What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 751 added, 789 removed, 598 unchanged (72% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

ASSETS September 30,

2022 December 31,

6 unchanged sentences

Total current assets 667,018 866,048

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

Fixed assets, net 189,767 188,401

10 unchanged sentences

Lease liabilities 8,018 7,891

Convertible senior notes 155,751 149,648

Contingent consideration 5,070 14,736

Convertible senior notes, net 160,000 350,466

Current portion of long-term debt, net 33,680 24,234

Income taxes payable 863 429

Total current liabilities 305,073 521,118

Convertible senior notes 326,146 313,030

Convertible senior notes, net 402,915 339,267

Long-term debt, net 326,828 335,263

Lease liabilities 69,710 71,727

Deferred revenue 10,125 10,125

Contingent consideration 56,527 57,598

5 unchanged sentences

5,000,000 shares authorized;

none issued and outstanding at

September 30, 2021 and December 31, 2020

none issued and outstanding at March 31, 2022 and December 31, 2021

Common stock, par value $ 0.001 ;

250,000,000 shares authorized;

44,523,410 shares issued and

outstanding at September 30, 2021;

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

45,064,459 and 44,734,308 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 867,890 942,091

Accumulated deficit ( 157,832 ) ( 211,895 )

Accumulated other comprehensive income 153 318

Accumulated other comprehensive income (loss) ( 527 ) 167

Total stockholders’ equity 709,576 730,408

Total liabilities and stockholders’ equity $ 1,891,476 $ 2,075,353

See accompanying condensed notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net product sales $ 157,422 $ 118,738

Collaborative licensing and milestone revenue — — 125 —

Royalty revenue 569 289

5 unchanged sentences

Amortization of acquired intangible assets 14,322 1,967

Acquisition-related (gains) charges, product

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

Acquisition-related charges, product discontinuation and other 4,337 1,873

Total operating expenses 140,598 99,590

3 unchanged sentences

Interest expense ( 10,246 ) ( 6,971 )

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

Other, net ( 124 ) ( 157 )

1 unchanged sentence

Income before income taxes 7,294 12,724

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

Income tax expense ( 466 ) ( 2,355 )

Net income $ 6,828 $ 10,369

5 unchanged sentences

Diluted 46,438 45,966

See accompanying condensed notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 6,828 $ 10,369

Other comprehensive income (loss):

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

Net unrealized loss on investments, net of tax ( 733 ) ( 150 )

Foreign currency translation adjustments 39 4

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

Total other comprehensive loss ( 694 ) ( 146 )

Comprehensive income $ 6,134 $ 10,223

See accompanying condensed notes to consolidated financial statements.

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 6

PACIRA BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(In thousands)

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Shares Amount Total

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 — — — — —

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

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

Net income — — — 17,660 — 17,660

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

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Shares Amount Total

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 — — — — —

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

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.

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc.

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(In thousands)

6 unchanged sentences

Balance at December 31, 2021 44,734 $ 45 $ 942,091 $ ( 211,895 ) $ 167 $ 730,408

Reclassification of the equity components of convertible senior notes to liability upon adoption of Accounting Standards Update 2020-06 (Note 2) — — ( 96,468 ) 47,235 — ( 49,233 )

Exercise of stock options 323 — 11,078 — — 11,078

Vested restricted stock units 7 — — — — —

Shares issued under employee stock

purchase plan 31 — 1,574 — — 1,574

Stock-based compensation — — 11,189 — — 11,189

1 unchanged sentence

Net income — — — 6,828 — 6,828

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

Balance at March 31, 2022 45,064 $ 45 $ 867,890 $ ( 157,832 ) $ ( 527 ) $ 709,576

Common Stock Additional

7 unchanged sentences

Vested restricted stock units 4 — — — — —

Shares issued under employee stock

purchase plan 37 — 1,421 — — 1,421

Stock-based compensation — — 10,110 — — 10,110

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

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

Net income — — — 10,369 — 10,369

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

See accompanying condensed notes to consolidated financial statements.

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

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc.

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities:

5 unchanged sentences

Amortization of debt discount 706 5,657

Loss on early extinguishment of debt — 8,071

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

Loss (gain) on disposal of fixed assets 9 ( 11 )

Stock-based compensation 11,189 10,110

Changes in contingent consideration ( 1,071 ) ( 1,127 )

Loss (gain) on investment and other non-operating income, net 2,641 ( 2,779 )

Loss on investment 18 155

Changes in operating assets and liabilities:

5 unchanged sentences

Other liabilities 70 ( 1,701 )

Payment of contingent consideration to MyoScience, Inc.

securityholders ( 5,662 ) ( 9,409 )

Net cash provided by operating activities 30,777 12,081

3 unchanged sentences

Sales of available-for-sale investments — 145,282

Payment of contingent consideration ( 32,000 ) —

Purchases of equity and debt investments ( 12,750 ) ( 1,220 )

Sale of equity investment 9,057 —

Net cash used in investing activities ( 208,019 ) ( 55,664 )

1 unchanged sentence

Proceeds from exercises of stock options 11,024 10,325

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 2024 convertible senior notes ( 192,609 ) —

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.

securityholders ( 1,338 ) ( 5,591 )

Net cash provided by financing activities 19,285 211,941

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

Net cash provided by (used in) financing activities ( 181,585 ) 10,325

Net decrease in cash and cash equivalents ( 358,827 ) ( 33,258 )

Cash and cash equivalents, beginning of period 585,578 99,957

5 unchanged sentences

Fixed assets included in accounts payable and accrued liabilities $ 6,244 $ 7,033

See accompanying condensed notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc.

1 unchanged sentence

PACIRA BIOSCIENCES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1— DESCRIPTION OF BUSINESS

Pacira BioSciences, Inc.

and its subsidiaries (collectively, the “Company” or “Pacira”) is the industry leader in its commitment to non-opioid pain management and regenerative health solutions to improve patients’ journeys along the neural pain pathway.

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 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.

and its subsidiaries (collectively, the “Company” or “Pacira”) is the industry leader in its commitment to non-opioid pain management and providing a non-opioid option to as many patients as possible to redefine the role of opioids as rescue therapy only.

The Company’s long-acting, local analgesic, EXPAREL ® (bupivacaine liposome injectable suspension), was commercially launched in the United States, or U.S., in April 2012 and approved in select European countries and the United Kingdom, or U.K.

in November 2021.

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

In November 2021, the Company acquired Flexion Therapeutics, Inc., or Flexion, and added ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension) to its product portfolio.

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

For more information, see Note 4, Flexion Acquisition .

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

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.

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 three products, reliance on a limited number of wholesalers, reliance on a limited number of manufacturing sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, compliance with government regulations and risks related to cybersecurity.

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

1 unchanged sentence

Accordingly, the Company views its business as one reportable segment to evaluate performance, allocate resources, set operational targets and forecast its future financial results.

Novel Coronavirus (COVID-19) Pandemic

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

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

However, while many restrictions have since eased 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.

Coronavirus (COVID-19) Pandemic

Since early 2020, the Company’s revenues have been impacted by the global pandemic caused by a novel strain of coronavirus (COVID-19) and pandemic-related challenges that included the significant postponement or suspension in the scheduling of elective surgical procedures due to public health guidance and government directives.

While the degree of impact has diminished during the course of the pandemic due to the introduction of vaccines and therapeutics, as well as the lessening of elective surgery restrictions, certain pandemic-related operational and staffing challenges persist.

For instance, 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 variant cases, staffing shortages and fatigue from care teams addressing significant procedure backlogs, and in December 2021, the COVID-19 Omicron variant prompted some government restrictions on elective surgical procedures and created surgical staffing challenges, both of which began to ease in January 2022.

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.

Indirect effects of the pandemic may include longer lead-times for or the inability to secure a sufficient supply of materials due to the prioritization by certain suppliers for COVID-19 vaccine manufacturing.

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

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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

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 10

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, 2021 .

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.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 9

The condensed consolidated financial statements at March 31, 2022, and for the three-month periods ended March 31, 2022 and 2021, 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, 2021 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, 2021.

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The Company also sells EXPAREL directly to ambulatory surgery centers and physicians.

The Company sells its bupivacaine liposome injectable suspension for veterinary use to a third-party licensee and sells iovera° directly to end users.

The Company sells ZILRETTA primarily to specialty distributors and a specialty pharmacy, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals.

The Company also contracts directly with healthcare providers and intermediaries such as Group Purchasing Organizations, or GPOs.

The Company sells iovera° directly to end users and its bupivacaine liposome injectable suspension for veterinary use to a third-party licensee in the U.S.

The table below includes the percentage of revenues comprised by the Company’s three largest wholesalers in each period presented:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Largest wholesaler 31 % 32 %

2 unchanged sentences

Total 76 % 88 %

The percentage of revenues from the Company’s three largest wholesalers have shifted in the current year with the integration of ZILRETTA sales in 2022.

Recently Adopted Accounting Pronouncements

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 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 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

In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 were recorded as paid in capital.

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

The Company elected to adopt the new guidance using a modified retrospective method of transition, which applied to transactions outstanding at January 1, 2022.

As a result, the Company does not separately present in equity an embedded conversion feature for its convertible debt.

Instead, the Company accounts for its convertible debt instruments wholly as debt.

In addition, the Company did not record interest expense on the previously recorded discount on its convertible debt.

The impact on the condensed consolidated balance sheet at January 1, 2022 increased net debt by approximately $ 64.9 million, reduced accumulated deficit by $ 47.2 million, reduced additional paid-in capital by $ 96.5 million and decreased deferred tax liabilities by $ 15.7 million.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 10

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

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

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

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

NOTE 3— REVENUE

Revenue from Contracts with Customers

The Company’s sources of revenue include (i) sales of EXPAREL in the United States, or U.S.;

(ii) sales of iovera° in the U.S.;

(iii) sales of, and royalties on, its bupivacaine liposome injectable suspension for veterinary use in the U.S.

and (iv) license fees and milestone payments.

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

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

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

The Company’s net product sales consist of (i) EXPAREL in the U.S., the European Union, or E.U., and the U.K.;

(ii) ZILRETTA in the U.S.;

(iii) iovera° in the U.S., Canada and the E.U.

and (iv) sales of, and royalties on, its bupivacaine liposome injectable suspension for veterinary use.

Royalty revenues are from the Company’s collaborative licensing agreements.

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

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

Net Product Sales

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EXPAREL is delivered directly to the end-user without the wholesaler ever taking physical possession of the product.

The Company primarily sells ZILRETTA to specialty distributors and a specialty pharmacy, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals.

The Company also contracts directly with healthcare providers and intermediaries such as GPOs.

Product revenue is recognized when control of the promised goods are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods.

EXPAREL revenue is recorded at the time the product is delivered to the end-user.

Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, wholesaler service fees, volume rebates and chargebacks.

EXPAREL and ZILRETTA revenue is recorded at the time the product is transferred to the customer.

Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, service fees, government rebates, volume rebates and chargebacks.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales.

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The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved.

The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future.

The adequacy of these provisions is reviewed on a quarterly basis.

The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts, statutory requirements and other related information that may become known in the future.

Accounts Receivable

The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers and doctors.

The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers, specialty distributors, specialty pharmacy, Group Purchasing Organizations and doctors.

Payment terms generally range from zero to 97 days from the date of the transaction, and accordingly, there is no significant financing component.

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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

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 and ZILRETTA to 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.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 11

its customers.

