What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-09 compared with 2022-04-13 · 418 added, 689 removed, 1047 unchanged (51% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 13, 2022 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 9, 2023 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

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The Company's products have a shelf life of up to 48 months from date of manufacture.

We identified the evaluation of accrued sales deductions related to Trokendi XR and Oxtellar XR product returns, and specifically the assessment of the expected long-term return rates, as a critical audit matter.

We identified the evaluation of accrued sales deductions related to Trokendi XR, Oxtellar XR and Qelbree product returns, and specifically the assessment of the expected long-term return rates, as a critical audit matter.

The assessment of the expected long-term return rates included a comparison to actual returns experience and involved a high degree of auditor judgment due to the significant passage of time between product sale and the time at which the Company issues credit for expired product.

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Baltimore, Maryland

April 13, 2022

March 9, 2023

Report of Independent Registered Public Accounting Firm

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In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31 , 2021 and 2020, the related consolidated statements of earnings, comprehensive earnings, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated April 13, 2022 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive earnings, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated March 9, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses related to the Company not having sufficient resources and as a result, the Company did not adequately perform the following:

assess, redesign and timely evaluate performance of controls over financial reporting risks as a result of existing circumstances;

train, monitor, and supervise newly hired contractors and employees;

and generate real time information across the organization to allow the finance department to perform timely controls;

which in the aggregate, create a reasonable possibility that material misstatements in substantially all financial reporting processes and financial statement accounts in the consolidated financial statements will not be prevented or detected on a timely basis, have been identified and included in management's assessment.

The material weaknesses are specific to the lack of qualified resources and an adequate risk assessment over design and effective operation of controls in the inventory and cost of goods sold processes and the lack of an adequate risk assessment over the design and effective operation of controls that would affect the estimation of accrued product rebates have been identified and included in management’s assessment.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

The Company acquired Adamas Pharmaceuticals, Inc.

during 2021, and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2021, Adamas Pharmaceuticals, Inc's internal control over financial reporting associated with 8% of total assets (excluding the goodwill and other intangible assets, which are included within the scope of the assessment) and 2% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Adamas Pharmaceuticals, Inc.

Basis for Opinion

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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 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;

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Baltimore, Maryland

April 13, 2022

March 9, 2023

Supernus Pharmaceuticals, Inc.

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Contingent consideration, current portion 21,120 44,840

Convertible notes, net 401,968 —

Other current liabilities 16,863 20,132

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Additional paid-in capital 408,115 434,337

Accumulated other comprehensive earnings, net of tax 1,539 8,975

Accumulated other comprehensive (loss) earnings, net of tax ( 3,210 ) 1,539

Retained earnings 481,245 379,922

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Net product sales $ 649,432 $ 567,504 $ 509,350

Royalty revenue 12,271 11,047 9,355

Royalty revenues 17,806 12,271 11,047

Total revenues 667,238 579,775 520,397

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Operating earnings 46,124 86,029 173,698

Other (expense) income

Interest expense ( 23,423 ) ( 23,754 ) ( 22,707 )

Other income (expense)

Interest and other income, net 21,689 10,569 18,704

Total other expense ( 12,854 ) ( 5,050 ) ( 1,084 )

Interest expense ( 7,070 ) ( 23,423 ) ( 23,754 )

Total other income (expense) 14,619 ( 12,854 ) ( 5,050 )

Earnings before income taxes 60,743 73,175 168,648

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Diluted 61,679,800 54,356,744 53,689,743

(a) Excludes amortization of acquired intangible assets.

(a) Excludes amortization of intangible assets.

See accompanying notes.

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Net earnings $ 60,711 $ 53,424 $ 126,950

Other comprehensive earnings (loss):

Unrealized gain (loss) on marketable securities, net of tax ( 7,436 ) 1,558 10,575

Other comprehensive earnings (loss), net of tax ( 7,436 ) 1,558 10,575

Other comprehensive loss:

Unrealized (loss) gain on marketable securities, net of tax ( 4,749 ) ( 7,436 ) 1,558

Other comprehensive (loss) earnings, net of tax ( 4,749 ) ( 7,436 ) 1,558

Comprehensive earnings $ 55,962 $ 45,988 $ 128,508

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Net earnings — — — — 53,424 53,424

Unrealized gain on marketable securities, net of tax — — — 1,558 — 1,558

Unrealized loss on marketable securities, net of tax — — — ( 7,436 ) — ( 7,436 )

Balance, December 31, 2021 53,256,094 53 434,337 1,539 379,922 815,851

Cumulative effect of adoption of ASU 2020-06 — — ( 56,212 ) — 40,612 ( 15,600 )

Balance, January 1, 2022 53,256,094 53 378,125 1,539 420,534 800,251

Share-based compensation — — 17,568 — — 17,568

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Depreciation and amortization 85,543 32,595 18,141

Navitor investment R&D expense 15,000 — —

Navitor investment R&D expense (see Note 5) — 15,000 —

Other income from Navitor (see Note 5) ( 12,888 ) — —

Amortization of deferred financing costs and debt discount 2,112 17,501 16,581

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Accounts payable and other liabilities ( 19,163 ) 18,179 8,272

Contingent consideration ( 2,100 ) — —

Net cash provided by operating activities 116,826 127,127 138,399

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Payments on finance lease liability — — ( 802 )

Payment of contingent consideration ( 22,900 ) — —

Net cash (used in) provided by financing activities ( 10,477 ) ( 130,420 ) 3,559

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Trokendi XR ® , Oxtellar XR ® , Qelbree ® , APOKYN ® , XADAGO ® , MYOBLOC ® , GOCOVRI ® , and Osmolex ER ® .

In addition, the Company has two late-stage development products included in its product candidates portfolio, including SPN-830 (apomorphine infusion device), an acquired product candidate from the USWM Acquisition.

In February 2022, the Company's New Drug Application (NDA) for SPN-830 (apomorphine infusion device) was accepted for review by the U.S.

Food and Drug Administration (FDA) and was assigned a Prescription Drug User Fee Act (PDUFA) target action date of October 7, 2022.

2021 Adamas Acquisition

On October 10, 2021, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement”) by and among the Company, Adamas Pharmaceuticals, Inc.

(Adamas) and Supernus Reef, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (Purchaser).

On November 24, 2021, the Purchaser was merged with and into Adamas (the "Merger"), with Adamas continuing as the surviving corporation in the Merger as a wholly owned subsidiary of the Company (the Adamas Acquisition).

At the time of the Adamas Acquisition, Adamas had two established commercial products in its portfolio, GOCOVRI and Osmolex ER, in addition to royalty rights to Namzaric.

Refer to Note 3, Acquisitions , for further discussion on the Adamas Acquisition.

Navitor Development Agreement

On April 21, 2020, the Company entered into a Development and Option Agreement (Development Agreement) with Navitor Pharmaceuticals, Inc.

Under the terms of the Development Agreement, the Company and Navitor will jointly conduct a Phase II clinical program for NV-5138 (SPN-820) in treatment-resistant depression (TRD).

Refer to Note 5, Investments , for further discussion on the Navitor Development Agreement.

2020 USWM Acquisition

On April 28, 2020, the Company entered into a Sale and Purchase Agreement with US WorldMeds Partners, LLC to acquire the CNS portfolio of USWM Enterprises, LLC (USWM Enterprises) (the USWM Acquisition).

With the acquisition, completed on June 9, 2020, the Company added three established commercial products, APOKYN, XADAGO, and MYOBLOC, and a product candidate in late-stage development, SPN-830 (apomorphine infusion device), to its portfolio.

Refer to Note 3, Acquisitions , for further discussion on the USWM Acquisition.

Ransomware Incident

On November 24, 2021, we announced that we were the target of a ransomware attack.

The attack had no significant impact on our business and did not cause any long-term disruption to our operations.

Based on the preliminary results of the ongoing investigation, the Company believes the criminal ransomware groups ("criminal groups") copied certain data from our systems, encrypted certain data on the Company's systems, and then deployed malware designed to impede access to our systems.

Thereafter the criminal groups contacted the Company and threatened to publish certain data copied from the Company's systems.

Upon detection of the ransomware attack, the Company notified government authorities, engaged third-party cybersecurity experts through our outside counsel, and commenced its recovery process.

The Company maintains redundant off-site data backups, which were verified to have not been compromised by the ransomware attack and were utilized to restore the data encrypted by the criminal groups.

At this time, the Company has successfully recovered the impacted files and has taken additional steps designed to further protect its networks and files.

We have not paid any ransom amounts.

We have incurred costs in 2021 and expect

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Organization and Business (Continued)

to continue to incur costs in the future, which may be significant, in connection with efforts designed to enhance our data security and take further steps designed to protect against unauthorized access to, or manipulation of, our systems and data.

These costs were primarily comprised of certain employee related expenses and various third party consulting services, including forensic experts, legal counsel and other IT and accounting professional expenses, and enhancements to our cyber security measures.

We expect to incur additional costs related to the ransomware attack in the future, including costs related to our response to the ransomware incident and our efforts designed to enhance our security measures.

The Company continues to monitor the situation.

Refer to Note 15, Commitments and Contingencies .

In addition, SPN-830 (apomorphine infusion device) is a late-stage drug/device combination product candidate for the continuous treatment of motor fluctuations ("off" episodes) in PD patients that are not adequately controlled with oral levodopa and one or more adjunct PD medications.

Adamas Acquisition and Reorganization

On October 10, 2021, the Company entered into an Agreement and Plan of Merger by and among the Company, Adamas Pharmaceuticals, Inc.

(Adamas) and Supernus Reef, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (Purchaser) (Adamas Agreement).

On November 24, 2021 (the Closing Date), the Company completed its purchase of all of the outstanding equity of Adamas, pursuant to the Adamas Agreement dated October 10, 2021, and the Purchaser was merged with and into Adamas (the Merger), with Adamas continuing as the surviving corporation in the Merger as a wholly-owned subsidiary of the Company (Adamas Acquisition).

On the Closing Date, Adamas owned two marketed products:

GOCOVRI (amantadine) extended-release capsules, the first and only FDA approved medicine indicated for the treatment of both "off" episodes and dyskinesia in patients with PD receiving levodopa-based therapy and as an adjunctive treatment to levodopa/carbidopa in patients with PD experiencing "off" episodes;

and Osmolex ER (amantadine) extended-release tablets, approved for the treatment of PD and drug-induced extrapyramidal reactions in adult patients.

Adamas also owns the right to receive royalties from Allergan plc for sales of Namzaric (memantine hydrochloride extended-release and donepezil hydrochloride) in the U.S.

In the first quarter of 2022 and subsequent to the Adamas Acquisition, the Company completed a reorganization of the Adamas legal entities in an effort to obtain operational, legal and other benefits that also resulted in certain state tax efficiencies.

The reorganization had no effect on the consolidated financial statements other than certain state tax efficiencies.

