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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-22 · 122 added, 103 removed, 282 unchanged (44% of the section changed)

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We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Form 10-K, including those set forth under “Forward-looking Statements” and “Risk Factors,” as revised and supplemented by those risks described from time to time in other reports which we file with the SEC.

We are building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.

We commercialize our pain portfolio, consisting of Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), Belbuca, and Symproic, in the United States.

Xtampza ER, an abuse-deterrent, oral formulation of oxycodone, was approved by the United States Food and Drug Administration (“FDA”) in April 2016 for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative treatment options are inadequate.

Our discussion and analysis of our financial condition and results of operations for the year ended Decemebr 31, 2024 as compared to December 31, 2023 are discussed below.

For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

We are building a leading, diversified biopharmaceutical company committed to improving the lives of people living with serious medical conditions.

We have developed, licensed, and acquired a portfolio of meaningfully differentiated products for use in the treatment of moderate to severe pain and attention deficit hyperactivity disorder (“ADHD”), consisting of Jornay PM (“Jornay”), Belbuca, Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), and Symproic, in the United States.

Jornay is a central nervous system (“CNS”) stimulant prescription medicine that contains methylphenidate HCl, which was approved by the U.S.

Food and Drug Administration (“FDA”) in August 2018 for the treatment of attention deficit hyperactivity disorder (“ADHD”) in people six years of age and older and currently the only FDA-approved stimulant medication that is dosed in the evening.

We began recognizing product revenue related to Jornay in September 2024 following our acquisition of Ironshore Therapeutics Inc.

(“Ironshore”) (the “Ironshore Acquisition”).

Belbuca is a buccal film that contains buprenorphine, a Schedule III opioid, and was approved by the FDA in October 2015 for severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative options are inadequate.

Symproic was approved by the FDA in March 2017 for the treatment of opioid-induced constipation (“OIC”) in adult patients with chronic non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent (e.g., weekly) opioid dosage escalation.

We began shipping and recognizing product revenue related to Belbuca in March 2022 following our acquisition of BioDelivery Sciences International, Inc.

Xtampza ER, an abuse-deterrent, oral formulation of oxycodone, was approved by the FDA in April 2016 for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative treatment options are inadequate.

We commercially launched Xtampza ER in June 2016.

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Nucynta IR is indicated for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate in adults and pediatric patients aged 6 years and older with a body weight of at least 40 kg.

We began shipping and recognizing product sales on the Nucynta Products in January 2018 and began marketing the Nucynta Products in February 2018.

We began shipping and recognizing product revenue on the Nucynta Products in January 2018 and began marketing the Nucynta Products in February 2018.

In August 2023, the FDA granted New Patient Population exclusivity in pediatrics for Nucynta IR.

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exclusivity for Nucynta IR from June 27, 2025 to July 3, 2026.

On March 22, 2022, we 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 of the BDSI Acquisition, we acquired Belbuca and Symproic.

We began shipping and recognizing product sales related to Belbuca and Symproic in March 2022.

We began shipping and recognizing product revenue related to Symproic in March 2022 following our acquisition of BDSI.

Financial Operations Overview

Product Revenues

Product revenues through the year ended December 31, 2023 were primarily generated from sales of Xtampza ER, the Nucynta Products, Belbuca, and Symproic.

Product revenues through the year ended December 31, 2024 were generated from sales of Jornay, Belbuca, Xtampza ER, the Nucynta Products, and Symproic.

In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (“ASC 606”) product sales are recorded upon delivery of products to customers (upon the transfer of control of the product to the customer), net of a provision for estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.

Cost of Product Revenues

Cost of product revenues include amortization and impairment expense for the intangible assets acquired in connection with business combinations and asset acquisitions, royalty expenses, the cost of active pharmaceutical ingredient, the cost of producing finished goods that correspond with revenue for the reporting period, as well as certain period costs

related to freight, packaging, stability and quality testing.

Refer to Note 5, License Agreements , and Note 11, Goodwill and Intangible Assets, for further detail around the intangible assets acquired from the BDSI Acquisition, the Nucynta Intangible Asset and royalty expenses.

Refer to Note 5, License Agreements , and Note 11, Goodwill and Intangible Assets, for further detail around the intangible assets acquired from the Ironshore Acquisition, the BDSI Acquisition, the Nucynta Intangible Asset, and royalty expenses.

