What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-03 compared with 2021-08-03 · 483 added, 363 removed, 904 unchanged (48% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

ASSETS June 30,

ASSETS September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 134,036 $ 99,957

Short-term investments 540,821 421,705

Short-term available-for-sale investments 559,822 421,705

Accounts receivable, net 49,975 53,046

2 unchanged sentences

Total current assets 822,352 651,623

Long-term investments — 95,459

Long-term available-for-sale investments — 95,459

Fixed assets, net 159,235 136,688

3 unchanged sentences

Deferred tax assets 93,265 106,164

Equity investments and other assets 17,966 14,019

Investments and other assets 21,192 14,019

Total assets $ 1,356,002 $ 1,274,513

18 unchanged sentences

none issued and outstanding at

June 30, 2021 and December 31, 2020

September 30, 2021 and December 31, 2020

Common stock, par value $ 0.001 ;

1 unchanged sentence

44,523,410 shares issued and

outstanding at June 30, 2021;

outstanding at September 30, 2021;

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

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

8 unchanged sentences

Amortization of acquired intangible assets 1,967 1,967 5,900 5,900

Acquisition-related charges (gains), product

Acquisition-related (gains) charges, product

discontinuation and other ( 714 ) 692 1,305 ( 1,599 )

Total operating expenses 96,289 99,864 296,626 271,105

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

Income from operations 31,433 17,620 85,713 27,568

Other (expense) income:

1 unchanged sentence

Interest expense ( 7,333 ) ( 7,132 ) ( 21,327 ) ( 18,609 )

Loss on early extinguishment of debt — ( 8,071 ) — ( 8,071 )

Other, net ( 46 ) 2,708 ( 2,600 ) 2,571

Total other expense, net ( 7,202 ) ( 11,470 ) ( 23,111 ) ( 20,173 )

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

Income before income taxes 24,231 6,150 62,602 7,395

Income tax (expense) benefit ( 6,571 ) 123,969 ( 15,492 ) 123,613

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

Net income $ 17,660 $ 130,119 $ 47,110 $ 131,008

Net income per share:

Basic net income per common share $ 0.40 $ 3.03 $ 1.07 $ 3.09

Diluted net income per common share $ 0.39 $ 2.94 $ 1.03 $ 3.02

Weighted average common shares outstanding:

5 unchanged sentences

PACIRA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

Net income $ 17,660 $ 130,119 $ 47,110 $ 131,008

Other comprehensive income (loss):

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

Net unrealized (loss) gain on investments, net of tax ( 30 ) ( 643 ) ( 168 ) 525

Foreign currency translation adjustments 2 — 3 —

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

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

Total other comprehensive (loss) income ( 28 ) ( 643 ) ( 165 ) 525

Comprehensive income $ 17,632 $ 129,476 $ 46,945 $ 131,533

See accompanying condensed notes to consolidated financial statements.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(In thousands)

5 unchanged sentences

Shares Amount Total

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

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

Exercise of stock options 74 1 3,017 — — 3,018

Vested restricted stock units 12 — — — — —

Shares issued under employee stock

purchase plan 31 — 1,574 — — 1,574

Stock-based compensation — — 10,784 — — 10,784

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

Other comprehensive loss (Note 11) — — — — ( 28 ) ( 28 )

Net income — — — 17,660 — 17,660

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

Balance at September 30, 2021 44,523 $ 45 $ 925,169 $ ( 206,765 ) $ 153 $ 718,602

Common Stock Additional

4 unchanged sentences

Shares Amount Total

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

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

Exercise of stock options 703 — 24,582 — — 24,582

Vested restricted stock units 2 — — — — —

Shares issued under employee stock

purchase plan 37 — 1,421 — — 1,421

Stock-based compensation — — 10,954 — — 10,954

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

Retirement of equity component

of 2022 convertible senior notes (Note 8) — — ( 33,089 ) — — ( 33,089 )

Equity component of 2025 convertible

senior notes issued, net of deferred taxes

of $ 20,450 (Note 8)

— — 64,619 — — 64,619

Other comprehensive loss (Note 11) — — — — ( 643 ) ( 643 )

Net income — — — 130,119 — 130,119

Balance at September 30, 2020 43,313 $ 43 $ 852,190 $ ( 268,390 ) $ 847 $ 584,690

See accompanying condensed notes to consolidated financial statements.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(In thousands)

13 unchanged sentences

Net income — — — 47,110 — 47,110

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

Balance at September 30, 2021 44,523 $ 45 $ 925,169 $ ( 206,765 ) $ 153 $ 718,602

Common Stock Additional

10 unchanged sentences

Stock-based compensation — — 29,024 — — 29,024

Retirement of equity component

of 2022 convertible senior notes (Note 8) — — ( 33,089 ) — — ( 33,089 )

Equity component of 2025 convertible

senior notes issued, net of deferred taxes

of $ 20,450 (Note 8)

— — 64,619 — — 64,619

Other comprehensive income (Note 11) — — — — 525 525

Net income — — — 131,008 — 131,008

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

Balance at September 30, 2020 43,313 $ 43 $ 852,190 $ ( 268,390 ) $ 847 $ 584,690

See accompanying condensed notes to consolidated financial statements.

4 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

Net income $ 47,110 $ 131,008

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

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

Deferred taxes 12,953 ( 124,572 )

2 unchanged sentences

Amortization of debt discount 17,245 12,684

(Gain) loss on disposal and impairment of fixed assets ( 10 ) 22

Loss on early extinguishment of debt — 8,071

(Gain) loss on disposal of fixed assets ( 10 ) 22

Stock-based compensation 31,356 29,024

10 unchanged sentences

securityholders ( 5,662 ) ( 9,409 )

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

Net cash provided by operating activities 102,502 30,365

Investing activities:

4 unchanged sentences

Sale of equity investment 9,057 —

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

Net cash (used in) investing activities ( 87,708 ) ( 195,290 )

Financing activities:

1 unchanged sentence

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

Proceeds from debt component of the 2025 convertible senior notes — 314,708

Proceeds from equity component of the 2025 convertible senior notes — 87,792

Repayment of 2022 convertible senior notes — ( 176,793 )

Retirement of equity component of the 2022 convertible senior notes — ( 33,089 )

Payment of debt issuance and financing costs — ( 12,487 )

Payment of contingent consideration to MyoScience, Inc.

18 unchanged sentences

The Company’s long-acting, local analgesic, EXPAREL ® (bupivacaine liposome injectable suspension), was commercially launched in the United States in April 2012 and approved by the European Commission in November 2020.

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.

EXPAREL utilizes the Company’s unique and proprietary multivesicular liposome delivery technology that encapsulates drugs without altering their molecular structure, and releases them over a desired period of time.

In April 2019, the Company added iovera° ® to its commercial offering with the acquisition of MyoScience, Inc., or MyoScience.

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

In October 2021, Pacira entered the Merger Agreement (as defined below) with Oyster Acquisition Company Inc., a Delaware corporation and wholly owned subsidiary of Pacira (“Merger Sub”), and Flexion Therapeutics, Inc., a Delaware corporation, or Flexion.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, on October 22, 2021, Merger Sub commenced a cash tender offer (the “Offer”), to acquire all of the outstanding shares of common stock of Flexion, $ 0.001 par value per share (the “Flexion Shares”), at an offer price of (i) $ 8.50 per Flexion Share in cash, net of applicable withholding taxes and without interest, plus (ii) one contingent value right per Flexion Share, which will represent the right to receive one or more contingent payments up to $ 8.00 per Flexion Share in the aggregate upon the achievement of specified milestones on or prior to December 31, 2030.

Refer to Note 16, Subsequent Events , for further discussion.

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.

5 unchanged sentences

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.

However, while many restrictions have since eased with COVID-19 vaccines now widely available, the elective surgery market faced additional pandemic-related challenges in August and September 2021 due to regional surges in COVID-19 delta variant cases, staffing shortages and surgical fatigue from care teams addressing significant procedure backlogs.

While these challenges began to subside in October 2021, it is unknown 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 safety protocols and guidelines as recommended by federal, state and local governments.

To date, there have been no material impacts to the Company’s supply chain.

4 unchanged sentences

Basis of Presentation and Principles of Consolidation

These interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (SEC), for interim reporting.

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States Securities and Exchange Commission (SEC), for interim reporting.

Pursuant to these rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted.

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 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 financial statements at September 30, 2021, and for the three and nine month periods ended September 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

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

The condensed consolidated 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.

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

5 unchanged sentences

In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes , which amended the approaches and methodologies in accounting for income taxes during interim periods and makes changes to certain income tax classifications.

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 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 allows for certain exceptions, including the 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 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 future acquisitions, the Company will 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 June 30, 2021

Recent Accounting Pronouncements Not Adopted as of September 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.

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

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

2 unchanged sentences

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.

At September 30, 2021, the Company has recognized debt discounts of $ 68.7 million for its 0.750 % convertible senior notes due 2025 and $ 3.8 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.

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The Company expects the impact of this standard to be material to its consolidated financial statements and related disclosures.

NOTE 3— REVENUE

27 unchanged sentences

The Company’s contracts with customers require it to transfer an individual distinct product, which represents a single performance obligation.

The Company’s performance obligation with respect to its product sales is satisfied at a point in time, which transfers control upon delivery of EXPAREL to its customers.

The Company’s performance obligation with respect to its product sales is satisfied at a point in time, which transfers control upon delivery of EXPAREL to

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its customers.

The Company considers control to have transferred upon delivery because the customer has legal title to the asset, physical possession of the asset has been transferred, the customer has significant risks and rewards of ownership of the asset, and the Company has a present right to payment at that time.

1 unchanged sentence

The following table represents disaggregated net product sales in the periods presented as follows (in thousands):

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

5 unchanged sentences

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

June 30, December 31,

September 30, December 31,

Raw materials $ 35,434 $ 26,886

4 unchanged sentences

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

June 30, December 31,

September 30, December 31,

Machinery and equipment $ 111,819 $ 74,966

6 unchanged sentences

Fixed assets, net $ 159,235 $ 136,688

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.

For the three months ended September 30, 2021 and 2020, depreciation expense was $ 3.8 million and $ 3.1 million, respectively.

For the three months ended September 30, 2021 and 2020, there was $ 0.9 million and $ 0.7 million of capitalized interest on the construction of manufacturing sites, respectively.

For the nine months ended September 30, 2021 and 2020, depreciation expense was $ 9.6 million and $ 8.9 million, respectively.

For the nine months ended September 30, 2021 and 2020, there was $ 3.0 million and $ 1.5 million of capitalized interest on the construction of manufacturing sites, respectively.

At September 30, 2021 and December 31, 2020, total fixed assets, net includes leasehold improvements and manufacturing process equipment located in Europe in the amount of $ 66.9 million and $ 67.5 million, respectively.

As of September 30, 2021 and December 31, 2020, the Company had asset retirement obligations of $ 2.1 million and $ 2.0 million, respectively, which are included in accrued expenses and other liabilities on its condensed consolidated balance

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sheet, for costs associated with returning leased spaces to their original condition upon the termination of certain lease agreements.

NOTE 6— LEASES

5 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

3 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Cash paid for operating lease liabilities, net of lease incentive $ 9,868 $ 11,251

3 unchanged sentences

The weighted average remaining lease term and the weighted average discount rate are summarized as follows:

September 30,

Weighted average remaining lease term 8.46 years 9.39 years

Weighted average discount rate 6.88 % 6.88 %

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Maturities of the Company’s operating lease liabilities are as follows (in thousands):

Year Aggregate Minimum Payments Due

2021 (remaining six months) $ 5,350

2021 (remaining three months) $ 2,659

2026 and thereafter 50,802

2 unchanged sentences

Total operating lease liabilities $ 72,663

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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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 September 30, 2021 (in thousands):

Year Aggregate Minimum Payments Due

2021 (remaining six months) $ —

2021 (remaining three months) $ —

Total future lease payments $ 2,333

1 unchanged sentence

The Company’s goodwill results from the acquisition of Pacira Pharmaceuticals, Inc.

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

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

(the Company’s California operating subsidiary) from SkyePharma Holding, Inc., or Skyepharma, (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 and six months ended June 30, 2021.

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

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

The balance at both September 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 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;

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

$ 4.0 million upon the first commercial sale in the United Kingdom, France, Germany, Italy or Spain (the “Applicable Countries”);

and $ 32.0 million when annual net sales collected reach $ 500.0 million (measured on a rolling quarterly basis).

4 unchanged sentences

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 June 30, December 31,

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Useful Life September 30, December 31,

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

3 unchanged sentences

Intangible assets, net $ 90,621 $ 96,521

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

Amortization expense was $ 2.0 million and $ 5.9 million for the three and nine month periods, respectively.

Assuming no changes in the gross carrying amount of these intangible assets, amortization expense will be $ 2.0 million for the remaining three months of 2021, $ 7.9 million annually through 2032 and $ 2.2 million in 2033.

Convertible Senior Notes Due 2025

3 unchanged sentences

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

June 30, December 31,

September 30, December 31,

0.750 % convertible senior notes due 2025

10 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 June 30, 2021, none of these conditions for conversion were met.

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

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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.

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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.

As of September 30, 2021, the 2025 Notes had a market price o f $1,086 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.

10 unchanged sentences

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 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.

While the 2025 Notes are currently classified on the Company’s consolidated balance sheet at September 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.

2 unchanged sentences

The initial carrying value of the liability component of $ 314.7 million was calculated using a 5.78 % assumed borrowing rate.

The equity component of $ 87.8 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2025 Notes and is recorded in additional paid-in capital on the consolidated balance sheet at the issuance date.

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balance sheet at the issuance date.

The equity component is treated as a discount on the liability component of the 2025 Notes, which is amortized over the five-year term of the 2025 Notes using the effective interest rate method.

5 unchanged sentences

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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Convertible Senior Notes Due 2022

5 unchanged sentences

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

June 30, December 31,

September 30, December 31,

2.375 % convertible senior notes due 2022

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Total debt, net of debt discount and deferred financing costs $ 155,751 $ 149,648

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 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.

As of October 1, 2021 and 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, calculated based on the per share volume-weighted average price for each of the 40 consecutive trading days during the observation period (as more fully described in the 2022 Indenture).

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

As of September 30, 2021, the 2022 Notes had a market price of $1,038 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 stock price appreciation.

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In the event that all of the 2022 Notes are settled, the Company would be required to repay the remaining $ 160.0 million in principal value a nd any conversion premium in any combination of cash and shares of its common stock (at the Company’s option).

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 June 30, 2021.

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 18

trading days prior to the date on which the Company provides notice of redemption.

This condition was not met during the quarter ended September 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.

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No sinking fund is provided for the 2022 Notes.

Pacira BioSciences, Inc.

| Q2 2021 Form 10-Q | Page 18

Interest Expense

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

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

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

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| Q3 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):

At September 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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$ 326,146 $ — $ 437,216 $ —

(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.

(1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $ 56.00 per share on September 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 September 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.

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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.

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

During the nine months ended September 30, 2021, the Company recognized a 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 was based on a Level 1 input.

At September 30, 2021 and December 31, 2020, the Company held an equity investment of $ 4.1 million and $ 1.2 million, respectively, 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 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.

During 2021, the Company purchased a convertible note from GeneQuine in the amount of $ 1.2 million and invested an additional $ 3.0 million in equity investments.

During the nine months ended September 30, 2021, the valuation of the convertible note was reduced by less than $ 0.1 million due to changes in foreign currency exchange rates.

The Company has the right to make additional investments in debt securities of $ 1.7 million predicated upon GeneQuine achieving certain prespecified near-term milestones.

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.

There were no adjustments to this investment during the three and nine months ended September 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.

There were no adjustments to this investment during the three and nine months ended September 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 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.

As of September 30, 2021, the maximum potential remaining milestone payments to be paid are $ 48.0 million.

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

Another regulatory milestone in the amount of $ 5.0 million was met in the three months ended September 30, 2021 and is expected to be paid in November 2021.

During the nine months ended September 30, 2020, the Company made $ 15.0 million in cash payments for the achievement of two regulatory milestones.

As of September 30, 2021

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 20

and December 31, 2020, a contingent consideration liability related to the MyoScience Acquisition has been recognized in the amounts of $ 16.2 million and $ 28.3 million, respectively.

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.

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.

For the three and nine months ended September 30, 2021, the Company recognized $ 1.2 million and $ 2.1 million gains, respectively, related to contingent consideration.

For the three and nine months ended September 30, 2020, the Company recognized $ 0.8 million of charges and $ 1.6 million of gains, respectively, related to contingent consideration.

These amounts have been included in acquisition-related (gains) charges 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 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 %.

At September 30, 2021, the weighted average discount rate was 3.65 % and the weighted average probability of success for the regulatory milestone that has not yet been met was 2.0 %.

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

Assumption Ranges Utilized as of June 30, 2021

Assumption Ranges Utilized as of September 30, 2021

Discount rates 3.49 % to 3.81 %

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Offset indemnification claims ( 3,000 )

Balance at June 30, 2021 $ 17,358

Balance at September 30, 2021 $ 16,199

Available-for-Sale Investments

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.

Long-term investments consist of asset-backed securities collateralized by credit card receivables and government bonds with maturities greater than one year but less than three years.

Long-term investments consist of government bonds with maturities greater than one year but less than three years.

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 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.

At September 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):

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 21

June 30, 2021 Investments Cost Gross

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

September 30, 2021 Investments Cost Gross

Losses Fair Value

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

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

At September 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 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.

At September 30, 2021 and December 31, 2020, the interest receivable recognized in prepaid expenses and other current assets was $ 0.4 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 June 30, 2021, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 43 %, 25 % and 21 %.

As of September 30, 2021, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 31 %, 27 % and 26 %.

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

As of September 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

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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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 six months ended June 30, 2021:

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

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

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Expired ( 42,416 ) 76.62

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

Outstanding at September 30, 2021 6,170,166 48.71

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

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Forfeited ( 114,562 ) 49.95

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.

Unvested at September 30, 2021 942,508 52.85

The weighted average fair value of stock options granted during the nine months ended September 30, 2021 wa s $ 27.36 per share.

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

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

Black-Scholes Weighted Average Assumption Nine Months Ended September 30, 2021

Expected dividend yield None

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

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

NOTE 11— STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive Income (Loss)

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

Six Months Ended

Accumulated Other Comprehensive Income

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

Nine Months Ended

September 30,

Balance at beginning of period $ 318 $ 322

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

( 138 ) 1,168

Foreign currency translation adjustments 3 —

Amounts reclassified from accumulated other comprehensive income (loss) — —

Amounts reclassified from accumulated other comprehensive income — —

Balance at end of period $ 153 $ 847

(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.

(1) Net of a $ 54 thousand tax benefit for the nine months ended September 30, 2021.

There was no tax benefit for the nine months ended September 30, 2020.

NOTE 12— NET INCOME (LOSS) PER SHARE

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Diluted net income (loss) per common share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding plus dilutive potential common shares outstanding during the period.

Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options, the vesting of RSUs, the purchase of shares from the ESPP (using the treasury stock method) and the conversion of the excess conversion value on the 2022 Notes and 2025 Notes.

As discussed in Note 8, Debt, the Company has the option to pay cash for the aggregate principal amount due upon the conversion of its 2022 Notes and 2025 Notes.

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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 June 30, 2021.

this new accounting pronouncement has not been adopted as of September 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.

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.

| Q3 2021 Form 10-Q | Page 24

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

Net income $ 17,660 $ 130,119 $ 47,110 $ 131,008

Weighted average common shares outstanding—basic 44,476 42,928 44,151 42,393

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Weighted average common shares outstanding—diluted 45,463 44,275 45,674 43,333

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

Net income per share:

Basic net income per common share $ 0.40 $ 3.03 $ 1.07 $ 3.09

Diluted net income per common share $ 0.39 $ 2.94 $ 1.03 $ 3.02

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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Foreign ( 936 ) ( 2,025 ) ( 4,360 ) ( 2,759 )

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.

Total income before income taxes $ 24,231 $ 6,150 $ 62,602 $ 7,395

For the three months ended September 30, 2021 and 2020, the Company had income tax expense of $ 6.6 million and an income tax benefit of $ 124.0 million, respectively.

For the nine months ended September 30, 2021 and 2020, the Company recorded income tax expense of $ 15.5 million and an income tax benefit of $ 123.6 million, respectively.

The income tax expense for the three and nine months ended September 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 equity compensation and non-deductible capital losses.

The income tax benefit for the three and nine months ended September 30, 2020 represents the full release of a $ 124.6 million valuation allowance on the Company’s net domestic deferred assets as the Company determined that there was sufficient positive evidence to conclude that it was more likely than not that domestic deferred taxes were realizable.

In the nine months ended September 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.

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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.

The Company received 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 nine months ended September 30, 2021.

Nuance Biotech Co.

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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.

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

Verve Medical Products, Inc.

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The Company is unable to predict the outcome of this action at this time.

Other Commitments and Contingencies

The United States Food and Drug Administration, or FDA, as a condition of EXPAREL approval, has required the Company to study EXPAREL in pediatric patients.

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

Pediatric Trial Commitments

Food and Drug Administration, or FDA, as a condition of EXPAREL approval, has required the Company to study EXPAREL in pediatric patients, as well as the administration of EXPAREL as a nerve block in the pediatric setting.

The Company was granted a deferral for the required pediatric trials until after the indications were approved in adults.

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

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| Q3 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 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.

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

Despite the United Kingdom’s withdrawal from the E.U., the agreed pediatric plan will be applicable in the United Kingdom , or UK, as well.

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

Those positive results were the basis for the submission of a supplemental New Drug Application, or sNDA, in the U.S.

and Type II variations in the E.U.

and UK to expand the EXPAREL label to include use in patients six years of age and older for single-dose infiltration to produce postsurgical local analgesia.

In March 2021, the Company announced that the FDA approved the submission of the sNDA in the U.S.

The EMA and the Medicines and Healthcare Products Regulatory Agency (MHRA) are still reviewing the Type II variations.

The Company is working with the FDA, MAA and MHRA to finalize the regulatory pathway for its remaining pediatric commitments.

One-Time Termination Benefits

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.

The Company is recognizing these expenses ratably over the remaining service period required.

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

In the three and nine months ended September 30, 2021, the Company has recognized $ 0.4 million in one-time termination charges, which are included in acquisition-related (gains) charges, product discontinuation and other in the condensed consolidated statements of operations.

NOTE 16— SUBSEQUENT EVENTS

On October 11, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Merger Sub and Flexion.

Flexion is a biopharmaceutical company focused on the discovery, development and commercialization of novel, local therapies for the treatment of patients with musculoskeletal conditions, beginning with osteoarthritis, or OA, the most common form of arthritis.

Flexion has an approved product, ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension), which it markets in the U.S.

ZILRETTA is the first and only extended-release, intra-articular (meaning in the joint) injection indicated for the management of OA knee pain.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, on October 22, 2021, Merger Sub commenced the Offer to acquire all of the outstanding Flexion Shares at an offer price of (i) $ 8.50 per Flexion Share in cash, net of applicable withholding taxes and without interest, plus (ii) one contingent value right per Flexion Share, or CVR, which will represent the right to receive one or more contingent payments up to $ 8.00 per Flexion Share in the aggregate upon the achievement of specified milestones on or prior to December 31, 2030.

The Company estimates the initial cash payment to acquire all of the Flexion Shares will be approximately $ 450.0 million, which excludes merger transaction fees.

In addition, the Company will assume Flexion’s cash and outstanding debt at the closing of the merger.

As of September 30, 2021, Flexion’s outstanding debt and termination fees less cash was estimated to be approximately $ 144.0 million.

The total consideration payable pursuant to the Merger Agreement will be dependent upon, among other things, the total number of Flexion Shares outstanding at the expiration of the Offer and at the closing of the merger as well as the closing price of the Flexion Shares on the trading day immediately prior to the closing of the merger.

The Company anticipates funding such cash requirements from its available cash and cash equivalents and short-term investments and expects to explore debt financing to supplement its cash position.

The fair value of the CVRs will be estimated and recognized at the closing of the merger and will be paid if and when milestones are met.

The obligation of the Company to purchase Flexion Shares tendered in the Offer is subject to the conditions set forth in the Merger Agreement, including but not limited to, that (i) the number of Flexion Shares tendered together with other Flexion shares owned by the Merger Sub would represent more than 50 % of the total Flexion Shares at the time of the expiration of the Offer, and (ii) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired or been terminated.

The foregoing description of the Merger Agreement and the transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1 to the Company ’s Current Report on Form 8-K dated October 11, 2021 .

Pacira BioSciences, Inc.

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These forward-looking statements include, among others, statements about:

the anticipated consummation of the acquisition of Flexion (as defined below) and the timing and benefits thereof, Pacira’s strategy, plans, objectives, expectations (financial or otherwise) and intentions, future financial results and growth potential, anticipated product portfolio, development programs, patent terms and other statements that are not historical facts.

Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including risks related to Pacira’s ability to complete the Merger (as defined below) on the proposed terms and schedule or at all;

whether the tender offer conditions will be satisfied;

whether sufficient stockholders of Flexion tender their Flexion Shares (as defined below) in the Offer (as defined below);

the outcome of legal proceedings that may be instituted against Flexion and/or others relating to the transaction;

the failure (or delay) to receive the required regulatory approvals relating to the transaction;

the possibility that competing offers will be made;

risks associated with acquisitions, such as the risk that the businesses will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the transaction will not occur;

the commercial success of ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension);

risks related to future opportunities and plans for Flexion and its products, including uncertainty of the expected financial performance of Flexion and its products, including whether the milestones will ever be achieved;

disruption from the proposed transaction, making it more difficult to conduct business as usual or maintain relationships with customers, employees or suppliers;

the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement (as defined below);

the possibility that if Pacira does not achieve the perceived benefits of the proposed transaction as rapidly or to the extent anticipated by financial analysts or investors, the market price of Pacira’s shares could decline;

the impact of the COVID-19 pandemic on elective surgeries, our manufacturing and supply chain, global and U.S.

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

our plans to evaluate, develop and pursue additional DepoFoam ® -based product candidates;

our plans to evaluate, develop and pursue additional multivesicular liposome-based product candidates;

the approval of the commercialization of our products in other jurisdictions;

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

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

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

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

the outcome of any litigation;

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

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

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

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and its subsidiaries.

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

EXPAREL, our long-acting, local analgesic was commercially launched in April 2012.

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.

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.

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

EXPAREL is indicated in patients six 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, more than 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.

In April 2019, we acquired iovera°, a handheld cryoanalgesia device used to deliver precise, controlled doses 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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We expect to continue to pursue the expanded use of EXPAREL and iovera° in additional procedures;

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expand and enhance our manufacturing capacity for EXPAREL and iovera°;

and invest in products, businesses and technologies.

and invest in complementary products, businesses and technologies.

Flexion Therapeutics, Inc.

On October 11, 2021, Pacira entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Oyster Acquisition Company Inc., a Delaware corporation and wholly owned subsidiary of Pacira (“Merger Sub”) and Flexion Therapeutics, Inc., a Delaware corporation (“Flexion”).

Flexion has an approved product, ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension), which it markets in the U.S.

ZILRETTA is the first and only extended-release, intra-articular (meaning in the joint), injection indicated for the management of OA knee pain.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, on October 22, 2021, Merger Sub commenced a cash tender offer (the “Offer”), to acquire all of the outstanding shares of common stock of Flexion, $0.001 par value per share (the “Flexion Shares”), at an offer price of (i) $8.50 per Flexion Share in cash, net of applicable withholding taxes and without interest, plus (ii) one contingent value right per Flexion Share, which will represent the right to receive one or more contingent payments up to $8.00 per Flexion Share in the aggregate upon the achievement of specified milestones on or prior to December 31, 2030.

We estimate the initial cash payment to acquire all of the Flexion Shares will be approximately $450.0 million, which excludes Merger transaction fees.

In addition, we will assume Flexion’s cash and outstanding debt at the closing of the Merger.

As of September 30, 2021, Flexion’s outstanding debt and termination fees less cash is estimated to be approximately $144.0 million.

The total consideration payable pursuant to the Merger Agreement will be dependent upon, among other things, the total number of Flexion Shares outstanding at the expiration of the Offer and at the closing of the Merger as well as the closing price of the Flexion Shares on the trading day immediately prior to the closing of the Merger.

We anticipate funding such cash requirements from our available cash and cash equivalents and short-term investments and expect to explore debt financing to supplement our cash position.

The fair value of the CVRs will be estimated and recognized at the closing of the Merger and will be paid if and when milestones are met.

The obligation of Merger Sub to purchase Flexion Shares tendered in the Offer is subject to the conditions set forth in the Merger Agreement, including, but not limited to, that the (i) number of Flexion Shares validly tendered in accordance with the terms of the Offer and not validly withdrawn (but excluding Flexion Shares tendered pursuant to guaranteed delivery procedures that have not been “received”, as defined by Section 251(h)(6)(f) of the General Corporation Law of the State of Delaware (the “DGCL”)), when considered together with all other Flexion Shares owned by Merger Sub and its affiliates, would represent at least one Flexion Share more than 50% of the total number of Flexion Shares at the time of the expiration of the Offer, which is currently scheduled for the end of the day, one minute following 11:59 p.m., Eastern Time, on November 18, 2021, subject to extension in certain circumstances as permitted by the Merger Agreement, and (ii) waiting period (or any extension thereof) applicable to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder having expired or been terminated.

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Following the completion of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will merge with and into Flexion, with Flexion surviving as a wholly owned subsidiary of Pacira (the “Merger”).

Pacira will effect the Merger after consummation of the Offer pursuant to Section 251(h) of the DGCL.

At the effective time of the Merger (the “Effective Time”), the Flexion Shares then outstanding (other than Flexion Shares held (i) by Flexion or its subsidiaries (including Flexion Shares held in Flexion’s treasury), (ii) by Pacira, Merger Sub, any other direct or indirect wholly owned subsidiary of Pacira, or (iii) by stockholders of Flexion who have properly exercised and perfected their statutory rights of appraisal under the DGCL) will each be converted into the right to receive the Offer Price.

The total consideration payable pursuant to the Merger Agreement will be dependent upon the total number of Flexion Shares outstanding at the expiration of the Offer and the Effective Time.

The foregoing description of the Merger Agreement and the transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Merger Agreement, a copy of which is attached as Exhibit 2.1 to Pacira’s Current Report on Form 8-K dated October 11, 2021 .

Novel Coronavirus (COVID-19) Pandemic

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.

During 2020, our net product sales were negatively impacted by the COVID-19 pandemic 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.

While these challenges began to subside in October 2021, it is unknown 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.

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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.

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, 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.

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Recent Highlights

• 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.

The investment will support the advancement of Spine BioPharma’s lead candidate, Remedisc™, a first-in-class therapeutic for the treatment of degenerative disc disease.

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.

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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.

• In September 2021, we announced that full results of our Phase 3 PLAY study of EXPAREL administered via infiltration in pediatric patients undergoing spinal or cardiac surgeries were published in the Journal of Clinical

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The study characterized the safety and pharmacokinetics, or PK, of EXPAREL in pediatric patients.

The PK profile was comparable across age groups and generally consistent with the profile in adult patients.

No safety concerns were identified at a dose of 4 mg/kg.

• In September 2021, we announced that we have successfully completed process validation on our custom 200-liter manufacturing suite in Swindon, England, and that commercial production of EXPAREL is underway at this suite.

The suite was developed under a partnership with Thermo Fisher Scientific Pharma Services, or Thermo Fisher.

• In October 2021, we received two Notices of Allowance from the U.S.

Patent and Trademark Office.

One patent claims chemical composition of EXPAREL and the other claims a novel manufacturing process.

After issuance, we will submit the composition patent for listing in the FDA Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”).

The patents will have an expiration date of January 22, 2041.

In the U.S., EXPAREL is currently indicated in patients six 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.

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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 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.

We are 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.

We are also working with both the European Medicines Agency, or EMA, and Medicines and Healthcare Products Regulatory Agency, or MHRA, to align our pediatric clinical studies across all regions.

Nerve Block in Lower Extremity Surgery

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.

In May 2021, we 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.

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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.

The results from STRIDE informed the design of two follow-up studies that are now underway and place us on track for an sNDA submission in 2022.

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EXPAREL Global Expansion

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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 fourth quarter of 2021.

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

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The launch of EXPAREL is now underway through a contracted sales force with shipments expected to begin in the fourth quarter of 2021.

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., 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.

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

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

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, Brazil, Colombia, and Mexico.

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

In addition, Eurofarma is 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.

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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.

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

The iovera° System

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It is also indicated for the relief of pain and symptoms associated with arthritis of the knee for up to 90 days.

We are currently awaiting regulatory clearance for our second-generation iovera° device in the E.U., which we anticipate launching in targeted European countries in the first quarter of 2022.

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

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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.

The second target market is iovera° for OA 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.

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

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Total Knee Arthroplasty

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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°.

Patients who received iovera° before TKA were compared with a historical control group including patients who underwent TKA without iovera°.

Both groups received a similar perioperative multimodal pain management protocol.

