What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-22 compared with 2023-02-23 · 534 added, 559 removed, 1016 unchanged (52% of the section changed)

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(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

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Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

Because of such limitations, there is a risk that material misstatements may not be prevented

or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process.

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As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the fourth quarter of 2022, we completed the integration of BDSI into our internal control over financial reporting.

Except for this change, there has been no other changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer did not identify any change in our internal control over financial reporting during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Other Information

Not applicable.

Insider Trading Arrangements

During the three months ended December 31, 2023, none of our directors or officers adopted, amended , or terminated a “Rule 10 b5-1 trading arrangement” or “non-Rule 10 b5- 1 trading arrangement,” as each term is defined in Item 408 (a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Disclosure regarding any amendments to the Code of Ethics, or any waivers of its requirements, will be made on our website.

Insider Trading Policies

Our Board of Directors has adopted an Insider Trading Policy which governs the purchase, sales, and/or other dispositions of our securities by directors, officers, and employees.

Our Insider Trading Policy is attached hereto as Exhibit 19 and incorporated herein.

Executive Compensation

The information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the 2023 Annual Meeting of Shareholders.

The information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the 2024 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (excluding the information under the heading “Pay Versus Performance”), “Director Compensation” and “Compensation Committee Report.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 is incorporated herein by reference from our definitive proxy statement for the 2023 Annual Meeting of Shareholders.

The information required by this Item 12 is incorporated herein by reference from our definitive proxy statement for the 2024 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (excluding the information under the heading “Pay Versus Performance”), “Director Compensation” and “Compensation Committee Report.”

Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated herein by reference from our definitive proxy statement for the 2023 Annual Meeting of Shareholders.

The information required by this Item 13 is incorporated herein by reference from our definitive proxy statement for the 2024 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (excluding the information under the heading “Pay Versus Performance”), “Director Compensation” and “Compensation Committee Report.”

Principa l Accountant Fees and Services

The information required by this Item 14 is incorporated herein by reference from our definitive proxy statement for the 2023 Annual Meeting of Shareholders.

The information required by this Item 14 is incorporated herein by reference from our definitive proxy statement for the 2024 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (excluding the information under the heading “Pay Versus Performance”), “Director Compensation” and “Compensation Committee Report.”

Exhibits and Financial Statement Schedules

Consolidated Financial Statements

See Part II, Item 8 for the Consolidated Financial Statements required to be included in this Form 10 - K.

Refer to Part II, Item 8 for the Consolidated Financial Statements required to be included in this Form 10 - K.

Consolidated Financial Statement Schedules

All financial statement schedules are omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto.

Exhibit Number

Exhibit Description

Agreement and Plan of Merger, dated July 10, 2014, by and between Collegium Pharmaceutical, Inc., a Delaware corporation, and Collegium Pharmaceutical, Inc., a Virginia corporation.

Agreement and Plan of Merger, dated as of February 14, 2022, by and among Collegium Pharmaceutical, Inc., Bristol Acquisition Company, Inc.

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Amended and Restated Bylaws of Collegium Pharmaceutical, Inc.

Warrant to Purchase Stock, dated November 8, 2018, issued by Collegium Pharmaceutical, Inc.

to Assertio Therapeutics, Inc.

Indenture, dated as of February 13, 2020, between Collegium Pharmaceutical, Inc.

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Form of certificate representing the 2.875% Convertible Senior Notes due 2029 (included as Exhibit A to Exhibit 4.4).

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed herewith).

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

Office Lease agreement by and between Campanelli-Trigate 100 TCD Stoughton, LLC, and Collegium Pharmaceutical, Inc as of March 23, 2018.

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Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan.

Form of Restricted Stock Award Agreement under the Amended and Restated 2014 Stock Incentive Plan.

Form of Restricted Stock Unit Agreement under the Amended and Restated 2014 Stock Incentive Plan.

Form of Performance Share Unit Agreement under the Amended and Restated 2014 Stock Incentive Plan.

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and Scott Dreyer.

Amended & Restated Employment Agreement, effective as of December 27, 2020, by and between Richard Malamut, M.D.

and Collegium Pharmaceutical, Inc.

License Agreement (U.S.), dated as of January 13, 2015, by and among Grünenthal GmbH, Janssen Research & Development, LLC, Assertio Therapeutics, Inc.

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Amended and Restated Loan Agreement, dated as of March 22, 2022, by and among Collegium Pharmaceutical, Inc., the guarantors party thereto, BioPharma Credit PLC, and BioPharma Credit Investments V (Master) LP, as lenders.

First Amendment and Consent to Amended and Restated Loan Agreement, dated as of January 3, 2023, by and among Collegium Pharmaceutical, Inc., the guarantors party thereto, BioPharma Credit PLC, and BioPharma Credit Investments V (Master) LP, as lenders.

Second Amendment to Loan Agreement, dated as of February 6, 2023, Amended and Restated Loan Agreement, dated as of March 22, 2022, by and among Collegium Pharmaceutical, Inc., the guarantors party thereto, BioPharma Credit PLC, and BioPharma Credit Investments V (Master) LP, as lenders.

Third Amendment to Loan Agreement, dated as of June 23, 2023, by and among Collegium Pharmaceutical, Inc., the guarantors party thereto, BioPharma Credit PLC, and Bio Pharma Credit Investments V (Master) LP, as lenders.

Exclusive License Agreement, dated April 4, 2019, between the Company and Shionogi, Inc.

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and Thomas Smith.

Insider Trading Policy

Subsidiaries of Collegium Pharmaceutical, Inc.

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Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the United States Code.

Compensation Recovery Policy

The following financial information from this Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL:

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* Certain portions of the exhibits that are not material and would be competitively harmful if publicly disclosed have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Copies of the unredacted exhibits will be furnished to the Commission upon request.

(1) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1 (File No.

333-203208) filed with the Commission on April 2, 2015.

(2) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed with the Commission on August 5, 2020.

(3) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on December 4, 2017.

(4) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on November 8, 2018.

(5) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on February 13, 2020.

(6) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 filed with the Commission on May 9, 2018.

Copies of the unredacted exhibits will be furnished to the Securities and Exchange Commission (“SEC”) upon request.

(1) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022.

(2) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed with the SEC on August 5, 2020.

(3) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 4, 2017.

(4) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2020.

(5) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2023.

(6) Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023.

(7) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 filed with the SEC on May 9, 2018.

(8) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No.

333-207744) filed with the Commission on November 2, 2015.

333-207744) filed with the SEC on November 2, 2015.

(9) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1/A (File No.

333-203208) filed with the Commission on April 27, 2015.

(9) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 filed with the Commission on May 8, 2019.

(10) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on December 30, 2020.

(11) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on February 13, 2023.

(12) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the Commission on May 7, 2020.

(13) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on September 30, 2020.

(14) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 filed with the Commission August 5, 2021.

(15) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the Commission May 10, 2022.

(16) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on February 14, 2022.

(17) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on March 23, 2022.

333-203208) filed with the SEC on April 27, 2015.

(10) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 filed with the SEC on May 8, 2019.

(11) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 30, 2020.

(12) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 7, 2020.

(13) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on September 30, 2020.

(14) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 filed with the SEC August 5, 2021.

(15) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on March 23, 2022.

(16) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 filed with the SEC May 4, 2023.

(17) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 filed with the SEC August 3, 2023.

(18) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the SEC May 10, 2022.

Form 10-K Summary

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/s/ Joseph Ciaffoni

President and Chief Executive Officer

President and Chief Executive Officer (Principal Executive Officer) and Director

February 22, 2024

Joseph Ciaffoni

(Principal Executive Officer) and Director

/s/ Colleen Tupper

Executive Vice President and Chief Financial Officer

Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

February 22, 2024

Colleen Tupper

(Principal Financial and Accounting Officer)

/s/ Michael T.

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We have audited the accompanying consolidated balance sheets of Collegium Pharmaceutical, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for convertible debt in 2021 due to the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , using the modified retrospective approach.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Product Return Liability – Refer to Note 3 to the Financial Statements

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The transaction price for product sales includes variable consideration related to sales deductions and a refund liability is established for estimated product returns.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable

consideration should be constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration should be constrained).

Variable consideration, including the risk of customer concessions, is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved.

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Estimating the variable consideration and the provision for the refund liability requires significant judgment by management.

Given the complexity and significant level of estimation uncertainty involved in calculating the refund liability, our audit in this area required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue deductions and the refund liability (the “return adjustments”) included the following, among others:

● We tested the effectiveness of controls over the measurement and recognition of return adjustments, including management's controls over product returns and revenue data.

● We evaluated the Company's methodology and significant assumptions made in developing the return adjustments.

● We tested the completeness and accuracy of the data underlying the measurement of return adjustments.

● We tested the mathematical accuracy of management's underlying calculation of return adjustments.

● We tested the reasonableness of management's estimate through corroboration with management outside of accounting and finance and evaluated evidence related to return adjustments.

● We evaluated management's ability to accurately forecast product return activity by performing a retrospective review, comparing prior period product return estimates to actual product returns processed in the subsequent year to identify potential bias or unanticipated trends in the determination of the refund liability.

● We developed independent estimates of the return adjustments using historical sales and returns activity, product dating and expiration dates, and other information.

Business Combinations - Refer to Note 4 to the financial statements

Critical Audit Matter Description

During the year ended December 31, 2022, the Company acquired BioDelivery Sciences International, Inc (“BDSI”) for $669.4 million and accounted for the transaction as a business combination.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identifiable intangible assets and inventory of $435.0 million and $77.4 million, respectively.

Management estimated the fair value of these assets using valuation techniques, including income-based models, which required the use of significant estimates and assumptions related to revenue forecasts, future profit margins, and the selection of appropriate discount rates.

We identified the valuation of acquired intangible assets and inventory as a critical audit matter.

Given that the determination of the fair value of the acquired intangible assets and inventory requires significant estimates and assumptions by management, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

Given the complexity and significant level of estimation uncertainty involved in calculating the refund liability, our audit procedures in this area required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue forecasts, future profit margins, and the selection of the discount rates for the acquired intangible assets and inventory included the following, among others:

● We tested the effectiveness of controls over the valuation of the acquired intangible assets and inventory, including management's controls over revenue forecasts, future profit margins, and selection of the discount rates.

● We assessed the reasonableness of management's revenue and profit margin forecasts by performing the following:

o We compared the forecasts to historical results of the acquired business.

o We compared the forecasts to internal forecasts and other information obtained while performing the audit.

o We performed a sensitivity analysis to determine the impact of the assumptions under different scenarios.

o We compared the revenue growth rates and profit margins to available external information.

● With the assistance of our fair value specialists, we performed the following:

o We evaluated the reasonableness of the valuation methodologies selected and the mathematical accuracy of the calculation.

o We tested the source information underlying the determination of the discount rates, tested the mathematical accuracy of the calculations and compared those to the amounts selected by management.

Our audit procedures related to the revenue deductions for returns and the refund liability (the “return provision”) included the following, among others:

● We tested the effectiveness of controls over the measurement and recognition of the return provision.

● We evaluated the Company's methodology and significant assumptions made in developing the return provision.

● We tested the completeness and accuracy of the data underlying the measurement of the return provision.

● We tested the mathematical accuracy of management's underlying calculation of the return provision.

● We performed a retrospective review, comparing prior period product return estimates to actual product returns.

● We developed independent estimates of the return provision using historical sales and returns activity, product dating and expiration dates, and other information.

/s/ Deloitte & Touche LLP

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Cash and cash equivalents

Marketable securities

Accounts receivable, net

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Accounts payable

Accrued expenses

Accrued liabilities

Accrued rebates, returns and discounts

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authorized shares - 100,000,000 ;

37,084,759 issued and 33,848,936 outstanding shares at December 31, 2022 and 35,806,119 issued and 33,655,402 outstanding shares at December 31, 2021

38,192,441 issued and 31,868,549 outstanding shares as of December 31, 2023 and 37,084,759 issued and 33,848,936 outstanding shares as of December 31, 2022

Additional paid-in capital

Treasury stock, at cost;

3,235,823 shares at December 31, 2022 and 2,150,717 shares at December 31, 2021

6,323,892 shares as of December 31, 2023 and 3,235,823 shares as of December 31, 2022

Accumulated other comprehensive income

Accumulated deficit

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Interest income

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

(Loss) earnings per share — basic

Loss on extinguishment of debt

Income (loss) before income taxes

Provision for (benefit from) income taxes

Net income (loss)

Earnings (loss) per share — basic

Weighted-average shares — basic

(Loss) earnings per share — diluted

Earnings (loss) per share — diluted

Weighted-average shares — diluted

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COLLEGIUM PHARMACEUTICAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Years Ended December 31,

Net income (loss)

Other comprehensive income:

Unrealized gains on marketable securities

Total other comprehensive income

Comprehensive income (loss)

The accompanying notes are an integral part of these consolidated financial statements.

COLLEGIUM PHARMACEUTICAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUIT Y

(In thousands, except share data)

Accumulated Other

Treasury Stock

Comprehensive

Shareholders’

Balance at December 31, 2019

Exercise of common stock options

Issuance for employee stock purchase plan

Vesting of RSUs

Shares withheld for employee taxes upon vesting of RSUs

Stock-based compensation

Equity component of 2020 Convertible Notes, net of issuance costs of $ 1,773

Balance at December 31, 2020

Balance as of December 31, 2020

Cumulative effect of adjustment for adoption of ASU 2020-06

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Stock-based compensation

Balance at December 31, 2021

Balance as of December 31, 2021

( 2,150,717 )

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Stock-based compensation

Balance at December 31, 2022

Balance as of December 31, 2022

( 3,235,823 )

Exercise of common stock options

Issuance for employee stock purchase plan

Vesting of RSUs and PSUs

Shares withheld for employee taxes upon vesting of RSUs and PSUs

Share repurchases

( 3,088,069 )

Stock-based compensation

Other comprehensive income, net of tax

Balance as of December 31, 2023

( 6,323,892 )

The accompanying notes are an integral part of these consolidated financial statements.

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Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization and impairment expense

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Stock-based compensation expense

Non-cash lease expense

Non-cash lease (benefit) expense

Loss on extinguishment of debt

Non-cash interest expense for amortization of debt discount and issuance costs

Net amortization of premiums and discounts on investments

Changes in operating assets and liabilities:

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Accounts payable

Accrued expenses

Accrued liabilities

Accrued rebates, returns and discounts

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Investing activities

Purchase of intangible asset

Purchases of property and equipment

Purchases of marketable securities

Maturities of marketable securities

Acquisition of BDSI (net of cash acquired)

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Repurchases of common stock

Proceeds from issuance of term note, net of issuance costs of $ 2,456

Proceeds from convertible senior notes, net of issuance costs of $ 5,473

Repayment of term notes

Proceeds from term note modification

Repayment of term loan

Net cash provided by (used in) financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Proceeds from issuances of 2029 convertible notes, net of issuance costs of $ 6,280

Repurchase of 2026 Convertible Notes, including premium

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

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Supplemental disclosure of non-cash activities

Acquisition of property and equipment in accounts payable and accrued expenses

Accrued royalties discharged upon closing of asset acquisition

Acquisition of property and equipment in accounts payable and accrued liabilities

Excise tax on share repurchases in accrued liabilities

Inventory used in the construction and installation of property and equipment

Receivable from stock option exercises in other current assets

The accompanying notes are an integral part of these consolidated financial statements.