Research and Development Expenses

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Selling, general and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation and travel expenses for our employees.

Other selling, general and administrative expenses include facility-related costs and professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining patents.

Other selling, general and administrative expenses include expenses related to commercial activities, such as sales, marketing, and market access, facility-related costs, professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining patents.

As we continue to invest in the commercialization of our products, we expect our selling, general and administrative expenses to continue to be substantial for the foreseeable future.

Interest Expense

Interest expense consists primarily of cash and non-cash interest costs related to our debt, including the term loan issued in March 2022 in connection with the BDSI Acquisition (the “2022 Term Loan”), the term notes (the “2020 Term Loan”) and convertible notes (the “2026 Convertible Notes”) issued in February 2020 in connection with the Nucynta Acquisition, and convertible notes issued in February 2023 (the “2029 Convertible Notes”).

On March 22, 2022 the outstanding balance related to the 2020 Term Loan was fully paid in connection with the closing of the BDSI Acquisition and establishment of the 2022 Term Loan.

Interest expense consists primarily of cash and non-cash interest costs related to our debt, including the term loan issued in March 2022 in connection with the BDSI Acquisition and refinancing our 2020 Term Loan (the “2022 Term Loan”), the term loan issued in July 2024 in connection with the Ironshore Acquisition (the “2024 Term Loan”), convertible notes issued in February 2020 in connection with the Nucynta Acquisition (the “2026 Convertible Notes”), and convertible notes issued in February 2023 (the “2029 Convertible Notes”).

Interest Income

Interest income consists of interest earned on our cash, cash equivalents, and marketable securities.

Interest income consists of interest and amortization of premiums and discounts on investments earned on our cash, cash equivalents, and marketable securities.

Provision for Income Taxes

The provision for income taxes reflects expense or tax benefit for federal and state income taxes, as well as the impact of non-deductible expenses.

During the year ended December 31, 2021, we removed the valuation allowance on the substantial majority of our deferred tax assets, resulting in the recognition of a discrete deferred tax benefit of $78.0 million in 2021.

Critical Accounting Policies and Significant Judgments and Estimates

Critical Accounting Policies and Estimates

Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements.

Estimates include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of our 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, intangible assets and deferred tax valuation allowances.

We base our estimates and assumptions on

historical experience when available and on various factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Estimates include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of our products, estimates related to the fair value of assets acquired and liabilities assumed in business combinations, 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 goodwill and intangible assets, and deferred tax valuation allowances.

We base our estimates and assumptions on historical experience when available and on various factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

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This generally occurs upon delivery to our customers when estimated provisions for chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns are reasonably determinable.

Therefore, product sales are recorded upon delivery to our customers net of estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, as well as estimated product returns.

Therefore, product sales are recorded upon delivery to our customers net of estimated rebates and incentives, product returns, and trade allowances and chargebacks.

Sales Deductions

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

As our rebates and incentives are based on products dispensed to patients, we are required to estimate the expected value of claims at the time of product delivery to distributors.

As our rebates and incentives are based on products dispensed to patients, we are required

to estimate the expected value of claims at the time of product delivery to distributors.

Given that distributors sell the product to pharmacies, which in turn dispense the product to patients, claims can be submitted significantly after the related sales are recognized.

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

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.

Provisions for product returns, including returns for Jornay, Belbuca, Xtampza, the Nucynta Products, 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 we expect to be entitled (that is, excluding the products expected to be returned).

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Business Combination Accounting and Valuation of Acquired Assets

We completed the BDSI Acquisition on March 22, 2022, which was accounted for as a business combination.

To determine whether the acquisition should be accounted for as a business combination or as an asset acquisition, we made certain judgments regarding whether the acquired set of activities and assets met the definition of a business.

We completed the Ironshore Acquisition in September 2024 and the BDSI Acquisition in March 2022, both of which were accounted for as business combinations.

To determine whether the acquisitions should be accounted for as business combinations or as asset acquisitions, we made certain judgments regarding whether the acquired set of activities and assets met the definition of a business.

Judgment is required in assessing whether the acquired processes or activities, along with their inputs, would be substantive to constitute a business, as defined by U.S.

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The determination of the fair value of the acquired assets and liabilities assumed is a critical accounting estimate because the estimation of fair values requires significant management judgment and requires various assumptions based on non-observable inputs that are included in valuation models.

An income approach, which generally relies upon projected cash flow models, is used in estimating the fair value of the acquired intangible assets and the fair value of acquired inventory.

These cash flow projections are based on management’s estimates of economic and market conditions including the estimated future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit margins, tax rates, and an appropriate discount rate.

An income approach, which generally relies upon projected cash flow models, is used in estimating the fair value of the acquired intangible assets and the deferred royalty obligation.

The fair value of acquired inventory is based on inventory cost and other assumptions.

The cash flow projections are based on management’s estimates of economic and market conditions including the estimated future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit margins, tax rates, and an appropriate discount rate.

During the measurement period, which occurs before finalization of the purchase price allocation, changes in assumptions and estimates that result in adjustments to the fair values of assets acquired and liabilities assumed, if based on facts and circumstances existing at the acquisition date, are recorded on a retroactive basis as of the acquisition date, with the corresponding offset to goodwill.

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If the sum of expected undiscounted future cash flows of the intangible assets (or asset group) 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.

As of December 31, 2023, our intangible assets included those acquired in connection with the BDSI Acquisition and the Nucynta Intangible Asset.

As of December 31, 2024, our intangible assets included those acquired in connection with the Ironshore Acquisition, the BDSI Acquisition, and the Nucynta Intangible Asset.

We utilize the asset and liability method of accounting for income taxes.

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To the extent our future expectations change, we would have to assess the recoverability of these deferred tax assets at that time.

As a result of sustained positive earnings history as demonstrated through cumulative earnings, we are using projections of future taxable income as a source of realizing our deferred tax assets.

We have maintained a valuation allowance on the portion of our deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions of $6.5 million as of December 31, 2024.

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In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Comparison of the Years Ended December 31, 2024 and 2023

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Operating expenses

Research and development

Selling, general and administrative

Gain on fair value remeasurement of contingent consideration

Total operating expenses

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Loss on extinguishment of debt

Income (loss) before income taxes

Provision for (benefit from) income taxes

Net income (loss)

Income before income taxes

Provision for income taxes

Product revenues, net

Product revenues, net were $631.4 million for the year ended December 31, 2024 (“2024”), compared to $566.8 million for the year ended December 31, 2023 (“2023”), representing a $64.6 million increase.

The $102.9 million increase is primarily due to increases in revenue for Belbuca of $55.6 million, Xtampza ER of $38.6 million, the Nucynta Products of $6.3 million, and Symproic of $4.2 million, partially offset by decreases in other revenue of $1.8 million.

The increase in revenue for Belbuca of $55.6 million and Symproic of $4.2 million is primarily due to a full year of revenue in 2023, compared to a partial year of revenue in 2022 due to the timing of the BDSI Acquisition.

The increase in revenue for Xtampza ER of $38.6 million is primarily due to lower gross-to-net adjustments primarily related to provisions for rebates and higher gross price, partially offset by lower sales volume and higher gross-to-net adjustments related to provisions for returns.

The increase in revenue for the Nucynta Products of $6.3 million is primarily due to lower gross-to-net adjustments primarily related to provisions for rebates and returns and higher gross price, partially offset by decreased sales volume.

The $64.6 million increase is primarily due to increases in revenue for Jornay of $37.2 million, Belbuca of $29.2 million, and Xtampza ER of $14.0 million, partially offset by decreases in revenue for the Nucynta Products of $14.3 million and Symproic of $1.4 million.

The increase in revenue for Jornay of $37.2 million is due to the acquisition of the product from Ironshore in 2024.

The increase in revenue for Belbuca of $29.2 million is primarily due to higher sales volume, gross price, and lower gross-to-net adjustments related to provisions for rebates, partially offset by higher gross-to-net adjustments related to provisions for chargebacks.

The increase in revenue for Xtampza ER of $14.0 million is primarily due to lower gross-to-net adjustments related to provisions for rebates and higher gross price, partially offset by lower sales volume.

The decrease in revenue for the Nucynta Products of $14.3 million is primarily due to lower sales volume and higher gross-to-net adjustments related to provisions for rebates, partially offset by higher gross price.

Cost of product revenues

Cost of product revenues (excluding intangible asset amortization) was $88.8 million for 2024, compared to $94.8 million for 2023.

The $23.4 million decrease was primarily related to 2022 including higher cost of product revenues related to the step-up basis in inventory acquired from BDSI as well as lower sales volume in 2023 for Xtampza and the Nucynta Products.

