Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024.
Management’s Report on Internal Control Over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(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; and
(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.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. 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
60
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. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of our internal control over financial reporting.
As permitted by SEC guidance, management may omit an assessment of a newly acquired operation’s internal control over financial reporting for up to one year from the date of acquisition. Accordingly, we excluded the portion of Ironshore’s operations that represented approximately 8.5% of total operating expenses for the year ended December 31, 2024 from management’s assessment of internal control over financial reporting.
Based on our evaluation, and subject to the exclusion above, management has concluded that our internal control over financial reporting was effective as of December 31, 2024.
Changes in Internal Control Over Financial Reporting
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, 2024 that have materially affected, or are 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, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Collegium Pharmaceutical, Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 27, 2025, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Ironshore Therapeutics Inc., which was acquired on September 3, 2024, and whose financial statements constitute 8.5% of the consolidated operating expenses for the year ended December 31, 2024. Accordingly, our audit did not include the internal control over financial reporting at Ironshore Therapeutics Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
62
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness 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 the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 27, 2025
Item 9B. Other Information
Insider Trading Arrangements
During the three months ended December 31, 2024, 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.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART II I
Item 10. Director s, Executive Officers, and Corporate Governance
Other than the information regarding our executive officers provided in Part I of this report under the heading “ Business — Our Executive Officers ,” the information required to be furnished pursuant to this item is incorporated herein by reference to our definitive proxy statement for the 2025 Annual Meeting of the Shareholders.
Our Board of Directors has adopted a Code of Ethics applicable to all of our employees, executive officers and directors. The Code of Ethics is available on our website at www.collegiumpharma.com. Our Board of Directors is responsible for overseeing compliance with the Code of Ethics, and our Board of Directors or an appropriate committee thereof must approve any waivers of the Code of Ethics for employees, executive officers or directors. 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.
Item 11. Executive Compensation
The information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the 2025 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.”
63
Item 12. 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 2025 Annual Meeting of Shareholders under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”
Item 13. 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 2025 Annual Meeting of Shareholders under the captions “Certain Relationships and Related Party Transactions” and “Election of Directors – Director Independence.”
Item 14. 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 2025 Annual Meeting of Shareholders under the captions “Ratification of Appointment of Independent Registered Public Accounting Firm - Independent Registered Public Accountants’ Fees” and “Ratification of Appointment of Independent Registered Public Accounting Firm – Pre-Approval Policies and Procedures.”
PART I V
Item 15. Exhibits and Financial Statement Schedules
Consolidated Financial Statements
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.
Exhibits
Exhibit Number
Exhibit Description
2.1
†
Agreement and Plan of Merger, dated as of February 14, 2022, by and among Collegium Pharmaceutical, Inc., Bristol Acquisition Company, Inc. and BioDelivery Sciences International, Inc.
(1)
2.2
*
Agreement and Plan of Merger, dated as of July 28, 2024, by and among Collegium Pharmaceutical Inc., Ironshore Therapeutics Inc. and Shareholder Representative Services LLC
(2)
3.1
†
Third Amended and Restated Articles of Incorporation of Collegium Pharmaceutical, Inc.
(3)
3.2
†
Amended and Restated Bylaws of Collegium Pharmaceutical, Inc.
(4)
4.1
†
Indenture, dated as of February 13, 2020, between Collegium Pharmaceutical, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee.
(5)
4.2
†
First Supplemental Indenture, dated as of February 13, 2020, between Collegium Pharmaceutical, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee.
(5)
4.3
†
Form of certificate representing the 2.625% Convertible Senior Notes due 2026 (included as Exhibit A to Exhibit 4.2).
(5)
4.4
†
Indenture, dated as of February 10, 2023, between Collegium Pharmaceutical, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee.
(6)
4.5
†
Form of certificate representing the 2.875% Convertible Senior Notes due 2029 (included as Exhibit A to Exhibit 4.4).
(6)
4.6
†
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
(7)
10.1
†
Office Lease agreement by and between Campanelli-Trigate 100 TCD Stoughton, LLC, and Collegium Pharmaceutical, Inc as of March 23, 2018.
(8)
64
10.2
+†
2015 Employee Stock Purchase Plan.
(9)
10.3
+†
Performance Bonus Plan.
(10)
10.4(a)
+†
Amended and Restated 2014 Stock Incentive Plan.
(9)
10.4(b)
+†
Form of Incentive Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan.
(9)
10.4(c)
+†
Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan.
(9)
10.4(d)
+
Form of Restricted Stock Unit Agreement under the Amended and Restated 2014 Stock Incentive Plan.
(11)
10.4(e)
+†
Form of Performance Share Unit Agreement under the Amended and Restated 2014 Stock Incentive Plan.
(12)
10.5
†
Form of Indemnification Agreement.
(10)
10.6
+†
Amended & Restated Employment Agreement, dated December 27, 2020, by and between Shirley Kuhlmann and Collegium Pharmaceutical, Inc.
(13)
10.7
+†
Amended & Restated Employment Agreement, dated December 27, 2020, by and between Collegium Pharmaceutical, Inc. and Scott Dreyer.
(13)
10.8
†
License Agreement (U.S.), dated as of January 13, 2015, by and among Grünenthal GmbH, Janssen Research & Development, LLC, Assertio Therapeutics, Inc. and Collegium Pharmaceutical, Inc.
(14)
10.9
†
Consent Agreement, dated January 30, 2020, by and among Grünenthal GmbH, Assertio Therapeutics, Inc. and Collegium Pharmaceutical, Inc.
(14)
10.10
†
Settlement Agreement, dated September 29, 2020, by and among Collegium Pharmaceutical, Inc. and Teva Pharmaceuticals USA, Inc.
(15)
10.11
+†
Employment Agreement, dated May 24, 2021, by and between Colleen Tupper and Collegium Pharmaceutical, Inc.
(16)
10.12
†
Second Amended and Restated Loan Agreement by and among Collegium Pharmaceutical Inc., its subsidiaries party thereto; BioPharma Credit PLC, as collateral agent and lender; BPCR Limited Partnership, and BioPharma Credit Investments V (Master) LP, as lender, dated as of July 28,2024.
(2)
10.13
+†
Separation Agreement, by and between Collegium Pharmaceutical Inc.and Joseph Ciaffoni, dated May 24, 2024.
(17)
10.14
†*
Authorized Generic Agreement by and between Collegium Pharmaceutical Inc.and Hikma Pharmaceuticals USA Inc., dated April 26, 2024.
(17)
10.15
†
Exclusive License Agreement, dated April 4, 2019, between the Company and Shionogi, Inc. (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K filed by BDSI on March 9, 2022).
(18)
10.16
+†
Amendment to Employment Agreement, dated January 20, 2022 by and between Collegium Pharmaceutical, Inc. and Colleen Tupper.
(18)
10.17
+†
Amendment to Employment Agreement, dated January 20, 2022 by and between Collegium Pharmaceutical, Inc. and Shirley Kuhlmann.
(18)
10.18
+†
Amendment to Employment Agreement, dated January 20, 2022 by and between Collegium Pharmaceutical, Inc. and Scott Dreyer.
(18)
10.19
+†
Employment Agreement, dated March 23, 2022 by and between Collegium Pharmaceutical, Inc. and Thomas Smith.
(18)
10.20
+
Employment Agreement, dated November 12, 2024 by and between Collegium Pharmaceutical, Inc. and Vikram Karnani.
19
†
Insider Trading Policy
(11)
21.1
Subsidiaries of Collegium Pharmaceutical, Inc.
23.1
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
31.1
Certifying Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes ‑ Oxley Act of 2002.
31.2
Certifying Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes ‑ Oxley Act of 2002.
32.1
Certifying Statement of the Chief Executive Officer pursuant to Section 1350 of Title 18 of the United States Code.
32.2
Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the United States Code.
97
†
Compensation Recovery Policy
(11)
65
101
The following financial information from this Annual Report on Form 10-K for the year ended December 31, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheets as of December 31, 2024, and 2023, (ii) Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, (iii) Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024, 2023 and 2022, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†Previously filed.
+Indicates management contract or compensatory plan.
* 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 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 Current Report on Form 8-K filed with the SEC on July 29, 2024.
(3) 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.
(4) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 4, 2017.
(5) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2020.
(6) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2023.
(7) 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.
(8) 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.
(9) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No. 333-207744) filed with the SEC on November 2, 2015.
(10) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1/A (File No. 333-203208) filed with the SEC on April 27, 2015.
(11) Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 22, 2024.
(12) 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.
(13) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 30, 2020.
(14) 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.
66
(15) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on September 30, 2020.
(16) 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.
(17) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 filed with the SEC on August 8, 2024.
(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.
Item 16. Form 10-K Summary
None.
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLLEGIUM PHARMACEUTICAL, INC.
By: /s/ Vikram Karnani
Vikram Karnani
Chief Executive Officer
Signature
Title
Date
/s/ Vikram Karnani
President and Chief Executive Officer (Principal Executive Officer) and Director
February 27, 2025
Vikram Karnani
/s/ Colleen Tupper
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
February 27, 2025
Colleen Tupper
/s/ Michael T. Heffernan, R.Ph.
Chairman of the Board
February 27, 2025
Michael T. Heffernan, R.Ph.
/s/ Rita Balice-Gordon, Ph.D.
Director
February 27, 2025
Rita Balice-Gordon, Ph.D.
/s/ Garen G. Bohlin
Director
February 27, 2025
Garen G. Bohlin
/s/ John A. Fallon, M.D.
Director
February 27, 2025
John A. Fallon, M.D.
/s/ John G. Freund, M.D.
Director
February 27, 2025
John G. Freund, M.D.
/s/ Gwen Melincoff
Director
February 27, 2025
Gwen Melincoff
/s/ Gino Santini
Director
February 27, 2025
Gino Santini
/s/ Nancy Lurker
Director
February 27, 2025
Nancy Lurker
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.
68
COLLEGIUM PHARMACEUTICAL, INC.
Index to Consolidated Financial Statements
Audited Consolidated Financial Statements
Pages
Report of Independent Registered Public Accounting Firm ( PCAOB ID 34 )
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023, and 2022
F-6
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024, 2023, and 2022
F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022
F-9
Notes to Consolidated Financial Statements
F-10
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Collegium Pharmaceutical, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, 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, 2024, 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, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 27, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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.
Revenue Recognition – Product Return Liability– Refer to Note 3 to the Financial Statements
Critical Audit Matter Description
Revenue is recognized when control is transferred to the customer, which occurs upon delivery, and revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer (“transaction price”). 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). Variable consideration, including the risk of customer concessions, is included in
F-2
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. The Company updates the measurement of the returns and the refund liability (the “return provision”) at the end of each reporting period for changes in expectations about the amount of refunds with the corresponding adjustments recognized as revenue (or reductions of revenue).
Estimating the return provision requires significant judgment by management. Given the complexity and significant level of estimation uncertainty involved in calculating the return provision, 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 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.
Business Combinations - Refer to Note 4 to the financial statements
Critical Audit Matter Description
During the year ended December 31, 2024, the Company acquired Ironshore Therapeutics Inc. (“Ironshore”) for total consideration of $309.9 million. The assets acquired and liabilities assumed were recorded based on their fair value, including an intangible asset and a deferred royalty obligation of $635.0 million and $116.9 million, respectively. Management estimated the fair value of the asset and liability using valuation techniques, including income-based models, which required the use of significant estimates and assumptions related to future cash flows and the selection of appropriate discount rates.
We identified the valuation of the intangible asset and deferred royalty obligation as a critical audit matter. Given that the determination of the fair value 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.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the estimated future cash flows and the selection of the discount rates for the intangible asset and deferred royalty obligation included the following, among others:
● We tested the effectiveness of controls over the valuation of the intangible asset and deferred royalty obligation, including management's controls over the underlying revenue forecasts, future profit margins, and selection of the discount rates.
● We assessed the reasonableness of management's revenue and profit margin forecasts underlying the forecasted cash flows 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 to available external information.
