What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-03 compared with 2021-05-04 · 481 added, 317 removed, 786 unchanged (50% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

ASSETS March 31,

ASSETS June 30,

2021 December 31,

33 unchanged sentences

none issued and outstanding at

March 31, 2021 and December 31, 2020

June 30, 2021 and December 31, 2020

Common stock, par value $ 0.001 ;

1 unchanged sentence

44,436,630 shares issued and

outstanding at March 31, 2021;

outstanding at June 30, 2021;

43,636,929 shares issued and outstanding at December 31, 2020

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net product sales $ 134,863 $ 75,216 $ 253,601 $ 179,961

Collaborative licensing and milestone revenue 125 — 125 —

Royalty revenue 602 289 891 1,228

5 unchanged sentences

Amortization of acquired intangible assets 1,967 1,967 3,933 3,933

Acquisition-related loss (gains), product discontinuation and other 1,873 ( 3,708 )

Acquisition-related charges (gains), product

discontinuation and other 146 1,418 2,019 ( 2,290 )

Total operating expenses 100,747 82,652 200,337 171,242

Income from operations 19,437 17,094

Income (loss) from operations 34,843 ( 7,147 ) 54,280 9,947

Other (expense) income:

3 unchanged sentences

Total other expense, net ( 9,195 ) ( 164 ) ( 15,909 ) ( 8,702 )

Income before income taxes 12,724 8,557

Income tax expense ( 2,355 ) ( 398 )

Net income $ 10,369 $ 8,159

Net income per share:

Basic net income per common share $ 0.24 $ 0.19

Diluted net income per common share $ 0.23 $ 0.19

Income (loss) before income taxes 25,648 ( 7,311 ) 38,371 1,245

Income tax (expense) benefit ( 6,567 ) 42 ( 8,921 ) ( 356 )

Net income (loss) $ 19,081 $ ( 7,269 ) $ 29,450 $ 889

Net income (loss) per share:

Basic net income (loss) per common share $ 0.43 $ ( 0.17 ) $ 0.67 $ 0.02

Diluted net income (loss) per common share $ 0.42 $ ( 0.17 ) $ 0.64 $ 0.02

Weighted average common shares outstanding:

5 unchanged sentences

PACIRA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended

Net income $ 10,369 $ 8,159

June 30, Six Months Ended

2021 2020 2021 2020

Net income (loss) $ 19,081 $ ( 7,269 ) $ 29,450 $ 889

Other comprehensive income (loss):

Net unrealized loss on investments, net of tax ( 150 ) ( 1,368 )

Net unrealized gain (loss) on investments, net of tax 12 2,536 ( 138 ) 1,168

Foreign currency translation adjustments ( 3 ) — 1 —

Total other comprehensive loss ( 146 ) ( 1,368 )

Comprehensive income $ 10,223 $ 6,791

Total other comprehensive income (loss) 9 2,536 ( 137 ) 1,168

Comprehensive income (loss) $ 19,090 $ ( 4,733 ) $ 29,313 $ 2,057

See accompanying condensed notes to consolidated financial statements.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands)

5 unchanged sentences

Shares Amount Total

Balance at December 31, 2020 43,637 $ 44 $ 873,201 $ ( 253,875 ) $ 318 $ 619,688

Balance at March 31, 2021 43,958 $ 44 $ 894,108 $ ( 243,506 ) $ 172 $ 650,818

Exercise of stock options 162 — 5,225 — — 5,225

Vested restricted stock units 286 — — — — —

Shares issued under employee stock

purchase plan 31 — 1,574 — — 1,574

Stock-based compensation — — 10,461 — — 10,461

Other comprehensive loss (Note 11) — — — — ( 146 ) ( 146 )

Other comprehensive income (Note 11) — — — — 9 9

Net income — — — 19,081 — 19,081

Balance at June 30, 2021 44,437 $ 44 $ 911,368 $ ( 224,425 ) $ 181 $ 687,168

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Shares Amount Total

Balance at March 31, 2020 42,117 $ 42 $ 766,280 $ ( 391,240 ) $ ( 1,046 ) $ 374,036

Exercise of stock options 220 1 8,201 — — 8,202

Vested restricted stock units 234 — — — — —

Shares issued under employee stock

purchase plan 37 — 1,421 — — 1,421

Stock-based compensation — — 9,222 — — 9,222

Other comprehensive income (Note 11) — — — — 2,536 2,536

Net loss — — — ( 7,269 ) — ( 7,269 )

Balance at June 30, 2020 42,608 $ 43 $ 785,124 $ ( 398,509 ) $ 1,490 $ 388,148

See accompanying condensed notes to consolidated financial statements.

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| Q2 2021 Form 10-Q | Page 7

PACIRA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands)

Common Stock Additional

7 unchanged sentences

Vested restricted stock units 290 — — — — —

Shares issued under employee stock

purchase plan 31 — 1,574 — — 1,574

Stock-based compensation — — 20,571 — — 20,571

1 unchanged sentence

Net income — — — 29,450 — 29,450

Balance at March 31, 2020 42,117 $ 42 $ 766,280 $ ( 391,239 ) $ ( 1,046 ) $ 374,037

Balance at June 30, 2021 44,437 $ 44 $ 911,368 $ ( 224,425 ) $ 181 $ 687,168

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Shares Amount Total

Balance at December 31, 2019 41,908 $ 42 $ 753,978 $ ( 399,398 ) $ 322 $ 354,944

Exercise of stock options 427 1 11,655 — — 11,656

Vested restricted stock units 236 — — — — —

Shares issued under employee stock

purchase plan 37 — 1,421 — — 1,421

Stock-based compensation — — 18,070 — — 18,070

Other comprehensive income (Note 11) — — — — 1,168 1,168

Net income — — — 889 — 889

Balance at June 30, 2020 42,608 $ 43 $ 785,124 $ ( 398,509 ) $ 1,490 $ 388,148

See accompanying condensed notes to consolidated financial statements.

4 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating activities:

Net income $ 29,450 $ 889

Adjustments to reconcile net income to net cash provided by operating activities:

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

Deferred taxes 7,613 —

5 unchanged sentences

Changes in contingent consideration ( 988 ) ( 2,312 )

Loss on investment and other non-operating income, net 155 3,971

Loss (gain) on investment and other non-operating income, net 2,601 ( 8 )

Changes in operating assets and liabilities:

7 unchanged sentences

securityholders ( 5,662 ) ( 9,409 )

Net cash provided by operating activities 12,081 6,208

Net cash provided by (used in) operating activities 42,215 ( 9,416 )

Investing activities:

2 unchanged sentences

Sales of available for sale investments 294,288 95,450

Debt investments ( 1,220 ) —

Net cash used in investing activities ( 55,664 ) ( 28,566 )

Purchases of equity and debt investments ( 14,220 ) —

Sale of equity investment 9,057 —

Net cash (used in) provided by investing activities ( 52,631 ) 7,557

Financing activities:

Proceeds from exercises of stock options 15,997 6,353

Proceeds from shares issued under employee stock purchase plan 1,574 1,421

Payment of contingent consideration to MyoScience, Inc.

securityholders ( 1,338 ) ( 5,591 )

Net cash provided by (used in) financing activities 10,325 ( 1,281 )

Net decrease in cash and cash equivalents ( 33,258 ) ( 23,639 )

Net cash provided by financing activities 16,233 2,183

Net increase in cash and cash equivalents 5,817 324

Cash and cash equivalents, beginning of period 99,957 78,228

17 unchanged sentences

The iovera° system is a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature to only targeted nerves.

Pacira is subject to risks common to companies in similar industries and stages, including, but not limited to, competition from larger companies, reliance on revenue from two products, reliance on a limited number of manufacturing sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, compliance with government regulations and risks related to cybersecurity.

Pacira is subject to risks common to companies in similar industries and stages, including, but not limited to, competition from larger companies, reliance on revenue from two products, reliance on a limited number of wholesalers, reliance on a limited number of manufacturing sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, compliance with government regulations and risks related to cybersecurity.

The Company is managed and operated as a single business focused on the development, manufacture, marketing, distribution and sale of non-opioid pain management and regenerative health solutions.

2 unchanged sentences

Novel Coronavirus (COVID-19) Pandemic

During 2020 and thus far in 2021, the Company’s net product sales were negatively impacted by the global pandemic caused by a novel strain of coronavirus (COVID-19), which mandated significant postponement or suspension in the scheduling of elective surgical procedures resulting from public health guidance and government directives.

Elective surgical restrictions began to lift on a state-by-state basis in April 2020;

however, while many restrictions have since eased as COVID-19 vaccines become more widely available and administered to the general public, the Company still does not know how long it will take the elective surgical market to normalize, or if restrictions on elective surgical procedures will recur.

During 2020, the Company’s net product sales were negatively impacted by the global pandemic caused by a novel strain of coronavirus (COVID-19), which mandated significant postponement or suspension in the scheduling of elective surgical procedures resulting from public health guidance and government directives.

Elective surgical restrictions began to lift on a state-by-state basis in April 2020, allowing net product sales to return to year-over-year growth in June 2020.

However, while many restrictions have since eased as COVID-19 vaccines become more widely available and administered to the general public, the Company still does not know how long it will take the elective surgical market to normalize, or if restrictions on elective surgical procedures will recur due to COVID-19 variant strains or otherwise.

The Company’s manufacturing sites are operational and have implemented new safety protocols and guidelines as recommended by federal, state and local governments.

8 unchanged sentences

Therefore, these interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 .

The condensed consolidated financial statements at March 31, 2021, and for the three-month periods ended March 31, 2021 and 2020, are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP.

The condensed consolidated financial statements at June 30, 2021, and for the three and six month periods ended June 30, 2021 and 2020, are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP.

The condensed consolidated balance sheet at December 31, 2020 is derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The condensed consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the

The condensed consolidated

Pacira BioSciences, Inc.

| Q2 2021 Form 10-Q | Page 10

current year presentation.

financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the current year presentation.

The accounts of wholly-owned subsidiaries are included in the condensed consolidated financial statements.

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Largest wholesaler 31 % 32 % 31 % 31 %

5 unchanged sentences

The new standard now allows for certain exceptions, including an exception to the use of the incremental approach for intra-period tax allocations, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year.

The standard also requires franchise or similar taxes partially based on income to be reported as income tax and to reflect the effects of enacted changes in tax laws or rates in the annual effective tax rate computation from the date of enactment.

The new standard also required franchise or similar taxes partially based on income to be reported as income tax and to reflect the effects of enacted changes in tax laws or rates in the annual effective tax rate computation from the date of enactment.

Lastly, in any future acquisition, the Company would be required to evaluate when the step-up in the tax basis of goodwill is part of the business combination and when it should be considered a separate transaction.

The standard became effective for the Company beginning January 1, 2021 and there were no material impacts to the consolidated financial statements upon adoption.

Recent Accounting Pronouncements Not Adopted as of March 31, 2021

Recent Accounting Pronouncements Not Adopted as of June 30, 2021

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which limits the number of convertible instruments that require separate accounting to (i) those with embedded conversion features that are not clearly and closely related to the debt, that meet the definition of a derivative, and that do not qualify for the scope exception from derivative accounting and (ii) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.

The other separation models would be eliminated, including the model for convertible debt that can be settled in cash or shares.

As a result these convertible debt instruments will be accounted for as a single liability instrument.

In addition, the new guidance requires diluted earnings per share calculations to be prepared using the if-converted method, instead of the treasury stock method.

The guidance must be applied in fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

The Company has the option to adopt the new guidance using a modified retrospective method of transition, which would then be applied to transactions outstanding at the time of adoption, or the full retrospective method.

The Company is evaluating the impact from the adoption of ASU 2020-06 on its consolidated financial statements.

The Company plans to adopt the new guidance using a modified retrospective method of transition, which would be applied to transactions outstanding at the time of adoption.

At June 30, 2021, the Company has recognized debt discounts of $ 72.7 million for its 0.750 % convertible senior notes due 2025 and $ 5.7 million for its 2.375 % convertible senior notes due 2022.

Upon adoption on January 1, 2022, these debt discounts would be eliminated along with any related future amortization.

Further deferred financing costs previously allocated to the conversion features will be re-allocated to the outstanding debt, slightly increasing future annual amortization of deferred financing costs.