The $6.0 million decrease was primarily related to 2023 including higher cost of product revenues related to the step-up basis in inventory acquired from BDSI, partially offset by cost of product revenues for Jornay as well as higher sales volume in 2024 for Belbuca.

Intangible asset amortization was $165.3 million for 2024, compared to $145.8 million for 2023.

The $9.5 million increase in intangible asset amortization was due to a full year of amortization expense recognized in 2023 related to the intangible assets acquired from BDSI of which $435.0 million of consideration was allocated to our acquired intangible assets, compared to a partial year of amortization expense in 2022.

This increase was partially offset by a decrease in amortization expense as a result of the FDA granting New Patient Population exclusivity in pediatrics for Nucynta IR to July 3, 2026, resulting in an extension of the estimated useful life of the underlying intangible asset.

The intangible assets are amortized on a straight-line basis over the respective estimated useful lives.

The $19.5 million increase in intangible asset amortization was primarily related to the Ironshore Acquisition in 2024.

This increase was partially offset by a decrease as a result of the FDA granting New Patient Population exclusivity for Nucynta IR until July 3, 2026 in the third quarter of 2023, resulting in an extension of the estimated useful life of the underlying intangible asset and a reduction of amortization expense recognized in 2024.

Operating expenses

We did not recognize research and development expenses in 2023, compared to $4.0 million recognized in 2022.

The $4.0 million decrease was due to redirection of resources from research and development activities during 2022 as we shifted our focus to supporting our commercial products rather than research and development.

Selling, general and administrative expenses were $210.4 million for 2024, compared to $159.2 million for 2023.

The $13.0 million decrease was primarily related to:

● a decrease in acquisition related expenses classified as selling, general and administrative of $30.6 million;

The $51.2 million increase was primarily related to:

● an increase in acquisition related expense of $24.3 million due to the Ironshore Acquisition;

● an increase in salaries, wages and benefits of $23.1 million primarily due to additional headcount added in September 2024 as a result of the Ironshore Acquisition, including the sales force that promotes Jornay, as well as expenses incurred as a result of the CEO transition announced in May 2024, including higher stock-based compensation expense of $3.7 million related to accelerated equity awards and higher severance, benefits, and related expenses incurred of $3.1 million;

● an increase in sales and marketing expenses of $9.5 million, primarily due to expenses incurred to support the ongoing commercialization of Jornay following the Ironshore Acquisition in September 2024;

● an increase in regulatory fees of $1.8 million primarily due to fees incurred for Jornay following the Ironshore Acquisition in September 2024;

partially offset by

● an increase in salaries, wages, and benefits of $8.7 million, primarily due to increases in personnel costs for employees retained following the BDSI Acquisition and higher stock-based compensation expenses;

● an overall increase in audit and legal expenses of $5.0 million, primarily due to an $8.5 million litigation settlement;

● an increase in sales and marketing expenses of $3.1 million, primarily due to expenses incurred to support the ongoing commercialization of products acquired from BDSI;

● an increase in regulatory expenses of $0.8 million, primarily due to a full year of expenses related to products acquired from BDSI.

● an overall decrease in audit and legal expenses of $9.5 million, primarily due to an $8.5 million litigation settlement during 2023 and lower litigation related expenses.

Interest expense and Interest income

Interest expense was $74.0 million for 2024, compared to $83.3 million for 2023.

The $20.1 million increase was primarily due to the 2022 Term Loan that we entered into in connection with the BDSI Acquisition, higher interest rates impacting our variable rate term loan debt, and higher interest expense due to the issuance of the 2029 Convertible Notes (offset by the partial repurchase of the 2026 Convertible Notes).

The $9.3 million decrease was primarily due to lower interest expense associated with the 2022 Term as a result of a lower average overall principal balance during 2024, as well as a lower interest rate on the 2024 Term Loan.

Interest income was $14.0 million for 2024, compared to $15.6 million for 2023.

The $14.6 million increase was primarily due to a higher overall balance invested in 2023 compared to 2022 and higher interest rates earned on cash equivalents and marketable securities.

The $1.6 million decrease was primarily due to lower interest rates earned on cash equivalents and marketable securities as well as a lower overall average balance invested in 2024 compared to 2023.

Loss on extinguishment of debt

We recognized a $23.5 million loss on extinguishment of debt in 2023 in connection with the repurchase of a portion of our 2026 Convertible Notes.