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The principal risks include inability to continue successfully commercializing products, changing market conditions for products and development of competing products, changing regulatory environment and reimbursement landscape, product-related litigation, manufacture of adequate commercial inventory, inability to secure adequate supplies of active pharmaceutical ingredients, key personnel retention, protection of intellectual property, and patent infringement litigation.

As the COVID-19 pandemic unfolded, and governmental and societal reactions to it evolved, the Company’s business was impacted by several trends, including depressed pain patient office visits compared to pre-COVID periods.

The Company believes the disruptions caused by COVID-19 will continue and there remains substantial uncertainty as to when such disruptions will cease.

Summary of Significant Accounting Policies

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The preparation of the consolidated financial statements in accordance with GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of products, estimates related to the fair value of assets acquired and liabilities assumed, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsaleable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of intangible assets and deferred tax valuation allowances.

Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of products, estimates related to the fair value of assets acquired and liabilities assumed, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsalable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of intangible assets and deferred tax valuation allowances.

The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

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Quoted prices (unadjusted) in active markets for identical assets or liabilities.

An active market is defined as a market where transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs:

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3 inputs:

Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company’s approach to fair value measurement is aligned with its investment policy focused on capital preservation.

The Company invests in instruments within defined credit parameters to minimize credit risk while ensuring liquidity.

There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2023 and 2022.

The following tables present the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument at December 31, 2022 and 2021.

The following table presents the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument as of December 31, 2023 and 2022.

Quoted Prices

December 31, 2023

Money market funds, included in cash equivalents

Cash equivalents:

Money market funds

Treasury securities

Marketable securities:

Corporate debt securities

Treasury securities

Government-sponsored securities

Total assets measured at fair value

December 31, 2022

Money market funds, included in cash equivalents

Cash equivalents:

Money market funds

Total assets measured at fair value

The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis using quoted market prices.

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The fair value was determined based on data points other than quoted prices that are observable, either directly or indirectly, such as broker quotes in a non-active market.

As of December 31, 2022, the convertible senior notes had a fair value of approximately $ 138,359 and a net carrying value of $ 140,873 .

As of December 31, 2023, the fair value of the Company’s 2.625 % convertible senior notes due in 2026 was $ 25,033 and the net carrying value was $ 25,992 .

As of December 31, 2023, the fair value of the Company’s 2.875 % convertible senior notes due in 2029 was $ 249,803 and the net carrying value was $ 236,133 .

The Company’s term notes fall into the Level 2 category within the fair value level hierarchy and the fair value was determined using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals.

As of December 31, 2023, the carrying amount of the term notes reasonably approximated the estimated fair value.

As of December 31, 2022, and 2021, the carrying amounts of the cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued rebates, returns and discounts, reasonably approximated the estimated fair values.

As of December 31, 2023, and 2022, the carrying amounts of the cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and accrued rebates, returns and discounts, reasonably approximated the estimated fair values.

Concentration of Credit Risk

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Cash and Cash Equivalents

Cash and cash equivalents include cash in readily available checking and savings accounts and money market funds.

Cash and cash equivalents include cash in readily available checking and savings accounts, including bank deposits, and investments in money market funds.

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

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Restricted cash is reported as non-current unless the restrictions are expected to be released in the next twelve months.

As of December 31, 2022 and 2021, the Company had restricted cash of $ 2,547 , which represents cash held in a depository account at a financial institution to collateralize conditional standby letters of credit for the Company’s corporate credit card program, its lease of its corporate headquarters, and its leases of vehicles for its field-based employees.

Restricted cash as of December 31, 2023 represents cash held in a depository account at a financial institution to collateralize conditional standby letters of credit for the Company’s lease of its corporate headquarters and its leases of vehicles for its field-based employees.

Marketable Securities

As of December 31, 2023, the Company’s marketable securities consisted of investments in available-for-sale corporate debt, U.S.

Treasury, and government-sponsored securities with readily determinable fair values.

The Company classifies available-for-sale marketable securities as current assets on its consolidated balance sheets.

The fair value of these securities is based on quoted prices for identical assets or inputs other than quoted prices that are observable for similar assets, either directly or indirectly.

The Company records interest earned and net amortization of premiums and discounts on investments within interest income on its consolidated statements of operations.

The Company records unrealized gains (losses) on available-for-

sale debt securities as a component of “ Accumulated other comprehensive income,” which is a separate component of shareholders’ equity on its consolidated balance sheets, until such gains and losses are realized.

Realized gains and losses are determined using the specific identification method.

For available-for-sale debt securities with unrealized losses, the Company assesses whether a credit loss allowance is required using an expected loss model.

This process involves evaluating whether the fair value of an investment is recoverable when compared to its amortized cost.

If an increase in fair value is observed, the Company may reduce any previously recognized credit losses.

In determining whether impairments are other-than-temporary, the Company considers its ability and intention to hold the investment until market price recovery, as well as issuer-specific credit ratings, historical losses, and current economic conditions.

The Company generally intends to retain investments until their amortized cost is recovered and did not identify any investments with other-than-temporary impairment as of December 31, 2023.

Inventories are stated at the lower of cost or net realizable value.

Inventory costs consist of costs related to the manufacturing of the Company’s products, which are primarily the costs of contract manufacturing and active pharmaceutical ingredient.

Inventory costs consist of costs related to the manufacturing of the Company’s products, which are primarily the costs of contract manufacturing and active pharmaceutical ingredients.

The Company determines the cost of its inventories on a specific identification basis and removes amounts from inventories on a first-in, first-out basis.

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Accordingly, the Company has concentration risk associated with its commercial manufacturing.

The Company has capitalized $ 46,501 of inventory as of December 31, 2022.

The Company expects to use the inventory over its operating cycle.

Property and Equipment

Property and equipment, including leasehold improvements, are recorded at cost.

Maintenance and repair costs are expensed as incurred.

Costs which materially improve or extend the lives of existing assets are capitalized.

equipment are depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:

Asset Category

Estimated Useful Life

Computers and office equipment

Laboratory equipment

Furniture and fixtures

Manufacturing equipment

Leasehold improvements

Lesser of remaining lease term and estimated useful life

Costs for capital assets not yet placed into service have been capitalized as construction-in-progress, and will be depreciated in accordance with the above guidelines once placed into service.

Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in the statements of operations.

Business Combination Accounting and Valuation of Acquired Assets

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The Company tests intangible assets for potential impairment whenever triggering events or circumstances present an indication of impairment.

If the sum of expected undiscounted future cash flows of the intangible assets is less than the carrying amount of such assets, the

intangible assets would be written down to the estimated fair value, calculated based on the present value of expected future cash flows.

If the sum of expected undiscounted future cash flows of the intangible assets is less than the carrying amount of such assets, the intangible assets would be written down to the estimated fair value, calculated based on the present value of expected future cash flows.

Property and Equipment

Property and equipment, including leasehold improvements, are recorded at cost.

Maintenance and repair costs are expensed as incurred.

Costs which materially improve or extend the lives of existing assets are capitalized.

Property and equipment are depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:

Asset Category

Estimated Useful Life

Computers and office equipment

Laboratory equipment

Furniture and fixtures

Manufacturing equipment

Leasehold improvements

Lesser of remaining lease term and estimated useful life

Costs for capital assets not yet placed into service have been capitalized as construction-in-progress and will be depreciated in accordance with the above guidelines once placed into service.

Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in the statements of operations.

The Company records lease assets and liabilities for lease arrangements exceeding a 12-month initial term.

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Variable lease costs are not included in the measurement of the operating lease liability and are recognized in the period in which they are incurred.

Leases with an initial term of 12 months or less, or short-term leases, are not recorded on the Company’s Consolidated Balance Sheets.

Leases with an initial term of

12 months or less, or short-term leases, are not recorded on the Company’s consolidated balance sheets.

Short-term lease expense is recognized on a straight-line basis over the lease term.

The Company does not have any financing lease arrangements.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment, operating and finance lease assets, and definite-lived intangible assets.

The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If indications of impairment exist, projected future undiscounted cash flows associated with the asset (or asset group) would be compared to the carrying value of the asset to determine whether the asset's value is recoverable.

If impairment is determined, the Company writes down the asset to its estimated fair value and records an impairment loss equal to the excess of the carrying value of the long-lived asset over its estimated fair value in the period at which such a determination is made.

Revenue Recognition

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In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and the absence of carryback available from results of recent operations.

The Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more likely than not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company records uncertain tax positions on the basis of a two-step process whereby:

(i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position;

and (ii) for those tax positions that meet the more likely than not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company will recognize interest and penalties related to uncertain tax positions within income tax expense.

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Earnings per Share

Basic earnings per share is calculated by dividing the net income (loss) attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.

Diluted earnings per share is computed by dividing the net income (loss) attributable to common shareholders by the weighted-average number of shares of common stock, plus potentially dilutive securities outstanding for the period, as determined in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security.

Basic earnings per share is calculated by dividing the net income or loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.

Diluted earnings per share is computed by dividing the net income or loss by the weighted-average number of shares of common stock, plus potentially dilutive securities outstanding for the period, as determined in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security.

For purposes of the diluted earnings per share calculation, stock options, restricted stock units, performance share units, and shares potentially issuable in connection with the employee stock purchase plan and convertible senior notes are considered potentially dilutive securities and included to the extent that their addition is not anti-dilutive.

Embedded Derivatives

The Company accounts for derivative financial instruments as either equity or liabilities in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging , based on the characteristics and provisions of each instrument.

The Company accounts for derivative financial instruments as either equity or liabilities in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging , (“ASC 815”) based on the characteristics and provisions of each instrument.

Embedded derivatives are required to be bifurcated from the host instruments and recorded at fair value if the derivatives are not clearly and closely related to the host instruments on the date of issuance.

The Company’s term notes and convertible notes (refer to Note 14, Debt ) contain certain features that, in accordance with ASC 815, are not clearly and closely related to the host instrument and represent derivatives that are required to be re-measured at fair value each reporting period.

The Company determined that the estimated fair value of the derivatives at issuance and as of December 31, 2022 were not material based on a scenario-based cash flow model that uses unobservable inputs that

reflect the Company’s own assumptions.

The Company determined that the estimated fair value of the derivatives at issuance and through December 31, 2023 were not material based on a scenario-based cash flow model that uses unobservable inputs that reflect the Company’s own assumptions.

Should the Company’s assessment of the probabilities around these scenarios change, including due to changes in market conditions, there could be a change to the fair value.

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As a result of the adoption of this guidance, interest expense decreased and net income increased by $ 6,488 , basic earnings per share was increased by $ 0.19 , and diluted earnings per share was decreased by $ 0.06 for the year ended December 31, 2021.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This ASU clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021 and may be applied prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

The Company adopted this standard effective January 1, 2022 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This ASU amends Accounting Standards Codification (“ASC”) 805 to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

As a result of the amendments made by the ASU, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements.

The ASU’s amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Early adoption of the amendments is permitted, including adoption in an interim period.

An entity that early adopts in an interim period should apply the amendments (i) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the

interim period of early application and (ii) prospectively to all business combinations that occur on or after the date of initial application.

The Company adopted this standard effective January 1, 2022 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) :

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) :

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , to ease the potential burden in accounting for reference rate reform.

The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

The amendments in ASU 2020-04 were elective and applied to all entities that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

The standard became effective immediately and may be applied prospectively to contracts and transactions through December 31, 2022.

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Scope, in January 2021 to refine and clarify some of its guidance on ASU 2020-04 and ASU 2022-06, Reference Rate Reform (Topic 848) to defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

As the United Kingdom’s Financial Conduct Authority announced that the intended cessation date of LIBOR in the United States will be June 30, 2023, the Company expects to be impacted by reference reform in the next twelve months as the Company’s contracts and transactions are transitioned to another reference rate, however, the impact of such transition is not yet known.

Upon the transition of the Company’s contracts and transactions to new reference rates in connection with reference rate reform, the Company will prospectively apply the standard and disclose the effect on its consolidated financial statements.

Following the cessation of LIBOR in the United States on June 30, 2023, the Company elected to apply the optional expedient provided in FASB ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting prospectively.

Thus, debt previously referenced to LIBOR was transitioned to the Secured Overnight Financing Rate (“SOFR”) effective July 1, 2023, however, such transition did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280).

The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

The amendments in this update expand income tax disclosure requirements, including additional information pertaining to the rate reconciliation, income taxes paid, and other disclosures.

This update is effective for annual periods beginning after December 15, 2024.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.

Revenue from Contracts with Customers

The Company’s revenue to date is from sales of the Company’s products, which are primarily sold to wholesalers (“customers”), which in turn sell the product to pharmacies for the treatment of patients (“end users”).

The Company’s revenue to date is from sales of the Company’s products, which are primarily sold to wholesalers (customers), which in turn sell the product to pharmacies or other outlets for the treatment of patients.

Revenue Recognition

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Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”).

The transaction price for product sales includes variable consideration related to sales deductions, including (1) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances;

(2) product returns, including return estimates;

and, (3) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks.

The transaction price for product sales includes variable consideration related to sales deductions, including:

(i) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances;

(ii) product returns, including return estimates;

and (iii) trade allowances and chargebacks, including fees for distribution services, prompt pay discounts, and chargebacks.

The Company will estimate the amount of variable consideration that should be included in the transaction price under the expected value method for all sales deductions other than trade allowances, which are estimated under the most likely amount method.

These provisions reflect the expected amount of consideration to which the Company is entitled based on the terms of the contract.

These provisions reflect the expected amount of consideration to which

the Company is entitled based on the terms of the contract.

In addition, the Company made a policy election to exclude from the measurement of the transaction price all taxes that are assessed by a governmental authority that are imposed on revenue-producing transactions.

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Estimates include:

(i) timing of the rebates and returns incurred, (ii) pricing adjustments related to rebates and returns, and (iii) the quantity of product that will be rebated or returned in the future.

(i) timing of the rebates and returns incurred;

(ii) pricing adjustments related to rebates and returns;

and (iii) the quantity of product that will be rebated or returned in the future.

Significant judgment is used in determining the appropriateness of these assumptions at each reporting period.

Rebates and Incentives

Provisions for rebates and incentives are based on the estimated amount of rebates and incentives to be claimed on the related sales.

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If actual results vary, the Company may need to adjust future estimates, which could have an effect on earnings in the period of the adjustment.

Provisions for trade allowances and chargebacks are primarily based on customer-level contractual terms.

Accruals and related reserves are adjusted as new information becomes available, which generally consists of actual trade allowances and chargebacks processed relating to sales recognized.

Product Returns

Provisions for product returns, including returns for Xtampza, the Nucynta Products, Belbuca and Symproic, are based on product-level returns rates, including processed as well as unprocessed return claims, in addition to relevant market events and other factors.

Estimates of the future product returns are made at the time of revenue recognition to determine the amount of consideration to which the Company expects to be entitled (that is, excluding the products expected to be returned).

At the end of each reporting period, the Company analyzes trends in returns rates and updates its assessment of variable consideration for returns to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

At the end of each reporting period, the Company analyzes trends in returns rates and updates its assessment of variable consideration.

To the extent the Company receives amounts in excess of what it expects to be entitled to receive due to a product return, the Company does not recognize revenue when it transfers products to customers but instead recognizes those excess amounts received as a refund liability.

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The Company subsequently received payment for only a portion of the denied claims and vigorously pursued collections of the full amount of these short-pay receivables.

As a result of discussions with customers related to unprocessed return claims and the uncertainty associated with the ultimate resolution, as well as the impact of unprocessed claims on estimates of future returns, the Company recorded an adjustment to reduce product revenue, net of $ 38,329 , with offsetting reductions in accounts receivable or increases in the refund liability for future product returns.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

In particular, resolution of the unprocessed return claims includes the risk of concession for those that are outside of the Company’s return policy.

As a result of discussions with customers related to unprocessed return claims and the uncertainty associated with the ultimate resolution, as well as the impact of unprocessed claims on estimates of future returns, the Company recorded an adjustment to reduce product revenues, net of $ 38,329 , with offsetting reductions in accounts receivable or increases in the refund liability for future product returns.

During the year ended December 31, 2022, the Company revised its estimate of variable consideration associated with unprocessed returns claims that arose in prior periods due to the receipt of payment and settlement, which resulted in an increase to product revenues, net of $ 4,684 .

During the year ended December 31, 2021, the Company’s adjustment was a $ 26,644 reduction in product revenues.

Trade Allowances and Chargebacks

Provisions for trade allowances and chargebacks are primarily based on customer-level contractual terms.

Accruals and related reserves are adjusted as new information becomes available, which generally consists of actual trade allowances and chargebacks processed relating to sales recognized.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained).

Significant judgment is required to determine the variable consideration included in the transaction price as described above.

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Chargebacks (3)

Balance at December 31, 2019

Balance as of December 31, 2020

Provision related to current period sales

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Credits/payments made

Balance at December 31, 2020

Balance as of December 31, 2021

Acquired from BDSI

Provision related to current period sales

1 unchanged sentence

Credits/payments made

Balance at December 31, 2021

Acquired from BDSI

Balance as of December 31, 2022

Provision related to current period sales

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Credits/payments made

Balance at December 31, 2022

Balance as of December 31, 2023

(1) Provisions for rebates and incentives includes managed care rebates, government rebates and co-pay program incentives.

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Total product revenues, net

The Company began recognizing revenue from net product sales of Belbuca, Symproic, and Elyxyb following the Acquisition Date as defined in Note 4, Acquisitions .

The Company began recognizing revenue from net product sales of Belbuca and Symproic following the Acquisition Date as defined in Note 4, Acquisitions .

On March 22, 2022 (the “Acquisition Date”), the Company acquired BioDelivery Sciences International, Inc.

(“BDSI”), a specialty pharmaceutical company working to deliver innovative therapies for individuals living with serious and debilitating chronic conditions (the “BDSI Acquisition”).

Upon closing, the Company acquired the Belbuca, Symproic, and Elyxyb products.

Upon completion of t he BDSI Acquisition, management leveraged the Company’s existing sales force and other operations to commercialize additional products that are typically marketed to similar physicians and to develop other synergies.

The Company obtained control through the acquisition of shares in the all-cash transaction which closed on March 22, 2022.

Upon closing, the Company acquired Belbuca and Symproic.

The BDSI Acquisition was completed to leverage the Company’s existing sales force and other operations to commercialize additional products that are typically marketed to similar physicians and to develop other synergies.

The Company obtained control through the acquisition of shares in an all-cash transaction which closed on March 22, 2022.

The total consideration paid for the BDSI acquisition was approximately $ 669,431 consisting of the following (in thousands, except per share amounts):

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The Company has accounted for the BDSI Acquisition as a business combination and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its financial statements following the Acquisition Date.

The preliminary purchase price allocation is based on estimates, assumptions, valuations and other studies which have not yet been finalized.

Prior to the finalization of the purchase price allocation, if information becomes available that would indicate it is probable that unknown events had occurred and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation and may change the carrying value of goodwill.

The Company is finalizing its valuation of acquired deferred tax assets and anticipates finalizing the purchase price allocation as the information necessary to complete the analysis is obtained, but no later than one year after the Acquisition Date.

During the year ended December 31, 2022, the subsequent adjustments within the measurement period to the preliminary purchase price allocation did not have a significant impact on earnings.

The Company recorded measurement period adjustments to increase inventory by $ 14,300 , decrease intangible assets by $ 10,000 , increase accrued rebates, returns and discounts by $ 3,916 , increase prepaid expenses and other current assets by $ 888 , decrease accrued expenses by $ 502 , and increase deferred tax liabilities by $ 3,957 , with a net offsetting increase to goodwill of $ 2,183 .

The following tables set forth the preliminary allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date (in thousands):

The final allocation of the consideration transferred to the assets acquired and liabilities assumed has been completed.

During the three months ended March 31, 2023, the Company recorded measurement period adjustments to increase accrued expenses by $ 134 and deferred tax liabilities by $ 28 , with a corresponding increase to goodwill of $ 162 .

The following tables set forth the final allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:

Amounts Recognized at the Acquisition Date

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Accounts payable

Accrued expenses

Accrued liabilities

Accrued rebates, returns and discounts

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The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with risk.

The Company is amortizing the identifiable intangible assets on a straight-line basis over their respective useful lives (refer to Note 10, Goodwill and Intangible Assets ).

The Company amortizes the identifiable intangible assets on a straight-line basis over their respective useful lives (refer to Note 11, Goodwill and Intangible Assets ).

In addition, the acquired inventory was recognized at its acquisition-date fair value, which resulted in an increase of $ 54,700 compared to its preacquisition book value.

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Total acquisition related expenses

LICENSE AGREEMENTS

L icenses Agreements

The Company periodically enters into license agreements to develop and commercialize its products.

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In the event that Symproic is sourced from a third-party supplier, Shionogi would continue to supply naldemedine tosylate for use in Symproic manufacturing at cost plus such agreed upon markup for the duration of the Shionogi License Agreement.

Reddy’s acquired product rights

Prior to the BDSI Acquisition, BDSI and Dr.

Reddy’s Laboratories Limited (“DRL”), entered into an asset purchase agreement (the “ Elyxyb Asset Purchase Agreement”) for the acquisition by BDSI from DRL of certain patents, trademarks, regulatory approvals and other rights related to Elyxyb and its commercialization in the United States and Canada (the “DRL Territory”).

Pursuant to the terms of the Elyxyb Asset Purchase Agreement, a $ 9,000 payment was due to DRL on August 3, 2022.

In addition, up to an additional $ 9,000 of payments are due to DRL upon achievement of certain regulatory milestones as well as for quarterly earn-out payments on potential sales of the Elyxyb Product in the DRL Territory that range from high single digits to the low double digits (subject to reduction in certain circumstances) of net sales based on volume of sales.

DRL will also be entitled to one-time payments upon the achievement of six escalating sales milestones, which range from $ 4,000 to be paid upon the achievement of $ 50,000 in net sales in a calendar year to $ 100,000 to be paid upon the achievement of $ 1,000,000 in net sales in a calendar year up to a total of $ 262,000 .

During the three months ended December 31, 2022, the Company discontinued the commercialization of Elyxyb.

Refer to Note 10, Goodwill and Intangible Assets , for more information.

In February 2023, the Company entered into an agreement with Scilex to transfer to Scilex all assets, rights, and obligations necessary to commercialize Elyxyb in the United States and Canada (the “Elyxyb Sale Agreement”).

Refer to Note 20, Subsequent Events , for more information.

Earnings Per Share

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Years Ended December 31,

Net (loss) income

Net income (loss)

Adjustment for interest expense recognized on convertible senior notes:

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Weighted average shares outstanding — diluted

(Loss) earnings per share — basic

(Loss) earnings per share — diluted

The Company has the option to settle the conversion obligation for its convertible senior notes due in 2026 in cash, shares or a combination of the two.

Earnings (loss) per share — basic

Earnings (loss) per share — diluted

The Company has the option to settle the conversion obligation for its convertible senior notes due in 2026 and 2029 in cash, shares or a combination of the two.

The Company uses the if-converted method for the convertible senior notes.

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Performance share units

Employee stock purchase plan

Convertible senior notes

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All other securities presented in the table above were excluded from the calculation of diluted earnings per share as their inclusion would have had an antidilutive effect.

Marketable Securities

Available-for-sale debt securities were classified on the consolidated balance sheets at fair value as follows:

Cash and cash equivalents

Marketable securities

The following table summarizes the available-for-sale securities held as of December 31, 2023:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Corporate debt securities

Treasury securities

Government-sponsored securities

The following table summarizes the contractual maturities of available-for-sale securities other than investments in money market funds as of December 31, 2023:

Matures within one year

Matures after one year through five years

The Company did not record any allowances for credit losses to adjust the fair value of available-for-sale debt securities during the year ended December 31, 2023.

The Company did not hold marketable securities as of December 31, 2022.

There were no sales of marketable securities during the year ended December 31, 2023.

Net unrealized holding gains or losses for the period that have been included in other comprehensive income were not material to the Company’s consolidated results of operations.

Inventory consisted of the following:

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Total inventory

During the year ended December 31, 2022, the expenses related to excess and obsolete inventory that were recorded as a component of cost of products revenues were $ 1,814 .

Expenses related to excess and obsolete inventory were immaterial for the years ended December 31, 2021 and 2020.

During the years ended December 31, 2022, 2021, and 2020, inventory used in the construction and installation of property and equipment was zero , $ 516 , and $ 2,299 , respectively.

During the years ended December 31, 2023 and 2022, the expenses related to excess and obsolete inventory that were recorded as a component of cost of products revenues were $ 1,624 and $ 1,814 , respectively.

Expenses related to excess and obsolete inventory were immaterial for the year ended December 31, 2021.

During the years ended December 31, 2023, 2022, and 2021, inventory used in the construction and installation of property and equipment was immaterial.

Prepaid Expenses and Other Current Assets

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Prepaid insurance

Manufacturing deposits

Other current assets

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Leasehold improvements

Construction-in-process

Total property and equipment

accumulated deprecation

accumulated depreciation

Property and equipment, net

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The following tables summarizes the changes in the carrying amount of goodwill:

Balance at December 31, 2021

Balance as of December 31, 2021

Goodwill resulting from BDSI Acquisition

Balance at December 31, 2022

Balance as of December 31, 2022

Measurement period adjustments from BDSI Acquisition

Balance as of December 31, 2023

The following table sets forth the cost, accumulated amortization, and carrying amount of intangible assets as of December 31, 2023 and 2022:

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Total amortization and impairment expense

(1) During the three months ended September 30, 2023, the United States Food and Drug Administration (“FDA”) granted New Patient Population exclusivity in pediatrics for Nucynta IR which extends the period of U.S.

exclusivity for Nucynta IR to July 3, 2026, resulting in an extension of the estimated useful life of the underlying intangible asset from 8.0 years to 8.5 years.

This change in estimate resulted in a decrease of amortization expense of $ 4,099 and an increase in net income of $ 3,037 during the year ended December 31, 2023.

The impact to earnings per share — basic and earnings per share — diluted was $ 0.09 and $ 0.07 , respectively, during the year ended December 31, 2023.

(2) Includes $ 214 of amortization expense and $ 4,786 of impairment expense .

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Elyxyb is not considered a significant component of the entity’s business and therefore, is not presented as a discontinued operation.

There were no employees impacted by the decision to discontinue the commercialization of Elyxyb and therefore, no severance or employee benefit expense were recognized.

In addition, contract termination costs related to the

discontinuation were immaterial and expensed upon the termination of the contracts.

The expected completion date of the remaining exit and other activities associated with the discontuation of Elyxyb is March 31, 2023.

There were no employees impacted by the decision to discontinue the commercialization of Elyxyb and therefore, no severance or employee benefit expenses were recognized.

In addition, contract termination costs related to the discontinuation were immaterial and expensed upon the termination of the contracts.

In February 2023, the Company entered into the Elyxyb Sale Agreement with Scilex to transfer to Scilex all assets, rights, and obligations necessary to commercialize Elyxyb in the United States and Canada.

Refer to Note 20, Subsequent Events , for more information.

As of December 31, 2023, the remaining amortization expense expected to be recognized is as follows:

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Remaining amortization expense

ACCRUED EXPENSES

Accrued expenses consisted of the following:

Accrued Liabilities

Accrued liabilities consisted of the following:

As of December 31,

Accrued royalties

Accrued bonuses

Accrued product taxes and fees

Accrued sales and marketing

Accrued audit and legal

Accrued incentive compensation

Accrued bonuses

Accrued interest

Accrued payroll and related benefits

Accrued income taxes

Accrued restructuring expenses

Accrued payroll and related benefits

Accrued incentive compensation

Accrued sales and marketing

Accrued audit and legal

Accrued other operating costs

Total accrued expenses

Total accrued liabilities

Commitments and Contingencies

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Xtampza ER Litigation

The Company filed the NDA for Xtampza ER as a 505(b)(2) application, which allows the Company to reference data from an approved drug listed in the FDA’s Orange Book, in this case OxyContin.

The 505(b)(2) process requires that the Company certify to the FDA that the Company does not infringe any of the patents listed for OxyContin in the Orange Book, or that the patents are invalid.

The process also requires that the Company notify Purdue Pharma, L.P (“Purdue”), as the holder of the NDA, and any other Orange Book-listed patent owners that it has made such a certification.

On February 11, 2015, the Company made the required certification documenting why Xtampza ER does not infringe any of

the 11 Orange Book-listed patents for OxyContin, five of which have been invalidated in court proceedings, and provided the required notice to Purdue.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, Purdue had the option to sue the Company for infringement and receive a stay of up to 30 months before the FDA could issue a final approval for Xtampza ER, unless the stay was earlier terminated.

In response to these actions, Purdue sued the Company for infringement in the District of Delaware on March 24, 2015 asserting infringement of three of Purdue’s Orange Book-listed patents (Patent Nos.

On March 24, 2015, Purdue sued the Company in the U.S.