F-3
● 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 calculations.
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.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 27, 2025
We have served as the Company's auditor since 2016.
F-4
COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED BALANCE SHEET S
(In thousands, except share and per share data)
December 31,
December 31,
2024
2023
Assets
Current assets
Cash and cash equivalents
$
70,565
$
238,947
Marketable securities
92,198
71,601
Accounts receivable, net
228,540
179,525
Inventory
35,560
32,332
Prepaid expenses and other current assets
30,394
15,195
Restricted cash
25,000
—
Total current assets
482,257
537,600
Property and equipment, net
14,329
15,983
Operating lease assets
5,822
6,029
Intangible assets, net
891,402
421,708
Restricted cash
1,047
1,047
Deferred tax assets
98,033
26,259
Other noncurrent assets
8,368
825
Goodwill
162,333
133,857
Total assets
$
1,663,591
$
1,143,308
Liabilities and shareholders' equity
Current liabilities
Accounts payable
$
3,934
$
8,692
Accrued liabilities
72,124
37,571
Accrued rebates, returns and discounts
338,642
227,331
Current portion of term notes payable
64,583
183,333
Current portion of operating lease liabilities
1,271
988
Business combination consideration payable
28,956
—
Total current liabilities
509,510
457,915
Term notes payable, net of current portion
550,733
221,713
Convertible senior notes
237,172
262,125
Operating lease liabilities, net of current portion
5,539
6,124
Deferred royalty obligation
120,613
—
Deferred revenue
10,000
—
Contingent consideration
1,182
—
Total liabilities
1,434,749
947,877
Commitments and contingencies (refer to Note 13)
Shareholders’ equity:
Preferred stock, $ 0.001 par value; authorized shares - 5,000,000
—
—
Common stock, $ 0.001 par value; authorized shares - 100,000,000 ; 39,646,749 issued and 31,440,155 outstanding shares as of December 31, 2024 and 38,192,441 issued and 31,868,549 outstanding shares as of December 31, 2023
40
38
Additional paid-in capital
590,251
565,949
Treasury stock, at cost; 8,206,594 shares as of December 31, 2024 and 6,323,892 shares as of December 31, 2023
( 197,505 )
( 137,381 )
Accumulated other comprehensive income
55
14
Accumulated deficit
( 163,999 )
( 233,189 )
Total shareholders’ equity
228,842
195,431
Total liabilities and shareholders’ equity
$
1,663,591
$
1,143,308
The accompanying notes are an integral part of these consolidated financial statements.
F-5
COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATION S
(In thousands, except share and per share data)
Years Ended December 31,
2024
2023
2022
Product revenues, net
$
631,449
$
566,767
$
463,933
Cost of product revenues
Cost of product revenues (excluding intangible asset amortization)
88,801
94,838
118,190
Intangible asset amortization and impairment
165,304
145,760
136,255
Total cost of products revenues
254,105
240,598
254,445
Gross profit
377,344
326,169
209,488
Operating expenses
Research and development
—
—
3,983
Selling, general and administrative
210,363
159,208
172,186
Gain on fair value remeasurement of contingent consideration
( 2,914 )
—
—
Total operating expenses
207,449
159,208
176,169
Income from operations
169,895
166,961
33,319
Interest expense
( 73,974 )
( 83,339 )
( 63,213 )
Interest income
13,976
15,615
1,047
Loss on extinguishment of debt
( 11,329 )
( 23,504 )
—
Income (loss) before income taxes
98,568
75,733
( 28,847 )
Provision for (benefit from) income taxes
29,378
27,578
( 3,845 )
Net income (loss)
$
69,190
$
48,155
$
( 25,002 )
Earnings (loss) per share — basic
$
2.14
$
1.43
$
( 0.74 )
Weighted-average shares — basic
32,273,850
33,741,213
33,829,495
Earnings (loss) per share — diluted
$
1.86
$
1.29
$
( 0.74 )
Weighted-average shares — diluted
40,424,180
41,788,125
33,829,495
The accompanying notes are an integral part of these consolidated financial statements.
F-6
COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Years Ended December 31,
2024
2023
2022
Net income (loss)
$
69,190
$
48,155
$
( 25,002 )
Other comprehensive income:
Unrealized gains on marketable securities, net of tax
41
14
—
Total other comprehensive income
41
14
—
Comprehensive income (loss)
$
69,231
$
48,169
$
( 25,002 )
The accompanying notes are an integral part of these consolidated financial statements.
F-7
COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUIT Y
(In thousands, except share data)
Additional
Accumulated Other
Total
Common Stock
Paid-In
Treasury Stock
Accumulated
Comprehensive
Shareholders’
Shares
Amount
Capital
Shares
Amount
Deficit
Loss
Equity
Balance as of December 31, 2021
35,806,119
$
36
$
502,095
( 2,150,717 )
$
( 42,861 )
$
( 256,342 )
$
—
$
202,928
Exercise of common stock options
742,348
—
11,811
—
—
—
—
11,811
Issuance for employee stock purchase plan
22,627
—
337
—
—
—
—
337
Vesting of RSUs and PSUs
699,285
1
—
—
—
—
—
1
Shares withheld for employee taxes upon vesting of RSUs and PSUs
( 226,286 )
—
( 4,044 )
—
—
—
—
( 4,044 )
Share repurchases
—
—
5,000
( 1,085,106 )
( 19,063 )
—
—
( 14,063 )
Exercise of warrant
40,666
—
—
—
—
—
—
—
Stock-based compensation
—
—
22,874
—
—
—
—
22,874
Net loss
—
—
—
—
—
( 25,002 )
—
( 25,002 )
Balance as of December 31, 2022
37,084,759
37
538,073
( 3,235,823 )
( 61,924 )
( 281,344 )
—
194,842
Exercise of common stock options
498,008
—
8,641
—
—
—
—
8,641
Issuance for employee stock purchase plan
26,505
—
460
—
—
—
—
460
Vesting of RSUs and PSUs
898,817
1
—
—
—
—
—
1
Shares withheld for employee taxes upon vesting of RSUs and PSUs
( 315,648 )
—
( 8,361 )
—
—
—
—
( 8,361 )
Share repurchases
—
—
—
( 3,088,069 )
( 75,457 )
—
—
( 75,457 )
Stock-based compensation
—
—
27,136
—
—
—
—
27,136
Other comprehensive income, net of tax
—
—
—
—
—
—
14
14
Net income
—
—
—
—
—
48,155
—
48,155
Balance as of December 31, 2023
38,192,441
38
565,949
( 6,323,892 )
( 137,381 )
( 233,189 )
14
195,431
Exercise of common stock options
502,688
1
10,245
—
—
—
—
10,246
Issuance for employee stock purchase plan
35,664
—
827
—
—
—
—
827
Vesting of RSUs and PSUs
1,481,823
1
—
—
—
—
—
1
Shares withheld for employee taxes upon vesting of RSUs and PSUs
( 565,867 )
—
( 19,170 )
—
—
—
—
( 19,170 )
Share repurchases
—
—
—
( 1,882,702 )
( 60,124 )
—
( 60,124 )
Stock-based compensation
—
—
32,400
—
—
—
—
32,400
Other comprehensive income, net of tax
—
—
—
—
—
—
41
41
Net income
—
—
—
—
—
69,190
—
69,190
Balance as of December 31, 2024
39,646,749
$
40
$
590,251
( 8,206,594 )
$
( 197,505 )
$
( 163,999 )
$
55
$
228,842
The accompanying notes are an integral part of these consolidated financial statements.
F-8
COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW S
(In thousands)
Years Ended December 31,
2024
2023
2022
Operating activities
Net income (loss)
$
69,190
$
48,155
$
( 25,002 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and impairment expense
165,304
145,760
136,255
Depreciation expense
3,856
3,496
2,684
Deferred income taxes
( 26,814 )
( 2,153 )
( 8,391 )
Stock-based compensation expense
32,400
27,136
22,874
Non-cash lease (benefit) expense
( 94 )
( 280 )
238
Loss on extinguishment of debt
11,329
23,504
—
Non-cash interest expense for amortization of debt discount and issuance costs
6,016
8,635
8,285
Non-cash interest expense for deferred royalty obligation
3,713
—
—
Net amortization of premiums and discounts on investments
( 2,028 )
( 1,235 )
—
Non-cash change in fair value of contingent consideration
( 2,914 )
—
—
Changes in operating assets and liabilities:
Accounts receivable
( 4,414 )
3,594
( 21,780 )
Inventory
13,927
14,169
48,274
Prepaid expenses and other assets
( 14,070 )
1,439
( 4,606 )
Accounts payable
( 11,278 )
5,061
( 707 )
Accrued liabilities
( 39,530 )
628
( 11,131 )
Accrued rebates, returns and discounts
387
( 3,160 )
( 22,766 )
Operating lease assets and liabilities
—
—
3
Net cash provided by operating activities
204,980
274,749
124,230
Investing activities
Acquisition of Ironshore (net of cash acquired)
( 267,538 )
—
—
Acquisition of BDSI (net of cash acquired)
—
—
( 572,069 )
Purchases of property and equipment
( 1,652 )
( 461 )
( 1,622 )
Purchases of marketable securities
( 111,171 )
( 92,351 )
—
Maturities of marketable securities
92,602
22,000
—
Net cash used in investing activities
( 287,759 )
( 70,812 )
( 573,691 )
Financing activities
Proceeds from issuances of common stock from employee stock purchase plans
827
460
337
Proceeds from the exercise of stock options
10,246
8,641
11,811
Payments made for employee stock tax withholdings
( 19,170 )
( 8,361 )
( 4,044 )
Repurchases of common stock
( 60,025 )
( 75,000 )
( 14,063 )
Repayment of term notes
( 107,813 )
( 162,500 )
( 75,000 )
Proceeds from term note modification, net of fees paid to lender of $ 11,825
313,175
—
517,682
Proceeds from issuances of 2029 convertible notes, net of issuance costs of $ 6,280
—
235,220
—
Repurchase of 2026 Convertible Notes, including premium
—
( 138,638 )
—
Redemption of 2026 Convertible Notes, including premium and redemption costs
( 33,245 )
—
—
Repayment of assumed debt from Ironshore acquisition
( 164,598 )
—
—
Net cash (used in) provided by financing activities
( 60,603 )
( 140,178 )
436,723
Net (decrease) increase in cash, cash equivalents and restricted cash
( 143,382 )
63,759
( 12,738 )
Cash, cash equivalents and restricted cash at beginning of year
239,994
176,235
188,973
Cash, cash equivalents and restricted cash at end of year
$
96,612
$
239,994
$
176,235
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:
Cash and cash equivalents
$
70,565
$
238,947
$
173,688
Restricted cash
26,047
1,047
2,547
Total cash, cash equivalents and restricted cash
$
96,612
$
239,994
$
176,235
Supplemental disclosure of cash flow information
Cash paid for interest
$
62,434
$
73,256
$
52,528
Cash paid for income taxes
$
52,090
$
24,205
$
10,400
Supplemental disclosure of non-cash activities
Acquisition of property and equipment in accounts payable and accrued liabilities
$
185
$
176
$
—
Excise tax on share repurchases in accrued liabilities
$
99
$
457
$
—
Acquisition date fair value of contingent consideration
4,096
—
—
Business combination consideration payable
28,956
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-9
COLLEGIUM PHARMACEUTICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Nature of Business
Organization
Collegium Pharmaceutical, Inc. (the “Company” or “Collegium”) was incorporated in Delaware in April 2002 and then reincorporated in Virginia in July 2014. The Company has its principal operations in Stoughton, Massachusetts. The Company’s mission is to build a leading, diversified biopharmaceutical company committed to improving the lives of people living with serious medical conditions. The Company’s product portfolio includes Jornay PM (“Jornay”), Belbuca, Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), and Symproic.