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• 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)

• Decrease in average hospital LOS (P<0.0001), with 17% of iovera° 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)

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Osteoarthritis of the Knee

There is a growing body of clinical data demonstrating success with the iovera° treatment for osteoarthritis of the knee.

There is a growing body of clinical data demonstrating success with the iovera° treatment for OA of the knee.

There are 14 million individuals in the U.S.

who have symptomatic knee osteoarthritis, and nearly two million are under the age of 45.

Surgical intervention is typically a last resort for patients suffering from osteoarthritis of the knee.

In one study, the majority of the patients suffering from osteoarthritis of the knee experienced pain relief beyond 150 days after being treated with iovera°.

who have symptomatic knee OA, and nearly two million are under the age of 45.

Surgical intervention is typically a last resort for patients suffering from OA of the knee.

In one study, the majority of the patients suffering from OA of the knee experienced pain relief beyond 150 days after being treated with iovera°.

Preliminary findings demonstrated reductions in opioids, including:

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• Patients in the iovera° group demonstrated a statistically significant reduction in pain scores from their baseline pain scores at 72 hours (p<0.05) and at 12 weeks (p<0.05).

We believe these data validate iovera° as a clinically meaningful non-opioid alternative for patients undergoing TKA, and that iovera° offers the opportunity to provide patients with non-opioid pain control well in advance of any necessary surgical intervention through a number of key product attributes:

We believe these data validate iovera° as a clinically meaningful non-opioid alternative for patients undergoing TKA or those with symptomatic knee OA, and that iovera° offers the opportunity to provide patients with non-opioid pain control well in advance of any necessary surgical intervention through a number of key product attributes:

• iovera° is safe and effective with immediate pain relief that can last for months as the nerve regenerates over time;

• iovera° is repeatable;

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

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

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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 opioids.

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

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for the distribution of iovera° in Canada.

We expect to begin selling iovera° in Canada in the fourth quarter of 2021.

Additionally, we expect to begin selling iovera° in the E.U.

through a contracted sales force in the first quarter of 2022.

Product Portfolio and Product Candidate Pipeline

Our current product portfolio and product candidate pipeline, along with anticipated milestones over the next 12 to 18 months, are summarized in the table below:

We are building our product development pipeline using a combination of internally and externally sourced innovation of non-opioid and regenerative medicine franchises to address medical needs along the neural pain pathway.

Our internal clinical team is currently supporting the following clinical and regulatory initiatives:

i) Two Phase 3 registration studies for EXPAREL in lower extremity nerve block.

ii) Expansion of the EXPAREL label to include pediatric nerve block program and an indication for patients under six years of age.

iii) EXPAREL collaborative studies at leading academic hospitals, such as Henry Ford Hospital, Shriners Hospitals and Cleveland Clinic.

iv) New opportunities, such as an EXPAREL Stellate Ganglion block for treatment of post-operative dysrhythmia from open heart procedures.

v) The PREPARE study of EXPAREL and iovera° in TKA procedures.

vi) Pilot studies in potential new iovera° markets, such as Spasticity, Restless Leg Syndrome and Rib Fracture.

vii) Early-stage multivesicular liposome-based assets, including a Phase 1 study for low-dose DepoBupivacaine administered intrathecally, as well as preclinical activities for a DepoDexamethasone asset and a high potency DepoBupivacaine with an extended duration of action.

Our business development activities have focused on investing in the musculoskeletal and chronic pain spaces.

We will continue to advance these two key franchises with a focus on the knee and spine continuums of care while bridging to chronic pain.

We plan to use a combination of strategic investments that support promising early-stage platforms, like our investments in GeneQuine Biotherapeutics GmbH, or GeneQuine, and Spine BioPharma, LLC, or Spine BioPharma, and in-licensing or acquisition transactions to build out a complementary pipeline of externally-sourced innovation.

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Our current product portfolio and internal product candidate pipeline, along with anticipated milestones over the next 12 to 18 months, are summarized in the table below:

* Study designs have not been finalized for infiltration in pediatric patients aged 0 to 6 years old or for nerve block in pediatric patients.

- TAP block is a transversus abdominis plane field block

- NOCITA ® is a registered trademark of Aratana Therapeutics, Inc., a wholly owned subsidiary of Elanco Animal Health, Inc.

Pacira Innovation and Training Center of Tampa

In October 2020, we announced the grand opening of the Pacira Innovation and Training center of Tampa (the “PITT”).

In October 2020, we opened the Pacira Innovation and Training center of Tampa (the “PITT”).

We designed this facility to help advance clinician understanding of the latest local, regional and field block approaches for managing pain.

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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.

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Our corporate headquarters are also located at the PITT.

The PITT consists of approximately 13,000 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;

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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.

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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 and Six Months Ended June 30, 2021 and 2020

Comparison of the Three and Nine Months Ended September 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

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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Total revenues $ 127,722 $ 117,484 9% $ 382,339 $ 298,673 28%

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 revenue grew 7% and 27% in the three and nine months ended September 30, 2021 versus 2020, respectively, primarily due to increases of 6% and 26% in gross vial volume and increases of 4% in gross selling price per unit in both periods, partially offset by the sales mix of EXPAREL vial sizes.

Although the demand for EXPAREL has continued to increase primarily 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 elective surgery market faced additional pandemic-related challenges in August and September 2021 due to regional surges in COVID-19 delta variant cases, staffing shortages and surgical fatigue from care teams addressing significant procedure backlogs.

The three and nine months ended September 30, 2020 were 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 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

Bupivacaine liposome injectable suspension revenue increased 52% and 1% in the three and nine months ended September 30, 2021 versus 2020, respectively, and the related royalties increased 56% in the three months and were flat in the nine months ended September 30, 2021 versus 2020 as a result of the timing of orders placed by Aratana for veterinary use.

Net product sales of iovera° increased 53% and 76% in the three and nine months ended September 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 nine months of 2020.

Thus far, we have seen the greatest iovera° demand as a 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 collaborative licensing and milestone revenue recognized in the nine months ended September 30, 2021 was the result of a portion of an upfront payment recognized under our distribution agreement with Eurofarma for the development and

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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.

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

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

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

Chargebacks Total

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Payments / Adjustments (347) (7,578) (5,870) (8,838) (22,633)

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

Balance at September 30, 2021 $ 1,407 $ 981 $ 999 $ 2,038 $ 5,425

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

Chargebacks Total

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Payments / Adjustments (230) (5,997) (5,029) (7,736) (18,992)

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.

Balance at September 30, 2020 $ 871 $ 912 $ 976 $ 1,489 $ 4,248

Total reductions to gross product sales from sales-related allowances and accruals were $23.3 million and $18.4 million, or 5.8% and 5.8% of gross product sales, for the nine months ended September 30, 2021 and 2020, respectively.

Sales-related allowances and accruals as a percentage of gross product sales were flat between periods.

Cost of Goods Sold

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Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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Gross margin 73 % 74 % 74 % 73 %

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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Gross margin decreased one percentage point in the three months ended September 30, 2021 versus 2020, mainly due to higher usage of manufacturing supplies at our UK manufacturing facility and capacity expansion costs for EXPAREL and iovera°, partially offset by the impact of an EXPAREL price increase.

Gross margin increased one percentage point in the nine months ended September 30, 2021 versus 2020 due to the impact of an EXPAREL price increase and reduction in inventory reserves, partially offset by capacity expansion costs for EXPAREL and iovera°.

Research and Development Expenses

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Product development and manufacturing capacity expansion expenses include development costs for our products, which include personnel, equipment, materials and contractor costs for process development and product candidates, development costs related to significant scale-ups of our manufacturing capacity and facility costs for our research space.

Regulatory and other expenses include regulatory activities related to unapproved products and indications, medical information expenses and related personnel.

Regulatory and other expenses include regulatory activities related to unapproved products

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and indications, medical information expenses and related personnel.

Stock-based compensation expense relates to the costs of stock option grants, awards of restricted stock units, or RSUs, and our employee stock purchase plan, or ESPP.

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Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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% of total revenues 9 % 12 % 10 % 15 %

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 due to protocol feasibility given the rapid evolution of medical practice for spinal procedures.

Total research and development expense decreased 21% and 9% in the three and nine months ended September 30, 2021 versus 2020, respectively.

Clinical and preclinical development expense decreased 25% in the three months ended September 30, 2021 versus 2020, due to the completion of our lower extremity nerve block (“STRIDE”) clinical trial, as well as a break in the enrollment for our iovera° and EXPAREL TKA (“PREPARE”) trial to adjust for a protocol amendment.

PREPARE trial enrollment is expected to resume in the fourth quarter of 2021.

In the nine months ended September 30, 2021 versus 2020, the 7% increase was due to our PREPARE trial, as well as the ongoing enrollment and completion of our STRIDE trial.

This increase was partially offset by the completion of our Phase 4 C-Section (“CHOICE”) trial, as well as the completion of our EXPAREL clinical trial for pectoral field block in breast augmentation.

In addition, we made the strategic decision to conclude enrollment in our 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.

Product development and manufacturing capacity expansion expense decreased 16% and 23% in the three and nine months ended September 30, 2021 versus 2020, respectively.

In the three months ended September 31, 2021 versus 2020, the decreases were due to non-recurring Research and Development facility expenses in 2020.

In the nine months ended September 30, 2021, the decreases were mainly attributable to the completion of the significant scale-up of our manufacturing capacity at the Thermo Fisher site in Swindon, England.

Regulatory and other expense decreased 25% in the three months ended September 30, 2021 versus 2020.

Regulatory expenses remained relatively the same, while other research and development expenses decreased with lower publication spend for EXPAREL and iovera° abstracts, as well as decreased iovera° clinical data registry activities.

For the nine months ended September 30, 2021 versus 2020, regulatory expenses decreased 10% as a result of the finalization of our Marketing Authorization Application (MAA) with the EMA.

Stock-based compensation decreased by 17% and 9% in the three and nine months ended September 30, 2021 versus 2020, respectively, primarily due to fewer equity awards outstanding for research and development personnel.

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, 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.

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 iovera°, and educational programs for our customers.

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

Stock-based compensation expense relates to the costs of stock option grants, RSU awards and our ESPP.

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The following table provides information regarding our selling, general and administrative expenses during the periods indicated, including percent changes (dollar amounts in thousands):

Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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% of total revenues 38 % 45 % 39 % 47 %

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.

Total selling, general and administrative expenses decreased 7% and increased 5% in the three and nine months ended September 30, 2021 versus 2020, respectively.

Sales and marketing expenses decreased 21% and 6% in the three and nine months ended September 30, 2021 versus 2020, respectively.

The decreases were driven by the termination of our co-promotion agreement with DePuy Synthes Sales, Inc.

effective January 2021.

Partially offsetting the decreases were higher compensation expenses due to an expanded sales force and set-up costs for our new E.U.

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.

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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.

General and administrative expenses increased 27% and 30% in the three and nine months ended September 30, 2021 versus 2020, respectively.

The increase in the three months ended September 30, 2021 was primarily related to due diligence costs incurred for the proposed acquisition of Flexion and other legal expenditures.

The increase in the nine months ended September 30, 2021 was due to increased legal costs, which reflected an insurance recovery of $2.1 million that was received in 2020 for legal expenditures related to a since-resolved Department of Justice inquiry, and maintenance costs for network updates.

Stock-based compensation increased 1% and 11% in the three and nine months ended September 30, 2021 and 2020, respectively, primarily due to an increase in the number of unvested grants outstanding.

Amortization of Acquired Intangible Assets

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Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

3 unchanged sentences

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

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

Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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

Acquisition-related (gains) charges $ (1,159) $ 752 N/A $ (2,140) $ (1,410) 52%

Product discontinuation — (60) (100)% — (189) (100)%

Other 445 — N/A 3,445 — 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.

Total acquisition-related (gains) charges,

product discontinuation and other $ (714) $ 692 N/A $ 1,305 $ (1,599) N/A

As part of the MyoScience Acquisition, we recognized acquisition-related gains of $1.2 million and $2.1 million in the three and nine months ended September 30, 2021, respectively, primarily related to changes in the fair value of contingent consideration.

Partially offsetting these gains were $0.4 million in one-time termination benefit expenses in the three and nine months ended September 30, 2021.

See Note 15, Commitments and Contingencies to our condensed consolidated financial statements included herein, for more information.

In the three and nine months ended September 30, 2020, we recognized acquisition-related charges in the amount of $0.8 million and acquisition-related gains of $1.4 million, respectively, primarily 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.

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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.

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

Other Income (Expense)

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Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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Interest expense (7,333) (7,132) 3% (21,327) (18,609) 15%

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

Loss on early extinguishment of debt — (8,071) (100)% — (8,071) (100)%

Other, net (46) 2,708 N/A (2,600) 2,571 N/A

Total other expense, net $ (7,202) $ (11,470) (37)% $ (23,111) $ (20,173) 15%

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.

Total other expense, net decreased by 37% and increased 15% in the three and nine months ended September 30, 2021 versus 2020, respectively.

The most significant cost in total other expense, net represents interest expense.

There was an increase in interest expense during the three and nine months ended September 30, 2021 due to the increase in outstanding debt as a result of the issuance of $402.5 million aggregate principal of our 0.750% convertible senior notes due 2025, or 2025 Notes, in July 2020.

In conjunction with the issuance of the new 2025 Notes, we incurred an $8.1 million loss on early extinguishment of debt recognized as a result of the retirement of $185.0 million aggregate principal of our existing 2.375% convertible senior notes due 2022, or 2022 Notes.

In addition, our interest income decreased in the three and nine months ended September 30, 2021 versus 2020 due to lower short-term interest rates.

Other, net expense during the three months ended September 30, 2021 was not significant.

Other, net for the nine months ended September 30, 2021 included a realized loss on the sale of our equity investment in TELA Bio, Inc., or TELA Bio, in the amount of $2.6 million.

In the three and nine months ended September 30, 2020, we incurred unrealized gains of $2.8 million on our TELA Bio investment.

These unrealized gains were partially offset by foreign currency losses.

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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):

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

Three Months Ended

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

June 30, % Increase / (Decrease)

September 30, % Increase / (Decrease) Nine Months Ended

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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

Income tax expense (benefit) $ 6,571 $ (123,969) N/A $ 15,492 $ (123,613) N/A

Effective tax rate 27 % (100)% + 25 % (100)% +

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.

For the three months ended September 30, 2021 and 2020, we recorded income tax expense of $6.6 million and an income tax benefit of $124.0 million, respectively.

For the nine months ended September 30, 2021 and 2020, we recorded income tax expense of $15.5 million and an income tax benefit of $123.6 million, respectively.

The significant change to the income tax provision for both the three and nine month periods was driven by the release of a full valuation allowance against domestic net deferred tax assets during the quarter ended September 30, 2020.

The income tax expense for the three and nine months ended September 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 stock-based compensation and non-deductible capital losses.

The income tax benefit for the three and nine months ended September 30, 2020, respectively, represents a full release of $124.6 million valuation allowance against net domestic deferred tax assets as we determined there was sufficient positive evidence to conclude it was more likely than not that domestic deferred taxes were realizable.

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 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.

As of September 30, 2021, we had an accumulated deficit of $206.8 million, cash and cash equivalents, short-term and long-term investments of $693.9 million and working capital of $596.6 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, including the cash needed to purchase Flexion Shares tendered in the Offer and to consummate the Merger, in each case, if the offer is successful.

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

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

Six Months Ended

Nine Months Ended

September 30,

Condensed Consolidated Statements of Cash Flows Data:

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Net increase in cash and cash equivalents $ 34,079 $ 47,016

Operating Activities

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 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.

Operating Activities

During the nine months ended September 30, 2021, net cash provided by operating activities was $102.5 million, compared to $30.4 million during the nine months ended September 30, 2020.

The increase of $72.1 million was primarily attributable to an increase in gross margin on a 27% increase in EXPAREL net product sales, which were adversely impacted in the nine months ended September 30, 2020 by a suspension of elective surgeries caused by the COVID-19 pandemic.

In 2021, 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 versus a $15.0 million contingent consideration payment in 2020 of which $9.4 million was classified as an operating cash outflow and $5.6 million as a financing cash outflow.

Investing Activities

During the nine months ended September 30, 2021, net cash used in investing activities was $87.7 million, which reflected $42.9 million of short-term and long-term available-for-sale investment purchases (net of maturities) and purchases of fixed assets of $36.7 million.

In addition, we invested $13.0 million in equity investments in Coda Therapeutics, Inc.

and GeneQuine, and also purchased a total of $4.2 million in convertible notes from GeneQuine and Spine BioPharma.

Further, we sold our investment in TELA Bio for net cash proceeds of $9.1 million.

During the nine months ended September 30, 2020, net cash used in investing activities was $195.3 million, which reflected $171.9 million of short-term and long-term investment purchases (net of maturities) and purchases of fixed assets of $23.4 million.

Financing Activities

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.

During the nine months ended September 30, 2021, net cash provided by financing activities was $19.3 million, which consisted of proceeds from the exercise of stock options of $19.0 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 nine months ended September 30, 2020, net cash provided by financing activities was $211.9 million, which consisted of gross proceeds from the issuance of the 2025 Notes of $402.5 million, the exercise of stock options of $36.0 million and $1.4 million from the issuance of shares through our ESPP.

In conjunction with the issuance of the 2025 Notes, we paid $12.5 million in financing costs and retired $185.0 million in aggregate principal amount of our 2022 Notes in privately-negotiated transactions for a total of $211.1 million of cash (including $1.2 million of accrued interest classified as an operating outflow).

We also made $5.6 million of contingent consideration payments to MyoScience securityholders.

2025 Convertible Senior Notes

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The 2025 Notes mature on August 1, 2025.

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

At September 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.

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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.

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.

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

The 2022 Notes mature on April 1, 2022, and since October 1, 2020, holders may convert their 2022 Notes at any time.

In July 2020, we used part of the net proceeds from the issuance of the 2025 Notes discussed above to repurchase $185.0 million

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aggregate principal of the 2022 Notes in privately-negotiated transactions for an aggregate of approximately $211.1 million in cash, including accrued interest.

At September 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.

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

• the cost and timing of the consummation of the acquisition of Flexion, which remains subject to the consummation of the Offer, the closing of the Merger and the satisfaction of certain conditions set forth in the Merger Agreement (See Note 16, Subsequent Events , to our condensed consolidated financial statements included herein for more information);

• the costs of successfully integrating Flexion into our existing business and expanding the commercialization of ZILRETTA, which remains subject to the consummation of the Offer, the closing of the Merger and the satisfaction of certain conditions set forth in the Merger Agreement (See Note 16, Subsequent Events , to our condensed consolidated financial statements included herein for more information);

• the cost and timing of the Milestone Payments under the CVR Agreement, which remains subject to the consummation of the Offer, the closing of the Merger and the satisfaction of certain conditions set forth in the Merger Agreement (See Note 16, Subsequent Events , to our condensed consolidated financial statements included herein for more information);

• the impact of the COVID-19 pandemic, including the amounts and delays of suspended elective surgical procedures, clinical trials and general economic conditions;

• the costs and our ability to successfully continue to expand the commercialization of EXPAREL and iovera°, including outside of the U.S.;

• 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 expanding and maintaining our manufacturing facilities, including the current 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 $48.0 million if certain regulatory and commercial milestones are met;

Pacira BioSciences, Inc.

| Q2 2021 Form 10-Q | Page 40

• 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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We have no committed external sources of funds, and additional equity or debt financing may not be available on acceptable terms, if at all.

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 43

In particular, capital market disruptions or negative economic conditions, especially in light of the COVID-19 pandemic, may hinder our access to capital.

Off-Balance Sheet Arrangements

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.

We do not have any material off-balance sheet arrangements as of September 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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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 .

Our contractual obligations are subject to change upon consummation of the Offer and the closing of the Merger, which remain subject to the satisfaction of certain conditions set forth in the Merger Agreement.

See Note 16, Subsequent Events , to our condensed consolidated financial statements included herein, for more information.

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