The Company is currently evaluating the impact from the adoption of ASU 2020-06 on its consolidated financial statements.

Pacira BioSciences, Inc.

7 unchanged sentences

To date, there has been no revenue from sales of EXPAREL or iovera° in the European Union, or E.U.

The Company does not consider revenue from sources other than sales of EXPAREL to be material to its consolidated revenue.

The Company does not consider revenue from sources other than sales of EXPAREL to be material to its consolidated revenue, which could change in the future.

As such, the following disclosure only relates to revenue associated with net EXPAREL product sales.

26 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net product sales:

4 unchanged sentences

The components of inventories, net are as follows (in thousands):

March 31, December 31,

June 30, December 31,

Raw materials $ 34,324 $ 26,886

4 unchanged sentences

Fixed assets, net, summarized by major category, consist of the following (in thousands):

March 31, December 31,

June 30, December 31,

Machinery and equipment $ 77,376 $ 74,966

6 unchanged sentences

Fixed assets, net $ 153,302 $ 136,688

For both the three months ended March 31, 2021 and 2020, depreciation expense was $ 2.9 million.

For the three months ended March 31, 2021 and 2020, there was $ 1.0 million and less than $ 0.1 million of capitalized interest on the construction of manufacturing sites, respectively.

At March 31, 2021 and December 31, 2020, total fixed assets, net includes leasehold improvements and manufacturing process equipment located in Europe in the amount of $ 67.8 million and $ 67.5 million, respectively.

As of both March 31, 2021 and December 31, 2020, the Company had asset retirement obligations of $ 2.0 million, which are included in accrued expenses and other liabilities on its condensed consolidated balance sheet, for costs associated with returning leased spaces to their original condition upon the termination of certain lease agreements.

For the three months ended June 30, 2021 and 2020, depreciation expense was $ 2.9 million and $ 3.0 million, respectively.

For the three months ended June 30, 2021 and 2020, there was $ 1.1 million and $ 0.7 million of capitalized interest on the construction of manufacturing sites, respectively.

For the six months ended June 30, 2021 and 2020, depreciation expense was $ 5.8 million and $ 5.9 million, respectively.

For the six months ended June 30, 2021 and 2020, there was $ 2.1 million and $ 0.8 million of capitalized interest on the construction of manufacturing sites, respectively.

At June 30, 2021 and December 31, 2020, total fixed assets, net includes leasehold improvements and manufacturing process equipment located in Europe in the amount of $ 68.6 million and $ 67.5 million, respectively.

As of both June 30, 2021 and December 31, 2020, the Company had asset retirement obligations of $ 2.0 million, which are included in accrued expenses and other liabilities on its condensed consolidated balance sheet, for costs associated with returning leased spaces to their original condition upon the termination of certain lease agreements.

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| Q2 2021 Form 10-Q | Page 13

NOTE 6— LEASES

2 unchanged sentences

The Company also has an embedded lease with Thermo Fisher Scientific Pharma Services for the use of their manufacturing facility in Swindon, England.

A portion of the associated monthly base fees has been allocated to the lease component based on a relative fair value basis.

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| Q1 2021 Form 10-Q | Page 12

A portion of the associated monthly base fees have been allocated to the lease component based on a relative fair value basis.

The operating lease costs for the facilities include lease and non-lease components, such as common area maintenance and other common operating expenses, along with executory costs such as insurance and real estate taxes.

Total operating lease costs are as follows (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Fixed lease costs $ 2,922 $ 2,422 $ 5,843 $ 3,986

2 unchanged sentences

Supplemental cash flow information related to operating leases is as follows (in thousands):

Three Months Ended

Six Months Ended

Cash paid for operating lease liabilities, net of lease incentive $ 7,177 $ 8,503

7 unchanged sentences

Year Aggregate Minimum Payments Due

2021 (remaining nine months) $ 8,059

2026 through 2031 50,802

2021 (remaining six months) $ 5,350

2026 and thereafter 50,802

Total lease payments 99,523

1 unchanged sentence

Total operating lease liabilities $ 73,879

The Company has entered into one lease agreement (not included in the table above) for which there are future obligations but the lease has not yet commenced as of June 30, 2021 (in thousands):

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Year Aggregate Minimum Payments Due

2021 (remaining six months) $ —

Total future lease payments $ 2,333

NOTE 7— GOODWILL AND INTANGIBLE ASSETS

1 unchanged sentence

(the Company’s California operating subsidiary) from SkyePharma Holding, Inc.

(now a subsidiary of Vectura Group plc), or Skyepharma in March 2007 (the “Skyepharma Acquisition”), and the acquisition of MyoScience, Inc.

(now a subsidiary of Vectura Group plc) in March 2007 (the “Skyepharma Acquisition”), and the acquisition of MyoScience, Inc.

(the “MyoScience Acquisition”) in April 2019.

There was no change in the carrying value of the Company’s goodwill during the three months ended March 31, 2021.

The balance at both March 31, 2021 and December 31, 2020 was $ 99.5 million.

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| Q1 2021 Form 10-Q | Page 13

There was no change in the carrying value of the Company’s goodwill during the three and six months ended June 30, 2021.

The balance at both June 30, 2021 and December 31, 2020 was $ 99.5 million.

The Skyepharma Acquisition occurred in March 2007, prior to the requirements to record contingent consideration at fair value under ASC 805-30.

In connection with the Skyepharma Acquisition, the Company agreed to certain milestone payments for DepoBupivacaine products, including EXPAREL.

As of March 31, 2021, the remaining milestone payments include:

As of June 30, 2021, the remaining milestone payments include:

$ 4.0 million upon the first commercial sale in the United Kingdom, France, Germany, Italy or Spain;

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Intangible assets, net, consist of the developed technology and customer relationships that were acquired in the MyoScience Acquisition and are summarized as follows (in thousands):

Useful Life March 31, December 31,

Useful Life June 30, December 31,

Developed technology 14 years $ 110,000 $ 110,000

3 unchanged sentences

Intangible assets, net $ 92,588 $ 96,521

Amortization expense on intangible assets for both the three months ended March 31, 2021 and 2020 was $ 2.0 million.

Assuming no changes in the gross carrying amount of these intangible assets, amortization expense will be $ 5.9 million for the remaining nine months of 2021, $ 7.9 million annually through 2032 and $ 2.2 million in 2033.

Amortization expense on intangible assets was consistent for the three and six months periods ended June 30, 2021 and 2020.

Amortization expense was $ 2.0 million and $ 3.9 million for the three and six month periods, respectively.

Assuming no changes in the gross carrying amount of these intangible assets, amortization expense will be $ 3.9 million for the remaining six months of 2021, $ 7.9 million annually through 2032 and $ 2.2 million in 2033.

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| Q2 2021 Form 10-Q | Page 15

Convertible Senior Notes Due 2025

3 unchanged sentences

The total debt composition of the 2025 Notes is as follows (in thousands):

March 31, December 31,

June 30, December 31,

0.750 % convertible senior notes due 2025

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Holders may convert the 2025 Notes at any time prior to the close of business on the business day immediately preceding February 3, 2025, only under the following circumstances:

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(i) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

2 unchanged sentences

(iv) if the Company calls the 2025 Notes for redemption, until the close of business on the business day immediately preceding the redemption date.

During the quarter ended March 31, 2021, none of these conditions for conversion were met.

During the quarter ended June 30, 2021, none of these conditions for conversion were met.

On or after February 3, 2025, until the close of business on the second scheduled trading day immediately preceding August 1, 2025, holders may convert their 2025 Notes at any time.

4 unchanged sentences

The initial conversion price of the 2025 Notes represents a premium of approximately 32.5 % to the closing sale price of $ 54.17 per share of the Company’s common stock on the Nasdaq Global Select Market on July 7, 2020, the date that the Company priced the private offering of the 2025 Notes.

As of March 31, 2021, the 2025 Notes had a market price o f $1,200 pe r $1,000 principal amount.

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As of June 30, 2021, the 2025 Notes had a market price o f $1,100 pe r $1,000 principal amount.

In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation.

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In addition, if a “make-whole fundamental change” (as defined in the 2025 Indenture) occurs prior to August 1, 2025, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with the make-whole fundamental change.

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| Q1 2021 Form 10-Q | Page 15

The 2025 Notes are the Company’s general unsecured obligations that rank senior in right of payment to all of its indebtedness that is expressly subordinated in right of payment to the 2025 Notes, and equal in right of payment to the Company’s unsecured indebtedness.

The 2025 Notes are also effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to any debt or other liabilities (including trade payables) of the Company’s subsidiaries.

While the 2025 Notes are currently classified on the Company’s consolidated balance sheet at March 31, 2021 as long-term debt, the future convertibility and resulting balance sheet classification of this liability is monitored at each quarterly reporting date and is analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods.

While the 2025 Notes are currently classified on the Company’s consolidated balance sheet at June 30, 2021 as long-term debt, the future convertibility and resulting balance sheet classification of this liability is monitored at each quarterly reporting date and is analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods.

In the event that the holders of the 2025 Notes have the election to convert the 2025 Notes at any time during the prescribed measurement period, the 2025 Notes would then be considered a current obligation and classified as such.

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The 2025 Indenture contains customary events of default with respect to the 2025 Notes, including that upon certain events of default, 100% of the principal and accrued and unpaid interest on the 2025 Notes will automatically become due and payable.

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| Q2 2021 Form 10-Q | Page 17

Convertible Senior Notes Due 2022

5 unchanged sentences

The total debt composition of the 2022 Notes is as follows (in thousands):

March 31, December 31,

June 30, December 31,

2.375 % convertible senior notes due 2022

4 unchanged sentences

Holders may convert their 2022 Notes prior to October 1, 2021 only if certain circumstances are met, including if during the previous calendar quarter, the last reported sales price of the Company’s common stock was greater than or equal to 130 % of the conversion price then applicable for at least 20 out of the last 30 consecutive trading days of the quarter.

During the quarter ended March 31, 2021, this condition for conversion was not met.

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| Q1 2021 Form 10-Q | Page 16

During the quarter ended June 30, 2021, this condition for conversion was not met.

On or after October 1, 2021, until the close of business on the second scheduled trading day immediately preceding April 1, 2022, holders may convert their 2022 Notes at any time.

4 unchanged sentences

The initial conversion price of the 2022 Notes represents a premium of approximately 37.5 % to the closing sale price of $ 48.65 per share of the Company’s common stock on the Nasdaq Global Select Market on March 7, 2017, the date that the Company priced the private offering of the 2022 Notes.

As of March 31, 2021, the 2022 Notes had a market price of $1,216 per $1,000 principal amount.

As of June 30, 2021, the 2022 Notes had a market price of $1,099 p er $1,000 principal amount.

In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of stock price appreciation.

2 unchanged sentences

As of April 1, 2020, the Company may redeem for 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 option, all or part of the 2022 Notes if the last reported sale price (as defined in the 2022 Indenture) of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which the Company provides notice of redemption.

This condition was not met during the quarter ended March 31, 2021.

This condition was not met during the quarter ended June 30, 2021.

The redemption price will equal the sum of (i) 100 % of the principal amount of the 2022 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

1 unchanged sentence

No sinking fund is provided for the 2022 Notes.

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| Q2 2021 Form 10-Q | Page 18

Interest Expense

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Contractual interest expense $ 1,713 $ 2,048 $ 3,418 $ 4,097

4 unchanged sentences

Effective interest rate on convertible senior notes 6.70 % 7.81 % 6.70 % 7.81 %

ASU 2020-06 will require the Company to eliminate debt discounts along with any related future amortization.

This new accounting pronouncement has not been adopted as of June 30, 2021.

For additional information regarding ASU 2020-06, see Note 2 , Summary of Significant Accounting Policies .

NOTE 9— FINANCIAL INSTRUMENTS

3 unchanged sentences

The three levels of fair value measurements are:

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Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

4 unchanged sentences

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these items.

The fair value of the Company’s equity investment with a readily determinable fair value is calculated utilizing market quotations from a major American stock exchange (Level 1).

The fair value of the Company’s equity investment with a readily determinable fair value was calculated utilizing market quotations from a major American stock exchange (Level 1).

The fair value of the Company’s convertible senior notes are calculated utilizing market quotations from an over-the-counter trading market for these notes (Level 2).

The fair value of the Company’s acquisition-related contingent consideration is reported at fair value on a recurring basis (Level 3).

The carrying amount of the investment without a readily determinable fair value has not been adjusted for either an impairment or upward or downward adjustments based on observable transactions.

Certain assets and liabilities are measured at fair value on a non-recurring basis, including assets and liabilities acquired in a business combination and long-lived assets, which would be recognized at fair value if deemed impaired or if reclassified as assets held for sale.

The carrying amount of the investments without a readily determinable fair value have not been adjusted for either an impairment or upward or downward adjustments based on observable transactions.

Certain assets and liabilities are measured at fair value on a non-recurring basis, including assets and liabilities acquired in a business combination, equity instruments measured at cost and long-lived assets, which would be recognized at fair value if deemed impaired or if reclassified as assets held for sale.

The fair value in these instances would be determined using Level 3 inputs.

At March 31, 2021, the carrying values and fair values of the following financial assets and liabilities was as follows (in thousands):

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| Q2 2021 Form 10-Q | Page 19

At June 30, 2021, the carrying values and fair values of the following financial assets and liabilities were as follows (in thousands):

Carrying Value Fair Value Measurements Using

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Financial Assets:

Equity investment with readily determinable fair value $ 11,533 $ 11,533 $ — $ —

Note receivable $ 1,174 $ — $ — $ 1,174

Notes receivable $ 4,204 $ — $ — $ 4,204

Financial Liabilities:

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$ 321,708 $ — $ 442,750 $ —

(1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $ 70.09 per share on March 31, 2021, compared to a conversion price of $ 66.89 per share for the 2022 Notes and $ 71.78 per share for the 2025 Notes.

The maximum conversion premium that could have been due on the 2022 Notes and 2025 Notes at March 31, 2021 was approximately 2.4 million and 5.6 million shares of the Company’s common stock, respectively.

(1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $ 60.68 per share on June 30, 2021, compared to a conversion price of $ 66.89 per share for the 2022 Notes and $ 71.78 per share for the 2025 Notes.

The maximum conversion premium that could have been due on the 2022 Notes and 2025 Notes at June 30, 2021 was approximately 2.4 million and 5.6 million shares of the Company’s common stock, respectively.

These figures assume no increases in the conversion rate for certain corporate events.

Equity and Debt Investments

At March 31, 2021 and December 31, 2020, the Company held an equity investment in TELA Bio, Inc., or TELA Bio, in its condensed consolidated balance sheets in the amounts of $ 11.5 million and $ 11.6 million, respectively.

For the three months ended March 31, 2021 and 2020, the fair value of this publicly traded investment decreased by $ 0.1 million and $ 4.0 million, respectively, which was recorded in other, net in the condensed consolidated statement of operations.

The fair values of TELA Bio at March 31, 2021 and December 31, 2020 were based on Level 1 inputs.

At March 31, 2021 and December 31, 2020, the Company held an equity investment of $ 1.2 million in GeneQuine Biotherapeutics GmbH, or GeneQuine, a privately held biopharmaceutical company headquartered in Hamburg, Germany.

At December 31, 2020, the Company held an equity investment in TELA Bio, Inc., or TELA Bio, in its condensed consolidated balance sheets in the amount of $ 11.6 million.

During the six months ended June 30, 2021, the Company sold its investment in TELA Bio for net cash proceeds of $ 9.1 million.

During the six months ended June 30, 2021, the Company recognized a net realized loss of $ 2.6 million, which has been recorded in other, net in the condensed consolidated statements of operations.

The fair value of TELA Bio at December 31, 2020 was based on a Level 1 input.

At June 30, 2021 and December 31, 2020, the Company held an equity investment of $ 1.2 million in GeneQuine Biotherapeutics GmbH, or GeneQuine, a privately held biopharmaceutical company headquartered in Hamburg, Germany.

This investment has no readily determinable fair value and is recorded at cost minus impairment, if any, plus or minus observable price changes of identical or similar investments.

In January 2021, the Company purchased a convertible note from GeneQuine in the amount of $ 1.2 million.

There were no adjustments recognized in the GeneQuine investments during the three months ended March 31, 2021.The Company has the right to make additional investments in both equity and debt securities of $ 4.7 million predicated upon GeneQuine achieving certain prespecified near-term milestones.

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| Q1 2021 Form 10-Q | Page 18

There were no adjustments recognized in the GeneQuine investments during the six months ended June 30, 2021.

The Company has the right to make additional investments in both equity and debt securities of $ 4.7 million predicated upon GeneQuine achieving certain prespecified near-term milestones.

Certain milestones have been met and the Company expects to make a payment of $ 2.9 million in the quarter ending September 30, 2021.

In April 2021, the Company purchased privately-held preferred shares in Coda BioTherapeutics, Inc., a preclinical stage biopharmaceutical company that is developing a gene-therapy platform to treat neurological disorders and diseases for a purchase price of $ 10.0 million.

There were no adjustments to this investment during the three months ended June 30, 2021.

In April 2021, the Company purchased a convertible note in the amount of $ 3.0 million from Spine BioPharma, LLC, a preclinical stage biopharmaceutical company.

There were no adjustments to this investment during the three months ended June 30, 2021.

Acquisition-related Contingent Consideration

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The Company’s obligation to make milestone payments is limited to those milestones achieved through December 31, 2023, and are to be paid within 60 days of the end of the fiscal quarter of achievement.

As of March 31, 2021, the maximum potential remaining milestone payments are $ 58.0 million.

The Company made no milestone payments during the three months ended March 31, 2021.

In the three months ended March 31, 2020, the Company made a $ 5.0 million cash payment for the achievement of one regulatory milestone.

A regulatory milestone in the amount of $ 10.0 million is payable during the second quarter of 2021.

As of March 31, 2021 and December 31, 2020, the Company has recognized contingent consideration related to the MyoScience Acquisition in the amounts of $ 27.2 million and $ 28.3 million, respectively.

As of June 30, 2021, the maximum potential remaining milestone payments are $ 48.0 million.

The Company made a $ 7.0 million milestone payment during the six months ended June 30, 2021 for the achievement of one regulatory milestone.

In the six months ended June 30, 2020, the Company made $ 15.0 million in cash payments for the achievement of two regulatory milestones.

As of June 30, 2021 and December 31, 2020, the Company recognized contingent consideration related to the MyoScience Acquisition in the amounts of $ 17.4 million and $ 28.3 million, respectively.

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| Q2 2021 Form 10-Q | Page 20

The Company’s contingent consideration obligations are recorded at their estimated fair values and are revalued each reporting period if and until the related contingencies are resolved.

In the three month periods ended March 31, 2021 and 2020, the Company recognized $ 1.1 million and $ 3.9 million of gains, respectively, which have been included in acquisition-related gains in the condensed consolidated statements of operations.

For the three and six months ended June 30, 2021, the Company recognized a $ 0.1 million charge and a $ 1.0 million gain, respectively, related to contingent consideration.

For the three and six months ended June 30, 2020, the Company recognized $ 1.6 million of charges and $ 2.3 million of gains, respectively, related to contingent consideration.

These amounts have been included in acquisition-related charges (gains) in the condensed consolidated statements of operations.

The Company has measured the fair value of its contingent consideration using a probability-weighted discounted cash flow approach that is based on unobservable inputs and a Monte Carlo simulation.

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Significant changes may increase or decrease the probabilities of achieving the related commercial and regulatory events, shorten or lengthen the time required to achieve such events, or increase or decrease estimated forecasts.

At March 31, 2021, the weighted average discount rate was 3.66 % and the weighted average probability of success for regulatory milestones that have not yet been met was 34.7 %.

At June 30, 2021, the weighted average discount rate was 3.46 % and the weighted average probability of success for regulatory milestones that have not yet been met was 34.7 %.

The following table includes the key assumptions used in the valuation of the Company’s contingent consideration:

Assumption Ranges Utilized as of March 31, 2021

Assumption Ranges Utilized as of June 30, 2021

Discount rates 3.29 % to 3.63 %

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Payments made ( 7,000 )

Balance at March 31, 2021 $ 27,219

Offset indemnification claims ( 3,000 )

Balance at June 30, 2021 $ 17,358

Short-term investments consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper and corporate and government bonds with maturities greater than three months, but less than one year.

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Net unrealized gains and losses (excluding credit losses, if any) from the Company’s short-term and long-term investments are reported in other comprehensive income (loss).

At March 31, 2021, all of the Company’s short-term and long-term investments are classified as available-for-sale investments and are determined to be Level 2 instruments, which are measured at fair value using standard industry models with observable inputs.

At June 30, 2021 and December 31, 2020, all of the Company’s short-term and long-term investments are classified as available-for-sale investments and are determined to be Level 2 instruments, which are measured at fair value using standard industry models with observable inputs.

The fair value of the commercial paper is measured based on a standard industry model that uses the three-month U.S.

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At the time of purchase, all short-term and long-term investments had an “A” or better rating by Standard & Poor’s.

The following summarizes the Company’s investments at June 30, 2021 and December 31, 2020 (in thousands):

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| Q2 2021 Form 10-Q | Page 21

The following summarizes the Company’s investments at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 Investments Cost Gross

June 30, 2021 Investments Cost Gross

Losses Fair Value

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Government bonds 95,416 37 — 95,453

Subtotal 523,260 137 ( 33 ) 523,364

Asset-backed securities 3,469 — ( 2 ) 3,467

Government bonds 31,486 18 — 31,504

Subtotal 34,955 18 ( 2 ) 34,971

Total $ 540,688 $ 137 $ ( 4 ) $ 540,821

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Total $ 516,845 $ 350 $ ( 31 ) $ 517,164

At March 31, 2021, there were no investments available for sale that were materially less than their amortized cost.

At June 30, 2021, there were no investments available for sale that were materially less than their amortized cost.

The Company elects to recognize its interest receivable separate from its available-for-sale investments.

At March 31, 2021 and December 31, 2020, the interest receivable recognized in prepaid expenses and other current assets was $ 0.8 million and $ 1.6 million, respectively.

At June 30, 2021 and December 31, 2020, the interest receivable recognized in prepaid expenses and other current assets was $ 0.9 million and $ 1.6 million, respectively.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable.

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Such amounts may exceed federally-insured limits.

As of March 31, 2021, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 35 %, 27 % and 26 %.

As of June 30, 2021, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 43 %, 25 % and 21 %.

At December 31, 2020, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 36 %, 28 % and 23 %.

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Allowances for credit losses on the Company’s accounts receivable are maintained based on historical payment patterns, current and estimated future economic conditions, aging of accounts receivable and its write-off history.

As of March 31, 2021 and December 31, 2020, the Company did no t deem any allowances for credit losses on its accounts receivable necessary.

As of June 30, 2021 and December 31, 2020, the Company did no t deem any allowances for credit losses on its accounts receivable necessary.

NOTE 10— STOCK PLANS

Stock Incentive Plans

In June 2021, the Company’s stockholders approved the Amended and Restated 2011 Stock Incentive Plan, or 2011 Plan.

The 2011 Plan was amended to increase the number of shares of common stock authorized for issuance as equity awards under the plan by 1,500,000 shares.

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| Q2 2021 Form 10-Q | Page 22

NOTE 10— STOCK PLANS

Stock-Based Compensation

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Cost of goods sold $ 1,465 $ 1,284 $ 2,917 $ 2,503

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Equity Awards

The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the three months ended March 31, 2021:

The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the six months ended June 30, 2021:

Stock Options Number of Options Weighted Average Exercise Price (Per Share)

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Expired ( 22,116 ) 76.75

Outstanding at March 31, 2021 5,858,478 46.76

Outstanding at June 30, 2021 6,231,804 48.56

Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value (Per Share)

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Forfeited ( 77,081 ) 47.47

Unvested at March 31, 2021 940,864 46.85

The weighted average fair value of stock options granted during the three months ended March 31, 2021 wa s $ 30.86 per share.

Unvested at June 30, 2021 964,313 52.76

The weighted average fair value of stock options granted during the six months ended June 30, 2021 wa s $ 27.49 per share.

The fair values of stock options granted were estimated using the Black-Scholes option valuation model with the following weighted average assumptions:

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| Q1 2021 Form 10-Q | Page 21

Black-Scholes Weighted Average Assumption Three Months Ended March 31, 2021

Black-Scholes Weighted Average Assumption Six Months Ended June 30, 2021

Expected dividend yield None

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Expected term of options 5.44 years

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| Q2 2021 Form 10-Q | Page 23

Employee Stock Purchase Plan

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Under the ESPP, employees may elect to contribute after-tax earnings to purchase shares at 85 % of the closing fair market value of the Company’s common stock on either the offering date or the purchase date, whichever is less.

During the three months ended March 31, 2021, no shares were purchased and issued through the ESPP.

During the six months ended June 30, 2021, 31,230 shares were purchased and issued through the ESPP.

NOTE 11— STOCKHOLDERS’ EQUITY

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The following table illustrates the changes in the balances of the Company’s accumulated other comprehensive income (loss) for the periods presented (in thousands):

Three Months Ended

Net unrealized gains (losses) from available-for-sale investments:

Six Months Ended

Balance at beginning of period $ 318 $ 322

Net unrealized loss on investments, net of tax ( 150 ) ( 1,368 )

Net unrealized (loss) gain on investments, net of tax (1)

( 138 ) 1,168

Foreign currency translation adjustments 1 —

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Balance at end of period $ 181 $ 1,490

(1) Net of a $ 49 thousand tax benefit for the six months ended June 30, 2021.

There was no tax benefit for the six months ended June 30, 2020.

NOTE 12— NET INCOME (LOSS) PER SHARE

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ASU 2020-06 will require the Company to use the if-converted method upon adoption;

this new accounting pronouncement has not been adopted as of March 31, 2021.

this new accounting pronouncement has not been adopted as of June 30, 2021.

For additional information regarding ASU 2020-06, see Note 2 , Summary of Significant Accounting Policies .

Potential common shares are excluded from the diluted net income (loss) per share computation to the extent they would be antidilutive.

The following table sets forth the computation of basic and diluted net income per share for the three mon ths ended March 31, 2021 and 2020 (in thousands, except per share amounts):

Because the Company reported a net loss for the three months ended June 30, 2020, no potentially dilutive securities have been included in the computation of diluted net loss per share for that period.

The following table sets forth the computation of basic and diluted net income (loss) per common share for the three and six mon ths ended June 30, 2021 and 2020 (in thousands, except per share amounts):

Pacira BioSciences, Inc.

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Three Months Ended

Net income $ 10,369 $ 8,159

June 30, Six Months Ended

2021 2020 2021 2020

Net income (loss) $ 19,081 $ ( 7,269 ) $ 29,450 $ 889

Weighted average common shares outstanding—basic 44,145 42,221 43,989 42,126

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Weighted average common shares outstanding—diluted 45,592 42,221 45,779 42,861

Net income per share:

Basic net income per common share $ 0.24 $ 0.19

Diluted net income per common share $ 0.23 $ 0.19

Net income (loss) per share:

Basic net income (loss) per common share $ 0.43 $ ( 0.17 ) $ 0.67 $ 0.02

Diluted net income (loss) per common share $ 0.42 $ ( 0.17 ) $ 0.64 $ 0.02

The following outstanding stock options, RSUs and ESPP purchase options are antidilutive in the periods presented (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Weighted average number of stock options 2,088 6,804 1,489 5,327

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Income (loss) before income taxes:

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Foreign ( 215 ) ( 666 ) ( 3,424 ) ( 5,155 )

Total income before income taxes $ 12,724 $ 8,557

For the three months ended March 31, 2021 and 2020, the Company had income tax expense of $ 2.4 million and $ 0.4 million, respectively.

The income tax expense for the three months ended March 31, 2021 represents the estimated annual effective tax rate applied to the year-to-date domestic operating results adjusted for certain discrete tax benefits related to equity compensation.

The income tax expense for the three months ended March 31, 2020 consisted primarily of state income taxes in jurisdictions where the availability of carryforward losses were either limited or fully utilized.

Total income (loss) before income taxes $ 25,648 $ ( 7,311 ) $ 38,371 $ 1,245

For the three months ended June 30, 2021 and 2020, the Company had income tax expense of $ 6.6 million and an income tax benefit of less than $0.1 million, respectively.

For the six months ended June 30, 2021 and 2020, the Company recorded income tax expense of $ 8.9 million and $ 0.4 million, respectively.

The income tax expense for the three and six months ended June 30, 2021 represents the estimated annual effective tax rate applied to the year-to-date domestic operating results adjusted for certain discrete tax items including a benefit related to equity compensation, partially offset by a cost related to non-deductible capital losses.

The income tax expense for the three and six months ended June 30, 2020 consisted primarily of state income tax.

During the year ended December 31, 2020, the Company determined that there was sufficient positive evidence to conclude that it was more likely than not that domestic deferred taxes were realizable and, therefore, released the valuation allowance.

In the three months ended June 30, 2021, the Company recorded a valuation allowance against U.S.

capital loss carryforwards since it is more likely than not the tax benefit related to the losses are not realizable.

The Company continues to maintain a full valuation allowance on its foreign net deferred tax balances.

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NOTE 14— COMMERCIAL PARTNERS

Eurofarma Laboratories S.A.

In June 2021, the Company entered into a distribution agreement with Eurofarma Laboratories S.A., or Eurofarma, for the development and commercialization of EXPAREL in Latin America.

Under the terms of the agreement, Eurofarma obtained the exclusive right to market and distribute EXPAREL in 19 countries in Latin America, including Argentina, Brazil, Colombia, and Mexico.

In addition, Eurofarma is responsible for regulatory filings for EXPAREL in these countries.

The Company is entitled to a $ 0.3 million upfront payment that is partially refundable upon certain circumstances and will receive royalties based on Eurofarma’s future commercialization of the product and is also eligible to receive milestone payments that are triggered by the achievement of certain regulatory and commercial events.

The Company recognized $ 0.1 million of collaborative licensing and milestone revenue in its condensed consolidated statements of operations during the three and six months ended June 30, 2021.

Nuance Biotech Co.

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Under the terms of the agreement, the Company had granted Nuance the exclusive rights to develop and commercialize EXPAREL.

In April 2021, Pacira and Nuance agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguards the Company’s intellectual property against the risk of a generic product.

Estimated dissolution costs of $ 3.0 million have been included in other operating expenses in the condensed consolidated statements of operations for the three months ended March 31, 2021.

In April 2021, the Company and Nuance agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguards the Company’s intellectual property against the risk of a generic product.

Dissolution costs of $ 3.0 million were included in other operating expenses in the condensed consolidated statements of operations for the six months ended June 30, 2021.

Verve Medical Products, Inc.

In July 2021, the Company entered into a licensing agreement with Verve Medical Products, Inc.

for the distribution of iovera° in Canada.

NOTE 15— COMMITMENTS AND CONTINGENCIES

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In addition, the Company and Pacira CryoTech sought general, special and compensatory damages against the other defendants related to breach of fiduciary duties in connection with the purported achievement of milestone payments under the Merger Agreement, and breach of the Merger Agreement and certain other agreements with the defendants.

In October 2020, Fortis filed an answer and counterclaim against the Company and Pacira CryoTech seeking to recover certain milestone payments under the Merger Agreement totaling $ 40.0 million, and attorneys’ fees.

In October 2020, Fortis filed an answer and counterclaim against the Company and Pacira CryoTech seeking to recover certain milestone payments under the Merger Agreement.

The total remaining value of these milestones is $ 30.0 million, plus attorneys’ fees.

The Company believes that the counterclaim from Fortis is without merit and intends to vigorously defend against all claims.

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The Company was granted a deferral for the required pediatric trials in all age groups for EXPAREL in the setting of wound infiltration and is conducting these pediatric trials as post-marketing requirements, as stated in the New Drug Application (NDA) approval letter for EXPAREL.

Similarly, in Europe, the Company agreed with the European Medicines Agency, or EMA, on a Pediatric Investigation Plan, or PIP, as a prerequisite for submitting a Marketing Authorization Application (MAA) in the E.U.

Despite the United Kingdom’s withdrawal from the E.U.

(“Brexit”), the PIP will be applicable in the United Kingdom as well.

Similarly, in Europe, the Company agreed with the European Medicines Agency, or EMA, on a Pediatric Investigation Plan, or PIP, as a prerequisite for submitting

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| Q2 2021 Form 10-Q | Page 26

a Marketing Authorization Application (MAA) in the E.U.

Despite the United Kingdom’s withdrawal from the E.U., the PIP will be applicable in the United Kingdom as well.

The Company is working with both the FDA and EMA to align its pediatric clinical studies wherever possible between the two regions.

In December 2019, the Company announced positive results for its extended pharmacokinetic and safety study for local analgesia in children aged 6 to 17 undergoing cardiovascular or spine surgeries.

Those positive results provided the foundation for a supplemental New Drug Application, or sNDA, and in March 2021, the Company announced that the FDA approved the submission of the sNDA seeking expansion of the EXPAREL label to include use in patients 6 years of age and older for single-dose infiltration to produce postsurgical local analgesia.

The Company is working with both the FDA and EMA to harmonize its pediatric clinical studies as much as possible between the two regions.

NOTE 16— SUBSEQUENT EVENTS

In April 2021, the Company made cash investments of $ 13.0 million in debt and equity securities of two separate pre-clinical stage biopharmaceutical companies.

The Company intends to make an additional $ 7.0 million investment if and when certain events occur.

The Company is working with the FDA to finalize a regulatory pathway to expand the EXPAREL label for patients less than 6 years of age, as well as the administration of EXPAREL as a nerve block in the pediatric setting.

The Company has communicated to a select number of employees a commitment to provide one-time termination benefits in the event that a facility closure occurs.

The Company will recognize these expenses ratably over the remaining service period required.

The Company currently estimates the cost of these one-time benefits to be approximately $ 1.1 million.

Pacira BioSciences, Inc.

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economic conditions, and our business, including our revenues, financial condition and results of operations;

the success of our sales and manufacturing efforts in support of the commercialization of EXPAREL ® (bupivacaine liposome injectable suspension);

the rate and degree of market acceptance of EXPAREL;

the size and growth of the potential markets for EXPAREL and our ability to serve those markets;

our plans to expand the use of EXPAREL to additional indications and opportunities, and the timing and success of any related clinical trials for EXPAREL;

our ability to realize the anticipated benefits and synergies from the acquisition of MyoScience, Inc., or MyoScience;

the success of our sales and manufacturing efforts in support of the commercialization of iovera° ® ;

the rate and degree of market acceptance of iovera°;

the size and growth of the potential markets for iovera° and our ability to serve those markets;

our plans to expand the use of iovera° to additional indications and opportunities, and the timing and success of any related clinical trials for iovera°;

the success of our sales and manufacturing efforts in support of the commercialization of EXPAREL ® (bupivacaine liposome injectable suspension) and iovera° ® ;

the rate and degree of market acceptance of EXPAREL and iovera°;

the size and growth of the potential markets for EXPAREL and iovera° and our ability to serve those markets;

our plans to expand the use of EXPAREL and iovera° to additional indications and opportunities, and the timing and success of any related clinical trials for EXPAREL and iovera°;

the related timing and success of United States Food and Drug Administration, or FDA, supplemental New Drug Applications, or sNDAs;

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clinical trials in support of an existing or potential DepoFoam-based product;

our commercialization and marketing capabilities and our ability to successfully construct an additional EXPAREL manufacturing suite in Swindon, England;

our commercialization and marketing capabilities and our ability to successfully construct additional EXPAREL manufacturing suites in San Diego, California;

the outcome of any litigation;

the ability to successfully integrate any future acquisitions into our existing business;

the recoverability of our deferred tax assets and assumptions associated with contingent consideration payments.

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and its subsidiaries.

In addition, references in this Quarterly Report on Form 10-Q to DepoCyt(e) mean DepoCyt ® when discussed in the context of the United States, or U.S., and Canada and DepoCyte ® when discussed in the context of the European Union, or E.U.

Pacira is the industry leader in our commitment to non-opioid pain management and regenerative health solutions to improve patients’ journeys along the neural pain pathway.

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EXPAREL utilizes DepoFoam, a unique and proprietary delivery technology that encapsulates drugs without altering their molecular structure and releases them over a desired period of time.

as a brachial plexus block or femoral nerve block for treatment of post-operative pain in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults.

Since its initial approval in 2011 for single-dose infiltration, more than eight million patients have been treated with EXPAREL.

We drop-ship EXPAREL directly to the end-user based on orders

placed to wholesalers or directly to us, and there is no product held by wholesalers.

EXPAREL is indicated in patients 6 years of age and older for single-dose infiltration to produce postsurgical local analgesia, and in adults as an interscalene brachial plexus nerve block to produce postsurgical regional analgesia in the United States, or U.S., and in the European Union, or E.U., as a brachial plexus block and femoral nerve block for treatment of post-operative pain in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults.

Since its initial approval in 2011 for single-dose infiltration, nearly nine million patients have been treated with EXPAREL.

We drop-ship EXPAREL directly to the end-user based on orders placed to wholesalers or directly to us, and there is no product held by wholesalers.

In April 2019, we acquired iovera°, a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature only to targeted nerves, which we sell directly to end users.

The iovera° system is highly complementary to EXPAREL as a non-opioid therapy that alleviates pain by disrupting pain signals being transmitted to the brain from the site of injury or surgery.

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| Q2 2021 Form 10-Q | Page 28

We expect to continue to pursue the expanded use of EXPAREL and iovera° in additional procedures;

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Novel Coronavirus (COVID-19) Pandemic

Our net product sales were negatively impacted by the COVID-19 pandemic in 2020 and have continued to be thus far in 2021, due to the significant postponement or suspension in the scheduling of elective surgical procedures resulting from public health guidance and government directives.

Elective surgery restrictions began to lift on a state-by-state basis in April 2020;

however while many restrictions have since eased and COVID-19 vaccines become more widely available and administered to the general public, we still do not know how long it will take the elective surgery market to normalize, or if restrictions on elective procedures will recur.

Our net product sales were negatively impacted by the COVID-19 pandemic in 2020 due to the significant postponement or suspension in the scheduling of elective surgical procedures resulting from public health guidance and government directives.

Elective surgery restrictions began to lift on a state-by-state basis in April 2020, allowing our net product sales to return to year-over-year growth in June 2020.

However, while many restrictions have since eased and COVID-19 vaccines become more widely available and administered to the general public, we still do not know how long it will take the elective surgery market to normalize, or if restrictions on elective procedures will recur due to COVID-19 variant strains or otherwise.

Our manufacturing sites are operational and have implemented new safety protocols and guidelines as recommended by federal, state and local governments.

To date, there have been no material impacts to our supply chain.

With the reopening of many states, the ability of our sales representatives to renew their in-person engagement efforts, in conjunction with remote efforts, has occurred across all sites of care, with more focus on physician offices and ambulatory surgery centers.

With the reopening of all 50 states, the ability of our sales representatives to renew their in-person engagement efforts, in conjunction with remote efforts, has occurred across all sites of care, with more focus on physician offices and ambulatory surgery centers.

Our offices have re-opened with strict safety and hygiene guidelines implemented, and we continue to support remote working as appropriate.

The situation remains dynamic and is subject to rapid and possibly material changes.

It is not clear what the potential effects may be to our business going forward, including the impact on our revenues, results of operations or financial condition, particularly if these pandemic conditions persist or exacerbate over an extended period of time, including if states return to placing restrictions on elective surgical procedures or if patients are still reluctant to schedule an elective surgical procedure regardless of whether or not they have received a COVID-19 vaccine.

The COVID-19 situation remains dynamic and is subject to rapid and possibly material changes due to variant strains or otherwise.

It is not clear what the potential effects may be to our business going forward, including the impact on our revenues, results of operations or financial condition, particularly if pandemic conditions exacerbate over an extended period of time, including if states return to placing restrictions on elective surgical procedures or if patients are still reluctant to schedule an elective surgical procedure regardless of whether or not they have received a COVID-19 vaccine.

Additional negative impacts may also arise from the COVID-19 pandemic that we are unable to foresee.

The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted, including the availability and efficacy of COVID-19 vaccines and the willingness of the general public to get vaccinated.

The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted, including the availability and efficacy of COVID-19 vaccines, the willingness of the general public to get vaccinated and the impact of variant strains, such as the Delta variant, on the elective surgery market.

We will continue to actively monitor the situation and implement measures recommended by federal, state or local authorities, or that we determine are in the best interests of our patients, employees, partners, suppliers, shareholders and stakeholders.

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Recent Highlights

• In December 2020, we made a €1.0 million initial investment in GeneQuine Biotherapeutics GmbH, or GeneQuine, a privately held biopharmaceutical company headquartered in Hamburg, Germany.

In January 2021, we made an additional €1.0 million investment in the form of a convertible note.

We will make an additional €4.0 million investment if and when GeneQuine achieves certain prespecified near-term milestones related to its lead gene therapy product candidate, GQ-303.

Up to €2.5 million of our total investment will be in the form of a convertible note, which includes the investment made in January 2021.

• In March 2021, the FDA approved the submission of our sNDA seeking expansion of the EXPAREL label to include use in patients 6 years of age and older for single-dose infiltration to produce postsurgical local analgesia.

With this approval, EXPAREL is the first and only FDA approved long-acting local analgesic for the pediatric population as young as age six.

• In April 2021, we purchased privately-held preferred shares in Coda BioTherapeutics, Inc., or Coda, a preclinical stage biopharmaceutical company that is developing a gene-therapy platform to treat neurological disorders and diseases, for a purchase price of $10.0 million.

• In April 2021, we made a cash investment of $3.0 million in a convertible note agreement with Spine BioPharma, LLC, or Spine BioPharma, a preclinical stage biopharmaceutical company developing a non-opioid solution to relieve pain and restore functionality.

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We will make an additional $7.0 million investment if and when Spine BioPharma achieves certain prespecified milestones.

• In June 2021, the United States Patent and Trademark Office (USPTO) issued U.S.

11,033,495 related to EXPAREL.

The patent, “ Manufacturing of Bupivacaine Multivesicular Liposomes ,” claims composition of EXPAREL prepared by an improved manufacturing process and will have an expiration date of January 22, 2041.

In July 2021, we submitted this patent for listing in the FDA’s “ Approved Drug Products with Therapeutic Equivalence Evaluations ” (the Orange Book) after the FDA approved this enhanced manufacturing process for EXPAREL, which is housed at a custom facility in Swindon, England under a partnership with Thermo Fisher Scientific Pharma Services, or Thermo Fisher.

We expect to start selling commercial product manufactured in this 200-liter suite later this year.

• In June 2021, we entered into a distribution agreement with Eurofarma Laboratories S.A., or Eurofarma, for the development and commercialization of EXPAREL in Latin America.

Under the terms of the agreement, Eurofarma obtained the exclusive right to market and distribute EXPAREL in 19 countries in Latin America, including Argentina,

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Brazil, Colombia, and Mexico.

In addition, Eurofarma will be responsible for regulatory filings for EXPAREL in these countries.

• In July 2021, we announced new data on the ability of the iovera° system to reduce pain, opioid consumption and length of stay, or LOS, following total knee arthroplasty, or TKA.

The findings show that patients receiving preoperative iovera° as part of a multimodal pain management protocol reduced both opioid intake and in-hospital pain while optimizing outcomes during the 6-week recovery period after TKA.

The results of the study, A Multimodal Pain Management Protocol Including Preoperative Cryoneurolysis for Total Knee Arthroplasty to Reduce Pain, Opioid Consumption, and Length of Stay , were published in Arthroplasty Today .

See below for more details.

In the U.S., EXPAREL is currently indicated in patients 6 years of age and older for single-dose infiltration to produce postsurgical local analgesia, and in adults as an interscalene brachial plexus nerve block to produce postsurgical regional analgesia.

Safety and efficacy have not been established in other nerve blocks.

In the E.U., EXPAREL is indicated as a brachial plexus block or femoral nerve block for treatment of post-operative pain in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults.

In the E.U., EXPAREL is indicated as a brachial plexus block and femoral nerve block for treatment of post-operative pain in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults.

Label Expansion

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Per FDA guidance, the primary objectives of the PLAY study were to evaluate the pharmacokinetics and safety of EXPAREL.

We are also working with the FDA to finalize a regulatory pathway to expand the EXPAREL label for patients less than six years of age, as well as the administration of EXPAREL as a nerve block in the pediatric setting, and are working with both the FDA and the European Medicines Agency, or EMA, to harmonize our pediatric clinical studies as much as possible between the two regions.

We are also working with the FDA to finalize a regulatory pathway to expand the EXPAREL label for patients less than 6 years of age, as well as the administration of EXPAREL as a nerve block in the pediatric setting, and are working with both the FDA and the European Medicines Agency, or EMA, to align our pediatric clinical studies wherever possible between the two regions.

Nerve Block in Lower Extremity Surgery

We recently completed enrollment in a Phase 3 study for nerve block in lower extremity surgeries (known as “STRIDE”) that compared an EXPAREL nerve block in lower extremity surgeries to a bupivacaine lower extremity nerve block in patients undergoing foot and ankle surgeries.

We believe positive results from this study will support an sNDA submission seeking label expansion to include lower extremity nerve blocks.

A filing strategy was agreed to with the FDA, and we intend to file a variation with the EMA.

We believe the addition of this indication is significant as anesthesia-driven regional approaches using nerve and field blocks continue to expand as institutional protocols.

Global Expansion

We recently announced topline results from our Phase 3 study for nerve block in lower extremity surgeries (known as “STRIDE”) that compared an EXPAREL nerve block in lower extremity surgeries to a bupivacaine lower extremity nerve block in patients undergoing foot and ankle surgeries.

EXPAREL administered as combined sciatic (in popliteal fossa) and saphenous (in adductor canal) nerve blocks did not demonstrate statistical significance for the study’s primary endpoint of reduction in cumulative pain scores from 0 to 96 hours as measured by the area under the curve versus bupivacaine HCl.

EXPAREL did achieve statistical significance versus bupivacaine HCl for secondary endpoints of reducing cumulative pain scores from 24 to 96 hours post-surgery (p<0.001) and total opioid consumption from 24 to 96 hours post-surgery (p<0.01).

EXPAREL also achieved statistical significance versus bupivacaine HCl for area under the curve cumulative pain scores from 12 to 96 hours (p<0.02).

The EXPAREL group achieved and maintained mild pain at 36 hours (Least Square Mean NRS 3.0) while bupivacaine HCl was in the moderate range (Least Square Mean NRS 4.7).

There were no clinically relevant safety issues observed in STRIDE, specifically no reports of falls and no serious adverse events observed in the study.

The results from STRIDE gave us clarity on the follow-up studies to conduct for an eventual sNDA filing.

We expect to initiate those studies before the end of this year.

EXPAREL Global Expansion

We have defined a global expansion strategy for EXPAREL that we believe provides us with the opportunity to increase our revenue and leverage our fixed cost infrastructure.

In the E.U., EXPAREL was granted marketing authorization in November 2020.

We are planning to launch EXPAREL together with iovera° in targeted European countries during the third quarter of 2021.

We are planning to launch EXPAREL together with iovera° in targeted European countries during the fourth quarter of 2021.

We do not intend to pursue a partnership to commercialize EXPAREL in Europe.

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The European Commission decision is applicable to all 27 E.U.

member states plus the United Kingdom, Iceland, Norway and Liechtenstein.

Despite the United Kingdom’s withdrawal from the E.U.

(“Brexit”), this approval is recognized by the United Kingdom Medicines and Healthcare products Regulatory Agency (MHRA).

In Canada, Health Canada has validated our New Drug Submission and we remain in labeling discussions.

Despite the United Kingdom’s withdrawal from the E.U., this approval is recognized by the United Kingdom Medicines and Healthcare products Regulatory Agency.

In June 2021, we entered into a distribution agreement with Eurofarma for the development and commercialization of EXPAREL in Latin America.

Under the terms of the agreement, Eurofarma obtained the exclusive right to market and distribute EXPAREL in 19 countries in Latin America, including Argentina, Brazil, Colombia, and Mexico.

In addition, Eurofarma will be responsible for regulatory filings for EXPAREL in these countries.

We will receive royalties based on Eurofarma’s future commercialization of the product and are also eligible to receive milestone payments that are triggered by the achievement of certain regulatory and commercial events.

In China, we had an agreement with Nuance Biotech Co.

Ltd., or Nuance, a China-based specialty pharmaceutical company, for the development and commercialization of EXPAREL.

In April 2021, we and Nuance agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguards our intellectual property against the risk of a generic product.

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In April 2021, we and Nuance agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguarded our intellectual property against the risk of a generic product.

For more information, refer to Note 14, Commercial Partners , to our condensed consolidated financial statements included herein.

We are currently not pursuing regulatory approval for EXPAREL in Canada based on our labeling discussions with Health Canada.

The iovera° System

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Our commercial strategy for iovera° focuses on two broad market segments.

First, iovera° and EXPAREL for opioid-sparing pain management for the total knee arthroplasty, or TKA, patient, with iovera° being administered before surgery and EXPAREL administered during surgery.

First, iovera° and EXPAREL for opioid-sparing pain management for the TKA patient, with iovera° being administered before surgery and EXPAREL administered during surgery.

We are enrolling patients into our PREPARE study that will evaluate iovera° and EXPAREL for TKA.

As many as 30% of presurgical patients with end-stage knee osteoarthritis use prescription opioids.

As many as 30% of patients with presurgical osteoarthritis of the knee use prescription opioids.

With iovera°, our goal is to provide patients with several months of non-opioid pain control to allow them to prepare for surgery with an appropriate regimen.

We also believe that EXPAREL plus iovera° for postsurgical pain control could support rapid functional recovery.

In parallel, we are launching an Innovation in Genicular Outcomes Registry (“IGOR”) to capture real-world evidence for use in TKA procedures with leading academic and orthopedic centers of excellence.

The second target market is iovera° for osteoarthritis patients who have failed conservative treatments, such as non-steroidal anti-inflammatory drugs or viscosupplementation, and are seeking drug-free, opioid-free, surgery-free pain management for several months.

We are targeting patients who are seeking an active lifestyle, as well as patients who desire to delay surgery for personal or medical reasons.

We are also encouraged by usage of iovera° in other areas.

Key opinion leaders in orthopedics, spine and anesthesia are interested in replacing heat-based radiofrequency ablation with iovera° cold therapy.

There is interest across a wide range of treatment opportunities such as low back pain, spine, spasticity and rib fracture.

We intend to use investigator-initiated studies and grants to develop data across these areas.

Total Knee Arthroplasty

In July 2021, we announced new data on the ability of the iovera° system to reduce pain, opioid consumption and LOS following TKA.

This retrospective analysis utilized data from patients who underwent TKA by a single surgeon at one center.

Patients who received iovera° before TKA were compared with a historical control group including patients who underwent TKA

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without iovera°.

Both groups received a similar perioperative multimodal pain management protocol.

The primary outcome was opioid intake at various time points from hospital stay to 6 weeks after discharge.

Additional outcomes included pain, LOS, and range of motion.

The study population included a total of 267 patients, with 169 patients in the iovera° group and 98 patients in the control group.

Results showed that patients undergoing TKA who received iovera° compared to those who did not demonstrated a significant:

• Decrease in daily opioid consumption, as the iovera° group had 51% lower daily morphine milligram equivalents (MMEs) than the control group (47 vs 97 MMEs;

ratio estimate, 0.49 [95% confidence interval (CI), 0.43-0.56];

• Decrease in mean and maximum pain scores (P<.0001)

• Decrease in average hospital LOS (P<0.0001), with 17% of patients having an overall LOS of 2 or more days, compared with 99% of patients in the control group (P<.0001)

• Greater range of motion, as indicated by greater flexion degree at discharge (P<.0001)

Results of this study are consistent with findings from clinical trial and retrospective data that indicate a multimodal pain management protocol with preoperative iovera° treatment of the superficial genicular nerves reduced opioid consumption without increasing pain for up to 12 weeks after TKA compared with a standard multimodal pain management protocol.

Osteoarthritis of the Knee

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• iovera° is repeatable;

• The iovera° technology does not risk damage to the surrounding tissue;

• iovera° does not risk damage to the surrounding tissue;

• iovera° is a convenient handheld device with a single-use procedure-specific smart tip;

• iovera° can be delivered precisely using ultrasound guidance or an anatomical landmark.

We believe the combination of iovera° and EXPAREL will become the preferred procedural solution that will empower patients and their healthcare providers to take control of the patients’ osteoarthritis journey, while minimizing the need for

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We will be investing in key clinical studies to demonstrate the synergy of iovera° and EXPAREL to manage pain while reducing or eliminating opioids.

iovera° Global Expansion

In July 2021, we entered into a licensing agreement with Verve Medical Products, Inc.

for the distribution of iovera° in Canada.

Product Portfolio and Product Candidate Pipeline

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The PITT supports a full range of educational events to advance clinician understanding of the latest local, regional, and field block approaches for managing pain and reducing or eliminating exposure to opioids.

The PITT consists of approximately 10,000 square-feet of fully adaptable space and is equipped with state-of-the-art technology and audio/visual capabilities and features several distinct training spaces including a simulation lab equipped with seven ultrasound scanning stations;

a lecture hall featuring a 4½-foot-tall by 24-foot-wide liquid crystal display video wall to

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support live, virtual and even global presentations;

a lecture hall featuring a 4½-foot tall by 24-foot wide liquid crystal display video wall to support live, virtual and even global presentations;

and a green-screen broadcast studio designed to livestream content with single or multiple hosts.

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Led by healthcare professionals, these labs include didactic lectures and hands-on trainings including live model nerve scanning and identification using ultrasound and peripheral nerve stimulation.

The PITT also serves as a venue for national anesthesia provider organizations to host their own workshops and training sessions.

At no fee to the organization, the PITT also serves as a venue for national anesthesia provider organizations to host their own workshops and training sessions to educate healthcare providers.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Net product sales consist of sales of EXPAREL in the U.S., our bupivacaine liposome injectable suspension to Aratana Therapeutics, Inc., or Aratana, for veterinary use in the U.S.

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Net product sales:

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Bupivacaine liposome injectable suspension 991 775 28% 1,784 1,981 (10)%

Total EXPAREL / bupivacaine liposome injectable suspension net product sales 115,470 102,475 13%

Total EXPAREL / bupivacaine liposome

injectable suspension net product sales 131,050 73,821 78% 246,520 176,296 40%

iovera° 3,813 1,395 100%+ 7,081 3,665 93%

Total net product sales 134,863 75,216 79% 253,601 179,961 41%

Collaborative licensing and milestone revenue 125 — N/A 125 — N/A

Royalty revenue 602 289 100%+ 891 1,228 (27)%

Total revenues $ 135,590 $ 75,505 80% $ 254,617 $ 181,189 41%

EXPAREL revenue grew 13% in the three months ended March 31, 2021 versus 2020, primarily due to an increase in sales volume of 12% and a 4% increase in gross selling price per unit, partially offset by the sales mix of EXPAREL vial sizes.

EXPAREL revenue grew 78% and 40% in the three and six months ended June 30, 2021 versus 2020, respectively, primarily due to increases of 76% and 39% in gross vial volume and increases of 3% in gross selling price per unit in both periods, partially offset by the sales mix of EXPAREL vial sizes.

The demand for EXPAREL has generally continued to increase as a result of ambulatory surgery centers and anesthesiologists broadening the use of long-acting EXPAREL regional approaches as a foundation of multimodal opioid-minimization strategies that enable shifting inpatient procedures to 23-hour sites of care.

The three and six months ended June 30, 2020 were adversely impacted by the suspension of elective surgeries due to the COVID-19 pandemic.

EXPAREL utilization remained above the overall sharp decline in elective surgical procedures relative to pre-pandemic baseline levels, due to increased use in the outpatient setting.

EXPAREL utilization in emergency procedures also continues to grow.

Bupivacaine liposome injectable suspension revenue and related royalties decreased 34% and 69%, respectively, in the three months ended March 31, 2021 versus 2020, as a result of the timing of orders placed by Aratana for veterinary use.

Net product sales of iovera° increased 44% in the three months ended March 31, 2021 versus 2020, primarily due to an increased iovera° sales force and the impact that the COVID-19 pandemic had on the first quarter of 2020.

Thus far, we have seen the greatest iovera° demand as pain relief for patients in advance of TKA procedures and in chronic pain management, particularly for people with mild to severe osteoarthritis of the knee.

Any renewed government suspension of, or reluctance of patients to have, elective surgeries would impact our future sales of EXPAREL and iovera° during the ongoing COVID-19 pandemic.

The following tables provide a summary of activity with respect to our sales related allowances and accruals related to EXPAREL for the three months ended March 31, 2021 and 2020 (in thousands):

EXPAREL utilization in emergency procedures also continued to grow.

Bupivacaine liposome injectable suspension revenue and related royalties increased in the three months and decreased in the six months ended June 30, 2021 versus 2020 as a result of the timing of orders placed by Aratana for veterinary use.

Net product sales of iovera° increased more than 100% and 93% in the three and six months ended June 30, 2021 versus 2020, respectively.

These increases were primarily due to an increased iovera° sales force and the impact that the COVID-19 pandemic had on the first half of 2020.

Thus far, we have seen the greatest iovera° demand as a pain relief for patients in

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March 31, 2021 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume

advance of TKA procedures and in chronic pain management, particularly for people with mild to severe osteoarthritis of the knee.

Any renewed government suspension of, or reluctance of patients to have, elective surgeries would impact our future sales of EXPAREL and iovera° during the ongoing COVID-19 pandemic.

The increase in collaborative licensing and milestone revenue in the three and six months ended June 30, 2021 was the result of a portion of an upfront payment recognized under our distribution agreement with Eurofarma, S.A.

for the development and commercialization of EXPAREL in Latin America.

For more information, see Note 14, Commercial Partners, to our condensed consolidated financial statements included herein.

The following tables provide a summary of activity with respect to our sales related allowances and accruals related to EXPAREL for the six months ended June 30, 2021 and 2020 (in thousands):

June 30, 2021 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume

Chargebacks Total

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Payments / Adjustments (261) (4,631) (3,846) (5,814) (14,552)

Balance at March 31, 2021 $ 1,161 $ 1,023 $ 1,000 $ 1,744 $ 4,928

March 31, 2020 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume

Balance at June 30, 2021 $ 1,260 $ 1,426 $ 1,128 $ 2,024 $ 5,838

June 30, 2020 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume

Chargebacks Total

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Payments / Adjustments (142) (3,704) (3,398) (4,868) (12,112)

Balance at March 31, 2020 $ 609 $ 761 $ 984 $ 1,508 $ 3,862

Total reductions to gross product sales from sales-related allowances and accruals were $7.1 million and $6.4 million, or 5.7% and 5.8% of gross product sales, for the three months ended March 31, 2021 and 2020, respectively.

Balance at June 30, 2020 $ 732 $ 867 $ 847 $ 1,588 $ 4,034

Total reductions to gross product sales from sales-related allowances and accruals were $15.6 million and $11.3 million, or 5.8% and 5.9% of gross product sales, for the six months ended June 30, 2021 and 2020, respectively.

The overall decrease in sales-related allowances and accruals as a percentage of gross product sales was directly related to a slight decrease in discounting.

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Cost of goods sold $ 35,248 $ 22,305 58% $ 66,597 $ 52,037 28%

Gross margin 74 % 70 % 74 % 71 %

Gross margin increased two percentage points in the three months ended March 31, 2021 versus 2020.

The most significant changes were one percentage point due to increased sales of lower cost quantities manufactured at our custom manufacturing suite in Swindon, England, and one percentage point due to a price increase.

Gross margin increased four and three percentage points in the three and six months ended June 30, 2021 versus 2020, respectively.

Improvements in gross margin realized during both periods resulted from reductions in inventory reserves, lower unit costs resulting from manufacturing efficiencies, reductions in unplanned downtime and the impact of price increases, partially offset by ongoing capacity expansion costs primarily related to the creation of a 200-liter batch manufacturing unit at our San Diego, California facility.

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Research and Development Expenses

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The following table provides a breakout of our research and development expenses during the periods indicated, including percent changes (dollar amounts in thousands):

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Clinical and preclinical development $ 5,111 $ 4,363 17% $ 13,131 $ 10,648 23%

Product development and manufacturing capacity expansion 4,702 6,605 (29)%

Product development and manufacturing

capacity expansion 4,607 6,084 (24)% 9,309 12,688 (27)%

Regulatory and other 1,526 1,816 (16)% 3,578 3,560 1%

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% of total revenues 9 % 18 % 11 % 16 %

Total research and development expense remained flat in the three months ended March 31, 2021 versus 2020.

Clinical and preclinical development expense increased 26% in the three months ended March 31, 2021 versus 2020 due to ongoing enrollment in our iovera° and EXPAREL TKA (“PREPARE”) trial as well as continued and completed enrollment in our lower extremity nerve block (“STRIDE”) clinical trial.

Total research and development expense decreased 8% and 3% in the three and six months ended June 30, 2021 versus 2020, respectively.

Clinical and preclinical development expense increased 17% and 23% in the three and six months ended June 30, 2021 versus 2020, respectively, due to our ongoing iovera° and EXPAREL TKA (“PREPARE”) trial as well as our completed lower extremity nerve block (“STRIDE”) clinical trial.

These increases were partially offset by the completion of our Phase 3 pediatric (“PLAY”) clinical trial, our Phase 4 C-Section (“CHOICE”) trial, as well as the completion of our clinical trial for pectoral field block in breast augmentation.

In addition, we made the strategic decision to conclude enrollment in the spine (“FUSION”) study early due to protocol feasibility given the rapid evolution of medical practice for spinal procedures.

The data from approximately 65 FUSION study subjects will be analyzed with the intent to create either a future study or registry for this patient population.

Product development and manufacturing capacity expansion expense decreased 29% in the three months ended March 31, 2021 versus 2020.

These decreases are mainly due to our progress in constructing the significant scale-up of our manufacturing capacity at the Thermo Fisher Scientific Pharma Services, or Thermo Fisher, site in Swindon, England as the project advances from the development phase to the registration phase.

Regulatory and other expense increased 23% in the three months ended March 31, 2021 versus 2020 due to regulatory activities in support of our pediatric infiltration sNDA submission and activities related to an iovera° clinical data registry.

Stock-based compensation decreased by 7% in the three months ended March 31, 2021 versus 2020, primarily due to fewer equity awards outstanding for research and development personnel, partially offset by an increase in the average cost of equity grants.

In addition, we made the strategic decision to conclude enrollment in the spine (“FUSION”) study due to protocol feasibility given the rapid evolution of medical practice for spinal procedures.

The data from approximately 65 FUSION study subjects will be used to inform future studies for this patient population.

Product development and manufacturing capacity expansion expense decreased 24% and 27% in the three and six months ended June 30, 2021 versus 2020, respectively.

These decreases were mainly due to our progress in constructing the significant scale-up of our manufacturing capacity at the Thermo Fisher site in Swindon, England as the project advances from the development phase to the registration phase.

Regulatory and other expense decreased 16% in the three months ended June 30, 2021 versus 2020 due to prior year regulatory activities in support of our Marketing Authorization Application (MAA) to the EMA, partially offset by increased activities related to an iovera° clinical data registry.

Regulatory and other expense remained relatively flat in the six months ended June 30, 2021 versus 2020.

Stock-based compensation decreased by 2% and 4% in the three and six months ended June 30, 2021 versus 2020, respectively, primarily due to fewer equity awards outstanding for research and development personnel, partially offset by an increase in the average cost of equity grants.

Selling, General and Administrative Expenses

Sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support our sales, marketing, medical and scientific affairs operations, commission payments to our marketing partners for the promotion and sale of EXPAREL and iovera°, expenses related to communicating the health outcome benefits of EXPAREL and educational programs for our customers.

General and administrative expenses consist of compensation and benefits for legal, finance, regulatory activities related to approved products and indications, compliance, information technology, human resources, business development, executive management and other supporting personnel.

Sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support our sales, marketing, medical and scientific affairs operations, commission payments to our marketing partners for the promotion and sale of EXPAREL, expenses related to communicating the health outcome benefits of EXPAREL and educational programs for our customers.

General and administrative expenses consist of compensation and benefits for legal,

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finance, regulatory activities related to approved products and indications, compliance, information technology, human resources, business development, executive management and other supporting personnel.

It also includes professional fees for legal, audit, tax and consulting services.

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Sales and marketing $ 28,259 $ 25,356 11% $ 55,361 $ 53,268 4%

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% of total revenues 37 % 57 % 39 % 49 %

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Total selling, general and administrative expenses increased 8% in the three months ended March 31, 2021 versus 2020.

Sales and marketing expenses decreased 3% in the three months ended March 31, 2021 versus 2020.

The 3% decrease was driven by the termination of our co-promotion agreement with DePuy Synthes Sales, Inc.

and was partially offset by higher compensation due to an expanded sales force and pediatric launch expenses in anticipation of the March 2021 FDA approval of the sNDA for EXPAREL in infiltration for pediatric patients aged 6 and up.

Total selling, general and administrative expenses increased 17% and 13% in the three and six months ended June 30, 2021 versus 2020, respectively.

Sales and marketing expenses increased 11% and 4% in the three and six months ended June 30, 2021 versus 2020, respectively.

The increase was driven by higher compensation due to an expanded sales force and pediatric launch expenses as a result of the March 2021 FDA approval of the sNDA for EXPAREL in infiltration for pediatric patients aged 6 and up.

We are continuing our marketing investment in EXPAREL, which includes educational initiatives and programs related to the impact of opioids and postsurgical pain management and our national advocacy campaign designed to educate patients about non-opioid treatment options.

Additionally, we have continued our investment in clinician training of the use of EXPAREL and iovera° at our PITT training facility in Tampa, Florida.

We have also continued investing in marketing initiatives and customer outreach for iovera°.

General and administrative expenses increased 33% in the three months ended March 31, 2021 versus 2020 primarily due to an insurance recovery of $2.1 million received in early 2020 for legal expenditures related to a since-resolved Department of Justice inquiry and an increase in legal expenditures in support of other matters.

Stock-based compensation increased 17% in the three months ended March 31, 2021 versus 2020, primarily due to an increase in the average cost of equity grants, partially offset by fewer awards outstanding.

Additionally, we continue our investment in clinician training in the use of EXPAREL and iovera° at our PITT training facility in Tampa, Florida.

We also continue to invest in marketing initiatives and customer outreach for iovera°.

Partially offsetting the increase was the termination of our co-promotion agreement with DePuy Synthes Sales, Inc.

in January 2021.

General and administrative expenses increased 31% and 32% in the three and six months ended June 30, 2021 versus 2020, respectively.

The increase in the three months ended June 30, 2021 is primarily due to an increase in legal expenditures.

The increase in the six months ended June 30, 2021 is primarily due to an insurance recovery of $2.1 million received in early 2020 for legal expenditures related to a since-resolved Department of Justice inquiry and an increase in legal expenditures in support of other matters.

Stock-based compensation increased 17% in both the three and six months ended June 30, 2021 and 2020, primarily due to an increase in the average cost of equity grants, partially offset by fewer awards outstanding.

Amortization of Acquired Intangible Assets

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Amortization of acquired intangible assets $ 1,967 $ 1,967 —% $ 3,933 $ 3,933 —%

As part of the April 2019 acquisition of MyoScience (the “MyoScience Acquisition”), we acquired intangible assets consisting of developed technology and customer relationships, with estimated useful lives of 14 and 10 years, respectively.

As part of the April 2019 acquisition of MyoScience, Inc., or MyoScience, (the “MyoScience Acquisition”), we acquired intangible assets consisting of developed technology and customer relationships, with estimated useful lives of 14 and 10 years, respectively.

These amounts are amortized on a straight line basis.

For more information, see Note 7, Goodwill and Intangible Assets , to our condensed consolidated financial statements included herein.

Acquisition-Related Gains, Product Discontinuation and Other

The following table provides a summary of the costs related to the MyoScience Acquisition, our DepoCyt(e) discontinuation activities and termination costs for our agreement with Nuance during the periods indicated, including percent changes (dollar amounts in thousands):

Acquisition-Related Charges (Gains), Product Discontinuation and Other

The following table provides a summary of the costs related to the MyoScience Acquisition, product discontinuation activities and termination costs for our agreement with Nuance during the periods indicated, including percent changes (dollar amounts in thousands):

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Three Months Ended

March 31, % Increase / (Decrease)

Acquisition-related gains $ (1,127) $ (3,739) (70)%

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Acquisition-related charges (gains) $ 146 $ 1,577 (91)% $ (981) $ (2,162) (55)%

Product discontinuation — (159) (100)% — (128) (100)%

Other 3,000 — N/A

Total acquisition-related gains, product discontinuation and other $ 1,873 $ (3,708) N/A

As part of the MyoScience Acquisition, we recognized gains in the amount of $1.1 million and $3.7 million in the three months ended March 31, 2021 and 2020, respectively, primarily related to changes in the fair value of contingent consideration.

Other — — N/A 3,000 — N/A

Total acquisition-related charges (gains),

product discontinuation and other $ 146 $ 1,418 (90)% $ 2,019 $ (2,290) N/A

As part of the MyoScience Acquisition, we recognized acquisition-related charges of $0.1 million and gains of $1.0 million in the three and six months ended June 30, 2021, respectively, primarily related to changes in the fair value of contingent consideration.

In the three and six months ended June 30, 2020, we recognized acquisition-related charges in the amount of $1.6 million and acquisition-related gains of $2.2 million, respectively, also related to contingent consideration.

See Note 9, Financial Instruments , to our condensed consolidated financial statements included herein, for information regarding the methods and key assumptions used in the fair value measurements of contingent consideration.

In June 2018, we entered into an agreement with Nuance to advance the development and commercialization of EXPAREL in China.

In April 2021, we agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguards our intellectual property against the risk of a generic product.

Estimated dissolution costs of $3.0 million have been included in other operating expenses in the condensed consolidated statements of operations for the three months ended March 31, 2021.

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In 2021, we agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguards our intellectual property against the risk of a generic product.

Dissolution costs of $3.0 million were included in other operating expenses in the condensed consolidated statements of operations for the six months ended June 30, 2021.

Other Income (Expense)

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Three Months Ended

March 31, % Increase / (Decrease)

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Interest income $ 224 $ 1,323 (83)% $ 639 $ 2,911 (78)%

Interest expense (7,023) (5,456) 29% (13,994) (11,477) 22%

Other, net (157) (4,104) (96)%

Other, net (2,396) 3,969 N/A (2,554) (136) 100%+

Total other expense, net $ (9,195) $ (164) 100%+ $ (15,909) $ (8,702) 83%

Total other expense, net decreased by 21% in the three months ended March 31, 2021 versus 2020, primarily due to lower unrealized losses on our equity investment in TELA Bio, Inc., which were $0.1 million during the three months ended March 31, 2021 and $4.0 million during the three months ended March 31, 2020.

Further, our interest income decreased in the three months ended March 31, 2021 versus 2020 due to lower short-term interest rates.

The increase in interest expense in the current period was primarily due to an increase in outstanding debt resulting from the issuance of $402.5 million aggregate principal of our 0.750% convertible senior notes due 2025, or 2025 Notes, in July 2020.

Income Tax Expense

Total other expense, net increased by more than 100% and 83% in the three and six months ended June 30, 2021 versus 2020, respectively.

Other, net included a realized loss on the sale of our equity investment in TELA Bio, Inc., or TELA Bio, in the amounts of $2.5 million and $2.6 million during the three and six months ended June 30, 2021, respectively.

This contrasted with an unrealized gain of $4.0 million and no change in the three and six months ended June 30, 2020, respectively.

There was also an increase in interest expense in the three and six months ended June 30, 2021 due to the increase in outstanding debt resulting from the issuance of $402.5 million aggregate principal of our 0.750% convertible senior notes due 2025, or 2025 Notes, in July 2020.

Further, our interest income decreased in the three and six months ended June 30, 2021 versus 2020 due to lower short-term interest rates.

Income Tax Expense (Benefit)

The following table provides information regarding our income tax expense during the periods indicated, including percent changes (dollar amounts in thousands):

Three Months Ended

March 31, % Increase / (Decrease)

Income tax expense $ 2,355 $ 398 100%+

June 30, % Increase / (Decrease) Six Months Ended

June 30, % Increase / (Decrease)

2021 2020 2021 2020

Income tax expense (benefit) $ 6,567 $ (42) N/A $ 8,921 $ 356 100% +

Effective tax rate 26 % (1) % 23 % 29 %

For the three months ended March 31, 2021 and 2020, we recorded an income tax expense of $2.4 million and $0.4 million, respectively.