On September 3, 2024, (the “Acquisition Date”), the Company closed its acquisition of Ironshore Therapeutics Inc. (“Ironshore”) (the “Ironshore Acquisition” or “Merger”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), with Ironshore surviving the Merger as a wholly owned subsidiary of the Company. Ironshore had developed and obtained commercial approval to market Jornay in the United States. Upon closing the Ironshore Acquisition, the Company acquired the Jornay product.
On March 22, 2022, 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 BDSI Acquisition, the Company acquired the Belbuca and Symproic products.
The Company’s operations are subject to certain risks and uncertainties. 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.
2. Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements include the accounts of Collegium Pharmaceutical, Inc. as well as the accounts of its subsidiaries. The consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
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 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, future payments under the deferred royalty obligation, 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. The Company evaluates its estimates and
F-10
assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.
Fair Value Measurements
Fair value measurements and disclosures describe the fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, as follows:
Level 1 inputs:
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, 2024 and 2023.
F-11
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, 2024 and 2023.
Significant
Quoted Prices
other
Significant
in active
observable
unobservable
markets
inputs
inputs
Total
(Level 1)
(Level 2)
(Level 3)
December 31, 2024
Assets
Cash equivalents:
Money market funds
$
36,153
$
36,153
$
—
$
—
Commercial paper
1,993
1,993
Marketable securities:
Corporate debt securities
82,679
—
82,679
—
Government-sponsored securities
6,560
—
6,560
—
Commercial paper
2,959
—
2,959
—
Total assets measured at fair value
$
130,344
$
36,153
$
94,191
$
—
Liabilities
Contingent consideration
1,182
—
—
1,182
Total liabilities measured at fair value
$
1,182
$
—
$
—
$
1,182
December 31, 2023
Assets
Cash equivalents:
Money market funds
$
77,299
$
77,299
$
—
$
—
U.S. Treasury securities
4,729
—
4,729
—
Marketable securities:
Corporate debt securities
41,612
—
41,612
—
U.S. Treasury securities
25,468
—
25,468
—
Government-sponsored securities
4,521
—
4,521
—
Total assets measured at fair value
$
153,629
$
77,299
$
76,330
$
—
The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis using quoted market prices. Accordingly, these securities are categorized as Level 1.
Contingent Consideration
The Company’s contingent consideration liability is related to the Ironshore Acquisition in 2024. The Ironshore Acquisition includes a contingent payment of $ 25,000 related to the achievement of a financial milestone based on net revenues of Jornay for the year ended December 31, 2025.
The contingent consideration liability is measured at fair value using an option pricing model. The Company classifies its contingent consideration liability as a Level 3 fair value measurement based on the significant unobservable inputs used to estimate fair value. The key assumptions considered in estimating the fair value include the estimated probability and timing of milestone achievement, such as the probability and timing of projected revenues.
F-12
Change in the Fair Value of Contingent Consideration
The following table provide a reconciliation of the beginning and ending balances related to the contingent consideration for the Ironshore Acquisition:
Ironshore Acquisition
Contingent Consideration
Balance as of December 31, 2023
$
—
Acquisition date fair value
4,096
Gain on fair value remeasurement of contingent consideration
( 2,914 )
Balance as of December 31, 2024
$
1,182
Assets and Liabilities Not Carried at Fair Value
Convertible Senior Notes
The Company’s convertible senior notes fall into the Level 2 category within the fair value level hierarchy. 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, 2024, the fair value of the Company’s 2.875 % convertible senior notes due in 2029 was $ 266,184 and the net carrying value was $ 237,172 . 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 .
During the year ended December 31, 2024, the Company fully redeemed its 2.625 % convertible senior notes due in 2026 and thus none of these notes were outstanding as of December 31, 2024. 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 .
Term Notes Payable
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, 2024 and 2023, the carrying amount of the term notes reasonably approximated the estimated fair value.
Deferred Royalty Obligation
The Company’s deferred royalty obligation was assumed as part of the Ironshore Acquisition in 2024. Refer to Note 15, Deferred Royalty Obligation , for more information.
The deferred royalty obligation is not carried at fair value. The deferred royalty obligation is considered a level 3 fair value measurement. The fair value of the Company’s deferred royalty obligation approximates the carrying value as of December 31, 2024.
Other Assets and Liabilities
As of December 31, 2024, and 2023, 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, approximated the estimated fair values.
F-13
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash deposits primarily with one reputable and nationally recognized financial institution. In addition, as of December 31, 2024, the Company’s cash equivalents were invested in money market funds and commercial paper. The Company has not experienced any material losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the financial institutions in which those deposits are held and the nature of the assets in the money market funds.
Three customers comprised 10% or more of the Company’s accounts receivable balance as of December 31, 2024. These customers comprised 37 %, 33 %, and 28 % of the accounts receivable balance as of December 31, 2024 and 38 %, 35 %, and 26 % as of December 31, 2023.
The same customers comprised 10% or more of the Company’s revenue during the year ended December 31, 2024. These customers comprised 33 %, 33 %, and 31 % of revenue during the year ended December 31, 2024; 33 %, 32 %, and 32 % during the year ended December 31, 2023; and 33 %, 32 %, and 31 % during the year ended December 31, 2022.
To date, the Company has not experienced any credit losses with respect to the collection of its accounts receivable and has not recorded an allowance for credit losses as of December 31, 2024 or 2023. The Company has no financial instruments with off balance sheet risk of loss.
Cash and Cash Equivalents
Cash and cash equivalents include cash in readily available checking and savings accounts, including bank deposits, investments in money market funds, and commercial paper. 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.
Restricted Cash
Restricted cash is reported as non-current unless the restrictions are expected to be released in the next twelve months. Restricted cash as of December 31, 2024 includes $ 25,000 of deposits into escrow at the closing of the Ironshore Acquisition, to be released (i) in part, after, and subject to, determination of any adjustments related to finalization of working capital and cash at closing; and (ii) in part, and subject to, the lapse of certain indemnification obligations 12 months from the Acquisition Date. The remaining amounts in restricted cash represent 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, 2024 and 2023, the Company’s marketable securities consisted of investments in available-for-sale corporate debt, commercial paper, 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.
F-14
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, 2024 and 2023.
Inventory
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 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. If the Company identifies excess, obsolete or unsalable items, inventories are written down to their realizable value in the period in which the impairment is identified. These adjustments are recorded based upon various factors, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected demand and the expected shelf-life of the inventory components.
The Company outsources the manufacturing of its products to contract manufacturers. In addition, the Company currently relies on a sole supplier or a limited number of suppliers for the active pharmaceutical ingredients in its products. Accordingly, the Company has concentration risk associated with its commercial manufacturing.
The Company expects to use the inventory that is classified within current assets on its consolidated balance sheet over its operating cycle. Inventory that is not expected to be used over the Company’s operating cycle is classified as a non-current asset. Refer to Note 8, Inventory , for further information.
Business Combination Accounting and Valuation of Acquired Assets
To determine whether acquisitions should be accounted for as a business combination or as an asset acquisition, the Company makes certain judgments regarding whether the acquired set of activities and assets meets 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. GAAP.
The acquisition method of accounting requires the recognition of assets acquired and liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of consideration transferred over the acquisition date net fair values of the assets acquired and the liabilities assumed. The determination of the fair value requires the estimation of fair values 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 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.
F-15
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. Goodwill is not amortized but is subject to impairment testing at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment. In performing the goodwill impairment test, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying value. Alternatively, the Company may elect to proceed directly to the quantitative impairment test. In performing the quantitative analysis, the Company compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the Company’s reporting unit exceeds its fair value, the Company would recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. The Company performed a qualitative assessment during the annual impairment review as of October 1, 2024 and concluded that it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount.
Intangible Assets
The Company records the fair value of finite-lived intangible assets as of the transaction date. Intangible assets are then amortized over their estimated useful lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. 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.
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
3 - 5 years
Laboratory equipment
5 years
Furniture and fixtures
7 years
Manufacturing equipment
5 - 13 years
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.
Leases
The Company records lease assets and liabilities for lease arrangements exceeding a 12-month initial term. For operating leases, the Company records an initial lease liability equal to the present value of minimum lease payments to be made over the lease term discounted using the Company’s incremental borrowing rate and a corresponding lease asset adjusted for incentives received and indirect costs. The Company records operating lease rent expense in the statements of operations over the lease term. 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. Short-term lease expense is recognized on a straight-line basis over the lease term. The Company does not have any financing lease arrangements.
F-16
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment, operating 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 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
The Company’s revenue is from sales of the Company’s products, which are primarily sold to wholesale pharmaceutical distributors, which in turn sell the product to pharmacies for the treatment of patients. The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Refer to Note 3, Revenue from Contracts with Customers , for more information.
Deferred Royalty Obligation
The Company’s deferred royalty obligation liability is a debt obligation of Ironshore that was assumed as part of the Ironshore Acquisition. The deferred royalty obligation relates to royalty payments on revenue of Jornay that are paid to debtholders in exchange for preacquisition funding provided to Ironshore by the debtholders.
The Company accretes the deferred royalty obligation to the estimated future royalty payments over the life of the agreement and records the accretion as interest expense using the effective interest rate. The carrying value of the obligation decreases for royalty payments made based upon the actual Jornay revenue and related royalty payments.
The effective interest rate is calculated based on current estimates of future royalty payments over the life of the agreement. To the extent estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company accounts for any such changes by adjusting the effective interest rate on a prospective basis, which will adjust future interest expense. Refer to Note 15, Deferred Royalty Obligation , for more information.
Research and Development Costs
Research and development expenses have historically consisted of product development expenses incurred in identifying, developing, and testing product candidates. Product development expenses primarily consisted of labor, benefits, and related employee expenses for personnel directly involved in product development activities, fees paid to contract research organizations for managing clinical and non-clinical trials, and regulatory costs.
Since April 1, 2022, the Company has focused entirely on commercial products rather than research and development and redirected resources from research and development activities. As such, there were no expenses incurred in research and development after the three months ended March 31, 2022.
Advertising and Product Promotion Costs
Advertising and product promotion costs are included in selling, general and administrative expenses and were $ 10,663 , $ 7,406 , and $ 11,743 in the years ended December 31, 2024, 2023, and 2022 respectively. Advertising and product promotion costs are expensed as incurred.
F-17
Stock-Based Compensation
The Company accounts for grants of stock options, restricted stock units and performance share units to employees, as well as to the Board of Directors, based on the grant date fair value and recognizes compensation expense over the vesting period, net of actual forfeitures. For awards with service conditions, the Company recognizes compensation expense on a straight-line basis. The Company estimates the grant date fair value of stock options using the Black-Scholes option pricing model. The Company estimates the grant date fair value of restricted stock units based on the fair value of the underlying common stock. For awards with performance conditions, the Company estimates the number of shares that will vest based upon the probability of achieving performance metrics. For awards with market conditions, the Company recognizes compensation expense on an accelerated attribution basis. The Company estimates the grant date fair value of awards with market conditions using the Monte Carlo model.
Income Taxes
The Company accounts for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. 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 will recognize interest and penalties related to uncertain tax positions within income tax expense. Any accrued interest and penalties will be included within the related tax liability. As of December 31, 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.
Earnings per Share
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
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 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 through December 31, 2024 were not material based on a scenario-based cash flow model that uses unobservable inputs that reflect the Company’s own
F-18
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.
Recently Adopted Accounting Pronouncements
New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as required by the specified effective dates.
In November 2023, the FASB issued Accounting Standards Update (“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 for the Company’s annual report, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard did not to have a material impact on the Company’s consolidated financial statements, and the Company’s provided enhanced disclosures as required to comply with this standard. Refer to Note 21, Segments , for further information.
Recently Issued Accounting Pronouncements Not Yet Adopted
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 Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) . The amendments in this update require disclosure of specified information about certain costs and expenses. This update is effective for annual periods beginning after December 15, 2026. The Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20) . The amendments in this update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This update is effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the effect of adopting this guidance on its 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.
