UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C. 20549

                             Form 8-K

                           Current Report

               Pursuant to Section 13 or 15(d) of
              the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
                                                October 1, 2006
                                                ---------------

                       A.P. Pharma, Inc.
     ------------------------------------------------------
     (Exact name of registrant as specified in its charter)

                            000-16109
                    ------------------------
                    (Commission File Number)

Delaware                                             94-2875566
- -----------------------------                 ------------------
(State or other jurisdiction                    (I.R.S. Employer
of incorporation)                            Identification No.)


                       123 Saginaw Drive
                     Redwood City, CA 94063
    ---------------------------------------------------------
    (Address of principal executive offices, with zip code)

                        (650) 366-2626
      -----------------------------------------------------
      (Registrant's telephone number, including area code)

                               N/A
  -------------------------------------------------------------
  (Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General
Instruction A.2. below):

[  ]  Written communications pursuant to Rule 425 under the
      Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the
      Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b)
      under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c)
      under the Exchange Act (17 CFR 240.13e-4(c))


Item 1.01 Entry into a material Definitive Agreement

On October 1, 2006, the Company and RHEI Pharmaceuticals, Inc.
(RHEI) issued a joint press release announcing that the Company
had granted exclusive license to RHEI to develop and sell APF530
in Greater China (as defined in the release).  APF530 is
currently in Phase 3 trials in the United States for the
prevention of acute and delayed chemotherapy induced nausea and
vomiting.  The text of the press release is attached hereto as
Exhibit 99.1.

The agreement calls for an up front payment to the Company and
includes provisions for milestone payments and double digit
percentage royalties on future net sales.  Specific license
terms were not disclosed.



Item 9.01 Financial Statements and Exhibits.
(c)   Exhibits
Exhibit 99.1  Press release dated October 1, 2006



                             SIGNATURES


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


                              A.P. PHARMA, INC.



Date:  October 3, 2006       By: /s/ Stephen C. Whiteford
     -----------------           -------------------------
                                 Stephen C. Whiteford
                                 Vice President, Finance and
                                 Chief Financial Officer


Exhibit 99.1

A.P. Pharma Logo

News Release


       A.P. PHARMA LICENSES APF530 TO RHEI PHARMACEUTICALS
             FOR DEVELOPMENT IN GREATER CHINA

REDWOOD CITY, Calif. and NEW HAVEN, Conn. (October 2, 2006) - A.P.
Pharma, Inc. (NASDAQ: APPA) and RHEI Pharmaceuticals, Inc. today
announced that A.P. Pharma has granted an exclusive license to RHEI
Pharmaceuticals to develop and sell APF530 in Greater China, which
for the purposes of this agreement includes China, Taiwan, Hong Kong
and Macau. APF530 is currently in Phase 3 trials in the U.S. for the
prevention of acute and delayed chemotherapy-induced nausea and
vomiting.

While specific license terms were not disclosed, the agreement calls
for an upfront payment to A.P. Pharma, and includes provisions for
milestone payments and double digit percentage royalties on future
net sales.

"We are delighted to enter into our first international licensing
agreement for APF530 as part of our ongoing strategy for regional
partnerships with specialty pharmaceutical companies which are being
actively pursued.  We are encouraged by RHEI Pharmaceuticals' track
record of developing and marketing a number of cancer-related
products in Greater China," said Michael O'Connell, chief executive
officer of A.P. Pharma.  "RHEI provides the key factors to make
APF530 a success in that region, including regulatory and marketing
expertise combined with an experienced sales network with access to
extensive hospital coverage."

Based in New Haven, Conn., RHEI is a specialty pharmaceutical
company that acquires, licenses, develops and commercializes
therapies in China. RHEI partners with pharmaceutical and biotech
companies to expedite global development timelines and extend market
entry to China and Asia.

"The development of oncology compounds is one of the core
competencies at RHEI," said Dr. Sylvia He, chief executive officer
of RHEI Pharmaceuticals.  "As the incidence of cancer continues to
grow in China, the use of chemotherapy agents also continues to
rise.  Therefore, we believe APF530 will fulfill an important role
in cancer patient management."

About APF530
- ------------
APF530, which contains the 5HT3 antagonist anti-nausea drug
granisetron formulated with the Company's proprietary
Biochronomer(TM) bioerodible drug delivery system, is being
developed for the prevention of acute and delayed chemotherapy-
induced nausea and vomiting (CINV) in patients undergoing either
moderately or highly emetogenic chemotherapy.  No other 5HT3
antagonist is currently approved for the prevention of both acute
and delayed CINV for both moderately and highly emetogenic
chemotherapy.

About A.P. Pharma
- -----------------
A.P. Pharma is a specialty pharmaceutical company focused on the
development of ethical (prescription) pharmaceuticals utilizing its
proprietary polymer-based drug delivery systems.  The Company's
primary focus is the development and commercialization of its
bioerodible injectable and implantable systems under the trade name
Biochronomer.  Initial target areas of application for the Company's
drug delivery technology include anti-nausea, pain management, anti-
inflammation and DNA/RNAi applications.  For further information
visit the Company's web site at www.appharma.com.

About RHEI Pharmaceuticals
- --------------------------
RHEI Pharmaceuticals is a venture backed specialty pharmaceutical
company with operations in the U.S. and in China that acquires,
licenses, develops and commercializes in China proprietary drug
therapies based upon the unmet needs of the emerging China
pharmaceuticals market.  RHEI leverages its proprietary and
extensive network of experienced clinical development and regulatory
professionals in China to expedite approvals for pharmaceuticals new
to the China market.  RHEI's growing sales and marketing
capabilities then provide broad patient access in China to these new
and critically necessary therapeutics. RHEI specializes in hospital-
based proprietary products with a therapeutic focus on urgent unmet
needs in the areas of cancer, cardiovascular disease, neurology,
pulmonary disease, pain, anti-infective, anti-viral, and other life
threatening conditions.

Forward-looking Statements
- --------------------------
Except for historical information, this news release contains
certain forward-looking statements that involve risks and
uncertainties including, among others, uncertainty associated with
timely development, approval, launch and acceptance of new products,
satisfactory completion of clinical studies, establishment of new
corporate alliances, progress in research and development programs,
and the ability of RHEI Pharmaceuticals to develop APF530 in Greater
China.  Other risks and uncertainties associated with the Company's
business and prospects are identified in the Company's filings with
the Securities and Exchange Commission.  The Company does not intend
to revise these forward-looking statements to reflect events or
circumstances occurring in the future.

Contact Information
- -------------------
For A.P. Pharma:                         For RHEI Pharmaceuticals:
Michael O'Connell                        Scott B. Kozak
Chief Executive Officer                  Vice President,
(650) 366-2626                           Commercial Operations
                                         1-203-624-RHEI (7434)

Investor Relations Contacts:
Lippert/Heilshorn & Associates           Rx Communications Group, LLC
Zachary Bryant (zbryant@lhai.com)        Tina Posterli (media)
Don Markley (dmarkley@lhai.com)          917-322-2565
Bruce Voss (bvoss@lhai.com)              Rhonda Chiger (investors)
(310) 691-7100                           917-322-2569