District Court for the District of Delaware asserting infringement of three of Purdue’s Orange Book-listed patents (Patent Nos.

7,674,799, 7,674,800, and 7,683,072) and a non-Orange Book-listed patent (Patent No.

8,652,497), and accordingly, received a 30-month stay of FDA approval.

The lawsuit was initiated in response to the Company filing the New Drug Application (“NDA”) for Xtampza ER as a 505(b)(2) application referencing data from Purdue’s OxyContin NDA, and under the Drug Price Competition and Patent Term Restoration Act of 1984, triggered a stay of up to 30 months before the FDA could issue a final approval for Xtampza ER, unless the stay was earlier terminated.

The Delaware court transferred the case to the District of Massachusetts.

After the Company filed a partial motion for judgment on the pleadings relating to the Orange Book-listed patents, the District Court of Massachusetts ordered judgment in the Company’s favor on those three patents, and dismissed the claims asserting infringement of those patents with prejudice.

Upon dismissal of those claims, the 30-month stay of FDA approval was lifted.

As a result, the Company was able to obtain final approval for Xtampza ER and launch the product commercially.

Following this judgment, the Company obtained final approval for Xtampza ER and launched commercially.

Purdue subsequently filed two follow-on lawsuits asserting infringement of two patents that had been late-listed in the Orange Book and, therefore, could not trigger any stay of FDA approval:

Purdue filed suit asserting infringement of Patent No.

9,073,933 in November 2015, and asserted infringement of Patent No.

Purdue asserted infringement of Patent No.

9,073,933 in November 2015 and Patent No.

9,522,919 in April 2017.

In addition, Purdue filed suit on two patents that had not been listed in the Orange Book, filing suit in June 2016 asserting infringement of Patent No.

In addition, Purdue invoked two non-Orange Book-listed patents, filing suit in June 2016 asserting infringement of Patent No.

9,155,717 and in September 2017, asserting infringement of Patent No.

On March 13, 2018, the Company filed a Petition for Post-Grant Review (“PGR”) of the ʼ961 patent with the Patent Trial and Appeal Board (“PTAB”).

The PGR argues that the ʼ961 patent is invalid for lack of a written description, for lack of enablement, for indefiniteness, and as being anticipated by prior art.

The PTAB held oral argument on the proceedings on July 10, 2019 and was scheduled to issue a decision on the patentability of the ʼ961 patent by no later than October 4, 2019.

On September 15, 2019, Purdue commenced a voluntary case under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.

On September 24, 2019, Purdue gave the PTAB notice of its bankruptcy filing and sought the imposition of an automatic stay of the PGR proceedings.

On October 2, 2019, the PTAB extended the one-year period for issuing its decision by up to six months .

In October 2017, and in response to the filing of the Company’s Supplemental NDA (“sNDA”) seeking to update the drug abuse and dependence section of the Xtampza ER label, Purdue filed another suit asserting infringement of the ʼ933 and ʼ919 patent.

The Company filed a motion to dismiss that action, and the Court granted its motion on January 16, 2018.

A claim construction hearing was held on June 1, 2017.

The PGR argued that the ʼ961 patent is invalid.

On November 21, 2017, the Court issued its claim construction ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717 patents.

The Court issued an order on September 28, 2018 in which it granted in part a motion for summary judgment that the Company filed.

Specifically, the Court ruled that the Xtampza ER formulation does not infringe the ʼ497 and ʼ717 patents.

On September 18, 2019, Purdue gave the Court notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings.

On September 20, 2019, the matter was stayed pending further order of the Court.

On September 1, 2020, the Bankruptcy Court entered an Order Granting Motions for Relief from the Automatic Stay, lifting the automatic stays in both the District of Massachusetts and PTAB proceedings.

The Company appealed the Bankruptcy Court’s Order, in part, and that appeal is stayed, on consent by Purdue, pending the outcome of any appeal of the PTAB proceedings.

The Court issued an order on September 28, 2018, in which it ruled that the Xtampza ER formulation does not infringe the ʼ497 and ʼ717 patents.

On September 15, 2019, Purdue commenced chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York.

Later in September 2019, Purdue gave the District Court of Massachusetts, as well as the PTAB, notice of its bankruptcy filing and sought the imposition of an automatic stay of proceedings.

Both the Court and the PTAB granted Purdue’s requests to stay the pending matters.

On September 1, 2020, the Bankruptcy Court entered an Order, lifting the automatic stays in both the District of Massachusetts and PTAB proceedings.

On September 11, 2020, Purdue filed a motion to terminate the PTAB action on the basis that those proceedings had gone beyond the 18 -month statutory period.

The Company opposed Purdue’s motion.

On November 19, 2021, the PTAB (i) denied Purdue’s motion to terminate the PGR and (ii) issued its Final Written Decision, finding that claims 1-17 of the ʼ961 patent were invalid for lack of written description and anticipation.

On December 17, 2021, Purdue filed a Request for Director Review.

That request was denied on February 7, 2022.

On February 16, 2022, Purdue filed a Federal Circuit notice of appeal.

On April 12, 2022, the Company filed a Motion to

Dismiss the Appeal as Untimely.

On May 20, 2022, the Federal Circuit denied the Motion to Dismiss and directed the parties to address jurisdiction during merits briefing.

On November 19, 2021, the PTAB:

(i) denied Purdue’s motion to terminate the PGR;

and (ii) issued its Final Written Decision, finding that the asserted claims of the ʼ961 patent were invalid for lack of written description and anticipation.

Purdue appealed the decision to Federal Circuit, which issued its decision on November 21, 2023, affirming the authority of the PTAB to issue its Final Written Decision and upholding the PTAB’s finding of invalidity relative to the ’961 patent.

On April 2, 2021, the Court granted Purdue’s Motion to Lift the Stay in the District of Massachusetts that was entered following Purdue’s Notice of Bankruptcy.

On April 9, 2021, Purdue filed another follow-on lawsuit asserting infringement of U.S.

10,407,434, which was late-listed in the Orange Book and therefore could not trigger any stay of FDA approval.

The Company responded to Purdue’s complaint asserting the ’434 patent with a motion to dismiss.

On May 21, 2021, and in response to the Company’s motion to dismiss, Purdue filed an amended complaint asserting the ’434 patent.

The Company responded to Purdue’s complaint with a motion to dismiss.

On May 21, 2021, and in response to the Company’s motion to dismiss, Purdue filed an amended complaint.

The Company renewed its motion to dismiss on June 4, 2021, arguing:

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Like the prior follow-on lawsuits, the ’434 patent litigation was consolidated into the lead case and a scheduling order was entered.

On October 5, 2021, the Court held a claim construction hearing for the ʼ961 patent and the ʼ434 patent.

On November 17, 2022, the Court set (i) the fact discovery deadline for May 4, 2023;

and (ii) expert witness depositions to conclude by August 24, 2023.

On May 15, 2023, the Court issued an order that:

(i) vacated the existing deadlines with respect to the ʼ933, ʼ919, and ʼ434 patents and stayed the case pending the Federal Circuit’s decision in a different litigation that invalidated certain claims of the ʼ933 and ʼ919 patents;

and (ii) continued the existing stay concerning the ʼ961 patent pending resolution of Purdue’s appeal rights relating to the decision invalidating the claims of the ʼ961 patent.

The Court has not set a deadline for dispositive motions or trial.

The remaining patents-in-suit in the lead consolidated action in the District of Massachusetts are the ʼ933, ʼ919, ʼ434, and ʼ961 patents.

The parties agreed, however, that litigation concerning the ʼ961 patent is stayed pending resolution of Purdue’s Federal Circuit appeal of the PTAB decision invalidating the claims of the ʼ961 patent.

Purdue has made a demand for monetary relief, and requested a judgment of infringement, an adjustment of the effective date of FDA approval, and an injunction on the sale of the Company’s products accused of infringement.

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Nucynta Litigation

On February 7, 2018, Purdue filed a patent infringement suit against the Company in the District of Delaware.

Specifically, Purdue argues that the Company’s sale of immediate-release and extended-release Nucynta infringes U.S.

On February 7, 2018, Purdue filed a patent infringement suit against the Company in the U.S.

District Court for the District of Delaware, in which it argues that the Company’s sale of immediate-release and extended-release Nucynta infringes U.S.

9,861,583, 9,867,784, and 9,872,836.

Purdue has made a demand for monetary relief in its complaint but has not quantified its alleged damages.

On December 6, 2018, the Company filed an Amended Answer asserting an affirmative defense for patent exhaustion.

On December 10, 2018, the Court granted the parties’ stipulation for resolution of the Company’s affirmative defense of patent exhaustion and stayed the action, with the exception of briefing on and resolution of the Company’s Motion for Judgment on the Pleadings related to patent exhaustion and any discovery related to that Motion.

Also, on December 10, 2018, the Company filed a Rule 12(c) Motion for Judgment on the Pleadings, arguing that the Purdue’s claims were barred by the doctrine of patent exhaustion.

On June 18, 2019, the Court heard oral argument on the Company’s Rule 12(c) Motion for Judgment on the Pleadings.

On June 19, 2019, the Court issued an order stating that “judgment in Collegium’s favor is warranted under the doctrine of patent exhaustion to the extent Collegium’s alleged infringing activities resulted from sales that fall within the scope of that covenant.” The Court explained, however, that based on the current record, it was not possible “to determine whether title of the Nucynta Products was transferred to Collegium” from sales authorized by Purdue’s covenant not to sue.

The Court ordered discovery on this issue and the case remained “stayed with the exception of discovery and briefing on and resolution of the Company’s anticipated motion for summary judgment based on patent exhaustion.”

On September 19, 2019, Purdue gave the Court notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings.

The Nucynta litigation is subject to the automatic bankruptcy stay.

Pending resolution of the bankruptcy action, the Company plans to defend this case vigorously.

Also, on December 10, 2018, the Company filed a Rule 12(c) Motion for Judgment on the Pleadings, arguing that Purdue’s claims were barred by the doctrine of patent exhaustion.

On June 19, 2019, the Court issued an order calling for discovery on a factual predicate for the patent exhaustion defense and noted that the case remained “stayed with the exception of discovery and briefing on and resolution of the Company’s anticipated motion for summary judgment based on patent exhaustion.”

On September 19, 2019, Purdue notified the Court of its bankruptcy filing and sought an automatic stay of proceedings, which was granted.

The Nucynta litigation currently remains subject to the bankruptcy stay.

The Company plans to defend this case vigorously.

At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Opioid Litigation

As a result of the opioid epidemic, numerous state and local governments and other entities brought suit against manufacturers, distributors, and pharmacies alleging a variety of claims related to opioid marketing and distribution practices.

In late 2017, the U.S.

Judicial Panel on Multidistrict Litigation ordered the consolidation of cases pending around the country in federal court against opioid manufacturers and distributors into a Multi-District Litigation (“MDL”) in the Northern District of Ohio.

The Company was initially named as a defendant in 21 of the MDL cases.

By April 19, 2022, all MDL cases naming the Company were dismissed or withdrawn.

Outside of the MDL, several cases were filed against the Company in Arkansas, Pennsylvania, and Massachusetts state courts with allegations similar to those in the MDL related to opioid marketing and distribution practices, as well as allegations including violations of state consumer protections laws.

On March 21, 2019, the Arkansas state court litigation was dismissed.

On December 24, 2021, the Company entered into a settlement framework with Scott+Scott Attorneys at Law, LLP, the law firm representing plaintiffs in 27 jurisdictions filed either in Pennsylvania and Massachusetts state courts, or filed in other state courts and removed to the MDL.

Pursuant to the terms of the settlement, the Company paid $ 2,750 in exchange for dismissal, with prejudice, of each plaintiff’s lawsuit and a release of claims related to such lawsuits.

The Company is currently dismissed from all cases.

The Company settled to efficiently resolve these litigations and did not admit any liability or acknowledge any wrongdoing in connection with the settlement.

Opioid-Related Request and Subpoenas

The Company, like several other pharmaceutical companies, has received subpoenas or civil investigative demands related to opioid sales and marketing practices, from the Offices of the Attorney General of Washington, New Hampshire, Maryland, and Massachusetts.

On December 16, 2021, the Company entered into an Assurance of Discontinuance with the Massachusetts Attorney General’s Office.

The Company is currently cooperating with each of the remaining states in their respective investigations.

Aquestive Litigation

On September 22, 2014, Reckitt Benckiser, Inc., Indivior PLC (formerly RB Pharmaceuticals Limited, “Indivior”), and Aquestive Therapeutics, Inc.

(formerly MonoSol Rx, “Aquestive”) (collectively, the “RB Plaintiffs”) filed an action in the District Court in the District of New Jersey alleging patent infringement against BDSI related to its Bunavail product.

The RB Plaintiffs claimed that Bunavail, whose formulation and manufacturing processes have never been disclosed publicly, infringed U.S.

8,765,167 (the “’167 Patent”).

On January 13, 2017, Aquestive filed a complaint in the District Court for the District of New Jersey against BDSI alleging Belbuca also infringed the ’167 Patent.

On March 8, 2023, the parties filed a stipulation of dismissal after agreeing to settle the dispute.

Under the terms of the settlement agreement, BDSI resolved both the Bunavail and Belbuca litigations in exchange for a one-time, lump-sum payment of $ 8,500 to Aquestive, which was recognized as an expense included in “ selling, general and administrative expenses ” in the consolidated statements of operations for the year ended December 31, 2023.

Litigation Related to the BDSI Acquisition

On February 25, 2022, in connection with the BDSI Acquisition, a purported individual stockholder of BDSI filed a complaint in the United States District Court for the Southern District of New York, captioned Stein v.

BioDelivery Sciences International, Inc., et al.

1:22-cv-01600, naming as defendants BDSI and each member of its Board of Directors as of the date of the Merger Agreement (“ Stein Action”).

On February 28, 2022, two additional cases were filed by purported individual stockholders of BDSI in the same court, captioned Sanford v.

BioDelivery Sciences International, Inc., et al ., No.

1:22-cv-01676 (“ Sanford Action”), and Higley v.

BioDelivery Sciences International, Inc., et al.

1:22-cv-01658 (“ Higley Action”).

On March 2, 2022 and March 5, 2022, two additional cases were filed by purported individual stockholders of BDSI in the United States District Court for the Eastern District of New York, captioned Justice II v.

BioDelivery Sciences International, Inc., et al.

1:22-cv-01145 (“ Justice Action”) and Zomber v.

BioDelivery Sciences International, Inc., et al.

1:22-cv-01220 (“ Zomber Action”;

together with the Stein , Sanford , Higley , and Justice Actions, the “Actions”).

On February 25, 2022, in connection with the BDSI Acquisition, a purported individual stockholder of BDSI filed a complaint in the District Court for the Southern District of New York naming as defendants BDSI and each member of its Board of Directors as of the date of the Merger Agreement (“ Stein Action”).

On February 28, 2022, two additional cases were filed by purported individual stockholders of BDSI in the same court:

the “ Sanford Action” and the “ Higley Action.” In March 2022, two additional cases were filed by purported individual stockholders of BDSI in the District Court for the Eastern District of New York:

the “ Justice Action” and the “Zomber Action” (together with the Stein , Sanford , and Higley Actions, the “Actions”).

The Actions and any similar subsequently filed cases involving BDSI, its officers or Board of Directors, or any committee thereof, and/or any of the Company’s officers or directors relating directly or indirectly to the Merger Agreement, the BDSI Acquisition or any related transaction, are referred to as the “Merger Litigations.”

The Merger Litigations filed to date generally allege that the Schedule 14D-9 is materially incomplete and misleading by allegedly failing to disclose purportedly material information relating to the sale process leading to the Merger, BDSI’s financial projections, and the analyses performed by Moelis & Company LLC in connection with the Merger.

The Merger Litigations filed to date generally allege that the Schedule 14D-9 is materially incomplete and misleading.

The Merger Litigations assert violations of Section 14(e) of the Exchange Act and violations of Section 20(a) of the Exchange Act against BDSI’s Board of Directors.

Additionally, the Stein, Higley, Justice , and Zomber complaints assert violations of Section 14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder.

The Merger Litigations seek, among other things:

an injunction enjoining consummation of the Merger, rescission of the Merger Agreement, a declaration that BDSI and its Board of Directors violated Sections 14(e) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, damages, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees and expenses, and any other relief the court may deem just and proper.

In addition, on February 24, 2022, February 28, 2022, and March 7, 2022, BDSI received demand letters from three purported stockholders of BDSI seeking to inspect certain books and records of BDSI related to the Merger (collectively, the “Inspection Letters”).

On March 4, 2022, March 9, 2022, and March 11, 2022, BDSI received demand letters from four purported stockholders alleging that the Schedule 14D-9 omits purportedly material information relating to the Merger (collectively, the “Demand Letters”).

On April 14, 2022, plaintiff in the Higley Action filed a notice of voluntary dismissal of the complaint.

On May 15, 2022, plaintiff in the Zomber Action filed a notice of voluntary dismissal of the complaint.

And, on June 24, 2022, plaintiff in the Justice Action filed a notice of voluntary dismissal of the complaint.

In the remaining Stein and Sanford Actions, on July 20, 2022, the respective Courts entered an Order for plaintiff to serve a summons and complaint by August 3, 2022.

On July 28, 2022, plaintiff in the Sanford Action filed a partial voluntary dismissal of the individual named defendants but not BDSI from that action and filed a waiver of service as to BDSI.

On October 26, 2022, plaintiff in the Sanford Action filed a notice of voluntary dismissal of the complaint as to Defendant BDSI as well.

To date, the complaint in the Stein Action has not been served on, nor was service waived by, any of the named defendants in that action.

In addition, between February and March of 2022, BDSI received demand letters from three purported stockholders of BDSI seeking to inspect certain books and records of BDSI related to the Merger (collectively, the “Inspection Letters”).

In March 2022, BDSI received demand letters from four purported stockholders alleging that the Schedule 14D-9 omits purportedly material information relating to the Merger (collectively, the “Demand Letters”).

Plaintiffs in the Higley, Zomber, and Justice Actions each filed a notice of voluntary dismissal of their complaint in the second quarter of 2022.

On July 28, 2022, plaintiff in the Sanford Action filed a partial voluntary dismissal of the individual named defendants, and on October 26, 2022, filed a notice of voluntary dismissal of the BDSI defendant.

On February 17, 2023, the Stein Action was dismissed.

While the Company believes that the remaining Merger Litigations, Inspection Letters, and Demand Letters are without merit and that the disclosures in the Schedule 14D-9 comply fully with applicable law, solely in order to avoid the expense and distraction of litigation, BDSI previously determined to voluntarily supplement the Schedule 14D-9 with certain supplemental disclosures set forth in BDSI’s Schedule 14D-9 filed with the SEC on March 11, 2022 (the “Supplemental Disclosures”).

The Company and BDSI believe that the Supplemental Disclosures mooted all allegations or concerns raised in the Merger Litigations, Inspection Letters, and Demand Letters.

As set forth in the Supplemental Disclosures, nothing therein shall be deemed an admission of the legal necessity or materiality under applicable law of the Supplemental Disclosures.

To the contrary, the Company and BDSI specifically deny all allegations that any of the Supplemental Disclosures, or any other additional disclosures, were or are required.

The Company plans to defend the Merger Litigations vigorously.

At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Opioid Litigation

As a result of the opioid epidemic, numerous state and local governments, healthcare providers, and other entities brought suit against manufacturers, wholesale distributors, and pharmacies alleging a variety of claims related to opioid marketing and distribution practices.

In late 2017, the U.S.

Judicial Panel on Multidistrict Litigation ordered the consolidation of what were then a few hundred cases pending around the country in federal court against opioid manufacturers and distributors into a Multi-District Litigation (“MDL”) in the Northern District of Ohio.

The Company was named as a defendant in a small subset of the MDL cases.

Of the 21 MDL cases that named the Company as a defendant, the allegations against it were previously dismissed or withdrawn in 13 cases as of December 31, 2021.

As explained below, the remaining eight MDL cases that named the Company were dismissed as of April 19, 2022.

In addition, the Company had been previously dismissed from three non-MDL cases filed in Pennsylvania and Arkansas state courts.

Outside of the MDL, there were several cases filed against the Company in state courts in Pennsylvania and Massachusetts:

● In Pennsylvania, six lawsuits naming the Company were consolidated for discovery purposes in the Delaware County Court of Common Pleas as part of a consolidated proceeding of similar lawsuits brought by numerous Pennsylvania counties against other pharmaceutical manufacturers and distributors.

These included lawsuits filed between May 2018 and July 2019 on behalf of Bucks County, Clinton County, Mercer County, Warrington Township, Warminster Township, and the City of Lock Haven, each of Pennsylvania, alleging claims related to opioid marketing and distribution, including negligence, fraud, unjust enrichment, public nuisance, and violations of state consumer protections laws.

● In Massachusetts, there were lawsuits by the City of Worcester, the City of Salem, the City of Framingham, the Town of Lynnfield, the City of Springfield, the City of Haverhill, the City of Gloucester, the Town of Canton, the Town of Wakefield, the City of Chicopee, the Town of Natick, the City of Cambridge and the Town of Randolph, all of which were consolidated before the Business Litigation Session of the Superior Court.

The actions alleged a variety of claims related to opioid marketing and distribution practices including public nuisance, common law fraud, negligent misrepresentation, negligence, violations of Mass Gen.

93A, Section 11, unjust enrichment and civil conspiracy.

On December 24, 2021, the Company entered into a settlement framework with Scott+Scott Attorneys at Law, LLP, the law firm representing plaintiffs in each of the 27 cases, including the 8 remaining MDL cases and 19 state court cases described above.

Pursuant to the terms of the settlement framework, which were later memorialized in a final settlement agreement, the Company agreed to pay $ 2,750 in exchange for the dismissal, with prejudice, of each plaintiff’s lawsuit against the Company and a release of claims related to such lawsuits.

The settlement agreement was executed by the Company and all 27 plaintiffs, and the amounts subject to the settlement agreement were paid.

The Company entered into this settlement to efficiently resolve this litigation and does not admit any liability or acknowledge any wrongdoing in connection with the settlement agreement.

The parties have submitted appropriate motions to dismiss the Company with prejudice for each of the 27 cases.

All were granted, thereby dismissing the Company, with prejudice, from all 27 cases.

Ongoing BDSI Litigation Matters

BDSI’s ongoing litigations with Aquestive Therapeutics, Inc.

(formerly MonoSol Rx, “Aquestive”) and Indivior PLC (formerly RB Pharmaceuticals Limited, “Indivior”) are provided below.

Litigation related to BUNAVAIL

On October 29, 2013, Reckitt Benckiser, Inc., Indivior PLC (formerly RB Pharmaceuticals Limited, “Indivior”), and Aquestive Therapeutics, Inc.

(formerly MonoSol Rx, “Aquestive”) (collectively, the “RB Plaintiffs”) filed an action against BDSI relating to its BUNAVAIL product in the United States District Court for the Eastern District of North Carolina (“EDNC”) for alleged patent infringement.

BUNAVAIL is a drug approved for the maintenance treatment of opioid dependence.

The RB Plaintiffs claim that the formulation for BUNAVAIL, which has never been disclosed publicly, infringes its U.S.

8,475,832 (the “‘832 Patent”).

On May 21, 2014, the Court granted BDSI’s motion to dismiss.

On September 22, 2014, the RB Plaintiffs filed an action against BDSI (and BDSI’s commercial partner) relating to BDSI’s BUNAVAIL product in the United States District Court for the District of New Jersey for alleged patent infringement.

The RB Plaintiffs claim that BUNAVAIL, whose formulation and manufacturing processes have never been disclosed publicly, infringes its patent U.S.

8,765,167 (the “‘167 Patent”).

On December 12, 2014, BDSI filed a motion to transfer the case from New Jersey to North Carolina and a motion to dismiss the case against its commercial partner.

On October 28, 2014, BDSI filed multiple IPR petitions on certain claims of the ‘167 Patent.

The USPTO instituted three of the four IPR petitions.

The PTAB upheld the claims and denied collateral estoppel applied to the PTAB decisions in March 2016.

BDSI appealed to Court of Appeals for the Federal Circuit.

The USPTO intervened with respect to whether collateral estoppel applied to the PTAB.

On June 19, 2018, BDSI filed a motion to remand the case for further consideration by the PTAB in view of intervening authority.

On July 31, 2018, the Federal Circuit vacated the decisions, and remanded the ‘167 Patent IPRs for further consideration on the merits.

On February 7, 2019, the PTAB issued three decisions on remand vacating institution of the three previously instituted IPRs of the ‘167 patent.

BDSI timely appealed the PTAB decisions, and that appeal was ultimately denied.

On May 18, 2021, the RB Plaintiffs filed an amended complaint dropping BDSI’s commercial partner from the action it began on September 22, 2014.

On June 1, 2021, BDSI answered the amended complaint asserting counterclaims of non-infringement, invalidity, and unenforceability.

On December 16, 2021, the parties completed claim construction briefing on the disputed claim terms of the ʼ167 patent.

The Court has not set a date for the claim construction hearing, or for a subsequent trial.

The Company plans to defend this case vigorously.

At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Litigation related to BELBUCA

On January 13, 2017, Aquestive filed a complaint in the United States District Court for the District of New Jersey alleging BELBUCA infringes the ‘167 Patent.

In lieu of answering the complaint, BDSI filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC.

On July 25, 2017, the New Jersey Court administratively terminated the case pending the parties’ submission of a joint stipulation of transfer because the District of New Jersey was an inappropriate venue.

This case was later transferred to the Delaware District Court.

On October 31, 2017, BDSI filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC.

On October 16, 2018, denying the motion to dismiss as moot, the Delaware District Court granted BDSI’s motion to transfer the case to the EDNC.

On November 20, 2018, BDSI moved the EDNC to dismiss the complaint for patent infringement for failure to state a claim for relief.

On August 6, 2019, the EDNC granted BDSI’s motion to dismiss, and dismissed the complaint without prejudice.

On or about November 11, 2019, Aquestive refiled a complaint in the EDNC against BDSI alleging that BELBUCA infringes the ‘167 Patent.

On January 13, 2020, in lieu of answering the complaint, BDSI filed a motion to dismiss the complaint.

After that motion was denied, BDSI answered the complaint on April 16, 2020.

Aquestive moved to dismiss BDSI’s counterclaim of unenforceability, but the court denied that motion.

On December 16, 2021, the parties completed claim construction briefing on the disputed claim terms of the ʼ167 patent.

The Court has not set a date for the claim construction hearing, or for a subsequent trial.

The Company plans to defend this case vigorously.

At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

On September 7, 2018, BDSI filed a complaint for patent infringement in District Court for the District of Delaware against Alvogen Pb Research & Development LLC, Alvogen Malta Operations Ltd., Alvogen Pine Brook LLC, Alvogen, Incorporated, and Alvogen Group, Incorporated (collectively, “Alvogen”), asserting that Alvogen infringed BDSI’s Orange Book-listed patents for Belbuca, including U.S.

8,147,866, 9,655,843 and 9,901,539 (collectively, “the BEMA patents”) .

This complaint followed receipt by BDSI on July 30, 2018 of a Paragraph IV Patent Certification from Alvogen stating it had filed an abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of Belbuca Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, 600 mcg, 750 mcg and 900 mcg.

A three-day bench trial was held from March 1-3, 2021.

On December 20, 2021, the Court issued an opinion upholding the validity of certain claims in BDSI’s ʼ866 patent and certain claims in the ’539 patent.

The Court entered final judgment on January 21, 2022 upholding the validity of claims of the ’866 and ’539 patents and thereby extended the effective date of any final approval by the FDA of Alvogen’s ANDA until December 21, 2032, (the expiration date of the ’539 patent) and enjoining Alvogen from commercially launching its ANDA products until December 21, 2032.

Alvogen filed a motion to stay certain provisions of the final judgment.

BDSI filed an opposition to Alvogen’s request for a stay.

The Court retained jurisdiction to decide BDSI’s motion for contempt, which was filed on September 21, 2021.

Alvogen filed a notice of appeal to the Federal Circuit seeking to reverse the Court’s final judgment.

Separately, BDSI filed a cross-appeal to the Federal Circuit seeking to reverse the Court’s opinion that claims 3 and 10 of the ʼ866 patent and claims 8, 9 and 20 of the ’843 patent are invalid and thus, Alvogen is not liable for infringement of those claims, as well as any other ruling decided adversely to BDSI.

On December 21, 2022, the Federal Circuit affirmed the district court judgment that certain claims of the ʼ866 and ʼ539 patent were not invalid as obvious.

The Federal Circuit also vacated the district court’s judgment that certain claims of the ʼ866 and ʼ843 patent were invalid as obvious and remanded to the district court for further proceedings.

The mandate issued on February 10, 2023.

As it has done in the past, the Company intends to vigorously defend its intellectual property against assertions of invalidity or non-infringement.

Chemo Research, S.L.

On March 1, 2019, BDSI filed a complaint for patent infringement in United States District Court for the District of Delaware against Chemo Research, S.L., Insud Pharma S.L., IntelGenx Corp., and IntelGenx Technologies Corp.

(collectively, the “Chemo Defendants”), asserting that the Chemo Defendants infringe its Orange Book-listed patents for BELBUCA, including U.S.

8,147,866 (“’866 patent”) and 9,655,843, (“’843 patent”) both expiring in July of 2027, and U.S.

9,901,539 (“’539 patent”) expiring December of 2032 (collectively, “the BEMA patents”).

This complaint follows a receipt by BDSI on January 31, 2019, of a Notice Letter from Chemo Research S.L.

stating that it has filed with the FDA an ANDA containing a Paragraph IV Patent Certification, for a generic version of BELBUCA Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, and 900 mcg.

Because BDSI initiated a patent infringement suit asserting the patents identified in the Notice Letter within 45 days after receipt, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not infringed or invalid.

On March 15, 2019, BDSI filed a complaint against the Chemo Defendants in the Federal District Court for the District of New Jersey asserting the same claims for patent infringement made in the Delaware lawsuit.

On April 19, 2019, Defendants filed an answer to the Delaware complaint wherein they denied infringement of the ’866, ’843 and ’539 patents and asserted counterclaims seeking declaratory relief concerning the alleged invalidity and non-infringement of such patents.

On April 25, 2019, BDSI voluntarily dismissed the New Jersey lawsuit given Defendants’ consent to jurisdiction in Delaware.

The trial to adjudicate issues concerning the validity of the Orange Book-listed patents covering BELBUCA was held from March 1-3, 2021.

Chemo did not participate in the bench trial.

Instead, on February 26, 2021, Chemo agreed to be bound by the decision of the Court with respect to the validity of the BEMA patents from the March 1-3, 2021 trial with Alvogen.

On December 20, 2021, the Court issued an opinion upholding the validity of certain claims in BDSI’s ʼ866 patent, which expires in 2027, and certain claims in the ’539 patent, which expires in 2032, to which Chemo is bound.

This holding was affirmed on appeal by the Federal Circuit on December 21, 2022.

The bench trial to adjudicate issues concerning the Chemo Defendants’ infringement of the Orange Book patents was set to commence on April 25, 2022.

On March 30, 2022, the Court vacated the trial and has not yet set a new trial date.

On August 1, 2022, BDSI received a second Paragraph IV certification notice letter from Chemo indicating that Chemo has amended its ANDA to (i) withdraw its generic version of the 75 mcg and 150 mcg strengths of BELBUCA;

On March 1, 2019, BDSI filed a complaint for patent infringement in the District Court for the District of Delaware against Chemo Research, S.L., Insud Pharma S.L., IntelGenx Corp., and IntelGenx Technologies Corp.

(collectively, the “Chemo Defendants”), asserting that the Chemo Defendants infringe the BEMA patents.

This complaint followed receipt by BDSI on January 31, 2019, of a Notice Letter from Chemo Research S.L.

stating that it had filed with the FDA an ANDA containing a Paragraph IV Patent Certification, for a generic version of Belbuca Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, and 900 mcg.

Chemo agreed to be bound by the decision of the Court with respect to the validity of the BEMA patents as disputed between BDSI and Alvogen.

Accordingly, the December 20, 2021 ruling of the Court upholding the validity of certain claims of the BEMA patents is binding upon Chemo.

In March 2022, the Court vacated the bench trial set to begin April 25, 2022 to address the remaining Chemo infringement claims.

The Court has not yet set a new trial date.

On August 1, 2022, BDSI received a second Paragraph IV certification notice letter from Chemo indicating it amended its ANDA to:

(i) withdraw its generic version of the 75 mcg and 150 mcg strengths of Belbuca;

and (ii) include its generic version of the 600 mcg and 750 mcg strengths of Belbuca, in addition to the 300 mcg, 450 mcg, and 900 mcg strengths identified in the first Chemo Paragraph IV certification notice letter.

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Chemo answered the complaint on December 1, 2022.

The Court has not set a schedule for this litigation.

The Court has not yet set a schedule for this litigation.

On August 24, 2022, the Court instructed the parties to update the Court at such time as the FDA addresses Chemo's July 29, 2022 response to the FDA.

On February 8, 2023, the district court denied Chemo’s request for a trial date in the spring, and again instructed the parties to update the Court at such time as the FDA addresses Chemo’s July 29, 2022 response to the FDA.

The Company plans to litigate these cases vigorously.

On February 8, 2023, the Court denied Chemo’s request for a trial date in the spring, and

again instructed the parties to update the Court at such time as the FDA addresses Chemo’s July 29, 2022 response to the FDA.

Chemo received a complete response letter with respect to its July 29, 2022 ANDA in April 2023.

Chemo submitted a further amended ANDA to FDA in September 2023.

The Company plans to litigate this case vigorously.

At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

On September 7, 2018, BDSI filed a complaint for patent infringement in United States District Court for the District of Delaware against Alvogen Pb Research & Development LLC, Alvogen Malta Operations Ltd., Alvogen Pine Brook LLC, Alvogen, Incorporated, and Alvogen Group, Incorporated (collectively, “Alvogen”), asserting that Alvogen infringes BDSI’s Orange Book-listed patents for BELBUCA, including U.S.

8,147,866 and 9,655,843, both expiring in July of 2027, and U.S.

9,901,539, expiring in December of 2032 (collectively, “the BEMA patents”) .

This complaint followed receipt by BDSI on July 30, 2018 of a Paragraph IV Patent Certification from Alvogen stating that Alvogen had filed an ANDA with the FDA for a generic version of BELBUCA Buccal Film (75 mcg, 150 mcg, 300 mcg, 450 mcg, 600 mcg, 750 mcg and 900 mcg).

Because BDSI initiated a patent infringement suit asserting the patents identified in the Paragraph IV notice within 45 days after receipt of the Paragraph IV Certification, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not infringed or invalid.

The Court scheduled a bench trial to adjudicate issues concerning the validity of the BEMA patents.

A three-day bench trial against Alvogen was conducted commencing on March 1, 2021.

Alvogen conceded infringement of those claims prior to the trial.

The Court entered final judgment on January 21, 2022.

The final judgment entered in this case upholding the validity of claims of the ’866 and ’539 Orange Book-listed patents extends the effective date of any final approval by the FDA of Alvogen’s ANDA until December 21, 2032, which is the expiration date of the ’539 patent, and enjoins Alvogen and those acting in concert with Alvogen from commercially manufacturing, using, selling, or offering for sale Alvogen’s ANDA products until December 21, 2032.

Alvogen filed a motion to stay certain provisions of the final judgment in the Court.

BDSI filed an opposition to Alvogen’s request for a stay.

The Court retained jurisdiction to decide BDSI’s motion for contempt, which was filed on September 21, 2021.

Alvogen filed a notice of appeal to the Federal Circuit seeking to reverse the Court’s final judgment entered on January 21, 2022.

Separately, BDSI has filed a cross-appeal to the Federal Circuit seeking to reverse the Court’s opinion that claims 3 and 10 of the ʼ866 patent and claims 8, 9 and 20 of the ’843 patent are invalid and thus Alvogen is not liable for infringement of those claims, as well as any other ruling decided adversely to BDSI.

On November 1, 2022, the Federal Circuit held oral argument on the parties’ appeal and issued its decision on December 21, 2022.

In that decision, the Federal Circuit affirmed the district court judgment that certain claims of the ʼ866 and ʼ539 patent were not invalid as obvious.

The Federal Circuit also vacated the district court’s judgment that certain claims of the ʼ866 and ʼ843 patent were invalid as obvious and remanded to the district court for further proceedings.

The mandate issued on February 10, 2023.

As it has done in the past, the Company intends to vigorously defend its intellectual property against assertions of invalidity or non-infringement.

Opioid-Related Request and Subpoenas

The Company, like a number of other pharmaceutical companies, has received subpoenas or civil investigative demands related to opioid sales and marketing.

The Company has received such subpoenas or civil investigative demands from the Offices of the Attorney General of each of Washington, New Hampshire, Maryland and Massachusetts.

On December 16, 2021, the Company entered into an Assurance of Discontinuance with the Massachusetts Attorney General (the “AoD”).

Pursuant to the AoD, the Company provided certain assurances and agreed to pay the Massachusetts Attorney General $ 185 , including $ 65 relating to that office’s costs of investigation, in exchange for closure of the investigation and a release of claims pertaining to the subject matter of the investigation.

The Company is currently cooperating with each of the foregoing states in their respective investigations.

2020 Term Loan

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2022 Term Loan

On March 22, 2022, in connection with the closing of the BDSI Acquisition, the Company entered into an Amended and Restated Loan Agreement by and among the Company, and Pharmakon (the “2022 Loan Agreement”).

On March 22, 2022, in connection with the closing of the BDSI Acquisition, the Company entered into an Amended and Restated Loan Agreement by and among the Company, and BioPharma Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender (collectively “Pharmakon”), as amended (the “2022 Loan Agreement”).

The 2022 Loan Agreement provided for a $ 650,000 secured term loan (the “2022 Term Loan”), the proceeds of which were used to repay the Company’s existing term notes and fund a portion of the consideration to be paid to complete the BDSI Acquisition.

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The 2022 Term Loan is also secured by substantially all of the assets of the Company and its material domestic subsidiaries.

The 2022 Term Loan bears interest at a rate based upon the London Interbank Offered Rate (“LIBOR”) (subject to a LIBOR floor of 1.20 %), plus a margin of 7.5 % per annum.

As of December 31, 2022, the interest rate was 11.2 %.

The Company is required to repay the 2022 Term Loan by paying $ 100,000 in principal payments during the first year and the remaining $ 550,000 balance will amortize in equal quarterly installments over the remaining three years.

Prior to the cessation of LIBOR on June 30, 2023, the 2022 Term Loan bore interest at a rate based on LIBOR (subject to a LIBOR floor of 1.20 %), plus a margin of 7.5 % per annum.

On June 23, 2023, the Company entered into an amendment to the 2022 Loan Agreement to adjust the interest terms of the 2022 Term Loan to transition from LIBOR to SOFR in anticipation of the cessation of LIBOR.

Effective July 1, 2023, the 2022 Term Loan bears interest at a rate based on SOFR plus a spread adjustment of 0.26 % (subject to a floor of 1.20 %), plus a margin of 7.5 % per annum.

As of December 31, 2023, the contractual interest rate was 13.2 %.

The Company paid $ 100,000 in principal payments under the 2022 Term Loan during the first year and the remaining $ 550,000 balance is required to be paid in equal quarterly installments over the remaining three years.

The 2022 Loan Agreement permits voluntary prepayment at any time, subject to a prepayment premium.

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The 2022 Loan Agreement also includes various customary remedies for the lenders following an Event of Default, including the acceleration of repayment of outstanding amounts under the 2022 Loan Agreement and execution upon the collateral securing obligations under the 2022 Loan Agreement.

During the years ended December 31, 2022, 2021, and 2020, the Company recognized interest expense of $ 58,533 , $ 16,339 , and $ 19,034 , respectively.

The following table presents the total interest expense recognized related to the 2020 Term Loan and 2022 Term Loan during the years ended December 31, 2023, 2022, and 2021:

Years Ended December 31,

Contractual interest expense

Amortization of debt issuance costs

Total interest expense

As of December 31, 2023, the effective interest rate on the 2022 Term Loan was 14.7 %.

As of December 31, 2023, principal repayments under the 2022 Term Loan are as follows:

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2026 Convertible Notes

On February 13, 2020, the Company issued 2.625 % convertible senior notes due in 2026 (the “2026 Convertible Notes” or “convertible notes”) in the aggregate principal amount of $ 143,750 , in a public offering registered under the Securities Act of 1933, as amended.

The 2026 Convertible Notes were issued in connection with funding the Nucynta Acquisition, and the proceeds of the convertible notes were used to finance a portion of the purchase price payable pursuant to the Nucynta Purchase Agreement.

On February 13, 2020, the Company issued 2.625 % convertible senior notes due in 2026 (the “2026 Convertible Notes”) in the aggregate principal amount of $ 143,750 , in a public offering registered under the Securities Act of 1933, as amended.

The 2026 Convertible Notes were issued in connection with funding the acquisition of the Nucynta Products.

Some of the Company’s existing investors participated in the 2026 Convertible Notes offering.

The Company may, at its option, settle the convertible notes in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock.

Accordingly, the Company originally accounted for the liability component (the “Liability Component”) and the embedded derivative conversion option (the “Equity Component”) of the convertible notes separately by allocating the proceeds between the Liability Component and the Equity Component.

In connection with the issuance of the convertible notes, the Company incurred approximately $ 5,473 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs between the Liability Component and the Equity Component based on the allocation of the proceeds.

Of the total debt issuance costs, $ 1,773 was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $ 3,700 was allocated to the Liability Component and recorded as a debt discount of the convertible notes.

The portion allocated to the Liability Component was expected to be amortized to interest expense using the effective interest method over six years .

Prior to the adoption of ASU 2020-06 on January 1, 2021, the initial carrying amount of the Liability Component of $ 97,200 was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature.

The allocation was performed in a manner that reflected the Company’s non-convertible borrowing rate for similar debt.

The Equity Component of the convertible notes of $ 46,550 was recognized as a debt discount.

The excess of the principal amount of the Liability Component over its carrying amount was expected to be amortized to interest expense using the effective interest method over six years .

Subsequent to the adoption of ASU 2020-06 on January 1, 2021, which the Company elected to adopt using the modified retrospective method, the Company removed the impact of recognizing the Equity Component of the senior convertible notes (at issuance and the subsequent accounting impact of additional interest expense from debt discount amortization).

The convertible notes are the Company’s senior unsecured obligations and bear interest at a rate of 2.625 % per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

In connection with the issuance of the 2026 Convertible Notes, the Company incurred approximately $ 5,473 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

The 2026 Convertible Notes are senior unsecured obligations and bear interest at a rate of 2.625 % per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020.

Before August 15, 2025, noteholders will have the right to convert their notes only upon the occurrence of certain events.

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The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election.

The notes will mature on February 15, 2026, unless earlier repurchased, redeemed or converted.

The initial conversion rate is 34.2618 shares of common stock per $1 principal amount of notes, which represents an initial conversion price of approximately $ 29.19 per share of common stock.

The 2026 Convertible Notes will mature on February 15, 2026, unless earlier repurchased, redeemed or converted.

The initial conversion rate is 34.2618 shares of common stock per $1 principal amount of the 2026 Convertible Notes, which represents an initial conversion price of approximately $ 29.19 per share of common stock.

The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events.

6 unchanged sentences

As of December 31, 2023, none of the above circumstances had occurred and as such, the 2026 Convertible Notes could not have been converted.

The Company may not redeem the convertible notes prior to February 15, 2023.

The Company did not have the right to redeem the 2026 Convertible Notes prior to February 15, 2023.

On or after February 15, 2023, the Company may redeem the 2026 Convertible Notes, in whole and not in part, at a cash redemption price equal to the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on:

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(2) the trading day immediately before the date the Company sends such notice.

Calling any 2026 Convertible Notes for redemption will constitute a make-whole fundamental change, in which case the conversion rate applicable to the conversion of any 2026 Convertibles Notes, if converted in connection with the redemption, will be increased in certain circumstances for a specified period of time.

The 2026 Convertible Notes have customary default provisions, including:

(i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture, if such default is not cured within 3 calendar days after its occurrence;

(iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales;

(v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company;

(vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $ 20,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness;

(vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company's significant subsidiaries for the payment of at least $ 20,000 ;

and (viii) certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries.

Repurchase of a Portion of the 2026 Convertible Notes

Contemporaneously with the offering of the 2029 Convertible Notes (as defined below), the Company entered into separate privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $ 117,400 aggregate principal amount of the 2026 Convertible Notes for an aggregate of $ 140,100 of cash, which includes accrued

and unpaid interest on the 2026 Convertible Notes to be repurchased.

This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2026 Convertible Notes participating in the issuance of the 2029 Convertible Notes.

Accordingly, the Company evaluated the transaction for modification or extinguishment accounting in accordance with Accounting Standards Codification Topic 470-50 , Debt – Modifications and Extinguishments on a creditor-by-creditor basis depending on whether the exchange was determined to have substantially different terms.

The repurchase of the 2026 Convertible Notes and issuance of the 2029 Convertible Notes were deemed to have substantially different terms based on the present value of the cash flows immediately prior to and after the exchange.

Therefore, the repurchase of the 2026 Convertible Notes was accounted for as a debt extinguishment.

The Company recorded a $ 23,504 loss on early extinguishment of debt on the consolidated statements of operations during the three months ending March 31, 2023, which includes the recognition of previously deferred financing costs of $ 2,264 .

The total remaining principal amount outstanding under the 2026 Convertible Notes as of December 31, 2023 was $ 26,350 .

2029 Convertible Notes

On February 10, 2023, the Company issued 2.875 % convertible senior notes due in 2029 (the “2029 Convertible Notes”) in the aggregate principal amount of $ 241,500 , in a private offering to qualified institutional buyers pursuant to Section 4(a)(2) and Rule 144A under the Securities Act of 1933, as amended.

The 2029 Convertible Notes were issued to finance the concurrent repurchase of a portion of the 2026 Convertible Notes, and the remainder of the net proceeds may be used for general corporate purposes.

In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $ 6,280 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

The 2029 Convertible Notes are senior, unsecured obligations and bear interest at a rate of 2.875 % per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023.

The 2029 Convertible Notes will mature on February 15, 2029, unless earlier repurchased, redeemed or converted.

Before November 15, 2028, noteholders will have the right to convert their notes only upon the occurrence of certain events.

From and after November 15, 2028, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date.

The initial conversion rate is 27.3553 shares of common stock per $1 principal amount of 2029 Convertible Notes, which represents an initial conversion price of approximately $ 36.56 per share of common stock.

The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events.

Holders of the 2029 Convertible Notes may convert all or any portion of their 2029 Convertible Notes, in multiples of $1 principal amount, at their option only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2023, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(4) if the Company calls any or all of the 2029 Convertible Notes for redemption, but only with respect to the 2029 Convertible Notes called for redemption;

(5) at any time from, and including, November 15, 2028 until the close of business on the scheduled trading day immediately before the maturity date.

As of December 31, 2023, none of the above circumstances had occurred and as such, the 2029 Convertible Notes could not have been converted.

The Company may not redeem the 2029 Convertible Notes prior to February 17, 2026.

On or after February 17, 2026 and on or before the 40 th scheduled trading day before the maturity date, the Company may redeem the 2029 Convertible Notes, in whole or in part, at a cash redemption price equal to the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on:

(1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

(2) the trading day immediately before the date the Company sends such notice.

However, the Company may not redeem less than all of the outstanding 2029 Convertible Notes unless at least $ 75,000 aggregate principal amount of the 2029 Convertible Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

Calling any 2029 Convertible Note for redemption will constitute a make-whole fundamental change with respect to that 2029 Convertible Note, in which case the conversion rate applicable to the conversion of that 2029 Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances for a specified period of time.

The convertible notes have customary default provisions, including (i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture;

The 2029 Convertible Notes have customary default provisions, including:

(iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales;

(v) certain payment or other defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $ 20,000 ;

and (vi) certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries.

(v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company;

(vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $ 30,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness;

(vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company’s significant subsidiaries for the payment of at least $ 30,000 ;

and (xiii) upon the occurrence of certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries.

The 2026 Convertible Notes and 2029 Convertible Notes (together, the “Convertible Notes”) are classified on the consolidated balance sheets as of December 31, 2023 as convertible senior notes.

As of December 31, 2023, the Convertible Notes outstanding consisted of the following:

2026 Convertible Notes

2029 Convertible Notes

Total Convertible Notes

unamortized issuance costs

Net carrying amount

The Company determined the expected life of the convertible notes was equal to its six-year term.

The effective interest rate on the convertible notes was 3.26 %.

The Company determined the expected life of the 2026 Convertible Notes and 2029 Convertible Notes was equal to the six-year term of each.

The effective interest rate on the 2026 Convertible Notes and 2029 Convertible Notes is 3.34 % and 3.28 %, respectively.

As of December 31, 2023, the if-converted value did not exceed the remaining principal amount of the Convertible Notes.

2 unchanged sentences

Contractual interest expense

Amortization of debt discount

Amortization of debt issuance costs

2 unchanged sentences

Years ended December 31,

Future Minimum Payments

2026 Convertible Notes

2029 Convertible Notes

Total Convertible Notes

Total minimum payments

unamortized issuance costs

Convertible senior notes

Convertible Notes carrying value

Operating Lease Arrangements

In March 2018, the Company entered into an operating lease for its corporate headquarters (the “Stoughton Lease”) pursuant to which the Company leases approximately 50,678 of rentable square feet of space, in Stoughton, Massachusetts.

The Stoughton Lease commenced in August 2018 when the Company took possession of the space.

After the initial four-month free rent period following possession of the space, the operating lease will continue for a term of 10 years .

The Company has the right to extend the term of the Stoughton Lease for two additional five-year terms, provided that written notice is provided to the landlord no later than 12 months prior to the expiration of the then current Stoughton Lease term.

The Company did not believe the exercise of the extension to be reasonably certain as of the lease commencement date and therefore, did not include the extension as part of its recognized lease asset and lease liability.

The annual base rent is $ 1,214 , or $ 23.95 per rentable square foot, and will increase annually by 2.5 % to 3.1 % over the subsequent years.

In January 2016, the Company entered a non-cancellable contract with the contract manufacturing organization (“CMO”) of Xtampza ER.

The contract term continued through December 2022 and was automatically renewed for successive two-year terms as neither party gave written notice of termination two-years in advance.

Pursuant to the terms of the agreement, since 2016 the CMO has reserved 3,267 square feet of existing manufacturing space for a dedicated manufacturing suite for Xtampza ER, which was put into service in the year ended December 31, 2020.

As the Company can direct the use of the dedicated manufacturing suite and obtain substantially all the economic benefits of the dedicated space, the Company determined that the arrangement was an embedded operating lease.

The Company expects the lease term to continue at least through December 2026 and separated the agreement’s lease and non-lease components in determining the operating lease assets and liabilities.

The Company determined its best estimate of stand-alone prices for each of the lease and nonlease components by considering observable information including gross margins expected to be recovered from the Company’s service provider and terms of similar lease contracts.

In connection with the BDSI Acquisition, the Company acquired an operating lease for the former headquarters of BDSI pursuant to which the Company leases 11,628 of rentable square feet of space in Raleigh, North Carolina (the “BDSI Lease”).

The BDSI Lease continues through July 2023.

The Company does not expect to renew or extend the lease beyond its contractual expiration in July 2023.

As of December 31, 2022, the Company had operating lease assets of $ 6,861 and operating lease liabilities of $ 8,224 primarily related to operating lease agreements for its corporate headquarters.

The Company's main operating lease is for its corporate headquarters in Stoughton, Massachusetts, which was entered into in March 2018 and commenced in August 2018.

This lease encompasses approximately 50,678 square feet and is for an initial 10-year term, with options for two additional five-year extensions.

The initial annual base rent is $ 1,214 , subject to annual increases between 2.5 % to 3.1 %.

As of December 31, 2023, the Company's operating lease assets totaled $ 6,029 and operating lease liabilities amounted to $ 7,112 .

This primarily relates to the corporate headquarters lease, with other immaterial operating and embedded operating leases accounted for in the normal course of business.

Short-Term Lease Arrangements

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Years Ended December 31,

Lease Term and Discount Rate:

Weighted-average remaining lease term — operating leases (years)

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Years Ended December 31,

Other Information:

Cash paid for amounts included in the measurement of operating leases liabilities

1 unchanged sentence

The Company’s aggregate future minimum lease payments for its operating leases, including embedded operating lease arrangements, as of December 31, 2023, are as follows:

Years ended December 31,

Lease Payments

Total minimum lease payments

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The Company’s qualified incentive stock options, non-qualified options and restricted stock units generally vest ratably over a four-year period of service.

The stock options generally have a ten-year contractual life and, upon termination, vested options are generally exercisable between one and three months following the termination date, while unvested options are forfeited immediately upon termination.

Shares issued under all of our plans are funded through the issuance of new shares.

immediately upon termination.

Shares issued under all of the Company’s plans are funded through the issuance of new shares.

Refer to Note 17, Stock-based Compensation , for more information.

In connection with execution of the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio to purchase 1,041,667 shares of common stock of the Company (the “Warrant”) at an exercise price of $ 19.20 per share.

In connection with execution of the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio Therapeutics, Inc.

to purchase 1,041,667 shares of common stock of the Company (the “Warrant”) at an exercise price of $ 19.20 per share.

The Warrant was set to expire in November 2022 and included customary adjustments for changes in the Company’s capitalization.

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Share Repurchases

In August 2021, the Company’s Board of Directors authorized a repurchase program for the repurchase of up to $ 100,000 of shares of its common stock at any time or times through December 31, 2022 (the “Prior Repurchase Program”).

Prior Repurchase Program

In August 2021, the Company’s Board of Directors authorized the repurchase of up to $ 100,000 of shares of its common stock at any time or times through December 31, 2022 (the “Prior Repurchase Program”).

The Prior Repurchase Program permitted the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act.

Shares repurchased under the Prior Repurchase Program were returned to the Company’s pool of authorized but unissued shares available for reissuance.

The timing and amount of any such repurchases were determined based on share price, market conditions, legal requirements, and other relevant factors.

In October 2021, the Company’s Board of Directors authorized an ASR Program to repurchase $ 25,000 of the Company’s common stock, as part of the Company’s $ 100,000 Prior Repurchase Program.

Under the terms of the Company's ASR agreement with an investment bank (the “ASR Agreement”), the Company paid $ 25,000 on November 15, 2021, and received 1,026,694 shares, representing 80 % of the upfront payment on a price per share of $ 19.48 , the closing price on the date the agreement was executed.

The remaining shares purchased by the Company was based on the volume-weighted average price of its common stock through January 7, 2022, minus an agreed upon discount between the parties.

In October 2021, the Company’s Board of Directors authorized an accelerated share repurchase (“ASR”) program to repurchase $ 25,000 of the Company’s common stock, as part of the Company’s $ 100,000 Prior Repurchase Program.

Under the terms of the Company's ASR agreement with an investment bank, the Company paid $ 25,000 on November 15, 2021, and initially received 1,026,694 shares, representing 80 % of the upfront payment on a price per share of $ 19.48 , the closing price on the date the agreement was executed.

The remaining shares purchased by the Company were based on the volume-weighted average price of its common stock through January 7, 2022, minus an agreed upon discount between the parties.

On January 7, 2022, the ASR agreement settled and the Company received an additional 307,132 shares, bringing the total shares repurchased pursuant to the ASR agreement to 1,333,826 .

The ASR Agreement was accounted for as two separate transactions (1) a repurchase of common stock in a treasury stock transaction recorded on November 15, 2021 and (2) a forward contract indexed to the Company’s own common stock which settled on January 7, 2022.

The forward contract for the purchase of the remaining $ 5,000 , representing remaining shares to be delivered by the investment bank under the ASR Agreement, was recorded as a reduction to stockholders’ equity as of December 31, 2021.

Forward contracts to repurchase a variable number of the Company’s equity shares that require physical settlement are accounted for in conformity with guidance in ASC 815-10-15.

Under ASC 815-10-15-74, contracts issued or held by a

company that are both (1) indexed to its own stock and (2) classified in stockholders’ equity in its statement of financial position are not considered to be derivative instruments.

Based on the transaction structure, the Company concluded that the forward purchase contract portion of the Company’s ASR Agreement satisfied these criteria and accordingly was classified as an equity instrument.

In accordance with ASC 260-10-55-88, the above-noted treasury stock acquisition resulted in an immediate reduction of 1,026,694 shares from the outstanding shares used to calculate the weighted-average common shares outstanding for both basic and diluted earnings per share.

As the Company was entitled to receive additional shares of its common stock in connection with the outstanding forward contract, the receipt of additional shares of common stock was antidilutive.

Therefore, no adjustments were made in the computation of earnings per share for the period the forward was outstanding.

The forward contract was no longer outstanding as of December 31, 2022.

Through December 31, 2022, the Company repurchased 3,235,823 shares at a weighted-average price of $ 19.14 per share for a total of $ 61,924 under the Prior Repurchase Program and the cost of repurchased shares were recorded as treasury stock in the Consolidated Balance Sheet.

The ASR agreement was accounted for as two distinct transactions:

(1) an immediate repurchase of common stock, recorded as a treasury stock transaction, and (2) a forward contract indexed to the Company’s own stock.

The forward contract, which represented the remaining shares to be delivered by the investment bank, was recorded as a reduction to stockholders’ equity and was still outstanding as of December 31, 2021.

The Prior Repurchase Program expired on December 31, 2022.

In January 2023, the Company’s Board of Directors authorized the 2023 Share Repurchase Program for the repurchase of up to $ 100,000 of the Company’s common stock through December 31, 2023.

The 2023 Share Repurchase Program permits the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act.

Through December 31, 2022, the Company repurchased 3,235,823 shares at a weighted-average price of $ 19.14 per share for a total of $ 61,924 under the Prior Repurchase Program.

Repurchased shares were returned to the Company’s pool of authorized but unissued shares.

The cost of repurchased shares were recorded as treasury stock in the consolidated balance sheet.

Shares repurchased under the Prior Repurchase Program resulted in an immediate reduction of shares outstanding used to calculate the weighted-average common shares outstanding for both basic and diluted earnings per share.

As the Company was entitled to receive additional shares of its common stock in connection with the outstanding forward contracts, the receipt of additional shares of common stock was antidilutive.

Therefore, no adjustments were made in the computation of earnings per share for the period the forwards were outstanding.

2023 Repurchase Program

In January 2023, the Company’s Board of Directors authorized the repurchase of up to $ 100,000 of shares of its common stock at any time or times through December 31, 2023 (the “2023 Repurchase Program”).

The 2023 Repurchase Program permitted the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act.

In July 2023, the Company’s Board of Directors authorized an ASR program to repurchase $ 50,000 of the Company’s common stock, as part of the Company’s $ 100,000 2023 Repurchase Program.

Under the terms of the Company's ASR agreement with an investment bank, the Company paid $ 50,000 on August 7, 2023, and received 1,702,852 shares, representing 80 % of the upfront payment on a price per share of $ 23.49 , the closing price on the date the agreement was executed.

The remaining shares purchased by the Company were based on the volume-weighted average price of its common stock through October 31, 2023, minus an agreed upon discount between the parties.

In October 2023, the ASR agreement settled and the Company received an additional 462,442 shares, bringing the total shares repurchased pursuant to the ASR agreement to 2,165,294 .

In November 2023, the Company’s Board of Directors authorized a second ASR program as part of the Company’s $ 100,000 2023 Repurchase Program to repurchase $ 25,000 of the Company’s common stock.

Under the terms of the Company's ASR agreement with an investment bank, the Company paid $ 25,000 on November 9, 2023, and received 865,426 shares, representing 80 % of the upfront payment on a price per share of $ 23.11 , the closing price on the date the agreement was executed.

The remaining shares purchased by the Company were based on the volume-weighted average price of its common stock through December 29, 2023, minus an agreed upon discount between the parties.

In December 2023, the ASR agreement settled and the Company received an additional 57,349 shares, bringing the total shares repurchased pursuant to the ASR agreement to 922,775 .

Each ASR agreement was accounted for as two distinct transactions:

(1) an immediate repurchase of common stock, recorded as a treasury stock transaction, and (2) a forward contract indexed to the Company’s own stock.

The forward contracts, which represented the remaining shares to be delivered by the investment bank, were recorded as a reduction to stockholders’ equity.

Both forward contracts associated with these ASR agreements were settled and not outstanding as of December 31, 2023.

The 2023 Repurchase Program expired on December 31, 2023.

Through December 31, 2023, the Company repurchased 3,088,069 shares at a weighted-average price of $ 24.29 per share for a total of $ 75,000 under the 2023 Repurchase Program.

Repurchased shares were returned to the Company’s pool of authorized but unissued shares.

The cost of repurchased shares were recorded as treasury stock in the consolidated balance sheet.

Shares repurchased under the 2023 Repurchase Program resulted in an immediate reduction of shares outstanding used to calculate the weighted-average common shares outstanding for both basic and diluted earnings per share.

As the Company was entitled to receive additional shares of its common stock in connection with the outstanding forward contracts, the receipt of additional shares of common stock was antidilutive.

Therefore, no adjustments were made in the computation of earnings per share for the period the forwards were outstanding.

2024-2025 Repurchase Program

In January 2024, the Company’s Board of Directors authorized the repurchase of up to $ 150,000 of the Company’s common stock through June 30, 2025 (the “2024-2025 Repurchase Program”).

The 2024-2025 Repurchase Program permits the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act.

The timing and amount of any shares purchased on the open market will be determined based on the Company’s evaluation of the market conditions, share price and other factors.

The Company plans to utilize existing cash on hand to fund the share repurchase program.

The Company plans to utilize existing cash on hand to fund share repurchases.

Stock-based Compensation

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PSUs may vest in a range between 0 % and 200 %, based on the satisfaction of performance, and no shares will be issued if the minimum applicable performance metric is not achieved.

As these PSUs vest based on the achievement of market conditions, the grant date fair values were

determined using a Monte-Carlo valuation model.

As these PSUs vest based on the achievement of market conditions, the grant date fair values were determined using a Monte-Carlo valuation model.

The Monte-Carlo valuation model considered a variety of potential future share prices for the Company as well as its peer companies in the selected market index.

In December 2020, the Company’s Board of Directors approved a modification of PSUs that were originally granted to the Company’s senior management team in January 2019.

The modification replaced the original performance criteria for the 2020, 2021 and cumulative performance periods from being based on Xtampza 2020, 2021 and three-year cumulative revenue goals to being based on TSR for 2020, 2021 and the corresponding two-year cumulative period.

The PSUs achieved based on 2019 Xtampza revenues goals were not changed as part of the modification.

The Company accounted for this modification under ASC 718, and, per guidance, determined the modification created incremental value as the fair value of these awards was increased upon modification.

The increase in fair value resulted in an accelerated recognition of stock-based compensation expense on the modification date of $ 906 .

The total expense for these PSUs in years ended December 31, 2022, 2021, and 2020 was zero , $ 289 and $ 950 , respectively.

A summary of the Company’s performance share units activity for the year ended December 31, 2022 and related information is as follows:

A summary of the Company’s PSUs activity for the year ended December 31, 2023 and related information is as follows:

Weighted-Average

Grant Date Fair Value

Outstanding at December 31, 2021

Outstanding as of December 31, 2022

Performance adjustment

Outstanding at December 31, 2022

Outstanding as of December 31, 2023

The number of PSUs awarded represents the target number of shares of common stock that may be earned;

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Grant Date Fair Value

Outstanding at December 31, 2021

Outstanding at December 31, 2022

The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2022, 2021 and 2020 was $ 17.53 , $ 24.23 and $ 21.35 .

Outstanding as of December 31, 2022

Outstanding as of December 31, 2023

The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2023, 2022, and 2021 was $ 26.25 , $ 17.53 , and $ 24.23 , respectively.

The total fair value of RSUs vested (measured on the date of vesting) for the years ended December 31, 2023, 2022, and 2021 was $ 17,677 , $ 10,166 , and $ 11,165 , respectively.

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Term (in years)

Outstanding at December 31, 2021

Outstanding at December 31, 2022

Exercisable at December 31, 2022

Outstanding as of December 31, 2022

Outstanding as of December 31, 2023

Exercisable as of December 31, 2023

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

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The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

The weighted-average grant date fair value of stock options granted for the years ended December 31, 2022, 2021, and 2020 was zero , $ 12.60 and $ 12.78 respectively.

The Company did not grant stock options during the years ended December 31, 2023 and 2022.

The weighted-average grant date fair value of stock options granted for the year ended December 31, 2021 was $ 12.60 .

The total intrinsic value of stock options exercised for the years ended December 31, 2023, 2022, and 2021 was $ 4,786 , $ 3,943 , and $ 6,456 , respectively.

2 unchanged sentences

The Company’s 2015 Employee Stock Purchase Plan allows employees as designated by the Company’s Board of Directors to purchase shares of the Company’s common stock.

The purchase price is equal to 85 % of the lower of the closing price of the Company’s common stock on (1) the first day of the purchase period or (2) the last day of the purchase period.

The purchase price is equal to 85 % of the lower of the closing price of the Company’s common stock on:

(i) the first day of the purchase period;

or (ii) the last day of the purchase period.

During the year ended December 31, 2023, 26,505 shares of common stock were purchased for total proceeds of $ 460 .

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Total stock-based compensation expense

The (benefit from) provision for income taxes contained the following components:

The provision for (benefit from) income taxes contained the following components:

Years Ended December 31,

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Deferred benefit:

(Benefit from) provision for income taxes

Provision for (benefit from) income taxes

A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the consolidated financial statements is as follows:

1 unchanged sentence

Federal income tax expense at statutory rate

(Increase) decrease income tax (benefit) resulting from:

Change resulting from:

State income tax, net of federal benefit

Permanent differences

Permanent difference - debt extinguishment

Permanent differences - all other

Stock compensation

4 unchanged sentences

Effective income tax rate

During the year ended December 31, 2023, the effective tax rate was impacted by permanent differences, including the extinguishment of debt in connection with the repurchase of a portion of the Company’s 2026 Convertible Notes, for which certain extinguishment costs were not deductible for tax purposes.

Stock compensation, including the impact of excess benefits and 162(m) limitations, impacted the effective tax rate at varying percentages each year due to changes in the non-deductible amount and profit before tax.

In addition, during the year ended December 31, 2022, non-deductible transaction costs resulting from the BDSI Acquisition impacted the effective tax rate.

During the year ended December 31, 2021, the Company released the valuation allowance on the majority of its net operating losses, resulting in a significant discrete deferred tax benefit that impacted the effective tax rate.

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes.

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The Company maintains a partial valuation against its federal and state operating losses and federal R&D credits as of December 31, 2023.

The valuation allowance was $ 5,254 and $ 1,966 as of December 31, 2022 and 2021, respectively.

The change in the valuation allowance did not impact the tax provision for the year ended December 31, 2022.

The valuation allowance was $ 5,781 and $ 5,254 as of December 31, 2023 and 2022, respectively, and reflects limitations based on the Company’s ability to use such assets prior to expiration.

The change in the valuation allowance increased the tax provision by $ 527 for the year ended December 31, 2023.

The change in valuation allowance did not impact the tax provision for the year ended December 31, 2022.

As a result of sustained positive earnings history through cumulative earnings over the prior three years, as of June 30, during the year ended December 31, 2021, the Company began using projections of future taxable income as a source of realizing its deferred tax assets.

Accordingly, the Company recognized a deferred tax benefit of $ 78,042 for the year ended December 31, 2021 related to the reversal of valuation allowances.

As of December 31, 2022, 2021, and 2020, the Company had gross U.S.

federal net operating loss carryforwards of $ 229,797 , $ 119,280 , and $ 226,824 , respectively, which may be available to offset future income tax liabilities.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely but will generally limit the NOL deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Internal Revenue Code Sections 382 and 383).

The Tax Cuts and Jobs Act of 2017 (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely but will generally limit the net operating loss (“NOL”) deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Internal Revenue Code Sections 382 and 383).

Also, there will be no carryback for losses incurred after 2017.

Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income (subject to Internal Revenue Code Section 382 and 383) and be available for twenty years from the period the loss was generated.

As of December 31, 2023, the Company had gross U.S.

federal net operating loss carryforwards of $ 137,459 , of which $ 95,471 arose prior to 2018, which are available to offset future taxable income, if any, through 2037.

The remaining $ 41,988 are available for an indefinite period.

As of December 31, 2022, the Company had gross U.S.

federal net operating loss carryforwards of $ 229,797 .

As of December 31, 2023 and 2022, the Company also had gross U.S.

state net operating loss carryforwards of $ 202,381 and $ 252,597 , respectively, which may be available to offset future income tax liabilities and expire at various dates through 2037.

As of December 31, 2022, 2021 and 2020, the Company had federal research and development tax credit carryforwards of approximately $ 4,231 , $ 4,503 , and $ 4,623 , respectively, available to reduce future tax liabilities which expire at

various dates through 2037 and some are indefinite lived.

As of December 31, 2023 and 2022, the Company had federal research and development tax credit carryforwards of approximately $ 1,025 and $ 4,231 , respectively, available to reduce future tax liabilities which expire at various dates through 2032.

As of December 31, 2023 and 2022, the Company had state research and development tax credit carryforwards of approximately $ 672 and $ 832 , respectively, available to reduce future tax liabilities which expire at various dates through 2036.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions.

The net operating losses acquired in the BDSI acquisition, totaling $ 234,675 are subject to limitation.

The Company has completed studies to assess the impact of ownership changes, if any, on the Company’s ability to use its NOL and tax credit carryovers as defined under Section 382 of the Internal Revenue Code (“IRC 382”).

The Company concluded that there were ownership changes that occurred during the years 2006, 2012 and 2015 that would be subject to IRC 382 limitations.

In addition, the Company concluded that there were ownership changes for BDSI that occurred during the years 2006 and 2022 that would be subject to IRC 382 limitations.

The Company acquired $ 234,675 of net operating loss carryforward from the BDSI Acquisition.

The Company concluded that there were ownership changes for BDSI that occurred during the years 2006 and 2022 that would be subject to IRC 382 limitations.

These IRC 382 annual limitations may limit the Company’s ability to use pre-ownership change federal NOL carryovers and pre-ownership change federal tax credit carryovers.

As of December 31, 2023, remaining net operating losses of $ 124,310 are subject to limitation.

The Company files income tax returns in the United States and in several states.

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Years Ended December 31,

Gross UTB Balance at January 1

Gross UTB Balance as of January 1

Additions based on tax positions related to the current year

1 unchanged sentence

(Reductions) additions for tax positions of prior years

Gross UTB Balance at December 31

Net UTB impacting the effective tax rate at December 31 excluding valuation allowance impacts, if any

Gross UTB Balance as of December 31

Net UTB impacting the effective tax rate as of December 31 excluding valuation allowance impacts, if any

Employee Benefits

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Operating expenses

Research and development

Selling, general and administrative

Total operating expenses

(Loss) income from operations

Income from operations

Interest expense

Interest income

Loss on extinguishment of debt

(Loss) income before income taxes

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Selling, general and administrative

Restructuring

Total operating expenses

Income (loss) from operations

(Loss) income from operations

Interest expense

Interest income

Income (loss) before income taxes

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net income (loss)

Earnings (loss) per share — basic

Net (loss) income

(Loss) earnings per share — basic

Weighted-average shares — basic

Earnings (loss) per share — diluted

(Loss) earnings per share — diluted

Weighted-average shares — diluted

(1) In the fourth quarter of 2021, product revenues, net included a $ 38,329 product revenue adjustment related to returns adjustments, of which $ 13,787 related to Xtampza revenue and $ 24,542 related to Nucynta Products revenue.

In addition, selling general and administrative operating expense includes $ 2,935 of expense related to litigation settlements .

SUBSEQUENT EVENTS

2029 Convertible Notes

On February 10, 2023, the Company issued $ 241,500 principal amount of its 2.875 % Convertible Senior Notes due 2029.

The 2029 Convertible Notes issued on February 10, 2023 include $ 31,500 principal amount of notes issued pursuant to the full exercise by the initial purchasers of such optional purchase.

The 2029 Convertible Notes will be the Company’s senior, unsecured obligations and will be (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness, including its existing 2.625 % convertible senior notes due 2026;

(ii) senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the notes;

(iii) effectively subordinated to the Company’s existing and future secured indebtedness, including borrowings under the Company’s secured term loan agreement, to the extent of the value of the collateral securing that indebtedness;

and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The 2029 Convertible Notes will accrue interest at a rate of 2.875 % per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023.

The 2029 Convertible Notes will mature on February 15, 2029, unless earlier repurchased, redeemed or converted.

Before November 15, 2028, noteholders will have the right to convert their notes only upon the occurrence of certain events.

The Company will settle conversions by

paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate is 27.3553 shares of common stock per $ 1,000 principal amount of 2029 Convertible Notes, which represents an initial conversion price of approximately $ 36.56 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

Contemporaneously with the pricing of the notes in the offering, Collegium entered into separate privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $ 117,400 aggregate principal amount of the 2026 notes for an aggregate of approximately $ 140,100 of cash, which includes accrued and unpaid interest on the 2026 Convertible Notes to be repurchased.

Tranfser of Elyxyb Rights and Obligations to Scilex

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures