Pacira BioSciences, Inc. 10-Q

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary objective of our cash equivalents and investment activities is to preserve principal while at the same time maximizing the income that we receive from our investments without significantly increasing risk. We invest in corporate bonds, commercial paper and asset-backed securities, which are reported at fair value. These securities are subject to interest rate risk and credit risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the interest rate later rises, we expect that the fair value of our investment will decline. A hypothetical 100 basis point increase in 40 Table of Contents interest rates would have reduced the fair value of our available-for-sale securities at June 30, 2020 by approximately $1.1 million. We have an equity investment in the common stock of TELA Bio (traded on the Nasdaq Global Select Market under the ticker symbol “TELA”). Changes in the stock price of TELA Bio will affect the value of our investment, and we could incur realized or unrealized losses on all or a part of the value of this investment. At June 30, 2020, the value of our investment in TELA Bio was $10.0 million, and a hypothetical 10% decrease in the market price of TELA Bio stock would have caused a decrease in our carrying amount by $1.0 million. See Note 10, Financial Instruments , to our condensed consolidated financial statements included herein for additional information on our investment in TELA Bio. In July 2020, we issued $402.5 million in aggregate principal amount of our 2025 Notes, which mature in August 2025. Holders may convert their 2025 Notes prior to maturity under certain circumstances. Upon conversion, holders will receive the principal amount of the 2025 Notes and any excess conversion value in cash, shares of our common stock or a combination of cash and shares, at our option. The fair value of the 2025 Notes is impacted by both the fair value of our common stock and interest rate fluctuations. See Note 17, Subsequent Events , to our condensed consolidated financial statements included herein for further discussion of the 2025 Notes. In March 2017, we issued $345.0 million in aggregate principal amount of our 2022 Notes, which mature in April 2022. In July 2020, we used part of the net proceeds from the issuance of the 2025 Notes discussed above to repurchase $185.0 million aggregate principal of the 2022 Notes in privately-negotiated transactions for an aggregate of approximately $211.1 million in cash, including accrued interest. Holders may convert their 2022 Notes prior to maturity under certain circumstances. Upon conversion, holders will receive the principal amount of the 2022 Notes and any excess conversion value in cash, shares of our common stock or a combination of cash and shares, at our option. The fair value of the 2022 Notes is impacted by both the fair value of our common stock and interest rate fluctuations. As of June 30, 2020, the estimated fair value of the 2022 Notes was $1,096 per $1,000 principal amount. See Note 9, Debt , to our condensed consolidated financial statements included herein for further discussion of the 2022 Notes. At June 30, 2020, all $345.0 million of principal remained outstanding on the 2022 Notes, which was subsequently reduced to $160.0 million after the July 2020 repurchase of $185.0 million aggregate principal of the 2022 Notes. Additionally, our accounts receivable are primarily concentrated with three large wholesalers of pharmaceutical products. In the event of non-performance or non-payment, there may be a material adverse impact on our financial condition, results of operations or net cash flow.