of business for services rendered as a director, officer or employee of ANI or any of the ANI Subsidiaries). Except as set forth in Section 3.21 of the ANI Disclosure Schedule, none of ANI or any of the ANI Subsidiaries owes any amount to, or has any agreement or contract with or commitment to, any of its shareholders, directors, officers, employees or consultants or any Affiliate or associate thereof (other than compensation for current services not yet due and payable and reimbursement of expenses arising in the ordinary course of business), and none of such Persons owes any amount to ANI or any of the ANI Subsidiaries. For purposes of this Agreement, "Affiliate" means (i) with respect to any person, any member of the immediate family of such person or any entity controlled, directly or indirectly, by such person and/or members of the immediate family of such person, and (ii) with respect to any entity, (a) any Person that, directly or indirectly, controls, is controlled by or is under common control with, such entity or (b) any director, officer, manager, stockholder, member, partner or other owner of such entity.

        3.22    Brokers or Finders.    No agent, broker, investment banker or financial advisor has been retained by or is authorized to act on behalf of ANI or any of its Subsidiaries and is or might be entitled to any broker's or finder's fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement.

        3.23    Disclosure.    No representation or warranty or other statement made by the Company in this Agreement, the ANI Disclosure Schedule, the certificates delivered pursuant to Section 6.3(d)(i) or otherwise in connection with the transactions contemplated herein contains any untrue statement or omits to state a material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.


ARTICLE IV.
Representations and Warranties of the Company

        Except with respect to any subsection of this Article IV, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by the Company to ANI concurrently with this Agreement (the "Company Disclosure Schedule") (it being understood by the Parties that the information disclosed in one subsection of the Company Disclosure Schedule will be deemed to be included in each other subsection of the Company Disclosure Schedule in which the relevance of such information thereto would be readily apparent on the face thereof), the Company represents and warrants to ANI as follows:

        4.1    Organization, Standing and Power.    The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such other jurisdictions where the failure so to qualify and be in such standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. The Certificate of Incorporation and By-laws of the Company, copies of which were previously provided to ANI, are true, complete and correct copies of such documents as in effect on the date of this Agreement. Except as set forth in Section 4.1 of the Company Disclosure Schedule, the Company neither directly nor indirectly, (a) owns or otherwise controls, (b) has agreed to purchase or otherwise acquire or (c) holds any interest convertible into or exchangeable for, any capital stock or

A-39


other equity interest of any other corporation, partnership, joint venture or other business association or entity. Except as set forth in Section 4.1 of the Company Disclosure Schedule, the Company has not at any time during the preceding five years owned, of record or beneficially, more than five percent of the outstanding equity securities having ordinary voting rights or power of any corporation or partnership or other legal entity. The Company does not have any Subsidiaries. The stock records, minute books and other records of the Company are accurate, up to date and complete in all materials respects.

        4.2    Capital Structure.    

A-40


        4.3    Authority; Non-Contravention; Consent.    

A-41


        4.4    SEC Documents; Undisclosed Liabilities.    

A-42


A-43


        4.5    Compliance with Applicable Laws.    The Company has not violated or failed to comply with any Applicable Law material to the operation of the Company's business.

        4.6    Legal Proceedings.    Except as set forth in Section 4.6 of the Company Disclosure Schedule, there is no Action pending or, to the knowledge of the Company, threatened, against or affecting the Company nor is there any Order outstanding against the Company. To the knowledge of the Company, no investigation by any Government Authority with respect to the Company is pending or threatened. With respect to each Action set forth in Section 4.6 of the Company Disclosure Schedule, the Company has delivered to ANI all applicable pleadings, motions and other filings. With respect to each Action set forth in Section 4.6 of the Company Disclosure Schedule that is being defended by counsel for or otherwise appointed by one or more insurance carriers of the Company, (a) the defense thereof has been assumed by one or more insurance carriers of the Company, subject to a standard reservation of rights letter which has been provided to ANI, (b) the Company has previously paid all deductibles, reserves or co-payments required under the applicable insurance policy pursuant to which such matter is being defended, and (c) all further amounts which may become payable in respect thereof will be paid by the applicable insurance carrier, subject to the standard reservation of rights letter which has been provided to ANI, subject to the aggregate applicable coverage limits under such policies and (d) the Company has no reason to expect that any insurance company currently defending any such Action will disclaim coverage of any such Action.

        4.7    Taxes.    

A-44


        4.8    Certain Agreements.    

A-45


A-46


        4.9    Benefit Plans.    

A-47


A-48


        4.10    Absence of Certain Changes or Events.    (i) Since December 31, 2011, except as permitted by Section 5.2 in the case of actions taken after the date hereof, there has not been any change, circumstance or event (including any event involving a prospective change) which, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect on the Company, and (ii) since December 31, 2011, except as contemplated by this Agreement the Company has conducted its respective business in the ordinary course consistent with its past practice.

        4.11    Board Approval.    The Company's board of directors (the "Company Board"), by resolutions duly adopted at a meeting duly called and held has (a) approved the Company Charter Amendments providing for (i) the Reverse Stock Split, (ii) an increase to the number of authorized shares of Company Common Stock to a number to be determined by ANI, and (iii) a change of the name of the Company to "ANI Pharmaceuticals, Inc." or any other name designated by the Company; (b) approved the change of the Company's trading symbol to a symbol chosen by ANI; (c) approved and adopted, and declared the advisability of, this Agreement and the transactions contemplated hereby, including the Merger; (d) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the Company and the Company's stockholders; and (e) subject to Section 5.4(d), resolved to make and maintain the Company Board Recommendation.

        4.12    Takeover Statutes.    The Company has taken all action necessary to exempt or exclude this Agreement and the transactions contemplated hereby, including the Merger, from all applicable Takeover Statutes. Accordingly, no Takeover Statute applies to this Agreement or the transactions contemplated hereby, including the Merger, with respect to the Company. The Company does not have any stockholder rights plan, "poison pill" or similar plan or arrangement in effect.

        4.13    Properties.    Except as set forth in Section 4.13 of the Company Disclosure Schedule, the Company (a) has good and valid title to all of its properties and assets including those reflected in the Company Financial Statements as being owned by the Company or acquired after the date thereof that are material to the Company's business (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business and as permitted under Section 5.2), free and clear of all Liens, except (i) statutory liens securing payments not yet due or liens which are being properly contested by the Company in good faith and by proper legal proceedings and for which adequate reserves related thereto are maintained on the Company Financial Statements and provided the amount of such reserves or payments not yet due will be included as a Liability for purposes of calculating Net Cash, (ii) such imperfections or irregularities of title, claims, liens, charges, security interests, easements, covenants and other restrictions or encumbrances as do not materially affect the use or value of the properties or assets subject thereto or affected thereby or otherwise adversely impair business operations at such properties, (iii) mortgages, or deeds of trust, security interests or other encumbrances on title related to indebtedness reflected in the Company Financial Statements and which have been or will be satisfied and released at or prior to the Closing Date and any Indebtedness or other obligations secured thereby will be included as a Liability for purposes of calculating Net

A-49


Cash, and (iv) rights granted to any non-exclusive licensee of any the Company Intellectual Property in the ordinary course of business consistent with past practices (such liens, imperfections and irregularities in clauses (i), (ii), (iii) and (iv), "Company Permitted Liens"), and (b) has a valid leasehold interest as a lessee of all leasehold estates set forth in Section 4.13 of the Company Disclosure Schedule (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to the Company's knowledge, the lessor.

        4.14    Intellectual Property.    

A-50


A-51


        4.15    Regulatory Matters.    

A-52


A-53


A-54


        4.16    Environmental Matters.    Except as set forth in Section 4.16 of the Company Disclosure Schedules, (a) the Company holds, and is currently, and at all prior times have been, in continuous compliance with all Environmental Permits, and is currently, and at all prior times have been, otherwise in continuous compliance with all applicable Environmental Laws and, to the knowledge of the Company, there is no condition that would reasonably be expected to prevent or interfere with compliance with all applicable Environmental Laws and all applicable Environmental Permits in the future, (b) the Company has not received any Environmental Claim, and there is no pending or, to the knowledge of the Company, threatened Environmental Claim, (c) no Hazardous Materials have been generated, transported, treated, stored, installed, disposed of, arranged to be disposed of, released or threatened to be released at, on, from or under any of the properties or facilities currently or formerly owned, leased or otherwise used by the Company, in violation of, or in a manner or to a location that could give rise to liability to the Company under Environmental Laws, and (d) the Company has not assumed, contractually or by operation of law, any liabilities or obligations under or relating to any Environmental Laws.

        4.17    Labor and Employment Matters.    Except as set forth in Section 4.17 of the Company Disclosure Schedule, (a) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to the knowledge of the Company, threatened against the Company, (b) no union, works council or other labor organization represents, or claims to represent, any group of employees with respect to their employment by the Company and no union organizing campaign with respect to the employees of the Company is threatened or underway, (c) there is no unfair labor practice charge or complaint against the Company pending or, to the knowledge of the Company, threatened before the National Labor Relations Board or any similar state or foreign agency, (d) there is no grievance pending relating to any collective bargaining agreement or other grievance procedure, (e) no charges with respect to or relating to the Company are pending before the Equal Employment Opportunity Commission or any other state or foreign agency responsible for the prevention of unlawful employment practices, (f) no employee of the Company is in violation of (and to the knowledge of the Company no written allegation has been made

A-55


that any employee is in violation of) any term of any restrictive covenant, common law nondisclosure obligation, fiduciary duty, or other obligation to a former employer of any such employee relating (i) to the right of any such employee to be employed by the Company or (ii) to the knowledge or use of trade secrets or proprietary information, and (g) since January 1, 2011, the Company has not employed more than 75 employees at any one time and (h) since January 1, 2011, all Company employees have been employed in the State of Illinois. The Company is not a party to a current conciliation agreement, consent decree, or other agreement or order with any Government Authority with respect to labor or employment practices.

        4.18    Insurance.    

        4.19    Registration Statement; Joint Proxy Statement/Prospectus.    The registration statement on Form S-4 to be filed with the SEC by the Company in connection with the issuance of Company Common Stock pursuant to this Agreement (the "Registration Statement") (and any amendment or supplement thereto), at the time the Registration Statement (and any amendment or supplement thereto) is filed, at the time the Registration Statement (and any amendment or supplement thereto) is declared effective by the SEC and at the Effective Time, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/Prospectus, at the date the Joint Proxy Statement/Prospectus (and any amendment or supplement thereto) is first mailed to the Company and ANI stockholders and at the time of the Company Special Meeting and the ANI Special Meeting (or any adjournment or postponement thereof), will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.19 will not apply to statements or omissions included in the Registration Statement or Joint Proxy Statement/Prospectus (and, in each case, any amendment or supplement thereto) based upon information regarding ANI or any ANI Subsidiary supplied to the Company in writing by ANI for use therein (it being understood that all other information in the Registration Statement and Joint Proxy Statement/Prospectus (and, in each case, any amendment or

A-56


supplement thereto) will be deemed to have been supplied by the Company). The Registration Statement and Joint Proxy Statement/Prospectus (and, in each case, any amendment or supplement thereto) will, when filed, comply as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act and, subject to Section 5.4(d), the Joint Proxy Statement/Prospectus will include the Company Board Recommendation.

        4.20    Affiliate Transactions.    Since January 1, 2010, there have been no transactions, or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed transactions, or series of related transactions, that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act that have not been otherwise disclosed in the Company SEC Documents.

        4.21    Brokers or Finders.    No agent, broker, investment banker, financial advisor or other firm or person except Oppenheimer & Co. Inc. (the "Company Financial Advisor") has been retained by or is authorized to act on behalf of the Company and is or might be entitled to any broker's or finder's fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement. The Company has provided to ANI a copy of its engagement agreement with the Company Financial Advisor.

        4.22    Exchange Act Registration; NASDAQ Listing.    The Company Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on The NASDAQ Global Market. No event has occurred that is reasonably likely to have the effect of terminating the registration of Company Common Stock under the Exchange Act or delisting Company Common Stock from The NASDAQ Global Market, nor has the Company received any notification that the SEC or the NASDAQ is contemplating terminating such registration or such delisting.

        4.23    News Releases.    No statement made by the Company in either of the news releases issued by it in respect of the LibiGel Product on February 22, 2010 or May 31, 2011, as of the respective dates on which such news releases were issued, contained any untrue statement of material fact or omitted to state a material fact necessary to make any of the statements made, in light of the circumstances in which they were made, not misleading. No other public statement made by the Company concerning the results of any clinical trials, anticipated results of any clinical trials, potential for FDA approval or financial prospects for the Company or its products, including without limitation all SEC filings, news releases and statements to the financial press, to the knowledge of any officer or director of the Company, contained any untrue statements of material fact or omitted to state a material fact necessary to make any of the statements made, in light of the circumstances in which they were made, not misleading, as of the date such statements were made. No officers or directors of the Company had any knowledge of the results of the two pivotal efficacy trials of the LibiGel Product, known as TESTW006 and TESTW008, until shortly before the public announcement of such results on December 14, 2011, and such officers and directors reasonably believed that the results of such trials would be positive and consistent with all prior public statements in all material respects.

        4.24    Disclosure.    No representation or warranty or other statement made by the Company in this Agreement, the Company Disclosure Schedules, the certificates delivered pursuant to Section 6.2(d)(i) or otherwise in connection with the transactions contemplated herein contains any untrue statement or omits to state a material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.


ARTICLE V.
Covenants

        5.1    Conduct of ANI Business During Interim Period.    Except as contemplated or required by this Agreement or as expressly consented to in writing by the Company (which consent will not be unreasonably withheld, delayed or conditioned), or as set forth in Section 5.1 of the ANI Disclosure Schedule, during the

A-57


period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time (the "Interim Period"), each of ANI and the ANI Subsidiaries will: (i) conduct its operations according to its ordinary course of business and consistent with past practice; (ii) use its reasonable best efforts to preserve intact its business, to keep available the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, distributors, consultants, customers and others having business relationships with it, except in each case, to the extent that the termination of any such services or relationships is in the ordinary course of business and consistent with past practice; and (iii) not take any action which would reasonably be expected to adversely affect its ability to consummate the Merger or the other transactions contemplated hereby. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement or as set forth in Section 5.1 of the ANI Disclosure Schedule, during the Interim Period ANI will not, and will not permit ANI Subsidiaries to, without the prior written consent of the Company (which consent will not be unreasonably withheld, conditioned or delayed), directly or indirectly, do any of the following:

A-58


A-59


        5.2    Conduct of the Company Business During Interim Period.    Except as contemplated or required by this Agreement (including pursuant to Section 5.22 or Section 5.23) or as expressly consented to in writing by ANI (which consent will not be unreasonably withheld, delayed or conditioned), or as set forth in Section 5.2 of the Company Disclosure Schedule, during the Interim Period, the Company will: (i) conduct its operations according to its ordinary course of business and consistent with past practice; (ii) use its reasonable best efforts to preserve intact its business, to keep available the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, distributors, consultants, customers and others having business relationships with it, except in each case, to the extent that the termination of any such services or relationships is in the ordinary course of business and consistent with past practice; (iii) file all required Company SEC Documents required to be filed by it with the SEC under Applicable Law in a timely manner, with such Company SEC Documents complying, when filed, with Applicable Law; (iv) maintain compliance with the applicable listing requirements of NASDAQ; (v) take all such actions as may be necessary or advisable to effect a conclusion of the LibiGel Product clinical trials and safety study in accordance with the budget and timeline set forth in Section 5.2 of the Company Disclosure Schedule and (vi) not take any action which would reasonably be expected to adversely affect its ability to consummate the Merger or the other transactions contemplated hereby. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement (including pursuant to Section 5.22 or Section 5.23) or as set forth in Section 5.2 of the Company Disclosure Schedule, during the Interim Period, the Company will not, without the prior written consent of ANI (which consent will not be unreasonably withheld, conditioned or delayed), directly or indirectly, do any of the following:

A-60


A-61


        5.3    No Solicitation by ANI.    

A-62


A-63


        5.4    No Solicitation by the Company.    

A-64


A-65


        5.5    Access to Information.    During the Interim Period, each of the Company and ANI will, and will cause its respective Representatives to, upon reasonable notice and request: (i) furnish to each other and each other's Representatives reasonable access during normal business hours to its offices, properties, personnel, books and records; and (ii) furnish to each other and each other's Representatives such financial and operating data and other information as may be reasonably requested. Any investigation pursuant to this Section 5.5 will be conducted in a manner so as not to interfere unreasonably with the conduct of the business of the Company or the Company Subsidiaries or ANI or ANI Subsidiaries, as applicable. In addition, nothing contained in this Section 5.5 will require the Company or the Company Subsidiaries or ANI or the ANI Subsidiaries to take any action that would, in the good faith judgment of the Company or ANI, as applicable, constitute a waiver of the attorney-client or similar privilege or trade secret protection held by the Company or the Company Subsidiaries or ANI or ANI Subsidiaries, as applicable, or violate confidentiality obligations owing to third parties; provided, however, that each of the Company and ANI will make a good faith effort to accommodate any request from the other for access or information pursuant to this Section 5.5 in a manner that does not result in such a waiver or violation. All information furnished pursuant to this Section 5.5 will be subject to the Confidentiality Agreement, dated as of July 19, 2012, between the Company and ANI (the "Confidentiality Agreement").

        5.6    Registration Statement; Related Matters.    

A-66


        5.7    ANI Special Meeting; ANI Board Recommendation.    

A-67


        5.8    Company Special Meeting; Company Board Recommendation.    

        5.9    Reasonable Best Efforts.    

A-68


        5.10    Public Announcements.    Before issuing any news release or otherwise making any public statement with respect to any of the transactions contemplated hereby, including the Merger, the Company and ANI agree to consult with each other as to its form and substance, and agree not to issue any such news release or general communication to employees or make any public statement prior to obtaining the prior written consent of the other (which consent will not be unreasonably withheld, delayed or conditioned), except to the extent that the Company or ANI, as the case may be, is advised by outside counsel that such public statement is required by Applicable Law. Notwithstanding the foregoing, promptly following the date of this Agreement, the Company and ANI will issue a joint news release, in form and substance reasonably acceptable to each of the Company and ANI, with respect to this Agreement and the transactions contemplated hereby, including the Merger.

        5.11    Notification of Certain Matters.    ANI will give prompt notice to the Company of: (i) the occurrence or nonoccurrence of any event which would be likely to cause the failure of either of the conditions set forth in Section 6.3(a) or Section 6.3(b) to be met as of any time during the Interim Period; (ii) ANI's or any ANI Subsidiary's receipt of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, including the Merger (unless such consent has been previously identified in Section 3.3 of the ANI Disclosure Schedule); (iii) the institution of any Action not previously identified in Section 3.6 of the ANI Disclosure Schedule; or (iv) the existence of any facts or circumstances that would reasonably be expected to result in a Material Adverse Effect on ANI. The Company will give prompt notice to ANI of: (w) the occurrence or nonoccurrence of any event which would be likely to cause the failure of either of the conditions set forth in Section 6.2(a) or Section 6.2(b) to be met as of any time during the Interim Period; (x) the Company's or any Company Subsidiary's receipt of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, including the Merger (unless such consent has been previously identified on Section 4.3 of the Company Disclosure Schedule); (y) the institution of any Action not previously identified in Section 4.6 of the Company Disclosure Schedule; or (z) the existence of any facts or circumstances that would reasonably be expected to result in a material change to the most recent calculation of Net Cash, delivered pursuant to Section 5.22 or in a Material Adverse Effect on the Company. The delivery of

A-69


any notice pursuant to this Section 5.11 will not limit or otherwise affect the remedies available hereunder to the Party receiving such notice nor be deemed to have amended any of the disclosures set forth in the ANI Disclosure Schedule or the Company Disclosure Schedule, as applicable, to have qualified the representations and warranties contained herein or to have cured any misrepresentation or breach of a representation or warranty that otherwise might have existed hereunder by reason of such material development. No disclosure after the date of this Agreement of the untruth of any representation and warranty made in this Agreement will operate as a cure of any breach of the failure to disclose the information, or of any untrue representation or warranty made herein.

        5.12    Indemnification of Company Directors and Officers.    

A-70


        5.13    Indemnification of ANI Directors and Officers.    

A-71


        5.14    Composition of the Company Board; Officers.    

A-72


        5.15    Listing of Shares.    The Company will use its reasonable best efforts to maintain its existing listing on The NASDAQ Global Market and to cause the shares of Company Common Stock to be issued in the Merger to be approved for listing (subject to notice of issuance) on The NASDAQ Global Market or The NASDAQ Capital Market at or prior to the Effective Time. ANI will promptly furnish to the Company all information concerning ANI that may be required or reasonably requested in connection with such listing.

        5.16    Convertible Notes.    The Company will take such reasonable actions as may be reasonably necessary so that upon the Effective Time, the Company will be in compliance with the terms of the Indenture. The Company agrees to give the notice required under Section 9.6 of the Indenture and any other notice required under the Indenture to be given by the Company prior to the Effective Time with respect to the Merger.

        5.17    Employee Benefit Matters.    

A-73


A-74


        5.18    Takeover Statutes.    At all times prior to the Effective Time, each of the Company and ANI will: (i) take all reasonable action necessary to ensure that no Takeover Statute is or becomes applicable to this Agreement or the transactions contemplated hereby, including the Merger; and (ii) if any Takeover Statute becomes applicable to this Agreement or the transactions contemplated hereby, including the Merger, take all reasonable action necessary to ensure that the transactions contemplated by this Agreement, including the Merger, may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Takeover Statute on this Agreement or the transactions contemplated hereby, including the Merger.

        5.19    Further Assurances.    At and after the Effective Time, the officers and directors of the Company will be authorized to execute and deliver, in the name and on behalf of ANI, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of ANI, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of ANI acquired or to be acquired by the Company as a result of, or in connection with, the Merger.

        5.20    Stockholder Litigation.    The Company will give ANI the opportunity to participate in, and the Company and ANI will reasonably cooperate with respect to, the defense or settlement of any stockholder litigation against the Company and/or its directors or executive officers relating to the Merger, this Agreement or any transaction contemplated by this Agreement, whether commenced prior to or after the execution and delivery of this Agreement, will provide ANI with copies of all applicable pleadings, motions and other filings (as well as transcripts of depositions) and give ANI the reasonable opportunity to comment thereon, together with copies of any underlying documents relevant thereto and will not settle or offer to settle any such litigation without the prior written consent of ANI.

        5.21    Net Cash.    The Company will deliver to ANI a calculation of Net Cash (in the form previously delivered as Section 4.4(d) of the Company Disclosure Schedule) as follows: (a) no less than ten (10) days after the end of each calendar month, with respect to Net Cash as of the last day of the preceding month, (b) at least (3) calendar days prior to the mailing of the Joint Proxy Statement/Prospectus, with respect to estimated Net Cash as of the date of such mailing, and (c) at least (3) calendar days prior to the Closing Date, with respect to estimated Net Cash as of Closing Date. For purposes of determining Net Cash as of the Closing Date, the Parties agree that if ANI shall dispute such calculation as of the Closing Date and assert that the Minimum Net Cash condition to Closing set forth in Section 6.2(f) of the Agreement will not be satisfied, then the process set forth in Section 2.2(c) above will be followed in order to determine whether or not the Minimum Net Cash condition to Closing in Section 6.2(f) has been satisfied, subject to the timing set forth in clause (c) above. In the event a final determination of the Net Cash has not been made on the scheduled Closing Date, the Parties agree that the Closing Date will be adjourned to the second (2nd) Business Day following final determination of the Net Cash in accordance with Section 2.2(c)(vi) of the Agreement (assuming the

A-75


above referenced Minimum Net Cash covenant referenced above has either been satisfied or waived by ANI).

        5.22    Amending Party.    The Company agrees to use commercially reasonable efforts to enter into an amendment to the Company Contract with the party (the "Amending Party") set forth in Section 5.2 of the Company Disclosure Schedule prior to the Closing Date, in substantially the form provided to ANI prior to the date hereof. In the event that such amendment, in substantially the form presented to ANI prior to the date hereof, is entered into and is in full force and effect (without default thereunder) on the Determination Date, then ANI agrees that any amounts received by the Company pursuant to paragraph 2 of such amendment and Section 7(c)(i) as added by such amended agreement on December 31, 2012, may be included as "Net Cash" for purposes of the calculation of Net Cash as of the Determination Date under Section 2.2(a)(vii) of the Agreement, even if the Determination Date occurs prior to December 31, 2012.

        5.23    Asset Letter of Intent.    The Parties agree that the Company may enter into negotiations relating to the sale of the assets referred to in the non-binding letter of intent dated as of October 5, 2012 in the form provided to ANI prior to the date hereof and may execute such letter of intent (as executed, the "Letter of Intent") and a definitive agreement related thereto; provided, however, that ANI shall have the right to review the execution copy of the Letter of Intent and the right to approve any material changes therein from the form previously provided to ANI and to review the definitive agreement in respect thereto and to the extent any provision of that definitive agreement was not specifically set forth in the Letter of Intent, ANI shall have the right to approve such provision, which approval is not to be unreasonably withheld. ANI agrees that any amounts received by the Company prior to the Determination Date pursuant to such definitive agreement may be included as Net Cash for purposes of the calculation of Net Cash under Section 2.2(a)(vii).

        5.24    Hart-Scott-Rodino.    If the Parties mutually determine that any filing is required by the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), then each of the Parties agrees to file as promptly as practicable with the Federal Trade Commission and the Antitrust Division of the Department of Justice all requisite documents and notifications relating to this Agreement and the transactions contemplated hereby, including the Merger and supply any additional information that may be required or requested in connection therewith as promptly as practicable. The Parties further agree that any filing fee payable in connection therewith will be paid by the Company, however, only 50% thereof will be include in the calculation of Net Cash.

        5.25    ANI Warrants.    ANI agrees to use commercially reasonable efforts to obtain cancellation and termination agreements from all holders of the ANI Warrants prior to the Effective Time, pursuant to which each such holder will agree that all ANI Warrants held by such holder immediately prior to the Effective Time and that have not been validly exercised prior thereto will be cancelled and terminated as of the Effective Time without any consideration therefor.


ARTICLE VI.
Conditions Precedent

        6.1    Conditions to Each Party's Obligation to Effect the Merger.     The respective obligation of each of the Parties to this Agreement to effect the Merger will be subject to the satisfaction before the Closing of the following conditions, any one or more of which may be waived in writing by all of the Parties:

A-76


        6.2    Conditions to Obligations of ANI.    The obligation of ANI to effect the Merger is subject to the satisfaction before the Closing of the following additional conditions, any one or more of which may be waived in writing by ANI:

A-77


        6.3    Conditions to Obligations of the Company.    The obligation of the Company to effect the Merger is subject to the satisfaction before the Closing of the following additional conditions, any one or more of which may be waived in writing by the Company:


ARTICLE VII.
Termination

        7.1    Termination.    This Agreement may be terminated at any time prior to the Effective Time, whether before or after Company Stockholder Approval or ANI Stockholder Approval is obtained (except as otherwise set forth below):

A-78


A-79


        7.2    Notice of Termination; Effect of Termination.    A Party desiring to terminate this Agreement pursuant to Section 7.1 (other than Section 7.1(a)) must give written notice of such termination to the other Party in accordance with Section 8.4, specifying the provision or provisions hereof pursuant to which such termination is being effected. In the event of the valid termination of this Agreement as provided in Section 7.1, except as set forth in this Section 7.2 or in Section 7.3, each of which will survive the termination of this Agreement, this Agreement will forthwith become void and have no effect, without any liability on the part of any Party other than liability for any breach of this Agreement occurring prior to such termination. No termination of this Agreement will affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations will survive termination of this Agreement in accordance with their terms.

        7.3    Fees and Expenses.    

A-80



ARTICLE VIII.
General Provisions

        8.1    Non-Survival of Representations, Warranties, Covenants and Agreements.    None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants and agreements, will survive the Effective Time, except for (a) those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Effective Time, and (b) this Article VIII.

        8.2    Amendment and Modification.    This Agreement may be amended, modified or supplemented only by the written agreement of the Company and ANI at any time prior to the Effective Time; provided, however, that after either Company Stockholder Approval or the ANI Stockholder Approval is obtained no amendment or waiver that, pursuant to Applicable Law, requires further Company

A-81


Stockholder Approval or ANI Stockholder Approval, as applicable, will be effective without the receipt of such further Company Stockholder Approval or ANI Stockholder Approval, as applicable.

        8.3    Waiver of Compliance; Consents.    Any failure of the Company or ANI to comply with any obligation, covenant, agreement or condition herein may be waived by ANI (with respect to any failure by the Company) or by the Company (with respect to any failure by ANI), respectively, only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any Party, such consent will be deemed effective when given in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.3.

        8.4    Notices.    All notices, requests, demands, claims and other communications that are required to be or may be given under this Agreement must be in writing and will be deemed to have been effectively given: (i) upon personal delivery to the recipient; (ii) when sent by confirmed facsimile, if sent during normal business hours of the recipient; if not, then on the next Business Day; or (iii) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt, in each case to the intended recipient at the following addresses:

        with a copy to

        and

        with a copy to

or to such other address as any Party has furnished to the other by notice given in accordance with this Section 8.4.

A-82


        8.5    Assignment; Third-Party Beneficiaries.    Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any of the Parties without the prior written consent of the other Party. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or remedies upon any Person other than: (i) the Parties; (ii) the Company Indemnified Persons only after the Effective Time and only with respect to Section 5.12; (iii) the ANI Indemnified Persons only after the Effective Time and only with respect to Section 5.13; (iv) Company Director Designees only after the Effective Time and only with respect to Section 5.14 and (v) the Company Executives and other benefit plan participants only after the Effective Time and only with respect to Section 5.17.

        8.6    Governing Law.    This Agreement will be governed by the laws of the State of Delaware without reference to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.

        8.7    Other Remedies; Specific Enforcement; Consent to Jurisdiction.    Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the Parties do not perform their obligations pursuant to this Agreement in accordance with its specified terms or otherwise breach such terms. Accordingly, the Parties acknowledge and agree that the Parties will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief as provided herein on the basis that: (i) any Party has an adequate remedy at law; or (ii) an award of specific performance is not an appropriate remedy for any reason at law or in equity. In addition, each of the Parties: (x) consents to submit itself to the personal jurisdiction of any federal court located in the State of Delaware or any state court located in the State of Delaware in the event that any dispute arises out of this Agreement or the transactions contemplated hereby, including the Merger; (y) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court; and (z) agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby, including the Merger, in any court other than a federal court located in the State of Delaware or a state court located in the State of Delaware.

        8.8    Counterparts.    This Agreement may be executed in any number of counterparts and by facsimile signatures, any one of which need not contain the signatures of more than one Party and each of which will be an original, but all such counterparts taken together will constitute one and the same instrument. The exchange of copies of this Agreement or amendments thereto and of signature pages by facsimile transmission or by e-mail transmission in portable digital format (or similar format) will constitute effective execution and delivery of such instrument(s) as to the Parties and may be used in lieu of the original Agreement or amendment for all purposes. Signatures of the Parties transmitted by facsimile or by e-mail transmission in portable digital format (or similar format) will be deemed to be their original signatures for all purposes.