The increased income tax expense was driven by the release of a full valuation allowance against domestic net deferred tax assets during the year ended December 31, 2020.

For the three months ended June 30, 2021 and 2020, we recorded income tax expense of $6.6 million and an income tax benefit of less than $0.1 million, respectively.

For the six months ended June 30, 2021 and 2020, we recorded income tax

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expense of $8.9 million and $0.4 million, respectively.

The increased income tax expense for both the three and six month periods was driven by the release of a full valuation allowance against domestic net deferred tax assets during the year ended December 31, 2020.

The income tax benefit and expense for the three and six months ended June 30, 2020, respectively, consisted primarily of current state income taxes.

Liquidity and Capital Resources

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We have financed our operations primarily with the proceeds from the sale of convertible senior notes, common stock, product sales and collaborative licensing and milestone revenue.

As of March 31, 2021, we had an accumulated deficit of $243.5 million, cash and cash equivalents, short-term and long-term investments of $625.0 million and working capital of $488.2 million.

As of June 30, 2021, we had an accumulated deficit of $224.4 million, cash and cash equivalents, short-term and long-term investments of $646.6 million and working capital of $563.9 million.

We currently expect that our cash, short-term and long-term investments on hand will be adequate to cover any potential short-term liquidity needs, and that we would be able to access other sources of financing should the need arise.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law in response to the COVID-19 pandemic.

In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law in response to the COVID-19 pandemic.

The CARES Act, among other things, allowed for certain measures to increase liquidity for businesses such as the deferral of employer payroll taxes, a tax credit for retaining employees and other provisions.

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One-half of these deferrals are due at each of December 31, 2021 and December 31, 2022.

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Summary of Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

Condensed Consolidated Statements of Cash Flows Data:

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Financing activities 16,233 2,183

Net decrease in cash and cash equivalents $ (33,258) $ (23,639)

Net increase in cash and cash equivalents $ 5,817 $ 324

Operating Activities

During the three months ended March 31, 2021, net cash provided by operating activities was $12.1 million, compared to $6.2 million during the three months ended March 31, 2020.

The increase of $5.9 million was primarily attributable to an increase in gross margin on a 13% increase in EXPAREL net product sales, partially offset by increased general and administrative expenses, largely associated with legal expenses.

During the six months ended June 30, 2021, net cash provided by operating activities was $42.2 million, compared to $9.4 million used in operating activities during the six months ended June 30, 2020.

The increase of $51.6 million was primarily attributable to an increase in gross margin on a 40% increase in EXPAREL net product sales, which were adversely impacted in the six months ended June 30, 2020 by a suspension of elective surgeries caused by the COVID-19 pandemic.

There was also a contingent consideration payment to MyoScience securityholders of $7.0 million, of which $5.7 million has been classified as an operating cash outflow and $1.3 million as a financing cash outflow.

Investing Activities

During the three months ended March 31, 2021, net cash used in investing activities was $55.7 million, which reflected $41.4 million of short-term and long-term investment purchases (net of maturities) and purchases of fixed assets of $13.1 million.

Major fixed asset purchases included equipment for a new EXPAREL capacity expansion at our Science Center Campus in San Diego, California, and continuing expenditures for our expanding EXPAREL manufacturing capacity in Swindon, England.

In addition, we purchased a $1.2 million convertible note from GeneQuine.

During the three months ended March 31, 2020, net cash used in investing activities was $28.6 million, which reflected $21.8 million of short-term and long-term investment purchases (net of maturities) and purchases of fixed assets of $6.7 million.

Major fixed asset purchases included equipment for a new EXPAREL capacity expansion project at our Science Center Campus.

During the six months ended June 30, 2021, net cash used in investing activities was $52.6 million, which reflected $23.8 million of short-term and long-term investment purchases (net of maturities) and purchases of fixed assets of $23.6 million.

Major fixed asset purchases included equipment for a new 200-liter EXPAREL capacity expansion project at our Science Center Campus in San Diego, California, and continuing expenditures for our expanding EXPAREL manufacturing capacity in Swindon, England.

In addition, we made a $10.0 million equity investment in Coda and also purchased a total of $4.2 million in convertible notes from GeneQuine and Spine BioPharma.

We also sold our investment in TELA Bio for net cash proceeds of $9.1 million.

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During the six months ended June 30, 2020, net cash provided by investing activities was $7.6 million, which reflected $23.2 million of short-term and long-term investment maturities (net of purchases) and purchases of fixed assets of $15.6 million.

Major fixed asset purchases included equipment for a new EXPAREL capacity expansion project at our Science Center Campus and continuing expenditures for expanding our EXPAREL manufacturing capacity in Swindon, England in partnership with Thermo Fisher.

Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities was $10.3 million, which consisted entirely of proceeds from the exercise of stock options.

During the three months ended March 31, 2020, net cash used in financing activities was $1.3 million, which consisted of $4.7 million of contingent consideration payments made to MyoScience securityholders, partially offset by proceeds from the exercise of stock options of $3.5 million.

During the six months ended June 30, 2021, net cash provided by financing activities was $16.2 million, which consisted of proceeds from the exercise of stock options of $16.0 million and $1.6 million from the issuance of shares through our ESPP, partially offset by the $1.3 million financing component of the $7.0 million contingent consideration payment made to MyoScience securityholders.

During the six months ended June 30, 2020, net cash provided by financing activities was $2.2 million, which consisted of proceeds from the exercise of stock options of $6.4 million and $1.4 million from the issuance of shares through our ESPP, partially offset by $5.6 million of contingent consideration payments made to MyoScience securityholders.

2025 Convertible Senior Notes

In July 2020, we completed a private placement of $402.5 million in aggregate principal amount of our 2025 Notes and entered into an indenture, or 2025 Indenture, with respect to the 2025 Notes.

In July 2020, we completed a private placement of $402.5 million in aggregate principal amount of our 2025 Notes and entered into an indenture with respect to the 2025 Notes.

The 2025 Notes accrue interest at a fixed rate of 0.750% per annum, payable in arrears on February 1 and August 1 of each year.

The 2025 Notes mature on August 1, 2025.

At March 31, 2021, the outstanding principal on the 2025 Notes was $402.5 million.

On or after February 3, 2025, until the close of business on the second scheduled trading day immediately preceding August 1, 2025, holders may convert their 2025 Notes at any time.

Upon conversion, holders will receive the principal amount of their 2025 Notes and any excess conversion value.

For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our option.

The initial conversion rate for the 2025 Notes is 13.9324 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $71.78 per share of our common stock.

The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

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Prior to the close of business on the business day immediately preceding February 3, 2025, holders may convert the 2025 Notes under certain circumstances, including if during any given calendar quarter, our stock price closes at or above 130% of the conversion price then applicable during a period of at least 20 out of the last 30 consecutive trading days of the previous quarter.

While the 2025 Notes are currently classified on our consolidated balance sheet at March 31, 2021 as long-term debt, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of our common stock during the prescribed measurement periods.

In the event that the holders of the 2025 Notes have the right to convert the 2025 Notes at any time during the prescribed measurement period, the 2025 Notes would then be considered a current obligation and classified as such.

On or after August 1, 2023, we may redeem for cash, shares of our common stock or a combination of cash and shares of our common stock, at our option, all or part of the 2025 Notes if the last reported sale price (as defined in the 2025 Indenture) of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which we provide notice of redemption.

This condition was not met during the quarter ended March 31, 2021.

See Note 8, Debt , to our condensed consolidated financial statements included herein for further discussion of the 2025 Notes.

At June 30, 2021, the outstanding principal on the 2025 Notes was $402.5 million.

See Note 8, Debt , to our condensed consolidated financial statements included herein for further discussion of the 2025 Notes, including information on convertibility factors, redemption, timeframes and balance sheet classification.

2022 Convertible Senior Notes

In March 2017, we completed a private placement of $345.0 million in aggregate principal amount of our 2.375% convertible senior notes due 2022, or 2022 Notes, and entered into an indenture, or 2022 Indenture, with respect to the 2022 Notes.

The 2022 Notes accrue interest at a fixed rate of 2.375% per annum, payable semiannually in arrears on April 1 and October 1 of each year.

The 2022 Notes mature on April 1, 2022.

At March 31, 2021, the outstanding principal on the 2022 Notes was $160.0 million.

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.

On or after October 1, 2021, until the close of business on the second scheduled trading day immediately preceding April 1, 2022, holders may convert their 2022 Notes at any time.

Upon conversion, holders will receive the principal amount of their 2022 Notes and any excess conversion value.

For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our option.

The initial conversion rate for the 2022 Notes is 14.9491 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $66.89 per share of our common stock.

The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

Prior to the close of business on the business day immediately preceding October 1, 2021, holders may convert the 2022 Notes under certain circumstances, including if during any given calendar quarter, our stock price closes at or above 130% of the conversion price then applicable during a period of at least 20 out of the last 30 consecutive trading days of the previous quarter.

The holders of the 2022 Notes have the right to convert the 2022 Notes at any time on or after October 1, 2021, until the close of business on the second scheduled trading day immediately preceding April 1, 2022.

Therefore, the 2022 Notes are considered a current obligation to the Company.

While the 2022 Notes are currently classified on our consolidated balance sheet at March 31, 2021 as short-term debt, the future convertibility of this liability is monitored at each quarterly reporting date and is analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods.

As of April 1, 2020, we may redeem for cash, shares of our common stock or a combination of cash and shares of our common stock, at our option, all or part of the 2022 Notes if the last reported sale price (as defined in the 2022 Indenture) of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which we provide notice of redemption.

This condition was not met during the quarter ended March 31, 2021.

See Note 8, Debt , to our condensed consolidated financial statements included herein for further discussion of the 2022 Notes.

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At June 30, 2021, the outstanding principal on the 2022 Notes was $160.0 million.

See Note 8, Debt , to our condensed consolidated financial statements included herein for further discussion of the 2022 Notes, including information on convertibility factors, redemption, timeframes and balance sheet classification.

Future Capital Requirements

We believe that our existing cash and cash equivalents, short-term and long-term investments and cash received from product sales will be sufficient to enable us to fund our operating expenses, capital expenditure requirements, payment of the principal on any conversions of our 2022 Notes and 2025 Notes, and to service our indebtedness through the next 12 months.

We believe that our existing cash and cash equivalents, short-term and long-term investments and cash received from product sales will be sufficient to enable us to fund our operating expenses, capital expenditure requirements and payment of the interest and principal on any conversions of our 2022 Notes and 2025 Notes through the next 12 months.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including, but not limited to, the following:

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• the cost and timing of expanding our manufacturing facilities for EXPAREL and other product candidates, including the construction of an additional manufacturing suite at Thermo Fisher’s facility in Swindon, England and an EXPAREL capacity expansion project at our Science Center Campus in San Diego, California;

• the cost and timing of potential remaining milestone payments to MyoScience security holders, which could be up to an aggregate of $58.0 million if certain regulatory and commercial milestones are met, which includes one milestone payment of $10.0 million which is payable in the second quarter of 2021;

• the cost and timing of potential remaining milestone payments to MyoScience security holders, which could be up to an aggregate of $48.0 million if certain regulatory and commercial milestones are met;

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• the cost and timing of potential milestone payments to SkyePharma Holding, Inc., which could be up to an aggregate of $36.0 million if certain milestones pertaining to net sales of DepoBupivacaine products, including EXPAREL, are met, or upon the first commercial sale in the United Kingdom, France, Germany, Italy or Spain;

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Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements as of March 31, 2021, nor do we have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

We do not have any material off-balance sheet arrangements as of June 30, 2021, nor do we have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Critical Accounting Policies and Use of Estimates

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Contractual Obligations

There have been no material changes in our contractual obligations relating to our indebtedness, lease obligations and purchase obligations from those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

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information on our contractual obligations and commercial commitments, see Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020 .

Except for a new lease described in Note 6, Leases , to our condensed consolidated financial statements included herein, there have been no material changes in our contractual obligations relating to our indebtedness, lease obligations and purchase obligations from those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

For more information on our contractual obligations and commercial commitments, see Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements