UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2010


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

For the transition period from to .

Commission file number 333-112754

OSTEOLOGIX, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation)		32-0104570 (IRS Employer Identification No.)

4415 Cox Road, Glen Allen, VA 23060
(Address of principal executive offices)

(804) 747-6027
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such a shorter period that the registrant was required to submit and post such file): Yes o No o

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


Large Accelerated Filer o		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company þ

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

As of November 15, 2010, there were 32,970,871 shares of the registrant’s Common Stock, $0.0001 Par Value outstanding.

TABLE OF CONTENTS


	Page
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS		3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		14

ITEM 4. CONTROLS AND PROCEDURES		14

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		14

ITEM 1A. RISK FACTORS		14

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		22

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		22

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		22

ITEM 5. OTHER INFORMATION		22

ITEM 6. EXHIBITS		23

Exhibit 10.9
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Page 2

PART I — FINANCIAL INFORMATION


Item 1.		Financial Statements

Osteologix, Inc.
(a development stage company)

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)


	September 30,			December 31,
	2010			2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,142		$	818
Prepaid expenses and other assets		72			68

Total current assets		4,214			886

Equipment, net		0			2


Total assets	$	4,214		$	888


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	795		$	326
Accrued liabilities		256			161

Total current liabilities		1,051			487

Commitments and Contingencies		—			—

Stockholders’ Equity
Common stock, $0.0001 par value, 38,073 shares authorized; 32,971 and 29,484 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		3			3
Additional paid-in-capital		28,480			26,640
Accumulated other comprehensive loss		(199	)		(283	)
Deficit accumulated during development stage		(25,121	)		(25,959	)

Total stockholders’ equity		3,163			401


Total liabilities and stockholders’ equity	$	4,214		$	888

See accompanying notes to the condensed consolidated financial statements.

Page 3

Osteologix, Inc.
(a development stage company)

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)
(Unaudited)


											For the Period
	Three Months Ended					Nine Months Ended					from June 16, 2003
	September 30,					September 30,					(Inception) to
	2010		2009			2010		2009			September 30, 2010

Revenues	$	3,915	$	—		$	3,915	$	—		$	4,665


Operating expenses:
Research and development		18		195			300		936			12,916
General and administrative		1,361		548			2,779		1,822			17,597

Total operating expenses		1,379		743			3,079		2,758			30,513

Income (loss) from operations		2,536		(743	)		836		(2,758	)		(25,848	)

Interest income, net		1		3			2		25			727


Net Income (loss)	$	2,537	$	(740	)	$	838	$	(2,733	)	$	(25,121	)


Net income (loss) per share, basic and diluted	$	.08	$	(0.03	)	$	.03	$	(0.09	)


Weighted average number of shares outstanding basic and diluted		32,971		29,484			32,033		29,456

See accompanying notes to the condensed consolidated financial statements.

Page 4

Osteologix, Inc.
(a development stage company)

Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income (loss)

For the Period From June 16, 2003 (Inception) through September 30, 2010
(in thousands, except per share amounts)


										Deficit
							Accumulated			Accumulated
					Additional		Other			During the			Total
	Common Stock				Paid-In		Comprehensive			Development			Stockholders’
	Shares		Amount		Capital		Loss			Stage			Equity
Issuance of common stock to founders for cash of $0.02 per share in June 2003		4,897	$	1	$	84	$	—		$	—		$	85
Issuance of common stock for cash of $0.95 per share in October 2003		979		—		930		—			—			930
Issuance of common stock for cash of $1.01 per share in May 2004		979		—		988		—			—			988
Issuance of common stock for cash of $0.83 per share in January 2005, net of issuance costs		1,430		—		1,158		—			—			1,158
Issuance of common stock for cash of $1.24 per share in June 2005, net of issuance costs		2,220		—		2,699		—			—			2,699
Comprehensive loss:
Net loss for the period		—		—		—		—			(4,913	)		(4,913	)
Foreign currency translations		—		—		—		(4	)		—			(4	)

Total comprehensive loss														(4,917	)

Balance at December 31, 2005		10,505		1		5,859		(4	)		(4,913	)		943
Common stock transferred in merger with Castle & Morgan Holdings, Inc.		2,860		—		—		—			—			—
Issuance of common stock for cash of $1.31 per share in private placement in May 2006, net of issuance costs		7,656		1		9,255		—			—			9,256
Stock based compensation expense		—		—		508		—			—			508
Comprehensive loss:
Net loss for the period		—		—		—		—			(4,858	)		(4,858	)
Unrealized gain on short-term investments		—		—		—		2			—			2
Foreign currency translations		—		—		—		(54	)		—			(54	)

Total comprehensive loss														(4,910	)

Balance at December 31, 2006		21,021		2		15,622		(56	)		(9,771	)		5,797
Issuance of common stock and warrants for cash of $1.32 per share in private placement in June 2007, net of issuance costs		3,825		—		4,970		—			—			4,970
Stock issued in lieu of cash for services		143		—		170		—			—			170
Stock based compensation expense		—		—		184		—			—			184
Comprehensive loss:
Net loss for the period		—		—		—		—			(8,037	)		(8,037	)
Unrealized loss on short-term investments		—		—		—		(2	)		—			(2	)
Foreign currency translations		—		—		—		(74	)		—			(74	)

Total comprehensive loss														(8,113	)

Balance at December 31, 2007		24,989		2		20,946		(132	)		(17,808	)		3,008
Issuance of common stock and warrants for cash of $1.32 per share in private placement in April 2008, net of issuance costs		4,030		1		5,149		—			—			5,150
Stock issued in lieu of cash for services		123		—		123		—			—			123
Stock based compensation expense		—		—		217		—			—			217
Comprehensive loss:
Net loss for the period		—		—		—		—			(4,661	)		(4,661	)
Unrealized loss on short-term investments		—		—		—		(1	)		—			(1	)
Foreign currency translations		—		—		—		(59	)		—			(59	)

Total comprehensive loss														(4,721	)

Balance at December 31, 2008		29,142	$	3	$	26,435	$	(192	)	$	(22,469	)	$	3,777

Page 5

Osteologix, Inc.
(a development stage company)

Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income (loss)

For the Period From June 16, 2003 (Inception) through September 30, 2010
(in thousands, except per share amounts)


										Deficit
							Accumulated			Accumulated
					Additional		Other			During the			Total
	Common Stock				Paid-In		Comprehensive			Development			Stockholders’
	Shares		Amount		Capital		Loss			Stage			Equity
Balance at December 31, 2008		29,142	$	3	$	26,435	$	(192	)	$	(22,469	)	$	3,777
Stock issued in lieu of cash for services		342		—		30		—			—			30
Stock based compensation expense		—		—		175		—			—			175
Comprehensive loss:
Net loss for the period		—		—		—		—			(3,490	)		(3,490	)
Foreign currency translations		—		—		—		(91	)		—			(91	)

Total comprehensive loss														(3,581	)

Balance at December 31, 2009		29,484	$	3	$	26,640	$	(283	)	$	(25,959	)	$	401

Issuance of common stock for cash of $0.50 per share in private placement in Jan. 2010, net of issuance costs		1,992		—		942		—			—			942
Issuance of common stock for cash of $0.50 per share in private placement in June. 2010, net of issuance costs		1,495		—		717		—			—			717
Stock based compensation expense		—		—		181		—			—			181
Comprehensive income:
Net income for the period		—		—		—		—			838			838
Foreign currency translations		—		—		—		84			—			84

Total comprehensive income														922

Balance at September 30, 2010		32,971	$	3	$	28,480	$	(199	)	$	(25,121	)	$	3,163

See accompanying notes to the condensed consolidated financial statements.

Page 6

Osteologix, Inc.
(a development stage company)

Condensed Consolidated Statements of Cash Flow

(in thousands, except per share amounts)
(Unaudited)


							For the Period
	For the Nine Months Ended						From June 16, 2003
	September 30,						(Inception) to
	2010			2009			September 30, 2010
Operating activities
Net income (loss)	$	838		$	(2,733	)	$	(25,121	)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Depreciation		2			2			46
Loss on disposal of equipment		—			—			3
Issuance of stock in lieu of cash for services		—			31			323
Stock based compensation		181			131			1,265
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(4	)		28			(72	)
Accounts payable		469			(374	)		795
Accrued liabilities		95			53			256

Net cash provided by (used in) operating activities		1,581			(2,862	)		(22,505	)


Investing activities
Purchase of short-term investments		—			(3,255	)		(30,239	)
Sales and maturities of short-term investments		—			4,554			30,239
Purchase of equipment		—			—			(46	)

Net cash provided by (used in) investing activities		—			1,299			(46	)


Financing activities
Net proceeds from issuance of common stock		1,659			—			26,892

Net cash provided by financing activities		1,659			—			26,892


Effect of exchange rates on cash and cash equivalents		84			(98	)		(199	)


Net increase (decrease) in cash and cash equivalents		3,324			(1,661	)		4,142

Cash and cash equivalents at beginning of period		818			2,996			—

Cash and cash equivalents at end of period	$	4,142		$	1,335		$	4,142

See accompanying notes to the condensed consolidated financial statements.

Page 7

Osteologix, Inc.
(a development stage company)

Notes to Condensed Consolidated Financial Statements

September 30, 2010 (Unaudited)
(Tabular amounts in thousands, except per share amounts)

1. Basis of Presentation and Summary of Significant Accounting Policies

Business Description

Osteologix, Inc. (“Osteologix” or the “Company”) is in the business of developing pharmaceuticals for the treatment and prevention of diseases of bone and joint tissues. The Company’s lead product candidate, NB S101, is in clinical development for the treatment of osteoporosis. Osteologix has not yet generated substantial revenues from its operations and, accordingly, the Company is in the development stage.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Osteologix Holdings Ltd., Osteologix ApS and Osteologix Limited. All intercompany accounts and transactions have been eliminated. Osteologix operates in one business segment, the development of pharmaceutical products.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts may differ from those estimates. These condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2010, are not necessarily indicative of results that may be expected for the year ending December 31, 2010. The condensed consolidated balance sheet information as of December 31, 2009 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report.

The audited consolidated financial statements as of December 31, 2009 included a “going concern” audit opinion from the Company’s independent registered public accounting firm because Osteologix has experienced net losses and negative cash flows from operations since its inception. Since that time, the Company entered into a License Agreement with the Servier Research Group (“Servier”) described in Note 5. The Company is currently revising its operating and clinical development plans, with the intention that the Company’s current cash and funds it is expecting to receive under its agreement with Servier will enable the Company to continue operations for at least the next twelve months. Management therefore believes it is appropriate for the Company’s consolidated financial statements to be prepared on a going concern basis. The consolidated financial statements do not contain any adjustments that may be required if Osteologix is unable to continue as a going concern.

The Company has been in the development stage since its formation. All losses accumulated since the inception of Osteologix have been considered as part of the Company’s development stage activities.

Fair Value of Financial Instruments

For financial instruments consisting of cash and cash equivalents, short-term investments, prepaid expenses and other assets, accounts payable and accrued liabilities included in the condensed consolidated financial statements, the carrying amounts are reasonable estimates of the fair value due to their short maturities. The fair value of other short-term and long-term obligations is estimated based on current interest rates available for debt instruments with similar terms, degrees of risk and remaining maturities. The carrying values of these obligations approximate their fair values.

Page 8

2. Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with a maturity period of three months or less at the time of acquisition to be cash equivalents.

3. Stock-Based Compensation

Since adopting ASC Topic 718, Stock Compensation, on January 1, 2006, the Company has elected to use the Black-Scholes option-pricing model as its method for valuing stock-based compensation, which consists of options and warrants to purchase common stock at or above its fair value at the time of grant. The Company did not grant any options to purchase common stock during the three month period ended September 30, 2010. During the nine month period ended September 30, 2010, the Company granted incentive stock options to its employees exercisable for 375,000 shares of common stock under the Company’s 2006 Equity Incentive Plan, or the Plan, and pursuant to the standard form of Stock Option Agreement under the Plan. The Company granted a stock option exercisable for 100,000 shares of common stock to the new Chairman of the Board under the Plan and pursuant to the standard form of Stock Option Agreement under the Plan. The Company also granted stock options to all four of its non-employee directors, including the new Chairman of the Board, under the Plan and pursuant to the standard form of Stock Option Agreement under the Plan. Each option is exercisable for 40,000 shares of common stock. All of these options have an exercise price of $0.71 per share, vest over four years, and expire 10 years from the date of grant; the Company has estimated the fair value of these options at $0.51 per share using a volatility factor of 82%, expected life of 6.0 years, risk-free interest rate of 2.80% and no payment of dividends. Total expense for stock-based compensation was $57,000 and $44,000 for the three month period ended September 30, 2010 and 2009, respectively, and $181,000 and $131,000 for the nine month period ended September 30, 2010 and 2009, respectively. As of September 30, 2010, the total unrecognized expense for unvested stock warrants and options was $516,000, which will be expensed over the remaining vesting period of 3.25 years. The aggregate intrinsic value of the options and warrants outstanding and exercisable as of September 30, 2010 was $68,000 based on a closing stock price of $0.53.

4. Net Income (Loss) Per Share

The net income (loss) per share has been computed using the weighted-average number common shares outstanding during the period. During the nine months ended September 30, 2010 and 2009, potentially dilutive options and warrants to purchase common stock aggregating 2,805,240 and 2,095,392 shares, respectively, were outstanding and not considered because their effect would have been antidilutive.

5. Material Contract

On July 30, 2010, Osteologix, through its wholly owned Irish subsidiary, Osteologix Limited, and the Servier Research Group, the leading French independent pharmaceutical company, entered into a license agreement pursuant to which Osteologix has granted Servier an exclusive royalty bearing license to develop and commercialize the Company’s lead product, NB S101 (strontium malonate) to treat post menopausal osteoporosis, other bone and joint disorders and dental indications worldwide, except in the U.S.

6. Subsequent Event

On October 29, 2010, the Company received notice of a grant under section 48D of the Internal Revenue Code in the amount of $244,479.24. Per the guidelines provided by the Internal Revenue Service, the Company will file an amended tax return for the year ending 2009 to reduce 2009 expenses by the amount of the grant.

Page 9


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

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this Quarterly Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “contemplate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “will continue to be,” or the negative of foregoing and similar expressions regarding beliefs, plans expectations or intentions regarding the future also identify forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation: the statements in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our strategies, beliefs, plans, expectations, anticipations and intentions including, without limitation: (1) our expectation of future payments we may be entitled to receive under the Servier license and that those payments will be sufficient to fund our operations for at least the next twelve months; (2) our expectation that further clinical development of NB S101 in the United States will not proceed until we enter into a development agreement with a third party development partner with substantially more resources than us; (3) our expectation that NB S101 simultaneously decreases resorption (loss) of existing bone tissue while also increasing formation of new bone tissue; (4) our expectations regarding future research and development and general and administrative expenses, (5) our belief that the development risk for NB S101 is reduced by the proven safety and effectiveness of a drug approved in Europe that contains a different strontium compound as its active ingredient; (6) our expectation that the clinical development of NB S101 in the United States will include a larger phase 2 and/or phase 3 clinical trial; (7) our expectation that the larger phase 2 and/or phase 3 clinical trial will take at least two years to complete and that our clinical trials overall will take several years to complete; (8) our expectation that either one or two similar or potentially larger phase 3 trials will be required for U.S. regulatory approval of NB S101; (9) our expectation that we will not generate significant revenues from commercial sales of NB S101 for several years; (10) our expectation that NB S101 will generate substantially all of our revenues for the foreseeable future; (10) our expectation that we will rely on one or more third-party contractors to supply our drugs if any of our product candidates receives FDA approval; and (11) our anticipation that we will file additional patent applications in the U.S. and in other countries.

Our expectations, beliefs, objectives, intentions and strategies regarding the future, including, without limitation, those concerning expected operating results, revenues and earnings and potential litigation are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements. These risks and uncertainties include, but are not limited to: uncertainties associated with the research and registration process; general economic conditions; our inability to accurately forecast costs associated with our corporate activities; changes in government regulations and administrative procedures; changes in our business strategy; our inability to accurately forecast the resources required to fund our planned operations; our inability to meet government regulation standards; market demand for our product candidates; the availability and terms for licensing, capital raising and partnership opportunities; growth of alternative medicine and techniques; speed of development of our product candidates; and increased success and introduction of competing products.

The forward-looking statements in this Quarterly Report are subject to additional risks and uncertainties set forth under the heading “Risk Factors” in Item 1A of Part II, and are based on information available to us on the date hereof. We assume no obligation to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Quarterly Report. Readers should also review carefully the cautionary statements and risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2009, and in our other filings with the SEC, including our Forms 10-Q and 8-K.

Company Information and Background

We have been in the business of developing pharmaceuticals for the treatment and prevention of diseases of bone and joint tissues. Our product candidate, NB S101 (strontium malonate), is in clinical development for treatment of osteoporosis. In late 2007 we completed a human phase 2 clinical trial of this investigational drug which demonstrated a positive effect of NB S101 on biomarkers of bone loss and on bone mineral density after 12 weeks of treatment.

On July 29, 2010, Osteologix, through its wholly owned Irish subsidiary, Osteologix Limited, and the Servier Research Group, the leading French independent pharmaceutical company, entered into a license agreement pursuant to which Osteologix has granted Servier an exclusive royalty bearing license to develop and commercialize the Company’s lead product, NB S101 (strontium malonate) to treat post menopausal osteoporosis, other bone and joint disorders and dental indications worldwide, except in the U.S.

Under the terms of the agreement, Osteologix will receive up to €12 million in upfront and milestone payments. Additionally, Osteologix is eligible to receive up to €30 million in minimum royalty payments creditable against mid to low single digit royalties on sales. Osteologix will also be eligible to receive milestone payments and royalties on product development and sales in Japan. The agreement is subject to customary termination provisions. Under the license, Servier is responsible for all costs outside of the U.S. associated with development, regulatory approval and commercialization of NB S101. We retained intellectual property rights for the development of NB S101 in the U.S.

Page 10

We reported a net profit this quarter due to the receipt of the upfront payment from Servier. However, we do not expect to report profits each quarter in the future and regular quarterly revenues or profits will not likely occur for several years if ever.

Designing and conducting larger phase 2 and 3 clinical trials will be necessary to receive regulatory approval to commercialize NB S101 in the United States. We are seeking a third party development partner with substantially more resources than us for further clinical development in the United States, and we do not expect to proceed with further U.S. clinical development until we enter into a development agreement with such a partner. We are publicly traded in the United States on the OTC Bulletin Board under the stock ticker symbol “OLGX” (some quotation systems require the symbol to be entered as “OLGX.OB”).

We believe, based on preclinical and clinical data, that NB S101 simultaneously decreases resorption (loss) of existing bone tissue while also increasing formation of new bone tissue. No product currently approved (or, to our knowledge, under investigation) for the treatment of osteoporosis in the U.S. has demonstrated the ability to increase bone formation and decrease resorption. Our phase 1 study of the pharmacokinetic, or PK, properties of NB S101 revealed that a one-gram tablet dose of NB S101 resulted in approximately the same level of strontium in human serum as a European company’s approved product containing two grams of strontium ranelate in sachet formulation, which must be mixed with water before ingestion. Thus, at a lower dose our tablet formulation of strontium has shown bioequivalent levels of strontium to a marketed sachet product that has been proven safe and effective in osteoporotic patients in Europe. More importantly, the recent results of our phase 2 study demonstrated that NB S101 decreased an established biomarker of bone resorption, CTX-1, in a dose-dependent manner by an amount statistically equivalent to or superior to the product approved in Europe. The phase 2 results also showed that NB S101 significantly increased bone mineral density at the lumbar spine and hip with only 12 weeks of treatment, and no significant side effects were noted in the trial.

Critical Accounting Policies and Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts and classification of expense, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that it is important for investors to be aware that there is a particularly high degree of subjectivity involved in estimating the fair value of stock-based compensation, that the expenses recorded for stock-based compensation in the Company’s financial statements may differ significantly from the actual value realized by the recipients of the stock awards, and that the expenses recorded for stock-based compensation will not result in cash payments from Osteologix. For further information on our critical accounting policies, see the discussion of our critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2009.

Recently Adopted or Issued Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board, or FASB, issued guidance regarding subsequent events, which is intended to establish general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, the guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. In February 2010, FASB amended the guidance to remove the requirement for management to disclose the date through which the company had evaluated its subsequent events in issued and revised financial statements. The guidance is effective for financial statements issued for interim and annual financial periods ending after June 15, 2009 and the amended guidance is effective February 24, 2010. The Company adopted the provisions of the guidance which did not have a material effect on the Company’s financial statements.

Page 11

RESULTS OF OPERATION

Three and Nine Months Ended September 30, 2010 Compared to Three and Nine Months Ended September 30, 2009

Revenues

Osteologix’s product, NB S101, is currently in research and development, and there were no revenues from commercial sales of NB S101 recorded in the nine month periods ended September 30, 2010 and 2009. In the three and nine months period ended September 30, 2010, Osteologix recorded revenues of $3,915,000 resulting from a license fee from Servier under the terms of our agreement. We anticipate additional milestone payments from Servier over the next several years based on the attainment of specified milestones, but we do not expect significant revenues from commercial sales of NB S101 for several years, if at all.