        8.9    Severability.    Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the Parties agree that the court making such determination will have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and

A-83


enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement will be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the Parties agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

        8.10    Interpretation.    

A-84


        8.11    Entire Agreement.    This Agreement and the Confidentiality Agreement, including the exhibits hereto and the documents and instruments referred to herein (including the Company Disclosure Schedule and the ANI Disclosure Schedule), embody the entire agreement and understanding of the Parties in respect of the subject matter contained herein. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein.

        8.12    Deliveries.    Each Party agrees and acknowledges that all documents or other items included in the electronic dataroom used in connection with the Merger or otherwise delivered to the other Party or its representatives (including legal counsel and accountants) will be deemed to be delivered, provided or made available to the other Party for all purposes under this Agreement.

        8.13    Arbitration Concerning Litigation Reserve.    The Parties agree that any dispute arising out of or relating to the determination of the reserve in Section 2.2(a)(vii)(G) prior to November 15, 2012 (including any dispute regarding the arbitrability thereof), will be resolved through expedited, binding and confidential arbitration conducted before a single arbitrator pursuant to the then-current Expedited Procedures of the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association, unless the parties mutually agree in writing otherwise. Any arbitration hearing will be conducted in Chicago, Illinois. The arbitration hearing will be concluded within thirty (30) days of selection of the arbitrator and the arbitrator will rule within seven (7) days following the closing of the hearing, unless the parties mutually agree in writing otherwise. The arbitrator's award and decision will be limited to a determination of the amount of the litigation reserve to be included in the calculation of Net Cash pursuant to Section 2.2(a)(vii)(G). The Parties mutually waive any and all rights to challenge the arbitration decision in any state or federal court.

        8.14    WAIVER OF JURY TRIAL.    THE COMPANY AND ANI EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGER.

[signature page follows]

A-85


        IN WITNESS WHEREOF, Parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first set forth above.

    BIOSANTE PHARMACEUTICALS, INC.

 

 

By:

 

/s/ STEPHEN M. SIMES

        Name:   Stephen M. Simes
        Title:   Vice Chairman, President and Chief Executive Officer

 

 

ANIP ACQUISITION COMPANY

 

 

By:

 

/s/ ARTHUR PRZYBYL

        Name:   Arthur Przybyl
        Title:   President and Chief Executive Officer

A-86



Schedule I

ANI Stockholders to Sign Voting Agreement

Meridian Venture Partners II, L.P.

FA Private Equity Fund IV, L.P.

FA Private Equity Fund IV GMBH & Co. Beteiligungs KG

The Productivity Fund IV, L.P.

The Productivity Fund IV Advisors Fund, L.P.

Argentum Capital Partners II, L.P.

A-87



Schedule II

Company Stockholders to Sign Voting Agreement

Louis W. Sullivan, M.D.

Fred Holubow

Ross Mangano

John T. Potts, Jr., M.D.

Edward C. Rosenow, III, M.D.

Stephen M. Simes

Stephen A. Sherwin, M.D.

Phillip B. Donenberg

Michael C. Snabes, Ph.D., M.D.

JO & Co

Oliver & Co.

A-88



Schedule III

Company Directors and Officers after Effective Time

ANI Director Designees:

Robert E. Brown, Jr.

Thomas A. Penn

Tracy Marshbanks

Arthur S. Przybyl

Robert Schrepfer

Company Director Designees (to be two (2) of the following):

Louis W. Sullivan, M.D.

Fred Holubow

Ross Mangano

John T. Potts, Jr., M.D.

Edward C. Rosenow, III, M.D.

Stephen M. Simes

Stephen A. Sherwin, M.D.

Officers:

Robert E. Brown, Jr.—Chairman of the Board

Arthur S. Przybyl—President and Chief Executive Officer

Charlotte Arnold—Secretary, Treasurer and Chief Financial Officer

James Marken—Vice President of Operations

Robert Jamnick—Vice President of Quality and Product Development

A-89



AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER

        This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is entered into as of November 13, 2012 by and between BioSante Pharmaceuticals, Inc., a Delaware corporation and ANIP Acquisition Company (d/b/a/ ANI Pharmaceuticals), a Delaware corporation.

        WHEREAS, the parties are party to that certain Agreement and Plan of Merger dated October 3, 2012 (the "Agreement").

        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

[Signature page follows]

A-90


        IN WITNESS WHEREOF, the undersigned have caused this Amendment to be delivered as of the date first above written.

    BIOSANTE PHARMACEUTICALS, INC.

 

 

By:

 

/s/ STEPHEN M. SIMES

        Name:   Stephen M. Simes
        Title:   President & CEO

 

 

ANIP ACQUISITION COMPANY

 

 

By:

 

/s/ ARTHUR PRZYBYL

        Name:   Arthur Przybyl
        Title:   President and Chief Executive Officer

A-91


Table of Contents


ANNEX B

FORM OF VOTING AGREEMENT

        This VOTING AGREEMENT (this "Agreement"), dated as of October 3, 2012, is by and between, BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the undersigned stockholder ("Stockholder") of ANIP Acquisition Company, a Delaware corporation ("ANI") identified on the signature page hereto.

        A.    The Company and ANI are entering into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement"), dated as of the date hereof, providing for, among other things, the merger of ANI with and into the Company, with the Company continuing as the surviving corporation (the "Merger");

        B.    As of the date hereof, Stockholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of, that number of shares of common stock, Series A Preferred Stock, Series B Preferred Stock, Class C Preferred Stock and Series D Preferred Stock (the "ANI Shares") of ANI set forth beside Stockholder's name on Schedule A hereto; and

        C.    Concurrently with the entry by the Company and ANI into the Merger Agreement, and as a condition and inducement to the willingness of the Company to enter into the Merger Agreement and incur the obligations set forth therein, the Company has required that Stockholder enter into this Agreement;

        Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I.
Definitions

        Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:

        "Affiliate" means, with respect to any specified person, a person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. For purposes of this Agreement, with respect to Stockholder, "Affiliate" does not include ANI and the persons that directly, or indirectly through one or more intermediaries, are controlled by ANI. For the avoidance of doubt, no officer or director of ANI will be deemed an Affiliate of another officer or director of ANI by virtue of his or her status as an officer or director of ANI.

        "Beneficially Owned" or "Beneficial Ownership" with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities, securities Beneficially Owned by a person include securities Beneficially Owned by (i) all Affiliates of such person, and (ii) all other persons with whom such person would constitute a "group" within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.

        "Beneficial Owner" with respect to any securities means a person that has Beneficial Ownership of such securities.

        "person" has the meaning ascribed thereto in the Merger Agreement.

B-1


Table of Contents

        "Subject Shares" means, with respect to Stockholder, without duplication, (i) the ANI Shares owned by Stockholder on the date hereof as described on Schedule A, and (ii) any additional ANI Shares acquired by Stockholder or over which Stockholder acquires Beneficial Ownership from and after the date hereof, whether pursuant to existing stock option agreements, warrants or otherwise. Without limiting the other provisions of this Agreement, in the event that ANI changes the number of ANI Shares issued and outstanding prior to the Expiration Date as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, combination, recapitalization, subdivision, or other similar transaction, the number of Subject Shares subject to this Agreement will be equitably adjusted to reflect such change.

        "Transfer" means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, "Transfer" has a correlative meaning.


ARTICLE II.
Covenants of Stockholder

        2.1    Irrevocable Proxy.    Concurrently with the execution of this Agreement, Stockholder agrees to deliver to the Company a proxy in the form attached hereto as Exhibit A (the "Proxy"), which will be irrevocable to the extent provided in Section 212 of the Delaware General Corporation Law (the "DGCL"), with respect to the Subject Shares referred to therein.

        2.2    Agreement to Vote.    

        2.3    Revocation of Proxies; Cooperation.    Stockholder agrees as follows:

B-2


Table of Contents

        2.4    No Solicitation.    Stockholder acknowledges that ANI is subject to the non-solicitation prohibitions set forth in Section 5.3 of the Merger Agreement and that the Stockholder has read and understands the terms thereof. Stockholder will not, directly or indirectly, (a) solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing any non-public information relating to ANI or any of its Subsidiaries), or knowingly induce or knowingly take any other action which would reasonably be expected to lead to the making, submission or announcement of, any proposal or inquiry that constitutes, or is reasonably likely to lead to, an Acquisition Proposal; (b) other than informing Persons of the provisions contained in Section 5.3 of the Merger Agreement, enter into, continue or participate in any discussions or any negotiations regarding any Acquisition Proposal or otherwise take any action to knowingly facilitate or knowingly induce any effort or attempt to make or implement an Acquisition Proposal (including any Acquisition Proposal received prior to the date of this Agreement); (iii) approve, endorse or recommend an Acquisition Proposal or any letter of intent, memorandum of understanding or Contract contemplating an Acquisition Proposal or requiring ANI to abandon or terminate its obligations under the Merger Agreement, or enter into any of the foregoing; or (iv) agree, resolve or commit to do any of the foregoing.

        2.5    No Transfer of Subject Shares; Publicity.    Stockholder agrees that:


ARTICLE III.
Representations, Warranties and Additional Covenants of Stockholder

        Stockholder represents, warrants and covenants to the Company that:

        3.1    Ownership.    Stockholder is the sole Beneficial Owner and the record and legal owner of the Subject Shares identified on Schedule A and such shares constitute all of the capital stock of ANI Beneficially Owned by Stockholder. Stockholder has good and valid title to all of the Subject Shares,

B-3


Table of Contents

free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares. Except pursuant to that certain Third Amended and Restated Stockholders' Agreement, dated January 28, 2011, between ANI and certain holders of its capital stock (the "Stockholders' Agreement"), none of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares.

        3.2    Authority and Non-Contravention.    

        3.3    Total Shares.    Except as set forth on Schedule A or pursuant to the Stockholders' Agreement, Stockholder is not the Beneficial Owner of, and does not have (whether currently, upon

B-4


Table of Contents

lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, and has no other interest in or voting rights with respect to, any ANI Shares or any securities convertible into or exchangeable or exercisable for ANI Shares.

        3.4    Reliance.    Stockholder understands and acknowledges that the Company is entering into the Merger Agreement in reliance upon Stockholder's execution, delivery and performance of this Agreement.


ARTICLE IV.
Representations, Warranties and Covenants of the Company

        The Company represents, warrants and covenants to Stockholder that, assuming due authorization, execution and delivery of this Agreement by Stockholder, this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company.


ARTICLE V.
Term and Termination

        This Agreement will become effective upon its execution by Stockholder and the Company. This Agreement will terminate upon the earliest of (a) the Effective Time (as defined in the Merger Agreement), (b) a Change in Company Board Recommendation, (c) the Company taking any action permitted under Section 5.4(b) of the Merger Agreement, (d) the termination of the Merger Agreement in accordance with Article VII thereof, or (e) written notice by the Company to Stockholder of the termination of this Agreement (the date of the earliest of the events described in clauses (a), (b), (c) and (d), the "Expiration Date"). The Stockholder will not be liable for money damages the Company for any breach of this Agreement and the termination of this Agreement will relieve Stockholder from any liability for any inaccuracy in or breach of any representation, warranty or covenant contained in this Agreement. Notwithstanding the foregoing, Article VI of this Agreement shall survive any termination hereof.


ARTICLE VI.
General Provisions

        6.1    Action in Stockholder Capacity Only.    Stockholder is entering into this Agreement solely in Stockholder's capacity as a record holder and beneficial owner, as applicable, of the Subject Shares and not in Stockholder's capacity as a director or officer of ANI. Nothing herein will limit or affect Stockholder's ability to act as an officer or director of ANI.

B-5


        6.2    No Ownership Interest.    Nothing contained in this Agreement will be deemed to vest in the Company or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares will remain and belong to Stockholder, and neither the Company nor any of its Affiliates will have any authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of ANI or exercise any power or authority to direct Stockholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.

        6.3    Notices.    All notices, consents, waivers and other communications under this Agreement must be in writing (including facsimile or similar writing) and must be given:

or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, consent, waiver or other communication under this Agreement will be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.

        6.4    Further Actions.    Upon the request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Stockholder hereby agrees that the Company and ANI may publish and disclose in the Form S-4 Registration Statement and Joint Proxy Statement/Prospectus (including all documents and schedules filed with the SEC) such Stockholder's identity and ownership of Subject Shares and the nature of such Stockholder's commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to the Form S-4 Registration Statement or in any other filing made by the Company and/or ANI with the SEC relating to the Merger Agreement or the transactions contemplated thereby. Stockholder agrees to notify the Company promptly of any additional shares of capital stock of ANI of which Stockholder becomes the record or beneficial owner after the date of this Agreement.

        6.5    Entire Agreement and Modification.    This Agreement, the Proxy and any other documents delivered by the parties in connection herewith constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of

B-6


the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement inconsistent with the terms and conditions of this Agreement and the Proxy, or that addresses any of the subject matters addressed in this Agreement and the Proxy.

        6.6    Drafting and Representation.    The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there will be no presumption that any ambiguities in this Agreement will be resolved against any party. Any controversy over construction of this Agreement will be decided without regard to events of authorship or negotiation.

        6.7    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

        6.8    No Third-Party Rights.    Stockholder may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Company, except as permitted pursuant to Section 2.5(a). The Company may not assign any of its rights or delegate any of its obligations under this Agreement with respect to Stockholder without the prior written consent of Stockholder. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of Stockholder and the successors and permitted assigns of the Company. Nothing expressed or referred to in this Agreement will be construed to give any person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.

        6.9    Enforcement of Agreement.    Stockholder acknowledges and agrees that the Company could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by Stockholder could not be adequately compensated by monetary damages. Accordingly, Stockholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which the Company may be entitled, at law or in equity, the Company will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

        6.10    Waiver.    The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, the Proxy or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by Applicable Law, (a) no claim or right arising out of this Agreement, the Proxy or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party

B-7


giving such notice or demand to take further action without notice or demand as provided in this Agreement, the Proxy or the documents referred to in this Agreement.

        6.11    Governing Law.    This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed by, construed under and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts or choice of law.

        6.12    Consent to Jurisdiction.    Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Proxy or the transactions contemplated hereby or thereby will be brought exclusively in the United States District Court for the District of Delaware or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the Court of Chancery of the State of Delaware, County of New Castle, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Applicable Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 5.3 will be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

        6.13    Counterparts.    This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the same instrument. This Agreement may be executed by facsimile signature (including signatures in Adobe PDF or similar format).

        6.14    Expenses.    Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.

        6.15    Headings; Construction.    The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) "it" or "its" or words denoting any gender include all genders and (c) the word "including" means "including without limitation," whether or not expressed.

[Signature page follows]

B-8


        IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to be duly executed as of the day and year first above written.

THE COMPANY:   BIOSANTE PHARMACEUTICALS, INC.

 

 

By:

 

  

Name:
Title:

STOCKHOLDER:

 

[NAME]

 

 

 

Name:

 

 

Additional Signature (if held jointly):

 

 

  

(If held jointly)

 

 

 

(Printed Full Name)

B-9



SCHEDULE A

NAME AND
ADDRESS OF STOCKHOLDER

  ANI SHARES
BENEFICIALLY OWNED

B-10



EXHIBIT A

IRREVOCABLE PROXY

        From and after the date hereof and until the Expiration Date (as defined below), the undersigned stockholder ("Stockholder") of ANIP Acquisition Company, a Delaware corporation ("ANI"), hereby irrevocably (to the full extent permitted by Section 212 of the Delaware General Corporation Law) grants to, and appoints, BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and any designee of the Company, and each of them individually, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and resubstitution, to vote the Subject Shares (as defined in the Voting Agreement) of the Stockholder, or grant a consent or approval in respect of the Subject Shares of the Stockholder, in a manner consistent with Section 2.2 of the Voting Agreement (as defined below). Upon the undersigned's execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Subject Shares relating to the voting rights expressly provided herein are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Subject Shares relating to such voting rights at any time prior to the Expiration Date.

        This Proxy is irrevocable, is coupled with an interest and is granted pursuant to that certain Voting Agreement (as amended from time to time, the "Voting Agreement") of even date herewith, by and among the Company and Stockholder, and is granted in consideration of the Company entering into the Merger Agreement (as defined in the Voting Agreement). As used herein, the term "Expiration Date," and all capitalized terms used herein and not otherwise defined, will have the meanings set forth in the Voting Agreement. The Stockholder agrees that this proxy will be irrevocable until the Expiration Date and is coupled with an interest sufficient at law to support an irrevocable proxy and given to the Company as an inducement to enter into the Merger Agreement and, to the extent permitted under applicable law, will be valid and binding on any person to whom Stockholder may transfer any of his, her or its Subject Shares in breach of the Voting Agreement. The Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof.

        The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigned's attorney and proxy to vote the Subject Shares, and to exercise all voting and other rights of the undersigned with respect to the Subject Shares (including, without limitation, the power to execute and deliver written consents pursuant to Section 228 of the Delaware General Corporation Law), at every annual, special or adjourned meeting of the stockholders of the Company and in every written consent in lieu of such meeting in a manner consistent with Section 2.2 of the Voting Agreement.

        This Proxy will be binding upon the heirs, estate, executors, personal representatives, successors and assigns of Stockholder (including any transferee of any of the Subject Shares), and all authority herein conferred or agreed to be conferred will survive the death or incapacity of the Stockholder.

        If any provision of this Proxy or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof will, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction will not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) the invalidity or unenforceability of such provision or part thereof will not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Proxy. Each provision of this Proxy is separable from every other provision of

B-11


this Proxy, and each part of each provision of this Proxy is separable from every other part of such provision.

Dated: October       , 2012


 

 

  

(Signature of Stockholder)

 

 

 

(Print Name of Stockholder)

 

 

Number of Subject Shares owned of record or Beneficially Owned as of the date of this Proxy:

 

 

  

B-12


Table of Contents


ANNEX C

VOTING AGREEMENT

        This VOTING AGREEMENT (this "Agreement"), dated as of October 3, 2012, is by and between, BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the undersigned stockholder ("Stockholder") of ANIP Acquisition Company, a Delaware corporation ("ANI") identified on the signature page hereto.

        A.    The Company and ANI are entering into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement"), dated as of the date hereof, providing for, among other things, the merger of ANI with and into the Company, with the Company continuing as the surviving corporation (the "Merger");

        B.    As of the date hereof, Stockholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of, that number of shares of common stock, Series A Preferred Stock, Series B Preferred Stock, Class C Preferred Stock and Series D Preferred Stock (the "ANI Shares") of ANI set forth beside Stockholder's name on Schedule A hereto; and

        C.    Concurrently with the entry by the Company and ANI into the Merger Agreement, and as a condition and inducement to the willingness of the Company to enter into the Merger Agreement and incur the obligations set forth therein, the Company has required that Stockholder enter into this Agreement;

        Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I.
Definitions

        Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:

        "Affiliate" means, with respect to any specified person, a person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. For purposes of this Agreement, with respect to Stockholder, "Affiliate" does not include ANI and the persons that directly, or indirectly through one or more intermediaries, are controlled by ANI. For the avoidance of doubt, no officer or director of ANI will be deemed an Affiliate of another officer or director of ANI by virtue of his or her status as an officer or director of ANI.

        "Beneficially Owned" or "Beneficial Ownership" with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities, securities Beneficially Owned by a person include securities Beneficially Owned by (i) all Affiliates of such person, and (ii) all other persons with whom such person would constitute a "group" within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.

        "Beneficial Owner" with respect to any securities means a person that has Beneficial Ownership of such securities.

        "person" has the meaning ascribed thereto in the Merger Agreement.

C-1


Table of Contents

        "Subject Shares" means, with respect to Stockholder, without duplication, (i) the ANI Shares owned by Stockholder on the date hereof as described on Schedule A, and (ii) any additional ANI Shares acquired by Stockholder or over which Stockholder acquires Beneficial Ownership from and after the date hereof, whether pursuant to existing stock option agreements, warrants or otherwise. Without limiting the other provisions of this Agreement, in the event that ANI changes the number of ANI Shares issued and outstanding prior to the Expiration Date as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, combination, recapitalization, subdivision, or other similar transaction, the number of Subject Shares subject to this Agreement will be equitably adjusted to reflect such change.

        "Transfer" means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, "Transfer" has a correlative meaning.


ARTICLE II.
Covenants of Stockholder

        2.1    Irrevocable Proxy.    Concurrently with the execution of this Agreement, Stockholder agrees to deliver to the Company a proxy in the form attached hereto as Exhibit A (the "Proxy"), which will be irrevocable to the extent provided in Section 212 of the Delaware General Corporation Law (the "DGCL"), with respect to the Subject Shares referred to therein.

        2.2    Agreement to Vote.    

C-2


Table of Contents

        2.3    Revocation of Proxies; Cooperation.    Stockholder agrees as follows:

        2.4    No Solicitation.    Stockholder acknowledges that ANI is subject to the non-solicitation prohibitions set forth in Section 5.3 of the Merger Agreement and that the Stockholder has read and understands the terms thereof. Stockholder will not, directly or indirectly, (a) solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing any non-public information relating to ANI or any of its Subsidiaries), or knowingly induce or knowingly take any other action which would reasonably be expected to lead to the making, submission or announcement of, any proposal or inquiry that constitutes, or is reasonably likely to lead to, an Acquisition Proposal; (b) other than informing Persons of the provisions contained in Section 5.3 of the Merger Agreement, enter into, continue or participate in any discussions or any negotiations regarding any Acquisition Proposal or otherwise take any action to knowingly facilitate or knowingly induce any effort or attempt to make or implement an Acquisition Proposal (including any Acquisition Proposal received prior to the date of this Agreement); (iii) approve, endorse or recommend an Acquisition Proposal or any letter of intent, memorandum of understanding or Contract contemplating an Acquisition Proposal or requiring ANI to abandon or terminate its obligations under the Merger Agreement, or enter into any of the foregoing; or (iv) agree, resolve or commit to do any of the foregoing.

        2.5    No Transfer of Subject Shares; Publicity.    Stockholder agrees that:

C-3


Table of Contents

        2.6    Termination of Warrant.    Stockholder agrees that that certain (i) Common Stock Purchase Warrant No. 1 dated March 29, 2005, for the purchase of 52,490 shares of ANI Common Stock, (ii) Common Stock Purchase Warrant No. 7 dated in July, 2005, for the purchase of 61,740 shares of ANI Common Stock and (iii) Common Stock Purchase Warrant No. 12 dated in March, 2005, for the purchase of 5,280 shares of ANI Common Stock shall terminate immediately prior to the Effective Time (as defined in the Merger Agreement) and thereafter shall be of no further force or effect.


ARTICLE III.
Representations, Warranties and Additional Covenants of Stockholder

        Stockholder represents, warrants and covenants to the Company that:

        3.1    Ownership.    Stockholder is the sole Beneficial Owner and the record and legal owner of the Subject Shares identified on Schedule A and such shares constitute all of the capital stock of ANI Beneficially Owned by Stockholder. Stockholder has good and valid title to all of the Subject Shares, free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares. Except pursuant to that certain Third Amended and Restated Stockholders' Agreement, dated January 28, 2011, between ANI and certain holders of its capital stock (the "Stockholders' Agreement"), none of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares.

        3.2    Authority and Non-Contravention.    

C-4


Table of Contents

        3.3    Total Shares.    Except as set forth on Schedule A or pursuant to the Stockholders' Agreement, Stockholder is not the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, and has no other interest in or voting rights with respect to, any ANI Shares or any securities convertible into or exchangeable or exercisable for ANI Shares.

        3.4    Reliance.    Stockholder understands and acknowledges that the Company is entering into the Merger Agreement in reliance upon Stockholder's execution, delivery and performance of this Agreement.


ARTICLE IV.
Representations, Warranties and Covenants of the Company

        The Company represents, warrants and covenants to Stockholder that, assuming due authorization, execution and delivery of this Agreement by Stockholder, this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company.

C-5


Table of Contents


ARTICLE V.
Term and Termination

        This Agreement will become effective upon its execution by Stockholder and the Company. This Agreement will terminate upon the earliest of (a) the Effective Time (as defined in the Merger Agreement), (b) a Change in Company Board Recommendation, (c) the Company taking any action permitted under Section 5.4(b) of the Merger Agreement, (d) the termination of the Merger Agreement in accordance with Article VII thereof, or (e) written notice by the Company to Stockholder of the termination of this Agreement (the date of the earliest of the events described in clauses (a), (b), (c) and (d), the "Expiration Date"); provided, however, that, in the event this agreement is terminated pursuant to clause (a) above, the obligation of Stockholder under Section 2.2(b) shall survive until immediately following the Annual Meeting, or if earlier, upon the occurrence of a Prior Election or Consent. The Stockholder will not be liable for money damages the Company for any breach of this Agreement and the termination of this Agreement will relieve Stockholder from any liability for any inaccuracy in or breach of any representation, warranty or covenant contained in this Agreement. Notwithstanding the foregoing, Article VI of this Agreement shall survive any termination hereof.


ARTICLE VI.
General Provisions

        6.1    Action in Stockholder Capacity Only.    Stockholder is entering into this Agreement solely in Stockholder's capacity as a record holder and beneficial owner, as applicable, of the Subject Shares and not in Stockholder's capacity as a director or officer of ANI. Nothing herein will limit or affect Stockholder's ability to act as an officer or director of ANI.

        6.2    No Ownership Interest.    Nothing contained in this Agreement will be deemed to vest in the Company or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares will remain and belong to Stockholder, and neither the Company nor any of its Affiliates will have any authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of ANI or exercise any power or authority to direct Stockholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.

        6.3    Notices.    All notices, consents, waivers and other communications under this Agreement must be in writing (including facsimile or similar writing) and must be given:

C-6


or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, consent, waiver or other communication under this Agreement will be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.

        6.4    Further Actions.    Upon the request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Stockholder hereby agrees that the Company and ANI may publish and disclose in the Form S-4 Registration Statement and Joint Proxy Statement/Prospectus (including all documents and schedules filed with the SEC) such Stockholder's identity and ownership of Subject Shares and the nature of such Stockholder's commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to the Form S-4 Registration Statement or in any other filing made by the Company and/or ANI with the SEC relating to the Merger Agreement or the transactions contemplated thereby. Stockholder agrees to notify the Company promptly of any additional shares of capital stock of ANI of which Stockholder becomes the record or beneficial owner after the date of this Agreement.

        6.5    Entire Agreement and Modification.    This Agreement, the Proxy and any other documents delivered by the parties in connection herewith constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement inconsistent with the terms and conditions of this Agreement and the Proxy, or that addresses any of the subject matters addressed in this Agreement and the Proxy.

        6.6    Drafting and Representation.    The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there will be no presumption that any ambiguities in this Agreement will be resolved against any party. Any controversy over construction of this Agreement will be decided without regard to events of authorship or negotiation.

        6.7    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

        6.8    No Third-Party Rights.    Stockholder may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Company, except as permitted pursuant to Section 2.5(a). The Company may not assign any of its rights or delegate any of its obligations under this Agreement with respect to Stockholder without the prior written consent of Stockholder. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of Stockholder and the successors and permitted assigns of the Company. Nothing expressed or referred to in this Agreement will be construed to give any person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or

C-7


with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.

        6.9    Enforcement of Agreement.    Stockholder acknowledges and agrees that the Company could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by Stockholder could not be adequately compensated by monetary damages. Accordingly, Stockholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which the Company may be entitled, at law or in equity, the Company will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

        6.10    Waiver.    The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, the Proxy or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by Applicable Law, (a) no claim or right arising out of this Agreement, the Proxy or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement, the Proxy or the documents referred to in this Agreement.

        6.11    Governing Law.    This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed by, construed under and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts or choice of law.

        6.12    Consent to Jurisdiction.    Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Proxy or the transactions contemplated hereby or thereby will be brought exclusively in the United States District Court for the District of Delaware or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the Court of Chancery of the State of Delaware, County of New Castle, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Applicable Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 5.3 will be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

        6.13    Counterparts.    This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the

C-8


same instrument. This Agreement may be executed by facsimile signature (including signatures in Adobe PDF or similar format).

        6.14    Expenses.    Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.

        6.15    Headings; Construction.    The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) "it" or "its" or words denoting any gender include all genders and (c) the word "including" means "including without limitation," whether or not expressed.

[Signature page follows]

C-9


        IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to be duly executed as of the day and year first above written.

THE COMPANY:   BIOSANTE PHARMACEUTICALS, INC.

 

 

By:

 

/s/ STEPHEN M. SIMES

        Name:   Stephen M. Simes
        Title:   President and Chief Executive Officer

STOCKHOLDER:

 

MERIDIAN VENTURE PARTNERS II, L.P.

 

 

By:

 

MVP II, G.P., L.P., its General Partner

 

 

 

 

By:

 

Meridian Venture Partners II Co., its
General Partner

 

 

 

 

By:

 

/s/ THOMAS A. PENN

        Its:   Vice President

C-10



SCHEDULE A

NAME AND
ADDRESS OF STOCKHOLDER
  ANI SHARES
BENEFICIALLY OWNED
Meridian Venture Partners II, L.P.   67,599 shares of Series A Preferred Stock
259 N. Radnor-Chester Road, Suite 130   13,638 shares of Series B Preferred Stock
Radnor, PA 19087   11,364 shares of Series C Preferred Stock
    1,376,596 shares of Series D Preferred Stock
    12,477 Shares of Common Stock

C-11



EXHIBIT A

IRREVOCABLE PROXY

        From and after the date hereof and until the Expiration Date (as defined below), the undersigned stockholder ("Stockholder") of ANIP Acquisition Company, a Delaware corporation ("ANI"), hereby irrevocably (to the full extent permitted by Section 212 of the Delaware General Corporation Law) grants to, and appoints, BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and any designee of the Company, and each of them individually, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and resubstitution, to vote the Subject Shares (as defined in the Voting Agreement) of the Stockholder, or grant a consent or approval in respect of the Subject Shares of the Stockholder, in a manner consistent with Section 2.2 of the Voting Agreement (as defined below). Upon the undersigned's execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Subject Shares relating to the voting rights expressly provided herein are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Subject Shares relating to such voting rights at any time prior to the Expiration Date.

        This Proxy is irrevocable, is coupled with an interest and is granted pursuant to that certain Voting Agreement (as amended from time to time, the "Voting Agreement") of even date herewith, by and among the Company and Stockholder, and is granted in consideration of the Company entering into the Merger Agreement (as defined in the Voting Agreement). As used herein, the term "Expiration Date," and all capitalized terms used herein and not otherwise defined, will have the meanings set forth in the Voting Agreement. The Stockholder agrees that this proxy will be irrevocable until the Expiration Date and is coupled with an interest sufficient at law to support an irrevocable proxy and given to the Company as an inducement to enter into the Merger Agreement and, to the extent permitted under applicable law, will be valid and binding on any person to whom Stockholder may transfer any of his, her or its Subject Shares in breach of the Voting Agreement. The Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof.

        The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigned's attorney and proxy to vote the Subject Shares, and to exercise all voting and other rights of the undersigned with respect to the Subject Shares (including, without limitation, the power to execute and deliver written consents pursuant to Section 228 of the Delaware General Corporation Law), at every annual, special or adjourned meeting of the stockholders of the Company and in every written consent in lieu of such meeting in a manner consistent with Section 2.2 of the Voting Agreement.

        This Proxy will be binding upon the heirs, estate, executors, personal representatives, successors and assigns of Stockholder (including any transferee of any of the Subject Shares), and all authority herein conferred or agreed to be conferred will survive the death or incapacity of the Stockholder.

        If any provision of this Proxy or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof will, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction will not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) the invalidity or unenforceability of such provision or part thereof will not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Proxy. Each provision of this Proxy is separable from every other provision of

C-12


this Proxy, and each part of each provision of this Proxy is separable from every other part of such provision.

Dated: October 3, 2012

    MERIDIAN VENTURE PARTNERS II, L.P.
    By:   MVP II, G.P., L.P., its General Partner

 

 

 

 

By:

 

MERIDIAN VENTURE PARTNERS II CO., its
General Partner

 

 

 

 

 

 

By:

 

/s/ THOAMS A. PENN

                Name:   Thomas A. Penn
                Title:   Vice President

C-13


Table of Contents


ANNEX D

VOTING AGREEMENT

        This VOTING AGREEMENT (this "Agreement"), dated as of October     , 2012, is by and between ANIP Acquisition Company, a Delaware corporation ("ANI"), and the undersigned stockholder ("Stockholder") of BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), identified on the signature page hereto.

        A.    The Company and ANI are entering into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement"), dated as of the date hereof, providing for, among other things, the merger of ANI with and into the Company, with the Company continuing as the surviving corporation (the "Merger");

        B.    As of the date hereof, Stockholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of, that number of shares of common stock and Class C Special Shares (the "Company Shares") of the Company set forth beside Stockholder's name on Schedule A hereto; and

        C.    Concurrently with the entry by the Company and ANI into the Merger Agreement, and as a condition and inducement to the willingness of ANI to enter into the Merger Agreement and incur the obligations set forth therein, ANI has required that Stockholder enter into this Agreement;

        Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I.
Definitions

        Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:

        "Affiliate" means, with respect to any specified person, a person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. For purposes of this Agreement, with respect to Stockholder, "Affiliate" does not include the Company and the persons that directly, or indirectly through one or more intermediaries, are controlled by the Company. For the avoidance of doubt, no officer or director of the Company will be deemed an Affiliate of another officer or director of the Company by virtue of his or her status as an officer or director of the Company.

        "Beneficially Owned" or "Beneficial Ownership" with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities, securities Beneficially Owned by a person include securities Beneficially Owned by (i) all Affiliates of such person, and (ii) all other persons with whom such person would constitute a "group" within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.

        "Beneficial Owner" with respect to any securities means a person that has Beneficial Ownership of such securities.

        "person" has the meaning ascribed thereto in the Merger Agreement.

        "Subject Shares" means, with respect to Stockholder, without duplication, (i) the Company Shares owned by Stockholder on the date hereof as described on Schedule A, and (ii) any additional Company

D-1


Table of Contents

Shares acquired by Stockholder or over which Stockholder acquires Beneficial Ownership from and after the date hereof, whether pursuant to existing stock option agreements or otherwise. Without limiting the other provisions of this Agreement, in the event that the Company changes the number of Company Shares issued and outstanding prior to the Expiration Date as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, combination, recapitalization, subdivision, or other similar transaction, the number of Subject Shares subject to this Agreement will be equitably adjusted to reflect such change.

        "Transfer" means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, "Transfer" has a correlative meaning.


ARTICLE II.
Covenants of Stockholder

        2.1    Irrevocable Proxy.    Concurrently with the execution of this Agreement, Stockholder agrees to deliver to ANI a proxy in the form attached hereto as Exhibit A (the "Proxy"), which will be irrevocable to the extent provided in Section 212 of the Delaware General Corporation Law (the "DGCL"), with respect to the Subject Shares referred to therein.

        2.2    Agreement to Vote.    

        2.3    Revocation of Proxies; Cooperation.    Stockholder agrees as follows:

D-2


Table of Contents

        2.4    No Solicitation.    Stockholder acknowledges that the Company is subject to the non-solicitation prohibitions set forth in Section 5.4 of the Merger Agreement and that the Stockholder has read and understands the terms thereof. Stockholder will not, directly or indirectly, (a) solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing any non-public information relating to the Company or any of its Subsidiaries), or knowingly induce or knowingly take any other action which would reasonably be expected to lead to the making, submission or announcement of, any proposal or inquiry that constitutes, or is reasonably likely to lead to, an Acquisition Proposal; (b) other than informing Persons of the provisions contained in Section 5.4 of the Merger Agreement, enter into, continue or participate in any discussions or any negotiations regarding any Acquisition Proposal or otherwise take any action to knowingly facilitate or knowingly induce any effort or attempt to make or implement an Acquisition Proposal (including any Acquisition Proposal received prior to the date of this Agreement); (iii) approve, endorse or recommend an Acquisition Proposal or any letter of intent, memorandum of understanding or Contract contemplating an Acquisition Proposal or requiring the Company to abandon or terminate its obligations under the Merger Agreement, or enter into any of the foregoing; or (iv) agree, resolve or commit to do any of the foregoing.

        2.5    No Transfer of Subject Shares; Publicity.    Stockholder agrees that:

D-3


Table of Contents


ARTICLE III.
Representations, Warranties and Additional Covenants of Stockholder

        Stockholder represents, warrants and covenants to ANI that:

        3.1    Ownership.    Stockholder is the sole Beneficial Owner and the record and legal owner of the Subject Shares identified on Schedule A and such shares constitute all of the capital stock of the Company Beneficially Owned by Stockholder. Stockholder has good and valid title to all of the Subject Shares, free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares. None of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares.

        3.2    Authority and Non-Contravention.    

        3.3    Total Shares.    Except as set forth on Schedule A, Stockholder is not the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, and has

D-4


Table of Contents

no other interest in or voting rights with respect to, any Company Shares or any securities convertible into or exchangeable or exercisable for Company Shares.

        3.4    Reliance.    Stockholder understands and acknowledges that ANI is entering into the Merger Agreement in reliance upon Stockholder's execution, delivery and performance of this Agreement.


ARTICLE IV.
Representations, Warranties and Covenants of ANI

        ANI represents, warrants and covenants to Stockholder that, assuming due authorization, execution and delivery of this Agreement by Stockholder, this Agreement constitutes the legal, valid and binding obligation of ANI, enforceable against ANI in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. ANI has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by ANI of this Agreement and the consummation by ANI of the transactions contemplated hereby have been duly and validly authorized by ANI and no other corporate proceedings on the part of ANI are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by ANI.


ARTICLE V.
Term and Termination

        This Agreement will become effective upon its execution by Stockholder and ANI. This Agreement will terminate upon the earliest of (a) the Effective Time (as defined in the Merger Agreement), (b) the termination of the Merger Agreement in accordance with Article VII thereof, or (c) written notice by ANI to Stockholder of the termination of this Agreement (the date of the earliest of the events described in clauses (a), (b) and (c), the "Expiration Date"). The Stockholder will not be liable for money damages to ANI for any breach of this Agreement and the termination of this Agreement will relieve Stockholder from any liability for any inaccuracy in or breach of any representation, warranty or covenant contained in this Agreement. Notwithstanding the foregoing, Article VI of this Agreement shall survive any termination hereof.


ARTICLE VI.
General Provisions

        6.1    Action in Stockholder Capacity Only.    Stockholder is entering into this Agreement solely in Stockholder's capacity as a record holder and beneficial owner, as applicable, of the Subject Shares and not in Stockholder's capacity as a director or officer of the Company. Nothing herein will limit or affect Stockholder's ability to act as an officer or director of the Company.

        6.2    No Ownership Interest.    Nothing contained in this Agreement will be deemed to vest in ANI or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares will remain and belong to Stockholder, and neither ANI nor any of its Affiliates will have any authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of the Company or exercise any power or authority to direct Stockholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.

D-5


Table of Contents

        6.3    Notices.    All notices, consents, waivers and other communications under this Agreement must be in writing (including facsimile or similar writing) and must be given:

or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, consent, waiver or other communication under this Agreement will be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.

        6.4    Further Actions.    Upon the request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Stockholder hereby agrees that the Company and ANI may publish and disclose in the Form S-4 Registration Statement and Joint Proxy Statement/Prospectus (including all documents and schedules filed with the SEC) such Stockholder's identity and ownership of Subject Shares and the nature of such Stockholder's commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to the Form S-4 Registration Statement or in any other filing made by the Company with the SEC relating to the Merger Agreement or the transactions contemplated thereby. Stockholder agrees to notify ANI promptly of any additional shares of capital stock of the Company of which Stockholder becomes the record or beneficial owner after the date of this Agreement.

        6.5    Entire Agreement and Modification.    This Agreement, the Proxy and any other documents delivered by the parties in connection herewith constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement inconsistent with the terms and conditions of this Agreement and the Proxy, or that addresses any of the subject matters addressed in this Agreement and the Proxy.

D-6


Table of Contents

        6.6    Drafting and Representation.    The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there will be no presumption that any ambiguities in this Agreement will be resolved against any party. Any controversy over construction of this Agreement will be decided without regard to events of authorship or negotiation.

        6.7    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

        6.8    No Third-Party Rights.    Stockholder may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of ANI. ANI may not assign any of its rights or delegate any of its obligations under this Agreement with respect to Stockholder without the prior written consent of Stockholder. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of Stockholder and the successors and permitted assigns of ANI. Nothing expressed or referred to in this Agreement will be construed to give any person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.

        6.9    Enforcement of Agreement.    Stockholder acknowledges and agrees that ANI could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by Stockholder could not be adequately compensated by monetary damages. Accordingly, Stockholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which ANI may be entitled, at law or in equity, ANI will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

        6.10    Waiver.    The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, the Proxy or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by Applicable Law, (a) no claim or right arising out of this Agreement, the Proxy or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement, the Proxy or the documents referred to in this Agreement.

        6.11    Governing Law.    This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed by, construed under and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts or choice of law.

D-7


Table of Contents

        6.12    Consent to Jurisdiction.    Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Proxy or the transactions contemplated hereby or thereby will be brought exclusively in the United States District Court for the District of Delaware or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the Court of Chancery of the State of Delaware, County of New Castle, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Applicable Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 5.3 will be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

        6.13    Counterparts.    This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the same instrument. This Agreement may be executed by facsimile signature (including signatures in Adobe PDF or similar format).

        6.14    Expenses.    Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.

        6.15    Headings; Construction.    The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) "it" or "its" or words denoting any gender include all genders and (c) the word "including" means "including without limitation," whether or not expressed.

[Signature page follows]

D-8


Table of Contents

        IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to be duly executed as of the day and year first above written.

ANI:   ANIP ACQUISITION COMPANY

 

 

By:

 

  

Name:
Title:

STOCKHOLDER:

 

  

D-9


Table of Contents


SCHEDULE A

NAME AND
ADDRESS OF STOCKHOLDER
  COMPANY SHARES
BENEFICIALLY OWNED
     

 

 

 

 

 

 

D-10


Table of Contents


EXHIBIT A

IRREVOCABLE PROXY

Dated: October     , 2012

        From and after the date hereof and until the Expiration Date (as defined below), the undersigned stockholder ("Stockholder") of BioSante Pharmaceuticals, Inc., a Delaware corporation (the "Company"), hereby irrevocably (to the full extent permitted by Section 212 of the Delaware General Corporation Law) grants to, and appoints, ANIP Acquisition Company, a Delaware corporation ("ANI"), and any designee of ANI, and each of them individually, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and resubstitution, to vote the Subject Shares (as defined in the Voting Agreement) of the Stockholder, or grant a consent or approval in respect of the Subject Shares of the Stockholder, in a manner consistent with Section 2.2 of the Voting Agreement (as defined below). Upon the undersigned's execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Subject Shares relating to the voting rights expressly provided herein are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Subject Shares relating to such voting rights at any time prior to the Expiration Date.

        This Proxy is irrevocable, is coupled with an interest and is granted pursuant to that certain Voting Agreement (as amended from time to time, the "Voting Agreement") of even date herewith, by and among ANI and Stockholder, and is granted in consideration of ANI entering into the Merger Agreement (as defined in the Voting Agreement). As used herein, the term "Expiration Date," and all capitalized terms used herein and not otherwise defined, will have the meanings set forth in the Voting Agreement. The Stockholder agrees that this proxy will be irrevocable until the Expiration Date and is coupled with an interest sufficient at law to support an irrevocable proxy and given to ANI as an inducement to enter into the Merger Agreement and, to the extent permitted under applicable law, will be valid and binding on any person to whom Stockholder may transfer any of his, her or its Subject Shares in breach of the Voting Agreement. The Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof.

        The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Expiration Date, to act as the undersigned's attorney and proxy to vote the Subject Shares, and to exercise all voting and other rights of the undersigned with respect to the Subject Shares (including, without limitation, the power to execute and deliver written consents pursuant to Section 228 of the Delaware General Corporation Law), at every annual, special or adjourned meeting of the stockholders of the Company and in every written consent in lieu of such meeting in a manner consistent with Section 2.2 of the Voting Agreement.

        This Proxy will be binding upon the heirs, estate, executors, personal representatives, successors and assigns of Stockholder (including any transferee of any of the Subject Shares), and all authority herein conferred or agreed to be conferred will survive the death or incapacity of the Stockholder.

        If any provision of this Proxy or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof will, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction will not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) the invalidity or unenforceability of such provision or part thereof will not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Proxy. Each provision of this Proxy is separable from every other provision of

D-11


Table of Contents

this Proxy, and each part of each provision of this Proxy is separable from every other part of such provision.


 

 

  

(Signature of Stockholder)

 

 

 

(Print Name of Stockholder)

 

 

Number of Subject Shares owned of record or Beneficially Owned as of the date of this Proxy:

 

 

  

D-12


Table of Contents


ANNEX E

FORM OF LOCK-UP AGREEMENT

October 3, 2012

BioSante Pharmaceuticals, Inc.
111 Barclay Boulevard
Lincolnshire, Illinois 60069

Ladies and Gentlemen:

        Reference is made to the Agreement and Plan of Merger (the "Merger Agreement"), by and between BioSante Pharmaceuticals, Inc., a Delaware corporation ("BioSante"), and ANIP Acquisition Company (d/b/a ANI Pharmaceuticals, Inc.), a Delaware corporation ("ANI"), dated as of the date hereof. Pursuant to the Merger Agreement, BioSante and ANI plan to effect a merger (the "Merger") in which ANI will be merging with and into BioSante, with BioSante being the surviving corporation. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement.

        To induce both parties to continue their efforts in connection with the Merger contemplated by the Merger Agreement, the undersigned agrees that, without BioSante's prior written consent, the undersigned will not, for a period commencing on the closing date of the Merger and ending 180 days after such date (the "Lock-Up Period"), directly or indirectly, or publicly announce an intention to (a) offer, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of any shares of BioSante's common stock, par value $0.0001 per share, to be received by the undersigned in the Merger (the "Common Stock"), (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing restriction (i) shall not limit the right of the undersigned during the Lock-Up Period to make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into, exercisable for, or exchangeable for shares of Common Stock so long as there are no sales of such shares of Common Stock during the Lock-Up Period and (ii) shall include, without limitation, any securities issued to the undersigned in the Merger in exchange for securities of ANI.

        Any Common Stock acquired by the undersigned in the open market on or after the closing of the Merger will not be subject to this agreement. A transfer of Common Stock to an immediate family member or a trust for the benefit of the undersigned or an immediate family member (including by will or intestacy) or a distribution to partners, members or shareholders of the undersigned may be made, provided that the transferee agrees in writing prior to such transfer to be bound by the terms of this agreement as if it were a party hereto. For purposes of this agreement, "immediate family" means any relationship by blood, marriage or adoption, not more remote than first cousin (including lineal descendants, stepchildren, father, mother, brother or sister of the undersigned or the undersigned's spouse).

        The foregoing restriction shall not apply: (1) to bona fide gifts by the undersigned, provided that (a) each resulting transferee of Common Stock executes and delivers to BioSante an agreement certifying that such transferee is bound by the terms of this agreement and has been in compliance with the terms hereof since the date first above written as if it had been an original party hereto and (b) to the extent any interest in Common Stock is retained by the undersigned (or such spouse or family member), such Common Stock shall remain subject to the restrictions contained in this agreement or (2) to sale, transfer or other transaction in or relating to shares of Common Stock in connection with any merger of BioSante with or into any other entity or tender offer by BioSante or any other entity

E-1


Table of Contents

for the Common Stock, in each case which transaction has been approved by at least a majority of BioSante's Board of Directors.

        The undersigned agrees and consents to the entry of stop transfer instructions with BioSante's transfer agent and registrar relating to the transfer of the undersigned's shares of Common Stock except in compliance with the restrictions described above and authorizes BioSante, during the Lock-Up Period, to cause BioSante's transfer agent to place a notation on book-entry notations representing the Common Stock.

        The undersigned represents and warrants that the undersigned has full power and authority to enter into this agreement, and that, upon request, the undersigned will execute any additional documents reasonably necessary to carry out the transactions contemplated hereby. Any obligations created by this agreement shall be binding upon the heirs, devisees, personal representatives, successors and assigns of the undersigned.

        The undersigned agrees that in the event of any breach or threatened breach by the undersigned of any covenant, obligation or other provision contained in this agreement, then BioSante shall be entitled (in addition to any other remedy that may be available to BioSante) to (a) a decree or order of specific performance to enforce the observance and performance of such covenant, obligation or other provision and (b) an injunction restraining such breach or threatened breach.

        Any term or provision of this agreement that is invalid or unenforceable under applicable law, such provision shall be excluded from this agreement and the balance of this agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

        The provisions of this agreement may not be amended or waived by the undersigned party without the prior written consent of BioSante.

        This agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to such State's principles of conflict of laws. Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.

Very truly yours,

   

By:

 

 


   

  Name:        

  Title:        

E-2


Table of Contents


ANNEX F

CONTINGENT VALUE RIGHTS AGREEMENT

        THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of [                    ], 2013 (this "Agreement"), is entered into by and among BioSante Pharmaceuticals, Inc., a Delaware corporation ("BioSante"), ANIP Acquisition Company, a Delaware corporation ("ANI"), Computershare Inc., a Delaware corporation, and its fully owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company (collectively, the "Rights Agent" or individually, "Computershare" and the "Trust Company", respectively) and as initial CVR Registrar (as defined herein), and [                    ], acting solely in his capacity as representative of the Holders (the "Holder Representative").

        A.    BioSante and ANI have entered into an Agreement and Plan of Merger dated as of October 3, 2012 (the "Merger Agreement"), pursuant to which ANI will merge with and into BioSante (the "Merger") (the surviving entity of the Merger is referred to in this Agreement as the "Company").

        B.    Prior to the effectiveness of the Merger, BioSante wishes to create and issue contingent value rights relating to the LibiGel Assets (as defined below) to the record holders of BioSante Common Stock (as hereinafter defined) as of a record date prior to the effectiveness of the Merger.

        C.    On [                        ], 2013 the Board of Directors of BioSante authorized and declared a dividend of one CVR (as hereinafter defined) for each share of Common Stock outstanding at the Close of Business (as hereinafter defined) on the Record Date (as hereinafter defined).

        D.    BioSante has done all things necessary to make the CVRs, when issued hereunder, the valid obligations of the Company in accordance with their terms.

        Accordingly, and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the benefit of the Holders (as hereinafter defined), as follows:


ARTICLE I.
Definitions

1.1    Definitions.    

        (a)   For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

F-1


Table of Contents

        (b)   The following terms have the meanings ascribed to them as follows:

        "Achievement Certificate" has the meaning set forth in Section 2.4(a).

        "Affiliates" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person.

        "Board of Directors" means the board of directors of the Company.

        "Board Resolution" means a copy of a resolution certified by the secretary or an assistant secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent and the Holder Representative.

        "Business Day" means each day other than a Saturday, Sunday or any other day on which commercial banks in New York, New York are authorized or required by law to close.

        "Change of Control" means (x) (i) any consolidation or merger of the Company with or into any other corporation or entity or Person or (ii) any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the voting power of the surviving entity immediately after such consolidation, merger or reorganization, or (y) any sale of all or substantially all of the assets of the Company.

        "Close of Business" on any given date means 5:00 p.m., Central Time, on such date; provided, however, that if such date is not a Business Day it will mean 5:00 p.m., Central Time, on the next succeeding Business Day.

        "Common Stock" means the common stock, $0.0001 par value, of BioSante.

        "CVR Payment Amount" means an amount equal to sixty-six percent (66%) of the Net Proceeds actually received by the Company (or any of its Subsidiaries) in connection with a LibiGel Transaction occurring after the date of the Merger Agreement and prior to the Outside Date; provided, however, that in no event will the aggregate amount of CVR Payment Amounts paid to the Holders pursuant to this Agreement exceed $40,000,000. All payments of any CVR Payment Amount to any Holders pursuant to this Agreement must be made in cash, and for that purpose any property other than cash received as Net Proceeds will be either, as determined by the board of directors of the Company in its discretion within sixty (60) days of the receipt of such property, (i) valued in good faith by the board of directors of the Company and the value so determined will be treated as Net Proceeds as of the date such non-cash property was received by the Company or (ii) the non-cash property will be excluded from Net Proceeds until converted into or exchanged for or disposed of by the Company for cash.

        "CVR Payment Date" means the date (if any and if ever) that a CVR Payment Amount is payable by the Company to the Holders, which date will be established pursuant to Section 2.4.

        "CVR Register" has the meaning set forth in Section 2.3(b).

        "CVR Registrar" has the meaning set forth in Section 2.3(b).

        "CVRs" means the contingent value rights issued by BioSante pursuant to this Agreement.

        "Effective Time" means the effective time of the Merger, pursuant to the Merger Agreement. Company shall notify the Rights Agent of the Effective Time promptly after the occurrence thereof.

        "Holder" means a Person in whose name a CVR is registered in the CVR Register.

        "Holder Representative" means the Holder Representative named in the first paragraph of this Agreement, until a successor Holder Representative has become such pursuant to the applicable provisions of this Agreement, and thereafter "Holder Representative" will mean such successor Holder Representative.

F-2


Table of Contents

        "LibiGel Assets" means the intellectual property rights and know-how and related assets, that currently are or have been used in the research, development and manufacture of BioSante's LibiGel® product, a proprietary transdermal testosterone formulation subject to a license agreement with Antares Pharma Inc., including all BioSante generated regulatory filings, clinical and non-clinical safety, efficacy and pharmacokinetic data, compiled by or on behalf of BioSante in connection with the development of the LibiGel product.

        "LibiGel Transaction" means the full or partial sale, license, transfer or other disposition entered into by the Company or any Subsidiary prior to Outside Date with any Person (other than any of the Company's Subsidiaries) with respect to the LibiGel Assets. For purposes of clarity, more than one transaction can constitute a LibiGel Transaction pursuant to this Agreement.

        "Net Proceeds" means the aggregate payments received after the Effective Time in connection with a LibiGel Transaction, less (i) all transaction costs and expenses, such as legal and investment banker fees, incurred or payable by the Company (or any of its stockholders or Affiliates) after the Effective Time in connection with the LibiGel Transaction, (ii) all applicable sales, income and other taxes in respect of the LibiGel Transaction that are incurred or payable after the Effective Time (net of any Company tax benefits resulting from the payment of any CVR Payment Amount to Holders pursuant to this Agreement), (iii) all out-of-pocket costs incurred or payable after the Effective Time in connection with or relating to the CVRs, including the Rights Agent Fee and legal fees, reimbursement of expenses or indemnity payments payable in respect of the CVRs or the administration thereof or calculation of Net Proceeds, but excluding any fees or expenses related to the Company's internal accounting for the CVRs, (iv) all of the Company's remaining costs or liabilities (whether incurred before or after the completion of the Merger) related to the development of the LibiGel Assets or the conduct, completion or termination of any clinical trials, safety studies or other research studies associated with the LibiGel Assets (in each case, to the extent not paid prior to completion of the Merger or included pursuant to Section 2.2(a)(vii)(E) of the Merger Agreement in the calculation of Net Cash as of the Determination Date), and (v) in the case of Net Proceeds received by a Subsidiary which is not wholly owned by the Company, a percentage of such Net Proceeds equal to the percentage of the equity of such Subsidiary not owned by the Company or its wholly owned Subsidiaries. Amounts placed in escrow or earnout or other contingent payments in connection with a LibiGel Transaction will not be considered Net Proceeds unless and until (and only to the extent that) such amounts are released from escrow or otherwise paid to the Company (or any of its stockholders or Affiliates) in cash. With respect to any LibiGel Transaction that occurs prior to the Outside Date, any such escrow, earnout or other contingent payments released or paid after the Outside Date will be deemed to be Net Proceeds, so long as such amount is actually received within three years of the Outside Date. For purposes of determining any income taxes relating to a LibiGel Transaction, the tax rate used will be the highest marginal rate that would be paid by the Company in connection with similar types of income for the year in which such LibiGel Transaction occurs (taking into account all tax benefits, including net operating losses, of the Company for such period).

        "Non-Achievement Certificate" has the meaning set forth in Section 2.4(b).

        "Notice of Objection" has the meaning set forth in Section 2.4(c).

        "Objection Period" has the meaning set forth in Section 2.4(c).

        "Officer's Certificate" means a certificate signed by the chief executive officer, president, chief financial officer or secretary of the Company, in his or her capacity as such an officer, and delivered to the Rights Agent and the Holder Representative.

        "Outside Date" means the date that is ten (10) years after the date hereof.

        "Permitted Transfer" means: (i) the transfer of any or all of the CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which

F-3


Table of Contents

the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a pro-rata distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant's account in a tax-qualified employee benefit plan to the participant or to such participant's account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the CVRs from such participant's account in such tax-qualified employee benefit plan, to such participant's account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

        "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof.

        "Record Date" means [                        ].

        "Rights Agent" means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent has become such pursuant to the applicable provisions of this Agreement, and thereafter "Rights Agent" will mean such successor Rights Agent.

        "Rights Agent Fee" means the agreed-upon fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

        "Subsidiary" means any corporation or other entity in which the Company owns at least a majority of the stock or other equity interests.

        "Surviving Person" has the meaning set forth in Section 6.1(a)(i).


ARTICLE II.
Contingent Value Rights

2.1    Authority; Issuance of CVRs; Appointment of Rights Agent.    

        (a)   BioSante has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of BioSante and no other corporate proceedings on the part of BioSante are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, (i) result in any Violation (as defined in the Merger Agreement) pursuant to any provision of the Certificate of Incorporation or By-laws of BioSante, or (ii) result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Company Benefit Plan (as defined in the Merger Agreement) or other agreement, obligation, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to BioSante or its properties or assets which Violation, in the case of clause (ii), individually or in the aggregate, would reasonably be expected to be material to BioSante. No consent, approval, order or authorization of, or registration, declaration or filing with, any Government Authority (as defined in the Merger Agreement) is required by or with respect to BioSante in connection with the execution and delivery of this Agreement by BioSante or the consummation by BioSante of the transactions contemplated hereby.

F-4


Table of Contents

        (b)   One CVR will be issued with respect to each share of Common Stock that is outstanding as of the Close of Business on the Record Date.

        (c)   The Company hereby appoints the Trust Company as the Rights Agent to act as rights agent for the Company in accordance with the instructions hereinafter set forth in this Agreement, and Computershare as the service provider to the Trust Company and as processor of all payments received or made by or on behalf of Company under this Agreement, and the Trust Company and Computershare hereby accept such appointment.

2.2    Nontransferable.    

        The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

2.3    No Certificate; Registration; Registration of Transfer; Change of Address.    

        (a)   The CVRs will be issued in book-entry form only and will not be evidenced by a certificate or other instrument.

        (b)   The Rights Agent will keep a register (the "CVR Register") for the registration of CVRs. The Rights Agent is hereby initially appointed "CVR Registrar" for the purpose of registering CVRs and transfers of CVRs as herein provided. Upon any change in the identity of the Rights Agent, the successor Rights Agent will automatically also become the successor CVR Registrar.

        (c)   Subject to the restrictions on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in a form reasonably satisfactory to the Company and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, including the evidence of authority of the party presenting the CVR for transfer which authority may include, if applicable, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association. A request for a transfer of a CVR must be accompanied by such documentation establishing that the transfer is a Permitted Transfer as may be reasonably requested by the Company and/or the CVR Registrar, if appropriate. Upon receipt of such written request and materials, the CVR Registrar will, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register will be the valid obligations of the Company, evidencing the same right and will entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of a CVR will be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void and invalid. All costs and expenses related to any transfer or assignment of the CVRs (including the cost of any transfer tax) will be the responsibility of the transferor.

        (d)   A Holder (or an authorized representative thereof) may make a request to the CVR Registrar to change such Holder's address of record in the CVR Register. Upon receipt of such request, the CVR Registrar will promptly record the change of address in the CVR Register.

2.4    Payment Procedures.    

        (a)   Promptly following the occurrence of a LibiGel Transaction as to which the Holders are entitled to receive a CVR Payment Amount, but in no event later than thirty (30) days after the occurrence of such a LibiGel Transaction, the Company will deliver to the Holder Representative and the Rights Agent a certificate (the "Achievement Certificate"), certifying that the Holders are entitled to receive a CVR Payment Amount (and setting forth the calculation of the CVR Payment Amount).

F-5


Table of Contents

No transaction described in Section 6.1(a) hereof will give the Holders the right to receive a CVR Payment Amount.

        (b)   If no LibiGel Transaction has occurred on or before the Outside Date, then, as soon as reasonably practicable after the Outside Date, but in no event later than thirty (30) days after the Outside Date, the Company will deliver to the Holder Representative and the Rights Agent a certificate (the "Non-Achievement Certificate"), stating that no LibiGel Transaction occurred.

        (c)   Within sixty (60) calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the "Objection Period"), the Holder Representative may deliver a written notice to the Company specifying that the Holder Representative objects to the determination of the Company that no LibiGel Transaction occurred (a "Notice of Objection") and stating the reason upon which the Holder Representative has determined that a LibiGel Transaction has occurred on or before the Outside Date. Any dispute arising from a Notice of Objection will be resolved in accordance with the procedure set forth in Section 8.10, which decision will be binding on the parties hereto and every Holder.

        (d)   If a Notice of Objection has not been delivered to the Company within the Objection Period, then the Holders will have no right to receive the CVR Payment Amount, and the Company and the Rights Agent will have no further obligations with respect to the CVR Payment Amount.

        (e)   If the Company delivers an Achievement Certificate to the Holder Representative and the Rights Agent or if the CVR Payment Amount is determined to be payable pursuant to Section 2.4(c) above, the Company will establish a CVR Payment Date that is the earlier of (i) one hundred (100) days after the end of the Company's fiscal year (or, if the applicable CVR Payment Date is greater than twelve million five hundred thousand dollars ($12,500,000), fifty (50) days after the end of the Company's fiscal quarter) during which the Achievement Certificate is delivered or (ii) thirty (30) days after the date of final determination pursuant to Section 2.4(c) above, as applicable. At least five (5) Business Days before such CVR Payment Date, the Company will cause the CVR Payment Amount in cash to be delivered to the Rights Agent, and in turn, on the CVR Payment Date, Computershare will distribute the CVR Payment Amount to the Holders (each Holder being entitled to receive its pro rata share of the CVR Payment Amount based on the number of CVRs held (as of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(c) above, as applicable) by such Holder as reflected on the CVR Register) (i) by check mailed to the address of each such respective Holder as reflected in the CVR Register as of the Close of Business on the last Business Day before such CVR Payment Date, or, (ii) with respect to any Holder who has provided the Rights Agent with wire transfer instructions meeting the Rights Agent's requirements, by wire transfer of immediately available funds to such account.

        (f)    The Company will be entitled to deduct and withhold, or cause to be deducted or withheld, from each CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as the Company or the applicable Affiliate of the Company is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

        (g)   Subject to prior execution and delivery by the Holder Representative of a reasonable and customary confidentiality agreement, the Company will promptly furnish to the Holder Representative all information and documentation in connection with this Agreement and the CVRs that the Holder Representative may reasonably request in connection with the determination of whether the LibiGel Transaction has occurred. The Company will promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the CVRs that the Rights Agent may reasonably request in order to perform under this Agreement.

F-6


Table of Contents

        (h)   The Company acknowledges that the bank accounts maintained by Computershare in connection with the services provided under this Agreement will be in Computershare's name and that Computershare may receive investment earnings in connection with the investment at Computershare's risk and for its benefit of funds held in those accounts from time to time.

2.5    No Voting, Dividends or Interest; No Equity or Ownership Interest in the Company.    

        (a)   The CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable on the CVRs to any Holder.

        (b)   The CVRs will not represent any equity or ownership interest in the Company.

2.6    No Obligation on Company.    

        Notwithstanding anything else in this Agreement to the contrary, the Company's only obligation in connection with (a) any continued operation of, development of or investment in the LibiGel Assets, (b) pursuing, negotiating or entering into one or more LibiGel Transactions, and (c) the terms and conditions of any LibiGel Transaction will be to act or forbear from acting in good faith; provided, however, that to the extent that the Company makes a decision to pursue, engage in, negotiate or enter into a LibiGel Transaction, the Company will use commercially reasonable efforts to seek to ensure that the consideration from such LibiGel Transaction is paid to the Company in cash and prior to the Outside Date.


ARTICLE III.
The Rights Agent

3.1    Certain Duties and Responsibilities.    

        (a)   The Rights Agent will not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence. No provision of this Agreement will require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. Notwithstanding anything contained herein to the contrary, the Rights Agent's aggregate liability under this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by the Company to the Rights Agent as fees and charges, but not including reimbursable expenses.

        (b)   The Holder Representative may direct the Rights Agent to act on behalf of the Holders in enforcing any of its or their rights hereunder, including the delivery of any Notice of Objection and negotiation or arbitration pursuant to Section 8.10. The Rights Agent will be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve material expense unless the Holder Representative will furnish the Rights Agent with reasonable security and indemnity for any costs and expenses that may be incurred. All rights of action under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent will be brought in its name as Rights Agent, and any recovery of judgment will be for the ratable benefit of all the Holders, as their respective rights or interests may appear.

3.2    Certain Rights of Rights Agent.    

        The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations will be read into this Agreement against the Rights Agent. In addition:

        (a)   the Rights Agent may rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order

F-7


Table of Contents

or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

        (b)   whenever the Rights Agent will deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful misconduct, bad faith or gross negligence on its part, rely upon an Officer's Certificate;

        (c)   the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

        (d)   in the event of arbitration, the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

        (e)   the permissive rights of the Rights Agent to do things enumerated in this Agreement will not be construed as a duty;

        (f)    the Rights Agent will not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

        (g)   the Company agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense (in each case pertaining to the Rights Agent's own account only) arising out of or in connection with the Rights Agent's duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss has been determined by a court of competent jurisdiction to be a result of the Rights Agent's willful misconduct, bad faith or gross negligence; and

        (h)   the Company agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent's net income). The Rights Agent will also be entitled to reimbursement from the Company for all reasonable and necessary out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent's counsel and agent) paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder. An invoice for the Rights Agent Fee will be rendered a reasonable time before, and paid on, the effective date of the applicable transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within thirty (30) calendar days after receipt by the Company. The Company agrees to pay to Rights Agent any amounts, including fees and expenses, payable in favor of the Rights Agent in connection with any dispute, resolution or arbitration arising under or in connection with the Agreement; and any fees and expenses, payable by the Company in favor of the Rights Agent or payable in favor of the Company related to such dispute, resolution or arbitration will be offset against the CVR Payment Amount, if any, or any payment to be made thereafter under this Agreement.

3.3    Resignation and Removal; Appointment of Successor.    

        (a)   The Rights Agent may resign at any time by giving written notice thereof to the Company specifying a date when such resignation will take effect, which notice will be sent at least thirty (30) days before the date so specified.

        (b)   If the Rights Agent will resign, be removed or become incapable of acting, the Company, by way of a Board Resolution, will promptly appoint a qualified successor Rights Agent who may (but need not) be a Holder but will not be an officer of the Company. The successor Rights Agent so appointed will, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

F-8


Table of Contents

        (c)   The Company will give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the CVR Register and by delivering notice to the Holder Representative. Each notice will include the name and address of the successor Rights Agent. If the Company fails to send such notice within five (5) Business Days after acceptance of appointment by a successor Rights Agent, upon Company's request the successor Rights Agent will cause such notice to be mailed at the expense of the Company.

3.4    Acceptance of Appointment by Successor.    

        Every successor Rights Agent appointed hereunder will execute, acknowledge and deliver to the Company and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided, however, that upon the request of the Company or the successor Rights Agent, such retiring Rights Agent will cooperate in the transfer of all relevant data, including the CVR Register, to the successor Rights Agent.


ARTICLE IV.
Covenants

4.1    List of Holders.    

        The Company will furnish or cause to be furnished to the Holder Representative and the Rights Agent in such form as the Company receives from its transfer agent (or other agent performing similar services for the Company), the names, addresses and shareholdings of registered holders of Common Stock as of the Close of Business on the Record Date. The Company will promptly furnish an electronic copy of the CVR Register to the Holder Representative upon written request from the Holder Representative.

4.2    Payment of CVR Payment Amount.    

        The Company will duly and promptly pay the CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.


ARTICLE V.
Amendments

5.1    Amendments Without Consent of Holder Representative.    

        (a)   Without the consent of the Holder Representative or the Rights Agent, the Company, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

F-9


Table of Contents

        (b)   Without the consent of the Holder Representative, the Company, when authorized by a Board Resolution, together with the Rights Agent, in the Rights Agent's sole and absolute discretion, may at any time and from time to time, enter into one or more amendments hereto:

        (c)   Promptly after the execution by the Company and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, the Company will deliver a notice thereof to the Holder Representative, setting forth in general terms the substance of such amendment.

5.2    Amendments with Consent of Holder Representative.    

        Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holder Representative), the Company, when authorized by a Board Resolution, and the Rights Agent and the Holder Representative may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any or all provisions of this Agreement.

5.3    Execution of Amendments.    

        In executing any amendment permitted by this Article V, the Rights Agent will be entitled to receive, and will be fully protected in relying upon, an opinion of counsel of the Company, at Company's sole expense, stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent's own rights, privileges, covenants or duties under this Agreement or otherwise.

5.4    Effect of Amendments.    

        Upon the execution of any amendment under this Article V, this Agreement will be modified in accordance therewith, such amendment will form a part of this Agreement for all purposes and every Holder will be bound thereby.

5.5    Amendment Prior to Effective Time.    

        This Agreement may not be amended prior to the Effective Time without the prior written consent of ANI.

F-10


Table of Contents


ARTICLE VI.
Consolidation, Merger, Sale or Conveyance

6.1    The Company May Consolidate, Etc.    

        (a)   Except as contemplated by the Merger, the Company will not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

        (b)   In the event the Company conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, the Surviving Person will be liable for the payment of the CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of the Company to be performed or observed.

        (c)   Notwithstanding the foregoing, in the event the Company conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1 or a Change of Control shall occur, then the Company will have the right to purchase all, but not less than all, of the outstanding CVRs for an amount equal to their then fair market value as determined in good faith by an independent third party appraisal firm retained by the Company; provided, however, that such right may not be exercised by the Company or the Surviving Person prior to the fifth anniversary of the Effective Time. Within sixty (60) calendar days after distribution by the Rights Agent of the purchase price for the CVRs as determined in accordance with the terms of this Section 6.1(c), the Holder Representative may deliver a written notice to the Company specifying that the Holder Representative objects to the determination of the purchase price for the CVRs as determined in accordance with the terms of this this Section 6.1(c). Any dispute arising from such an objection will be resolved in accordance with the procedure set forth in Section 8.10, which decision will be binding on the parties hereto and every Holder (including the Holders not participating therein).

6.2    Successor Substituted.    

        Upon any consolidation of or merger by the Company with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if the Surviving Person had been named as the Company herein, and thereafter the predecessor Person will be relieved of all obligations and covenants under this Agreement and the CVRs.

F-11


Table of Contents


ARTICLE VII.
The Holder Representative

7.1    Appointment.    

        Effective upon the issuance of the CVRs under this terms of this Agreement, and without any further act of any of Holders, the Holder Representative is appointed as the representative of the Holders and as the attorney-in-fact and agent for and on behalf of each Holder for purposes of this Agreement and will take such actions to be taken by the Holder Representative under this Agreement and such other actions on behalf of such Holders as it may deem necessary or appropriate in connection with or to consummate the transactions contemplated hereby, including (i) executing and delivering this Agreement and any other ancillary documents and negotiating and executing any amendments, modifications, waivers or changes thereto as to which the Holder Representative, in its sole discretion, has consented (provided that any waiver or amendment that adversely and disproportionately affects the rights or obligations of one or more Holders as compared to other Holders will require the prior written consent of a majority in interest of the disproportionately affected Holders), (ii) agreeing to, negotiating, entering into settlements and compromises of, complying with orders of courts with respect to, and otherwise administering and handling any claims under this Agreement on behalf of such Holders, and (iii) taking all other actions that are either necessary or appropriate in the judgment of the Holder Representative for the accomplishment of the foregoing or contemplated by the terms of this Agreement. The Holder Representative hereby accepts such appointment and agrees to serve as such without compensation. The appointment of the Holder Representative as each Holder's attorney-in-fact revokes any power of attorney heretofore granted that authorized any other Person to represent such Holder with regard to this Agreement and any other agreements or documents executed or delivered in connection with this Agreement. The Holder Representative is the sole and exclusive representative of each of the Holders for any purpose provided for by this Agreement.

7.2    Actions of Holder Representative.    

        (a)   A decision, act, consent or instruction of the Holder Representative hereunder will constitute a decision, act, consent or instruction of all Holders and will be final, binding and conclusive upon each such Holder, and the Company and the Rights Agent may rely upon any such decision, act, consent or instruction of the Holder Representative as being the decision, act, consent or instruction of each and every such Holder. The Company and the Rights Agent will be relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Holder Representative.

        (b)   The Holder Representative will incur no liability with respect to any action taken or suffered by any Holder in reliance upon any notice, direction, instruction, consent, statement or other document believed by such Holder Representative to be genuine and to have been signed by such Holder (and will have no responsibility to determine the authenticity thereof), nor for any other action or inaction, except the gross negligence, bad faith or willful misconduct of the Holder Representative. In all questions arising under this Agreement, the Holder Representative may rely on the advice of outside counsel, and the Holder Representative will not be liable to any Holder for anything done, omitted or suffered in good faith by Holder Representative based on such advice.

        (c)   The Holders will severally (on a pro rata basis, based on the number of CVRs held by each Holder) but not jointly indemnify the Holder Representative and hold the Holder Representative harmless against any loss, liability or expense incurred without gross negligence, bad faith or willful misconduct on the part of the Holder Representative and arising out of or in connection with the acceptance or administration of the Holder Representative's duties hereunder, including the reasonable fees and expenses of any legal counsel or other advisors reasonably retained by the Holder Representative.

F-12


Table of Contents

        (d)   In connection with providing services under this Agreement, the Holder Representative (i) will be compensated by the Company at the rate of $[                ] per hour for such services and (ii) will be reimbursed by the Company for all reasonable fees and expenses incurred in providing such services. Any such compensation and fees and expenses will be paid by the Company within thirty (30) days of the receipt of an invoice from the Holder Representative and will be offset against the CVR Payment Amount, if any.

7.3    Removal; Appointment of Successor.    

        (a)   At any time Holders representing at least a majority of the outstanding CVRs may, by written consent, appoint another Person as Holder Representative. Notice together with a copy of the written consent appointing such Person and bearing the signatures of Holders of at least a majority of the outstanding CVRs must be delivered to the Company and the Rights Agent not less than ten (10) days prior to such appointment. Such appointment will be effective upon the later of the date indicated in the consent or the date ten (10) days after such consent is received by the Company and the Rights Agent.

        (b)   If the Holder Representative becomes unable or unwilling to continue in his or its capacity as the Holder Representative, or if the Holder Representative resigns as a Holder Representative, the Holder Representative may appoint a new representative as the Holder Representative. If the Holder Representative is unable or unwilling to appoint a successor Holder Representative, then [                ] will serve as the Holder Representative. Notice and a copy of the written consent appointing such new representative must be delivered to the Company and the Rights Agent. Such appointment will be effective upon the later of the date indicated in the consent or the date ten (10) days after such consent is received by the Company and the Rights Agent.

7.4    Grant of Authority.    

        The grant of authority provided for in this Article VII (i) is coupled with an interest and will be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Holder, and (ii) will survive the consummation of the Merger. The provisions of this Article III will be binding upon the executors, heirs, legal representatives, successors and assigns of each Holder, and any references in this Agreement to any Holder or the Holders will mean and include the successors to such Holder's rights hereunder, whether pursuant to testamentary disposition, the laws of descent and distribution or otherwise.

F-13


Table of Contents


ARTICLE VIII.
Other Provisions of General Application

8.1    Notices to Rights Agent, Company and Holder Representative.    

        Subject to Section 8.2, all notices, requests, demands, claims and other communications that are required to be or may be given under this Agreement must be in writing and will be deemed to have been effectively given: (a) upon personal delivery to the recipient; (b) when sent by confirmed facsimile, if sent during normal business hours of the recipient; if not, then on the next Business Day; or (c) one Business Day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt, in each case to the intended recipient at the following addresses:

        (a)   if to BioSante or ANI, to

        with a copy to

        (b)   if to the Rights Agent, to

        (c)   if to the Holder Representative, to

        with a copy to

or to such other address as either party has furnished to the other by notice given in accordance with this Section 8.1.

8.2    Notice to Holders.    

        Where this Agreement provides for notice to Holders, such notice will be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In

F-14


Table of Contents

any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder will affect the sufficiency of such notice with respect to other Holders.

8.3    Assignment; Third Party Beneficiaries.    

        Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties hereto; provided, however, that the Rights Agent may, without further consent of the other parties hereto, assign any of its rights and obligations hereunder to any affiliated transfer agent registered under Rule 17Ac2-1 promulgated under the Securities Exchange Act of 1934, as amended. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, will give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns. The Holders will not have any rights or remedies with respect to the CVRs except as expressly set forth herein.

8.4    Governing Law.    

        This Agreement and the CVRs will be governed by the laws of the State of Delaware without reference to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.

8.5    Legal Holidays.    

        If a CVR Payment Date is not a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the CVR Payment Date.

8.6    Severability Clause.    

        Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties hereto agree that the court making such determination will have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement will be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

8.7    Counterparts.    

        This Agreement may be executed in any number of counterparts and by facsimile signatures, any one of which need not contain the signatures of more than one party and each of which will be an original, but all such counterparts taken together will constitute one and the same instrument. The exchange of copies of this Agreement or amendments thereto and of signature pages by facsimile transmission or by e-mail transmission in portable digital format (or similar format) will constitute effective execution and delivery of such instrument(s) as to the parties and may be used in lieu of the

F-15


Table of Contents

original Agreement or amendment for all purposes. Signatures of the parties transmitted by facsimile or by e-mail transmission in portable digital format (or similar format) will be deemed to be their original signatures for all purposes.

8.8    Termination.    

        This Agreement will terminate and be of no further force or effect, and the parties hereto will have no liability hereunder, upon the earliest to occur of (a) the payment of the last possible CVR Payment Amount due hereunder, (b) if a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that no LibiGel Transaction has been achieved or (ii) the fulfillment of any payment obligation required pursuant to a final determination made in accordance with this Agreement.

8.9    Entire Agreement.    

        This Agreement represents the entire understanding of the parties hereto with reference to the CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the CVRs.

8.10    Arbitration.    

        (a)   Before any arbitration pursuant to Section 8.10(b), the Company, the Rights Agent and the Holder Representative will negotiate in good faith for a period of thirty (30) days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

        (b)   Any claim which the Holders have the right to assert hereunder (including any claims brought by the Holder Representative on behalf of the Holders) will be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The Company, the Rights Agent and/or the Holder Representative may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration will be whether a LibiGel Transaction has occurred on or before the Outside Date. The number of arbitrators will be one, and such arbitrator will be selected by the American Arbitration Association. The place of the arbitration will be Chicago, Illinois. The arbitrator will be a lawyer or retired judge or accountant with experience in the pharmaceutical industry and with mergers and acquisitions. Except as may be required by law, neither a party nor the arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the other parties (provided that the Holder Representative may disclose to the Holders any such information without the consent of the Company). Any award payable in favor of the Holders or the Rights Agent as a result of arbitration will be distributed to the Holders on a pro rata basis, based on the number of CVRs held by each Holder. The Company will pay all fees and expenses of the arbitration, including the costs and expenses billed by the arbitrator in connection with the performance of its duties described herein; provided, however, that if the arbitrator rules in favor of the Company, the arbitrator's fees and expenses will be offset against the CVR Payment Amount, if any, or any payment to be made thereafter hereunder. Each party will be responsible for its own attorney fees, expenses and costs of investigation.

8.11    Survival.    

        Notwithstanding anything in this Agreement to the contrary, all provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and protection of proprietary rights and trade secrets shall survive the termination or expiration of this Agreement.

F-16


Table of Contents

8.12    Force Majeure.    

        Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunctions of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest.

8.13    Confidentiality    

        (a)    Definition.    "Confidential Information" shall mean any and all technical or business information relating to a party, including, without limitation, financial, marketing and product development information, stockholder information (including any non-public information of such stockholder), and proprietary information that is disclosed or otherwise becomes known to the other party or its affiliates, agents or representatives before or during the term of this Agreement. Confidential Information constitutes trade secrets and is of great value to the owner (or its affiliates). Confidential Information shall not include any information that is: (a) already known to the other party or its affiliates at the time of the disclosure, provided that such prior knowledge can be substantiated by the written records of such party; (b) publicly known at the time of the disclosure or becomes publicly known through no wrongful act or failure of the other party; (c) subsequently disclosed to the other party or its affiliates on a non-confidential basis by a third party not having a confidential relationship with the owner and which rightfully acquired such information; or (d) independently developed by one party without access to the Confidential Information of the other, provided that such independent development can be substantiated by the written records of such party. This Agreement, including all of its terms and conditions, will not be deemed to be Confidential Information and may be publicly disclosed by BioSante and ANI.

        (b)    Use and Disclosure.    All Confidential Information of a party will be held in confidence by the other party with at least the same degree of care as such party protects its own confidential or proprietary information of like kind and import, but not less than a reasonable degree of care. Neither party will disclose in any manner Confidential Information of the other party in any form to any person or entity without the other party's prior consent. However, each party may disclose relevant aspects of the other party's Confidential Information to its officers, affiliates, agents, subcontractors and employees to the extent reasonably necessary to perform its duties and obligations under this Agreement. Without limiting the foregoing, each party will implement such physical and other security measures and controls as are necessary to protect (a) the security and confidentiality of Confidential Information; (b) against any threats or hazards to the security and integrity of Confidential Information; and (c) against any unauthorized access to or use of Confidential Information. To the extent that a party delegates any duties and responsibilities under this Agreement to an agent or other subcontractor, the party ensures that such agent and subcontractor are contractually bound to confidentiality terms consistent with the terms of this Section 8.13.

        (c)    Required or Permitted Disclosure.    In the event that any requests or demands are made for the disclosure of Confidential Information, other than requests to Rights Agent for stockholder records pursuant to standard subpoenas from state or federal government authorities (e.g., divorce and criminal actions), the party receiving such request will promptly notify the other party to secure instructions from an authorized officer of such party as to such request and to enable the other party the opportunity to obtain a protective order or other confidential treatment, unless such notification is otherwise prohibited by law or court order. Each party expressly reserves the right, however, to disclose Confidential Information to any person whenever it is advised by counsel that it may be held liable for the failure to disclose such Confidential Information or if required by law or court order.

F-17


Table of Contents

        (d)    Unauthorized Disclosure.    As may be required by law and without limiting any party's rights in respect of a breach of this Section 8.13, each party will promptly:

        (e)    Costs.    Each party will bear the costs it incurs as a result of compliance with this Section 8.13.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

F-18


Table of Contents

        IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

  BIOSANTE PHARMACEUTICALS, INC.

 

By:

 


      Name:    

      Title:    

 

ANIP ACQUISITION COMPANY

 

By:

 


      Name:    

      Title:    

 

COMPUTERSHARE TRUST COMPANY, N.A. AND COMPUTERSHARE INC.
(ON BEHALF OF BOTH ENTITIES)

 

By:

 


      Name:    

      Title:    

 

[HOLDER REPRESENTATIVE]

 

By:

 


      Name:    

      Title:    

F-19


Table of Contents


ANNEX G

October 3, 2012

The Board of Directors
BioSante Pharmaceuticals, Inc.
111 Barclay Boulevard
Lincolnshire, IL 60069

Members of the Board:

        You have asked Oppenheimer & Co. Inc. ("Oppenheimer") to render a written opinion ("Opinion") to the Board of Directors of BioSante Pharmaceuticals, Inc. (the "Company") as to the fairness, from a financial point of view, to the Company, of the Exchange Ratios, as defined in the draft of the Agreement and Plan of Merger, dated as of October 2, 2012 (the "Agreement"), to be entered into between the Company and ANIP Acquisition Company ("ANI"). The Agreement provides for, among other things, the merger of ANI with and into the Company (the "Merger"), pursuant to which each outstanding share of the series D convertible preferred stock, par value $0.10 per share, of ANI ("ANI Series D Preferred Stock") will be converted into the right to receive the number of shares of common stock, par value $0.0001 per share, of the Company (the "Company Common Stock") equal to the Series D Exchange Ratio (as defined in the Agreement). Further, pursuant to the Agreement under certain circumstances, holders of (i) series C convertible preferred stock, par value $0.10 per share, of ANI, (ii) series B convertible preferred stock, par value $0.10 per share, of ANI and (iii) series A convertible preferred stock, par value $0.10 per share, of ANI may receive shares of Company Common Stock equal to the applicable Exchange Ratio (as defined in the Agreement).

        In arriving at our Opinion, we:

G-1


Table of Contents

        In rendering our Opinion, we relied upon and assumed, without independent verification or investigation, the accuracy and completeness of all of the financial and other information publicly available or provided to or discussed with us by the Company and ANI and their respective employees, representatives and affiliates or otherwise reviewed by us. With respect to the respective financial forecasts and estimates relating to the Company and ANI referred to above, we have assumed, at the direction of the respective management of each of the Company and ANI and with the Company's consent, without independent verification or investigation, that such forecasts and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the respective managements of the Company and ANI as to the future financial condition and operating results of the Company and ANI and the other matters covered thereby and that the financial results reflected in such forecasts and estimates will be achieved at the times and in the amounts projected. At the direction of representatives of the Company, we also assumed that the final terms of the Agreement will not vary materially from those set forth in the draft reviewed by us. We have assumed, with the consent of the Company, that the Merger will qualify for federal income tax purposes as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. We also have assumed, with the consent of the Company, that the Merger will be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on the Company or the contemplated benefits of the Merger. We have neither made nor obtained any independent evaluations or appraisals of the assets or liabilities, contingent or otherwise, of the Company or ANI.

        We are not expressing any opinion as to the underlying valuation, future performance or long term viability of the Company or ANI, the actual value of Company Common Stock when issued in the Merger or the price at which Company Common Stock will trade at any time. We express no view as to, and our Opinion does not address, any terms or other aspects or implications of the Merger (other than the Exchange Ratios to the extent expressly specified herein) or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the Merger or otherwise, including, without limitation, the fairness of the amount or nature of the compensation resulting from the Merger to any individual officers, directors or employees of the Company, or class of such persons, relative to the Exchange Ratios. Notably, we express no view as to, and our Opinion does not address, the right of the Company to issue to the holders of Company Common Stock a dividend prior to the consummation of the Merger of contingent value rights with respect to certain payments arising from the sale, transfer, license or a similar transaction relating to the Company's LibiGel program in accordance with the terms of a form of Contingent Value Rights Agreement in the form agreed to by the Company and ANI.

        In addition, we express no view as to, and our Opinion does not address, the underlying business decision of the Company to proceed with or effect the Merger nor does our Opinion address the relative merits of the Merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. Our Opinion is necessarily based on the information available to us and general economic, financial and stock market conditions and circumstances as they exist and can be evaluated by us on the date hereof. It should be understood that, although subsequent developments may affect this Opinion, we do not have any obligation to update, revise or reaffirm the Opinion.

        We are not legal, tax, regulatory or accounting advisors and have relied on the assessments made by the Company and its advisors with respect to such issues. This Opinion does not address any legal, tax, regulatory or accounting matters. In addition, this Opinion does not constitute a solvency opinion

G-2


Table of Contents

or a fair value opinion, and we have not evaluated the solvency or fair value of the Company under any federal or state laws relating to bankruptcy, insolvency or similar matters.

        The issuance of this Opinion was approved by an authorized committee of Oppenheimer. As part of our investment banking business, we are regularly engaged in valuations of businesses and securities in connection with acquisitions and mergers, underwritings, secondary distributions of securities, private placements and valuations for other purposes.

        We have acted as financial advisor to the Company in connection with the Merger and will receive a fee for our services, a portion of which will be payable upon delivery of this Opinion and a portion of which is contingent upon consummation of the Merger. In the two years prior to the date hereof, we have provided financial advisory services for the Company unrelated to the Merger and have received fees from the Company in connection with certain of such services. During the same period, we provided certain private placement and/or arranger services for ANI unrelated to the Merger; however, the proposed transaction was not consummated and we did not receive any compensation therefor. We may also seek to provide financial advisory services to the Company in the future and expect to receive fees for the rendering of these services. In the ordinary course of business, we and our affiliates may actively trade securities of the Company for our and our affiliates' own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. In addition, a senior member of the Oppenheimer Investment Banking team assisting the Company in connection with the Merger currently owns approximately 1,400 shares of Company Common Stock, which were acquired in 2009.

        Based upon and subject to the foregoing, and such other factors as we deemed relevant, it is our opinion that, as of the date hereof, the Exchange Ratios provided for in the Agreement are fair, from a financial point of view, to the Company. This Opinion is for the use of the Board of Directors of the Company in its evaluation of the Merger and may not be used for any other purpose without our prior written consent, except that a copy of this Opinion may be included in its entirety in any filing that the Company is required to make with the Securities and Exchange Commission in connection with the Merger if such inclusion is required by law. In addition, this Opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the Merger.

    Very truly yours,

 

 

OPPENHEIMER & CO. INC.

G-3


Table of Contents


ANNEX H


SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

§ 262. Appraisal rights.

        (a)   Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

        (b)   Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or § 264 of this title:

H-1


Table of Contents

        (c)   Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

        (d)   Appraisal rights shall be perfected as follows:

H-2


Table of Contents

        (e)   Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such person's own name, file a petition or request from the corporation the statement described in this subsection.

        (f)    Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.

        (g)   At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

        (h)   After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the

H-3


Table of Contents

fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

        (i)    The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.

        (j)    The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

        (k)   From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.

        (l)    The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

H-4


Table of Contents


ANNEX I

FORM OF
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF BIOSANTE PHARMACEUTICALS, INC.

        BioSante Pharmaceuticals, Inc., a corporation organized and existing under and by virtue of the laws of the State of Delaware (the "Corporation"), pursuant to the provisions of the General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY CERTIFY that:

        FIRST:    The Board of Directors of the Corporation (the "Board of Directors"), at meetings held on [                    ], 201[  ] and [                        ], duly adopted resolutions setting forth proposed amendments of the Restated Certificate of Incorporation of the Corporation, as amended, declaring said amendments to be advisable and proposing that said amendments be submitted to the stockholders of the Corporation for their consideration and approval. The resolutions setting forth the proposed amendments are substantially as follows:

I-1


Table of Contents

        SECOND:    The stockholders of the Corporation duly approved and adopted such amendments in accordance with the provisions of Section 242 of the DGCL.

        IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Stephen M. Simes, its Vice Chairman, President and Chief Executive Officer, thereunto duly authorized, this [    ] day of [                    ].

    BIOSANTE PHARMACEUTICALS, INC.

 

 

By:

 

 

Stephen M. Simes
Vice Chairman, President and Chief Executive Officer

I-2


Table of Contents


ANNEX J

FORM OF
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF BIOSANTE PHARMACEUTICALS, INC.

        BioSante Pharmaceuticals, Inc., a corporation organized and existing under and by virtue of the laws of the State of Delaware (the "Corporation"), pursuant to the provisions of the General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY CERTIFY that:

        FIRST:    The Board of Directors of the Corporation (the "Board of Directors"), at meetings held on [                    ], 201[  ] and [                    ], duly adopted resolutions setting forth a proposed amendment of the Restated Certificate of Incorporation of the Corporation, as amended, declaring said amendment to be advisable and proposing that said amendment be submitted to the stockholders of the Corporation for their consideration and approval. The resolution setting forth the proposed amendment is substantially as follows:

        SECOND:    The stockholders of the Corporation duly approved and adopted such amendment in accordance with the provisions of Section 242 of the DGCL.

        IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Stephen M. Simes, its Vice Chairman, President and Chief Executive Officer, thereunto duly authorized, this [      ] day of [                    ].

  BIOSANTE PHARMACEUTICALS, INC.

 

By:

 

 


Stephen M. Simes
Vice Chairman, President and
Chief Executive Officer

J-1