Disaggregated Revenue

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net product sales:

EXPAREL / bupivacaine liposome injectable suspension $ 122,609 $ 114,163 $ 369,128 $ 290,459

EXPAREL $ 129,205 $ 114,678

ZILRETTA 23,635 —

iovera° 3,026 3,268

Bupivacaine liposome injectable suspension 1,556 792

Total net product sales $ 157,422 $ 118,738

NOTE 4— FLEXION ACQUISITION

On November 19, 2021, the Company acquired Flexion (the “Flexion Acquisition”), 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, the most common form of arthritis.

Upon consummation of the Flexion Acquisition, Flexion became a wholly-owned subsidiary of the Company and was renamed Pacira Therapeutics, Inc.

The total consideration for the Flexion Acquisition was approximately $ 578.8 million consisting of:

(i) $ 448.5 million of cash paid to former Flexion stockholders and to settle restricted stock units and in-the-money stock options;

(ii) an $ 85.1 million cash payment to repay Flexion debt that was not assumed by the Company and (iii) $ 45.2 million of estimated contingent consideration related to contingent value rights, or CVRs, that were issued to Flexion shareholders and certain equity award holders in conjunction with the Flexion Acquisition.

The consideration is subject to adjustments based on the achievement of certain potential milestone payments.

Up to an additional $ 380.2 million in the aggregate may be payable to holders of the CVRs if each of the applicable milestones are achieved.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 12

The Company is finalizing its valuation of intangible assets, liabilities and tax analyses, and anticipates finalizing the purchase price allocation as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

The following table sets forth the preliminary allocation of the Flexion Acquisition purchase price to the estimated fair value of the net assets acquired at the acquisition date (in thousands):

Amounts Recognized at the Acquisition Date

(as previously

reported) (a)

Measurement Period Adjustments (b)

Amounts Recognized at the Acquisition Date

(as adjusted)

ASSETS ACQUIRED

Cash and cash equivalents $ 113,562 $ — $ 113,562

Short-term available-for-sale investments 11,153 — 11,153

Accounts receivable 32,838 — 32,838

Inventories 29,667 — 29,667

Prepaid expenses and other assets 4,852 — 4,852

Fixed assets 23,307 — 23,307

Deferred tax assets 58,015 — 58,015

Right-of-use assets 6,585 — 6,585

Identifiable intangible assets 480,000 — 480,000

In-process research and development (IPR&D) 61,000 — 61,000

Total assets $ 820,979 $ — $ 820,979

LIABILITIES ASSUMED

Accounts payable $ 9,794 $ — $ 9,794

Accrued expenses 22,746 547 23,293

Deferred revenue 10,000 — 10,000

Lease liabilities 6,585 — 6,585

Other liabilities 1,187 — 1,187

Long-term debt 201,450 — 201,450

Total liabilities 251,762 547 252,309

Total identifiable net assets acquired 569,217 ( 547 ) 568,670

Goodwill 9,628 547 10,175

Total consideration transferred $ 578,845 $ — $ 578,845

(a) As previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

(b) Represents pre-acquisition expenses that were paid by the Company in 2022.

Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the three months ended March 31, 2021, as if the Flexion Acquisition had occurred on January 1, 2020.

This pro forma information does not purport to represent what the Company’s actual results would have been if the Flexion Acquisition had occurred as of January 1, 2020, and is not indicative of what such results would be expected for any future period (in thousands, except per share amounts):

Three Months Ended

March 31, 2021

Total revenues $ 143,616

Net loss $ ( 17,120 )

Pro forma basic and diluted net loss per share $ ( 0.39 )

The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and Flexion.

The summary pro forma financial information primarily reflects the following pro forma adjustments:

• Recognition of the income tax benefit resulting from decreasing Flexion’s existing valuation allowance on deferred tax assets for the three months ended March 31, 2021;

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• Removal of Flexion’s interest expense and associated deferred financing cost amortization related to the $ 85.1 million of debt not assumed;

• Adjustments to the Company’s interest income for the cash used to acquire Flexion;

• Additional cost of goods sold related to a step-up value in inventory;

• Additional amortization expense from the acquired developed technology intangible assets;

• Additional depreciation of Flexion’s fixed assets;

• Additional lease expense on Flexion’s right-of-use, or ROU, assets.

In addition, all of the above adjustments were adjusted for the applicable tax impact.

NOTE 5— INVENTORIES

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

September 30, December 31,

March 31, December 31,

Raw materials $ 35,297 $ 36,337

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

September 30, December 31,

March 31, December 31,

Machinery and equipment $ 117,167 $ 117,264

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Fixed assets, net $ 189,767 $ 188,401

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

For the three months ended March 31, 2022 and 2021, depreciation expense was $ 5.7 million and $ 2.9 million, respectively.

For the three months ended March 31, 2022 and 2021, there was $ 0.8 million and $ 1.0 million of capitalized interest on the construction of manufacturing sites, respectively.

At March 31, 2022 and December 31, 2021, total fixed assets, net includes leasehold improvements and manufacturing process equipment located in Europe in the amount of $ 62.8 million and $ 65.4 million, respectively.

As of March 31, 2022 and December 31, 2021, the Company had asset retirement obligations of $ 3.0 million and $ 2.4 million, respectively, included in accrued expenses and other liabilities on its condensed consolidated balance sheet, for costs associated with returning leased spaces to their original condition upon the termination of certain lease agreements.

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

NOTE 7— LEASES

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These leases have remaining terms up to 8.4 years, some of which provide renewal options at the then-current market value.

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

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

The Company also has two embedded leases with Thermo Fisher Scientific Pharma Services for the use of their manufacturing facility in Swindon, England for the production of EXPAREL and ZILRETTA.

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

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Fixed lease costs $ 3,527 $ 2,922

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

Nine Months Ended

September 30,

Three Months Ended

Cash paid for operating lease liabilities, net of lease incentive $ 3,279 $ 4,600

Right-of-use assets recorded in exchange for lease obligations $ 212 $ 42,101

The Company has elected to net the amortization of the right-of-use asset and the reduction of the lease liability principal in other liabilities in the condensed consolidated statement of cash flows.

ROU assets recorded in exchange for lease obligations $ 16 $ —

The Company has elected to net the amortization of the ROU asset and the reduction of the lease liability principal in other liabilities in the condensed consolidated statement of cash flows.

The Company has measured its operating lease liabilities at an estimated discount rate at which it could borrow on a collateralized basis over the remaining term for each operating lease.

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

September 30,

Weighted average remaining lease term 7.55 years 8.95 years

Weighted average discount rate 6.95 % 6.89 %

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

Year Aggregate Minimum Payments Due

2021 (remaining three months) $ 2,659

2026 and thereafter 50,802

Total lease payments 97,054

2022 (remaining nine months) $ 9,867

Thereafter 39,423

Total future lease payments 100,914

imputed interest ( 23,186 )

Total operating lease liabilities $ 77,728

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):

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As of March 31, 2022, the Company has entered into one lease agreement not included above as the Company has not yet taken possession of the property.

When the lease commences, the future lease obligations will be as follows (in thousands):

Year Aggregate Minimum Payments Due

2021 (remaining three months) $ —

2022 (remaining nine months) $ 239

Thereafter 179

Total future lease payments $ 2,088

Additionally, in April 2022, the Company entered into an agreement to sublease the former Flexion research and development laboratory in Woburn, Massachusetts.

As of March 31, 2022, the associated ROU asset is $ 0.4 million, in which future cash to be received under this sublease agreement is expected to exceed the ROU asset by $ 0.1 million.

NOTE 8— GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill results from the acquisition of Pacira Pharmaceuticals, 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 nine months ended September 30, 2021.

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

The balances at March 31, 2022 and December 31, 2021 were $ 145.7 million and $ 145.2 million, respectively.

The increase was due to a measurement period adjustment associated with the Flexion Acquisition.

See Note 4, Flexion Acquisition, for more information.

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 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).

Any remaining milestone payments will be treated as additional costs of the Skyepharma Acquisition and, therefore, recorded as goodwill if and when each contingency is resolved.

In connection with the MyoScience Acquisition, the Company recorded goodwill totaling $ 37.5 million.

The Company made a tax election that allows the acquired goodwill and intangible assets associated with the MyoScience Acquisition to be tax deductible.

The final Skyepharma milestone payment of $ 32.0 million when annual net sales collected reached $ 500.0 million was achieved in the fourth quarter of 2021 and paid during the first quarter of 2022.

Intangible Assets

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):

Intangible assets, net, consist of the in-process research and development, or IPR&D, and developed technology from the Flexion Acquisition and developed technology and customer relationships from the MyoScience Acquisition and are summarized as follows (dollar amounts in thousands):

March 31, 2022 Gross Carrying Value Accumulated

Amortization Intangible

Assets, Net Weighted-Average Useful Lives

Developed technologies $ 590,000 $ ( 41,417 ) $ 548,583 10 years, 5 months

Customer relationships 90 ( 27 ) 63 10 years

Total finite-lived intangible assets, net 590,090 ( 41,444 ) 548,646

Acquired IPR&D 61,000 — 61,000

Total intangible assets, net $ 651,090 $ ( 41,444 ) $ 609,646

December 31, 2021 Gross Carrying Value Accumulated

Amortization Intangible

Assets, Net Weighted-Average Useful Lives

Developed technologies $ 590,000 $ ( 27,097 ) $ 562,903 10 years, 5 months

Customer relationships 90 ( 25 ) 65 10 years

Total finite-lived intangible assets, net 590,090 ( 27,122 ) 562,968

Acquired IPR&D 61,000 — 61,000

Total intangible assets, net $ 651,090 $ ( 27,122 ) $ 623,968

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Useful Life September 30, December 31,

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

Customer relationships 10 years 90 90

Total intangible assets 110,090 110,090

accumulated amortization ( 19,469 ) ( 13,569 )

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

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.

Amortization expense was $ 14.3 million and $ 2.0 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in amortization expense is a result of the amortization of ZILRETTA for osteoarthritis knee pain acquired as part of the Flexion Acquisition in November 2021.

Assuming no changes in the gross carrying amount of these intangible assets, the future estimated amortization expense on the finite-lived intangible assets will be $ 43.0 million for the remaining nine months of 2022, $ 57.3 million from 2023 to 2030, $ 37.4 million in 2031, $ 7.9 million in 2032 and $ 2.2 million in 2033.

The carrying value of the Company’s outstanding debt is summarized as follows (in thousands):

March 31, December 31,

Term loan B facility maturing December 2026 $ 360,508 $ 359,497

0.750 % Convertible senior notes due August 2025

394,275 330,627

3.375 % Convertible senior notes due May 2024

8,640 201,249

2.375 % Convertible senior notes due April 2022 (1)

160,000 157,857

Total $ 923,423 $ 1,049,230

(1) The 2022 Notes (as defined below) matured on April 1, 2022.

Term Loan B Facility

In December 2021, the Company entered into a term loan credit agreement (the “Credit Agreement”) with JP Morgan Chase Bank, N.A., as administrative agent and the initial lender.

The term loan issued under the Credit Agreement (the “Term Loan”) was issued at a 3 % discount and allows for a single-advance term loan B facility in the principal amount of $ 375.0 million, which is secured by substantially all of the Company’s and each subsidiary guarantor’s assets.

Subject to certain conditions, the Company may, at any time, on one or more occasion, add one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities.

The net proceeds of the Term Loan were approximately $ 363.8 million after deducting an original issue discount of $ 11.2 million.

The total debt composition of the Term Loan is as follows (in thousands):

March 31, December 31,

Term Loan maturing December 2026 $ 375,000 $ 375,000

Deferred financing costs ( 4,138 ) ( 4,443 )

Discount on debt ( 10,354 ) ( 11,060 )

Total debt, net of debt discount and deferred financing costs $ 360,508 $ 359,497

The Term Loan matures on December 7, 2026 and requires quarterly repayments of principal in the amount of $ 9.4 million commencing June 30, 2022, increasing to $ 14.1 million commencing December 31, 2025, with a remaining balloon payment of approximately $ 188.0 million due at maturity.

During 2022, the Company will be required to make three quarterly payments totaling $ 28.1 million.

The Company is also required to make mandatory prepayments of principal from (i) the Company’s excess cash flow (as defined in the Credit Agreement) existing in any fiscal year and if the Senior Secured Leverage Ratio (as defined in the Credit Agreement) for such fiscal year exceeds certain predetermined limits (ii) net proceeds (as defined in the Credit Agreement) of non-ordinary course assets sales and casualty events and (iii) debt issuance proceeds (other than permitted debt under the Credit Agreement).

Prepayment penalties for the Term Loan are 2 % in the first loan year plus an interest make-whole payment, 2 % in the second loan year, 1 % in the third loan year and nothing thereafter.

Prepayment penalties generally do not apply to mandatory prepayment obligations under the Credit Agreement, such as prepayments due in connection with excess cash flow.

The Term Loan requires the Company to, among other things, maintain (i) a first lien net leverage ratio, determined as of the last day of any fiscal quarter, of no greater than 1.75 to 1.00 and (ii) liquidity, at any time, of at least $ 150.0 million.

The Term Loan also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions.

As of March 31, 2022, the Company was in compliance with all financial covenants under the Credit Agreement.

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The Company may elect to borrow either term benchmark borrowings or alternate base rate borrowings.

Term benchmark borrowings bear interest at a variable rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Credit Agreement) (subject to a 75 basis points floor) plus an applicable margin of 700 basis points.

Alternate base rate borrowings bear interest at a variable rate per annum determined using a base rate (subject to a 175 basis points floor) equal to the greatest of (i) the Prime Rate (as defined in the Credit Agreement) in effect on such day, (ii) the NYFRB Rate (as defined in the Credit Agreement) plus 50 basis points or (iii) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 100 basis points, subject to certain exceptions, plus an applicable margin of 600 basis points.

As of March 31, 2022, borrowings under the Term Loan consisted entirely of term benchmark borrowings at a rate of 7.75 %.

Convertible Senior Notes Due 2025

3 unchanged sentences

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

September 30, December 31,

0.750 % convertible senior notes due 2025

March 31, December 31,

0.750 % convertible senior notes due August 2025

$ 402,500 $ 402,500

3 unchanged sentences

The net proceeds from the issuance of the 2025 Notes were approximately $ 390.0 million, after deducting commissions and the offering expenses paid by the Company.

A portion of the net proceeds from the 2025 Notes was used by the Company to repurchase $ 185.0 million in aggregate principal amount of its outstanding 2.375 % convertible senior notes due 2022 in privately-negotiated transactions for a total of $ 211.1 million of cash (including accrued interest).

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

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

(ii) during the five business day period immediately after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the 2025 Indenture) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

(iii) upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company’s assets;

(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 September 30, 2021, none of these conditions for conversion were met.

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| Q3 2021 Form 10-Q | Page 16

A portion of the net proceeds from the 2025 Notes was used by the Company to repurchase $ 185.0 million in aggregate principal amount of its then-outstanding 2.375 % convertible senior notes due 2022 in privately-negotiated transactions for a total of $ 211.1 million of cash (including accrued interest).

Holders may convert the 2025 Notes at any time prior to February 3, 2025, 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 130 % of the conversion price then applicable for at least 20 out of the last 30 consecutive trading days of the quarter.

During the quarter ended March 31, 2022, this condition for conversion was not met.

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

4 unchanged sentences

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

As of September 30, 2021, the 2025 Notes had a market price o f $1,086 pe r $1,000 principal amount.

As of March 31, 2022, the 2025 Notes had a market price o f $1,241 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.

2 unchanged sentences

Prior to August 1, 2023, the Company may not redeem the 2025 Notes.

On or after August 1, 2023 (but, in the case of a redemption of less than all of the outstanding 2025 Notes, no later than the 40 th scheduled trading day immediately before the maturity date), the Company may redeem for cash all or part of the 2025 Notes if the last reported sale price (as defined in the 2025 Indenture) of the Company’s common stock has been at least 130 % of the conversion price then in effect for (i) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related notice of redemption and (ii) the trading day immediately before the date the Company sends such notice.

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least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related notice of redemption and (ii) the trading day immediately before the date the Company sends such notice.

The redemption price will equal the sum of (i) 100 % of the principal amount of the 2025 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

1 unchanged sentence

No sinking fund is provided for the 2025 Notes.

If the Company undergoes a fundamental change, as defined in the 2025 Indenture, subject to certain conditions, holders of the 2025 Notes may require the Company to repurchase for cash all or part of their 2025 Notes at a repurchase price equal to 100 % of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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

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

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

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

While the 2025 Notes are currently classified on the Company’s condensed consolidated balance sheet at March 31, 2022 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.

Under ASC 470-20, Debt with Conversion and Other Options , an entity must separately account for the liability and equity components of convertible debt instruments (such as the 2025 Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The liability component of the instrument is valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance.

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

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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.

The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

A deferred tax liability was recognized in the amount of $ 20.5 million, with the offsetting amount recorded in additional paid-in capital.

The Company allocated the total transaction costs of approximately $ 12.5 million related to the issuance of the 2025 Notes to the liability and equity components of the 2025 Notes based on their relative values.

Transaction costs attributable to the liability component are amortized to interest expense over the five-year term of the 2025 Notes, and transaction costs attributable to the equity component totaling $ 2.7 million are netted with the equity component in stockholders’ equity.

The 2025 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company.

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.

Convertible Senior Notes Due 2024 Assumed from the Flexion Acquisition

Prior to the Flexion Acquisition, on May 2, 2017, Flexion issued an aggregate of $ 201.3 million principal amount of 3.375 % convertible senior notes due 2024 (the “Flexion 2024 Notes”), pursuant to the indenture, dated as of May 2, 2017 (the “Original Flexion Indenture”), between Flexion and Wells Fargo Bank, N.A., as trustee (the “Flexion Trustee”), as supplemented by the First Supplemental Indenture, dated as of November 19, 2021, between Flexion and the Flexion Trustee (the “First Supplemental Flexion Indenture” and, together with the Original Flexion Indenture, the “Flexion Indenture”).

The Flexion 2024 Notes have a maturity date of May 1, 2024, are unsecured, and accrue interest at a rate of 3.375 % per annum, payable semi-annually on May 1 and November 1 of each year.

Upon the Flexion Acquisition, the principal was assumed and recorded at fair value by the Company.

Upon conversion of the Flexion 2024 Notes, at the election of each holder thereof, each Flexion 2024 Note was convertible into cash, shares of Flexion’s common stock, or a combination thereof, at Flexion’s election, at a conversion rate of approximately 37.3413 shares of Flexion common stock per $1,000 principal amount of the Flexion 2024 Notes, which corresponded to an initial conversion price of approximately $ 26.78 per share of Flexion’s common stock.

As a result of the Flexion Acquisition, and in connection with the Notice (as defined below), holders of the Flexion 2024 Notes became entitled to certain Flexion Acquisition-related conversion and repurchase rights, as discussed below.

In addition, as a result of the Flexion Acquisition and as discussed in more detail below, any future conversion rights are subject to the occurrence of any future events giving rise to such conversion rights under the Flexion Indenture.

On December 6, 2021, as a result of the Flexion Acquisition and in accordance with the Flexion Indenture, Flexion provided a Fundamental Change Company Notice and Offer to Purchase (the “Notice”) to the holders of the Flexion 2024 Notes and offered to repurchase for cash all of the outstanding Flexion 2024 Notes, at a repurchase price in cash equal to 100 % of the principal amount of the Flexion 2024 Notes being repurchased, plus accrued and unpaid interest thereon to, but excluding, January 7, 2022, subject to the terms and conditions set forth therein.

The offer to purchase expired at 5:00 p.m., New York City time, on January 6, 2022, as scheduled.

Any holder that did not exercise its repurchase right in accordance with the terms of the Notice retained the conversion rights associated with such holder’s Flexion 2024 Notes under the Flexion Indenture.

For conversion of Flexion 2024 Notes in connection with the Fundamental Change and the Make-Whole Fundamental Change (each as defined in the Flexion Indenture) resulting from the Flexion Acquisition, each $1,000 principal amount of the Flexion 2024 Notes was convertible into (i) $ 317.40 in cash and (ii) 37.3413 CVRs, based on the conversion rate of 37.3413, prior to 5:00 p.m., New York City time, on January 7, 2022.

Alternatively, holders could retain their Flexion 2024 Notes and such Flexion 2024 Notes would remain outstanding subject to their existing terms, including with respect to a holder’s right to receive interest payments on the Flexion 2024 Notes and exercise any future conversion rights that may arise under the Flexion Indenture.

On January 7, 2022, following the expiration of the offer to purchase, the Company accepted the $ 192.6 million aggregate principal amount of Flexion 2024 Notes that were validly tendered (and not validly withdrawn).

No Flexion 2024 Notes were converted in connection with the Notice.

At March 31, 2022, the remaining principal outstanding is $ 8.6 million.

Convertible Senior Notes Due 2022

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

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

The 2022 Notes mature on April 1, 2022.

In March 2017, the Company completed a private placement of $ 345.0 million in aggregate principal amount of 2.375 % convertible senior notes due 2022, or 2022 Notes.

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

As discussed above, in July 2020, the Company used part of the net proceeds from the issuance of the 2025 Notes to repurchase $ 185.0 million aggregate principal amount of the 2022 Notes in privately-negotiated transactions for an aggregate of $ 211.1 million in cash (including accrued interest).

The partial repurchase of the 2022 Notes resulted in an $ 8.1 million loss on early extinguishment of debt.

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| Q1 2022 Form 10-Q | Page 19

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

September 30, December 31,

2.375 % convertible senior notes due 2022

March 31, December 31,

2.375 % convertible senior notes due April 2022

$ 160,000 $ 160,000

2 unchanged sentences

Total debt, net of debt discount and deferred financing costs $ 160,000 $ 157,857

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).

For both the principal and excess conversion value, holders may receive 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.

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

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

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 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.

Upon the receipt of conversion requests, the settlement of the 2022 Notes will be paid pursuant to the terms of the 2022 Indenture.

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

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| 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.

In addition, calling the 2022 Notes for redemption will constitute a “make-whole fundamental change” (as defined in the 2022 Indenture) and will, in certain circumstances, increase the conversion rate applicable to the conversion of such notes if it is converted in connection with the redemption.

No sinking fund is provided for the 2022 Notes.

Subsequently, on April 1, 2022, the 2022 Notes matured, and the Company settled the remaining outstanding principal balance of $ 160.0 million and a conversion premium of $ 4.8 million through a cash payment of $ 156.9 million and the issuance of 101,521 shares of the Company’s common stock.

Interest Expense

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Contractual interest expense $ 9,130 $ 1,705

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Capitalized interest and other (Note 6)

( 824 ) ( 1,042 )

Total $ 10,191 $ 6,971

Effective interest rate on convertible senior notes 6.70 % 6.78 % 6.70 % 7.35 %

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

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

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

Effective interest rate on total debt 5.58 % 6.70 %

Upon the adoption of ASU 2020-06 effective January 1, 2022, the Company eliminated the convertible debt discounts associated with the 2022 Notes and the 2025 Notes that were originally recorded as offsets to the embedded conversion features recognized in equity.

Effective January 1, 2022, the Company will not record interest expense on the previously recorded discounts on convertible debt.

The deferred financing costs previously allocated to the conversion features have since been re-allocated to the outstanding debt, slightly increasing the future annual amortization of deferred financing costs.

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

NOTE 10— FINANCIAL INSTRUMENTS

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

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

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

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

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

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

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

The carrying amounts of equity investments and convertible notes receivable without readily determinable fair values have not been adjusted for either an impairment or upward or downward adjustments based on observable transactions.

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| Q1 2022 Form 10-Q | Page 20

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

At March 31, 2022, the carrying values and fair values of the following financial assets and liabilities were as follows (in thousands):

Carrying Value Fair Value Measurements Using

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Financial Assets:

Notes receivable $ 4,164 $ — $ — $ 4,164

Equity investments $ 25,627 $ — $ — $ 25,627

Convertible notes receivable $ 5,364 $ — $ — $ 5,364

Financial Liabilities:

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Financial Liabilities Measured at Amortized Cost:

Term loan facility due December 2026 $ 360,508 $ — $ 371,250 $ —

0.750 % convertible senior notes due 2025 (1)

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$ 8,640 $ — $ 8,662 $ —

(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.

Equity and Debt Investments

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 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.

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 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 and nine months ended September 30, 2021.

2.375 % convertible senior notes due 2022 (3)

$ 160,000 $ — $ 163,600 $ —

(1) The fair value of the 2025 Notes was based on the Company’s closing stock price of $ 76.32 per share at March 31, 2022 compared to a conversion price of $ 71.78 per share which, if converted, would result in an approximate conversion premium of 0.3 million shares or $ 25.5 million of cash.

The maximum conversion premium that can be due on the 2025 Notes is 5.6 million shares, which assumes no increases in the conversion rate for certain corporate events.

(2) Relates to the Flexion 2024 Notes.

For more information, See Note 9, Debt .

(3) The 2022 Notes matured on April 1, 2022.

For more information, See Note 9, Debt .

Equity and Convertible Note Investments

The Company holds strategic investments in clinical and preclinical stage privately-held biotechnology companies in the form of equity and convertible note investments.

The following investments have no readily determinable fair value and are recorded at cost minus impairment, if any, plus or minus observable price changes of identical or similar investments (in thousands):

Equity Investments Convertible Notes Receivable Total

Balance at December 31, 2021

$ 14,127 $ 4,132 $ 18,259

Purchases 11,500 1,250 12,750

Foreign currency adjustments — ( 18 ) ( 18 )

Balance at March 31, 2022

$ 25,627 $ 5,364 $ 30,991

Acquisition-Related Contingent Consideration

In April 2019, the Company completed the MyoScience Acquisition pursuant to the terms of an Agreement and Plan of Merger, which provided for contingent milestone payments of up to an aggregate of $ 100.0 million upon the achievement of certain regulatory and commercial milestones.

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 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

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| 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 has recognized contingent consideration related to the Flexion Acquisition and the MyoScience Acquisition in the amount of $ 56.5 million and $ 57.6 million as of March 31, 2022 and December 31, 2021, 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 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.

These inputs include, as applicable, estimated probabilities and the timing of achieving specified commercial and regulatory milestones, estimated forecasts of revenue and costs and the discount rate used to calculate the present value of estimated future payments.

These inputs include, as applicable, estimated probabilities and the timing of achieving specified commercial and regulatory milestones, estimated forecasts of revenue and costs and the discount rates used to calculate the present value of estimated future payments.

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 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 %.

In November 2021, as part of the purchase price consideration related to the Flexion Acquisition, the Company recorded contingent consideration of $ 45.2 million, which represents the Company’s potential achievement of meeting regulatory and sales-based milestones.

For the period from the date of the Flexion Acquisition through December 31, 2021, the Company recorded an additional $ 1.2 million liability due to an estimated $ 0.02 fair value increase to contingent consideration per CVR.

During the three months ended March 31, 2022 , the Company recorded a $ 0.8 million credit due to a decrease in the fair value of contingent consideration.

These adjustments were recorded as acquisition-related charges in the condensed consolidated

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| Q1 2022 Form 10-Q | Page 21

statements of operations.

At March 31, 2022, the weighted average discount rate was 12.6 % and the weighted average probability of success for regulatory milestones was 11.7 %.

As of March 31, 2022 and December 31, 2021, a contingent consideration liability related to the Flexion Acquisition was recognized in the amount of $ 45.6 million and $ 46.4 million, respectively.

As of March 31, 2022, the maximum potential remaining milestone payments to be paid are $ 43.0 million.

The Company recognized contingent consideration credits of $ 0.3 million and $ 1.1 million during the three months ended March 31, 2022 and 2021, respectively .

At March 31, 2022, the weighted average discount rate was 11.3 % and the probability of success for the regulatory milestone that has not yet been met was 1.0 %.

As of March 31, 2022 and December 31, 2021, a contingent consideration liability related to the MyoScience Acquisition has been recognized in the amounts of $ 10.9 million and $ 11.2 million, respectively.

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

Assumption Ranges Utilized as of September 30, 2021

Assumption Flexion Ranges

Utilized as of

March 31, 2022

MyoScience Ranges

Utilized as of

March 31, 2022

Discount rates 11.50 % to 13.65 %

10.23 % to 12.28 %

Probabilities of payment for regulatory milestones 5 % to 15 %

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Fair value adjustments and accretion ( 1,071 )

Payments made ( 7,000 )

Offset indemnification claims ( 3,000 )

Balance at September 30, 2021 $ 16,199

Balance at March 31, 2022 $ 56,527

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 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 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.

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

At March 31, 2022 and December 31, 2021, all of the Company’s short-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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The fair value of the asset-backed securities and corporate bonds is principally measured or corroborated by trade data for identical issues in which related trading activity is not sufficiently frequent to be considered a Level 1 input or that of comparable securities.

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

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

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| Q1 2022 Form 10-Q | Page 22

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

September 30, 2021 Investments Cost Gross

The following summarizes the Company’s short-term available-for-sale investments at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 Investments Cost Gross

Losses Fair Value

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Corporate bonds 9,936 102 — 10,038

Government bonds 44,629 7 ( 2 ) 44,634

Subtotal 421,416 320 ( 31 ) 421,705

Government bonds 95,429 30 — 95,459

Subtotal 95,429 30 — 95,459

Total $ 70,651 $ 182 $ ( 2 ) $ 70,831

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

At March 31, 2022, 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 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.

At March 31, 2022 and December 31, 2021, the interest receivable recognized in prepaid expenses and other current assets was $ 0.4 million and $ 0.1 million, respectively.

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

The Company maintains its cash and cash equivalents with high-credit quality financial institutions.

Such amounts may exceed federally-insured limits.

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 %.

As of March 31, 2022, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 34 %, 19 % and 19 %.

At December 31, 2021, four wholesalers each accounted for over 10% of the Company’s accounts receivable, at 30 %, 20 %, 17 % and 11 %.

For additional information regarding the Company’s wholesalers, see Note 2 , Summary of Significant Accounting Policies .

EXPAREL revenues are primarily derived from major wholesalers that generally have significant cash resources.

EXPAREL and ZILRETTA revenues are primarily derived from major wholesalers and specialty distributors that generally have significant cash resources.

The Company performs ongoing credit evaluations of its customers as warranted and generally does not require collateral.

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 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

Stock Incentive Plans

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

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

As of March 31, 2022 and December 31, 2021, the Company did no t deem any allowances for credit losses on its accounts receivable necessary.

NOTE 11— STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive Income

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

Net Unrealized Gains

(Losses) From Available

For Sale Investments Unrealized Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)

Balance at December 31, 2021

$ 139 $ 28 $ 167

Net unrealized loss on investments, net of tax ( 733 ) — ( 733 )

Foreign currency translation adjustments — 39 39

Balance at March 31, 2022

$ ( 594 ) $ 67 $ ( 527 )

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| Q1 2022 Form 10-Q | Page 23

Net Unrealized Gains

(Losses) From Available

For Sale Investments Unrealized Foreign Currency Translation Accumulated Other Comprehensive Income (Loss)

Balance at December 31, 2020

$ 319 $ ( 1 ) $ 318

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

Foreign currency translation adjustments — 4 4

Balance at March 31, 2021

$ 169 $ 3 $ 172

NOTE 12— STOCK PLANS

Stock-Based Compensation

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Cost of goods sold $ 1,352 $ 1,452

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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 nine months ended September 30, 2021:

The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the three months ended March 31, 2022:

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

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Expired ( 13,054 ) 85.48

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

Outstanding at March 31, 2022 5,800,950 50.33

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

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Forfeited ( 31,074 ) 53.76

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.

Unvested at March 31, 2022 981,953 53.38

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| Q1 2022 Form 10-Q | Page 24

The weighted average fair value of stock options granted during the three months ended March 31, 2022 wa s $ 27.71 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 Nine Months Ended September 30, 2021

Black-Scholes Weighted Average Assumption Three Months Ended March 31, 2022

Expected dividend yield None

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Expected term of options 5.30 years

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 23

Employee Stock Purchase Plan

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

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

NOTE 11— STOCKHOLDERS’ EQUITY

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)

Foreign currency translation adjustments 3 —

Amounts reclassified from accumulated other comprehensive income — —

Balance at end of period $ 153 $ 847

(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.

During the three months ended March 31, 2022, no shares were purchased and issued through the ESPP.

NOTE 13— 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, if applicable.

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.

Since it is the Company’s intent to settle the principal amount of its 2022 Notes and 2025 Notes in cash, the potentially dilutive effect of such notes on net income (loss) per share is computed under the treasury stock method.

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 September 30, 2021.

ASU 2020-06 was adopted on January 1, 2022 and requires the Company to use the if-converted method to calculate the number of potentially dilutive shares for convertible debt.

Under the if-converted method, adjustments are made to the diluted net income (loss) per common share calculation as if the Company had converted the convertible debt on the first day of each period presented.

Adjustments to the numerator are made to add back the interest expense associated with the convertible debt on a post-tax basis.

Adjustments to the denominator reflect the number of shares assumed to be convertible at the beginning of the period.

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

Prior to January 1, 2022, the Company used the treasury stock method to calculate dilutive shares on its convertible debt.

Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options, the vesting of RSUs and the purchase of shares from the ESPP (using the treasury stock method), if applicable.

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

The following table sets forth the computation of basic and diluted net income per common share for the three mon ths ended March 31, 2022 and 2021 (in thousands, except per share amounts):

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| Q1 2022 Form 10-Q | Page 25

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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 6,828 $ 10,369

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Diluted net income per common share $ 0.15 $ 0.23

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

The following table summarizes the outstanding stock options, RSUs and convertible senior notes that were excluded from the diluted net income per common share calculation because the effects of including these potential shares were antidilutive in the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Weighted average number of stock options 1,762 890

Convertible senior notes 8,000 —

Weighted average number of RSUs 17 2

Weighted average ESPP purchase options 26 25 9 22

Total 9,779 892

NOTE 14— INCOME TAXES

Income (loss) before income taxes is as follows (in thousands):

Income before income taxes is as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Income (loss) before income taxes:

2 unchanged sentences

Total income before income taxes $ 7,294 $ 12,724

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.

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

For the three months ended March 31, 2022 and 2021, the Company recognized income tax expense of $ 0.5 million and $ 2.4 million, respectively, which represented the estimated annual effective tax rate applied to the year-to-date domestic operating results adjusted for certain discrete tax benefits related to equity compensation.

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| Q1 2022 Form 10-Q | Page 26

NOTE 14— COMMERCIAL PARTNERS

Eurofarma Laboratories S.A.

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

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

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

The Company 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.

NOTE 15— ACQUISITION–RELATED CHARGES, PRODUCT DISCONTINUATION AND OTHER

Acquisition-related charges, product discontinuation and other for the three months ended March 31, 2022 and 2021 summarized below (in thousands):

Three Months Ended

Severance-related expenses $ 3,115 $ —

Acquisition-related fees 1,845 —

Other acquisition expenses 448 —

Total acquisition-related charges 5,408 —

Flexion contingent consideration ( 794 ) —

MyoScience contingent consideration ( 277 ) ( 1,127 )

Nuance Biotech Co.

agreement dissolution costs

Total acquisition-related charges, product discontinuation and other $ 4,337 $ 1,873

Flexion Acquisition

The Company recognized acquisition-related costs of $ 5.4 million, primarily severance, legal fees, third-party services and other one-time charges during the three months ended March 31, 2022 related to the Flexion Acquisition.

See Note 4 , Flexion Acquisition , for more information.

On November 19, 2021, as part of the purchase price consideration related to the Flexion Acquisition, the Company recorded contingent consideration of $ 45.2 million, which represents the Company’s potential achievement of meeting regulatory and sales-based milestones.

During the three months ended March 31, 2022 , the Company recorded a $ 0.8 million credit due to a decrease to the fair value of its contingent consideration, which was included in acquisition-related charges in the condensed consolidated statements of operations.

See Note 10 , Financial Instruments , for information regarding the method and key assumptions used in the fair value measurements of contingent consideration.

MyoScience Acquisition

The Company recognized contingent consideration credits of $ 0.3 million and $ 1.1 million during the three months ended March 31, 2022 and 2021, respectively.

See Note 10 , Financial Instruments , for information regarding the method and key assumptions used in the fair value measurements of contingent consideration.

Nuance Biotech Co.

In June 2018, the Company entered an agreement with Nuance Biotech Co.

2 unchanged sentences

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 nine months ended September 30, 2021.

Verve Medical Products, Inc.

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

for the distribution of iovera° in Canada.

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

NOTE 16— COMMITMENTS AND CONTINGENCIES

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In August 2020, the Company and its subsidiary, Pacira CryoTech, Inc.

(“Pacira CryoTech”), filed a lawsuit in the Court of Chancery of the State of Delaware against Fortis Advisors LLC (“Fortis”), solely in its capacity as representative for the former securityholders of MyoScience, and certain other defendants, seeking declaratory judgment with respect to certain terms of the merger agreement for the MyoScience Acquisition (the “Merger Agreement”), specifically related to the achievement of certain milestone payments under the Merger Agreement.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 27

of the merger agreement for the MyoScience Acquisition (the “Merger Agreement”), specifically related to the achievement of certain milestone payments under the Merger Agreement.

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

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

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

eVenus Pharmaceutical Laboratories Litigations

In October 2021, the Company received a Notice Letter advising that eVenus Pharmaceutical Laboratories, Inc., or eVenus, of Princeton, New Jersey, submitted to the FDA an Abbreviated New Drug Application (ANDA) with a Paragraph IV certification seeking authorization for the manufacturing and marketing of a generic version of EXPAREL (266 mg/20 mL) in the U.S.

prior to the expiration of U.S.

11,033,495 (the ’495 patent).

In November 2021, the Company filed a patent infringement suit against eVenus and its parent company in the U.S.

District Court for the District of New Jersey (21-cv-19829) asserting infringement of the ’495 patent.

This triggered an automatic 30-month stay of final approval of the eVenus ANDA.

On January 6, 2022, eVenus filed an Answer with counterclaims to the Complaint, alleging the ’495 patent is invalid and/or not infringed through the manufacture, sale, or offer for sale of the product described in product described in eVenus’s ANDA submission.

In December 2021, the Company received a second Notice Letter advising that eVenus submitted to the FDA an amendment to its ANDA with a Paragraph IV Certification seeking authorization for the manufacturing and marketing of a generic version of EXPAREL (133 mg/10 mL) in the U.S.

prior to the expiration of the ’495 patent.

In the Notice Letter, eVenus also advised that it submitted a Paragraph IV Certification to the FDA seeking authorization for the manufacturing and marketing of a generic version of EXPAREL (266 mg/20 mL and 133 mg/10 mL) in the U.S.

prior to the expiration of U.S.

11,179,336 (the ’336 patent).

eVenus further alleges in the Notice Letter that both the ’495 patent and the ’366 patent are invalid and/or not infringed.

In February 2022, the Company filed a second patent infringement suit against eVenus and its parent company in the U.S.

District Court for the District of New Jersey (22-cv-00718) asserting that the 133 mg/10 mL ANDA product will infringe the ’495 and ’336 patents and that the 266 mg/20 mL ANDA product will infringe the ’336 patent.

This filing triggered a second automatic 30-month stay of final approval for the 133 mg/10 mL ANDA product.

These litigations are in their infancy, and the Company is unable to predict the outcome of this action at this time.

Research Development Foundation

Pursuant to an agreement with the Research Development Foundation, or RDF, the Company was required to pay RDF a low single-digit royalty on the collection of revenues from certain products, for as long as certain patents assigned to the Company under the agreement remain valid.

RDF has the right to terminate the agreement for an uncured material breach by the Company, in connection with its bankruptcy or insolvency or if it directly or indirectly opposes or disputes the validity of the assigned patent rights.

The Company’s U.S.

11,033,495 was issued on June 15, 2021.

Thereafter, RDF asserted that the issuance of that patent extends the Company’s royalty obligations under the agreement until 2041.

The Company believes that the royalty period under the agreement was set to end on December 24, 2021 with the expiration of its U.S.

Because of the disagreement over the interpretation of the agreement, in December 2021, the Company filed a declaratory judgment lawsuit in the U.S.

District Court for the District of Nevada (21-cv-02241).

The lawsuit seeks a declaration from the court that the Company owes no royalties to RDF with respect to its EXPAREL product after December 24, 2021.

During the pendency of the lawsuit, the Company will continue to pay royalties to RDF under protest, however, the Company is unable to predict the outcome of this action at this time.

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| Q1 2022 Form 10-Q | Page 28

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.

Other Commitments and Contingencies

Pediatric Trial Commitments

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

Despite the U.K.’s withdrawal from the E.U., the agreed pediatric plan is applicable in the U.K.

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.

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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.

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 EMA and the Medicines and Healthcare Products Regulatory Agency, or 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 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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Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC.

This Quarterly Report on Form 10-Q and certain other communications made by us contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements about our growth and future operating results and trends, development of products, strategic alliances and intellectual property.

This Quarterly Report on Form 10-Q and certain other communications made by us contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, including, without limitation, statements related to:

the Flexion Acquisition (as defined below) and the costs and benefits thereof, our growth and future operating results and trends, our strategy, plans, objectives, expectations (financial or otherwise) and intentions, future financial results and growth potential, anticipated product portfolio, development programs, strategic alliances, patent terms and intellectual property.

For this purpose, any statement that is not a statement of historical fact should be considered a forward-looking statement.

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We cannot assure you that our estimates, assumptions and expectations will prove to have been correct.

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;

Actual results may differ materially from these indicated by such forward-looking statements as a result of various important factors, including risks relating to, among others:

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.

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

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

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

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

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

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

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

the possibility that if we do not achieve the perceived benefits of the Flexion Acquisition (as defined below) as rapidly or to the extent anticipated by financial analysts or investors, the market price of our shares could decline;

the impact of the COVID-19 pandemic on elective surgeries, our manufacturing and supply chain, global and United States, or U.S., economic conditions, and our business, including our revenues, financial condition and results of operations;

the success of our sales and manufacturing efforts in support of the commercialization of EXPAREL ® (bupivacaine liposome injectable suspension), ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension) and iovera° ® and the rate and degree of market acceptance of EXPAREL, ZILRETTA and iovera°;

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

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

the commercial success of EXPAREL, ZILRETTA and iovera°;

the related timing and success of United States Food and Drug Administration, or FDA, supplemental New Drug Applications, or sNDAs, and premarket notification 510(k)s;

the related timing and success of European Medicines Agency, or EMA, Marketing Authorization Applications, or MAA;

our plans to evaluate, develop and pursue additional product candidates utilizing our proprietary multivesicular liposome, or pMVL, drug delivery technology;

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

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;

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

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

our ability to successfully complete a ZILRETTA capacity expansion project in Swindon, England;

the outcome of any litigation;

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.

Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements.

We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and readers should not rely on the forward-looking statements as representing our views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

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

the recoverability of our deferred tax assets;

and assumptions associated with contingent consideration payments.

Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements, and as such we anticipate that subsequent events and developments will cause our views to change.

Except as required by applicable law, we undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and readers should not rely on the forward-looking statements as representing our views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements.

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| Q1 2022 Form 10-Q | Page 30

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 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 precise, controlled doses of cold temperature only to targeted nerves, which we sell directly to end users.

Pacira is the industry leader in our commitment to non-opioid pain management and providing a non-opioid option to as many patients as possible to redefine the role of opioids as rescue therapy only.

Our long-acting, local analgesic EXPAREL ® (bupivacaine liposome injectable suspension) was commercially launched in April 2012.

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

In the U.S., EXPAREL is the only opioid-free, long-acting local and regional analgesic approved for infiltration, field blocks and interscalene brachial plexus nerve block to produce local or regional postsurgical analgesia.

EXPAREL is also approved for infiltration in pediatric patients aged six years and older in the U.S.

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

Since its initial approval in 2011, more than 10 million patients have been treated with EXPAREL.

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

With the acquisition (the “Flexion Acquisition”) of Flexion Therapeutics, Inc.

(“Flexion”) in November 2021, we acquired ZILRETTA ® (triamcinolone acetonide extended-release injectable suspension), the first and only extended-release, intra-articular therapy that can provide major relief for osteoarthritis, or OA, knee pain for three months and has the potential to become an alternative to hyaluronic acid, or HA, and platelet rich plasma, or PRP, injections or other early intervention treatments.

With the acquisition of MyoScience, Inc.

(the “MyoScience Acquisition” ) in April 2019, we acquired iovera° ® , a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature only to targeted nerves, which we sell directly to end users.

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

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

We also believe ZILRETTA is highly complementary to iovera°.

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

progress our earlier-stage product candidate pipeline;

advance regulatory activities for EXPAREL, iovera° and other product candidates;

invest in sales and marketing resources for EXPAREL and iovera°;

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

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.

advance regulatory activities for EXPAREL, ZILRETTA, iovera° and other product candidates;

invest in sales and marketing resources for EXPAREL, ZILRETTA and iovera°;

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

invest in products, businesses and technologies;

and support legal matters.

Flexion Acquisition

In November 2021, we completed the Flexion Acquisition pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), under which Flexion became our wholly owned subsidiary and added ZILRETTA, a non-opioid corticosteroid that employs a proprietary microsphere technology to provide extended pain relief, to our commercial offering.

The addition of ZILRETTA to our innovative non-opioid product portfolio directly aligns with our mission to provide an opioid alternative to as many patients as possible and address medical needs along the neural pain pathway.

The total consideration of $578.8 million included an initial payment of $428.3 million which represented $8.50 in cash per share of Flexion common stock, $20.2 million paid to settle restricted stock units and in-the-money stock options, an $85.1 million cash payment to repay Flexion debt that was not assumed by us and $45.2 million in contingent consideration representing the fair value of contingent value rights, or CVRs, that were issued in conjunction with the Flexion Acquisition.

The Merger Agreement provided for one non-tradeable CVR per share of Flexion common stock as well as one CVR per share for certain Flexion equity awards.

Each CVR entitles Flexion shareholders to contingent milestone payments of up to an aggregate of $8.00 in cash per share of Flexion common stock if certain milestones are met on or prior to December 31, 2030.

Up to an additional $380.2 million in the aggregate may be payable to holders of the CVRs if each of the applicable milestones are achieved.

For more information, see Note 4, Flexion Acquisition , to our condensed consolidated financial statements included herein.

Coronavirus (COVID-19) Pandemic

Since early 2020, our revenues have been impacted by the global pandemic caused by a novel strain of coronavirus (COVID-19) and pandemic-related challenges that included the significant postponement or suspension in the scheduling of elective surgical procedures due to public health guidance and government directives.

Our manufacturing sites are operational and have safety protocols and

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| Q1 2022 Form 10-Q | Page 31

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

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.

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.

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

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

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

The 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, if patients are still reluctant to schedule an elective surgical procedure regardless of whether or not they have received a COVID-19 vaccine.

guidelines as recommended by federal, state and local governments.

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

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

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

The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.

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

For a description of risks facing the Company that relate to the COVID-19 pandemic or any other future pandemic, epidemic or outbreak of contagious disease, see our Annual Report on Form 10-K for the year ended December 31, 2020 .

For a description of risks facing us that relate to the COVID-19 pandemic or any other future pandemic, epidemic or outbreak of contagious disease, see our Annual Report on Form 10-K for the year ended December 31, 2021 .

Recent Highlights

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

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

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

See below for more details.

• In 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 April 2022, the U.S.

Patent and Trademark Office issued Patent Nos.

11,304,904, and 11,311,486.

The ’ 904 and ’ 486 patents have an expiration date of January 22, 2041 and are listed in the FDA Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”).

With these two new patents, there are currently five EXPAREL patents listed in the Orange Book each with an expiration date of January 22, 2041.

• We recently launched development plans for our second training facility in Houston, Texas.

This 19,000 square-feet state-of-the-art facility will feature an adaptive lecture hall, broadcast studio and lab space for cadaver and other interactive workshops.

Together with our Tampa facility, this second training center will play a core role in developing physician champions and community-based clinicians who want to stay on the forefront of opioid-sparing pain management.

We expect to open the Houston facility before the end of 2022 to host programs for EXPAREL, ZILRETTA and iovera°.

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.

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

Label Expansion

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

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

The sNDA was based on the positive data from the Phase 3 PLAY study of EXPAREL infiltration in pediatric patients undergoing spinal or cardiac surgeries.

Overall findings were consistent with the pharmacokinetic and safety profiles for adult patients with no safety concerns identified at a dose of 4 mg/kg.

The PLAY study enrolled 98 patients to evaluate safety and the pharmacokinetics of EXPAREL for two patient groups:

patients aged 12 to less than 17 years and patients aged 6 to less than 12 years.

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

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

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.

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

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

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

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

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

EXPAREL Label and Global Expansion

• Lower extremity nerve block.

We are advancing two Phase 3 studies of EXPAREL as a nerve block in lower extremity surgeries.

One is a popliteal sciatic nerve block for bunionectomy and the second is an adductor canal block for total knee arthroplasty, or TKA.

We believe positive results from these studies will form the basis for an sNDA submission seeking label expansion to include lower extremity nerve blocks.

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

• Pediatrics.

We are working with the FDA to finalize our studies to support expansion of the EXPAREL single-dose infiltration label to include patients under six years of age.

We have met with the FDA to discuss appropriate studies of EXPAREL in pediatric patients aged 0 to less than 6 years of age.

We expect that these studies, if successful, will be the basis for an sNDA seeking expansion of the EXPAREL label to include this patient population for single-dose infiltration.

We are also discussing our regulatory strategy for EXPAREL administered as a nerve block in the pediatric setting.

We are working with both the FDA and the European Medicines Agency, or EMA, with the goal of harmonizing our pediatric clinical studies as much as possible between the two regions.

• Stellate ganglion block.

We believe a long-acting stellate ganglion block with EXPAREL has the potential to be an effective approach for managing ventricular tachycardia (commonly referred to as “electrical storm”), a life-threatening clinical condition characterized by the recurrence of hemodynamically unstable ventricular tachycardia and/or ventricular fibrillation.

We are planning a multi-center registration study to evaluate EXPAREL as a stellate ganglion block for managing electrical storm.

We are also supporting an investigator-initiated study that will evaluate iovera° as a longer-acting stellate ganglion block.

• Global expansion.

We have prioritized the European and Latin American markets for global expansion.

In Europe, we were granted marketing authorization by the EC in November 2020 for EXPAREL as a brachial plexus block or femoral nerve block for treatment of post-operating pain in adults and as a field block for treatment of somatic post-

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EXPAREL Global Expansion

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

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

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, 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 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.

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

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

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

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

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

The iovera° System

The iovera° system is highly complementary to EXPAREL as a novel cold technology that administers a non-pharmacological nerve block to safely and immediately deliver long-term, non-opioid pain control.

The iovera° handheld device is 510(k) cleared in the U.S., has a CE mark in the E.U.

operative pain from small- to medium-sized surgical wounds in adults.

We launched EXPAREL in the U.K.

and targeted E.U.

countries in the fourth quarter of 2021.

In Latin America, we have a distribution agreement with Eurofarma Laboratories S.A., or Eurofarma, for the development and commercialization of EXPAREL.

Eurofarma has the exclusive right to market and distribute EXPAREL in 19 countries in Latin America, including Argentina, Brazil, Colombia and Mexico.

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

We will receive royalties and are also eligible to receive regulatory- and commercial-based milestone payments that are triggered by the achievement of certain events.

ZILRETTA was approved by the FDA in October 2017 and launched in the U.S.

shortly thereafter.

We market ZILRETTA through our ZILRETTA and iovera° sales force of approximately 50 Treatment Solutions Managers who are providing clinicians with two unique OA treatment options to individualize patient care.

ZILRETTA is the first and only extended-release, intra-articular therapy for patients confronting OA knee pain.

ZILRETTA employs a proprietary microsphere technology combining triamcinolone acetonide, or TA, a commonly administered, immediate-release corticosteroid, with a poly lactic-co-glycolic acid, or PLGA, matrix to provide extended pain relief.

PLGA is a proven extended-release delivery vehicle that is metabolized to carbon dioxide and water as it releases drug in the IA space and is used in other approved drug products and surgical devices.

The ZILRETTA microspheres slowly and continuously release triamcinolone acetonide into the knee to provide significant pain relief for 12 weeks, with some people experiencing pain relief through 16 weeks.

We believe ZILRETTA’s extended-release profile may also provide effective treatment for OA pain of the shoulder, and we intend to initiate a Phase 3 trial investigating ZILRETTA in shoulder OA in 2023 after aligning with the FDA on study design.

In addition, we are planning a comparative safety study of ZILRETTA in patients with Type 2 diabetes and are evaluating a repeat dosing study.

ZILRETTA Clinical Benefits

ZILRETTA combines a commonly administered steroid, TA, with PLGA, delivering a 32 milligram dose of TA to provide extended therapeutic concentrations in the joint and persistent analgesic effect.

Based on the strength of its pivotal and other clinical trials, we believe that ZILRETTA represents an important treatment option for the millions of patients in the U.S.

in need of safe and effective extended relief from OA knee pain.

The pivotal Phase 3 trial, on which the approval of ZILRETTA was based, showed that ZILRETTA significantly reduced OA knee pain for 12 weeks, with some people experiencing pain relief through Week 16.

Both the magnitude and duration of pain relief provided by ZILRETTA in clinical trials were clinically meaningful with the magnitude of pain relief amongst the largest seen to date in OA clinical trials.

The overall frequency of treatment-related adverse events in these trials was similar to those observed with placebo, and no drug-related serious adverse events were reported.

We believe that ZILRETTA holds the potential to become the corticosteroid of choice given its safety and efficacy profile, and the fact that it is the first and only extended-release corticosteroid on the market.

In September 2021, the American Association of Orthopaedic Surgeons, or AAOS, updated its evidence-based clinical practice guidelines, finding ZILRETTA can improve patient outcomes over traditional immediate-release corticosteroids.

The iovera° system is an FDA-approved, non-opioid handheld cryoanalgesia device used to produce precise, controlled doses of cold temperature only to targeted nerves.

It has been FDA 510(k) cleared in the U.S., has a CE mark in the E.U.

and is cleared for marketing in Canada for the blocking of pain.

We believe the iovera° system is highly complementary to EXPAREL and ZILRETTA as a non-opioid therapy that alleviates pain using a non-pharmacological nerve block to disrupt pain signals being transmitted to the brain from the site of injury or surgery.

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.

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

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

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

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

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

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

The second target market is iovera° for 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.

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

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

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

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

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Total Knee Arthroplasty

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

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

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

Both groups received a similar perioperative multimodal pain management protocol.

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

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

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

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

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

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

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

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

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

Osteoarthritis of the Knee

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 OA, and nearly two million are under the age of 45.

iovera° Clinical Benefits

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

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°.

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

Preliminary findings demonstrated reductions in opioids, including:

• The daily morphine equivalent was significantly lower at 72 hours (p<0.05), 6 weeks (p<0.05) and 12 weeks (p<0.05), with an overall 35 percent reduction in daily morphine equivalents across the 12-week postoperative period in the iovera° treatment group.

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• The daily morphine equivalent consumption in the per protocol group analysis was significantly lower at 72 hours (p<0.05), 6 weeks (p<0.05) and 12 weeks (p<0.05).

• Patients who were administered iovera° were far less likely to take opioids six weeks after surgery.

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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 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:

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:

• 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;

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

• iovera° is a convenient handheld device with a single-use procedure-specific Smart Tip;

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

We believe the combination of iovera° and EXPAREL will become the preferred procedural solution that will empower patients and their healthcare providers to take control of the patients’ OA 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.

In September 2021, the AAOS updated its evidence-based clinical practice guidelines, reporting that denervation therapy—including cryoneurolysis—may reduce knee pain and improve function in patients with symptomatic OA of the knee.

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

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

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

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

iovera° Global Expansion

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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.

We began selling iovera° in Canada in the fourth quarter of 2021.

Additionally, we began selling iovera° in the E.U.

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

Product Portfolio and Product Candidate Pipeline

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.

The Osteoarthritis Market

OA is the most common form of arthritis.

It is also called degenerative joint disease and occurs most frequently in the hands, hips and knees.

With OA, the cartilage within a joint begins to break down and the underlying bone begins to change.

These changes usually develop slowly and get worse over time.

OA can cause pain, stiffness and swelling.

In some cases it also causes reduced function and disability;

some people are no longer able to do daily tasks or work.

According to the CDC, OA affects over 32.5 million adults in the U.S.

The lifetime risk of developing symptomatic knee OA is 45 percent.

The prevalence of symptomatic knee OA increases with each decade of life, with the annual incidence of knee OA being highest between age 55 and 64 years old.

There are 14 million individuals in the U.S.

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.

With the addition of ZILRETTA to our product offering, we can now offer clinicians the flexibility to individualize OA knee pain treatment with either ZILRETTA or a drug-free nerve block with iovera° based on patient factors and preference, physician training, site of care and reimbursement considerations.

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Clinical Development Programs

PCRX-201 and PCRX-301 (Formerly FX-201 and FX-301)

PCRX-201 and PCRX-301 were added to our portfolio as part of the Flexion Acquisition.

PCRX-201 is a gene therapy product candidate designed to provide “on demand” production of an anti-inflammatory protein, interleukin-1 receptor antagonist (IL-1Ra) whenever inflammation is detected in the joint.

PCRX-301, is a locally administered Na V 1.7 inhibitor, known as funapide, formulated for extended release in a thermosensitive hydrogel.

The initial development of PCRX-301 was intended to support administration as a peripheral analgesic lower extremity nerve block for management of post-operative pain.

pMVL-Based Clinical Programs

Given the proven safety, flexibility and customizability of our pMVL drug delivery technology platform for acute, sub-acute and chronic pain applications, we have several pMVL-based products in clinical development.

Following data readouts from preclinical and feasibility studies for these candidates, we have prioritized three programs for clinical development:

(i) PCRX-401, a dexamethasone-pMVL for low back pain;

(ii) PCRX-501, a high-dose bupivacaine-pMVL for extended pain relief and (iii) a low-dose bupivacaine-pMVL for intrathecal analgesia.

We are planning to initiate a Phase 2 study for low-dose bupivacaine-pMVL for intrathecal analgesia in late 2022.

External Innovation

In parallel to our internal clinical programs, our business development team continues to pursue innovative acquisition targets that are complementary to EXPAREL, ZILRETTA and iovera° and are of great interest to the surgical and anesthesia audiences we are already calling on today.

We are using a combination of strategic investments, in-licensing and acquisition transactions to build out a pipeline of innovation to improve patients’ journeys along the neural pain pathway.

Select strategic investments we have made to support promising early stage platforms are summarized below.

Company Development Stage Description of Platform Technology Potential Therapeutic Areas

Carthronix, Inc.

Preclinical CX-011, an intra-articular injection designed to slow joint degeneration by mediating IL-6 cytokines Knee OA

Coda Therapeutics, Inc.

Preclinical Chemogenetic platform to reverse the aberrant neuronal activity underlying neurological disorders using optimized Adeno-Associated Virus (AAV) vectors

Neuropathic pain

Genascence Corporation Phase 1 AAV vector-based gene therapy targeting Interleukin 1 Receptor Antagonist (IL-1Ra)

GeneQuine Biotherapeutics GmbH Preclinical Next-generation gene transfer vehicles that enter joint cells to confer multi-year gene expression

OA and other musculoskeletal disorders

Spine BioPharma, LLC Phase 3-ready Remedisc 7-amino acid chain peptide that binds to and induces down regulation of transforming growth factor, beta 1 (TGFβ1)

Degenerative disc disease

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Product Portfolio and Internal Pipeline

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:

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

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Pacira Innovation and Training Center of Tampa

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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.

We have launched development plans for a second training facility in Houston, Texas.

This 19,000 square-foot state-of-the-art facility will feature an adaptive lecture hall, broadcast studio and lab space for cadaver and other interactive workshops.

These training centers are core to developing both our physician champions and community-based clinicians who want to stay on the forefront of opioid-sparing pain management.

We expect to open this facility before the end of 2022 which would immediately double our capacity and ability to host programs for EXPAREL, ZILRETTA and iovera°.

Results of Operations

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.

and sales of iovera° in the U.S.

Licensing, milestone and royalty revenues are from our collaborative licensing agreements.

Comparison of the Three Months Ended March 31, 2022 and 2021

Net product sales consist of (i) EXPAREL in the U.S., the European Union, or E.U., and the United Kingdom, or U.K.;

(ii) ZILRETTA in the U.S.;

(iii) iovera° in the U.S., Canada and the E.U.

and (iv) sales of, and royalties on, our bupivacaine liposome injectable suspension for veterinary use.

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

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Net product sales:

EXPAREL $ 129,205 $ 114,678 13%

Bupivacaine liposome injectable suspension 683 449 52% 2,465 2,430 1%

Total EXPAREL / bupivacaine liposome

injectable suspension net product sales 122,609 114,163 7% 369,128 290,459 27%

ZILRETTA 23,635 — N/A

iovera° 3,026 3,268 (7)%

Bupivacaine liposome injectable suspension 1,556 792 96%

Total net product sales 157,422 118,738 33%

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

Royalty revenue 569 289 97%

Total revenues $ 157,991 $ 119,027 33%

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 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

EXPAREL revenue increased 13% in the three months ended March 31, 2022 versus 2021 primarily due to increases of 11% in gross vial volume and increases of 4% in gross selling price per unit, 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 Surgical 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

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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 nine months ended September 30, 2021 and 2020 (in thousands):

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

Chargebacks Total

additional pandemic-related challenges in January 2022 due to regional surges in COVID-19 variant cases, staffing shortages and fatigue from care teams addressing significant procedure backlogs.

EXPAREL utilization remains above the overall sharp decline in elective surgical procedures relative to pre-pandemic baseline levels due to increased utilization in outpatient settings and emergent procedures.

As a result of the Flexion Acquisition, we acquired ZILRETTA in November 2021, which is an extended-release corticosteroid treatment for OA knee pain.

We recognized net product sales of $23.6 million for the three months ended March 31, 2022.

Net product sales of iovera° decreased 7% in the three months ended March 31, 2022 versus 2021 primarily due to a delay in the transition from generation 1 to generation 2 iovera° products and short-term variations in reimbursement policies in certain territories.

Bupivacaine liposome injectable suspension net product sales and its related royalties increased 96% and 97%, respectively, in the three months ended March 31, 2022 versus 2021 due to the timing of orders placed by Aratana Therapeutics, Inc.

for veterinary use.

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

The following tables provide a summary of activity with respect to our sales related allowances and accruals related to EXPAREL and ZILRETTA for the three months ended March 31, 2022 and 2021 (in thousands):

March 31, 2022 Returns Allowances Prompt Payment Discounts Service

Chargebacks Government Rebates Total

Balance at December 31, 2021 $ 3,361 $ 1,178 $ 3,636 $ 3,494 $ 761 $ 12,430

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Payments / Adjustments (856) (2,608) (4,031) (8,473) (401) (16,369)

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

Balance at March 31, 2022 $ 2,909 $ 1,225 $ 3,554 $ 4,413 $ 708 $ 12,809

March 31, 2021 Returns Allowances Prompt Payment Discounts Service

Chargebacks Government

Rebates Total

Balance at December 31, 2020 $ 1,023 $ 1,007 $ 1,168 $ 1,600 $ — $ 4,798

1 unchanged sentence

Payments / Adjustments (111) (2,349) (1,953) (2,582) — (6,995)

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.

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

Total reductions of gross product sales from sales-related allowances and accruals were $16.7 million and $7.1 million, or 9.7% and 5.7% of gross product sales, for the three months ended March 31, 2022 and 2021, respectively.

The overall increase in sales-related allowances and accruals as a percentage of gross product sales was directly related to the addition of the ZILRETTA-related allowances and accruals.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 38

Cost of Goods Sold

3 unchanged sentences

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Cost of goods sold $ 36,074 $ 31,349 15%

Gross margin 77 % 74 %

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°.

Gross margin increased three percentage points in the three months ended March 31, 2022 versus 2021, mainly due to lower cost of EXPAREL product sold due to higher production levels and downtime that occurred in 2021, partially offset by the ZILRETTA step-up of fixed assets and inventory to fair value in purchase accounting.

Research and Development Expenses

Research and development expenses primarily consist of costs related to clinical trials and related outside services, product development and other research and development costs, including Phase 4 trials that we are conducting to generate new data for EXPAREL and iovera° and stock-based compensation expense.

Research and development expenses primarily consist of costs related to clinical trials and related outside services, product development and other research and development costs, including trials that we are conducting to generate new data for EXPAREL, ZILRETTA and iovera° and stock-based compensation expense.

Clinical and preclinical development expenses include costs for clinical personnel, clinical trials performed by third-parties, toxicology studies, materials and supplies, database management and other third-party fees.

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

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 37

and indications, medical information expenses and related personnel.

Regulatory and other expenses include regulatory activities related to unapproved products 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.

1 unchanged sentence

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Clinical and preclinical development $ 13,440 $ 8,020 68%

Product development and manufacturing

capacity expansion 4,738 5,629 (16)% 14,047 18,317 (23)%

Product development and manufacturing capacity expansion 4,993 4,702 6%

Regulatory and other 1,714 2,051 (16)%

2 unchanged sentences

% of total revenues 14 % 13 %

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 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.

Total research and development expense increased 36% in the three months ended March 31, 2022 versus 2021.

Clinical and preclinical development expense increased 68% in the three months ended March 31, 2022 versus 2021 due to the start-up of and continued enrollment in two EXPAREL lower extremity nerve block trials in bunionectomy and TKA and ongoing trials for the product candidates acquired as part of the Flexion Acquisition.

Product development and manufacturing capacity expansion expense increased 6% in the three months ended March 31, 2022 versus 2021 mainly attributable to the scale-up of our manufacturing capacity at our Science Center Campus in San Diego, California.

Regulatory and other expense decreased 16% in the three months ended March 31, 2022 versus 2021 due lower ongoing costs in the first quarter 2022 related to our iovera° clinical data registry, as compared to start-up expenses incurred in the first quarter of 2021.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 39

Stock-based compensation increased 32% in the three months ended March 31, 2022 versus 2021 primarily due to greater 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 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.

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, payments to our marketing partners for the promotion and sale of our products, expenses related to communicating the health outcome benefits of our products, investments in provider-level market access and patient reimbursement support and educational programs for our customers.

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

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.

Pacira BioSciences, Inc.

| Q3 2021 Form 10-Q | Page 38

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

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Sales and marketing $ 38,440 $ 27,102 42%

3 unchanged sentences

% of total revenues 41 % 41 %

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.

Total selling, general and administrative expenses increased 32% in the three months ended March 31, 2022 versus 2021.

Sales and marketing expenses increased 42% in the three months ended March 31, 2022 versus 2021.

The increases were driven by a sales force expansion supporting iovera°, the addition of a sales force to support ZILRETTA and fully staffing a contracted sales force in Europe.

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

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

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

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.

We expect that the addition of ZILRETTA to our commercial portfolio will increase our sales and marketing spend in 2022 as we increase the size of our ZILRETTA and iovera° sales force, which is providing clinicians with two unique OA treatment options to individualize patient care and patient reimbursement support for ZILRETTA.

General and administrative expenses increased 26% in the three months ended March 31, 2022 versus 2021 due to administrative support costs as a result of the Flexion Acquisition in November 2021, legal costs to support intellectual property protection and additional support for our expansion into European markets.

Stock-based compensation increased 11% in the three months ended March 31, 2022 and 2021 primarily due to an increase in the number of equity awards outstanding for selling, general and administrative personnel.

Amortization of Acquired Intangible Assets

1 unchanged sentence

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Amortization of acquired intangible assets $ 14,322 $ 1,967 100% +

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

These amounts are amortized on a straight line basis.

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

Amortization of acquired intangible assets increased substantially in the three months ended March 31, 2022 versus 2021 due to the Flexion Acquisition.

We acquired a developed technology intangible asset for ZILRETTA for OA knee pain, which is being amortized over a useful life of approximately ten years.

For more information, see Note 4, Flexion Acquisition, and Note 8, Goodwill and Intangible Assets , to our condensed consolidated financial statements included herein.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 40

Acquisition-Related (Gains) Charges, 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):

Acquisition-Related Charges, Product Discontinuation and Other

The following table provides a summary of the costs related to the Flexion Acquisition, MyoScience Acquisition, termination costs and other activities during the periods indicated, including percent changes (dollar amounts in thousands):

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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 (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.

March 31, % Increase / (Decrease)

Acquisition-related charges (gains) $ 4,337 $ (1,127) N/A

Other — 3,000 (100)%

Total acquisition-related charges, product discontinuation and other $ 4,337 $ 1,873 100% +

During the three months ended March 31, 2022, we recognized acquisition-related charges of $4.3 million.

These charges are primarily driven by severance and other employee related costs, legal and other professional fees, third-party services and other one-time charges associated with the Flexion Acquisition, which were partially offset by credits from changes in the fair value of contingent consideration related to the Flexion Acquisition and MyoScience Acquisition.

For more information, see Note 15, Acquisition-Related Charges, Product Discontinuation and Other , to our condensed consolidated financial statements included herein.

In the three months ended March 31, 2021, as part of the MyoScience Acquisition, we recognized gains in the amount of $1.1 million related to changes in the fair value of contingent consideration.

See Note 10, Financial Instruments , to our condensed consolidated financial statements included herein, for information regarding the methods and key assumptions used in the fair value measurements of contingent consideration.

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

In 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 nine months ended September 30, 2021.

In June 2018, we entered into an agreement with Nuance Biotech Co.

to advance the development and commercialization of EXPAREL in China.

In April 2021, we agreed to a mutual termination of the agreement due to the lack of a viable regulatory pathway that adequately safeguarded 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 three months ended March 31, 2021.

Other Income (Expense)

1 unchanged sentence

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

March 31, % Increase / (Decrease)

Interest income $ 271 $ 415 (35)%

Interest expense (10,246) (6,971) 47%

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

Other, net (124) (157) (21)%

Total other expense, net $ (10,099) $ (6,713) 50%

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.

Total other expense, net increased 50% in the three months ended March 31, 2022 versus 2021 primarily due to the increase in interest expense.

The 47% increase in interest expense during the three months ended March 31, 2022 was due to the $375.0 million term loan B credit agreement (the “Term Loan”) entered into in December 2021.

This increase was partially offset by the absence of debt discount amortization associated with our convertible notes in the current year due to adopting Accounting Standards Update, or ASU, 2020-06 in 2022.

For additional information regarding the adoption of ASU 2020-06, see Note 2 , Summary of Significant Accounting Policies, to our condensed consolidated financial statements herein.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 41

Income Tax Expense (Benefit)

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

Income Tax Expense

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

Three Months Ended

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

September 30, % Increase / (Decrease)

2021 2020 2021 2020

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

March 31, % Increase / (Decrease)

Income tax expense $ 466 $ 2,355 (80)%

Effective tax rate 6 % 19 %

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.

For the three months ended March 31, 2022 and 2021, we recorded income tax expense of $0.5 million and $2.4 million, respectively, which represented the estimated annual effective tax rate applied to the year-to-date domestic operating results adjusted for certain discrete tax benefits related to equity compensation.

Liquidity and Capital Resources

Since our inception in December 2006, we have devoted most of our cash resources to manufacturing, research and development and selling, general and administrative activities related to the development and commercialization of EXPAREL.

In addition, we acquired iovera° as part of the MyoScience Acquisition in April 2019.

We are highly dependent on the commercial success of EXPAREL, which we launched in April 2012.

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 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.

Since our inception in 2006, we have devoted most of our cash resources to manufacturing, research and development and selling, general and administrative activities related to the development and commercialization of EXPAREL.

In addition, we acquired ZILRETTA as part of the Flexion Acquisition in November 2021 and iovera° as part of the MyoScience Acquisition in April 2019.

We are primarily dependent on the commercial success of EXPAREL and ZILRETTA.

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

As of March 31, 2022, we had an accumulated deficit of $157.8 million, cash and cash equivalents and short-term available-for-sale investments of $452.2 million and working capital of $361.9 million.

The COVID-19 pandemic could continue to result in a reduction of certain commercial and clinical expenditures which could offset a portion of the potential revenue declines caused by the COVID-19 pandemic.

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

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

We benefited from the provision to defer the payment of certain employer payroll taxes in the amount of $2.8 million for the year ended December 31, 2020.

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

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

We benefited from the provision to defer the payment of certain employer payroll taxes in the amount of $2.8 million for the year ended December 31, 2020 and remitted $1.4 million in December 2021.

The remaining $1.4 million is due by December 31, 2022.

Summary of Cash Flows

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

Nine Months Ended

September 30,

Three Months Ended

Condensed Consolidated Statements of Cash Flows Data:

3 unchanged sentences

Financing activities (181,585) 10,325

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

Net decrease in cash and cash equivalents $ (358,827) $ (33,258)

Operating Activities

During the three months ended March 31, 2022, net cash provided by operating activities was $30.8 million, compared to $12.1 million during the three months ended March 31, 2021.

The increase of $18.7 million was primarily attributable to increased revenue from both EXPAREL and ZILRETTA coupled with realized efficiencies from the Flexion acquisition and an improved gross margin.

Pacira BioSciences, Inc.

| Q1 2022 Form 10-Q | Page 42

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.

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 partnership with Thermo Fisher.

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.

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.

During the three months ended March 31, 2022, net cash used in investing activities was $208.0 million, which reflected $155.6 million of short-term available-for-sale investment purchases (net of maturities), a $32.0 million contingent consideration milestone payment that had been achieved in the fourth quarter of 2021 associated with our 2007 acquisition of Pacira Pharmaceuticals, Inc.

from SkyePharma Holding, Inc.

(now a subsidiary of Vectura Group plc), purchases of equity and debt investments of $12.8 million and purchases of fixed assets of $7.7 million.

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

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

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

Financing Activities

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.

During the three months ended March 31, 2022, net cash used in financing activities was $181.6 million, which primarily consisted of a $192.6 million principal repayment of the 3.375% convertible senior notes due 2024 (the “Flexion 2024 Notes” and, together with the 2025 Notes (as defined below), the “Notes”) as part of a repurchase offer to the holders of the Flexion 2024 Notes that was triggered by the Flexion Acquisition, partially offset by proceeds from the exercise of stock options of $11.0 million.

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

2026 Term Loan B Facility

In December 2021, we entered into the $375.0 million Term Loan which is secured by substantially all of our and any subsidiary guarantor’s assets and is scheduled to mature on December 7, 2026, subject to certain exceptions set forth in the term loan credit agreement (the “Credit Agreement”).

We may elect to borrow either alternate base rate borrowings or term benchmark borrowings.

Each term loan borrowing which is an alternate base rate borrowing bears interest at a variable rate per annum equal to the Alternate Base Rate (as defined in the Credit Agreement) subject to a 1.75% floor, plus 6.00%.

Each term loan borrowing which is a term benchmark borrowing bears interest at a variable rate per annum equal to (i) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) subject to a 0.75% floor plus (ii) 7.00%.

The Credit Agreement requires us to, among other things, maintain (i) a first lien net leverage ratio, determined as of the last day of any fiscal quarter, of no greater than 1.75 to 1.00 and (ii) liquidity, at any time, of at least $150.0 million.

The Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions.

As of March 31, 2022, we were in compliance with all financial covenants under the Credit Agreement.

At March 31, 2022, we had $375.0 million in outstanding borrowings under the Term Loan.

As a result of our entry into the Term Loan, we expect our interest expense to increase in 2022.

See Note 9, Debt , to our condensed consolidated financial statements included herein for further discussion.

2025 Convertible Senior Notes

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

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

In July 2020, we completed a private placement of $402.5 million in aggregate principal amount of our 0.750% convertible senior notes due 2025, or 2025 Notes, and entered into an indenture with respect to the 2025 Notes.

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

The 2025 Notes mature on August 1, 2025.

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.

At March 31, 2022, the outstanding principal on the 2025 Notes was $402.5 million.

See Note 9, Debt , to our condensed consolidated financial statements included herein for further discussion.

2024 Convertible Senior Notes

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

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

The 2022 Notes mature on April 1, 2022, 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

In November 2021, as part of the Flexion Acquisition, we assumed $201.3 million in aggregate principal amount of the Flexion 2024 Notes.

The Flexion 2024 Notes have a maturity date of May 1, 2024, are unsecured, and accrue interest at a rate of 3.375% per annum, payable semi-annually on May 1 and November 1 of each year.

In January 2022, we repurchased $192.6 million aggregate principal amount of the Flexion 2024 Notes.

At March 31, 2022, the outstanding principal on the Flexion

Pacira BioSciences, Inc.

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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.

2024 Notes was $8.6 million.

See Note 9, Debt , to our condensed consolidated financial statements included herein for further discussion.

2022 Convertible Senior Notes

In March 2017, we completed a private placement of $345.0 million in aggregate principal amount of 2.375% convertible senior notes due 2022, or 2022 Notes.

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

In July 2020, we used part of the net proceeds from the issuance of the 2025 Notes to repurchase $185.0 million aggregate principal amount of the 2022 Notes in privately-negotiated transactions.

The 2022 Notes matured on April 1, 2022, and we settled the remaining outstanding principal balance of $160.0 million and a conversion premium of $4.8 million through a cash payment of $156.9 million and the issuance of 101,521 shares of our common stock.

For more information, see Note 9, Debt , to our condensed consolidated financial statements included herein for further discussion.

Future Capital Requirements

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

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

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

• 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 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;

• 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;

• the costs of successfully integrating Flexion into our existing business and expanding the commercialization of ZILRETTA;

• the cost and timing of the potential Flexion milestone payments under the CVR Agreement, which could be up to an aggregate of $425.5 million if certain regulatory and commercial milestones are met.

(See Note 4, Flexion Acquisition , 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, longer lead-times for or the inability to secure a sufficient supply of materials due to the prioritization by certain suppliers for COVID-19 vaccine manufacturing and general economic conditions;

• the timing of and extent to which the holders of our Notes elect to convert their Notes and the timing of principal and interest payments on our Term Loan;

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

• 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 and a ZILRETTA capacity expansion project at the Thermo Fisher site in Swindon, England;

• the cost and timing of potential remaining milestone payments to MyoScience security holders, which could be up to an aggregate of $43.0 million if certain regulatory and commercial milestones are met (See Note 10, Financial Instruments , to our condensed consolidated financial statements included herein for more information);

• the cost and timing of additional strategic investments, including additional investments under existing agreements;

• the timing of and extent to which the holders of our 2022 Notes and 2025 Notes elect to convert their notes;

• costs related to legal and regulatory issues;

• the costs of performing additional clinical trials for EXPAREL, including the additional pediatric trials required by the FDA and EMA as a condition of approval;

• the costs of performing additional clinical trials for iovera°;

• the costs related to legal and regulatory issues;

• the costs of performing additional clinical trials for our products, including the additional pediatric trials required by the FDA and EMA as a condition of approval of EXPAREL;

• the costs for the development and commercialization of other product candidates;

• the costs and timing of future payments under our employee benefit plans, including but not limited to our cash long-term incentive plan and non-qualified deferred compensation plan;

• the extent to which we acquire or invest in products, businesses and technologies.

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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 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

Critical Accounting Estimates

See Note 2, Summary of Significant Accounting Policies , to our condensed consolidated financial statements included herein for a discussion of recently issued accounting pronouncements and their impact or future potential impact on our financial results, if determinable.

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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, 2021 .

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