(See Note 12, Income Taxes .)

Summary of Significant Accounting Policies

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The Company, which is primarily located in the United States (U.S.), operates in one operating segment.

Reclassifications

Certain prior year amounts in the consolidated balance sheets, statements of cashflows, and statements of earnings have been reclassified to conform to the current year presentation, including a reclassification made to present amortization of intangible assets separately.

This was previously included in Selling, general and administrative expenses and now is recorded as a component of Amortization of intangible assets on the consolidated statements of earnings .

These reclassifications did not affect operating earnings or other consolidated financial statements for the years ended December 31, 2021, 2020, and 2019.

Consolidation

The Company's consolidated financial statements include the accounts of:

Supernus Pharmaceuticals, Inc.;

Supernus Europe Ltd.;

Biscayne Neurotherapeutics, Inc.

and its wholly owned subsidiaries;

MDD US Enterprises, LLC (formerly USWM Enterprises, LLC) and its wholly owned subsidiaries;

and Adamas Holdings, LLC.

The Company's consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc.

and its wholly-owned subsidiaries.

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and the obligation to absorb losses of, or the right to receive benefits from the VIE that could potentially be significant to that VIE.

The Company's judgment with respect to its level of influence or control of an entity involves the consideration of various factors, including the form of an ownership interest;

The Company's judgment with respect to its level of

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

influence or control of an entity involves the consideration of various factors, including the form of an ownership interest;

representation in the entity's governance;

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Use of Estimates

The Company bases its estimates on historical experience;

various forecasts;

The Company bases its estimates on:

historical experience;

information received from its service providers;

information from other sources, including public and proprietary sources;

and other assumptions that the Company

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

believes are reasonable under the circumstances.

and other assumptions that the Company believes are reasonable under the circumstances.

Actual results could differ materially from the Company’s estimates.

The Company periodically evaluates the methodologies employed in making its estimates on an ongoing basis.

The Company periodically evaluates the methodologies employed in making its estimates.

The extent to which the COVID-19 pandemic may directly or indirectly impact our business, financial condition and results of operations is highly uncertain and subject to change.

As a result, certain of our estimates and assumptions, including the provision for sales deductions (i.e., provision for estimated rebates, provision for estimated future product returns, and an estimated provision for discounts), the creditworthiness of customers entering into revenue arrangements, the valuation of the assets and liabilities acquired in the acquisitions, and the fair values of our financial instruments, require increased judgment and carry a higher degree of variability and volatility that could result in material changes to our estimates in future periods.

As a result, certain of our estimates and assumptions, including the provision for sales deductions, the fair values of financial instruments and the recoverability of intangible assets, require increased judgment and carry a higher degree of variability and volatility that could result in material changes to our estimates in future periods.

Cash and Cash Equivalents

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Realized gains and losses, included in Interest and other income, net in the consolidated statement of earnings, are determined using the specific identification method for determining the cost of securities sold.

The Company adopted Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020, using the allowance approach.

Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses) are included in the consolidated statement of earnings, with a corresponding allowance established.

If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings and adjust the allowance accordingly.

Refer to Recently Issued Accounting Pronouncements in this Note 2.

Business Combinations and Contingent Considerations

In determining whether an acquisition should be accounted for as a business combination or as an asset acquisition, the Company makes certain judgments regarding whether the acquired set of activities and assets meets the definition of a business.

Significant judgment is required in assessing whether the acquired processes or activities, along with their inputs, would be substantive to constitute a business, as defined by U.S.

If the acquired set of activities and assets does not meet the definition of a business, the transaction is accounted for as an asset acquisition.

The Company determines whether an acquisition should be accounted for as a business combination or as an asset acquisition.

If the acquired set of activities and assets does not meet the definition of a business, as defined by U.S.

GAAP, the transaction is accounted for as an asset acquisition.

In an asset acquisition, any acquired research and development that does not have an alternative future use is charged to expense as of the acquisition date, and no goodwill is recorded.

If the acquired set of activities and assets meets the definition of a business, the Company applies the acquisition method of accounting and accounts for the transaction as a business combination.

In a business combination, assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date.

The excess of the purchase price over the fair value of the acquired net assets, if applicable, is recorded as goodwill.

In a business combination, the operating results of the acquired business are included in the Company's consolidated statement of earnings, beginning on the effective acquisition date.

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

In a business combination, assets acquired and liabilities assumed are recorded at

Supernus Pharmaceuticals, Inc.

1 unchanged sentence

Summary of Significant Accounting Policies (Continued)

their respective fair values as of the acquisition date.

The excess of the purchase price over the fair value of the acquired net assets, if applicable, is recorded as goodwill.

In a business combination, the operating results of the acquired business are included in the Company's consolidated statement of earnings, beginning on the effective acquisition date.

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

Significant judgment is involved in the determination of the fair value assigned to assets acquired and liabilities assumed in a business combination, as well as the estimated useful lives of assets.

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the probability of regulatory approval, revenue growth, and appropriate discount rate.

Depending on the facts and circumstances, the Company may deem it necessary to engage an independent valuation expert to assist in valuing significant assets and liabilities.

While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed as of the acquisition date, estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date.

The Company continues to collect information related to facts and circumstances existing as of the acquisition date and evaluates these estimates and assumptions.

The Company records measurement period adjustments to the Company's preliminary estimates to goodwill based on the facts and circumstances existing as of the acquisition date.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to our consolidated statements of earnings in the period that these adjustments are identified.

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Changes that are not measurement period adjustments are reported on the consolidated statement of earnings in Contingent consideration (gain) expense .

Additional information regarding contingent consideration is included in Note 3, Acquisitions .

Additional information regarding contingent consideration is included in Note 3, Acquisition and Note 7, Contingent Consideration.

Accounts Receivable, Net

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Payment terms for receivables are based on customary commercial terms and are predominantly less than one year.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk concentrations consist of cash, cash equivalents, marketable securities, and accounts receivable.

The counterparties are various corporations, governmental institutions, and financial institutions of high credit standing.

Supernus Pharmaceuticals, Inc.

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Summary of Significant Accounting Policies (Continued)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk concentrations consist of cash, cash equivalents, marketable securities, and accounts receivable.

The counterparties are various corporations, governmental institutions, and financial institutions of high credit standing.

Substantially all of the Company's cash, cash equivalents, and marketable securities are maintained in U.S.

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Expired inventory is destroyed, and the related costs are recognized as Cost of goods sold in the consolidated statement of earnings.

Inventories Produced in Preparation of Product Launches

The Company capitalizes inventories produced in preparation for product launches when future commercialization of a product is probable and when a future economic benefit is expected to be realized.

The determination to capitalize is based on the particular facts and circumstances relating to the product.

Capitalization of such inventory begins when the Company determines that (i) positive clinical trial results have been obtained in order to support regulatory approval;

(ii) uncertainties regarding regulatory approval have been significantly reduced;

and (iii) it is probable that these capitalized costs will provide a future economic benefit in excess of capitalized costs.

In evaluating whether these conditions are met, the Company considers the following factors:

the product candidate's current status in the regulatory approval process;

results from the related pivotal and supportive clinical trials;

results from meetings with relevant regulatory agencies prior to the filing of regulatory applications;

completion of the regulatory applications;

consequent acceptance by the regulatory agency;

potential impediments to the approval process such as product safety or efficacy concerns, potential labeling restrictions, and other impediments:

historical experience with manufacturing and commercializing similar products as well as the manufacture of the relevant product candidate;

and the Company's manufacturing environment, and supply chain in determining logistical constraints that could hamper approval or commercialization.

In assessing the economic benefit that the Company is likely to realize, the Company considers the shelf life of the product in relation to the expected timeline for approval;

patent related or contractual issues that may prevent or delay commercialization and product stability data of all pre-approval production to assess the adequacy of expected shelf life;

viability of commercialization taking into account competitive dynamics in the marketplace and market acceptance;

and anticipated future sales and anticipated reimbursement strategies that may prevail with respect to the product, to determine product profit margin.

In applying the lower of cost or net realizable value to pre-launch inventory, the Company estimates a range of likely commercial prices based on the pricing of competitive commercial products and pre-launch discussions with managed care providers.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

The Company could be required to write down previously capitalized costs related to pre-launch inventories upon a change in facts and circumstances, including, among other potential factors, a denial or significant delay of approval by regulatory bodies, a delay in commercialization, or other adverse factors.

Intangible Assets

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During the period prior to completion or abandonment, the IPR&D asset is not amortized but tested for impairment on an annual basis or when potential indicators of impairment are identified.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

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Impairment of Indefinite-Lived Intangible Assets

For indefinite-lived intangible assets, such as the acquired IPR&D asset, the Company evaluates impairment annually (during the fourth quarter of each fiscal year) or more frequently if impairment indicators exist.

For indefinite-lived intangible assets, such as the acquired IPR&D asset, the Company evaluates impairment annually or more frequently if impairment indicators exist.

The annual evaluation is generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.

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If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, the Company writes down the indefinite-lived intangible asset to its estimated fair value, and an impairment loss equal to the difference between the assets fair value and carrying value is recognized in the consolidated statement of earnings in the period at which such determination is made.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Goodwill and Goodwill Impairment Assessment

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Interest Expense

Interest expense includes stated interest and the amortization of deferred financing costs and debt discount incurred by the Company in connection with the issuance of $ 402.5 million of 0.625 % Convertible Senior Notes due 2023 (see Note 14).

The Company amortizes the deferred financing costs and debt discount over the term of the debt, using the effective interest method.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Revenue Recognition

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and an estimated provision for discounts.

These are collectively considered "sales deductions."

As described below, variability in the net transaction price for the Company's products arises primarily from the aforementioned sales deductions.

These are collectively considered "sales deductions." Sales deductions 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 sale using the most likely value method.

The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal will not occur.

Variability in the net transaction price for the Company's products arises primarily from the aforementioned sales deductions.

Significant judgment is required in estimating certain sales deductions.

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The Company adjusts its estimates of revenue either when the most likely amount of consideration it expects to receive changes, or when the consideration becomes fixed.

Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

If actual results in the future vary from our estimates, the Company adjusts its estimates in the period identified.

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Sales Deductions

The Company records product sales net of the following sales deductions:

Rebates are discounts which the Company pays under either public sector or private sector health care programs.

The Company records product sales net of rebates, returns and discounts.

• Rebates - Rebates are discounts which the Company pays under either public sector or private sector health care programs.

Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by the Company with managed care providers.

Both types of rebates vary over time.

Public sector rebate programs encompass:

various Medicaid drug rebate programs;

Medicare gap coverage programs;

programs covering public health service institutions;

and programs covering government entities.

All federal employees and agencies purchase drugs under the Federal Supply Schedule.