3. 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 or other outlets for the treatment of patients.
Revenue Recognition
The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements with a customer, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The
F-19
Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the assets is one year or less.
Performance Obligations
The Company determined that performance obligations are satisfied, and revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This generally occurs upon delivery of the products to customers, at which point the Company recognizes revenue and records accounts receivable. Payment is typically received 30 to 90 days after satisfaction of the Company’s performance obligations.
Transaction Price and Variable Consideration
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: (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. 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.
The Company bases its estimates of variable consideration, which could include estimates of future rebates, returns, and other adjustments, on historical data and other information. 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. 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. As the Company’s rebates and incentives are based on products dispensed to patients, the Company is required to estimate the expected value of claims at the time of product delivery to wholesalers. Given that wholesalers sell the product to pharmacies, which in turn dispense the product to patients, claims can be submitted significantly after the related sales are recognized. The Company’s estimates of these claims are based on the historical experience of existing or similar programs, including current contractual and statutory requirements, specific known market events and trends, industry data, and estimated distribution channel inventory levels. Accruals and related reserves required for rebates and incentives are adjusted as new information becomes available, including actual claims. 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.
Product Returns
Provisions for product returns 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. 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
F-20
transfers products to customers but instead recognizes those excess amounts received as a refund liability. The Company updates the measurement of the refund liability at the end of each reporting period for changes in expectations about the amount of refunds with the corresponding adjustments recognized as revenue (or reductions of revenue).
The Company provides the right of return to its customers for an 18-month window beginning six months prior to expiration and up until twelve months after expiration. The Company’s customers short-pay an existing invoice upon notice of a product return claim. Adjustments to the preliminary short-paid claims are processed when the return claim is validated and finalized. The Company’s return policy requires that product is returned and that the return is claimed within the 18-month window.
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). 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.
Significant judgment is required to determine the variable consideration included in the transaction price as described above. Adjustments to the estimated variable consideration included in the transaction price occurs when new information indicates that the estimate should be revised. If the value of accepted and processed claims is different than the amount estimated and included in variable consideration, then adjustments would impact product revenues, net and earnings in the period such revisions become known. The amount of variable consideration ultimately received and included in the transaction price may materially differ from the Company’s estimates, resulting in additional adjustments recorded to increase or decrease product revenues, net.
F-21
The following table summarizes activity in each of the Company’s product revenue provision and allowance categories for the years ended December 31, 2024, 2023, and 2022, respectively:
Trade
Rebates and
Product
Allowances and
Incentives (1)
Returns (2)
Chargebacks (3)
Balance as of December 31, 2021
$
142,379
$
54,617
$
13,226
Acquired from BDSI
38,074
18,187
7,575
Provision related to current period sales
497,250
38,250
132,547
Changes in estimate related to prior period sales
( 619 )
2,505
( 592 )
Credits/payments made
( 520,147 )
( 40,005 )
( 130,698 )
Balance as of December 31, 2022
$
156,937
$
73,554
$
22,058
Provision related to current period sales
424,013
41,993
149,976
Changes in estimate related to prior period sales
( 4,802 )
4,268
555
Credits/payments made
( 426,322 )
( 42,310 )
( 151,672 )
Balance as of December 31, 2023
$
149,826
$
77,505
$
20,917
Acquired from Ironshore
43,065
67,859
4,993
Provision related to current period sales
445,875
55,211
179,314
Changes in estimate related to prior period sales
372
1,962
( 86 )
Credits/payments made
( 447,630 )
( 55,403 )
( 166,626 )
Balance as of December 31, 2024
$
191,508
$
147,134
$
38,512
(1) Provisions for rebates and incentives includes managed care rebates, government rebates and co-pay program incentives. Provisions for rebates and incentives are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s consolidated balance sheets.
(2) Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s Consolidated Balance Sheets.
(3) Provisions for trade allowances and chargebacks include fees for distribution service fees, prompt pay discounts, and chargebacks. Trade allowances and chargebacks are deducted from gross revenue at the time revenues are recognized and are recorded as a reduction to accounts receivable in the Company’s consolidated balance sheets.
As of December 31, 2024, the Company did not have any transaction price allocated to remaining performance obligations and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial.
Disaggregation of Revenue
The Company discloses disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As such, the Company disaggregates its product revenues, net from contracts with customers by product, as disclosed in the table below.
Years Ended December 31,
2024
2023
2022
Belbuca
$
211,269
$
182,095
$
126,461
Xtampza ER
191,330
177,374
138,804
Nucynta IR
100,740
108,150
112,058
Nucynta ER
75,767
82,653
72,418
Jornay
37,239
—
—
Symproic
15,104
16,495
12,267
Other
—
—
1,925
Total product revenues, net
$
631,449
$
566,767
$
463,933
F-22
The Company began recognizing revenue from Jornay in September 2024 following the acquisition of Ironshore. The Company began recognizing revenue from Belbuca and Symproic in March 2022 following the acquisition of BDSI. Refer Note 4, Acquisitions , for further information.
Contract Liabilities
The Company’s contract liabilities, or deferred revenue, primarily relate to contracts where the Company has received payment, but it has not yet satisfied or fully satisfied the related performance obligations. Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company satisfies its obligations under these arrangements.
The Company’s only contract liability relates to a contract with Knight Therapeutics, Inc. (“Knight”), which was entered into by Ironshore and Knight in May 2024 and was assumed as part of the Ironshore Acquisition (see Note 4, Acquisition ). The contract provides Knight the right to sell Jornay in Canada and certain countries in Latin America, subject to regulatory approval. The contract provides for a nonrefundable upfront payment of $ 10,000 , sales milestones, royalties on net revenue, and reimbursement for certain manufacturing expenses. The Company identified one combined performance obligation in the contract related primarily to the sale of products. The up-front payment will be recognized as revenue as product sales are made over the term of the contract. No products have been delivered to date under this contract and therefore no revenue has been recognized through December 31, 2024.
4. Acquisitions
Ironshore Acquisition
On September 3, 2024, the Company closed the Ironshore Acquisition. Ironshore had developed and obtained commercial approval to market Jornay in the United States. The Ironshore Acquisition was completed to expand the Company’s business beyond pain management and establish a commercial presence in neuropsychiatry via the attention deficit hyperactivity disorder (“ADHD”) market. The Company obtained control through the acquisition of shares in an all-cash transaction which closed on September 3, 2024 (“the Acquisition Date”).
The acquisition consideration includes payments for the Ironshore equity and assumption of certain of its debt. The Company deposited $ 25,000 into escrow at closing, to be released (i) in part, after, and subject to, determination of any adjustments related to finalization of working capital and cash at closing; and (ii) in part, and subject to, the lapse of certain indemnification obligations 12 months from the Acquisition Date. As of the Acquisition Date, and December 31, 2024, approximately $ 21,956 was due to the former Ironshore equity holders and $ 25,000 is recorded as restricted cash. In addition, the Company will pay approximately $ 7,000 to former Ironshore equity holders as the Company recovers certain acquired deposits as specified in the Merger Agreement, which amount is due no later than 225 days from the Acquisition Date. The Company also agreed to pay a $ 25,000 contingent payment upon the achievement of a financial milestone based on net revenues of Jornay for the year ended December 31, 2025.
The fair value of the total consideration was approximately $ 309,940 consisting of the following (in thousands):
Fair Value of Purchase Price Consideration
Amount
Fair value of purchase price consideration paid at closing:
Initial cash consideration
$
276,888
Deferred payments and contingent consideration:
Cash held in escrow related to indemnification and other settlements
21,956
Other deferred consideration
7,000
Fair value of contingent consideration
4,096
Total purchase consideration
$
309,940
The Company has accounted for the Ironshore 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.
F-23
The preliminary purchase price allocation is based on estimates, assumptions, valuations and other studies which have not yet been finalized. The Company is finalizing its valuation of intangible assets, tangible assets, liabilities and tax analyses, and anticipates finalizing the valuation of assets acquired and liabilities assumed as the information necessary to complete the analysis is obtained, but no later than one year after the Acquisition Date. In the fourth quarter of 2024, the Company recognized measurement period adjustments to increase accrued returns by $ 31,298 , deferred tax assets by $ 15,368 , goodwill by $ 16,374 and certain other accounts by $ 444 .
The following tables set forth the final allocation of the Ironshore Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:
Amounts Recognized at the Acquisition Date
Assets Acquired
Cash and cash equivalents
$
9,350
Accounts receivable
44,601
Inventory
17,155
Prepaid expenses and other current assets
8,671
Property, plant and equipment, net
541
Intangible assets
635,000
Right-of-use assets
800
Deferred tax assets
44,960
Total assets
$
761,078
Liabilities Assumed
Accounts payable
$
6,656
Accrued liabilities
73,880
Accrued rebates, returns and discounts
110,924
Borrowings
8,954
Lease liabilities
800
Senior secured notes payable
151,500
Deferred royalty obligation
116,900
Deferred revenue
10,000
Total liabilities
$
479,614
Total identifiable net assets acquired
281,464
Goodwill
28,476
Total consideration transferred
$
309,940
The valuation of the acquired intangible assets and assumed deferred royalty obligations relies on significant unobservable inputs. The Company used an income approach to value the $ 635,000 for the acquired intangible asset. The valuation of the intangible asset was based on estimated projections of expected cash flows to be generated by the asset, discounted to the present value at an appropriate discount rate. The Company is amortizing the identifiable intangible asset on a straight-line basis over its useful life of 7.7 years (refer to Note 11, Goodwill and Intangible Assets ). The acquired inventory was recorded at fair value, which includes an adjustment to record inventory from its historic cost to fair value of $ 10,700 . The assumed senior secured notes payable and borrowings were settled immediately after the close of the acquisition, resulting in a loss in debt extinguishment of $ 4,145 .
The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.
Total revenues attributable to Ironshore from the Acquisition Date through December 31, 2024 were $ 37,239 . However, earnings attributable to Ironshore from the Acquisition Date through December 31, 2024 are not distinguishable due to the rapid integration of Ironshore’s core operations into the Company.
F-24
Unaudited Pro Forma Summary of Operations
The following table shows the unaudited pro forma summary of operations for the twelve months ended December 31, 2024 and 2023, as if the Ironshore Acquisition had occurred on January 1, 2023. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of January 1, 2023, and is not indicative of what such results would be expected for any future period (in thousands) :
Years Ended December 31,
2024
2023
Total revenues
$
694,874
$
645,353
Net loss
$
( 15,798 )
$
( 104,139 )
The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and Ironshore. The summary pro forma financial information primarily reflects the following pro forma adjustments:
● Employee severance-related expense of $ 10,360 was reflected as of January 1, 2023;
● The Company’s acquisition-related transaction costs of $ 9,046 were reflected as of January 1, 2023;
● Additional amortization expense from the acquired intangibles;
● Additional cost of product revenues related to the step-up basis in inventory to record inventory at fair value;
● Adjustments to the Company’s interest expense related to additional borrowings on the 2024 Term Loan as defined in Note 14, Debt, and elimination of certain Ironshore debt .
In addition, all of the above adjustments were adjusted for the applicable tax impact.
Acquisition Related Expenses
During the year ended December 31, 2024, the Company incurred $ 24,329 of acquisition related expenses as a result of the Ironshore Acquisition and the substantial majority were included in Selling, general, and administrative expense in the consolidated statements of operations. These costs include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition; employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, Ironshore directors and officers insurance purchased at the closing of the Ironshore Acquisition, and miscellaneous other acquisition expenses incurred, including integration consulting costs and contract termination costs. The Company has accrued $ 510 related to employee severance costs incurred as of December 31, 2024 but not yet paid. Additional charges related to severance or retention payments are not expected to be material and the remaining employee termination costs are expected to be paid by March 31, 2025. The Company expects, however, to incur additional acquisition-related expenses relating to consulting fees, contract termination costs, and other integration-related expenses during the first half of 2025.
Year Ended December 31, 2024
Employee-related expenses
$
10,360
Transaction costs
9,046
Ironshore directors and officers insurance
1,090
Other acquisition expenses
3,833
Total acquisition related expenses
$
24,329
F-25
BDSI Acquisition
On March 22, 2022 (the “BDSI Acquisition Date”), the Company acquired BioDelivery Sciences International, Inc. (“BDSI”) in an all-cash transaction. 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 total consideration paid for the BDSI acquisition was approximately $ 669,431 consisting of the following (in thousands, except per share amounts):
Fair Value of Purchase Price Consideration
Amount
Fair value of purchase price consideration paid at closing:
Cash consideration for all outstanding shares of BDSI's common and preferred stock ( 103,235,298 shares acquired at $ 5.60 per share)
$
578,118
Cash consideration paid to settle RSUs and in-the-money options
28,309
Cash paid to settle BDSI debt
63,004
Total purchase consideration
$
669,431
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 BDSI Acquisition Date.
The final allocation of the consideration transferred to the assets acquired and liabilities assumed was completed in the year ended December 31, 2023.
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 BDSI Acquisition Date:
Amounts Recognized at the BDSI Acquisition Date
Assets Acquired
Cash and cash equivalents
$
97,362
Accounts receivable
55,495
Inventory
77,382
Prepaid expenses and other current assets
6,125
Property and equipment
1,242
Operating lease assets
481
Intangible assets
435,000
Total assets
$
673,087
Liabilities Assumed
Accounts payable
$
12
Accrued liabilities
18,249
Accrued rebates, returns and discounts
56,261
Operating lease liabilities
481
Deferred tax liabilities
62,510
Total liabilities
$
137,513
Total identifiable net assets acquired
535,574
Goodwill
133,857
Total consideration transferred
$
669,431
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The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the $ 435,000 of intangible assets. 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 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.
The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.
Total revenues attributable to BDSI from the BDSI Acquisition Date through December 31, 2022 were $ 140,653 . However, earnings attributable to BDSI from the BDSI Acquisition Date through December 31, 2022 are not distinguishable due to the rapid integration of BDSI’s core operations into the Company.
Unaudited Pro Forma Summary of Operations
The following table shows the unaudited pro forma summary of operations for the years ended December 31, 2022, as if the BDSI Acquisition had occurred on January 1, 2021. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of January 1, 2021, and is not indicative of what such results would be expected for any future period:
Year Ended December 31, 2022
Total revenues
$
493,284
Net income
$
8,674
The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and BDSI. The pro forma financial information primarily reflects the following pro forma adjustments:
● A dditional amortization expense from the acquired intangibles;
● Additional cost of product revenues related to the step-up basis in inventory to record inventory at fair value; and
● Adjustments to the Company’s interest expense related to repayment of the 2020 Term Loan and entering into the 2022 Term Loan as defined in Note 14, Debt .
In addition, all of the above adjustments were adjusted for the applicable tax impact.
F-27
Acquisition Related Expenses
During the year ended December 31, 2022, the Company incurred $ 31,297 of acquisition related expenses as a result of the BDSI Acquisition and the substantial majority were included in “Selling, general, and administrative” expenses in the consolidated statements of operations. These costs include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, BDSI directors and officers insurance, and miscellaneous other acquisition expenses incurred. The Company does not expect to incur any additional expenses related to the BDSI Acquisition.
Year Ended December 31, 2022
Transaction costs
$
14,718
Employee-related expenses
8,008
BDSI directors and officers insurance
4,492
Other acquisition expenses
4,079
Total acquisition related expenses
$
31,297
5. L icenses Agreements
The Company periodically enters into license agreements to develop and commercialize its products.
Grünenthal License
In connection with the acquisition of the Nucynta Products from Assertio Therapeutics, Inc. (the “Nucynta Acquisition”), the Company assumed all commercialization responsibilities, including sales and marketing, for the Nucynta Products through the acquisition of a license from Grünenthal Gmbh (“Grünenthal”) (the “Grünenthal License”).
Pursuant to the Grünenthal License, the Company is obligated to make royalty payments directly to Grünenthal at a rate of 14 % on net sales of Nucynta Products. Unless earlier terminated, the Grünenthal License Agreement will continue in effect until the expiration of the royalty obligations therein. Upon expiration of the Grünenthal License, the Company will retain a fully paid up, non-exclusive license to make, use and sell the Nucynta Products under the Grünenthal Patents (as defined therein) in the United States.
Shionogi License and Supply Agreement
Prior to the BDSI Acquisition, BDSI and Shionogi Inc. (“Shionogi”) entered into an exclusive license agreement (the “Shionogi License Agreement”) for the commercialization of Symproic in the United States including Puerto Rico (the “Shionogi Territory”) for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain (the “Shionogi Field”).
Pursuant to the terms of the Shionogi License Agreement, tiered royalty payments on net sales of Symproic in the Shionogi Territory are payable quarterly based on a royalty rate that ranges from 8.5 % to 17.5 % (plus an additional 1 % of net sales on a pass-through basis to a third-party licensor of Shionogi) based on volume of net sales and whether Symproic is being sold as an authorized generic. Unless earlier terminated, the Shionogi License Agreement will continue in effect until the expiration of the royalty obligations, as defined therein. Upon expiration of the Shionogi License Agreement, all licenses granted for Symproic in the Shionogi Field and in the Shionogi Territory survive and become fully-paid, royalty-free, perpetual and irrevocable.
BDSI and Shionogi also had entered into a supply agreement under which Shionogi will supply Symproic at cost plus an agreed upon markup. 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.
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6. Earnings Per Share
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 (“RSUs”), performance share units (“PSUs”), 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 antidilutive.
The following table presents the computations of basic and dilutive earnings (loss) per common share:
Years Ended December 31,
2024
2023
2022
Numerator:
Net income (loss)
$
69,190
$
48,155
$
( 25,002 )
Adjustment for interest expense recognized on convertible senior notes, net of tax
5,863
5,889
—
Net income (loss) — diluted
$
75,053
$
54,044
$
( 25,002 )
Denominator:
Weighted-average shares outstanding — basic
32,273,850
33,741,213
33,829,495
Effect of dilutive securities:
Stock options
369,662
271,540
—
Restricted stock units
1,064,851
714,190
—
Performance share units
109,512
267,761
—
Convertible senior notes
6,606,305
6,793,421
—
Weighted average shares outstanding — diluted
40,424,180
41,788,125
33,829,495
Earnings (loss) per share — basic
$
2.14
$
1.43
$
( 0.74 )
Earnings (loss) per share — diluted
$
1.86
$
1.29
$
( 0.74 )
The Company has the option to settle the conversion obligation for its convertible senior notes in cash, shares or a combination of the two. The Company uses the if-converted method for the convertible senior notes.
The following table presents dilutive securities excluded from the calculation of diluted earnings per share:
Years Ended December 31,
2024
2023
2022
Stock options
130,344
259,405
1,683,805
Restricted stock units
232,269
31,050
2,047,571
Performance share units
232,572
308,680
447,770
Employee stock purchase plan
17,946
18,591
—
Convertible senior notes
—
—
4,925,134
For PSUs, these securities were excluded from the calculation of diluted earnings per share as the performance-based or market-based vesting conditions were not met as of the end of the reporting period. 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.
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7. Marketable Securities
Available-for-sale debt securities were classified on the consolidated balance sheets at fair value as follows:
December 31,
December 31,
2024
2023
Cash and cash equivalents
$
1,993
$
4,729
Marketable securities
92,198
71,601
Total
$
94,191
$
76,330
Available-for-sale debt securities consisted of the following:
December 31, 2024
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Corporate debt securities
$
82,611
$
161
$
( 93 )
$
82,679
U.S. Treasury securities
—
—
—
—
Government-sponsored securities
6,572
—
( 12 )
6,560
Commercial paper
4,953
1
( 2 )
4,952
Total
$
94,136
$
162
$
( 107 )
$
94,191
December 31, 2023
Corporate debt securities
$
41,610
$
47
$
( 45 )
$
41,612
U.S. Treasury securities
30,189
8
—
30,197
Government-sponsored securities
4,517
4
—
4,521
Total
$
76,316
$
59
$
( 45 )
$
76,330
The contractual maturities of available-for-sale debt securities were as follows:
December 31,
December 31,
2024
2023
Matures within one year
$
50,469
$
61,672
Matures after one year through five years
43,722
14,658
Total
$
94,191
$
76,330
The unrealized losses on the Company’s available-for-sale debt securities were immaterial as of December 31, 2024 and December 31, 2023. The Company did not hold available-for-sale debt securities as of December 31, 2022.
There were no sales of marketable securities during the years ended December 31, 2024 or 2023. Net unrealized holding gains or losses for the period that have been previously included in accumulated other comprehensive income were not material to the Company’s consolidated statement of operations.
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, 2024 or 2023. The Company reviews its investments for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. The Company generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position. As such, the Company did not hold any securities with other-than-temporary impairment as of December 31, 2024 or 2023.
F-30
8. Inventory
Inventory consisted of the following:
Years Ended December 31,
2024
2023
Raw materials
$
12,531
$
10,384
Work in process
13,163
6,740
Finished goods
17,812
15,208
Total inventory
$
43,506
$
32,332
Long-term inventory is included in other noncurrent assets in the Company’s consolidated balance sheet.
The balance sheet classification of inventory consisted of the following:
Years Ended December 31,
2024
2023
Inventory
$
35,560
$
32,332
Other noncurrent assets
7,946
—
Total inventory
$
43,506
$
32,332
During the years ended December 31, 2024, 2023 and 2022 the expenses related to excess and obsolete inventory that were recorded as a component of cost of product revenues were $ 866 , $ 1,624 , and $ 1,814 , respectively.
9. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
Years Ended December 31,
2024
2023
Prepaid co-pay program incentives
$
9,282
$
1,758
Prepaid regulatory fees
7,270
5,938
Prepaid income taxes
3,071
1,416
Other current assets
2,742
93
Manufacturing deposits
2,640
2,640
Prepaid insurance
632
672
Other prepaid expenses
4,757
2,678
Prepaid expenses and other current assets
$
30,394
$
15,195
F-31
10. Property and Equipment
Property and equipment consisted of the following:
Years Ended December 31,
2024
2023
Computers and office equipment
$
3,437
$
2,388
Laboratory equipment
436
436
Furniture and fixtures
1,154
1,133
Manufacturing equipment
20,803
20,643
Leasehold improvements
1,231
1,061
Construction-in-process
802
—
Total property and equipment
27,863
25,661
Less: accumulated depreciation
( 13,534 )
( 9,678 )
Property and equipment, net
$
14,329
$
15,983
Depreciation expense related to property and equipment amounted to $ 3,856 , $ 3,496 , and $ 2,684 for the years ended December 31, 2024, 2023, and 2022, respectively. During the year ended December 31, 2024, the Company disposals of property and equipment assets were immaterial. During the years ended December 31, 2023 and 2022, the Company disposed of fully depreciated assets of $ 141 , and $ 1,040 respectively. Any gains or losses from the retirement, sale or disposal of property and equipment during the years ended December 31, 2024, 2023, and 2022 were immaterial.
11. Goodwill and Intangible Assets
The Company’s goodwill resulted from the acquisition of BioDelivery Sciences International, Inc. (“BDSI”) on March 22, 2022 (the “BDSI Acquisition”) and the Ironshore Acquisition on September 3, 2024. Refer to Note 4, Acquisitions, for more information.
The following tables summarizes the changes in the carrying amount of goodwill:
Amount
Balance as of December 31, 2022
$
133,695
Measurement period adjustments from BDSI Acquisition
162
Balance as of December 31, 2023
$
133,857
Goodwill resulting from Ironshore Acquisition
28,476
Balance as of December 31, 2024
$
162,333
The following table sets forth the cost, accumulated amortization, and carrying amount of intangible assets as of December 31, 2024 and 2023:
As of December 31, 2024
As of December 31, 2023
Cost
Accumulated Amortization
Carrying Amount
Cost
Accumulated Amortization
Carrying Amount
Jornay
$
635,000
$
( 27,242 )
$
607,758
$
—
$
—
$
—
Belbuca
360,000
( 209,214 )
150,786
360,000
( 133,821 )
226,179
Nucynta Products (1)
521,170
( 438,094 )
83,076
521,170
( 382,710 )
138,460
Symproic
70,000
( 20,218 )
49,782
70,000
( 12,931 )
57,069
Elyxyb
—
—
—
—
—
—
Total intangibles
$
1,586,170
$
( 694,768 )
$
891,402
$
951,170
$
( 529,462 )
$
421,708
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The following table presents amortization and impairment expense recognized in cost of product revenues for the years ended December 31, 2024, 2023, and 2022 :
Years Ended December 31,
2024
2023
2022
Jornay
$
27,242
$
—
$
—
Belbuca
75,393
75,393
58,428
Nucynta Products (1)
55,384
63,082
67,181
Symproic
7,285
7,285
5,646
Elyxyb (2)
—
—
5,000
Total amortization and impairment expense
$
165,304
$
145,760
$
136,255
(1) During the year ended December 31, 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.
(2) Includes $ 214 of amortization expense and $ 4,786 of impairment expense .
Intangible Asset Impairment
During the three months ended December 31, 2022, the Company made the decision to discontinue the commercialization of Elyxyb. Accordingly, an asset impairment evaluation performed during the three months ended December 31, 2022 resulted in the Company recognizing $ 4,786 of impairment expense related to the Elyxyb intangible asset, which was equivalent to the carrying amount of the Elyxyb asset at the time of the impairment determination. The impairment expense reflects that no significant proceeds are expected to be realized from its disposition. The impairment expense is included in “ Intangible asset amortization and impairment ” in the consolidated statements of operations. Other expenses associated with the discontinuation of Elyxyb were immaterial. In February 2023, the Company transferred all of the assets, rights, and obligations necessary to commercialize Elyxyb in the United States and Canada to a third party.
As of December 31, 2024, the remaining amortization expense expected to be recognized is as follows:
Years ended December 31,
Jornay
Belbuca
Nucynta Products
Symproic
Total
2025
$
83,829
$
75,393
$
55,384
$
7,285
$
221,891
2026
83,829
75,393
27,692
7,285
194,199
2027
83,829
—
—
7,285
91,114
2028
83,829
—
—
7,285
91,114
2029
83,829
—
—
7,285
91,114
Thereafter
188,613
—
—
13,357
201,970
Remaining amortization expense
$
607,758
$
150,786
$
83,076
$
49,782
$
891,402
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12. Accrued Liabilities
Accrued liabilities consisted of the following:
As of December 31,
2024
2023
Accrued royalties
$
13,120
$
14,198
Accrued income taxes
8,525
2,136
Accrued bonuses
8,399
4,987
Accrued product taxes and fees
6,660
5,013
Accrued interest
6,146
2,853
Accrued inventory
6,073
—
Accrued payroll and related benefits
4,589
1,511
Accrued sales and marketing
4,398
1,198
Accrued incentive compensation
4,054
1,375
Liability for cash-settled share-based awards assumed from Ironshore Acquisition
3,044
—
Accrued audit and legal
1,848
700
Accrued severance expense related to Ironshore Acquisition
510
—
Accrued other operating costs
4,758
3,600
Total accrued liabilities
$
72,124
$
37,571
13. Commitments and Contingencies
Legal Proceedings
From time to time, the Company may face legal claims or actions in the normal course of business. Except as disclosed below, the Company is not currently a party to any material litigation.
Xtampza ER Litigation
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). 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 which lifted the 30-month stay of FDA approval. 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 asserted infringement of Patent No. 9,073,933 in November 2015 and Patent No. 9,522,919 in April 2017. 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. 9,693,961.
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 argued that the ʼ961 patent is invalid.
F-34
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 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. 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. Patent No. 10,407,434. 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: (i) Purdue cannot, as a matter of law, state a claim for infringement under § 271(e)(2)(A); (ii) Purdue cannot, as a matter of law, state a claim for product-by-process infringement under §271(g); and (iii) Purdue has not alleged facts sufficient to support any indirect infringement theory under §271(b) or (c). The Court held a hearing on the Company’s motion to dismiss on October 13, 2021, and the motion is pending before the Court.
Like the prior follow-on lawsuits, the ’434 patent litigation was consolidated into the lead case and a scheduling order was entered. 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. 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. The Company has denied all claims and has requested a judgment that the remaining asserted patents are invalid and/or not infringed; the Company is also seeking a judgment that the case is exceptional and has requested an award of the Company’s attorneys’ fees for defending the case.
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.
Nucynta Litigation
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. Patent Nos. 9,861,583, 9,867,784, and 9,872,836. 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.
F-35
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-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. Patent No. 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 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. 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. 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
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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, 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.
Alvogen
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. Patent Nos. 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.
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Chemo Research, S.L.
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. In response, BDSI filed a complaint for patent infringement in Federal District Court for the District of Delaware. Chemo answered the complaint on December 1, 2022. 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 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. On May 30, 2024, the parties submitted a Joint Status Report to the Court providing that Chemo received a fourth Complete Response Letter on March 27, 2024. On February 7, 2025, the parties submitted a Joint Status Report to the Court providing that Chemo received a fifth Complete Response Letter in January 2025.
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.
14. D ebt
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 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 outstanding from an existing 2020 Term Loan and fund a portion of the consideration to be paid to complete the BDSI Acquisition. The 2022 Loan Agreement was accounted for as a debt modification and transaction fees of $ 173 were expensed. In connection with the 2022 Loan Agreement, the Company paid loan commitment and other fees to the lender of $ 19,818 , which together with preexisting debt issuance costs and note discounts of $ 2,049 were be amortized over the term of the loan using the effective interest rate. The net proceeds of the loan modification were $ 517,682 .
On July 28, 2024, the 2022 Term Loan was amended and restated in connection with the Ironshore Acquisition and establishment of the 2024 Term Loan as described below.
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2024 Term Loan
On July 28, 2024, the Company entered into a Second Amended and Restated Loan Agreement by and among the Company, certain of its subsidiaries party thereto as guarantors, BioPharma Credit PLC as collateral agent, and BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership (investment funds managed by Pharmakon Advisors, LP) as the lenders (the “Lenders”) party thereto (the “2024 Loan Agreement”). The 2024 Loan Agreement provided for a $ 645,833 secured term loan (the “2024 Term Loan”), consisting of a $ 320,833 initial term loan and a $ 325,000 delayed draw term loan. On the effective date of the 2024 Loan Agreement, the Company used the proceeds of the initial term loan to refinance in full all outstanding indebtedness under the 2022 Term Loan. On the closing date of the Ironshore Acquisition, the Company used the proceeds of the delayed draw term loan to fund a portion of the consideration to complete the Ironshore Acquisition. The Company used the remainder for general corporate purposes.
The 2024 Loan Agreement was accounted for as a debt modification as there was no change in the debtor or creditor and the present value of the cash flows under the terms of the new debt instrument were not at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. Accordingly, the new effective interest rate was determined based on the carrying amount of the original debt instrument adjusted for the increase in debt, and transaction fees of $ 619 were expensed. In connection with the 2024 Loan Agreement, the Company paid loan commitment and other fees to the lender of $ 11,825 , which together with preexisting debt issuance costs and note discounts of $ 4,192 are amortized over the term of the loan using the effective interest rate.
The 2024 Term Loan is scheduled to mature on July 28, 2029 (provided, however, that if the aggregate principal amount outstanding under the 2029 Convertibles Notes is more than $ 50,000 as of November 18, 2028, then the 2024 Term Loan will mature on November 18, 2028) and is guaranteed by certain of the Company’s material subsidiaries. The 2024 Term Loan is secured by substantially all of the assets of the Company and its material subsidiaries. Until September 30, 2024, the 2024 Term Loan bore an annual interest rate equal to term Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment of 0.13 % (subject to a 1.20 % floor), plus a margin of 7.50 %. Following September 30, 2024, the 2024 Term Loan bears an annual interest rate equal to term SOFR plus a spread adjustment of 0.13 % (subject to a 4.00 % floor), plus a margin of 4.50 % per annum, and is subject to quarterly amortization payments equal to 2.50 % of the original funded amount of the 2024 Term Loan. The Company paid a one-time fee of 1.25 % of the initial term loan principal amount on July 29, 2024 and paid a one-time fee of 2.25 % of the delayed draw term loan principal amount on September 3, 2024. As of December 31, 2024, the contractual interest rate was 9.2 %. The Company is required to pay the $ 629,687 principal balance under the 2024 Term Loan in equal quarterly installments of $ 16,146 over the remaining four years with a $ 387,500 final payment.
The 2024 Loan Agreement contains certain covenants and obligations of the parties, including, without limitation, covenants that limit the Company’s ability to incur additional indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of business. Failure to comply with these covenants would constitute an event of default under the 2024 Loan Agreement, notwithstanding the Company’s ability to meet its debt service obligations. The 2024 Loan Agreement also includes various customary remedies for secured lenders following an event of default, including the acceleration of the outstanding amounts under the 2024 Loan Agreement and enforcement upon the collateral securing obligations under the 2024 Loan Agreement.
The following table presents the total interest expense recognized related to the 2024 Term Loan, the 2022 Term Loan, and the 2020 Term Loan during the years ended December 31, 2024, 2023, and 2022:
Years Ended December 31,
2024
2023
2022
Contractual interest expense
$
54,915
$
67,499
$
51,155
Amortization of debt issuance costs
4,908
7,468
7,378
Total interest expense
$
59,823
$
74,967
$
58,533
As of December 31, 2024, the effective interest rate on the 2024 Term Loan was 9.9 %.
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As of December 31, 2024, future principal repayments under the 2024 Term Loan are as follows:
Years ended December 31,
Principal Payments
2025
$
64,583
2026
64,583
2027
64,583
2028
435,938
Total before unamortized discount and issuance costs
$
629,687
Less: unamortized discount and issuance costs
( 14,371 )
Total term notes
$
615,316
2026 Convertible Notes
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.
Repurchase of a Portion of the 2026 Convertible Notes in 2023
Contemporaneously with the offering of the 2029 Convertible Notes in February 2023 (as described 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 year ended December 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 following the repurchase was $ 26,350 .
Redemption of Remaining 2026 Convertible Notes in 2024
On April 11, 2024, the Company provided notice of redemption for the remaining $ 26,350 aggregate principal amount of its outstanding 2026 Convertible Notes. The 2026 Convertible Notes were fully redeemed on June 18, 2024. The Company settled all conversions of the 2026 Convertible Notes in cash.
In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the Company accounted for the redemption of the 2026 Convertible Notes as a debt extinguishment. The Company paid $ 33,218 to settle the 2026 Convertible Notes, as well as accrued and unpaid interest of $ 229 . The Company recorded a $ 7,184 loss on extinguishment of debt on the consolidated statements of operations during the year ended December 31, 2024, which includes recognition of previously deferred financing costs of $ 289 and miscellaneous costs of redemption of $ 27 .
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 were used
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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 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 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; or
(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, 2024, 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; and
(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.
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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 2029 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 business 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 $ 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 2029 Convertible Notes are classified on the consolidated balance sheets as of December 31, 2024 as convertible senior notes.
As of December 31, 2024, the convertible senior notes outstanding consisted of the following:
2029 Convertible Notes
Principal
$
241,500
Less: unamortized issuance costs
( 4,328 )
Net carrying amount
$
237,172
The Company determined the expected life of the 2029 Convertible Notes was equal to the six-year term. The effective interest rate on the 2029 Convertible Notes is 3.28 %. As of December 31, 2024, the if-converted value did not exceed the remaining principal amount of the 2029 Convertible Notes.
The following table presents the total interest expense recognized related to the 2026 Convertible Notes and 2029 Convertible Notes during the years ended December 31, 2024, 2023, and 2022:
Years Ended December 31,
2024
2023
2022
Contractual interest expense
$
7,258
$
7,206
$
3,773
Amortization of debt issuance costs
1,109
1,166
907
Total interest expense
$
8,367
$
8,372
$
4,680
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As of December 31, 2024, the future minimum payments on the 2029 Convertible Notes were as follows:
Years ended December 31,
2029 Convertible Notes
2025
$
6,943
2026
6,943
2027
6,943
2028
6,943
2029
244,972
Total minimum payments
$
272,744
Less: interest
( 31,244 )
Less: unamortized issuance costs
( 4,328 )
Convertible Notes carrying value
$
237,172
15. Deferred Royalty Obligation
The Company’s deferred royalty obligation is a debt obligation of Ironshore that was assumed as part of the Ironshore Acquisition. The deferred royalty obligation relates to royalty payments on net sales of Jornay that are paid to debtholders in exchange for funding provided to Ironshore by its debtholders. The royalty rate is 7.4 % for net sales prior to July 1, 2025 and 9.7 % thereafter through March 2032. The royalty payments are an unsecured obligation of the Company and there are no financial covenants or other restrictive covenants. The royalty payments are to be made semi-annually in February and August of each year based on the sales of Jornay in the prior six-month calendar year period.
The deferred royalty obligation will be accreted to the estimated future royalty payments over the life of the agreement, which will be recorded as interest expense using the effective interest rate. The carrying value of the obligation will decrease for royalty payments made based upon the actual Jornay sales and the related royalty payments. The effective interest rate is calculated based on current estimates of future royalty payments over the life of the arrangement. To the extent estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company accounts for any such changes by adjusting the effective interest rate on a prospective basis, which will adjust future interest expense. The effective interest rate as of December 31, 2024 was approximately 15.2 %.
A rollforward of the deferred royalty obligation is as follows:
Deferred Royalty Obligation
Acquired balance as of September 3, 2024
$
116,900
Accretion interest expense
3,713
Payments made
—
Net carrying amount
$
120,613
The total interest expense recognized related to the deferred royalty obligation during year ended December 31, 2024 was $ 5,795 .
16. L eases
Operating Lease Arrangements
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 %.
In connection with the Ironshore Acquisition, the Company acquired an operating lease for the U.S. headquarters of Ironshore pursuant to which the Company leases 8,817 of rentable square feet of space in Durham, North Carolina (the “Ironshore Lease”). The Ironshore Lease continues through February 2028.
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As of December 31, 2024, the Company's operating lease assets totaled $ 5,822 and operating lease liabilities totaled $ 6,810 . This primarily relates to the Company’s corporate headquarters lease in Stoughton, Massachusetts and the Ironshore Lease.
Short-Term Lease Arrangements
In December 2018, the Company began entering into 12 -month, non-cancelable vehicle leases for its field-based employees. Each vehicle lease is executed separately and expires at varying times with automatic renewal options that are cancelable at any time. The rent expense for these leases is recognized on a straight-line basis over the lease term in the period in which it is incurred.
Variable Lease Costs
Variable lease costs primarily include utilities, property taxes, and other operating costs that are passed on from the lessor.
The components of lease cost for the years ended December 31, 2024, 2023, and 2022 are as follows:
Years Ended December 31,
2024
2023
2022
Operating lease cost
$
1,444
$
1,306
$
1,805
Short-term lease cost
1,474
1,446
993
Variable lease cost
913
565
331
Total lease cost
$
3,831
$
3,317
$
3,129
The lease term and discount rate for operating leases for the years ended December 31, 2024 and 2023 are as follows:
Years Ended December 31,
2024
2023
Weighted-average remaining lease term — operating leases (years)
4.6
5.7
Weighted-average discount rate — operating leases
6.6 %
6.2 %
Other information related to operating leases for the years ended December 31, 2024, 2023, and 2022 is as follows:
Years Ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of operating leases liabilities
$
1,538
$
1,585
$
1,568
Leased assets obtained in exchange for new operating lease liabilities
—
—
—
The Company’s aggregate future minimum lease payments for its operating leases, including embedded operating lease arrangements, as of December 31, 2024, are as follows:
Years ended December 31,
Lease Payments
2025
$
1,683
2026
1,728
2027
1,750
2028
1,572
2029
1,169
Thereafter
—
Total minimum lease payments
$
7,902
Less: Present value discount
1,092
Present value of lease liabilities
$
6,810
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17. Equity
Common Stock
In May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which an aggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultants and advisors of the Company, plus an annual increase on the first day of each fiscal year until the expiration of the Plan equal to 4 % of the total number of outstanding shares of common stock on December 31st of the immediately preceding calendar year (or a lower amount as otherwise determined by the Company’s Board of Directors prior to January 1st). As of December 31, 2024, there were 1,849,020 shares of common stock available for issuance pursuant to the Plan. The Plan provides for granting of both Internal Revenue Service qualified incentive stock options and non-qualified options, restricted stock awards, restricted stock units and performance stock units. 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 the Company’s plans are funded through the issuance of new shares. Refer to Note 18, Stock-based Compensation , for more information.
Warrants
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. In November 2022, the Warrant was exercised through a cashless exercise and the Company issued 40,666 shares.
Share Repurchases
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.
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 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. 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
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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
F-46
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 share repurchases.
In May 2024, the Company’s Board of Directors authorized an ASR program to repurchase $ 35,000 of the Company’s common stock, as part of the 2024-2025 Repurchase Program. Under the terms of the Company’s ASR agreement with an investment bank, the Company paid $ 35,000 on May 13, 2024, and received 888,889 shares, representing 80 % of the upfront payment on a price per share of $ 31.50 , the closing price on the date the agreement was executed. The remaining shares to be purchased by the Company was to be based on the volume-weighted average price of its common stock through July 31, 2024, minus an agreed upon discount between the parties. In July 2024, the ASR agreement settled and the Company received an additional 173,659 shares, bringing the total shares repurchased pursuant to the ASR agreement to 1,062,548 .
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 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 this ASR agreement were settled and not outstanding as of December 31, 2024.
As of December 31, 2024, the Company repurchased 1,882,702 shares at a weighted-average price of $ 31.88 per share for a total of $ 60,025 , inclusive of $ 25 of fees and commissions, under the 2024-2025 Repurchase Program and the cost of repurchased shares was recorded as treasury stock in the consolidated balance sheet. As of December 31, 2024, $ 90,000 remained available for share repurchases under the 2024-2025 Repurchase Program.
18. Stock-based Compensation
Performance Share Units, Restricted Stock Units and Stock Options
Performance Share Units
The Company periodically grants PSUs to certain members of the Company's senior management team. PSUs vest subject to the satisfaction of annual and cumulative performance and/or market conditions established by the Compensation Committee.
Beginning in February 2020 and each year thereafter, the Company granted PSUs with performance criteria related to the relative ranking of the total stockholder return (“TSR”) of the Company’s common stock for each individual year within a three-year performance period as well as the cumulative three-year performance period return relative to the TSR of certain peer companies within the S&P Pharmaceutical Select Industry Index. TSR will be measured based on the 30-day average stock price on the first day of each period compared to the 30-day average stock price on the last day of each period. The PSUs subject to the annual performance criteria will vest annually, subject to the satisfaction of the performance criteria and the executive’s continued employment through the performance period. The cumulative PSUs will vest following the three-year performance period, subject to the satisfaction of the performance criteria and the executive’s continued employment through the performance period. 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. 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.
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A summary of the Company’s PSUs activity for the year ended December 31, 2024 and related information is as follows:
Weighted-Average
Shares
Grant Date Fair Value
Outstanding as of December 31, 2023
503,880
$
33.13
Granted
308,972
44.15
Vested
( 514,050 )
32.53
Forfeited
( 165,700 )
43.12
Performance adjustment
196,550
32.58
Outstanding as of December 31, 2024
329,652
$
39.04
The number of PSUs awarded represents the target number of shares of common stock that may be earned; however, the actual number of shares earned may vary based on the satisfaction of performance criteria. The weighted-average grant date fair value of PSUs granted for the years ended December 31, 2024, 2023, and 2022 was $ 44.15 , $ 38.71 , and $ 24.12 , respectively. The total fair value of PSUs vested (measured on the date of vesting) for the years ended December 31, 2024, 2023, and 2022 was $ 17,433 , $ 5,970 , and $ 2,257 , respectively.
For the years ended December 31, 2024, 2023, and 2022, the stock-based compensation expense for PSUs was $ 5,037 , $ 7,037 , and $ 5,398 respectively.
As of December 31, 2024, the unrecognized compensation cost related to performance share units was $ 7,045 and is expected to be recognized as expense over approximately 2.1 years.
Restricted Stock Units
A summary of the Company’s RSUs activity for the year ended December 31, 2024 and related information is as follows:
Weighted-Average
Shares
Grant Date Fair Value
Outstanding as of December 31, 2023
2,443,907
$
22.88
Granted
1,345,309
34.33
Vested
( 967,773 )
23.09
Forfeited
( 338,101 )
28.25
Outstanding as of December 31, 2024
2,483,342
$
28.27
The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2024, 2023, and 2022 was $ 34.33 , $ 26.25 , and $ 17.53 , respectively. The total fair value of RSUs vested (measured on the date of vesting) for the years ended December 31, 2024, 2023, and 2022 was $ 32,792 , $ 17,677 , and $ 10,166 , respectively.
As of December 31, 2024, the unrecognized compensation cost related to restricted stock units was $ 46,802 and is expected to be recognized as expense over approximately 2.3 years. The weighted-average grant date fair value of restricted stock units vested during the years ended December 31, 2024, 2023, and 2022 was $ 22,346 , $ 13,398 , and $ 12,547 , respectively.
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Stock Options
A summary of the Company’s stock option activity for the year ended December 31, 2024 and related information is as follows:
Weighted-
Weighted-
Average
Average
Remaining
Aggregate
Exercise Price
Contractual
Intrinsic
Shares
per Share
Term (in years)
Value
Outstanding as of December 31, 2023
1,176,750
$
19.48
4.3
$
13,297
Granted
130,344
31.41
Exercised
( 502,688 )
20.38
Cancelled
( 1,000 )
27.73
Outstanding as of December 31, 2024
803,406
$
20.84
4.4
$
6,634
Exercisable as of December 31, 2024
673,062
$
18.79
3.3
$
6,634
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:
Years Ended December 31,
2024
2023
2022
Risk-free interest rate
4.4
%
—
%
—
%
Volatility
51.7
%
—
%
—
%
Expected term (years)
6.1
—
—
Expected dividend yield
—
%
—
%
—
%
Risk-free Interest Rate. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants.
Expected Volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on the Company’s volatility as well as the historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology and pharmaceutical industries. In evaluating similarity, the Company considers factors such as industry, stage of life cycle and size.
Expected Term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have sufficient levels of historical exercise behavior through December 31, 2024, it determined the expected term assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.
Expected Dividend Yield. 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 year ended December 31, 2024 was $ 17.10 . The Company did not grant stock options during the years ended December 31, 2023 and 2022. The total intrinsic value of stock options exercised for the years ended December 31, 2024, 2023 and 2022 was $ 6,833 , $ 4,786 , and $ 3,943 , respectively.
As of December 31, 2024, the unrecognized compensation cost related to outstanding options was $ 2,154 and is expected to be recognized as expense over approximately 3.9 years.
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Employee Stock Purchase Plan
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: (i) the first day of the purchase period; or (ii) the last day of the purchase period. During the year ended December 31, 2024, 35,664 shares of common stock were purchased for total proceeds of $ 827 . As of December 31, 2024, there were 2,527,178 shares of common stock authorized for issuance pursuant to the employee stock purchase plan. The expense for the years ended December 31, 2024, 2023 and 2022 was $ 310 , $ 209 and $ 117 respectively.
Stock-Based Compensation Expense
Stock-based compensation for all stock options, restricted stock awards, restricted stock units, performance share units and for the employee stock purchase plan are reported within the following:
Years Ended December 31,
2024
2023
2022
Research and development
$
—
$
—
$
1,591
Selling, general and administrative
32,400
27,136
21,283
Total stock-based compensation expense
$
32,400
$
27,136
$
22,874
19. Income Taxes
The provision for (benefit from) income taxes contained the following components:
Years Ended December 31,
2024
2023
2022
Current provision:
Federal
$
45,343
$
21,504
$
166
State
10,849
8,227
4,540
56,192
29,731
4,706
Deferred benefit:
Federal
$
( 23,977 )
$
( 1,401 )
$
( 4,631 )
State
( 2,837 )
( 752 )
( 3,920 )
( 26,814 )
( 2,153 )
( 8,551 )
Provision for (benefit from) income taxes
$
29,378
$
27,578
$
( 3,845 )
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:
Years Ended December 31,
2024
2023
2022
Federal income tax expense at statutory rate
21.0
%
21.0
%
21.0
%
Change resulting from:
State income tax, net of federal benefit
5.5
4.9
5.0
Permanent difference - debt extinguishment
1.7
7.1
—
Permanent differences - all other
1.1
1.3
( 1.9 )
Stock compensation
0.8
1.0
( 5.1 )
Research and development credit
—
—
0.7
Transaction costs
—
—
( 4.4 )
Change in tax rates and other
( 0.7 )
0.4
( 2.0 )
Change in valuation allowance
0.4
0.7
—
Effective income tax rate
29.8
%
36.4
%
13.3
%
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During the years ended December 31, 2024 and 2023, the effective tax rate was impacted by permanent differences, including the extinguishment 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. During the year ended December 31, 2022, non-deductible transaction costs resulting from the BDSI Acquisition 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. The significant components of the Company’s deferred tax assets and liabilities are comprised of the following:
Years Ended December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
26,586
$
33,800
Research and development credits
1,238
1,769
Operating lease liabilities
1,604
1,803
Returns and discounts
45,774
18,528
Stock-based compensation
7,621
7,570
Accruals and other
8,791
6,257
163(j) Carryforward
—
—
Capitalized R&D
468
707
Intangible assets
37,928
32,771
Deferred royalty obligation
28,712
—
Gross deferred tax assets:
158,722
103,205
Valuation allowance
( 6,498 )
( 5,781 )
Total deferred tax assets:
152,224
97,424
Deferred tax liabilities:
Debt discount
( 45 )
( 344 )
Operating lease assets
( 1,372 )
( 1,529 )
Intangible assets
( 49,964 )
( 65,774 )
Property and equipment
( 2,810 )
( 3,518 )
Total deferred tax liabilities:
( 54,191 )
( 71,165 )
Net deferred tax assets
$
98,033
$
26,259
The Company provides a valuation allowance when it is more-likely-than-not that deferred tax assets will not be realized. In determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluates all available evidence including projections of future taxable income, carryback opportunities, reversal of certain deferred tax liabilities, and other tax planning strategies. The Company maintains a partial valuation against its federal, state, and international operating losses and federal R&D credits as of December 31, 2024. The valuation allowance was $ 6,498 and $ 5,781 as of December 31, 2024 and 2023, 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 $ 431 and $ 527 for the years ended December 31, 2024 and 2023. The change in valuation allowance did no t impact the tax provision for the year ended December 31, 2022. The change in the valuation allowance for the year ended December 31, 2024 was $ 717 , including $ 287 recorded through purchase accounting.
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.
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As of December 31, 2024, the Company had gross U.S. federal net operating loss carryforwards of $ 102,148 , of which $ 60,160 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, 2023, the Company had gross U.S. federal net operating loss carryforwards of $ 137,459 .
As of December 31, 2024 and 2023, the Company also had gross U.S. state net operating loss carryforwards of $ 198,986 and $ 202,381 , respectively, which may be available to offset future income tax liabilities and expire at various dates through 2037.
As of December 31, 2024 and 2023, the Company had federal research and development tax credit carryforwards of approximately $ 1,025 . As of December 31, 2024, the Company did no t have any state research and development tax credit carryforwards. As of December 31, 2023, the Company had state research and development tax credit carryforwards of approximately $ 672 .
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. 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, 2024, remaining net operating losses of $ 90,062 are subject to limitation. The Company also acquired $ 1,092 of Canadian operating losses as part of the Ironshore Acquisition on which the Company has recorded a full valuation allowance.
The Company files income tax returns in the United States and in several states. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2020 through December 31, 2024. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.
The Company has not recognized deferred tax assets for certain federal and state research and development credits related to uncertain tax positions, and that is included in the tabular rollforward of uncertain tax positions. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:
Years Ended December 31,
2024
2023
2022
Gross UTB Balance as of January 1
$
11,306
$
11,400
$
654
Additions based on tax positions related to the current year
—
—
—
Additions for tax positions related to acquisitions
—
—
10,930
(Reductions) additions for tax positions of prior years
—
( 94 )
( 184 )
Gross UTB Balance as of December 31
$
11,306
$
11,306
$
11,400
Net UTB impacting the effective tax rate as of December 31 excluding valuation allowance impacts, if any
$
11,275
$
11,275
$
11,368
20. Employee Benefits
The Company has a retirement savings plan, which is qualified under section 401(k) of the Code, for its employees. The plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Revenue Service annual limits. Employees become eligible to participate starting on the first day of employment. The Company is not required to contribute to this plan. Total expense for contributions made by the Company for the years ended December 31, 2024, 2023 and 2022 was $ 1,945 , $ 1,759 , and $ 1,315 , respectively.
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21. Segment Information
The Company’s product portfolio includes Jornay, Belbuca, Xtampza ER, Nucynta IR and Nucynta ER, and Symproic. The Company defines its segments on the basis of the way in which internally reported financial information is regularly reviewed by the chief operating decision maker (“CODM”) to analyze financial performance, make decisions, and allocate resources. The CODM is the Chief Executive Officer. As the internal reporting is based on the consolidated results, the Company has identified one operating and reportable segment and the measure of segment profit or loss is consolidated net income (loss). The CODM uses net income (loss) to assess actual results and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources.
The financial information regularly provided to the CODM includes consolidated cost of sales information and segment expense categories at a more disaggregated level than the consolidated statement of operations. The significant segment expenses for functional areas exclude stock-based compensation and certain other segment expenses, and are reported for the following functional areas: corporate, medical, technical operations, and commercial. The corporate functional area includes operating expenses related to finance, legal, business development, and other administrative activities, excluding stock-based compensation and other segment expenses (“Corporate Expenses”). The medical functional area includes operating expenses related to medical affairs, regulatory, pharmacovigilance and other medical-related activities, excluding stock-based compensation and other segment expenses (“Medical Expenses”). The technical operations functional area includes non-inventoriable operating expenses related to supply chain, product quality, information technology and other technical activities, excluding stock-based compensation and other segment expenses (“Technical Operations Expenses”). The commercial function includes operating expenses related to sales, marketing, market access, and other commercial activities, excluding stock-based compensation and other segment expenses (“Commercial Expenses”). Stock compensation is a significant segment expense and other segment expenses are included in Other segment items or separately stated in the table below.
The table below provides information about the Company’s segment, including segment expenses, and a reconciliation to net income (loss):
Years Ended December 31,
2024
2023
2022
Product revenues, net
$
631,449
$
566,767
$
463,933
Cost of product revenues (excluding intangible asset amortization)
88,801
94,838
118,190
Intangible asset amortization and impairment
165,304
145,760
136,255
Commercial expenses
91,225
68,513
68,831
Corporate expenses
33,702
32,322
33,915
Medical expenses
23,905
20,737
16,991
Technical operations expenses
1,751
2,000
2,261
Stock-based compensation expense
32,400
27,136
22,874
Other segment items (1)
24,466
8,500
31,297
Interest expense
73,974
83,339
63,213
Interest income
( 13,976 )
( 15,615 )
( 1,047 )
Loss on extinguishment of debt
11,329
23,504
—
Provision for (benefit from) income taxes
29,378
27,578
( 3,845 )
Net income (loss)
$
69,190
$
48,155
$
( 25,002 )
(1) – Other segment expenses are primarily acquisition-related expenses, expenses related to the Company’s CEO transition, litigation settlements, and fair value remeasurement of contingent consideration.
Depreciation expense was $ 3,856 , $ 3,496 and $ 2,684 in the years ended December 31, 2024, 2023 and 2022, respectively. Intangible asset amortization and impairment expense was $ 165,304 , $ 145,760 and $ 136,255 in the years ended December 31, 2024, 2023 and 2022.
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22. Unaudited Quarterly Operating Results
The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2024 and 2023:
First
Second
Third
Fourth
Year Ended December 31, 2024
Quarter
Quarter
Quarter
Quarter
Product revenues, net
$
144,923
$
145,276
$
159,301
$
181,949
Cost of product revenues
Cost of product revenues (excluding intangible asset amortization)
18,950
19,955
21,706
28,190
Intangible asset amortization and impairment
34,517
34,515
40,801
55,471
Total cost of products revenues
53,467
54,470
62,507
83,661
Gross profit
91,456
90,806
96,794
98,288
Operating expenses
Selling, general and administrative
41,982
43,335
61,955
63,091
Gain on fair value remeasurement of contingent consideration
—
—
—
( 2,914 )
Total operating expenses
41,982
43,335
61,955
60,177
Income from operations
49,474
47,471
34,839
38,111
Interest expense
( 17,339 )
( 15,587 )
( 18,394 )
( 22,654 )
Interest income
4,487
4,397
3,280
1,812
Loss on extinguishment of debt
—
( 7,184 )
( 4,145 )
—
Income (loss) before income taxes
36,622
29,097
15,580
17,269
Provision for income taxes
8,909
9,491
6,245
4,733
Net income
$
27,713
$
19,606
$
9,335
$
12,536
Earnings (loss) per share — basic
$
0.86
$
0.60
$
0.29
$
0.39
Weighted-average shares — basic
32,326,589
32,433,025
32,259,468
32,078,621
Earnings (loss) per share — diluted
$
0.71
$
0.52
$
0.27
$
0.36
Weighted-average shares — diluted
41,438,466
40,383,694
40,163,266
40,109,649
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First
Second
Third
Fourth
Year Ended December 31, 2023
Quarter
Quarter
Quarter
Quarter
Product revenues, net
$
144,767
$
135,546
$
136,709
$
149,745
Cost of product revenues
Cost of product revenues (excluding intangible asset amortization)
29,899
24,257
20,081
20,601
Intangible asset amortization and impairment
37,466
37,463
36,317
34,514
Total cost of products revenues
67,365
61,720
56,398
55,115
Gross profit
77,402
73,826
80,311
94,630
Operating expenses
Selling, general and administrative
52,775
38,193
35,298
32,942
Total operating expenses
52,775
38,193
35,298
32,942
Income from operations
24,627
35,633
45,013
61,688
Interest expense
( 21,427 )
( 21,863 )
( 20,768 )
( 19,281 )
Interest income
2,747
4,027
4,538
4,303
Loss on extinguishment of debt
( 23,504 )
—
—
—
(Loss) income before income taxes
( 17,557 )
17,797
28,783
46,710
(Benefit from) provision for income taxes
( 131 )
4,790
8,149
14,770
Net income
$
( 17,426 )
$
13,007
$
20,634
$
31,940
(Loss) earnings per share — basic
$
( 0.51 )
$
0.38
$
0.61
$
0.99
Weighted-average shares — basic
34,319,291
34,622,284
33,744,209
32,301,211
(Loss) earnings per share — diluted
$
( 0.51 )
$
0.34
$
0.53
$
0.82
Weighted-average shares — diluted
34,319,291
42,849,952
42,058,821
41,279,981
F-55