Pacira BioSciences, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, which are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. Management’s Report on Internal Control over Financial Reporting Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon the results of the evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2023 was audited by KPMG LLP, our independent registered public accounting firm, which expressed an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2023. Changes in Internal Control over Financial Reporting During the quarter ended December 31, 2023, there have been no changes in our internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Pacira BioSciences, Inc. | 2023 Form 10-K | Page 85 Table of Content s Item 9B. Other Information (a) On February 26, 2024 (the “Effective Date”), the Company’s operating subsidiary, Pacira Pharmaceuticals, Inc. (“PPI”), and Integrated Commercialization Solutions, LLC (“ICS”) entered into a Commercial Outsourcing Services Agreement (the “Agreement”) with respect to the warehousing, distribution, order management, data management and certain other services for EXPAREL, ZILRETTA and iovera°. The Agreement replaces and supersedes all existing commercial outsourcing service agreements between the parties relating to the aforementioned services. Pursuant to the Agreement, PPI appointed ICS as the exclusive provider of third-party logistics services for EXPAREL, ZILRETTA and iovera° and as a provider of certain additional services, in each case, in the United States, Guam, Puerto Rico and the United States Territories during the Term (as defined below). The third-party logistics services include warehousing and inventory services as well as distribution services. The additional services include, but are not limited to, invoicing and accounts receivable management, customer service and contract administration. The Agreement became effective as of the Effective Date and will continue for an initial three-year term (the “Term”). The Agreement may be extended upon written mutual agreement of the parties, with any such extension(s) to be negotiated in good faith within six-months prior to the expiration of the Term, subject to certain conditions set forth in the Agreement. PPI and ICS each has mutual termination rights under the Agreement, subject to certain terms, conditions and notice requirements set forth in the Agreement. Each party also has additional unilateral termination rights in the event of a breach or under certain circumstances. PPI is also required to pay ICS certain compensation per month, commencing on the giving of a notice of termination by ICS to PPI, for the then-remaining months of the then-current Term (including any extension). The Agreement contains customary representations, warranties, covenants and confidentiality provisions, and also contains mutual indemnification obligations. The above summary does not purport to be a complete summary of the Agreement and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit 10.23 to this Annual Report and is incorporated by reference herein. (b) The following table shows the “Rule 10b5-1 trading arrangements” and “non-Rule 10b5-1 trading arrangements” (as each term is defined in Item 408(a) of Regulation S-K) terminated by our directors and executive officers during the quarter ended December 31, 2023. No trading arrangements were adopted or modified by our directors and executive officers during the quarter ended December 31, 2023. Trading Arrangement Name and Position Action Date Rule 10b5-1* Non-Rule 10b5-1** Total Number of Shares to be Sold Expiration Date Roy Winston Chief Medical Officer and Orthopedic Franchise Terminate (1) 11/13/2023 x N/A N/A * Intended to satisfy the affirmative defense of Rule 10b5-1(c). ** Not intended to satisfy the affirmative defense of Rule 10b5-1(c). (1) Dr. Winston resigned on October 11, 2023 and sold 31,000 shares of common stock on November 13, 2023, effectively terminating his previously adopted Rule 10b5-1 trading arrangement. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. Pacira BioSciences, Inc. | 2023 Form 10-K | Page 86 Table of Content s PART III Item 10. Directors, Executive Officers and Corporate Governance Information required by this item will be included in the proxy statement for our 2024 annual stockholders’ meeting and is incorporated by reference into this report. Item 11. Executive Compensation Information required by this item will be included in the proxy statement for our 2024 annual stockholders’ meeting and is incorporated by reference into this report. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters Securities Authorized For Issuance Under Equity Compensation Plans The following table sets forth certain information, as of December 31, 2023, concerning shares of our common stock authorized for issuance under our equity compensation plans. We have two equity compensation plans under which shares are currently authorized for issuance—our Amended and Restated 2011 Stock Incentive Plan (the “2011 Plan”) and our Amended and Restated 2014 Employee Stock Purchase Plan (the “2014 ESPP”). The 2011 Plan and the 2014 ESPP were approved by stockholders. In April 2014, our board of directors adopted (without stockholder approval), pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules, our 2014 Inducement Plan, pursuant to which awards for up to 175,000 shares of common stock could be made as a material inducement to such persons entering into employment with us (the “2014 Inducement Plan”). In December 2023, our board of directors adopted (without stockholder approval), pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules, our Amended and Restated 2014 Inducement Plan (the “Inducement Plan”). Pursuant to the Inducement Plan, awards for up to 817,093 shares of common stock can be made as a material inducement to such persons entering into employment with us. (a) (b) (c) Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights (1) (2) Weighted Average Exercise Price of Outstanding Options and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (1) Equity compensation plans approved by stockholders (3) 7,067,248 $ 49.37 2,369,247 Equity compensation plans not approved by stockholders (3) (4) 12,500 $ 64.21 792,032 Total equity compensation plans 7,079,748 $ 49.40 3,161,279 (1) Awards issuable under our 2011 Plan, 2014 Inducement Plan and Inducement Plan include common stock, stock options, restricted stock, restricted stock units and other incentive awards. (2) Does not include 1,364,618 unvested shares outstanding as of December 31, 2023 in the form of restricted stock units under our 2011 Plan, which do not require the payment of any consideration by the recipients. (3) See Note 14, Stock Plans , to our consolidated financial statements included herein for further descriptions of our 2011 Plan, 2014 ESPP, 2014 Inducement Plan and Inducement Plan. (4) On December 20, 2023, in connection with Frank D. Lee’s appointment as Chief Executive Officer, the board of directors approved the grant of inducement awards to Mr. Lee pursuant to the Inducement Plan. Mr. Lee’s inducement awards included stock options to purchase an aggregate of 692,512 shares of common stock with an exercise price per share equal to $32.07, the closing price of our common stock as reported on the Nasdaq Global Select Market on January 3, 2024, and, subject to continued service with us as of each vesting date, such option will vest and become exercisable as to 25% of the option shares on January 3, 2025, and vest as to the remaining shares in successive equal quarterly installments over the subsequent three years; and (ii) a restricted stock unit award for 99,520 shares of common stock, subject to continued service with us as of each vesting date, to vest in four equal annual installments beginning on January 2, 2025, in each case, pursuant to the terms and provisions of the Inducement Plan. Because these awards were granted subsequent to December 31, 2023, they are not reflected in the table above. Other information required by this item will be included in the proxy statement for our 2024 annual stockholders’ meeting and is incorporated by reference into this report. Pacira BioSciences, Inc. | 2023 Form 10-K | Page 87 Table of Content s Item 13. Certain Relationships and Related Transactions, and Director Independence Information required by this item will be included in the proxy statement for our 2024 annual stockholders’ meeting and is incorporated by reference into this report. Item 14. Principal Accountant Fees and Services Information required by this item will be included in the proxy statement for our 2024 annual stockholders’ meeting and is incorporated by reference into this report. PART IV Item 15. Exhibits, Financial Statement Schedules (a) Documents filed as part of this Annual Report on Form 10-K: (1) Financial Statements Index to the Consolidated Financial Statements Page # Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Comprehensive Income F-6 Consolidated Statements of Stockholders’ Equity F-7 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-10 The report of our independent registered accounting firm, KPMG LLP, with respect to the above-referenced financial statements and on internal control over financial reporting, is included in this Annual Report on Form 10-K. Their consent appears as Exhibit 23.1 of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting Firm (2) Schedules All financial statement schedules have been omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or related notes thereto. (3) Exhibits The following exhibits are filed with, or incorporated by reference in this Annual Report on Form 10-K. Pacira BioSciences, Inc. | 2023 Form 10-K | Page 88 Table of Content s EXHIBIT INDEX Incorporation By Reference From Exhibit Number Description Form Exhibit Date Filed 2.1 Agreement and Plan of Merger, dated March 4, 2019, by and among Pacira Pharmaceuticals, Inc., PS Merger, Inc., MyoScience, Inc., and Fortis Advisors LLC, as the securityholders’ representative. # † 8-K 2.1 3/5/2019 2.2 Agreement and Plan of Merger, dated as of October 11, 2021, by and among Flexion Therapeutics, Inc., Pacira BioSciences, Inc. and Oyster Acquisition Company Inc. 8-K 2.1 10/12/2021 3.1 Amended and Restated Certificate of Incorporation. 8-K 3.1 2/11/2011 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated April 9, 2019. 8-K 3.1 4/9/2019 3.3 Second Amended and Restated Bylaws. 8-K 3.2 4/9/2019 4.1 Specimen Certificate Evidencing Shares of Common Stock.* 4.2 Indenture (including form of 0.750% Convertible Senior Notes due 2025), dated July 10, 2020, between the Registrant and Computershare Corporate Trust, National Association, as trustee (formerly Wells Fargo Bank, National Association). 8-K 4.1 7/10/2020 4.3 Indenture (including form of 3.375% Convertible Senior Notes due 2024), dated as of May 2, 2017, by and between Flexion Therapeutics, Inc. and Computershare Corporate Trust, National Association, as trustee (formerly Wells Fargo Bank, National Association). 10-K 4.4 2/28/2022 4.4 First Supplemental Indenture, dated as of November 19, 2021, by and between Flexion Therapeutics, Inc. and Computershare Corporate Trust, National Association, as trustee (formerly Wells Fargo Bank, National Association). 10-K 4.5 2/28/2022 4.5 Description of Securities. 10-K 4.3 2/21/2020 10.1 Amended and Restated 2011 Stock Incentive Plan.*** 8-K 10.1 6/20/2023 10.2 Form of Nonstatutory Stock Option Agreement under the Amended and Restated 2011 Stock Incentive Plan for grants made prior to February 1, 2022.*** 8-K 10.3 6/4/2014 10.3 Form of Nonstatutory Stock Option Agreement (Employees) under the Amended and Restated 2011 Stock Incentive Plan for grants made on or after February 1, 2022.*** 10-K 10.3 2/28/2022 10.4 Form of Nonstatutory Stock Option Agreement (Non-Employee Directors) under the Amended and Restated 2011 Stock Incentive Plan for grants made on or after February 1, 2022.*** 10-K 10.4 2/28/2022 10.5 Form of Restricted Stock Unit Award Agreement (Employees) under the Amended and Restated 2011 Stock Incentive Plan for grants made prior to February 1, 2022.* *** 10.6 Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) under the Amended and Restated 2011 Stock Incentive Plan for grants made prior to February 1, 2022.* *** 10.7 Amended and Restated 2014 Inducement Plan.*** 8-K 10.2 12/21/2023 10.8 Form of Nonstatutory Stock Option Agreement under the Amended and Restated 2014 Inducement Plan.* *** 10. 9 Form of Restricted Stock Unit Award Agreement under the Amended and Restated 2014 Inducement Plan.* *** 10.10 Amended and Restated 2014 Employee Stock Purchase Plan.*** 8-K 10.1 6/10/2022 10.11 Assignment Agreement, dated February 9, 1994, amended April 15, 2004, between the Registrant and Research Development Foundation. S-1/A 10.4 12/3/2010 10.12 Stock Purchase Agreement, dated January 8, 2007, between SkyePharma, Inc. and the Registrant. S-1/A 10.5 12/3/2010 10.13 Employment Agreement between the Registrant and David Stack.*** S-1/A 10.21 12/3/2010 10.14 Amendment No. 1 to Executive Employment Agreement, dated March 13, 2013, between the Registrant and David Stack.*** 8-K 99.3 3/18/2013 Pacira BioSciences, Inc. | 2023 Form 10-K | Page 89 Table of Content s Incorporation By Reference From Exhibit Number Description Form Exhibit Date Filed 10.15 Amendment No. 2 to Executive Employment Agreement, dated June 30, 2015, between the Registrant and David Stack.*** 10-Q 10.2 7/30/2015 10.16 Transition and Retirement Agreement, dated September 20, 2023, between the Registrant and David Stack. *** 8-K 10.1 9/26/2023 10.17 Employment Agreement, dated December 20, 2023, between the Registrant and Frank D. Lee.*** 8-K 10.1 12/21/2023 10.18 Employment Agreement, dated November 29, 2012, between the Registrant and Kristen Williams.*** 10-Q 10.2 4/30/2015 10.19 Amendment No. 1 to Employment Agreement, dated March 13, 2013, between the Registrant and Kristen Williams.*** 10-Q 10.3 4/30/2015 10.20 Amendment No. 2 to Employment Agreement, dated June 30, 2015, between the Registrant and Kristen Williams.*** 10-Q 10.5 7/30/2015 10.21 Executive Employment Agreement, dated May 2, 2016, between the Registrant and Charles A. Reinhart, III.*** 10-Q 10.1 8/4/2016 10.22 Form of Indemnification Agreement between the Registrant and its directors and officers.* *** 10.23 Commercial Outsourcing Services Agreement entered into as of February 26, 2024 by the Registrant and Integrated Commercialization Solutions, Inc.* †† 10.24 Pacira BioSciences, Inc. Deferred Compensation Plan.*** 8-K 10.1 6/11/2020 10.25 Amendment No. 1 to Pacira BioSciences, Inc. Deferred Compensation Plan.*** 10-K 10.25 2/28/2023 10.26 Pacira BioSciences, Inc. Long-Term Incentive Plan.*** 8-K 10.1 12/7/2020 10.27 Strategic Co-Production Agreement dated April 4, 2014, by and between the Registrant and Patheon UK Limited.† 10-Q 10.1 7/31/2014 10.28 Manufacturing and Supply Agreement dated April 4, 2014, by and between the Registrant and Patheon UK Limited.† 10-Q 10.2 7/31/2014 10.29 Technical Transfer and Service Agreement dated April 4, 2014, by and between the Registrant and Patheon UK Limited.† 10-Q 10.3 7/31/2014 10.30 Side Letter dated June 5, 2023, to the Manufacturing and Supply Agreement by and between the Registrant and Patheon UK Limited.†† 10-Q 10.2 8/2/2023 10.31 Manufacturing and Supply Agreement dated July 31, 2015, between Flexion Therapeutics, Inc. and Patheon UK Limited, as amended to date.†† 10-K 10.36 2/28/2022 10.32 First Amendment to Manufacturing and Supply Agreement dated May 8, 2019, between Flexion Therapeutics, Inc. and Patheon UK Limited.* †† 10.33 Second Amendment to Manufacturing and Supply Agreement dated June 17, 2019, between Flexion Therapeutics, Inc. and Patheon UK Limited.* †† 10.34 Third Amendment to Manufacturing and Supply Agreement dated December 1, 2023, by and between the Registrant and Patheon UK Limited.* †† 10.35 Technical Transfer and Service Agreement dated July 31, 2015, between Flexion Therapeutics, Inc. and Patheon UK Limited, as amended to date.†† 10-K 10.37 2/28/2022 10.36 Side Letter to the Manufacturing and Supply Agreement between Flexion Therapeutics, Inc. and Patheon UK Limited, dated as of April 8, 2020.†† 10-K 10.38 2/28/2022 10.37 Amended and Restated Consulting Agreement, dated April 3, 2012, between the Registrant and Gary Pace.*** 10-Q 10.1 5/9/2012 10.38 Second Amended and Restated Consulting Agreement, dated August 17, 2012, between the Registrant and Gary Pace.*** 10-Q 10.1 11/1/2012 10.39 Third Amendment to Consulting Agreement, dated September 11, 2013, between the Registrant and Gary Pace.*** 10-Q 10.3 10/31/2013 10.40 Fourth Amendment to Consulting Agreement, dated November 25, 2015, between the Registrant and Gary Pace.*** 10-K 10.57 2/25/2016 10.41 Contingent Value Right Agreement, dated as of November 19, 2021, by and between Pacira BioSciences, Inc. and American Stock Transfer & Trust Company, LLC. 8-K 10.1 11/19/2021 Pacira BioSciences, Inc. | 2023 Form 10-K | Page 90 Table of Content s Incorporation By Reference From Exhibit Number Description Form Exhibit Date Filed 10.42 Credit Agreement, dated as of March 31, 2023, by and among Pacira BioSciences, Inc., the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent.## 8-K 10.1 4/3/2023 10.43 Executive Employment Agreement, dated May 4, 2020, between the Registrant and Jonathan Slonin.*** 10-Q 10.1 5/4/2022 10.44 Executive Employment Agreement, dated June 17, 2019, between the Registrant and Daryl Gaugler.*** 10-Q 10.1 5/3/2023 10.45 Executive Employment Agreement, dated December 6, 2016, between the Registrant and Anthony Molloy.*** 10-Q 10.2 5/3/2023 21.1 Subsidiaries of the Registrant.* 23.1 Consent of KPMG LLP.* 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).* 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).* 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** 97 Incentive Compensation Recovery Policy.*** * 101.INS* Inline XBRL Instance Document.* 101.SCH* Inline XBRL Taxonomy Schema Document.* 101.CAL* Inline XBRL Taxonomy Calculation Linkbase Document.* 101.LAB* Inline XBRL Taxonomy Label Linkbase Document.* 101.PRE* Inline XBRL Taxonomy Presentation Linkbase Document.* 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.* 104* Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith. ** Furnished herewith. *** Denotes management contract or compensatory plan or arrangement. † Confidential treatment has been requested or granted as to certain portions, which portions were omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request. †† Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information (i) is not material and (ii) is the type that the Registrant treats as private or confidential. # Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Company hereby undertakes to supplementally furnish copies of any omitted schedules to the Securities and Exchange Commission upon request. ## Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to supplementally furnish copies of any omitted schedules and exhibits to the Securities and Exchange Commission upon request. Item 16. Form 10-K Summary None. Pacira BioSciences, Inc. | 2023 Form 10-K | Page 91 Table of Content s SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PACIRA BIOSCIENCES, INC. /s/ FRANK D. LEE Date: February 29, 2024 By: Frank D. Lee Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on February 29, 2024. Principal Executive Officer Directors /s/ FRANK D. LEE /s/ MARCELO BIGAL /s/ GARY PACE Frank D. Lee Marcelo Bigal Gary Pace Chief Executive Officer and Director /s/ LAURA BREGE /s/ ANDREAS WICKI Principal Financial Officer Laura Brege Andreas Wicki /s/ CHARLES A. REINHART, III /s/ ABRAHAM CEESAY /s/ MICHAEL YANG Charles A. Reinhart, III Abraham Ceesay Michael Yang Chief Financial Officer /s/ CHRISTOPHER J. CHRISTIE /s/ ALETHIA YOUNG Principal Accounting Officer Christopher J. Christie Alethia Young /s/ LAUREN RIKER /s/ MARK FROIMSON /s/ PAUL HASTINGS Lauren Riker Mark Froimson Paul Hastings Senior Vice President, Finance (Chair of the Board) /s/ MARK KRONENFELD Mark Kronenfeld Pacira BioSciences, Inc. | 2023 Form 10-K | Page 92 Table of Content s PACIRA BIOSCIENCES, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2023 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Page # Report of Independent Registered Public Accounting Firm F-2 Auditor Name: KPMG LLP Auditor Location: Short Hills, NJ Auditor Firm ID: 185 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-4 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 F-5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 F-6 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 F-8 Notes to Consolidated Financial Statements F-10 Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-1 Table of Content s REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Pacira BioSciences, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Pacira BioSciences, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-2 Table of Content s Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair value measurement of the contingent consideration liability associated with the acquisition of Flexion As discussed in Notes 5 and 12 to the consolidated financial statements, the Company recognized a contingent consideration liability at its estimated fair value on the acquisition date, in connection with the acquisition of Flexion Therapeutics, Inc. (Flexion). Subsequent changes to the fair value of the contingent consideration liability are recorded in the consolidated statement of operations in the period of change. The Company estimates the fair value using a probability-weighted discounted cash flow approach that is based on unobservable inputs and a Monte Carlo simulation. The fair value of the Flexion contingent consideration as of December 31, 2023 was $24.7 million. We identified the evaluation of the fair value measurement of the contingent consideration liability related to achieving commercial and regulatory milestones associated with the acquisition of Flexion as a critical audit matter. Evaluating the fair value measurement of the contingent consideration liability required significant auditor judgment, due to the high degree of subjectivity inherent in certain assumptions with unobservable inputs that were used in the model. In particular, the fair value measurement was sensitive to management’s forecasts of revenues, estimated probabilities and timing related to the achievement of certain commercial and regulatory milestones, volatility, and discount rates. In addition, the audit effort associated with the evaluation of the Company’s volatility and discount rates involved the use of valuation professionals with specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s fair value measurement process for the contingent consideration liability related to achieving commercial and regulatory milestones. This included controls related to the development of the assumptions for forecasted revenues, estimated probabilities and timing related to the achievement of certain milestones, volatility, and discount rates. We evaluated the forecasted revenues and certain commercial and regulatory milestone assumptions used in the Company’s models by comparing them to historical data, industry benchmarks and other third-party market data that were assessed to be relevant and reliable. We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent estimate of the discount rates and volatility assumptions using inputs from publicly available market data and comparing the results to the Company’s discount rates and volatility assumptions. /s/ KPMG LLP We have served as the Company’s auditor since 2015. Short Hills, New Jersey February 29, 2024 Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-3 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 153,298 $ 104,139 Short-term available-for-sale investments 125,283 184,512 Accounts receivable, net 105,556 98,397 Inventories, net 104,353 96,063 Prepaid expenses and other current assets 21,504 15,223 Total current assets 509,994 498,334 Noncurrent available-for-sale investments 2,410 37,209 Fixed assets, net 173,927 183,512 Right-of-use assets, net 61,020 70,877 Goodwill 163,243 163,243 Intangible assets, net 483,258 540,546 Deferred tax assets 144,485 160,309 Investments and other assets 36,049 27,170 Total assets $ 1,574,386 $ 1,681,200 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 15,698 $ 15,220 Accrued expenses 64,243 89,785 Lease liabilities 8,801 9,121 Current portion of convertible senior notes, net 8,641 — Current portion of long-term debt, net — 33,648 Total current liabilities 97,383 147,774 Convertible senior notes, net 398,594 404,767 Long-term debt, net 115,202 251,056 Lease liabilities 54,806 64,802 Contingent consideration 24,698 28,122 Other liabilities 13,573 9,669 Total liabilities 704,256 906,190 Commitments and contingencies (Note 20) Stockholders’ equity: Preferred stock, par value $ 0.001 ; 5,000,000 shares authorized; none issued and outstanding at December 31, 2023 and 2022 — — Common stock, par value $ 0.001 ; 250,000,000 shares authorized; 46,481,174 and 45,927,790 shares issued and outstanding at December 31, 2023 and 2022, respectively 46 46 Additional paid-in capital 976,633 924,095 Accumulated deficit ( 106,796 ) ( 148,751 ) Accumulated other comprehensive income (loss) 247 ( 380 ) Total stockholders’ equity 870,130 775,010 Total liabilities and stockholders’ equity $ 1,574,386 $ 1,681,200 See accompanying notes to consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-4 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2023 2022 2021 Revenues: Net product sales $ 672,245 $ 664,150 $ 538,966 Royalty revenue 2,733 2,673 2,442 Collaborative licensing and milestone revenue — — 125 Total revenues 674,978 666,823 541,533 Operating expenses: Cost of goods sold 184,669 199,295 140,255 Research and development 76,257 84,797 55,545 Selling, general and administrative 269,441 254,516 199,345 Amortization of acquired intangible assets 57,288 57,288 13,553 Contingent consideration (gains) charges, acquisition-related charges and other ( 352 ) 10,903 42,911 Total operating expenses 587,303 606,799 451,609 Income from operations 87,675 60,024 89,924 Other (expense) income: Interest income 11,444 4,542 896 Interest expense ( 20,306 ) ( 39,976 ) ( 31,750 ) Loss on early extinguishment of debt ( 16,926 ) — — Other, net ( 186 ) ( 11,288 ) ( 2,666 ) Total other expense, net ( 25,974 ) ( 46,722 ) ( 33,520 ) Income before income taxes 61,701 13,302 56,404 Income tax (expense) benefit ( 19,746 ) 2,607 ( 14,424 ) Net income $ 41,955 $ 15,909 $ 41,980 Net income per share: Basic net income per common share $ 0.91 $ 0.35 $ 0.95 Diluted net income per common share $ 0.89 $ 0.34 $ 0.92 Weighted average common shares outstanding: Basic 46,222 45,521 44,262 Diluted 51,979 46,538 45,630 See accompanying notes to consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-5 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2023 2022 2021 Net income $ 41,955 $ 15,909 $ 41,980 Other comprehensive income (loss): Net unrealized gain (loss) on investments, net of tax 647 ( 662 ) ( 180 ) Foreign currency translation adjustments ( 20 ) 115 29 Total other comprehensive income (loss) 627 ( 547 ) ( 151 ) Comprehensive income $ 42,582 $ 15,362 $ 41,829 See accompanying notes to consolidated financial statements Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-6 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (In thousands) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Shares Amount Balance at December 31, 2020 43,637 $ 44 $ 873,201 $ ( 253,875 ) $ 318 $ 619,688 Exercise of stock options 732 1 23,833 — — 23,834 Vested restricted stock units 310 — — — — — Common stock issued under employee stock purchase plan 55 — 2,811 — — 2,811 Stock-based compensation — — 42,246 — — 42,246 Other comprehensive loss (Note 13) — — — — ( 151 ) ( 151 ) Net income — — — 41,980 — 41,980 Balance at December 31, 2021 44,734 45 942,091 ( 211,895 ) 167 730,408 Reclassification of the equity component of convertible senior notes to liabilities upon adoption of Accounting Standards Update 2020-06 (1) — — ( 96,468 ) 47,235 — ( 49,233 ) Exercise of stock options 690 1 24,386 — — 24,387 Vested restricted stock units 331 — — — — — Common stock issued under employee stock purchase plan 71 — 2,954 — — 2,954 Stock-based compensation — — 48,092 — — 48,092 Issuance of common stock upon conversion of 2022 convertible senior notes (Note 11) 102 — 3,040 — — 3,040 Other comprehensive loss (Note 13) — — — — ( 547 ) ( 547 ) Net income — — — 15,909 — 15,909 Balance at December 31, 2022 45,928 46 924,095 ( 148,751 ) ( 380 ) 775,010 Exercise of stock options 63 — 1,939 — — 1,939 Vested restricted stock units 404 — ( 1 ) — — ( 1 ) Common stock withheld for employee withholding tax liabilities on vested restricted stock units ( 4 ) — ( 106 ) — — ( 106 ) Common stock issued under employee stock purchase plan 90 — 2,811 — — 2,811 Stock-based compensation — — 47,895 — — 47,895 Other comprehensive income (Note 13) — — — — 627 627 Net income — — — 41,955 — 41,955 Balance at December 31, 2023 46,481 $ 46 $ 976,633 $ ( 106,796 ) $ 247 $ 870,130 (1) Effective January 1, 2022, the Company adopted Accounting Standards Update 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) on a modified retrospective method of transition. As a result, the Company no longer separately presents in equity an embedded conversion feature for its convertible debt. See accompanying notes to consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-7 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 2021 Operating activities: Net income $ 41,955 $ 15,909 $ 41,980 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes 15,615 ( 7,945 ) 10,872 Depreciation of fixed assets and amortization of intangible assets 75,574 91,501 28,548 Amortization of debt issuance costs 2,996 4,400 2,754 Amortization of debt discount 752 2,807 23,152 Loss on early extinguishment of debt 16,926 — — Stock-based compensation 47,895 48,092 42,246 Changes in contingent consideration ( 3,424 ) ( 29,476 ) ( 989 ) Impairment of indefinite-lived intangible asset — 26,134 — Impairment of investment — 10,000 — Other losses 2,137 285 2,663 Changes in operating assets and liabilities: Accounts receivable, net ( 7,159 ) ( 2,079 ) ( 10,434 ) Inventories, net ( 8,290 ) 2,486 ( 4,467 ) Prepaid expenses and other assets ( 9,639 ) ( 2,699 ) 1,142 Accounts payable 916 6,272 ( 10,262 ) Accrued expenses and income taxes payable ( 22,039 ) ( 19,857 ) 5,451 Other liabilities 434 ( 556 ) ( 104 ) Payment of contingent consideration — — ( 6,835 ) Net cash provided by operating activities 154,649 145,274 125,717 Investing activities: Acquisition of Flexion Therapeutics, Inc. (net of cash acquired) — — ( 420,042 ) Purchases of fixed assets ( 15,161 ) ( 30,076 ) ( 45,866 ) Purchases of available-for-sale investments ( 137,608 ) ( 387,685 ) ( 611,488 ) Sales of available-for-sale investments 237,068 237,576 1,068,736 Payment of contingent consideration — ( 32,000 ) ( 4,000 ) Sale of equity investment — — 9,057 Purchases of equity and debt investments ( 6,758 ) ( 13,000 ) ( 17,187 ) Net cash provided by (used in) investing activities 77,541 ( 225,185 ) ( 20,790 ) Financing activities: Proceeds from exercises of stock options 1,939 24,387 23,844 Proceeds from common stock issued under employee stock purchase plan 2,811 2,954 2,811 Payment of employee withholding taxes on restricted stock unit vests ( 106 ) — — Proceeds from Term loan A facility maturing March 2028 149,550 — — Proceeds from Term loan B facility maturing December 2026 — — 363,750 Repayment of 2022 convertible senior notes — ( 156,960 ) — Repayment of 2024 convertible senior notes — ( 192,609 ) — Repayment of Term loan B facility maturing December 2026 ( 296,875 ) ( 78,125 ) — Repayment of Term loan A facility maturing March 2028 ( 33,437 ) — — Debt extinguishment costs ( 5,750 ) — — Payment of debt issuance and financing costs ( 1,163 ) ( 1,175 ) ( 4,546 ) Payment of contingent consideration — — ( 5,165 ) Net cash (used in) provided by financing activities ( 183,031 ) ( 401,528 ) 380,694 Net increase (decrease) in cash and cash equivalents 49,159 ( 481,439 ) 485,621 Cash and cash equivalents, beginning of year 104,139 585,578 99,957 Cash and cash equivalents, end of year $ 153,298 $ 104,139 $ 585,578 See accompanying notes to consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-8 Table of Content s PACIRA BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In thousands) Year Ended December 31, 2023 2022 2021 Supplemental cash flow information: Cash paid for interest $ 27,635 $ 33,295 $ 6,996 Cash paid for income taxes, net of refunds $ 4,366 $ 7,398 $ 3,221 Non-cash investing and financing activities: Issuance of common stock from conversion of 2022 convertible senior notes $ — $ 3,040 $ — Fixed assets included in accounts payable and accrued liabilities $ 1,982 $ 5,888 $ 6,828 Net additions to contingent consideration liabilities $ — $ — $ 45,241 See accompanying notes to consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-9 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— DESCRIPTION OF BUSINESS Pacira BioSciences, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) is the therapeutic area leader in non-opioid pain management with a stated corporate mission of providing non-opioid pain management options to as many patients as possible and redefining the role of opioids for rescue therapy only. The Company is also developing innovative interventions to address debilitating conditions involving the sympathetic nervous system, such as cardiac electrical storm, chronic pain and spasticity. 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, or pMVL, 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 (the “Flexion Acquisition”), 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 5, 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 targeted nerves. Pacira is subject to risks common to companies in similar industries and stages, including, but not limited to, competition from larger companies, reliance on revenue from 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. NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC. The accounts of the Company’s wholly owned subsidiaries are included in these consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications from previously issued financial statements have been made to conform to the current presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and contingent liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, among other things, revenue recognition, valuation of acquired assets and liabilities, stock-based compensation, inventory costs, impairments of equity investments, long-lived assets, goodwill and other intangible assets, liabilities and accruals, including contingent consideration, and the valuation of deferred tax assets. The Company’s critical accounting estimates are those that are both most important to the Company’s consolidated financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results could differ from these estimates. Revenue From Contracts With Customers The Company’s net product sales consist of (i) EXPAREL in the U.S., European Union, or E.U. and the U.K.; (ii) ZILRETTA in the U.S.; (iii) iovera° in the U.S., Canada and Europe and (iv) sales of its bupivacaine liposome injectable suspension for veterinary use. Royalty revenues are related to a collaborative licensing agreement from the sale of the Company’s bupivacaine liposome injectable suspension for veterinary use. See Note 4, Revenue , for further information on the Company’s accounting policies related to revenue from contracts with customers. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-10 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Collaborative Licensing and Milestone Revenue The Company’s collaboration agreements generally involve a license to the Company’s products. In determining when to recognize the revenue under a collaboration agreement, the Company must assess whether the license is distinct, which depends upon whether the customer can benefit from the license and whether the license is separate from other performance obligations in the agreement. If the license is distinct, the Company must further assess whether the customer has a right to access or a right to use the license depending on whether the functionality of the license is expected to substantively change over time. If the license is not expected to substantively change, the revenue is recognized at the point in time when the license is provided. If the license is expected to substantively change, the revenue is recognized over the license period. Revenue recognition from milestone payments is dependent upon the facts and circumstances surrounding the milestone payments. Milestone payments based on a non-sales metric such as a development-based milestone (e.g., obtaining regulatory approval) represent variable consideration and would be included in the transaction price subject to any constraints. If the milestone payments relate to future development, the timing of recognition depends upon historical experience and the significance a third-party has on the outcome. For milestone payments to be received upon the achievement of a sales threshold, the revenue from the milestone payments is recognized at the later of when the actual sales are incurred or the performance obligation to which the sales relate has been satisfied. Royalty Revenue Royalties are estimated and recognized as revenue when sales to the Company’s commercial partners occur, unless some constraint exists, as the royalties predominately relate to a supply agreement. Royalties are based on sales of the Company’s bupivacaine liposome injectable suspension product for veterinary use. Concentration of Major Customers The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers (including AmerisourceBergen Health Corporation, Cardinal Health, Inc. and McKesson Drug Company), but shipments of the product are sent directly to individual accounts, such as hospitals, ambulatory surgery centers and individual physicians. The Company also sells EXPAREL directly to ambulatory surgery centers and physicians. The Company sells ZILRETTA primarily to specialty distributors and specialty pharmacies, 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 its bupivacaine liposome injectable suspension for veterinary use to a third-party licensee in the U.S. and sells iovera° directly to end users. The table below includes the percentage of revenues comprised by the Company’s three largest wholesalers in each period presented: Year Ended December 31, 2023 2022 2021 Largest wholesaler 33 % 31 % 31 % Second largest wholesaler 24 % 23 % 28 % Third largest wholesaler 20 % 22 % 26 % Total 77 % 76 % 85 % The year ended December 31, 2022 included the first full-year of ZILRETTA net product sales. The Company began recognizing revenue from net product sales of ZILRETTA on November 19, 2021, the date of the Flexion Acquisition. Revenue from outside the U.S. accounted for less than 1 % of the Company’s total revenue for the years ended December 31, 2023, 2022 and 2021. The Company began selling EXPAREL in the E.U. and U.K. and iovera° in Canada in the fourth quarter of 2021. Research and Development Expenses Research and development expenditures are expensed as incurred. These include both internal and external costs, of which a significant portion of development activities are outsourced to third parties, including contract research organizations. Clinical trial costs are accrued over the service periods specified in contracts and adjusted as necessary based on an ongoing review of the level of effort and actual costs incurred. Research and development costs are presented net of reimbursements from commercial partners. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-11 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to basis differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company accrues interest and penalties on underpayments of income taxes, including those related to unrecognized tax benefits, as a component of income tax expense in its consolidated statements of operations. Stock-Based Compensation The Company’s stock-based compensation consists of grants of stock options and restricted stock units, or RSUs, to employees, consultants and non-employee directors, in addition to the opportunity for employees to participate in an employee stock purchase plan. The expense associated with these programs is recognized in the Company’s consolidated statements of operations based on their fair values as they are earned under their applicable vesting terms or the length of an offering period. In calculating the estimated fair value of stock options and employee stock purchase plan share options granted, the Company uses the Black-Scholes option valuation model, or Black-Scholes model, which requires the consideration of the following variables for purposes of estimating fair value in addition to the closing price of the Company’s common stock on the date of grant: • Expected term of the option • Expected volatility • Expected dividends • Risk-free interest rate The Company utilizes its historical volatility data to determine expected volatility over the expected option term. The Company uses an expected term based on its historical stock option activity data. The risk-free interest rate is based on the implied yield on U.S. Department of the Treasury zero-coupon bonds for periods commensurate with the expected term of the options. The dividend yield on the Company’s common stock is estimated to be zero as the Company has not declared or paid any dividends since inception, nor does it have any intention to do so in the foreseeable future. Additionally, the Company’s ability to declare and pay a dividend in the future could be limited per the agreements governing its indebtedness. The Company records forfeitures of grants as they occur rather than estimating forfeitures during each reporting period. Cash and Cash Equivalents All highly liquid investments with maturities of 90 days or less when purchased are considered cash equivalents. Cash equivalents include money market funds. As of December 31, 2023, the carrying value of money market funds was $ 26.1 million. As of December 31, 2022, the carrying value of money market funds was $ 42.6 million. The carrying values approximate fair value as of December 31, 2023 and 2022. Short-Term and Noncurrent Available-For-Sale Investments Available-for-sale investments may consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper, corporate bonds, federal agency bonds, government bonds, and other bonds issued in the U.S. (and denominated in the U.S. dollar) by foreign entities. Current available-for-sale investments are those with maturities of greater than three months, but less than one year. Noncurrent available-for-sale investments hold maturities greater than one year. The Company evaluates the classification of its investments at the time of purchase and re-evaluates such determination at each balance sheet date, which includes an assessment of the intent to hold the available-for-sale securities. The Company’s investment policy sets minimum credit quality criteria and maximum maturity limits on its investments to provide for preservation of capital, liquidity and a reasonable rate of return. The Company classifies its investments as available-for-sale. Available-for-sale securities are recorded at fair value, based on current market valuations. Unrealized holding gains and losses on available-for-sale securities (except for credit losses) are excluded from net income (loss) and are reported as a separate component of accumulated other comprehensive (loss) income until realized. Realized gains and losses are included in interest income in the consolidated statements of operations and are derived using the specific identification method for determining the Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-12 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) cost of the securities sold. The Company evaluates whether a credit loss exists, and in the event a credit loss does exist, the credit loss is recognized in the consolidated statements of operations based on the amount that the fair value is less than the amortized cost. Inventories Inventories consist of finished goods held for sale and distribution, raw materials and work in process. Inventories are stated at the lower of cost, which includes amounts related to material, labor and overhead, or net realizable value, and is determined using the first-in, first-out (“FIFO”) method. The Company periodically reviews its inventory to identify obsolete, slow-moving, or otherwise unsalable inventories, and establishes allowances for situations in which the cost of the inventory is not expected to be recovered. Fixed Assets Fixed assets are recorded at cost, net of accumulated depreciation and amortization. The Company reviews its property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of fixed assets is provided over their estimated useful lives on a straight-line basis. The Company periodically reviews these useful lives relative to physical factors, economic factors and industry trends. If there are changes in the planned use of property or equipment, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of accelerated depreciation expense in future periods. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the related remaining lease terms. Useful lives by asset category are as follows: Asset Category Useful Life Computer equipment and software 1 to 3 years Office furniture and equipment 5 years Manufacturing and laboratory equipment 5 to 10 years Asset Retirement Obligations The Company has contractual obligations stemming from certain of its lease agreements to return leased space to its original condition upon termination of such lease agreements. The Company records its asset retirement obligations, or ARO, along with a corresponding capital asset in an amount equal to the estimated fair value of the ARO, based on the present value of expected future cash flows. In subsequent periods, the Company records expense to accrete the ARO to its full value. Each ARO capital asset is depreciated over the depreciable term of the associated fixed asset. Leases The Company recognizes right-of-use, or ROU, assets and lease liabilities at the commencement of its lease agreements. The leases are evaluated at commencement to determine whether they should be classified as operating or financing leases. Lease costs associated with operating leases are recognized on a straight-line basis, while lease costs for financing leases are recognized over the lease term using the effective interest method. The Company does not have any financing leases. The amount of ROU assets and lease liabilities to be recognized is impacted by the type of lease payments, the lease term and the incremental borrowing rate. Variable lease payments are not included at commencement and are recognized in the period in which they are incurred. The Company has elected to net the amortization of its ROU assets and the reduction of the lease liability principal in other liabilities in the consolidated statement of cash flows. The lease term is based on the contractual term and is adjusted for any renewal options or termination rights that are reasonably certain to be exercised. The incremental borrowing rate is based on the rate the Company estimates it would pay on a collateralized basis over a similar term in a similar economic environment. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-13 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Acquisitions In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of the date of the acquisition at their respective fair values, with some exceptions. Assets acquired and liabilities assumed in a business combination that arise from contingencies are generally recognized at fair value. If fair value can be determined, the asset or liability is recognized; if fair value is not determinable, then no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Acquired in-process research and development, or IPR&D, is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is recorded as an expense at the acquisition date. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company’s consolidated financial statements after the closing date of the acquisition. Contingent Consideration Subsequent to an acquisition, the Company measures contingent consideration arrangements at fair value at each reporting period, with changes in fair value recognized in the consolidated statements of operations. Changes in contingent consideration can result from changes in the assumed achievement and timing of estimated sales and regulatory approvals. In the absence of new information, changes in fair value reflect the passage of time towards achievement or expiration of the milestones, and are accreted to the period in which payments are expected to be made. Goodwill Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination and is not amortized, but is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment exists. Intangible Assets Intangible assets with definite useful lives are amortized on a straight-line basis over their estimated useful lives and are recorded at cost, net of accumulated amortization. Indefinite-lived intangible assets are tested for impairment at least annually or when a triggering event occurs that could indicate a potential impairment exists. Impairment charges are recognized to the extent the carrying value exceeds its fair value. Equity Investments The Company holds investments in equity securities without a readily determinable fair value which are recognized at cost less any impairments, plus or minus any changes resulting from observable price changes in orderly transactions for a similar investment. Impairments of Long-Lived Assets Management reviews long-lived assets, including fixed assets and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-14 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Per Share Data Basic net income (loss) per common share is computed by dividing net income (loss) available (attributable) to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is calculated by dividing net income (loss) available (attributable) to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common stock 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 and the purchase of shares from the Company’s employee stock purchase plan (using the treasury stock method), if applicable. Potential common shares associated with convertible notes are treated under the if-converted method and 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 senior notes on a post-tax basis. Adjustments to the denominator reflect the number of shares assumed to be convertible at the beginning of the period. Foreign Currencies The balance sheet accounts of the Company’s foreign subsidiaries with functional currencies other than the U.S. Dollar are translated using the exchange rate at each respective balance sheet date. Revenues and expenses are translated using the average exchange rates for each calendar month during the year. Translation adjustments are recorded as a component of accumulated other comprehensive (loss) income in the consolidated financial statements. Gains or losses from foreign currency exchanges are recorded in other, net in the consolidated statements of operations. Segment Reporting 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. The Company is managed by a single management team, and, consistent with its organizational structure, the Chief Executive Officer—who is the Company’s chief operating decision maker—manages and allocates resources at a consolidated level. Accordingly, the Company views its business as one reportable operating segment to evaluate its performance, allocate resources, set operational targets and forecast its future financial results. NOTE 3— RECENT ACCOUNTING PRONOUNCEMENTS Recently Issued Accounting Pronouncements Not Adopted as of December 31, 2023 In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The ASU amendment improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis. The new segment disclosure requirements apply for entities with a single reportable segment. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023 and interim periods thereafter, with early adoption permitted. The ASU will require adoption on a retrospective basis. The Company is currently evaluating the impact of adopting ASU 2023-07 on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures . The ASU amendment addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-15 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4— REVENUE The Company’s sources of revenue are detailed in Note 2, Summary of Significant Accounting Policies . 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 is limited to revenue associated with net product sales of EXPAREL and ZILRETTA. Net Product Sales The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers based on orders of the product placed by end-users, namely hospitals, ambulatory surgery centers and healthcare provider offices. 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 specialty pharmacies, 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 and ZILRETTA revenue is recorded at the time the product is delivered 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. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, except for returns, which is based on the expected value method. 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. Chargebacks for fees and discounts to qualified government healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified Department of Veteran Affairs hospitals and 340B entities at prices lower than the list prices charged to other customers. The 340B Drug Discount Program is a U.S. federal government program that requires participating drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at reduced prices. Customers charge the Company for the difference between the product payment and the statutory selling price to the qualified entity. Reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net. Chargeback amounts are generally determined at the time of sale to the qualified government healthcare provider by customers, and the Company generally issues credits for such amounts within weeks of the customer’s notification to the Company of the sale. Reserves for chargebacks consist of credits that the Company expects to issue for units that the Company expects will be sold to qualified healthcare providers, and chargebacks that customers have claimed, but for which the Company has not yet issued a credit. The calculation for 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. The adequacy of these provisions is reviewed on a quarterly basis. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-16 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table provides a summary of activity with respect to the Company’s sales related allowances and accruals related to EXPAREL and ZILRETTA for the years ended December 31, 2023, 2022 and 2021: Returns Allowances Prompt Payment Discounts Service Fees Volume Rebates and Chargebacks Government Rebates Total Balance at December 31, 2020 $ 1,023 $ 1,007 $ 1,168 $ 1,600 $ — $ 4,798 Provision 3,095 10,388 10,112 17,101 1,139 41,835 Payments / Adjustments ( 757 ) ( 10,217 ) ( 7,644 ) ( 15,207 ) ( 378 ) ( 34,203 ) Balance at December 31, 2021 3,361 1,178 3,636 3,494 761 12,430 Provision 1,390 11,145 16,866 48,890 1,641 79,932 Payments / Adjustments ( 3,060 ) ( 11,136 ) ( 17,309 ) ( 46,932 ) ( 1,616 ) ( 80,053 ) Balance at December 31, 2022 1,691 1,187 3,193 5,452 786 12,309 Provision 1,335 11,970 18,129 92,009 2,176 125,619 Payments / Adjustments ( 1,158 ) ( 11,849 ) ( 17,625 ) ( 91,591 ) ( 1,787 ) ( 124,010 ) Balance at December 31, 2023 $ 1,868 $ 1,308 $ 3,697 $ 5,870 $ 1,175 $ 13,918 The Company began recognizing revenue and the related allowances and accruals from net product sales of ZILRETTA on November 19, 2021, the date of the Flexion Acquisition. Collaborative Licensing and Milestone Revenue The Company’s collaborative licensing and milestone revenue recognition policy is discussed in Note 2, Summary of Significant Accounting Policies. Accounts Receivable The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers, specialty distributors, specialty pharmacies and individual physicians. Payment terms generally range from zero to four months from the date of the transaction, and accordingly, there is no significant financing component. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification, or ASC, 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. At contract inception, the Company assesses the goods promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good that is distinct. When identifying individual performance obligations, the Company considers all goods promised in the contract regardless of whether explicitly stated in the customer contract or implied by customary business practices. 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 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. | 2023 Form 10-K | Page F-17 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Disaggregated Revenue The following table represents disaggregated net product sales in the periods presented as follows (in thousands): Year Ended December 31, 2023 2022 2021 Net product sales: EXPAREL $ 538,120 $ 536,899 $ 506,515 ZILRETTA 111,098 105,517 12,683 iovera° 19,685 15,258 16,162 Bupivacaine liposome injectable suspension 3,342 6,476 3,606 Total net product sales $ 672,245 $ 664,150 $ 538,966 The Company began recognizing revenue from net product sales of ZILRETTA on November 19, 2021, the date of the Flexion Acquisition. NOTE 5— FLEXION ACQUISITION On November 19, 2021, the Company acquired Flexion, a biopharmaceutical company focused on the discovery, development and commercialization of novel, local therapies for the treatment of patients with musculoskeletal conditions, beginning with OA, the most common form of arthritis, pursuant to an Agreement and Plan of Merger (the “Flexion Merger Agreement”), dated as of October 11, 2021, by and among the Company, Oyster Acquisition Company Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Purchaser”), and Flexion. Following the completion of a successful tender offer for the shares of Flexion’s common stock, and pursuant to the terms of the Flexion Merger Agreement and in accordance with Section 251(h) of the General Corporation Law of the State of Delaware, Purchaser merged with and into Flexion with Flexion surviving as a wholly owned subsidiary of the Company. The Company changed the name of Flexion to Pacira Therapeutics, Inc. after completing the merger. 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 of Flexion debt not assumed by the Company and (iii) $ 45.2 million of estimated contingent consideration at the time of the acquisition 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. At the time of the acquisition, the Company estimated that 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 by December 31, 2030, as follows: (i) $ 1.00 per CVR the first time that net sales of ZILRETTA in any calendar year equal or exceed $ 250.0 million; (ii) $ 2.00 per CVR, the first time that net sales of ZILRETTA in any calendar year equal or exceed $ 375.0 million; (iii) $ 3.00 per CVR, the first time that net sales of ZILRETTA in any calendar year equal or exceed $ 500.0 million; (iv) $ 1.00 per CVR upon approval by the U.S. Food and Drug Administration, or FDA, of a Biologics License Application (BLA) for PCRX-201, a clinical stage gene therapy product candidate; and (v) $ 1.00 per CVR upon approval by the FDA of a new drug application, or NDA, for PCRX-301, an investigational product candidate. In September 2022, based on the results of a completed phase 1 study, the Company decided to discontinue further development of PCRX-301. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-18 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The total consideration for the Flexion Acquisition was $ 578.8 million which consisted of the following (in thousands, except per share amounts): Fair Value of Purchase Price Consideration Amount Fair value of purchase consideration paid at closing: Cash consideration for all outstanding shares of Flexion’s common stock ( 50,392 shares of common stock acquired at $ 8.50 per share) $ 428,333 Cash consideration paid to settle RSUs and in-the-money stock options 20,153 Cash paid to settle Flexion debt 85,118 533,604 Fair value of CVRs 45,241 Total purchase consideration $ 578,845 The Company accounted for the Flexion Acquisition using the acquisition method of accounting and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its consolidated financial statements from the acquisition date of November 19, 2021. NOTE 6— INVENTORIES The components of inventories, net are as follows (in thousands): December 31, 2023 2022 Raw materials $ 54,099 $ 39,810 Work-in-process 31,215 28,853 Finished goods 19,039 27,400 Total $ 104,353 $ 96,063 NOTE 7— FIXED ASSETS Fixed assets, net, summarized by major category, consist of the following (in thousands): December 31, 2023 2022 Machinery and equipment $ 121,773 $ 118,684 Leasehold improvements 61,826 61,302 Computer equipment and software 17,186 15,360 Office furniture and equipment 2,543 2,420 Construction in progress 105,905 103,226 Total 309,233 300,992 Less: accumulated depreciation ( 135,306 ) ( 117,480 ) Fixed assets, net $ 173,927 $ 183,512 For information on useful lives by asset category, refer to Note 2, Summary of Significant Accounting Policies . Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $ 18.3 million, $ 34.2 million and $ 15.0 million, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company capitalized interest of $ 3.5 million, $ 4.1 million and $ 3.9 million, respectively. In 2022, the Company accelerated $ 10.5 million of depreciation expense for certain machinery and equipment for which no future economic benefit was identified. As of December 31, 2023 and 2022, total fixed assets, net, includes leasehold improvements and manufacturing process equipment located outside of the U.S. in the amount of $ 36.8 million and $ 44.7 million, respectively. As of December 31, 2023 and 2022, the Company had AROs of $ 4.3 million and $ 3.3 million, respectively, included in accrued expenses and other liabilities on its consolidated balance sheet, for costs associated with returning leased space to its original condition upon the termination of certain of its lease agreements. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-19 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8— LEASES The Company leases all of its facilities, including its EXPAREL and iovera° handpiece manufacturing facility at its Science Center Campus in San Diego, California. The Company also has two embedded leases with Thermo Fisher Scientific Pharma Services, or Thermo Fisher, 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. Since July 2022 and February 2023, the Company has been recognizing sublease income for laboratory space leased in Woburn, Massachusetts and a portion of office space leased in Burlington, Massachusetts, respectively, from leases that were assumed as part of the Flexion Acquisition. During the third quarter of 2023, the Company partially exited its Burlington, Massachusetts office space lease that had been assumed as part of the Flexion Acquisition through a one-time termination fee of $ 0.8 million, which released its obligation of $ 1.6 million in future cash payments for the respective proportion of square footage exited. The partial lease termination resulted in a nominal gain which was recorded within contingent consideration (gains) charges, acquisition-related charges and other in the consolidated statements of operations. 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): Year Ended December 31, Operating Lease Costs 2023 2022 2021 Fixed lease costs $ 14,344 $ 13,949 $ 11,976 Variable lease costs 1,952 1,988 1,722 Sublease income ( 657 ) ( 253 ) — Total $ 15,639 $ 15,684 $ 13,698 Supplemental cash flow information related to operating leases is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Cash paid for operating lease liabilities, net of lease incentives $ 14,259 $ 14,357 $ 12,709 Right-of-use assets recorded in exchange for lease obligations $ — $ 3,324 $ 8,692 The weighted average remaining lease terms and the weighted average discount rates are summarized as follows: December 31, 2023 2022 Weighted average remaining lease term 6.04 years 6.83 years Weighted average discount rate 7.02 % 7.05 % Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-20 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2023, maturities of the Company’s operating lease liabilities are as follows (in thousands): Year Aggregate Minimum Payments Due 2024 $ 13,038 2025 12,775 2026 12,814 2027 12,587 2028 10,925 Thereafter 16,426 Total future lease payments 78,565 Less: imputed interest ( 14,958 ) Total operating lease liabilities $ 63,607 NOTE 9— GOODWILL AND INTANGIBLE ASSETS Goodwill The Company’s goodwill results from the acquisition of Pacira Pharmaceuticals, Inc. (the Company’s California operating subsidiary) from SkyePharma Holding, Inc. (now a subsidiary of Vectura Group plc), or Skyepharma, in 2007 (the “Skyepharma Acquisition”), the MyoScience Acquisition in 2019 and the Flexion Acquisition in 2021. The Company’s goodwill balance at December 31, 2023 and December 31, 2022 was $ 163.2 million. The Company’s goodwill balance at December 31, 2021 was $ 145.2 million. During the year ended December 31, 2022, within one year from the Flexion Acquisition date, measurement period adjustments of $ 18.1 million were recorded to goodwill as the facts and circumstances existed prior to the acquisition date. The adjustments primarily represent the finalization of a tax study and pre-acquisition expenses. The acquired goodwill and intangible assets are not deductible for tax purposes. The Skyepharma Acquisition was accounted for under Statement of Financial Accounting Standards 141, Accounting for Business Combinations , which was the effective GAAP standard at the date of acquisition. In connection with the Skyepharma Acquisition, the Company agreed to certain milestone payments for DepoBupivacaine products, including EXPAREL. In the fourth quarter of 2021, the Company met both of its two remaining milestones due to Skyepharma: $ 4.0 million upon the first commercial sale in the U.K., France, Germany, Italy or Spain, which was paid in the fourth quarter of 2021; and $ 32.0 million when annual net sales collected reached $ 500.0 million, which was paid in the first quarter of 2022. These milestone payments were treated as additions to the Skyepharma Acquisition and, therefore, recorded as goodwill in the years achieved. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-21 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Intangible Assets Intangible assets, net, consists of the developed technology and IPR&D from the Flexion Acquisition and developed technology and customer relationships from the MyoScience Acquisition and are summarized as follows (dollar amounts in thousands): December 31, 2023 Gross Carrying Value Accumulated Amortization Intangible Assets, Net Weighted-Average Useful Lives Developed technologies $ 590,000 $ ( 141,655 ) $ 448,345 10 years, 5 months Customer relationships 90 ( 43 ) 47 10 years Total finite-lived intangible assets, net 590,090 ( 141,698 ) 448,392 Acquired IPR&D 34,866 — 34,866 Total intangible assets, net $ 624,956 $ ( 141,698 ) $ 483,258 December 31, 2022 Gross Carrying Value Accumulated Amortization Intangible Assets, Net Weighted-Average Useful Lives Developed technology $ 590,000 $ ( 84,376 ) $ 505,624 10 years, 5 months Customer relationships 90 ( 34 ) 56 10 years Total finite-lived intangible assets, net 590,090 ( 84,410 ) 505,680 Acquired IPR&D 34,866 — 34,866 Total intangible assets, net $ 624,956 $ ( 84,410 ) $ 540,546 Amortization expense on intangible assets was $ 57.3 million for both years ended December 31, 2023 and 2022. 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 $ 57.3 million from 2024 to 2030, $ 37.4 million in 2031, $ 7.9 million in 2032 and $ 2.2 million in 2033. The Company reviews its indefinite-lived intangible assets for impairment annually and whenever an event or change in circumstances arises that indicates the carrying amount of an indefinite-lived intangible asset is at risk of not being recoverable. During the year ended December 31, 2023, the Company conducted the annual impairment assessment for its acquired IPR&D and concluded there was no impairment as of that date. During the year ended December 31, 2022, the annual impairment assessment of ZILRETTA acquired IPR&D for the treatment of OA pain of the shoulder was conducted through a recoverability test at December 31, 2022 by comparing the $ 60.0 million carrying value of the asset against the fair value through a discounted cash flow model of $ 33.9 million based on new facts and circumstances. The change in fair value was primarily driven by later timelines for the completion of clinical trials impacting revenue forecasts, among other factors. An impairment of $ 26.1 million was recognized within contingent consideration (gains) charges, acquisition-related charges and other in the consolidated statements of operations for the year ended December 31, 2022 based on the amount its previous carrying value exceeded its updated fair value. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-22 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10— ACCRUED EXPENSES Accrued expenses consist of the following (in thousands): December 31, 2023 2022 Accrued selling, general and administrative expenses $ 12,811 $ 11,927 Accrued research and development expenses 5,141 4,065 Other accrued operating expenses 14,133 14,959 Compensation and benefits 21,682 26,198 Termination fee (1) — 13,000 Accrued royalties 561 3,400 Accrued interest 1,389 8,941 Product returns and wholesaler service fees 8,526 7,295 Total $ 64,243 $ 89,785 (1) See Note 20, Commitments and Contingencies , for more information. NOTE 11— DEBT The carrying value of the Company’s outstanding debt is summarized as follows (amounts in thousands): December 31, 2023 2022 Term loan A facility maturing March 2028 $ 115,202 $ — Term loan B facility maturing December 2026 — 284,704 0.750 % Convertible senior notes due August 2025 398,594 396,126 3.375 % Convertible senior notes due May 2024 8,641 8,641 Total $ 522,437 $ 689,471 2028 Term Loan A Facility On March 31, 2023, the Company entered into a credit agreement (the “TLA Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders, to refinance the indebtedness outstanding under the Company’s TLB Credit Agreement (as defined and discussed below). The term loan issued under the TLA Credit Agreement (the “TLA Term Loan”) was issued at a 0.30 % discount and provides for a single-advance term loan A facility in the principal amount of $ 150.0 million, which is secured by substantially all of the Company’s and any 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 TLA Term Loan were approximately $ 149.6 million after deducting an original issue discount of $ 0.4 million. The total debt composition of the TLA Term Loan is as follows (in thousands): December 31, 2023 Term loan A facility maturing March 2028 $ 116,563 Deferred financing costs ( 988 ) Discount on debt ( 373 ) Total debt, net of debt discount and deferred financing costs $ 115,202 The TLA Term Loan matures on March 31, 2028 and the TLA Credit Agreement requires quarterly repayments of principal in the amount of $ 2.8 million which commenced on June 30, 2023, increasing to $ 3.8 million commencing March 31, 2025, with a remaining balloon payment of approximately $ 85.3 million due at maturity. Due to voluntary principal Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-23 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) prepayments of $ 30.6 million made during the year ended December 31, 2023, the Company is not required to make further principal payments until December 2025, although the Company retains the option to do so. The TLA Credit Agreement requires the Company to, among other things, maintain (i) a Senior Secured Net Leverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00 and (ii) a Fixed Charge Coverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no less than 1.50 to 1.00. The TLA Credit Agreement requires the Company to maintain an unrestricted cash and cash equivalents balance of at least $ 500.0 million less any prepayments of the 2025 Notes (as defined below) at any time from 91 days prior to the maturity date through the earlier of (i) the latest maturity date of the 2025 Notes and (ii) the date on which there is no outstanding principal amount of the 2025 Notes. The TLA Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. As of December 31, 2023, the Company was in compliance with all financial covenants under the TLA Credit Agreement. The Company may elect to borrow either (i) alternate base rate borrowings or (ii) term benchmark borrowings or daily simple SOFR (as defined in the TLA Credit Agreement) borrowings. Each term loan borrowing that is an alternate base rate borrowing bears interest at a rate per annum equal to (i) the Alternate Base Rate (as defined in the TLA Credit Agreement), plus (ii) a spread based on the Company’s Senior Secured Net Leverage Ratio ranging from 2.00 % to 2.75 %. Each term loan borrowing that is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in the TLA Credit Agreement), plus (ii) a spread based on the Company’s Senior Secured Net Leverage Ratio ranging from 3.00 % to 3.75 %. During the year ended December 31, 2023, the Company made a scheduled principal payment of $ 2.8 million as well as $ 30.6 million of voluntary principal prepayments. As of December 31, 2023, borrowings under the TLA Term Loan consisted entirely of term benchmark borrowings at a rate of 8.46 %. 2026 Term Loan B Facility In December 2021, the Company entered into a term loan credit agreement (the “TLB Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and the initial lender. The term loan issued under the TLB Credit Agreement (the “TLB Term Loan”) was issued at a 3.00 % discount and allowed for a single-advance term loan B facility in the principal amount of $ 375.0 million, which was secured by substantially all of the Company’s and each subsidiary guarantor’s assets. The net proceeds of the TLB Term Loan were approximately $ 363.8 million after deducting an original issue discount of $ 11.2 million. On March 31, 2023, the Company used the $ 149.6 million of net borrowings under the TLA Credit Agreement and cash on hand to repay the indebtedness outstanding under the TLB Credit Agreement and concurrently terminated the TLB Credit Agreement. The Company incurred a prepayment fee of 2.00 % of the outstanding principal balance of the TLB Term Loan in connection with the termination. The total debt composition of the TLB Term Loan was as follows (in thousands): December 31, 2023 2022 Term loan B facility maturing December 2026 $ — $ 296,875 Deferred financing costs — ( 3,919 ) Discount on debt — ( 8,252 ) Total debt, net of debt discount and deferred financing costs $ — $ 284,704 During the year ended December 31, 2023, the Company made a scheduled principal payment of $ 9.4 million and repaid the outstanding $ 287.5 million principal on the TLB Term Loan, which resulted in a $ 16.9 million loss on early extinguishment of debt. Convertible Senior Notes Due 2025 In July 2020, the Company completed a private placement of $ 402.5 million in aggregate principal amount of 0.750 % convertible senior notes due 2025, or 2025 Notes, and entered into an indenture with Computershare Corporate Trust, N.A. (formerly Wells Fargo Bank, N.A.), or 2025 Indenture, with respect to the 2025 Notes. The 2025 Notes accrue interest at a fixed rate of 0.750 % per year, payable semiannually in arrears on February 1 st and August 1 st of each year, beginning on February 1, 2021. The 2025 Notes mature on August 1, 2025. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-24 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The total debt composition of the 2025 Notes is as follows (in thousands): December 31, 2023 2022 0.750 % convertible senior notes due August 2025 $ 402,500 $ 402,500 Deferred financing costs ( 3,906 ) ( 6,374 ) Total debt, net of debt discount and deferred financing costs $ 398,594 $ 396,126 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 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). The Company’s transaction costs of approximately $ 12.5 million related to the issuance of the 2025 Notes are amortized to interest expense over the five-year term of the 2025 Notes. 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; or (iv) if the Company calls the 2025 Notes for redemption, until the close of business on the business day immediately preceding the redemption date. The conditions for conversion were not met during the calendar quarter ended December 31, 2023. On or after February 3, 2025, until the close of business on the second scheduled trading day immediately preceding August 1, 2025, holders may convert their 2025 Notes at any time. Upon conversion, holders will receive the principal amount of their 2025 Notes and any excess conversion value, 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 2025 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 2025 Notes is 13.9324 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of $ 71.78 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 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 December 31, 2023, the 2025 Notes had a market price of $924 per $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. Upon the receipt of conversion requests, the settlement of the 2025 Notes will be paid pursuant to the terms of the 2025 Indenture. In the event that all of the 2025 Notes are converted, the Company would be required to repay the $ 402.5 million in principal value and any conversion premium in any combination of cash and shares of its common stock (at the Company’s option). Beginning on 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. 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. In addition, calling the 2025 Notes for redemption will constitute a “make-whole fundamental change” (as defined in the 2025 Indenture) and will, in certain circumstances, Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-25 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 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 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 classified on the Company’s consolidated balance sheet at December 31, 2023 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. Prior to January 1, 2022, under the previous ASC 470-20, Debt with Conversion and Other Options , an entity used to separately account for the liability and equity components of convertible debt instruments 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 used to be valued in a manner that reflected 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, which represented the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2025 Notes and was recorded in additional paid-in capital on the consolidated balance sheet at the issuance date. The equity component used to be treated as a discount on the liability component of the 2025 Notes, which was amortized over the five-year term of the 2025 Notes using the effective interest rate method. Resulting from ASU 2020-06, ASC 470-20 was revised effective January 1, 2022 which eliminated the requirement to separately account for the 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 convertible debt instruments issued with substantial premiums for which the premiums were recorded as paid in capital. Effective January 1, 2022, the 2025 Notes debt discount carrying value of $ 64.7 million was eliminated and there was a $ 1.7 million increase in deferred financing costs offset by additional paid-in capital, accumulated deficit and deferred tax assets. 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, in May 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 Computershare Corporate Trust, N.A. (formerly 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. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-26 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 December 31, 2023, the remaining principal outstanding was $ 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 with respect to the 2022 Notes. 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, which increased additional paid-in capital by $ 3.0 million. Interest Expense The following table sets forth the total interest expense recognized in the periods presented (dollar amounts in thousands): Year Ended December 31, 2023 2022 2021 Contractual and other interest expense $ 20,082 $ 36,880 $ 9,759 Amortization of debt issuance costs 2,996 4,400 2,754 Amortization of debt discount 752 2,807 23,152 Capitalized interest and other (Note 7) ( 3,524 ) ( 4,111 ) ( 3,915 ) Total $ 20,306 $ 39,976 $ 31,750 Effective interest rate on total debt 3.74 % 5.47 % 6.66 % 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 does not record interest expense on previously recorded discounts on convertible debt attributable to the convertible feature. The deferred financing costs previously allocated to the conversion features have been re-allocated to the outstanding debt. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-27 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12— FINANCIAL INSTRUMENTS Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the FASB established a three-level hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of fair value measurements are: • Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. • Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. • Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. 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 convertible senior notes and its term loan 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 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, whereas an equity investment was fully impaired during the year ended December 31, 2022. At December 31, 2023, the carrying values and fair values of the Company’s financial assets and liabilities were as follows (in thousands): Carrying Value Fair Value Measurements Using Level 1 Level 2 Level 3 Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis: Financial Asset: Equity investments $ 15,877 $ — $ — $ 15,877 Convertible notes receivable $ 12,134 $ — $ — $ 12,134 Financial Liabilities: Acquisition-related contingent consideration $ 24,698 $ — $ — $ 24,698 Financial Liabilities Measured at Amortized Cost: Term loan A facility due March 2028 $ 115,202 $ — $ 115,980 $ — 0.750 % convertible senior notes due 2025 (1) $ 398,594 $ — $ 371,809 $ — 3.375 % convertible senior notes due 2024 $ 8,641 $ — $ 8,641 $ — (1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $ 33.74 per share on December 29, 2023—the last trading day of 2023—compared to a conversion price of $ 71.78 per share. At December 31, 2023, as the conversion price was above the stock price, the requirements for conversion have not been met. The maximum conversion premium that could have been due on the 2025 Notes is 5.6 million shares of the Company’s common stock, which assumes no increase in the conversion rate for certain events. Certain assets and liabilities are measured at fair value on a non-recurring basis, including assets and liabilities acquired in a business combination and long-lived assets, which would be recognized at fair value if deemed impaired or if reclassified as assets held for sale. The fair value in these instances would be determined using Level 3 inputs. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-28 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis 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 11,750 1,250 13,000 Impairment ( 10,000 ) — ( 10,000 ) Foreign currency adjustments — ( 67 ) ( 67 ) Balance at December 31, 2022 15,877 5,315 21,192 Purchases — 6,758 6,758 Foreign currency adjustments — 61 61 Balance at December 31, 2023 $ 15,877 $ 12,134 $ 28,011 During the year ended December 31, 2022, an impairment of an equity investment of $ 10.0 million was recorded in other, net in the consolidated statements of operations. During the year ended December 31, 2021, the Company sold an equity investment for net cash proceeds of $ 9.1 million and recognized a realized loss of $ 2.6 million, which was recorded in other, net in the consolidated statements of operations. The fair value of the divested equity investment was based on a Level 1 input. Acquisition-Related Contingent Consideration The Company has recognized contingent consideration related to the Flexion Acquisition and the MyoScience Acquisition in the amount of $ 24.7 million and $ 28.1 million as of December 31, 2023 and 2022, respectively. Refer to Note 5, Flexion Acquisition and Note 18, Contingent Consideration (Gains) Charges, Acquisition-related Charges and Other, for more information. 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. 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 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. In November 2021, the Company completed the Flexion Acquisition, which provided for contingent consideration related to CVRs that were issued to Flexion shareholders and certain equity award holders which could aggregate up to a total of $ 372.3 million if certain regulatory and commercial milestones are met. The aggregate amount was previously $ 425.5 million prior to the Company’s September 2022 decision to formally discontinue further development of PCRX-301. The Company’s obligation to make milestone payments is limited to those milestones achieved through December 31, 2030, and are to be paid within 60 days of the end of the fiscal quarter of achievement. For the year ended December 31, 2023, the Company recorded gai ns of $ 3.4 million due to a decrease in the fair value of the Flexion contingent consideration. The decrease was primarily due to adjustments in the assumption for the long-term forecasts which reduced the probability of meeting the sales-based contingent consideration milestones by December 31, 2030, the expiration date for achieving the milestones. The impact of this assumption on the fair value was partially offset by a decrease to the assumed discount rate based on a significant improvement in the Company’s incremental borrowing rate resulting from the TLA Credit Agreement entered into in March 2023. For the year ended December 31, 2022, the Company recorded a gain of $ 18.3 million primarily due to adjustments to near -term forecasts for the earnout period of the Flexion contingent consideration. From the date of the Flexion Acquisition through December 31, 2021, the Company recorded charges of $ 1.2 million. These gains and charges were recorded as contingent consideration (gains) charges, acquisition-related charges and other in the consolidated statements of operations. At Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-29 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2023, the weighted average discount rate was 8.8 % and the probability of payment for the achievement of the remaining regulatory milestone by the expiration date was 12.5 %. As of December 31, 2023 and 2022, the contingent consideration liability related to the Flexion Acquisition was recognized in the amount of $ 24.7 million and $ 28.1 million, respectively. 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 was limited to milestones achieved through December 31, 2023. As of December 31, 2023 and 2022, the contingent consideration liability related to the MyoScience Acquisition has been assessed as zero . For the year ended December 31, 2022, the Company recognized a contingent consideration gain of $ 11.2 million due to the reduced probability of meeting the MyoScience contingent consideration milestones by the expiration. For the year ended December 31, 2021, the Company recognized a gain of $ 2.2 million. These gains were recorded as contingent consideration (gains) charges, acquisition-related charges and other in the consolidated statements of operations . The following table includes the key assumptions used in the valuation of the Company’s contingent consideration: Assumption Flexion Ranges Utilized as of December 31, 2023 Discount rates 7.9 % to 9.7 % Probability of payment for achievement of regulatory milestones 0 % to 12.5 % Projected year of achieving or expiration of regulatory milestones 2030 The change in the Company’s contingent consideration recorded at fair value using Level 3 measurements is as follows (in thousands): Contingent Consideration Fair Value Balance at December 31, 2021 $ 57,598 Fair value adjustments and accretion ( 29,476 ) Balance at December 31, 2022 28,122 Fair value adjustments and accretion ( 3,424 ) Balance at December 31, 2023 $ 24,698 Available-for-Sale Investments Short-term investments consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper and corporate, federal agency and government bonds with maturities greater than three months, but less than one year. Noncurrent investments consist of U.S. government and federal agency bonds and asset-backed securities 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 noncurrent investments are reported in other comprehensive (loss) income. At December 31, 2023, all of the Company’s short-term and noncurrent 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. Treasury bill rate as an observable input. The fair value of the federal agency bonds, 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. The fair value of U.S. government bonds is based on level 1 trading activity. At the time of purchase, all short-term and noncurrent investments had an “A” or better rating by Standard & Poor’s. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-30 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following summarizes the Company’s investments at December 31, 2023 and 2022 (in thousands): December 31, 2023 Investments: Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Level 1) Fair Value (Level 2) Current: Asset-backed securities $ 9,539 $ 1 $ — $ — $ 9,540 Commercial paper 77,941 103 — — 78,044 U.S. federal agency bonds 22,849 — ( 29 ) — 22,820 U.S. government bonds 14,899 — ( 20 ) 14,879 — Subtotal 125,228 104 ( 49 ) 14,879 110,404 Noncurrent: Asset-backed securities 2,403 7 — — 2,410 Subtotal 2,403 7 — — 2,410 Total $ 127,631 $ 111 $ ( 49 ) $ 14,879 $ 112,814 December 31, 2022 Investments: Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Level 1) Fair Value (Level 2) Current: Asset-backed securities $ 6,836 $ — $ ( 3 ) $ — $ 6,833 Commercial paper 134,423 23 ( 386 ) — 134,060 U.S. federal agency bonds 41,971 — ( 337 ) — 41,634 U.S. government bonds 2,003 — ( 18 ) — 1,985 Subtotal 185,233 23 ( 744 ) — 184,512 Noncurrent: U.S. federal agency bonds 22,783 2 ( 66 ) — 22,719 U.S. government bonds 14,499 — ( 9 ) — 14,490 Subtotal 37,282 2 ( 75 ) — 37,209 Total $ 222,515 $ 25 $ ( 819 ) $ — $ 221,721 At December 31, 2023, 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 December 31, 2023 and 2022, the interest receivable recognized in prepaid expenses and other current assets was $ 0.4 million and $ 0.8 million, respectively. Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and noncurrent 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 December 31, 2023, three wholesalers each accounted for over 10% of the Company’s accounts receivable at 37 %, 19 % and 16 %. As of December 31, 2022, three wholesalers each accounted for over 10% of the Company’s accounts receivable at 34 %, 19 % and 18 %. For additional information regarding the Company’s wholesalers, see Note 2 , Summary of Significant Accounting Policies . 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 December 31, 2023 and 2022, the Company did not deem any allowances for credit losses on its accounts receivable necessary. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-31 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13— STOCKHOLDERS’ EQUITY Common Stock The Company is authorized to issue up to 250,000,000 shares of common stock, of which 46,481,174 and 45,927,790 were issued and outstanding at December 31, 2023 and 2022, respectively. Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock. No preferred stock was issued or outstanding at either December 31, 2023 or 2022. Accumulated Other Comprehensive Income (Loss) The following table illustrates the changes in the balances of the Company’s accumulated other comprehensive income (loss) for the periods presented (in thousands): 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 (1) ( 180 ) — ( 180 ) Foreign currency translation adjustments — 29 29 Balance at December 31, 2021 139 28 167 Net unrealized loss on investments, net of tax (1) ( 662 ) — ( 662 ) Foreign currency translation adjustments — 115 115 Balance at December 31, 2022 ( 523 ) 143 ( 380 ) Net unrealized gain on investments, net of tax (1) 647 — 647 Foreign currency translation adjustments — ( 20 ) ( 20 ) Balance at December 31, 2023 $ 124 $ 123 $ 247 (1) Net of a $( 0.2 ) million, $ 0.2 million and $ 0.1 million tax (expense) benefit for the years ended December 31, 2023, 2022 and 2021, respectively. NOTE 14— STOCK PLANS Stock Incentive Plans The Company’s Amended and Restated 2011 Stock Incentive Plan, or 2011 Plan, was originally adopted by its board of directors and approved by its stockholders in June 2011 and was amended and restated in June 2014, June 2016, June 2019, June 2021 and June 2023. The June 2023 amendment and restatement and approval by the Company’s stockholders increased the number of shares of common stock authorized for issuance as equity awards under the 2011 Plan by 3,300,000 shares, which allows the granting of incentive stock options, non-statutory stock options, restricted stock units and other stock-based awards. In April 2014, the Company’s board of directors approved and adopted the Company’s 2014 Inducement Plan (the “2014 Inducement Plan”), pursuant to which awards could be made to new employees under the 2014 Inducement Plan for up to 175,000 shares of the Company’s common stock as a material inducement to such persons entering into employment with the Company. On December 20, 2023, the board of directors, upon recommendation of the compensation committee of the board of directors, adopted the Pacira BioSciences, Inc. Amended and Restated 2014 Inducement Plan (as amended and restated, the “Inducement Plan”) such that, among other things, an additional 642,093 shares of the Company’s common stock and 817,093 shares of the Company’s common stock in total, were reserved for issuance under the Inducement Plan, and the term of the Inducement Plan was extended such that it will now expire on December 20, 2033. The Inducement Plan allows the granting of incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-32 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In addition, on December 20, 2023, the board of directors, upon recommendation of the compensation committee, approved the Inducement Award (as defined below) pursuant to the terms and provisions of the Inducement Plan. The “Inducement Award” means the grant to Frank D. Lee, in connection with his appointment as Chief Executive Officer, of: (i) 692,512 stock options with an exercise price per share equal to the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market on January 3, 2024, vesting over a four-year period with a contractual term of 10 years, which will vest and become exercisable as to 25 % of the option shares on January 3, 2025, and vest as to the remaining shares in successive equal quarterly installments over the subsequent three years, provided that Mr. Lee remains in continuous service with the Company as of each vesting date, and (ii) restricted stock units for 99,520 shares of the Company’s common stock, subject to continued service with the Company as of each vesting date, to vest in four equal annual installments beginning on January 2, 2025. Following the Inducement Award, no shares of the Company’s common stock remained reserved for issuance under the Inducement Plan. The Inducement Plan was adopted by the board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or member of the board of directors or the board of directors or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. Equity Grants The Company’s stock option grants have an exercise price equal to the closing price of the Company’s common stock on the date of grant, generally have a 10-year contractual term and vest in increments (typically over four years from the date of grant, although the Company may occasionally grant options with different vesting terms, including grants made to its non-employee directors). The Company also grants RSUs to employees and non-employee directors generally vesting in increments over four years from the date of grant, except for such grants made to non-employee directors. The Company uses authorized but unissued shares of its common stock to satisfy its obligations under these plans. Employee Stock Purchase Plan The Company’s Amended and Restated 2014 Employee Stock Purchase Plan, or ESPP, was originally adopted by its board of directors in April 2014, approved by the Company’s stockholders in June 2014 and amended and restated in June 2022. The June 2022 amendment and restatement increased the number of shares of common stock that may be sold under the plan by an additional 500,000 shares from the originally provided 500,000 shares. The purpose of the ESPP is to provide a vehicle for eligible employees to purchase shares of the Company’s common stock at a discounted price and to help retain and motivate current employees as well as attract new talent. Under the ESPP, up to 1,000,000 shares of common stock may be sold. The ESPP expires in June 2032. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code, or IRC. The maximum fair market value of stock which can be purchased by a participant in a calendar year is $ 25,000 . Six-month offering periods begin on January 1 and July 1 of each year. During an offering period, eligible employees have the opportunity to elect to purchase shares of the Company’s common stock on the purchase dates of June 30 and December 31 (or the last trading day of an offering period). The per share purchase price is equal to 85 % of the fair market value of the Company’s common stock on either the offering date or the purchase date, whichever is lesser. During the year ended December 31, 2023, 90,317 shares were purchased and issued through the ESPP. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-33 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following tables contain information about the Company’s stock incentive plans at December 31, 2023: Stock Incentive Plan Awards Reserved For Issuance Awards Issued Awards Available For Grant 2011 Plan 17,731,701 15,362,454 2,369,247 2014 Inducement Plan (1) 817,093 25,061 792,032 Total 18,548,794 15,387,515 3,161,279 Employee Stock Purchase Plan Shares Reserved For Purchase Shares Purchased Shares Available For Purchase ESPP 1,000,000 570,667 429,333 (1) On December 20, 2023, in connection with Frank D. Lee’s appointment as Chief Executive Officer, the board of directors approved the grant of inducement awards to Mr. Lee pursuant to the Inducement Plan, which was adopted by the board of directors upon recommendation of the compensation committee of the board of directors, on December 20, 2023. Mr. Lee’s inducement awards included stock options to purchase an aggregate of 692,512 shares of common stock with an exercise price per share equal to $ 32.07 , the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market on January 3, 2024, and, subject to continued service with the Company as of each vesting date, such option will vest and become exercisable as to 25 % of the option shares on January 3, 2025, and vest as to the remaining shares in successive equal quarterly installments over the subsequent three years; and (ii) a restricted stock unit award for 99,520 shares of the Company’s common stock, subject to continued service with the Company as of each vesting date, to vest in four equal annual installments beginning on January 2, 2025, in each case, pursuant to the terms and provisions of the Inducement Plan. As these awards were granted subsequent to December 31, 2023, they are not reflected in the table above as awards issued. Stock-Based Compensation Compensation expense for stock options and RSUs is based on the estimated grant date fair value of an award recognized over the requisite service period on a straight-line expense attribution method. Compensation expense for ESPP share options is based on the estimated grant date fair value of the ESPP shares and the grant date number of shares that can be purchased, which is recognized as expense on a straight-line expense attribution method over the length of an offering period. The Company recognized stock-based compensation expense in its consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 as follows (in thousands): Year Ended December 31, 2023 2022 2021 Cost of goods sold $ 5,537 $ 5,967 $ 5,891 Research and development 8,694 6,594 5,465 Selling, general and administrative 33,664 35,531 30,890 Total $ 47,895 $ 48,092 $ 42,246 Stock-based compensation from: Stock options $ 24,005 $ 26,800 $ 25,980 RSUs 22,974 20,310 15,335 ESPP 916 982 931 Total $ 47,895 $ 48,092 $ 42,246 Related income tax benefit $ 10,186 $ 10,219 $ 8,989 Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-34 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes the Company’s stock option activity and related information for the period from December 31, 2020 to December 31, 2023: Number of Stock Options Weighted Average Exercise Price (Per Share) Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in Thousands) Outstanding at December 31, 2020 6,235,118 $ 45.98 6.97 $ 102,955 Granted 890,277 60.27 Exercised ( 732,117 ) 32.56 $ 23,967 Forfeited ( 278,233 ) 46.46 Expired ( 64,505 ) 80.31 Outstanding at December 31, 2021 6,050,540 49.32 6.59 $ 81,407 Granted 1,061,630 59.99 Exercised ( 689,464 ) 35.37 $ 23,983 Forfeited ( 113,506 ) 54.97 Expired ( 36,206 ) 79.90 Outstanding at December 31, 2022 6,272,994 52.38 6.28 $ 2,011 Granted 1,587,411 38.23 Exercised ( 62,680 ) 30.93 $ 580 Forfeited ( 252,035 ) 52.67 Expired ( 465,942 ) 52.11 Outstanding at December 31, 2023 7,079,748 $ 49.40 6.03 $ 863 Exercisable at December 31, 2023 4,752,678 $ 51.24 4.63 $ 272 Vested and expected to vest as of December 31, 2023 7,079,748 $ 49.40 6.03 $ 863 As of December 31, 2023, $ 40.7 million of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted average period of 2.6 years. The Company’s stock options have a maximum expiration date of ten years from the date of grant. The weighted average fair value of stock options granted for the years ended December 31, 2023, 2022 and 2021 was $ 15.92 , $ 25.60 and $ 26.74 per share, respectively. The fair values of stock options granted were estimated using the Black-Scholes model with the following weighted average assumptions: Year Ended December 31, Black-Scholes Weighted Average Assumption 2023 2022 2021 Expected dividend yield None None None Risk-free interest rate 3.05 % - 4.81 % 1.37 % - 4.17 % 0.43 % - 1.21 % Expected volatility 41.3 % 45.1 % 49.1 % Expected term of options 4.90 years 4.92 years 5.36 years Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-35 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes the Company’s RSU activity and related information for the period from December 31, 2020 to December 31, 2023: Number of Restricted Stock Units Weighted Average Grant Date Fair Value (Per Share) Aggregate Intrinsic Value (in Thousands) Unvested at December 31, 2020 957,453 $ 46.34 $ 57,294 Granted 446,450 60.81 Vested ( 309,779 ) 45.16 Forfeited ( 138,847 ) 50.67 Unvested at December 31, 2021 955,277 52.85 $ 57,479 Granted 621,149 60.11 Vested ( 331,196 ) 50.25 Forfeited ( 95,768 ) 56.00 Unvested at December 31, 2022 1,149,462 57.26 $ 44,381 Granted 795,962 38.95 Vested ( 404,095 ) 54.88 Forfeited ( 176,711 ) 54.15 Unvested and expected to vest as of December 31, 2023 1,364,618 $ 47.66 $ 46,042 As of December 31, 2023, $ 51.1 million of total unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted average period of 2.8 years. The Company’s RSUs have a maximum vest date of four years from the date of grant. The fair values of RSUs awarded are equal to the closing price of the Company’s common stock on the date of grant. The fair values of the ESPP share options granted were estimated using the Black-Scholes model with the following weighted average assumptions: Year Ended December 31, Black-Scholes Weighted Average Assumption 2023 2022 2021 ESPP share option fair value $ 10.00 - $ 10.34 $ 15.26 - $ 15.86 $ 15.16 - $ 15.23 Expected dividend yield None None None Risk-free interest rate 4.77 % - 5.53 % 0.22 % - 2.52 % 0.50 % - 0.90 % Expected volatility 35.4 % 39.5 % 37.0 % Expected term of ESPP share options 6 months 6 months 6 months Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-36 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15— NET INCOME PER SHARE Potential common shares are excluded from the diluted net income per share computation to the extent that they would be antidilutive. If the Company reported a net loss for the year, no potentially dilutive securities would be included in the computation of diluted net loss per share. As discussed in Note 11, Debt , the Company has the option to pay cash for the aggregate principal amount due upon the conversion of its 2025 Notes. For additional information on the Company’s computation, see Note 2, Summary of Significant Accounting Policies . Prior to the Company’s adoption of ASU 2020-06, for the year ended December 31, 2021, the Company used the treasury stock method to calculate dilutive shares on its convertible debt. The following table sets forth the computation of basic and diluted net income per common share for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 Numerator: Net income—basic $ 41,955 $ 15,909 $ 41,980 ASU 2020-06 convertible notes if-converted method adjustment 4,114 — — Adjusted net income—diluted $ 46,069 $ 15,909 $ 41,980 Denominator: Weighted average common shares outstanding—basic 46,222 45,521 44,262 Computation of diluted securities: ASU 2020-06 convertible notes if-converted method adjustment 5,608 — — Dilutive effect of stock options 51 787 1,030 Dilutive effect of RSUs 96 226 298 Dilutive effect of conversion premium on the 2022 Notes — — 38 Dilutive effect of ESPP purchase options 2 4 2 Weighted average common shares outstanding—diluted 51,979 46,538 45,630 Net income per share: Basic net income per common share $ 0.91 $ 0.35 $ 0.95 Diluted net income per common share $ 0.89 $ 0.34 $ 0.92 The following table summarizes the outstanding stock options, RSUs, ESPP purchase options 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): Year Ended December 31, 2023 2022 2021 Weighted average number of stock options 6,251 2,821 2,141 Convertible senior notes (1) — 6,206 — Weighted average number of RSUs 1,033 417 116 Weighted average ESPP purchase options 20 7 13 Total 7,304 9,451 2,270 (1) The convertible senior notes were antidilutive for the year ended December 31, 2022, in conjunction with a $ 5.1 million if-converted method adjustment to the numerator that adds back the interest expense associated with the convertible debt on a post-tax basis under ASU 2020-06. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-37 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 16— INCOME TAXES Income (loss) before income taxes and the related tax expense (benefit) is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Income (loss) before income taxes: Domestic $ 66,257 $ 21,068 $ 64,751 Foreign ( 4,556 ) ( 7,766 ) ( 8,347 ) Total income before income taxes $ 61,701 $ 13,302 $ 56,404 Current taxes: Federal $ 1,686 $ — $ — State 2,444 5,309 3,533 Foreign 1 29 19 Total current taxes $ 4,131 $ 5,338 $ 3,552 Deferred taxes: Federal $ 16,790 $ ( 2,781 ) $ 12,554 State ( 1,175 ) ( 5,164 ) ( 1,682 ) Total deferred taxes $ 15,615 $ ( 7,945 ) $ 10,872 Total income tax expense (benefit) $ 19,746 $ ( 2,607 ) $ 14,424 A reconciliation of income tax expense (benefit) at the U.S. federal statutory rate to the provision for income taxes is as follows (dollars in thousands): Year Ended December 31, 2023 2022 2021 Amount Tax Rate Amount Tax Rate Amount Tax Rate U.S. statutory rate applied to income before taxes $ 12,957 21.00 % $ 2,793 21.00 % $ 11,845 21.00 % State taxes 1,770 2.87 % 508 3.82 % 2,154 3.82 % Foreign taxes ( 1,798 ) ( 2.91 ) % 248 1.86 % ( 651 ) ( 1.15 ) % Change in valuation allowance 2,192 3.55 % 2,871 21.58 % 3,695 6.55 % Executive compensation 3,171 5.14 % 2,188 16.45 % 1,538 2.73 % Stock-based compensation 4,070 6.60 % ( 2,715 ) ( 20.41 ) % ( 2,963 ) ( 5.25 ) % Tax credits ( 3,327 ) ( 5.39 ) % ( 3,245 ) ( 24.39 ) % ( 1,690 ) ( 3.00 ) % Reserves 389 0.63 % 984 7.40 % ( 738 ) ( 1.31 ) % Non-Taxable or Nondeductible Items: Interest expense — — % ( 3,477 ) ( 26.14 ) % ( 430 ) ( 0.76 ) % Contingent consideration ( 719 ) ( 1.17 ) % ( 3,841 ) ( 28.88 ) % 247 0.44 % Nondeductible expenses 975 1.58 % 1,164 8.75 % 1,929 3.42 % Other 66 0.10 % ( 85 ) ( 0.64 ) % ( 512 ) ( 0.92 ) % Income tax expense (benefit) and effective tax rate $ 19,746 32.00 % $ ( 2,607 ) ( 19.60 ) % $ 14,424 25.57 % Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-38 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. At each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. The Company records a valuation allowance on U.S. capital losses and on foreign net deferred tax balances as it is more-likely-than-not the tax benefits are not realizable. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2023 and 2022 are as follows (in thousands): December 31, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 132,265 $ 151,495 Federal and state credits 24,018 23,098 Accruals and reserves 18,936 19,979 Stock based compensation 27,520 27,473 Inventory reserves 2,149 4,889 Other 7,143 11,036 Total deferred tax assets 212,031 237,970 Deferred tax liabilities: Depreciation and amortization ( 42,027 ) ( 54,743 ) Discount on convertible senior notes 1 13 Total deferred tax liabilities ( 42,026 ) ( 54,730 ) Deferred tax assets, net of deferred tax liabilities 170,005 183,240 Less: valuation allowance ( 25,520 ) ( 22,931 ) Net deferred tax assets $ 144,485 $ 160,309 As of December 31, 2023, the Company’s federal net operating losses, or NOLs, and federal tax credit carryforwards totaled $ 483.6 million and $ 16.7 million, respectively. The Company also had state NOLs and state tax credit carryforwards of $ 507.6 million and $ 7.3 million, respectively, which are subject to change on an annual basis due to variations in the Company’s annual state apportionment factors. There are no remaining unlimited federal NOLs. The state NOLs will begin to expire in 2028. The Company had non-U.S. NOLs of $ 5.5 million at December 31, 2023. The non-U.S. NOLs do not expire. Since the Company had cumulative changes in ownership of more than 50 % within a three-year period, under IRC sections 382 and 383, the Company’s ability to use certain NOLs, tax attributes and credit carryforwards to offset taxable income or tax will be limited. Such ownership changes were triggered by the initial acquisition of the Company’s stock in 2007 as well as cumulative ownership changes arising as a result of the completion of the Company’s initial public offering, other financing transactions and the Flexion Acquisition in 2021. As a result of these ownership changes, the Company has $ 483.6 million of federal NOLs subject to annual limitations and are available as follows: $ 32.5 million will become available in 2024, $ 32.4 million in 2025, $ 28.3 million in 2026, and $ 6.9 million in 2027 and thereafter. In accordance with ASC Topic 740, the Company establishes a valuation allowance for deferred tax assets that, in its judgment, are not more-likely-than-not realizable. These judgments are based on projections of future income—including tax-planning strategies—by individual tax jurisdictions. In each reporting period, the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to its valuation allowance are appropriate. The Company had a net increase in its valuation allowance of $ 2.6 million and $ 3.9 million for the years ended December 31, 2023 and 2022, respectively. The current year net increase in the Company’s valuation allowance includes $ 2.5 million against foreign net deferred tax assets and $ 0.1 million against U.S. capital loss carryforwards. The Company continues to maintain a full valuation allowance against foreign net deferred tax assets since it is more-likely-than-not the tax benefit related to the foreign losses are not realizable. In 2023 , the Company recorded a $ 0.4 million net increase to unrecognized tax benefits, or UTBs of which a $ 0.6 million increase is related to tax credit positions taken during the year, offset by a $ 0.2 million reduction related to prior year tax credit Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-39 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) positions. The Company’s UTB liability at December 31, 2023 was $ 6.7 million. The change in the Company’s UTBs for the year ended December 31, 2023 is summarized as follows (in thousands): Unrecognized Tax Benefit Balance at December 31, 2021 $ 9,021 Reduction for prior year positions ( 3,526 ) Additions for current year positions 827 Balance at December 31, 2022 6,322 Additions for current year positions 553 Reduction for prior year positions ( 164 ) Balance at December 31, 2023 $ 6,711 The UTBs as of December 31, 2023, 2022 and 2021 would, if subsequently recognized, favorably impact the effective income tax rate. The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its reserve for UTBs based on new information or developments. Of the UTB balance at December 31, 2023, $ 5.7 million was recorded as a reduction to the Company’s deferred tax assets. Any potential deficiency would not result in a tax liability, therefore, no interest or penalties were recognized in income tax expense for the years ended December 31, 2023, 2022 and 2021 for positions recorded to the Company’s deferred tax assets. During 2023, $ 1.0 million of reserves previously recorded to deferred tax assets were reclassified to the Company’s other long-term liabilities. The reclassification was required as the Company is utilizing tax credits in the current year and also filed amended returns to claim tax credits, both of which result in a reduction to the Company’s tax liabilities. No interest or penalties were recognized in income tax expense for the $ 1.0 million of reserve recorded to the Company’s other long-term liabilities as any potential deficiency would not result in a tax liability until next year. The Company is currently subject to audit by the U.S. Internal Revenue Service, or IRS, for the years 2019 through 2023, and state tax jurisdictions for the years 2018 through 2023. However, the IRS or states may still examine and adjust an NOL arising from a closed year to the extent it is utilized in a year that remains subject to audit. The Company’s previously filed income tax returns are not presently under audit by the IRS. The Company is under a state audit for the years 2020 through 2021. NOTE 17— EMPLOYEE BENEFIT PLANS 401(k) Plan The Company’s 401(k) plan is a deferred salary arrangement under section 401(k) of the IRC. Under the 401(k) plan, participating U.S. employees may defer a portion of their pre-tax earnings which are eligible for a discretionary percentage match as defined in the 401(k) plan and determined by the Company’s board of directors (up to the maximum amount permitted by the IRC). The Company recognized $ 4.8 million, $ 3.4 million and $ 2.8 million of related compensation expense for its 401(k) discretionary match for the years ended December 31, 2023, 2022 and 2021, respectively. Deferred Compensation Plan The Company intends that its Deferred Compensation Plan, or DCP, constitute, and be construed and administered as, an unfunded plan of deferred compensation within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and the IRC of 1986, as amended, under which eligible participants may elect to defer the receipt of current compensation. Eligible participants include select management and highly compensated employees of the Company, including the Company’s named executive officers. Pursuant to the DCP, subject to any minimum and maximum deferral requirements that the administrator of the DCP may establish, participants may elect to defer their base salary and annual incentive awards. In addition to elective deferrals, the DCP permits the Company to make matching and certain other discretionary contributions to the participants. The company contributes assets to a rabbi trust to accumulate funds to pay benefits under the DCP. Funds held in the rabbi trust must be used to pay benefits to DCP participants, except in the case of the Company’s bankruptcy or insolvency, in which case, they become subject to claims by the Company’s creditors. The Company recognized $ 0.3 million, $ 0.3 million and $ 0.2 million of related compensation expense for its DCP discretionary match for the years ended Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-40 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) December 31, 2023, 2022 and 2021, respectively. The carrying value of assets held in the rabbi trust equaled the DCP liability as of both December 31, 2023 and 2022. As of December 31, 2023, the carrying value of the assets held in the rabbi trust was $ 6.9 million, of which $ 0.7 million is classified as current. As of December 31, 2022, the carrying value of the assets held in the rabbi trust was $ 4.3 million, of which $ 0.1 million was classified as current. The rabbi trust current and noncurrent assets are classified within prepaid expenses and other assets and investments and other assets, respectively, within the consolidated balance sheets. The DCP current and noncurrent liabilities are classified within accrued expenses and other liabilities, respectively, within the consolidated balance sheets. Cash Long-Term Incentive Plan The Company’s cash long-term incentive plan, or LTIP, is focused on pre-determined and objective performance goals during each applicable performance period from January 1 through December 31 of each calendar year. Award amounts ranging from 0 % to 225 % of the target cash award can be earned based on achievement of two equally weighted financial metrics: net revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), with a relative total shareholder return modifier based on the Company’s stock price performance relative to the companies comprising the S&P Pharmaceuticals Select Industry Index. The performance period for these metrics is one year , with an additional three years of time-vesting following the performance period. For the years ended December 31, 2023 and 2022, the Company recognized $ 0.5 million and $ 1.0 million of related compensation expense under the LTIP, respectively, all of which related to the 2021 performance period. Amounts earned for the 2021 performance year are payable to participants in January 2025 after a three-year vesting period concludes. No amounts were earned by participants for the 2022 and 2023 performance periods. As of December 31, 2023 and 2022, there was $ 2.7 million and $ 2.2 million included in other liabilities in the consolidated balance sheets, respectively. NOTE 18— CONTINGENT CONSIDERATION (GAINS) CHARGES, ACQUISITION-RELATED CHARGES AND OTHER Contingent consideration (gains) charges, acquisition-related charges and other for the years ended December 31, 2023, 2022 and 2021 are summarized below (in thousands): Year Ended December 31, 2023 2022 2021 Contingent consideration (gains) charges: Flexion contingent consideration $ ( 3,424 ) $ ( 18,292 ) $ 1,174 MyoScience contingent consideration — ( 11,184 ) ( 2,163 ) Total contingent consideration (gains) charges ( 3,424 ) ( 29,476 ) ( 989 ) Acquisition-related charges: Severance-related expenses — 4,494 26,371 Acquisition-related fees 1,963 1,032 10,963 Other acquisition expenses — 5,719 3,566 Total acquisition-related charges 1,963 11,245 40,900 Restructuring charges 1,109 — — Impairment of acquired IPR&D — 26,134 — Termination of license agreement — 3,000 — Nuance Biotech Co. Ltd. agreement dissolution costs — — 3,000 Total contingent consideration (gains) charges, acquisition-related charges and other $ ( 352 ) $ 10,903 $ 42,911 Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-41 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Flexion Acquisition Contingent Consideration For the years ended December 31, 2023 and 2022, the Company recognized contingent consideration gains of $ 3.4 million and $ 18.3 million, respectively, due to a decrease in the fair value of its contingent consideration. From the date of the Flexion Acquisition through December 31, 2021, the Company recorded a contingent consideration charge of $ 1.2 million. See Note 12, Financial Instruments , for information regarding the method and key assumptions used in the fair value measurements of the Company’s contingent consideration and more information regarding the changes in fair value. MyoScience Acquisition Contingent Consideration The Company recognized contingent consideration gains related to the MyoScience Acquisition of $ 11.2 million and $ 2.2 million for the years ended December 31, 2022 and 2021, respectively. See Note 12, Financial Instruments , for information regarding the method and the changes in fair value. Restructuring Charges In J une 2023, t he Company implemented a restructuring plan in an effort to improve its operational efficiencies. The restructuring charges were predominantly related to one-time employee termination benefits through a reduction of headcount, such as severance and related costs. During the year ended December 31, 2023, t he Company recognized $ 1.1 million of restructuring charges. Acquisition-Related Charges The Company recognized acquisition-related and other costs of $ 2.0 million during the year ended December 31, 2023 primarily related to vacant and underutilized Flexion leases that were assumed from the Flexion Acquisition. The Company recognized acquisition-related and other costs of $ 11.2 million and $ 40.2 million during the years ended December 31, 2022 and 2021, respectively, primarily for severance, legal fees, third-party services and other one-time charges related to the Flexion Acquisition. See Note 5, Flexion Acquisition , for more information. Also included in the year ended December 31, 2021, the Company recognized acquisition-related and other charges of $ 0.7 million related to one-time termination benefits and fees associated with the MyoScience Acquisition. Impairment of Acquired IPR&D For the year ended December 31, 2022, an impairment of $ 26.1 million for an acquired IPR&D intangible asset related to ZILRETTA for the treatment of OA pain of the shoulder was recognized based on the amount its previous carrying value of $ 60.0 million exceeded its fair value of $ 33.9 million. See Note 9, Goodwill and Intangible Assets , for more information. Termination of License Agreement The Company recognized expense of $ 3.0 million during the year ended December 31, 2022 related to the termination of a license agreement. See Note 20, Commitments and Contingencies , for more information. Nuance Biotech Co. Ltd. Agreement Dissolution Costs In June 2018, the Company entered an agreement with Nuance Biotech Co. Ltd., or Nuance, a China-based specialty pharmaceutical company, to advance the development and commercialization of EXPAREL in China. Under the terms of the agreement, the Company had granted Nuance the exclusive rights to develop and commercialize EXPAREL. 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, which included dissolution costs of $ 3.0 million during the year ended December 31, 2021. NOTE 19— COMMERCIAL PARTNERS AND OTHER AGREEMENTS Thermo Fisher Scientific Pharma Services In April 2014, the Company and Thermo Fisher entered into a Strategic Co-Production Agreement, a Technical Transfer and Service Agreement (the “EXPAREL Technical Transfer and Service Agreement”) and a Manufacturing and Supply Agreement to collaborate in the manufacture of EXPAREL. Under the terms of the EXPAREL Technical Transfer and Service Agreement, Thermo Fisher undertook certain technical transfer activities and construction services needed to prepare its Swindon, England facility for the manufacture of EXPAREL in dedicated manufacturing suites. The Company is now utilizing Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-42 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) a second, larger-scale dedicated manufacturing suite. Under these agreements, the Company makes monthly base fee payments to Thermo Fisher. Unless earlier terminated by providing 18 months’ notice (other than termination by the Company in the event of a material breach by Thermo Fisher), this agreement will expire in May 2028. Prior to the Flexion Acquisition, in July 2015, Flexion and Thermo Fisher entered into a Manufacturing and Supply Agreement (the “ZILRETTA Manufacturing and Supply Agreement”) and a Technical Transfer and Service Agreement related to the manufacture of ZILRETTA at the same Thermo Fisher site in Swindon, England where the Company’s EXPAREL manufacturing suite is located. Thermo Fisher agreed to undertake certain transfer activities and construction services needed to prepare its facility for the commercial manufacture of ZILRETTA in dedicated manufacturing suites. Flexion provided Thermo Fisher with certain equipment and materials necessary to manufacture ZILRETTA. The Company pays a monthly base fee to Thermo Fisher for the operation of the manufacturing suites and a per product fee for each vial of ZILRETTA based upon a forecast of commercial demand. The Company also reimburses Thermo Fisher for purchases of materials and equipment made on its behalf, certain nominal expenses and additional services. Unless earlier terminated (other than termination by the Company in the event that Thermo Fisher does not meet specified milestones or for a breach by Thermo Fisher), the Company will be obligated to pay for the costs incurred by Thermo Fisher associated with the removal of its manufacturing equipment and for Thermo Fisher’s termination costs up to a specified capped amount. The initial term of the ZILRETTA Manufacturing and Supply Agreement that the Company assumed as part of the Flexion Acquisition expires in October 2027. The Company pays a monthly base fee to Thermo Fisher for the operation of the manufacturing suites and a per product fee for each vial of ZILRETTA based upon a forecast of commercial demand. The Company also reimburses Thermo Fisher for purchases of materials and equipment made on its behalf, certain nominal expenses and additional services. The ZILRETTA Manufacturing and Supply Agreement will remain in full effect unless and until it expires or is terminated. The Company may terminate this agreement upon one month ’s notice if a regulatory authority causes the withdrawal of ZILRETTA from the U.S. or any other market that represents 80 percent of its overall sales, or at any time for convenience by providing 24 months’ notice. Either party may terminate the ZILRETTA Manufacturing and Supply Agreement in the event of the breach or bankruptcy of the other party. Upon termination of the ZILRETTA Manufacturing Agreement (other than termination by the Company in the event that Thermo Fisher does not meet the manufacturing milestones or for a breach by Thermo Fisher), the Company will be obligated to pay for the costs incurred by Thermo Fisher associated with the removal of its manufacturing equipment and for Thermo Fisher’s termination costs up to a specified capped amount. 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 consolidated statements of operations during the year ended December 31, 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. The Company began selling iovera° in Canada in the fourth quarter of 2021. GQ Bio Therapeutics GmbH In April 2023, the Company entered into a process development agreement with GQ Bio Therapeutics GmbH, or GQ, for the development of a commercially scalable manufacturing process for the production of PCRX-201. The agreement calls for the Company to pay GQ upon three milestones that can be achieved independently of each other. Milestone 1 includes a € 0.5 million payment to GQ for the execution and completion of a feasibility assessment proposal for scalable process to support milestone 2. Achieving milestone 2 is associated with the development of a qualified program process for PCRX-201 where GQ would build a direct manufacturing cost of a PCRX-201 unit. Based on the direct manufacturing cost, the Company would pay GQ a success fee within a scale of € 0.5 million up to € 7.5 million, plus royalties within a scale of 0.25 % to 3.75 % of net sales associated with PCRX-201. The achievement of milestone 3 requires the Company to pay GQ € 0.5 million for delivering a validatable manufacturing process and validated analytical control package necessary for initiating process validation. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-43 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) GQ is one of the Company’s equity investments and convertible notes receivables classified within investments and other assets in the consolidated balance sheets. See Note 12, Financial Instruments , for more information. Aratana Therapeutics, Inc. In December 2012, the Company entered into a worldwide license, development and commercialization agreement with Aratana Therapeutics, Inc., a wholly owned subsidiary of Elanco Animal Health, Inc., or Aratana. Under the agreement, the Company granted Aratana an exclusive royalty-bearing license, including the limited right to grant sublicenses, for the development and commercialization of the Company’s bupivacaine liposome injectable suspension product for veterinary use. Under the agreement, Aratana developed and obtained FDA approval for the use of the product in veterinary surgery to manage postsurgical pain. The Company is eligible to receive from Aratana up to an aggregate of $ 40.0 million upon the achievement of commercial milestones. Aratana is required to pay the Company a tiered double-digit royalty on certain net sales made in the U.S. If the product is approved by foreign regulatory agencies for sale outside of the U.S., Aratana will be required to pay the Company a tiered double-digit royalty on such net sales. Royalty rates will be reduced by a certain percentage upon the entry of a generic competitor for animal health indications into certain jurisdictions or if Aratana must pay royalties to third parties under certain circumstances. Unless terminated earlier pursuant to its terms, the license agreement is effective until July 2033, after which Aratana has the option to extend the agreement for an additional five-year term, subject to certain requirements. Aratana began purchasing bupivacaine liposome injectable suspension product in 2016, which they market under the trade name NOCITA ® (a registered trademark of Aratana) for veterinary use. Carlisle Companies, Inc. In January 2020, the Company and Carlisle Companies, Inc., or Carlisle, entered into a Manufacturing and Supply Agreement (the “Carlisle Agreement”) to collaborate in the manufacture of iovera° Smart Tips at Carlisle’s Tijuana, Mexico facility. The initial term of the Carlisle Agreement is five years with automatic one-year extensions unless either party provides prior notice in writing. Under the Carlisle Agreement, the Company pays fees based on the amount of iovera° Smart Tips delivered by Carlisle. Since April 2022, all iovera° Smart Tips have been produced by Carlisle. The Carlisle Agreement may be terminated by either party upon one year s’ written notice without cause. The Company may terminate the Carlisle Agreement upon thirty days ’ written notice in the event that iovera° is withdrawn from the market or no longer sold by us. Either party may terminate the Carlisle Agreement in the event of the breach or bankruptcy of the other party. NOTE 20— COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of its business, including those related to patents, product liability and government investigations. Except as described below, the Company is not presently a party to any legal proceedings that it believes to be material, and is not aware of any pending or threatened litigation against the Company which it believes could have a material adverse effect on its business, operating results, financial condition or cash flows. MyoScience Milestone Litigation 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 “MyoScience Merger Agreement”), specifically related to the achievement of certain milestone payments under the MyoScience 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 MyoScience Merger Agreement, and breach of the MyoScience Merger Agreement and certain other agreements with the defendants. In October 2020, Fortis filed an answer and counterclaim against the Company and Pacira CryoTech seeking to recover certain milestone payments under the MyoScience Merger Agreement. The total remaining value of these milestones is $ 30.0 million, plus attorneys’ fees. A trial was conducted in September 2023, and a decision is expected before the end of the first half of 2024. The Company is unable to predict the outcome of this action at this time. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-44 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, or 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. Patent No. 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. Patent No. 11,179,336 (the ’336 patent). eVenus further alleges in the Notice Letter that both the ’495 patent and the ’336 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. The first and second patent infringement suits were consolidated. In February 2023, eVenus filed its first amended answer to the first amended complaint, alleging patent invalidity, non-infringement and inequitable conduct. The Company has denied the allegations in eVenus’s first amended answer. The Company has subsequently voluntarily dismissed its claims with respect to the ’336 Patent. The trial on the remaining claim occurred in February 2024 with a decision expected to be reached late in the first half of 2024. In April 2023, the Company filed a third patent infringement suit against eVenus, its parent company, and Fresenius Kabi USA, LLC, in the U.S. District Court for the District of New Jersey (23-cv-2367) asserting that the 133 mg/10 mL and 266 mg/20 mL ANDA products will infringe U.S. Patent No. 11,426,348 (the ’348 patent). In July 2023, eVenus filed its answer with claims for declaratory judgment, alleging patent invalidity, non-infringement and inequitable conduct with respect to the ’348 patent as well as the Company’s other patents, U.S. Patent Nos. 11,278,494; 11,304,904; 11,311,486; 11,357,727 and 11,452,691. The parties have subsequently dismissed all patents other than the ’348 patent from this litigation. The Company is unable to predict the outcome of these litigations 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 ’495 patent 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 ended on December 24, 2021 with the expiration of its U.S. Patent No. 9,585,838. 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. On August 8, 2023, the United States District Court, District of Nevada, granted the Company’s motion for partial summary judgment in respect to the Company’s claim for a declaration that it no longer owes royalties for EXPAREL made under the 45-liter manufacturing process as of December 24, 2021. As a result, the Company expects to receive $ 14.5 million from RDF, representing the royalties that the Company paid to RDF under protest after December 24, 2021 for EXPAREL made from the 45-liter manufacturing process. Once it becomes probable that the settlement amount will be received, the Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-45 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Company will record a settlement gain within other operating expenses in the condensed consolidated statement of operations. In November 2023, the United States District Court, District of Nevada conducted a mediation that did not result in a settlement. During the pendency of the remaining lawsuit, the Company will continue to pay royalties associated with the 200-liter manufacturing process to RDF under protest. The Company is unable to predict the outcome of this action at this time. Purchase Obligations The Company has approximately $ 71.4 million of minimum, non-cancelable contractual commitments for contract manufacturing services and $ 14.2 million of minimum, non-cancelable contractual commitments for the purchase of certain raw materials as of December 31, 2023. As of December 31, 2023, the Company has $ 4.9 million of other minimum, non-cancelable contractual commitments. Other Commitments and Contingencies Termination of License Agreement Prior to the Flexion Acquisition, in March 2020, Flexion entered into an exclusive license agreement with Hong Kong Tainuo Pharma Ltd., or HK Tainuo, and Jiangsu Tainuo Pharmaceutical Co. Ltd., a subsidiary of China Shijiazhuang Pharmaceutical Co, Ltd., for the development and commercialization of ZILRETTA in Greater China (consisting of mainland China, Hong Kong, Macau and Taiwan). Under the terms of the agreement, HK Tainuo paid Flexion an upfront payment of $ 10.0 million during the year ended December 31, 2020 which was recorded as deferred revenue as of December 31, 2021. The Company was also eligible to receive up to $ 32.5 million in aggregate development, regulatory and commercial sales milestone payments under the exclusive license agreement. HK Tainuo was responsible for the clinical development, product registration and commercialization of ZILRETTA in Greater China. The Company was solely responsible for the manufacture and supply of ZILRETTA to HK Tainuo for all clinical and commercial activities. The terms related to product manufacturing and supply, including pricing and minimum purchase requirements agreed to in the license agreement, were to be covered by a separate supply agreement which was never finalized. In July 2022, the Company submitted notice to HK Tainuo of its intent to pursue termination of the license agreement. The $ 13.0 million related to the termination of the license agreement was paid in January 2023. Pediatric Trial Commitments The FDA, as a condition of EXPAREL approval, has required the Company to study EXPAREL for infiltration and as a brachial plexus block in pediatric patients. The Company was granted deferrals 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. Those positive results were the basis for the submission of a supplemental New Drug Application, or sNDA, in the U.S. 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 sNDA in the U.S. In the E.U. and U.K., the Company also submitted the results of the PLAY study as Type II variations in the E.U. and U.K. to include the use of EXPAREL in children aged six years or older as a field block for treatment of somatic post-operative pain for small- to medium-sized wounds. The EMA and the Medicines and Healthcare Products Regulatory Agency, or MHRA, in the U.K. both approved the variations in their respective regions in November 2022. The Company received notification from the FDA in October 2023 that its pediatric studies requirement had been waived for the indication of brachial plexus interscalene nerve block to produce postsurgical regional analgesia in pediatric patients. The Company is still working with the FDA, EMA and MHRA to finalize the regulatory pathways for its remaining pediatric commitments. Contingent Milestone Payments Refer to Note 5, Flexion Acquisition and Note 12 , Financial Instruments , for information on potential contingent milestone payments related to the Flexion Acquisition and MyoScience Acquisition. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-46 Table of Contents PACIRA BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PCRX-201 PCRX-201, a novel, intra-articular gene therapy product candidate that produces the anti-inflammatory protein interleukin-1 receptor antagonist (IL-1Ra) treating OA pain in the knee, was added to the Company’s portfolio as part of the Flexion Acquisition in November 2021 as discussed in Note 5, Flexion Acquisition . Prior to the Flexion Acquisition, in February 2017, Flexion entered into an agreement with GQ to acquire the global rights to PCRX-201, a gene therapy product candidate. As part of the agreement, up to an aggregate of $ 56.0 million of payments could become due upon the achievement of certain development and regulatory milestones, including up to $ 4.5 million through initiation of a Phase 2 proof of concept clinical trial and, following successful proof of concept, up to an additional $ 51.5 million in development and global regulatory approval milestone payments. NOTE 21—SUBSEQUENT EVENT In February 2024, the Company initiated a restructuring plan to ensure it is well positioned for long-term growth. The restructuring plan includes: (i) reshaping the Company’s executive team; (ii) reallocating efforts and resources from the Company’s ex-U.S. and certain early-stage development programs to its commercial portfolio in the U.S. market; and (iii) reprioritizing investments to focus on commercial readiness for the Non-Opioids Prevent Addiction In the Nation (“NOPAIN”) Act that takes effect in 2025 and broader commercial initiatives in key areas, such as strategic national accounts, marketing and market access and reimbursement. The Company recognized approximately $ 5 million of restructuring charges in February 2024 related to employee termination benefits, such as the acceleration of share-based compensation, severance, and, to a lesser extent, other employment-related termination costs. Pacira BioSciences, Inc. | 2023 Form 10-K | Page F-47