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

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 provision for income taxes was $27.6 million for 2023, compared to a $3.8 million benefit from income taxes for 2022.

The tax provision for 2023 was impacted by non-deductible costs, including non-deductible costs associated with the debt extinguishment that occurred in the first quarter of 2023 as well as non-deductible costs related to stock-based compensation, including 162(m) limitations.

In 2022, we recognized a deferred tax benefit, partially offset by state income tax expense.

The provision for income taxes in 2022 primarily consisted of state income tax for states for which our state-level NOLs did not fully offset state-level taxable income.

Loss on extinguishment of debt was $11.3 million for 2024, compared to $23.5 million for 2023.

The $12.2 million decrease was due to 2023 including a $23.5 million loss on extinguishment resulting from the repurchase of $117.4 million of the 2026 Convertible Notes in 2023.

In 2024, the remaining $26.4 million of the 2026 Convertible Notes were redeemed, resulting in a $7.2 million loss on extinguishment in 2024.

In addition, in 2024, assumed debt from the Ironshore Acquisition was redeemed, resulting in a loss on extinguishment of $4.1 million in 2024.

The provision for income taxes was $29.4 million for 2024, compared to $27.6 million for 2023.

The $1.8 million increase is primarily due to higher earnings before taxes in 2024, partially offset by 2023 including higher non-deductible costs associated with debt extinguishments.

The effective tax rate was 29.8% and 36.4% for 2024 and 2023, respectively.

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Sources of Liquidity

Historically, we have funded our operations primarily through the private placements and/or public offerings of our preferred stock, common stock, and convertible notes;

commercial bank debt;

Historically, we have funded our operations primarily through public offerings of our common stock, private placements of term debt;

convertible notes;

and cash inflows from sales of our products.

We are primarily dependent on the commercial success of Belbuca, Xtampza, and the Nucynta Products.

In March 2022, our debt balance increased significantly as we modified the 2020 Term Loan with Pharmakon to an increased principal balance of $650.0 million to fund a portion of the consideration paid to complete the BDSI Acquisition.

We paid $100.0 million in principal payments during the first year of the 2022 Term Loan and the remaining $550.0 million balance will be paid in equal quarterly installments over the remaining three years of the term note.

We are primarily dependent on the commercial success of Jornay, Belbuca, Xtampza, and the Nucynta Products.

In July 2024, we amended and replaced our 2022 Term Loan with the 2024 Term Loan, which consisted of a $320.8 million initial term loan and a $325.0 million delayed draw term loan.

We used the proceeds of the initial term loan to refinance in full all outstanding indebtedness under the 2022 Term Loan.

We used the proceeds of the delayed draw term loan to fund a portion of the consideration to complete the Ironshore Acquisition and, to pay fees and expenses in connection with the Ironshore Acquisition and the 2024 Term Loan.

We will use the remainder for general corporate purposes.

As of December 31, 2024, the outstanding principal balance of the 2024 Term Loan was $629.7 million, of which $64.6 million in principal payments are due within the next 12 months.

As of December 31, 2023, the outstanding principal balance of the Convertible Notes was $267.9 million, of which $26.4 million is due in 2026 and $241.5 million is due in 2029.

As of December 31, 2024, the outstanding principal balance of the Convertible Notes was $241.5 million, which is due in 2029.

As of December 31, 2024, and December 31, 2023, we had $70.6 million and $238.9 million in cash and cash equivalents, respectively.

We believe that our cash, cash equivalents, and marketable securities as of December 31, 2023, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future.

Although our current assets of $482.3 million and current liabilities of $508.1 million resulted in a working capital deficit as of December 31, 2024, we believe that our cash, cash equivalents, and marketable securities as of December 31, 2024, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future.

Borrowing Arrangements and Equity Offerings

The following transactions represent our material borrowing arrangements and equity offerings:

the 2022 Term Loan, the 2026 Convertible Notes, and the 2029 Convertible Notes.

the 2024 Term Loan, and the 2029 Convertible Notes.

Refer to Note 14, Debt , for more information.

In this section, we discuss cash flows for the year ended December 31, 2024 compared to the year ended December 31, 2023.

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Years Ended December 31,

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Net cash (used in) provided by financing activities

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

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

Operating activities.

Cash provided by operating activities was $205.0 million in 2024, compared to $274.7 million in 2023.

The $150.5 million increase in cash provided by operating activities was primarily due to the increase in cash flow from operating results, which reflects operating earnings, after adjustment for non-cash items that are included in net income, including higher intangible asset amortization as a result of the BDSI Acquisition and recognition of a loss on extinguishment of debt in connection with the repurchase of a portion of our 2026 Convertible Notes, as well as changes in working capital.

The $69.7 million decrease in cash provided by operating activities was primarily due to $60.9 million of cash used to settle certain liabilities assumed from Ironshore at the Acquisition in September 2024, including the settlement of $28.4 million of Ironshore cash-settled share-based awards liabilities, $23.5 million of accrued operating liabilities, and $9.0 million of Ironshore cash-settled warrant liabilities.

In addition, $20.7 million of acquisition-related expenses were paid in 2024, including $9.6 million in employee-related expenses, $7.8 million in transaction costs, $1.1 million in Ironshore directors and officers insurance expense, and $2.2 million in other acquisition related expenses in 2024 related to the Ironshore Acquisition.

These decreases were partially offset by increases in cash flow from operating results, which reflects operating earnings, after adjustment for non-cash items that are included in net income.

Investing activities.

Cash used in investing activities was $287.8 million in 2024, compared to $70.8 million in 2023.

The $502.9 million decrease in cash used in investing activities was primarily due to the use of $572.1 million for the BDSI Acquisition in 2022, net of cash acquired, partially offset by purchases and maturities of marketable securities in 2023.

The $217.0 million increase in cash used in investing activities was primarily due to $267.5 million cash paid to acquire Ironshore (net of cash acquired) and $18.8 million increase in purchases of marketable securities, partially offset by $70.6 million increase in maturities of marketable securities.

Financing activities.

Cash used in financing activities was $140.2 million in 2023, compared to cash provided by financing activities of $436.7 million in 2022.

Cash used in financing activities was $60.6 million in 2024, compared to $140.2 million in 2023.

The $79.6 million decrease was primarily due to:

● the repayment of the outstanding balance of the 2020 Term Loan and establishment of the 2022 Term Loan in connection with the BDSI Acquisition, which was accounted for as a debt modification and resulted in $517.7 million in proceeds from the term note modification in 2022;

● an increase in repayments of term notes of $87.5 million;

● an increase in repurchases of common stock of $60.9 million, which includes $75.0 million related to accelerated share repurchases executed in 2023;

● an increase in proceeds received from the modification of term loans of $313.2 million;

● a decrease in repayments of term notes of $54.7 million;

● a decrease in cash used to repurchase common stock of $15.0 million;

● an increase in cash provided from stock option exercises of $1.6 million;

partially offset by

● the repurchase of a portion of our 2026 Convertibles Notes and issuance of our 2029 Convertible Notes which resulted in net proceeds of $96.6 million in 2023.

● the payoff of assumed debt from Ironshore of $164.6 million in 2024;

● the repurchase of a portion of our 2026 Convertible Notes and issuance of our 2029 Convertible Notes which resulted in net proceeds of $96.6 million in 2023;

● the $33.2 million cash settlement of the remaining 2026 Convertible Notes in 2024;

● an increase in payments for employee stock tax withholdings of $10.8 million.

Funding requirements

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● royalties we pay on sales of certain products within our portfolio;

● payment of income taxes;

● deferred royalty obligation in connection with Jornay;

● operating lease obligations;

● minimum purchase obligations in connection with our contract manufacturer;

● cash paid for income taxes.

● contingent payment upon the achievement of a financial milestone based on net revenues of Jornay.

In addition, we have significant potential future capital requirements, including:

● we may enter into business development transactions, including acquisitions, collaborations, licensing arrangements and equity investments, that require additional capital;

● in January 2024, our Board of Directors authorized a new share repurchase program for the repurchase of up to $150.0 million of shares of our common stock through June 30, 2025.

● any judgements rendered against us in connection with any of the litigation matters set forth in Note 13, Commitments and Contingencies , to our financial statements;

● in January 2024, our Board of Directors authorized a share repurchase program for the repurchase of up to $150.0 million of shares of our common stock through June 30, 2025.

As of December 31, 2024, $90 million remained available for share repurchases under the 2024-2025 Repurchase Program .

Future share repurchases will depend upon, among other factors, our cash balances and potential future capital requirements, our results of operations and financial conditions, the price of our common stock on the Nasdaq Global Select Market, and other factors that we may deem relevant.

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operating lease obligations;

and purchase obligations.

deferred royalty obligation, and purchase obligations.

For further detail regarding our term notes and convertible senior notes, refer to Note 14, Debt.

For further detail regarding our deferred royalty obligation, refer to Note 15, Deferred Royalty Obligation.

For further detail regarding our operating lease obligations, refer to Note 16, Leases .

Our purchase obligations represent the minimum purchase obligations of up to $3.0 million per year with our contract manufacturer which are in effect as of December 31, 2024 and will remain in effect each year until the termination of our manufacturing agreement.

We also have employment agreements with executive officers that would require us to make severance payments to them if we terminate their employment without cause or the executives resign for good cause.

These payments are contingent upon the occurrence of various future events, and the amounts payable under these provisions depend upon the level of compensation at the time of termination of employment, and therefore, are not calculable at this time.

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● adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;

● we exclude stock-based compensation expense from adjusted EBITDA although:

(i) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;

and (ii) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;

● adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;

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● adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

● we exclude stock-based compensation expense from adjusted EBITDA although:

(i) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;

● we exclude impairment expenses from adjusted EBITDA and, although these are non-cash expenses, the asset(s) being impaired may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;

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● we exclude losses on extinguishments of debt as these expenses are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis;

● we exclude other expenses, from time to time, that are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis.

Adjusted EBITDA for the years ended December 31, 2024 and 2023 was as follows:

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(in thousands)

GAAP net income (loss)

GAAP net income

Interest expense

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Loss on extinguishment of debt

Provision for (benefit from) income taxes

Impairment expense

Provision for income taxes

Stock-based compensation

Litigation settlements

Acquisition related expenses

Recognition of step-up basis in inventory

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Total adjustments

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Adjusted EBITDA was $401.2 million for 2024 compared to $367.0 million for 2023.

The $101.0 million increase was primarily due to higher revenues and gross profit before excluded costs, partially offset by higher adjusted operating expenses.

The $34.2 million increase was primarily due to higher revenues of $64.6 million, partially offset by higher salaries, wages and benefits (excluding stock-based compensation and CEO transition expense) of $14.7 million and higher sales and marketing expenses of $9.5 million.

The following is a summary of 2024 quarterly Adjusted EBITDA:

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(in thousands)

GAAP net (loss) income

GAAP Net income

Interest expense

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Loss on extinguishment of debt

(Benefit from) provision for income taxes

Provision for income taxes

Stock-based compensation

1 unchanged sentence

Recognition of step-up basis in inventory

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Total adjustments

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Litigation settlements

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Total adjustments

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The $27.0 million increase was primarily driven by:

● an increase in salaries, wages, and benefits (excluding stock-based compensation) of $1.8 million, primarily due to increases in personnel costs for employees retained following the BDSI Acquisition;

● an increase in sales and marketing expenses of $3.1 million, primarily due to expenses incurred to support the ongoing commercialization of products acquired from BDSI;

● an increase in regulatory expenses of $0.8 million, primarily due to a full year of expenses related to products acquired from BDSI;

partially offset by

● a decrease in audit and legal expenses (excluding litigation settlements) of $3.5 million.

● an increase in salaries, wages, and benefits (excluding stock-based compensation and CEO transition expense) of $14.7 million, primarily due to increases in personnel costs for employees retained following the Ironshore Acquisition;

● an increase in regulatory fees of $1.8 million, primarily due to fees incurred for Jornay following the Ironshore Acquisition in September 2024.

The following is a summary of 2024 quarterly adjusted operating expenses:

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Litigation settlements

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Total adjustments

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(in thousands, except share and per share data)

GAAP net income (loss)

GAAP net income

Non-cash interest expense

Loss on extinguishment of debt

Impairment expense

Stock-based compensation

Litigation settlements

Acquisition related expenses

Recognition of step-up basis in inventory

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Income tax effect of above adjustments (1)

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(in thousands, except share and per share data)

GAAP net (loss) income

GAAP net income

Non-cash interest expense

1 unchanged sentence

Stock-based compensation

Litigation settlements

Recognition of step-up basis in inventory

CEO transition expense

Acquisition related expenses

Gain on fair value remeasurement of contingent consideration

Income tax effect of above adjustments (1)

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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 7. Management’s Discussion and Analysis