Research and Development Expenses

Expenditures relating to research and development are expensed as incurred. Research and development expenses include clinical trial costs, preclinical studies, development and manufacturing costs for medicinal products under investigation, payments to contract research organizations, compensation expenses for research and development personnel, supplies and related consulting and advisor costs.

Research and development expenses for the third quarter of 2010 compared to the third quarter of the 2009 were as follows:


Three Months Ended September 30,				Decrease from Period in Prior Year
2010		2009		Dollars			Percent

$	18,000	$	195,000	$	(177,000	)		(91	)%

Research and development expenses decreased $177,000 for the third quarter of 2010 compared to the third quarter of 2009 as a result of reductions in activities related to clinical development and manufacturing of NB S101.

Research and development expenses for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 were as follows:


Nine Months Ended September 30,				Decrease from Period in Prior Year
2010		2009		Dollars			Percent

$	300,000	$	936,000	$	(636,000	)		(68	)%

Research and development expenses decreased $636,000 for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 as a result of reductions in activities related to clinical development and manufacturing of NB S101. We do not expect research and development expenses to increase materially in future periods unless we enter into a collaboration or license agreement with a third party for the development of NB S101 in the United States and such agreement requires additional research and development activities by us.

General and Administrative Expenses

General and administrative expenses include compensation expense for personnel not directly involved in research and development activities, management and other administrative personnel costs, insurance, accounting, legal and patent expenses.

General and administrative expenses for the third quarter of 2010 compared to the third quarter of 2009 were as follows:


Three Months Ended September 30,				Increase from Period in Prior Year
2010		2009		Dollars		Percent

$	1,361,000	$	548,000	$	813,000		148	%

General and administrative expenses increased by $813,000 for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to the legal and accounting costs of forming new Irish subsidiaries and the costs of negotiating our license agreement with Servier.

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General and administrative expenses for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 were as follows:


Nine Months Ended September 30,				Increase from Period in Prior Year
2010		2009		Dollars		Percent

$	2,779,000	$	1,822,000	$	957,000		53	%

General and administrative expenses increased by $957,000 for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 due to the legal and accounting costs of forming new Irish subsidiaries and the costs of negotiating our license agreement with Servier. Future general and administrative expenses will depend on the nature of any transactions we undertake, if any, along with ongoing costs of operations and maintenance of our intellectual property.

Interest Income

Interest income decreased by $2,000 to $1,000 for the third quarter of 2010 compared to $3,000 for the third quarter of 2009. The decrease in interest income was due to lower cash balances.

LIQUIDITY AND CAPITAL RESOURCES

We measure our liquidity primarily by the cash, cash equivalents and short-term investments, as well as the working capital, available to fund our operations. Since we were founded in 2003, we have applied the majority of our resources to research and development programs, primarily the development of NB S101, and the administrative expenses to support the our pharmaceutical development operations. We have operated at a loss since inception and expect to continue to incur losses in the future as a result of our ongoing research and development efforts. To date we have funded our operations primarily through the sale of our common stock.

In evaluating our liquidity, we do not distinguish between cash and short-term investments because when we hold short-term investments all of our short-term investments are available for sale and we believe they can readily be converted into cash when needed. We do not hold any auction rate securities. The following table summarizes our cash, cash equivalents and short-term investments, and our working capital available to fund our operations:


	September 30,		December 31,
	2010		2009
Cash, cash equivalents and short-term investments	$	4,142,000	$	818,000
Working capital		3,091,000		399,000

The increase in our cash of $3,324,000 during the first nine months of 2010 was due to cash received as a result of two stock sales, 1,992,428 shares of common stock on January 7, 2010 for aggregate gross proceeds of $1.0 million and 1,494,532 shares of common stock on June 11, 2010 for aggregate gross proceeds of $0.75 million, and $3,915,000 in a license fee from Servier, net of cash used in operations to fund the continuing development of NB S101, and for the general and administrative expenses of operating a public company, creating additional Irish subsidiaries and negotiating the Servier transaction.

The Company is currently revising its operating and clinical development plans, with the intention that the Company’s current cash and funds it is expecting to receive under its agreement with Servier will enable the Company to continue operations for at least the next twelve months. We may consume available resources more rapidly than currently anticipated, resulting in the need for funding at an earlier date. If adequate funds are not available, we may be required to significantly reduce, refocus or cease our operations, which could have a material adverse affect on the price of our common stock. There can be no assurance that we will receive additional funds from Servier or that any funds we may receive under the Servier license will reduce or delay our need for future funding.

Our business strategy is to maximize the value of the potential payments we may receive from Servier and to seek a collaboration agreement with another company to develop and commercialize NB S101 in the United States for the treatment of osteoporosis. The osteoporosis market is large, with approximately $10 billion in annual product sales worldwide. The Company has completed one phase 1 and one phase 2 human clinical study of NB S101. In addition, a drug which contains a different strontium compound as its active ingredient (as compared to NB S101) has been proven safe and effective and is approved for treatment of osteoporosis in Europe, which we believe reduces the development risk for NB S101 when compared to other investigational drugs in completely unproven chemical classes.

The development plan for NB S101 will require a larger phase 2 clinical trial that we estimate will take at least two years to complete. In addition, certain non-clinical testing will need to be completed. After our next clinical trial, either one or two similar or potentially larger phase 3 trials will be required. We are seeking a third party development partner with substantially more resources than us for further clinical development in the United States, and we do not expect to proceed with further U.S. clinical development until we enter into a development agreement with such a partner.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.


Item 4.		Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. In addition, our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, allowing timely decisions regarding required disclosure. As of September 30, 2010, based on an evaluation carried out with the participation of our management, including our chief executive officer, who also serves as our principal financial officer, of the effectiveness of our disclosure controls and procedures, our chief executive officer (in his capacity as such and in his capacity as our principal financial officer) has concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no significant changes in our internal control over financial reporting identified in management’s evaluation during the three months ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.		Legal Proceedings.

None.


Item 1A.		Risk Factors.

We are dependent on payments from our agreement with Servier. Failure of Servier to attain such milestones would result in our not receiving additional revenues. We have no control over Servier’s development, clinical trial strategy, regulatory activity, market or sales of NB S101.

Our near-term revenues depend to a significant extent on the attainment by Servier of milestones set forth in the Servier license. Such milestones are related to clinical trial developments, regulatory approvals and sales accomplishments. We have no control over the expertise or resources that Servier may devote to the development, clinical trial strategy, regulatory approval, marketing or sale of NB S101, or the timing of Servier’s activities. In addition, Servier is entitled to terminate the license under certain conditions. To the extent Servier does not achieve such milestones or terminates the license, we will not receive the associated revenues, or any further revenues, which could harm our financial condition and our business.

We are dependent on Servier to develop and commercialize NB S101 outside of the United States.

Our license agreement with Servier granted Servier exclusive rights to develop and commercialize NB S101 to treat bone disease and for dental indications outside of the U.S. We have no control over the resources or efforts that Servier will employ. There can be no assurance that Servier will receive regulatory approval to market NB S101 outside of the U.S. or that it will successfully commercialize the product. Servier’s failure to receive regulatory approval or successfully commercialize NB S101 outside the U.S. would significantly harm the value of our business.

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Future development of NB S101 as a pharmaceutical product to treat osteoporosis will require us to identify another party that is willing to fund development of the drug in the United States.

We do not have the financial or personnel resources needed to develop NB S101 as a pharmaceutical product to treat osteoporosis in the United States. Over the past several years we have sought to identify another company that would be interested in licensing the rights for NB S101 in the United States or in collaborating with us for the development of NB S101 in the United States, but we have not been able to do so. Continued development of NB S101 as a pharmaceutical product to treat osteoporosis in the United States will require such a license or collaboration agreement, and there can be no assurance that we will enter into such an agreement. Unless we are able to do so, stockholders should not expect that we will continue development of NB S101 in the United States on our own.

The concentrated ownership of our common stock may have the effect of delaying or preventing financings, mergers, acquisitions or other significant corporate transactions.

Nordic Biotech K/S, a venture capital firm and limited partnership in Denmark, and its affiliates or, collectively, Nordic, own approximately 68% of our outstanding common stock. In connection with our January 2010 private placement, our Certificate of Incorporation was amended in March 2010 to decrease the number of authorized shares of our preferred stock from 1,000,000 to 0, decrease the number of number of authorized shares of our common stock from 100,000,000 to 38,072,737 and provide that, so long as Nordic and its affiliates are the beneficial owners of at least 20% of the outstanding shares of our common stock, the size of our board of directors may not exceed seven persons and Nordic shall have the right to designate up to three members of our board of directors. We refer to these rights as the Nordic Board Rights, which are in addition to any other rights provided under Delaware law. One of the five members of our board of directors, John M. Barberich, who is also the chairman of our board, is a Venture Partner to Nordic Biotech Advisors ApS, a firm that provides investment advisory services to Nordic Biotech K/S and Nordic Opportunity Fund, security holders in the Company. On October 6, 2010, the Company received an action by written consent of stockholders holding a majority of the Company’s common stock signed by Nordic Biotech K/S and Nordic Biotech Opportunity Fund K/S (1) removing Jeremy Curnock Cook from his position as director of the Company without cause and (2) appointing each of Enda Kenny and David O’Flynn to fill the vacancies created by the resignation of Bobby W. Sandage, Jr. and the removal of Mr. Cook, each to hold such office until the next annual meeting of the stockholders and until their successors have been duly elected and qualified. Mr. Kenny is currently Chief Executive Officer of Rose Pharma A/S, a venture backed research and development company based in Copenhagen Denmark in which Nordic is a shareholder, and serves on the Board of Directors of H Pharmaceuticals ApS, a private company in which Nordic is a shareholder. Mr. O’Flynn currently serves as the managing director of Osteologix, Ltd., a wholly-owned subsidiary of the Company organized in Ireland. Because of its concentrated ownership of our stock, the Nordic Board Rights, and its current position on our board, Nordic is able to control all matters requiring stockholder approval and is able to exercise significant influence over all matters requiring board approval, including the election of directors, amendment to our bylaws, certificate of incorporation and approval of mergers, acquisitions, going private transactions, financings and other significant corporate transactions, and any decisions concerning the terms of any of these transactions. Nordic is able to prevent a change in control of our company or the sale of additional shares of capital stock, and no person interested in acquiring us or making a significant investment in us will be able to do so without obtaining the consent of Nordic. Nordic may in the future seek to acquire the remainder of our common stock that they do not already own in a going private transaction. Nordic’s interests may not be the same as those of our other stockholders. Nordic is also a stockholder and investor in a number of other biotechnology companies, and there may be conflicts between our business interests and Nordic’s other investments. In addition, if Nordic elects to sell any shares of our common stock which they own in the open market, our stock price is likely to decrease.

We may elect to seek additional financing in the future, which could be dilutive to our stockholders.

Developing drugs, conducting clinical trials, and commercializing products is expensive. Our future funding requirements will depend on many factors, including:

•

the progress and cost of our clinical trials and other research and development activities;

•

the costs and timing of obtaining regulatory approvals;

	•		the terms and timing of any collaborative, licensing, acquisition or other arrangements that we may establish;

	•		the costs of filing, prosecuting, defending and enforcing any patent applications, claims, patents and other intellectual property rights;

•

the cost and timing of securing manufacturing capabilities for our clinical product candidates and commercial products, if any;

•

the costs of lawsuits involving us or our product candidates; and

•

the costs of establishing sales, marketing and distribution capabilities.

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We are currently revising our operating and clinical development plans, with the intention that the Company’s current cash and funds it is expecting to receive under its agreement with Servier will enable the Company to continue operations for at least the next twelve months. We may consume available resources more rapidly than currently anticipated, resulting in the need for funding at an earlier date. Our funding requirements may change as a result of many factors, including underestimates of budget items, unanticipated cash requirements, future product opportunities with collaborators, future licensing opportunities and future business combinations. Consequently, we may need to seek additional sources of financing, which may not be available on a timely basis or terms favorable to us, if at all. There can be no assurance that any funds we may receive under the Servier license will reduce or delay our need for future financing.

Raising additional funds may cause dilution to existing stockholders or require us to relinquish valuable rights.

We may seek to raise additional financing through public or private equity offerings, debt financings, or additional corporate collaboration and licensing arrangements. We cannot be certain that additional funding will be available on a timely basis, on terms favorable to us, or at all. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital by issuing debt securities, we would incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants that could limit our flexibility in conducting future business activities. Debt financing would also be senior to our stockholders’ interests in bankruptcy or liquidation. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

We have incurred significant net operating losses since our inception and may not achieve profitability in future periods.

We have incurred significant net operating losses since our inception in 2003. To date, we have devoted significant financial resources to the research and development of our investigational drug NB S101. Due to the Servier agreement, we recorded a again of $838,000 for the nine month period ended September 30, 2010, but recorded a loss of $3.5 million for the year ended December 31, 2009, and our consolidated balance sheet had an accumulated deficit of approximately $25.1 million at September 30, 2010. Except for our milestone payments from Servier, we do not expect to generate any revenue from the sale of our NB S101 in the near term.

To achieve sustained profitability, we or Servier must develop and obtain regulatory approval for our product candidate and effectively manufacture, market and sell the product candidate. Accordingly, we may never generate significant revenues and, even if we do generate significant revenues, we may never achieve profitability in future periods.

Our independent public accounting firm has issued an opinion on our consolidated financial statements that states the consolidated financial statements were prepared assuming we will continue as a going concern.

We have limited revenues and have experienced net losses and negative cash flows from operations since our inception through September 30, 2010. These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have only one product that is currently being evaluated for commercial development, and even if our continued development of this product is successful, it will be several years before it can reach market.

Our current product candidate NB S101 is the only pharmaceutical product we have tested in humans, and it may never be successfully marketed or manufactured. To date, this product candidate has only been tested on a limited number of humans. The additional clinical trials required by the FDA and other regulatory authorities to obtain approval to market the product are long and complex and will take a number of years to complete. Our preferred single-tablet dosage may not be accepted by the FDA or supported by future clinical trial data. The FDA and other regulatory authorities also may disagree with our current clinical and pre-clinical research plans and require us to conduct more extensive studies than we currently anticipate before considering our investigational drug for marketing approval.

Most of our future planned studies of NB S101 involve drug exposures for durations that are significantly longer than we have tested thus far and may go out to three years of exposure on the drug as compared to our longest treatment period thus far of only 12 weeks. The longer-term studies could reveal safety or other issues that could adversely affect marketing approval. We need to commit substantial time and additional resources in order to conduct further clinical trials before we can submit a NDA with respect to NB S101. We cannot predict with any certainty when we might submit any NDA for regulatory approval for NB S101 or any other product candidates, if at all.

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Obtaining and maintaining the necessary U.S. or worldwide regulatory approvals for our product candidates will be time consuming, difficult and costly. If we fail to do so, we will be unable to commercialize our product candidates.

Government regulations in the U.S. and other countries have a significant impact on our business and affect research and development, manufacture and marketing of our product candidates. We or a future licensee will require FDA approval to commercialize NB S101 in the U.S., and Servier will require approvals from similar foreign regulatory authorities to commercialize NB S101 outside the U.S. In order to obtain FDA approval of a product candidate, we or a future licensee must submit to the FDA an NDA demonstrating that the product candidate is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials. Recently, the FDA has indicated that it will require an additional phase 2 trial and one large, well-controlled phase 3 trial, along with additional toxicology studies, to support approval of NB S101. These studies will be time consuming, difficult and costly, and we cannot predict whether our efforts will result in any drugs that the FDA or other regulatory authorities consider safe and effective for humans or whether the FDA or other regulatory authorities will require preclinical or clinical trials. The FDA has substantial discretion in the drug approval process and may refuse to accept our application or may deny approval. If the FDA does not accept or approve our application, it may require us to conduct additional preclinical testing or manufacturing studies and submit that data before it will reconsider our application, or require us to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation, administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals will increase our operating expenses and delay the commercialization of our product candidates and our ability to derive product revenues from them.

Even if we or a future licensee comply with all FDA requests, the FDA may ultimately determine, under its statutory authority, to deny our requests for approval of our drug candidates. We cannot be certain that we will ever obtain regulatory clearance for any product candidate. Failure to obtain FDA approval of NB S101 would harm our business and prospects.

In foreign jurisdictions, Servier must also receive approval from the appropriate regulatory, pricing and reimbursement authorities before we can commercialize and market our drugs. These processes generally include all of the risks associated with FDA procedures. Pursuing foreign approvals will be time-consuming and expensive. Regulations vary among countries, and foreign authorities may require different or additional clinical trials than we conduct in our attempts to obtain FDA approval. Servier may never receive any of the approvals necessary to commercialize our product candidates.

In addition, even if our product candidates are marketed, the products and our manufacturers are still subject to continual review by applicable regulatory authorities, including FDA adverse event reporting requirements and FDA requirements governing product distribution, advertising, and promotion. At any stage of development or commercialization, the discovery of previously unknown problems with our product candidates, our own manufacturing or the manufacture by third parties may result in restrictions on our product candidates or in their manufacture, including withdrawal of the product from the market.

Clinical trials are time-consuming, difficult and costly to design and implement.

Human clinical trials are expensive and difficult to design and implement, in part because the science behind them is complex and they are therefore subject to rigorous regulatory requirements. Further, the medical, regulatory and commercial environment for pharmaceutical products changes quickly and often in ways we may not be able to accurately predict. The clinical trial process is also time-consuming. We estimate that clinical trials of our product candidates will take at least several more years to complete. Furthermore, as failure can occur at any stage, we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by, among other things, changes in regulatory requirements, unforeseen safety issues, determination of dosing issues, lack of effectiveness in clinical trials, slower than expected patient recruitment, inability to monitor patients adequately during or after treatment, inability or unwillingness of medical investigators to follow our clinical protocols, inability to maintain a sufficient supply of the investigational drug to support the trials, suspension or termination of clinical trials for noncompliance with regulatory requirements and changes in clinical care protocols and standards of care within the institutions in which our trials take place.

In addition, we or the FDA may suspend our clinical trials at any time if it appears we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our IND submissions or the conduct of these trials.

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The results of our clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects.

Even if our clinical trials are completed as planned, we cannot be certain that the results of those trials will support our product candidate claims or that the FDA or foreign authorities will agree with our conclusions regarding the results. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses, which could cause us to abandon a product candidate and may delay or cancel development of others. Any delay of our clinical trials will delay the filing of our NDAs and, ultimately, our ability to commercialize our product candidates and generate revenues. Any cancellation of our clinical trials will eliminate our ability to file an NDA for that product and eliminate our ability to generate any revenue from that product, unless we are later able to conduct a different trial that would satisfy the regulatory authorities.

It is possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of our lead product candidate’s profile. In addition, our clinical trials involve a comparatively small patient population. Because of the small sample size, their results may not be indicative of future results. Companies typically collect the most reliable information on side effects during the large phase 3 studies, when significant numbers of patients are tested. We have not reached this development stage yet, and we cannot accurately predict if phase 3 studies with our investigational drug, strontium malonate, in tablet form as NB S101, will reveal unexpected side effects. Occurrence of any side effect could delay or terminate further development and hamper or prevent regulatory approval or marketing of our lead product candidate.

The strontium salt that is approved for treating osteoporosis in Europe has exhibited a new potential side effect not seen in clinical trials.

NB S101 contains a salt form of strontium as its active ingredient. There is one product approved in Europe and countries around the world that contains a different salt form of strontium, which is marketed by Servier SA as Protelos^®. Protelos was studied in clinical trials involving approximately 7,000 patients prior to its approval in late 2004. In November 2007, the European Medicines Agency, or EMEA, identified a potential side effect and recommended a label change for Protelos. The side effect “drug rash with eosinophilia and systemic symptoms,” or DRESS, was noted in 16 patients following 570,000 patient-years of worldwide exposure (approximately one case per 35,000 patient years), and two of the cases were fatal. The EMEA advised physicians and patients to stop treatment with Protelos should a rash occur (generally after three to six weeks of treatment), and to seek further medical advice. For these patients Protelos should not be reintroduced.

We currently do not know whether DRESS was caused by the strontium, the different synthetic salt used by Servier, a combination of Protelos with other drugs, or other factors. The infrequency of the cases of DRESS identified by post marketing observation will make it very difficult to ever detect in human clinical trials. It is possible that the FDA or other regulatory authorities will require us to conduct additional clinical or preclinical work on DRESS, which would increase our costs and/or increase the expected time it may take us to receive approval for NB S101. It is also possible that we will be required to note DRESS as a potential side effect in our label if we receive approval for NB S101, even if we do not observe any symptoms in our clinical trials.

Delays in patient enrollment for clinical trials could increase costs and delay regulatory approvals.

We or Servier may face substantial competition in seeking to enroll qualified patients into our future clinical trials. Competition for patients has delayed clinical trials of other biotechnology and drug development companies. In addition, recent improvements in existing drug therapy, particularly for medical products for prevention and treatment of osteoporosis, may make it more difficult for us to enroll patients in our clinical trials as the patient population may choose to enroll in clinical trials sponsored by other companies or choose alternative therapies. Delays in patient enrollment can result in increased development costs and delays in regulatory approvals. Furthermore, our agreement with Servier limits our ability to conduct clinical trials outside of the United States, which could contribute to challenges enrolling a sufficient number of qualified patients for future clinical trials of NB S101.

The FDA or other regulatory authorities may also change the requirements for testing new drugs for osteoporosis. For example, the current guidelines require placebo-controlled clinical trials conducted in osteoporotic patients. There are ethical concerns regarding treating osteoporotic patients with placebo, and the FDA or other regulatory authorities may at some time require osteoporosis drugs in the future to include active controls (such as existing osteoporosis treatments) instead of placebo. If the FDA makes these changes, we may need to enroll more patients, conduct longer clinical trials, or otherwise change our planned clinical trial designs, potentially and substantially increasing the costs and/or decreasing our chances of demonstrating the efficacy needed to obtain approval.

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Physicians and patients may not accept and use our drugs.

Even if the FDA or foreign regulatory authorities approve one or more of our drug candidates, physicians and patients may not accept and use them. Post-approval market acceptance and use of our drugs will depend upon a number of factors, including perceptions by the health care community, including physicians, about their safety and effectiveness, their cost-effectiveness relative to competing products, the availability of reimbursement for our products from government or other healthcare payors, such as major insurance companies, and the effectiveness of marketing and distribution efforts by us, our licensees and distributors. The failure of NB S101, which we expect to generate substantially all of our product revenues for the foreseeable future, or any of our other product candidates to find post-approval market acceptance would harm our business, financial condition and results of operations.

Patients may not be able to obtain adequate reimbursement for our drugs.

Our ability to commercialize our drugs, alone or with collaborators, will depend in part on the extent to which reimbursement will be available from government and health administration authorities, private health maintenance organizations, health insurers, and other payers. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, routinely challenge prices charged for drugs. Government and other healthcare payers limit both coverage and reimbursement. Even if our product candidates are approved by the FDA, insurance coverage may not be available and reimbursement may be inadequate. If payors do not provide adequate coverage and reimbursement levels, the post-approval market acceptance of our products could be diminished, which would harm our business, financial condition and results of operations.

Our drug-development programs depend upon third-party researchers who are outside our control.

We depend upon independent investigators and collaborators, such as medical institutions, clinical research organizations, and universities, to conduct our pre-clinical and clinical trials and, in certain cases, to develop a product for its target indication. We contract with these collaborators, but they are not our employees, and we cannot control the amount or timing of resources they devote to our programs. They may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking the programs ourselves. If outside collaborators fail to devote sufficient time and resources to our programs, or if their performance is substandard, the approval of our FDA applications and our introduction of new drugs, if any, will be delayed, which would harm our business, financial condition and results of operations. These collaborators may also have relationships with other commercial entities, some of whom may compete with us. If our collaborators were to assist our competitors at our expense, our competitive position would be harmed.

We rely exclusively on third parties to manufacture our product candidates.

We rely exclusively on a limited number of vendors to supply raw materials and finished goods necessary to manufacture our product candidates, and the loss of any one of these vendors could harm our business. The FDA and regulatory agencies in other countries also periodically inspect manufacturing facilities, including third parties who manufacture our product candidates or our active ingredients. The FDA may take the position that our chosen manufacturers do not have enough experience manufacturing the dosage forms we have contracted them to produce and may subject those manufacturers to increased scrutiny. Pharmaceutical manufacturing facilities must comply with applicable good manufacturing practice (GMP) standards, and manufacturers typically must invest substantial funds, time and effort to ensure full compliance with these standards and make quality products. We do not have control over our manufacturers’ compliance with these requirements. If our third party manufacturers fail to comply with regulatory requirements, it can result in denial of approval for our product candidate, a requirement to repeat clinical trials, sanctions, fines, delays, suspensions of approvals, seizures or recalls of products, operating restrictions, manufacturing interruptions, corrective actions, injunctions, adverse publicity against us and our product candidates and/or criminal prosecutions, any of which would harm our business.

If we are unable to obtain sufficient supplies of raw materials or if there is a significant increase in the price of raw materials, our business would be harmed. If any of our product candidates receives FDA approval, we expect to rely on one or more third-party contractors to supply our drugs. If our current or future third-party suppliers cease to supply drugs in the quantity and quality we need to manufacture our drug candidates, or if they are unable to comply with GMP standards and other government regulations, the qualification of other suppliers could be a lengthy process, and there may not be adequate alternatives to meet our needs. As a result, we may not be able to obtain the necessary ingredients used in our products in the future on a timely basis, if at all. This would negatively affect our business.

We currently rely on a single source for our supply of the active pharmaceutical ingredient in NB S101 and a different single source for the finished dosage form manufacturing. If either of these sole suppliers fail to provide us with sufficient quantities and with the acceptable level of quality, we may not be able to obtain an alternative supply on a timely or commercially acceptable basis. Any such interruption would disrupt our ability to manufacture NB S101 and could harm our business.

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Competition for qualified personnel is intense in our industry, and we may not be able to recruit and retain qualified personnel.

Recruiting and retaining qualified personnel will be critical to our success. We need to hire additional qualified personnel with expertise in pre-clinical testing, clinical research and testing, government regulation, formulation, manufacturing, and sales and marketing. Competition for such individuals is intense in our industry. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions, some of which are more established than we are and have the ability to pay more cash compensation than we do. As a result, we cannot be certain that we will be able to recruit and retain qualified new hires or retain existing highly skilled employees, which could harm our business, financial condition and operating results.

Developments by competitors may render our products or technologies obsolete or noncompetitive.

Companies that currently sell osteoporosis products include Merck, Warner-Chilcott, GlaxoSmithKline, Eli Lilly, Pfizer, Novartis, Hoffmann-LaRoche and sanofi-aventis. Alternative products and technologies are being developed by these companies and others to improve upon or replace current products for the treatment of osteoporosis, several of which are awaiting FDA approval or are in late-stage clinical trials. Other companies pursuing similar therapeutic areas also represent substantial competition. Many of these competitors have substantially greater financial resources and operate larger research and development organizations than we do. They may also have greater experience in drug development and in obtaining FDA and other regulatory approvals, as well as greater experience in launching, marketing and selling drugs. The greater size and experience of our competitors allows them to develop and market competing products more rapidly and more effectively than we can. If we fail to compete successfully with these competitors, our business, financial condition and operating results would be harmed.

If we fail to protect our intellectual property rights, or to secure rights to patents of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

Our success, competitive position and future revenues will depend in part on our ability, and the ability of our licensors, to obtain and maintain patent protection for our product candidates, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

We currently have one patent issued in Europe, one patent issued in Japan, one patent issued in Australia and two patents issued in the U.S. and several patent applications pending worldwide. We anticipate filing additional patent applications both in the U.S. and in other countries, as appropriate. These patent applications may not result in the issuance of any additional patents. Moreover, our patent, or any of the patents that may be issued to us in the future, could be challenged, invalidated, circumvented or may otherwise not provide a competitive advantage to us. As a result, others may independently develop similar products or design around our patents and other intellectual property rights.

Our issued patents and those that may be issued in the future may be challenged, invalidated or circumvented, which could limit our ability to prevent competitors from marketing related product candidates or could limit the length of the term of patent protection of our product candidates. In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. In addition, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

In addition, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in the U.S. and other countries are uncertain and may afford inadequate protection of our intellectual property. Consequently, we may be unable to prevent our intellectual property from being exploited by others in the U.S. or abroad, which could require costly efforts to protect our intellectual property. Policing the unauthorized use of our intellectual property is expensive, difficult and, in some instances, impracticable. Litigation may be necessary in the future to enforce or defend our intellectual property rights. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business.

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If we infringe the rights of third parties, we could be prevented from selling products, forced to pay damages, and compelled to defend against litigation.

An issued patent does not guarantee us the right to practice the patented technology or commercialize the patented product. Third parties may have blocking patents that could be used to prevent us from commercializing our patented products and practicing our patented technology. There are patents held by others for the use of strontium. Within the class of strontium-based pharmaceutical products, Servier has several patents. These include U.S. Patent No. 5,128,367, (European equivalent EP-B-0 415 850), which is directed to strontium ranelate and other metal ranelates, as well as methods and compositions for treating osteoporosis. In addition, Servier’s U.S. Patent No. 4,939,164 (European equivalent EP-B-0 349 432) is directed to a specific strontium salt of pentanedioic acid, as well as methods and compositions for treating osseous diseases using this salt. Also, Servier’s U.S. Patent No. 5,075,336 (European equivalent EB-P-0 445 025) describes specific types of carboxylic acid salts, including strontium salts as well as methods and compositions for treating osseous diseases using these salts. Servier’s U.S. Patent No. 5,856,356 (European equivalent: EP-B-0-813 869) describes the use of strontium salts, including strontium ranelate and strontium malonate, for treatment of arthrosis. Servier has also obtained three additional U.S. patents, Nos. 7,091,364 (European equivalent EP-A-1 403 265), 7,105,683 (European equivalent EP-B-1 403 264) and 7,214,805 (European equivalent EP-A-1 403 266), which are directed to methods of manufacturing strontium salts and chemical intermediates used to prepare such salts. Although we do not believe that we infringe any patents held by others, there can be no assurance that we will not be accused of infringement, which could lead to expensive and time-consuming litigation or that our product candidates will be held not to infringe valid third party patent claims.

If our product candidates, methods, processes and other technologies infringe proprietary rights of other parties, we could incur substantial costs, and we may have to obtain licenses, which may not be available on commercially reasonable terms, if at all. We may be required to redesign our product candidates or processes, stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation or administrative proceedings, which may be costly whether we win or lose. All these could result in a substantial diversion of valuable management and scientific resources. Resolving intellectual property issues could result in lengthy and costly legal proceedings, the outcome of which cannot be predicted.

We may be exposed to liability claims associated with using hazardous materials and chemicals.

Our research and development activities involve the controlled use of hazardous materials and chemicals. Although we believe our safety procedures for using, storing, handling and disposing of these materials comply with applicable laws and regulations, we cannot eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for resulting damages, which could materially adversely affect our business, financial condition and results of operations. In addition, laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.

We may incur substantial liabilities and be required to limit commercialization of our product candidates in response to product liability lawsuits.

Testing and marketing medical products entails an inherent risk of product liability. Although side effects from our phase 1 and phase 2 clinical studies have been mild and similar to placebo, we may be held liable if serious adverse reactions from the use of our product candidates occur either in clinical trials or in subsequent marketing. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Our inability to obtain sufficient product liability insurance at acceptable cost against claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators. We carry clinical trial insurance for our trials. We, or any collaborators, may not be able to obtain insurance at reasonable cost, if at all. Agreements with future collaborators entitling us to indemnification against losses may not be adequate if claims arise.

We rely on one key executive officer and scientific and medical advisors. Their knowledge of our business and technical expertise would be difficult to replace.

We are dependent on our limited number of employees to provide services to us, including our president and chief executive officer, Philip J. Young. We do not have “key person” life insurance policies for our chief executive officer. The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development, inability to obtain financing for our business, and diversion of management resources, which could adversely affect our operating results, our ability to obtain approval for our product candidates, or even our ability to continue operations as planned.

In addition, we rely on members of our scientific advisory board and clinical advisors to assist us in formulating research and development strategy. Our scientific advisory board members and clinical advisors generally have other full-time employment and other commitments, and may be subject to non-disclosure obligations that may limit their availability to work with us.

We cannot assure you that the common stock will become liquid or that it will become listed on a securities exchange.

We have never met the requirements to have our common stock listed on the NASDAQ Global Market, the NASDAQ Capital Market or the American Stock Exchange and we may never be able to do so. Until our common stock is listed on an exchange, we expect that it will continue to be quoted on the OTC Bulletin Board, another over-the-counter quotation system, or in the “pink sheets.” In these venues, however, investors and potential investors may find it difficult to obtain accurate stock price quotations and/or may have limitations imposed on their ability to purchase our common stock. In addition, various restrictions may be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity. These restrictions also make it more difficult for us to raise additional capital.

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Our common stock is considered a “penny stock.”

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and therefore is a “penny stock.” Brokers and dealers effecting transactions in “penny stocks” must disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect your ability to sell shares.

Anti-takeover provisions in our charter and by-laws and under Delaware law may make an acquisition of us or a change in our management more difficult, even if an acquisition or a management change would be beneficial to our stockholders.

Because we are incorporated in Delaware, we are subject to the provisions of Section 203 of the Delaware General Corporation Law. Section 203 may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These provisions under Delaware law could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.

We may deregister our common stock under the Exchange Act, which could negatively affect the liquidity and trading prices of our common stock and result in less disclosure about the Company.

We presently have fewer than 300 holders of record of our common stock which means that we are eligible under the Exchange Act to voluntarily deregister our common stock and become a non-reporting company. If we deregister under the Exchange Act, our common stock will no longer be eligible for trading on the OTC Bulletin Board but may be eligible for trading on the Pink OTC Markets, Inc. also known as the Pink Sheets. Deregistering our common stock could negatively affect the liquidity, trading volume and trading prices of our common stock. Further, in such circumstances, information previously reported to stockholders may not be available to the same extent or frequency.


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

There were no unregistered sales of equity securities of the Company in the three months ended September, 2010 that were not previously reported in a Current Report on Form 8-K.


Item 3.		Defaults Upon Senior Securities.

None.


Item 4.		[Removed and Reserved]


Item 5.		Other Information.

None.

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Item 6.		Exhibits.


Exhibit
Number		Description

	10.9*	License Agreement, dated as of July 30, 2010, by and between Osteologix Limited and Les Laboratoires Servier and Institut de Recherches Internationales Servier.

	31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Principal Financial and Accounting Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

	32.2	Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).


*		Confidential treatment has been requested with respect to portions of this Exhibit.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	OSTEOLOGIX, INC.
Date: November 15, 2010	By:	/s/ Philip J. Young
		Name:	Philip J. Young
		Title:	President and Chief Executive Officer


	By:	/s/ Philip J. Young
		Name:	Philip J. Young
Date: November 15, 2010		Title:	Principal Financial and Accounting Officer

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EXHIBIT INDEX


Exhibit
Number		Description

	10.9*	License Agreement, dated as of July 30, 2010, by and between Osteologix Limited and Les Laboratoires Servier and Institut de Recherches Internationales Servier.

	31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Principal Financial and Accounting Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

	32.2	Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).


*		Confidential treatment has been requested with respect to portions of this Exhibit.

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Osteologix, Inc. 10-Q