Private sector rebate programs include:

contractual agreements with managed care providers, under which the Company pays fees to gain access to that provider's patient drug formulary;

and Company-sponsored programs, under which the Company defrays or eliminates patient co-payment charges that the patient would otherwise be obligated to pay to their managed care provider in order to fill their prescription.

Rebates are owed when our customer dispenses our product to a patient;

i.e., filling a prescription.

The accrual balance for rebates consists of the following three components.

First, because rebates are generally invoiced and paid in arrears, the accrual balance consists of an estimate of the amount expected to be incurred for prescriptions dispensed in the current quarter.

Second, the accrual balance also includes an estimate for known or estimated prior quarters' unpaid rebates, covering those prescriptions dispensed in past quarters but for which no invoice has yet been received.

Third, the accrual balance includes an estimate for rebates that will be prospectively owed for prescriptions filled in future quarters.

This estimate pertains to a product that has been sold by the Company to wholesalers or distributors and which resides either as wholesaler/distributor inventory or as inventory held at pharmacies.

As of the end of the reporting period, this product has not been dispensed to a patient.

The Company’s estimates of expected rebate claims vary by program and by type of customer because the period between the date at which the prescription is filled and the date the Company receives and pays the invoice varies substantially.

For each of its products, the Company bases its estimates of expected rebate claims on multiple factors, including:

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The liability is recorded as a component of current liabilities on the consolidated balance sheets.

The sensitivity of the Company's estimates to subsequent adjustment varies by program and by type of customer.

If actual rebates vary from estimated amounts, the Company adjusts the balances of such accrued rebates to reflect actual experience.

These adjustments could materially affect the estimated liability balance, net product sales, and earnings in the period in which these adjustments are made.

Sales of the Company's products are not subject to a general right of return.

• Returns - Sales of the Company's products are not subject to a general right of return.

A product that has been used to fill patient prescriptions is no longer subject to any right of return.

However, the Company will accept a return of product that is damaged or defective when shipped from its third party fulfillment centers.

The Company will also accept a return of expired product six months prior to and up to 12 months subsequent to the product's expiry date for certain products.

Expired or defective returned product cannot be re-sold and is therefore destroyed.

The Company will also accept a return

Supernus Pharmaceuticals, Inc.

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Summary of Significant Accounting Policies (Continued)

of expired product six months prior to and up to 12 months subsequent to the product's expiry date for certain products.

Expired or defective returned product cannot be re-sold and is therefore destroyed.

The Company records an estimated liability for product returns at the time the customer takes title to the product (i.e., at time of sale).

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Because the Company's products have a shelf life up to 48 months from the date of manufacture, and because the Company accepts return of product up to 12 months post its expiry date, there is a time lag of several years between the time when the product is sold and the time when the Company may issue credit on the expired product.

The Company's returns policy generally permits product returns to be processed at the current wholesaler price rather than at historical acquisition price;

hence, the Company's estimated liability for product returns is affected by price increases taken subsequent to the date of sale and prior to its return.

At the time the Company adjusts its estimates for product returns, such adjustment affects the estimated liability, product sales, and earnings in the period of adjustment.

Those adjustments may be material to our financial results.

Sales discounts :

Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts, for distributing our products.

• Sales discounts - Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts, for distributing our products.

Distributor and wholesaler allowances and service fees arise from contractual agreements and are estimated as a percentage of the price at which the Company sells product to them.

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The Company accounts for these discounts at the time of sale as a reduction to gross product sales and accounts receivable, net.

License Revenue

The Company has entered into collaboration agreements to commercialize certain of its products outside of the U.S.

Those agreements include the right to use the Company's intellectual property as a functional license and generally include an up-front license fee and ongoing milestone payments upon the achievement of certain specific events.

These agreements may also require minimum royalty payments based on sales of products that use the applicable intellectual property.

Up-front license fees are recognized once the license has been executed between the Company and its licensee.

Milestones are a form of variable consideration recognized when either the underlying events have transpired (i.e., event-based milestone) or when the sales-based targets have been met by the collaborative partner (i.e., sales-based milestone).

Both types of milestone payments are nonrefundable.

The Company evaluates whether achieving the milestone is considered probable and estimates the amount of the milestone to be included in the transaction price using the most likely amount method.

The value of the associated milestone is not included in the transaction price if it is probable that a significant revenue reversal would occur.

This estimation is based on management's judgment and may require assessing factors that are outside of the Company's influence, such as:

likelihood of regulatory success;

availability of third party information;

and expected time period until achievement of the event.

These factors are evaluated based on the specific facts and circumstances.

Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs.

Milestones that are not within the control of the Company, such as approval from regulatory authorities, or where attainment of the specified event is dependent on the success of a third-party, are not considered probable until the specified event occurs.

Sales-based milestones are recognized as revenue only when the sales-based target is achieved.

There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Royalty Revenue

The Company recognizes noncash royalty revenue for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales of Orenitram by United Therapeutics (see Note 4).

Royalty Revenues

The Company recognizes noncash royalty revenues for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales of Orenitram by United Therapeutics (see Note 4, Disaggregated Revenues ).

This agreement includes the right to use the Company's intellectual property as a functional license.

In 2014, the Company sold certain of these royalty rights to Healthcare Royalty Partners III, L.P.

(HC Royalty) (see Note 15).

Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction and amortizes this liability as noncash royalty revenue.

(HC Royalty).

Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction and amortizes this liability as noncash royalty revenues (see Note 4, Disaggregated Revenues and Note 16, Commitments and Contingencies ).

Sales of Orenitram by United Therapeutics result in payments from United Therapeutics to HC Royalty, in accordance with this agreement.

The Company also recognizes noncash interest expense related to the nonrecourse liability and accrues interest expense at an estimated effective interest rate (see Note 14).

The Company also recognizes noncash interest expense related to the nonrecourse liability and accrues interest expense at an estimated effective interest rate (see Note 15, Interest Expense ).

This interest rate is determined based on projections of HC Royalty's rate of return.

Royalty revenue also includes cash royalty amounts received from other collaboration partners for the right to use the Company's intellectual property as a functional license.

The Company has a royalty arrangement with Takeda Pharmaceutical Company Ltd., based on net product sales of Takeda's product, Mydayis, and with Allergan, based on net product sales of Namzaric.

For these arrangements that include sales-based royalties on the licensed intellectual property to which the royalties relate, royalty revenue is only recognized when the underlying product sale has occurred.

Royalty revenues also include cash royalty amounts received from other collaboration partners for the right to use the Company's intellectual property as a functional license.

The Company has royalty arrangements with third parties that include sales-based royalties on the licensed intellectual property to which the royalties relate.

For sales-based royalties, royalty revenue is only recognized when the underlying product sale has occurred.

Sales-based royalties are recorded based on estimated quarterly net sales of the underlying product.

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cost to write down inventory to net realizable value and manufacturing overhead costs, including quality control and assurance.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Research and Development Expenses

15 unchanged sentences

If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such determination is made.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Share-Based Compensation

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Share-based compensation expense is recorded based on amortizing the fair market value of the RSU as of the date of the grant over the implied service period.

RSUs generally vest one year from the date of the grant and are subject to continued service requirements.

Forfeitures are accounted for as incurred.

RSUs granted to employees generally vest over four equivalent annual installments, starting on the first anniversary of the grant.

RSUs granted to directors generally vest over a one year term.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Performance Stock Units (PSUs)

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Treasury Note rate, as of the week, the award is issued, with a duration that most closely resembles the expected term of the award.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

The Company determines if an arrangement is a lease considering whether there is an identified asset, and the contract conveys the right to control its use.

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Advertising Expense

Advertising expense includes the cost of promotional materials and activities, such as printed materials and digital marketing, marketing programs, and speaker programs.

The cost of the Company's advertising efforts is expensed as incurred.

Advertising expense includes the cost of promotional materials and activities, such as television, print media, digital marketing, marketing programs and speaker programs.

The cost of the Company's advertising efforts are expensed as incurred.

The Company incurred approximately $ 131.7 million, $ 86.0 million, and $ 54.5 million in advertising expense for the years ended December 31, 2022, 2021, and 2020, respectively.

These expenses are recorded as a component of Selling, general and administrative expenses in the consolidated statements of earnings.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

The Company utilizes the asset and liability method of accounting for income taxes.

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Accounting Pronouncements Adopted in 2022

ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes - The new standard, issued in December 2019, simplifies the accounting for income taxes.

The Company adopted the guidance on January 1, 2021, on a prospective basis.

The adoption of the new standard did not have a material impact to the financial statements.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

ASU 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 - The new standard, issued in January 2020, clarifies the interaction of the equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain contracts and purchased options accounted for under Topic 815.

The amendment clarifies that an entity can elect to adopt the measurement alternative, which is if an entity identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, it should measure the equity security at fair value as of the date that the observable transaction occurred before applying or upon discontinuing the equity method.

The adoption of the new standard as of January 1, 2021 did not have a material impact to the financial statements.

Accounting Pronouncements Adopted in 2020

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) - The new standard, issued in July 2016, requires credit losses on financial assets to be measured as the net amount expected to be collected, rather than based on actual incurred losses.

For available-for-sale debt securities, the new standard did not revise the definition of impairment.

The new standard also eliminated the concept of "other than temporary" from the impairment model for available-for-sale debt securities.

Changes to the impairment model include recognition of credit losses on available-for-sale debt securities using the allowance method and limiting the allowance to the amount by which fair value is below amortized cost.

The Company adopted the new standard effective January 1, 2020, using the modified retrospective approach.

The adoption of the standard did not have a material impact on its consolidated financial statements.

ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) - The new standard, issued in August 2018, improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

The standard removes, modifies, and adds certain disclosure requirements.

The Company adopted the new standard effective January 1, 2020.

The adoption of the standard did not have a material impact on its consolidated financial statements.

ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract - The new standard, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred under a service contract for a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or to obtain internal-use software.

This includes hosting arrangements that include an internal-use software license.

This ASU also requires that the implementation costs of a hosting arrangement under a service contract be expensed over the term of the hosting arrangement, including reasonably certain renewals.

The Company adopted the new standard effective January 1, 2020, using the prospective transition approach.

The adoption of the standard did not have a material impact on its consolidated financial statements.

ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 - The new standard, issued in November 2018, clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606.

The Company adopted the new standard effective January 1, 2020.

The adoption of the standard did not have a material impact on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) :

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This new standard also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception.

This guidance will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted but no earlier than fiscal years beginning after December 15, 2020.

The Company adopted the new guidance as of January 1, 2022 using the modified retrospective method of transition which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As a result, the cumulative effect of the accounting change increased the carrying amount of the convertible notes, net by $ 20.6 million, increased retained earnings by $ 40.6 million, reduced additional paid-in capital by $ 56.2 million, and decreased deferred tax liabilities by $ 5.0 million as of January 1, 2022.

In addition, the Company had an increase of 6.8 million in dilutive shares included in diluted weighted average shares of common stock outstanding for the purposes of calculating diluted earnings per share under the if-converted method.

ASU 2021-10, Government Assistance (Topic 832) - The new standard, issued in November 2021, requires the disclosure of information about transactions with a government that are accounted for by applying a grant or contribution model by analogy.

This could include various forms of government assistance, but excludes transactions in the scope of specific U.S.

GAAP, such as tax incentives accounted for under Accounting Standards Codification (ASC) 740, Income Taxes .

For transactions in the scope of the new standard, information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction are required to be disclosed.

This guidance is effective for fiscal years beginning after December 15, 2021 on a prospective basis.

The adoption of the new standard as of January 1, 2022 did not have a material impact to the financial statements.

Supernus Pharmaceuticals, Inc.

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Summary of Significant Accounting Policies (Continued)

The Company will adopt the new guidance on January 1, 2022 using the modified retrospective method of transition which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As a result, the Company will account for the 2023 Notes wholly as debt and will not separately account for the embedded conversion feature (equity component) of its 2023 Notes in additional paid-in capital.

Using the modified retrospective method of transition, the cumulative effect of the accounting change is expected to increase net debt by approximately $ 20.6 million, increase retained earnings by approximately $ 40.6 million, reduce additional paid-in capital by approximately $ 56.2 million and decrease deferred tax liabilities by approximately $ 5.0 million.

In addition, the Company will no longer record interest expense on the previously recorded discount for the embedded conversion feature on the 2023 Notes.

Due to the adoption, the Company also expects non-cash interest expense related debt discount accretion of the 2023 Notes will be decreased by approximately $ 16.4 million for fiscal year 2022, compared to the debt discount accretion recorded prior to adoption.

The Company also expects an increase of approximately 6.8 million shares to be included in its diluted weighted-average shares of common stock outstanding for the purposes of calculating diluted earnings per share.

All estimates are based on the balance of the 2023 Notes outstanding as of December 31, 2021 and could change as we continue with our implementation efforts.

New Accounting Pronouncements Not Yet Adopted

ASU 2021-08, Business Combinations (Topic 805):

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Early adoption is permitted.

This could include various forms of government assistance, but excludes transactions in the scope of specific US GAAP, such as tax incentives accounted for under ASC 740, Income Taxes .

This guidance is effective for fiscal years beginning after December 15, 2021 on a prospective basis.

Early adoption is permitted.

The Company will adopt the standard effective January 1, 2022.

It is not expected to have a material effect on our consolidated financial statements.

Adamas Acquisition

On November 24, 2021 (the Adamas Closing Date), the Company completed its purchase of all of the outstanding equity of Adamas, a publicly-held pharmaceutical company, pursuant to the Agreement and Plan of Merger among the Company, Adamas and Supernus Reef, Inc., a wholly owned subsidiary of the Company, dated October 10, 2021 (the Adamas Agreement).

On the Adamas Closing Date, Adamas owned two marketed products:

GOCOVRI (amantadine) extended release capsules, the first and only U.S.

FDA-approved medicine indicated for the treatment of both "off" episodes and dyskinesia in patients with PD receiving levodopa-based therapy and as an adjunctive treatment to levodopa/carbidopa in patients with PD experiencing "off" episodes;

and Osmolex ER (amantadine) extended release tablets, approved for the treatment of PD and drug-induced extrapyramidal reactions in adult patients.

Adamas also owns the right to receive royalties from Allergan plc for sales of Namzaric (memantine hydrochloride extended release and donepezil hydrochloride) in the United States.

The Company paid the Seller $ 400.8 million and two non-tradable contingent value rights (CVRs) each of which represents the contractual right to receive a contingent payment of $ 0.50 per share in cash, less any applicable withholding taxes and without interest, upon the achievement of the applicable milestone (each such amount, a Milestone Payment) in accordance with the terms of a Contingent Value Rights Agreement entered into among the Company and American Stock Transfer & Trust Company, LLC, as rights agent, (CVR Agreement).

In connection with the Adamas Acquisition on November 24, 2021 (see Note 1, Organization and Nature of Operations ), the Company paid the Adamas shareholders $ 400.8 million and transferred two non-tradable contingent value rights (CVRs).

Each CVR represents the contractual right to receive a contingent payment of $ 0.50 per share in cash, less any applicable withholding taxes and without interest, upon the achievement of the applicable milestone (each such amount, a Milestone Payment) in accordance with the terms of a Contingent Value Rights Agreement entered into between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (CVR Agreement).

One Milestone Payment is payable (subject to certain terms and conditions) upon the first occurrence of the achievement of aggregate worldwide net sales of GOCOVRI in excess of $ 150 million during any consecutive 12-month period ending on or before December 31, 2024 (Milestone 2024).

Another Milestone Payment is payable (subject to certain terms and conditions) upon the first occurrence of the achievement of aggregate worldwide net sales of

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

GOCOVRI in excess of $ 225 million during any consecutive 12-month period ending on or before December 31, 2025 (Milestone 2025 and, together with Milestone 2024, the Milestones).

Another Milestone Payment is payable (subject to certain terms and conditions) upon the first occurrence of the achievement of aggregate worldwide net sales of GOCOVRI in excess of $ 225 million during any consecutive 12-month period ending on or before December 31, 2025 (Milestone 2025 and, together with Milestone 2024, the Milestones).

Each Milestone may only be achieved once.

In connection with the two CVRs, the Company recorded a contingent consideration liability of $ 10.3 million as of the date of the acquisition, to reflect the estimated fair value of the contingent consideration.

The estimated fair value of the contingent consideration was determined using the Monte Carlo simulation for the sales-based milestones.

The fair value measurement of the contingent consideration liability was determined based on significant unobservable inputs and thus represents a Level 3 fair value measurement.

The key assumptions considered include the estimated amount and timing of projected cash flows, volatility, estimated discount rates and risk-free interest rate.

In each reporting period after the acquisition, the Company will revalue the contingent consideration liability and will record increases or decreases in the fair value of the liability in its consolidated statements of earnings.

Changes in fair value will result from changes in actual and projected milestone achievement, as well as changes to forecasts.

The inputs and assumptions may not be observable in the market, but reflect the assumptions the Company believes would be made by a market participant.

In connection with the two CVRs, the Company recorded contingent consideration liabilities of $ 10.3 million as of the date of the acquisition, to reflect the estimated fair value of the contingent consideration.

The estimated fair values of the contingent consideration liabilities were determined using Monte Carlo simulations.

The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs and thus represent Level 3 fair value measurements.

The key assumptions considered include the estimated amount and timing of projected revenues, volatility, estimated discount rates and the risk-free interest rate.

In each reporting period after the acquisition, the Company will revalue the contingent consideration liabilities and will record increases or decreases in the fair value of the liabilities in its consolidated statements of earnings.

Changes in fair value will result from actual milestone achievement, as well as changes to forecasts.

The inputs and assumptions may not be observable in the market, but they reflect the assumptions the Company believes would be made by a market participant.

The possible outcomes for the contingent consideration range from $ 0 to $ 50.9 million on an undiscounted basis.

The acquisition is being accounted for as a business combination under the acquisition method of accounting, in accordance with ASC 805, Business Combinations .

The acquisition was accounted for as a business combination under the acquisition method of accounting, in accordance with ASC 805, Business Combinations .

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill.

The estimated fair values of the assets acquired and liabilities assumed, including goodwill, have been included in the Company's consolidated financial statements since the Adamas Closing Date.

The Company's accounting for this acquisition is preliminary and fair value estimates for the assets acquired and liabilities assumed and the Company's estimates and assumptions are subject to change as the Company obtains additional information for its estimates during the measurement period.

During the measurement period, if the Company obtains new information regarding facts and circumstances that existed as of the Adamas Closing Date that, if known, would have resulted in revised estimated values of those assets or liabilities, the Company will accordingly revise its estimates of fair values and purchase price allocation.

The effect of measurement period adjustments on the estimated fair value elements will be reflected as if the adjustments had been made as of the Adamas Closing Date.

The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

The Company expects to finalize its purchase price allocation within one year of the Adamas Closing Date.

In addition, the Company continues to analyze and assess relevant information necessary to determine, recognize and record at fair value the assets acquired and liabilities assumed in the following areas:

intangible assets, lease assets and liabilities, tax assets and liabilities, and certain existing or potential reserves, including those for legal or contract-related matters.

The activities the Company is currently undertaking, include but are not limited to the following:

review of acquired contracts and other contract-related and legal matters;

review and evaluation of the accounting policies, tax positions, and other tax-related matters.

Further, the Company is in the process of obtaining input from third party valuation firms with respect to the fair value of the acquired tangible and intangible assets, and other information necessary to record and measure the assets acquired and liabilities assumed.

Accordingly, the preliminary recognition and measurement of assets acquired and liabilities assumed as of Adamas Closing Date are subject to change.

The estimated fair values of the assets acquired and liabilities assumed, including goodwill, have been included in the Company's consolidated financial statements since the acquisition Closing Date.

In the fourth quarter of 2022 and within one year from the Closing Date, the Company finalized its accounting for the Adamas Acquisition;

the Company recorded measurement period adjustments related to deferred tax liabilities, and the fair values for a lease (refer to Note 13, Leases ), inventory, and intangible asset based on refinements to inputs used in the estimates.

The following purchase price allocation table presents the Company's estimates of the fair value of assets acquired and liabilities assumed as of the Adamas Closing Date, and subsequent measurement period adjustments recorded during the year ended December 31, 2022 (dollars in thousands):

Supernus Pharmaceuticals, Inc.

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Acquisitions (Continued)

The following preliminary purchase price allocation table presents the Company's preliminary estimates of the fair value of assets acquired and liabilities assumed as of the Adamas Closing Date (dollars in thousands):

Amount (in thousands)

As Initially Reported Measurement Period Adjustments (1)

Cash and cash equivalents $ 90,064 $ — $ 90,064

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Inventories (4)

20,200 ( 914 ) 19,286

Prepaid expenses and other current assets 5,077 — 5,077

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Intangibles (4)

450,100 400 450,500

Other assets (2)

6,442 ( 1,620 ) 4,822

Total fair value of assets acquired 584,293 ( 2,134 ) 582,159

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Current debt ( 138,315 ) — ( 138,315 )

Operating lease liability, long-term (1)

Deferred income tax liabilities, net (2)

Operating lease liabilities, long-term ( 5,224 ) — ( 5,224 )

Deferred income tax liabilities (2)(3)(4)

( 56,588 ) 2,631 ( 53,957 )

Total fair value of liabilities assumed ( 212,733 ) 2,631 ( 210,102 )

5 unchanged sentences

Total purchase price $ 411,113 $ — $ 411,113

(1) Acquired operating lease asset was $ 6.4 million and corresponding assumed operating lease liability was $ 7.2 million.

Refer to Note 12, Leases , for further discussion of the acquired lease asset and assumed lease liability.

(2) Includes tax attributes that are subject to tax limitations.

(1) Measurement period adjustments reflect changes for the year ended December 31, 2022 based on information related to the facts and circumstances that existed as of the Closing Date.

(2) Refinement of the estimate of fair value of the right of use asset associated with the acquired Adamas headquarters lease recorded in the first quarter of 2022.

Refer to Note 13, Leases .

(3) Represents tax impact for the changes in fair value estimate of the right of use asset.

inventory and intangible assets, and changes made to finalize the accounting of certain state tax attributes which existed at the opening balance sheet date.

(4) Represents adjustment to the fair value of inventory acquired which correspondingly increased the fair value of intangible assets.

Acquired Inventory

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The acquired intangible assets include the acquired developed technology and product rights to GOCOVRI and Osmolex ER, as well as the right to receive royalties from Allergan plc for sales of Namzaric.

The Company determined the estimated fair values for the acquired intangible assets as of the Adamas Closing Date using the income approach.

The Company determined the estimated fair values for the acquired intangible assets as of the Closing Date using the income approach.

This is a valuation technique that provides an estimate of fair value of the assets, based on the market participant's expectations of the cash flows that the assets are forecasted to generate.

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Acquisitions (Continued)

The fair value measurements of the acquired intangible assets were determined based on significant unobservable inputs and thus represents a Level 3 fair value measurement.

The fair value measurements of the acquired intangible assets were determined based on significant unobservable inputs and thus represent Level 3 fair value measurement.

Some of the more significant inputs and assumptions used in the intangible assets valuation includes:

the estimated future cash flows from product sales, the timing and projection of costs and expenses, discount rates and tax rates.

Acquired intangible assets consist of developed technology and property rights and are amortized over their estimated useful lives on a straight-line basis.

The following table summarizes the preliminary purchase price allocation, and the average remaining useful lives for identifiable intangible assets (dollars in thousands):

Acquired intangible assets consist of developed technology and product rights and are amortized over their estimated useful lives on a straight-line basis.

The following table summarizes the final purchase price allocation and the average remaining useful lives for identifiable intangible assets (dollars in thousands):

Estimated Fair Value Estimated Useful Life as of Closing Date (in years)

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The deferred income tax liabilities, net relates to the difference between the financial statement carrying amount and the tax basis of acquired intangible assets and inventory, partially offset by acquired net operating loss carryforwards and other temporary differences.

The acquired federal and state net operating loss carryforwards is reduced by a valuation allowance for amounts that are not expected to be realizable in the future.

Refer to Note 11, Income Taxes .

Acquisition-related Costs

For the year ended December 31, 2021, the Company incurred acquisition-related costs of $ 22.3 million of which the majority were included in the Selling, general and administrative expense in the consolidated statements of earnings.

These costs include, $ 15.6 million of employee-related expenses and $ 6.7 million in transaction costs, which primarily consisted of regulatory fees, advertisement fees, financial advisory and legal fees, and other consulting fees , to complete the acquisition.

The acquired federal and state net operating loss carryforwards are reduced by a valuation allowance for amounts that are not expected to be realizable in the future.

Revenue and Net Earnings of Adamas

The operations of Adamas and its subsidiaries have been included in the Company's consolidated statements of earnings for the period subsequent to the Adamas Closing Date, and through December 31, 2021.

Total revenues of $ 10.9 million and net loss of $ 18.1 million were recorded for the year ended December 31, 2021.

The operations of Adamas and its subsidiaries have been included in the Company's consolidated statements of earnings for the periods subsequent to the Closing Date.

Pro Forma Information

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Pro forma net loss $ ( 28,040 ) $ ( 16,186 )

The unaudited pro forma combined financial information is based on historical financial information and the Company's preliminary allocation of purchase price;

therefore, it is subject to subsequent adjustment upon finalization of the purchase price

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

The unaudited pro forma combined financial information is based on historical financial information and the Company's allocation of purchase price.

In order to reflect the occurrence of the acquisition on January 1, 2020, the unaudited pro forma combined financial information reflects the recognition of additional amortization expense on intangible assets and estimated additional cost of products sold related to the inventory step-up adjustment;

the estimated reduction in the Company's interest income generated from marketable securities that were liquidated to fund the purchase price of the Acquisition, and the estimated tax impact of the pro forma adjustments.

The unaudited pro forma combined financial information also reflects the recognition of non-recurring costs incurred directly as a result of the Acquisition for the year ended December 31, 2021 primarily pertaining to the following:

• Acquisition-related costs incurred by the Company of $ 22.3 million and incurred by Adamas of $ 10.5 million;

• Stock-based compensation expense of $ 12.7 million for Adamas incurred to accelerate the vesting of certain equity awards under the terms of the Merger Agreement.

the estimated reduction in the Company's interest income generated from marketable securities that were liquidated to fund the purchase price of the Adamas Acquisition, and the estimated tax impact of the pro forma adjustments.

The unaudited pro forma combined financial information should not necessarily be considered indicative of the results that would have occurred if the acquisition had been consummated on the assumed completion date, nor are they indicative of future results.

USWM Acquisition

On June 9, 2020 (the USWM Closing Date), the Company completed its acquisition of all the outstanding equity of USWM Enterprises, LLC (USWM Enterprises), a privately-held biopharmaceutical company, pursuant to the Sale and Purchase Agreement with US WorldMeds Partners, LLC (Seller), dated April 28, 2020 (the USWM Agreement).

Under the terms of the Agreement, the Company acquired the right to further develop and commercialize APOKYN, XADAGO, and the apomorphine infusion device (SPN-830;

the IPR&D asset) in the U.S., and MYOBLOC worldwide (the Products) for an upfront cash payment of $ 297.2 million, subject to working capital adjustments, and the potential for additional contingent consideration payments of up to $ 230 million.

The potential $ 230 million in contingent consideration payments includes up to $ 130 million for the achievement of certain SPN-830 regulatory and commercial activities (regulatory and developmental contingent consideration payments) and up to $ 100 million related to future sales performance of the Products (sales-based contingent consideration payments).

The regulatory and developmental contingent consideration payments include a $ 25 million milestone due upon the FDA acceptance of the SPN-830 NDA for review.

The remaining $ 105 million of the $ 130 million contingent consideration payments include payments upon the FDA's regulatory approval and commercial launch of SPN-830.

One of the regulatory milestones has a time-based mechanism for full or partial achievement.

The $ 100 million sales-based contingent consideration payments include a $ 35 million milestone due upon achievement of certain U.S.

net product sales of APOKYN.

The remaining $ 65 million of the $ 100 million sales-based contingent consideration payments relate to the achievement of certain net product sales of the Products in 2022 and 2023.

Refer to the contingent consideration discussion in Note 6, Fair Value of Financial Instruments and Contingent Consideration .

In the second quarter of 2021 and within one year from the USWM Closing Date, the Company finalized its accounting for the business combination, including the purchase price allocation;

the Company recorded measurement period adjustments related to the purchase price consideration, finalization of the accounting for the lease (refer to Note 12, Leases ), the fair values of inventory and intangible assets, and deferred tax liabilities based on refinements to inputs used in the estimates.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

Purchase Price Consideration

Cash consideration $ 306,485

Fair value of contingent consideration 74,800

Total purchase consideration $ 381,285

Cash consideration to Seller - net of cash acquired $ 299,491

The Company paid the Seller $ 297.2 million in cash at the USWM Closing Date.

As of December 31, 2021, the Company paid the Seller an additional $ 2.3 million for working capital adjustments on the purchase price consistent with the Agreement resulting in an increase to the original cash consideration paid to the Seller.

Of the $ 2.3 million additional payments, $ 1.0 million was incurred in the second quarter of 2021 and the remainder was reported and paid in 2020.

Contingent Consideration

In addition to the cash paid to the Seller, contingent payments of up to $ 230 million are also due to the Seller upon the achievement of certain milestones related to the development of SPN-830, the IPR&D asset, and sale of the Products.

The possible outcomes for the contingent consideration range from $ 0 , if no milestone is achieved, to $ 230 million on an undiscounted basis if all milestones are achieved.

The Company initially recorded a contingent consideration liability of $ 115.7 million as of the USWM Closing Date to reflect the estimated fair value of the contingent consideration based on information available at that time.

The estimated fair value of the contingent consideration was determined using a Monte Carlo simulation for the sales-based contingent consideration payments and an income approach for the regulatory and developmental contingent consideration payments.

The key assumptions considered in estimating the fair value include the estimated probability and timing of milestone achievement, such as the probability and timing of obtaining regulatory approval, discount rate, the estimated revenue volatility and the estimated amount and timing of projected revenues from the Products.

Subsequent to the Closing Date, the Company adjusted the contingent consideration fair value based on new information related to the facts and circumstances that existed as of the acquisition date related to the timing of meeting the conditions of the milestone payments that are contingent upon regulatory approval and commercial launch of the acquired IPR&D asset as well as the estimated timing of projected revenues from the Products.

As a result, the Company recorded in the fourth quarter of 2020, a measurement period adjustment of $ 40.9 million, which decreased the estimated fair value of the contingent consideration liability as of Closing Date to $ 74.8 million.

Refer to the contingent consideration discussion in Note 6, Fair Value of Financial Instruments and Contingent Consideration .

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

Fair Value of Net Assets Acquired

The following table presents the total purchase price and the fair value of the assets acquired and liabilities assumed as of the USWM Closing Date (dollars in thousands):

Cash and cash equivalents 6,994

Accounts receivable, net 18,474

Inventories, net 11,600

Prepaid expenses and other current assets 3,564

Property and equipment, net 454

Operating lease asset (1)

Intangible assets 355,000

Other assets 340

Total fair value of assets acquired 407,455

Accounts payable ( 2,573 )

Accrued expenses and other current liabilities ( 23,339 )

Operating lease liability (1)

Deferred income tax liabilities, net (2)

Total fair value of liabilities assumed ( 104,133 )

Total identifiable net assets 303,322

Goodwill 77,963

Total purchase price 381,285

(1) Refer to Note 12, Leases , for further discussion of the acquired lease asset and assumed lease liability.

(2) Includes tax attributes that are subject to tax limitations.

Acquired Inventory

The fair value of the inventory was determined using the comparative sales method, which estimated the expected sales price of the product, reduced by all costs expected to be incurred to complete or to dispose of the inventory, as well as a profit on the sale.

Acquired Intangible Assets

The acquired intangible assets include the acquired IPR&D asset and the acquired developed technology, and product rights.

The Company determined the fair value of the acquired intangible assets as of the USWM Closing Date using the income approach.

The fair value measurements of the acquired intangible assets were determined based on significant unobservable inputs and therefore, represent a Level 3 fair value measurement.

Some of the more significant inputs and assumptions used in the intangible assets valuation include:

the timing and probability of success of clinical and regulatory approvals for the IPR&D asset, the estimated future cash flows from Product sales, the timing and projection of costs and expenses, discount rates and tax rates.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

The following table summarizes the purchase price allocation, and the average remaining useful lives for identifiable intangible assets (dollars in thousands):

Estimated Fair Value Estimated Useful Lives as of Closing Date

Acquired In-process Research & Development $ 124,000 n/a

Acquired Developed Technology and Product Rights 231,000 10.5 - 12.5

Total intangible assets $ 355,000

Acquired intangible assets, excluding the acquired IPR&D, will be amortized over their estimated useful lives on a straight-line basis.

IPR&D assets are considered indefinite-lived, until the successful completion or abandonment of the associated research and development efforts.

Goodwill was calculated as the excess of the consideration paid consequent to completing the acquisition, compared to the net assets recognized.

Goodwill represents the future economic benefits arising from the other acquired assets, and which could not be individually identified and separately valued.

Goodwill is primarily attributable to the additional acquired growth platforms and an expanded revenue base.

Goodwill is not deductible for tax purposes.

Acquisition-related Transaction Costs

Acquisition-related transaction costs, which primarily consisted of regulatory, financial advisory, and legal fees, totaled $ 8.4 million for the year ended December 31, 2020.

MDD Enterprises Operations

The operations of MDD US Enterprises, LLC ("MDD Enterprises") (formerly USWM Enterprises, LLC) and its subsidiaries have been included in the Company's consolidated statements of earnings for the period subsequent to the USWM Closing Date.

The following table summarizes the total revenues for MDD Enterprises (dollars in thousands):

Net product sales $ 132,134 $ 90,985

The Company is unable to provide the results of operations attributable to MDD US Enterprises, LLC and its subsidiaries as those operations were substantially integrated into our business.

Pro forma Information

The following table presents the unaudited pro forma combined financial information for each of the periods presented as if the USWM Acquisition had occurred on January 1, 2019 (dollars in thousands):

Pro forma total revenues $ 583,657 $ 542,807

Pro forma net earnings 133,423 110,842

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Disaggregated Revenues

5 unchanged sentences

Oxtellar XR 115,345 110,708 98,725

GOCOVRI 104,421 9,778 —

APOKYN 75,305 99,233 74,296

XADAGO 13,387 6,943 —

MYOBLOC 19,514 9,746 —

Qelbree 61,322 9,879 —

GOCOVRI 9,778 — —

Osmolex ER 188 — —

31,818 33,089 16,689

Total net product sales 649,432 567,504 509,350

1 unchanged sentence

Total revenues $ 667,238 $ 579,775 $ 520,397

______________________________

(1) Includes net product sales of MYOBLOC, XADAGO and Osmolex ER.

Trokendi XR accounted for more than 40 % of the Company's total net product sales in 2022, more than 50 % in 2021, and more than 60 % in 2020.

The Company recognized noncash royalty revenue of $ 9.4 million, $ 8.5 million, and $ 6.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, consequent to the Company's agreement with HC Royalty (see Note 2).

During 2020, the Company recorded a $ 10.7 million adjustment to its estimated provision for product returns related to prior year sales.

The adjustment, which accounts for the majority of the total adjustments related to prior year net product sales of $ 13.8 million in 2020, was due to unfavorable actual returns experienced in the first quarter of 2020 for discontinued Trokendi XR commercial blister pack configurations, for which all production and distribution ceased in 2017.

(These amounts are reflected in the 2020 Trokendi net product sales of $ 319.6 million in the table above.) As a result, the Company changed its estimated provision for product returns, based on the most recent experience.

Adjustments related to prior year sales in 2021, 2020 and 2019 were decreased by $ 1.7 million, increased by $ 13.8 million and decreased by $ 0.4 million, respectively, compared to net product sales of $ 567.5 million, $ 509.4 million and $ 383.4 million, respectively.

Adjustments related to prior year sales in 2020 of $ 13.8 million included the $ 10.7 million aforementioned adjustment for discontinued Trokendi XR configuration.

For the year ended December 31, 2021, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) on royalty revenues were not material in the aggregate.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

The Company recognized noncash royalty revenues of $ 9.8 million, $ 9.4 million, and $ 8.5 million for the years ended December 31, 2022, 2021, and 2020, respectively, consequent to the Company's agreement with HC Royalty (see Note 2, Summary of Significant Accounting Policies ).

Adjustments related to prior year sales in 2022 and 2021 have amounted to less than 1 % of net product sales for each of the respective periods.

Adjustments related to prior year sales in 2020 was $ 13.8 million compared to net product sales of $ 509.4 million in 2020.

This included a $ 10.7 million adjustment for the discontinued Trokendi XR commercial blister pack configuration.

Marketable Securities

1 unchanged sentence

2022 December 31, 2021

Corporate and U.S.

Corporate, U.S.

government agency and municipal debt securities

3 unchanged sentences

Total fair value $ 462,110 $ 255,412

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Investments (Continued)

The contractual maturities of the unrestricted available-for-sale marketable securities held by the Company are as follows (dollars in thousands):

8 unchanged sentences

Development Agreement

In April 2020, the Company entered into a Development Agreement with Navitor Pharmaceuticals, Inc.

In April 2020, the Company entered into a development agreement (the Development Agreement) with Navitor Pharmaceuticals, Inc.

(Navitor Inc.).

The Company can terminate the Development Agreement upon 30 days' notice.

Under the terms of the Development Agreement, the Company and Navitor will jointly conduct a Phase II clinical program for NV-5138 (SPN-820) for TRD.

The Company will bear all of Phase I and Phase II development costs incurred by either party, up to a maximum of $ 50 million.

Under the terms of the Development Agreement, the Company and Navitor Inc.

will jointly conduct a Phase II clinical program for NV-5138 (SPN-820) for treatment-resistant depression.

The Company will bear all of the Phase I and Phase II development costs incurred by either party, up to a maximum of $ 50 million.

In addition, the Company will incur certain other research and development support costs.

There are certain additional payment amounts which could be incurred by the Company.

These costs are contingent upon Navitor achieving defined development milestones.

These costs are contingent upon Navitor Inc.

achieving defined development milestones.

The Company has an option to acquire or license NV-5138 (SPN-820), for which additional payments would be required.

In the second quarter of 2020, the Company paid Navitor a one time, nonrefundable, and non-creditable fee of $ 10 million for this option to acquire or license NV-5138 (SPN-820) which was expensed and recorded in Research and development expense in the consolidated statement of earnings.

Equity investment

In addition to entering into the Development Agreement, the Company acquired Series D Preferred Shares of Navitor Inc.

for $ 15 million in April 2020, representing an approximately 13 % ownership position in Navitor Inc.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Investments (Continued)

In addition to entering into the Development Agreement in April 2020, the Company acquired Series D Preferred Shares of Navitor Inc.

for $ 15 million, representing an approximately 13 % ownership position in Navitor Inc.

In March 2021, Navitor Inc.

1 unchanged sentence

In the restructuring, Navitor Inc.

became a wholly owned subsidiary of a newly formed limited liability company, Navitor LLC, and the outstanding shares of stock in Navitor Inc.

became a wholly-owned subsidiary of a newly formed limited liability company, Navitor Pharmaceuticals LLC (Navitor LLC), and the outstanding shares of stock in Navitor Inc.

were exchanged for units of membership in Navitor LLC having equivalent rights and preferences (Navitor Restructuring).

As part of the Navitor Restructuring, the Series D Preferred Shares previously held by the Company were exchanged for Series D Preferred Shares in Navitor LLC.

As part of the Navitor Restructuring, the Series D Preferred Shares previously held by the Company were exchanged for Series D Preferred Units in Navitor LLC.

In addition, certain assets that did not relate to NV-5138 (SPN-820) were transferred from Navitor Inc.

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The Company had determined that Navitor LLC is a VIE.

The Company does not consolidate this VIE because the Company lacks the power to direct the activities that most significantly impact the investee's economic performance.

The Company does not consolidate this VIE because the Company lacks the power to direct the activities that most significantly impact Navitor’s economic performance.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Investments (Continued)

Prior to the Navitor Restructuring, the investment was accounted for under the practical expedient allowed for equity securities without readily determinable fair value, which is cost minus impairment plus any changes in observable price changes from an orderly transaction of similar investments in Navitor Inc.

Following the legal restructuring and exchange of the preferred shares for member equity units of Navitor LLC, the investment was accounted for under the equity method of accounting due to the Company's ability to exert significant influence and the specific ownership accounts under the new Navitor LLC legal structure, but not control the financial and operating decisions of Navitor LLC.

As a result of the change from cost method investment to an equity method investment, the Company was required to measure its investment initially in accordance with the guidance in ASC 805.

Following the legal restructuring and exchange of the preferred shares for member equity units of Navitor LLC, the investment was accounted for under the equity method of accounting due to the Company's ability to exert significant influence over but not control the financial and operating decisions of Navitor LLC.

As a result of the change from a cost method investment to an equity method investment, the Company was required to measure its investment initially in accordance with the guidance in ASC 805.

The majority of the assets and liabilities recorded in Navitor LLC's financial statements represent working capital items and cash that are being used for research and development purposes and are significantly lower than the Company's investment in Navitor LLC, which created a significant basis difference for the Company's investment in the underlying net assets.

The Company has determined that substantially all of the fair value of the investment is attributable to a single IPR&D asset.

As a result, the investee is not considered a business as defined in ASC 805.

The Company determined that substantially all of the fair value of the investment was attributable to a single in-process research and development (IPR&D) asset.

As a result, Navitor LLC was not considered a business as defined in ASC 805.

In the first quarter of 2021, the $ 15 million investment, which was previously recorded in Other assets in the consolidated balance sheets, was expensed and recorded in Research and development expense in the consolidated statements of earnings .

The Company records its share of the results of its investee, a private company, on a quarter lag as the financial information of the investee is not sufficiently and timely available for the Company to apply the equity method of accounting.

In December 2021, the investee sold one of its subsidiaries in Navitor LLC and distributed cash to its members, including the Company, in connection with each member's share of the proceeds from the sale.

Therefore, the Company received a cash distribution of $ 12.9 million in December 2021 from Navitor LLC in connection with this sale.

As the Company's policy is to record our equity method investment on a quarter lag as previously indicated, the Company recorded the cash amount received in Other current liabilities in the consolidated balance sheets as of December 31, 2021.

The Company expects to reverse the liability recorded and record a gain based on the financial information of the investee becoming available in the first quarter of 2022.

The cash distribution of the Company is classified as a cash inflow from investing activities in the statement of cash flows similar to a return of investment using the cumulative earnings method.

The maximum exposure to losses related to the investee is a maximum of approximately $ 50 million in expense for Phase I and Phase II development of NV-5138 (SPN-820);

and the cost of other development and formulation activities provided by the Company.

The Company has provided no financing to the investee other than the amounts required under the Development Agreement.

Fair Value of Financial Instruments and Contingent Consideration

The Company records its share of the results of Navitor LLC, a private company, on a quarter lag as the financial information of Navitor LLC is not available on a sufficiently timely basis for the Company to apply the equity method of accounting.

In December 2021, Navitor LLC sold one of its subsidiaries and distributed cash to its members in accordance with each member's share of the proceeds from the sale.

The Company received $ 12.9 million in December 2021 from Navitor LLC in connection with this sale.

As the Company's policy is to record its share of the results in its equity method investment on a quarter lag as previously indicated, the Company recorded the cash amount received in Other current liabilities in the consolidated balance sheets as of December 31, 2021.

In the first quarter of 2022, the Company determined its estimated share of Navitor LLC's year-end 2021 earnings and recorded a gain of $ 12.9 million in Interest and other income, net in the consolidated statement of earnings.

The maximum exposure to losses related to Navitor LLC is approximately $50 million for Phase I and Phase II development of NV-5138 (SPN-820), and the cost of other development and formulation activities provided by the Company.

Subsequent to the Development Agreement entered into in 2020, no additional equity investment has been made or financing has been provided to Navitor LLC.

Fair Value of Financial Instruments

The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between unrelated market participants.

The Company reports the fair value of assets and liabilities using a three level measurement hierarchy that prioritizes the inputs used to measure fair value.

The three levels of inputs used to measure fair value are as follows:

• Level 1—Inputs are unadjusted quoted prices in active markets for identical assets.

The Company has the ability to access these prices as of the measurement date.

Level 1 assets include:

cash held at banks;

certificates of deposit;

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments and Contingent Consideration (Continued)

money market funds;

investment grade corporate debt securities;

government agency and municipal debt securities.

• Level 2—Level 2 securities are valued using third-party pricing sources that apply relevant inputs and data in their models to estimate fair value.

Inputs are quoted prices for similar assets and liabilities in active markets;

quoted prices for identical or similar assets and liabilities in markets that are not active;

inputs other than quoted prices, but that are observable for the asset or liability (e.g., interest rates;

The fair value hierarchy consists of the following three levels:

• Level 1—Valuations based on unadjusted quoted prices in active markets that are accessible at measurement date for identical assets.

• Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and model-based valuations in which all significant inputs are observable in the market, either directly or indirectly (e.g., interest rates;

yield curves).

and inputs that are derived principally from or corroborated by observable market data by correlation or by other means (i.e., market corroborated inputs).

Level 2 assets include:

investment grade corporate debt securities;

government agency and municipal debt securities;

other fixed income securities;

and SERP (Supplemental Executive Retirement Plan) assets.

The fair value of the restricted marketable securities is recorded in Other assets on the consolidated balance sheets.

• Level 3—Unobservable inputs that reflect the Company's own assumptions.

• Level 3—Valuations using significant inputs that are unobservable in the market and inputs that reflect the Company’s own assumptions.

These are based on the best information available, including the Company’s own data.

There were no level 3 assets as of December 31, 2021, or December 31, 2020.

Financial Assets Recorded at Fair Value

The Company's financial assets that are required to be measured at fair value on a recurring basis are as follows (dollars in thousands):

The fair value of the restricted marketable securities which are classified as Level 2 financial assets are recorded in Other assets on the consolidated balance sheets.

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Financial Assets Recorded at Fair Value on a Recurring Basis

The Company's financial assets and liabilities that are required to be measured at fair value on a recurring basis are as follows (dollars in thousands):

Fair Value Measurements as of December 31,

3 unchanged sentences

(Level 1) Significant

(Level 2) Unobservable

Inputs that Reflect the Company's own Assumptions

Cash and cash equivalents

2 unchanged sentences

Marketable securities

Corporate debt securities 136,246 251 135,995

Corporate, U.S.

government agency and municipal debt securities 368,214 — 368,214 —

Long term marketable securities

Corporate debt securities 119,166 — 119,166

Corporate and municipal debt securities 93,896 — 93,896 —

Other noncurrent assets

1 unchanged sentence

Total assets at fair value $ 555,726 $ 93,131 $ 462,595 $ —

Contingent consideration $ 54,967 $ — $ — $ 54,967

Total liabilities at fair value $ 54,967 $ — $ — $ 54,967

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments and Contingent Consideration (Continued)

Fair Value of Financial Instruments (Continued)

Fair Value Measurements as of December 31,

3 unchanged sentences

(Level 1) Significant

(Level 2) Unobservable

Inputs that Reflect the Company's own Assumptions

Cash and cash equivalents

5 unchanged sentences

Corporate debt securities 119,166 — 119,166 —

government agency and municipal debt securities —

Other noncurrent assets

1 unchanged sentence

Total assets at fair value $ 459,476 $ 203,692 $ 255,784 $ —

Contingent consideration $ 80,477 $ — $ — $ 80,477

Total liabilities at fair value $ 80,477 $ — $ — $ 80,477

Other Financial Instruments

The carrying amounts of other financial instruments, including accounts receivable, accounts payable, and accrued expenses, approximate fair value due to their short-term maturities.

Financial Liabilities Recorded at Fair Value

Financial Liabilities Recorded at Carrying Value

The following table sets forth the carrying value and fair value of the Company's financial liabilities that are not carried at fair value (dollars in thousands):

December 31, 2022 December 31, 2021

Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2)

Convertible notes, net $ 401,968 $ 395,959 $ 379,252 $ 400,236

The fair value has been estimated based on actual trading information, and quoted prices, both provided by bond traders.

Contingent Consideration

The Company's contingent consideration liabilities are measured at fair value on a recurring basis.

The Company's contingent consideration liabilities are related to the USWM Acquisition in 2020 (as defined below) and the Adamas Acquisition in 2021.

The contingent consideration liabilities are measured at fair value on a recurring basis using either a Monte Carlo simulation or the income approach.

The Company classifies its contingent consideration liabilities as Level 3 fair value measurements based on the significant unobservable inputs used to estimate fair value.

1 unchanged sentence

Changes in any of those inputs together or in isolation may result in significantly lower or higher fair value measurement.

Refer to Note 3, Acquisitions , for further discussion of significant inputs and assumptions used for the valuation of the contingent consideration.

During the measurement period, changes in the fair value of contingent consideration related to the USWM Acquisition and Adamas Acquisition are recorded against goodwill if such changes are related to facts and circumstances that existed at the acquisition date.

In each reporting period after the acquisition, the Company remeasures the fair value of contingent consideration liabilities and records in its consolidated statements of earnings the increases or decreases in the fair value of the liabilities.

In the fourth quarter of 2020, the Company recorded a measurement period adjustment of $ 40.9 million related to the USWM Acquisition.

Refer to Note 3, Acquisitions .

The Company recorded a $ 6.5 million gain due to the change in fair value of the USWM contingent consideration liability during the year-ended December 31, 2021.

The change in fair value of $ 6.5 million was reported on the consolidated statement of earnings in Contingent consideration (gain) expense .

The change in fair value is reported on the consolidated statement of earnings in Contingent consideration (gain) expense .

USWM Contingent Consideration

On June 9, 2020 (the USWM Closing Date), the Company completed its acquisition of all the outstanding equity of

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Contingent Consideration (Continued)

USWM Enterprises, LLC (USWM Enterprises) (USWM Acquisition).

The USWM Acquisition included potential additional contingent consideration payments of up to $ 230 million comprised of $ 130 million in regulatory and developmental milestones and $ 100 million in sales-based milestones.

• Regulatory and developmental milestones:

The $ 130 million in regulatory and developmental milestones consists of:

1) a $ 50 million milestone which had a time-based mechanism and was not achieved 2) a $ 25 million milestone due upon the FDA acceptance of the SPN-830 NDA for review, which was paid in the first quarter of 2022 and, 3) a remaining $ 55 million, of which $ 25 million relates to the FDA's approval of the SPN-830 NDA and $ 30 million relates to the subsequent commercial product launch.

Regarding the $ 25 million paid in the first quarter of 2022, $ 22.9 million represents the acquisition date fair value of the contingent consideration liability and was reported under cash flows from financing activities.

The remaining $ 2.1 million represents the excess of the acquisition date fair value and was reported under cash flows from operating activities.

• Sales-based milestones:

The $ 100 million in sales-based milestones consists of:

1) $ 70 million in milestones due upon the achievement of certain U.S.

net product sales of APOKYN in 2021 and 2022 which were not achieved and, 2) a remaining $ 30 million milestone which relates to the achievement of certain net product sales of the acquired USWM products in 2023.

As of December 31, 2022, the Company assessed that this remaining $ 30 million sales-based milestone will not be achieved based on net sales projections.

The Company recorded a $ 1.1 million expense due to the change in fair value of the contingent consideration liabilities for the USWM milestones during the year ended December 31, 2022.

The change in the fair value of contingent consideration for USWM milestones was primarily driven by the increase in estimated fair value of regulatory and developmental milestones due to passage of time and the accretion to the payout amount related to the milestone achieved in the first quarter of 2022.

The Company recorded a $ 6.5 million gain due to the change in fair value of the contingent consideration liabilities for the USWM milestones during the year ended December 31, 2021.

The change in fair value was primarily due to the write-down of the sales based contingent consideration liabilities offset by an increase in the estimated fair value of regulatory and developmental milestones due to the passage of time.

2 unchanged sentences

The Company updated its projected net sales of the Products based on recent historical sales trend experience.

Adamas Contingent Consideration

As discussed in Note 3, Acquisition , the Adamas Acquisition included payment of two non-tradable contingent value rights (CVRs) each of which represents the contractual right to receive a contingent payment upon the achievement of the applicable aggregate worldwide net product sales of GOCOVRI.

The Company recorded a $ 1.6 million gain due to the change in fair value of the contingent consideration liabilities for the year ended December 31, 2022.

The change in estimated fair value of contingent consideration for the sales-based Adamas milestones was primarily due to changes in market data and revenue projections.

The key assumptions considered in estimating the fair value of the Adamas sales-based milestones include the estimated revenue projections, volatility, estimated discount rates and risk-free interest rate.

Refer to Note 3, Acquisition , for further discussion of significant inputs and assumptions used in the valuation of the contingent consideration for the Adamas Acquisition.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments and Contingent Consideration (Continued)

As mentioned in Note 1, the Company received notice from the FDA on February 18, 2022 of its acceptance for review of the NDA for SPN-830.

The regulatory and developmental contingent consideration payments include a $ 25 million milestone due upon the FDA acceptance of the SPN-830 NDA for review, which was paid in the first quarter of 2022.

The following table provides the reconciliation of the contingent consideration liabilities balance as of December 31, 2021 (dollars in thousands):

Adamas Acquisition USWM Acquisition Total

Contingent Consideration (Continued)

The following table provides a reconciliation of the beginning and ending balances related to the contingent consideration liabilities for the USWM Acquisition and Adamas Acquisition (dollars in thousands):

USWM Acquisition Adamas Acquisition Total

Balance at December 31, 2021 $ 70,170 $ 10,307 $ 80,477

Initial estimate of contingent consideration at Closing Date 10,307 — 10,307

Milestone payments ( 25,000 ) — ( 25,000 )

Change in fair value recognized in earnings 1,100 ( 1,610 ) ( 510 )

Balance at December 31, 2022 $ 46,270 $ 8,697 $ 54,967

Reported under the following captions in the consolidated balance sheets:

Regulatory and developmental contingent consideration liabilities $ 46,270 $ — $ 46,270

Sales-based contingent consideration liabilities — 8,697 8,697

Balance at December 31, 2022 $ 46,270 $ 8,697 $ 54,967

The following table provides the current and long-term portions related to the contingent consideration for the USWM Acquisition and Adamas Acquisition (dollars in thousands):

2022 December 31,

Reported under the following captions in the consolidated balance sheets:

Contingent consideration, current portion $ 21,120 $ 44,840

1 unchanged sentence

Total $ 54,967 $ 80,477

Adamas Acquisition USWM Acquisition Total

Regulatory and developmental contingent consideration liabilities $ — $ 70,170 $ 70,170

Sales-based contingent consideration liabilities 10,307 — 10,307

Balance at December 31, 2021 $ 10,307 $ 70,170 $ 80,477

Financial Liabilities Recorded at Carrying Value

The following table sets forth the carrying value and fair value of the Company's financial liabilities that are not carried at fair value (dollars in thousands):

December 31, 2021 December 31, 2020

Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2)

Convertible notes, net $ 379,252 $ 400,236 $ 361,751 $ 383,381

The fair value has been estimated based on actual trading information, and quoted prices, both provided by bond traders.

Supernus Pharmaceuticals, Inc.

1 unchanged sentence

Goodwill and Intangible Assets, Net

The following table sets forth the gross carrying amounts and related accumulated amortization of intangible assets and goodwill as of December 31, 2021 (dollars in thousands):

The following table sets forth the gross carrying amounts of goodwill as of December 31, 2022 (dollars in thousands):

Balance as of December 31, 2021

Measurement period adjustments related to the acquisition of Adamas (see Note 3) ( 497 )

Balance as of December 31, 2022

Intangible Assets, Net

The following table sets forth the gross carrying amounts and related accumulated amortization of intangibles assets and goodwill (dollars in thousands):

December 31, 2022 December 31, 2021

Description Remaining Weighted-

Remaining Weighted-

Average Amortization Period

(Years) Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net

Goodwill $ 117,516 $ — $ 117,516 $ 77,911 $ — $ 77,911

Acquired in-process research and development $ 124,000 $ — $ 124,000 $ 124,000 $ — $ 124,000

3 unchanged sentences

Total intangible assets 7.72 $ 849,320 $ ( 146,857 ) $ 702,463 $ 848,920 $ ( 64,227 ) $ 784,693

The majority of the increase in goodwill was a result of the Adamas Acquisition.

Refer to Note 3, Acquisitions .

The remaining increase represents measurement period adjustments recorded in the second quarter of 2021, which related to the finalization of the business combination accounting of the USWM Acquisition.

Refer to Note 3, Acquisitions .

As of December 31, 2021, there were no identified indicators of impairment.

Intangible assets, net

Intangible assets include:

patent defense costs, which are deferred legal fees incurred in conjunction with defending patents;

acquired developed technology and product rights, and acquired IPR&D assets associated with the Company's acquisitions.

The Company amortizes intangible assets over their useful lives, except for the acquired IPR&D asset.

The acquired IPR&D asset pertains to SPN-830 (apomorphine infusion device) which was acquired as part of the USWM acquisition in 2020.

Refer to Note 3 for further discussion of the acquired IPR&D asset.

As discussed in Note 1, in February 2022, the Company received notice from the FDA on the acceptance for review of the NDA for SPN-830 and assigned a PDUFA target action date of October 7, 2022.

patents covering Oxtellar XR and Trokendi XR will expire no earlier than 2027.

In regards to Trokendi XR, the Company entered into settlement agreements that allow third parties to enter the market by January 1, 2023, or earlier under certain circumstances.

As a result of the USWM and Adamas acquisitions, the Company acquired developed technology and product rights for APOKYN, XADAGO, MYOBLOC, GOCOVRI, Osmolex ER and Namzaric.

Patent defense costs are deferred legal fees incurred in conjunction with defending patents for Oxtellar XR and Trokendi XR.

patents covering Trokendi XR and Oxtellar XR will expire no earlier than 2027.

In regards to Trokendi XR, the Company entered into settlement agreements that allow third parties to enter the market by January 1, 2023.

Amortization expense for intangible assets was approximately $ 82.6 million, $ 30.0 million, and $ 15.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The following table sets forth the anticipated annual amortization expense for definite-lived intangible assets.

Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors (dollars in thousands).

Estimated Amortization Expense

2023 $ 79,865

Thereafter 195,356

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Goodwill and Intangible Assets, Net (Continued)

Anticipated annual amortization expense for intangible assets in 2022 is estimated at $ 82.6 million.

Anticipated annual amortization expense for intangible assets from 2023 to 2024 is estimated at $ 79.8 million per year.

Anticipated annual amortization expense for intangible assets in 2025 to 2026 is estimated at $ 75.0 million per year.

In February 2022, the FDA approved the first generic of Apokyn (apomorphine hydrochloride injection) to treat hypomobility "off" episodes ("end-of-dose wearing off" and unpredictable "on/off" episodes) associated with advanced Parkinson's disease.

Refer to Note 17, Subsequent Events.

Convertible Senior Notes Due 2023

The 0.625 % Convertible Senior Notes Due 2023 (2023 Notes), issued in March 2018, bear interest at an annual rate of 0.625 %, payable semi-annually in arrears on April 1 and October 1 of each year.

The 0.625 % Convertible Senior Notes Due 2023 (2023 Notes), which were issued in March 2018, bear interest at an annual rate of 0.625 %, payable semi-annually in arrears on April 1 and October 1 of each year.

The 2023 Notes will mature on April 1, 2023, unless earlier converted or repurchased by the Company.

The Notes are being amortized to interest expense at an effective interest rate of 5.41 % over the contractual term of the 2023 Notes.

The Company may not redeem the 2023 Notes at its option before maturity.

The total principal amount of 2023 Notes is $ 402.5 million.

We have reclassified the debt from long-term to current liabilities on our Consolidated Balance Sheets , as the debt matures in less than twelve months as of December 31, 2022.

The 2023 Notes were issued pursuant to an Indenture between the Company and Wilmington Trust, National Association, as trustee.

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In the event that shares or cash are deliverable to holders of the 2023 Notes upon conversion at limits defined in the Indenture, counterparties to the convertible note hedges will be required to deliver up to approximately 6.8 million shares of the Company’s common stock, or to pay cash to the Company in a similar amount as the value that the Company delivers to the holders of the 2023 Notes, based on a conversion price of $ 59.33 per share.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Convertible Senior Notes Due 2023 (Continued)

Concurrently with entering into the Convertible Note Hedge Transactions, the Company also entered into separate privately negotiated warrant transactions (collectively, the Warrant Transactions) with each of the call spread counterparties.

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The Convertible Note Hedge Transactions are expected to reduce the potential dilution of the Company’s common stock upon conversion of the 2023 Notes, and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2023 Notes, as the case may be.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Convertible Senior Notes Due 2023 (Continued)

The Warrant Transactions were intended to partially offset the cost to the Company of the purchased Convertible Note Hedge Transactions;

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Total carrying value $ 401,968 $ 379,252

As discussed in Note 2, Summary of Significant Accounting Policies , the Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition resulting in an increase in the carrying amount of the debt by $ 20.6 million as of the adoption date.

Refer to Note 2, Summary of Significant Accounting Policies , for further discussion of the accounting standard adoption.

No 2023 Notes were converted as of December 31, 2022 or December 31, 2021.

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2021 Equity Incentive Plan (2021 Plan) which was approved by the stockholders in June 2021.

The 2021 Plan is the successor and replaced the 2012 Equity Incentive Plan, as amended (the 2012 Plan).

The 2021 Plan is the successor to, and replaced the 2012 Equity Incentive Plan, as amended (the 2012 Plan).

The 2021 Plan is administered by the Company's Board of Directors and the Company's Compensation Committee of the Board.

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Eligible employees may purchase shares at the lower of 85 % of the fair market value at either the first day of the purchase period or the fair market value at the end of the purchase period.

The ESPP provides for the issuance of up to 1.7 million shares of the Company's common stock.

The ESPP provides for the issuance of up to 1,700,000 shares of the Company's common stock.

The Company records compensation expense related to its ESPP.

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Share-Based Payments (Continued)

Share-based Compensation

Share-based compensation expense is as follows (dollars in thousands):

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Total $ 17,568 $ 17,910 $ 16,561

The fair value of each option award is estimated on the date of the grant, using the Black-Scholes option-pricing model and the assumptions in the following table:

Years Ended December 31,

2021 2020 2019

Fair value of common stock $ 25.09 - $ 30.45

$ 21.13 - $ 23.99

$ 22.99 - $ 37.78

Expected volatility 60.62 % - 61.80 %

61.56 % - 62.27 %

61.36 % - 63.28 %

Dividend yield 0 % 0 % 0 %

Expected term 5.63 years - 6.56 years

5.72 years - 6.54 years

5.53 years - 6.18 years

Risk-free interest rate 0.72 % - 1.30 %

0.27 % - 1.34 %

1.69 % - 2.55 %

As of December 31, 2021, the total unrecognized compensation expense was approximately $ 23.8 million.

The Company expects to prospectively recognize these expenses over a weighted-average period of 2.54 years.

Stock Option and Stock Appreciation Rights

The following table summarizes stock option and stock appreciation rights (SAR) activities:

Options Weighted-

Exercise Price Weighted-Average

Options & SARs Weighted

Exercise Price

(per share) Weighted

Term (in years) Aggregate

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The aggregate intrinsic value of shares exercised for the years ended December 31, 2022, 2021, and 2020 were $ 16.3 million, $ 2.8 million, and $ 2.3 million, respectively.

Proceeds from the option exercise for the years ended December 31, 2020, 2019, and 2018 were $ 4.9 million, $ 2.3 million, $ 1.5 million, respectively.

Proceeds from the options exercised for the years ended December 31, 2022, 2021, and 2020 were $ 10.4 million, $ 4.9 million, and $ 2.3 million, respectively.

The total fair value of the underlying common stock related to shares that vested during the years ended December 31, 2022, 2021, and 2020 were approximately $ 13.9 million, $ 13.9 million, and $ 14.1 million, respectively.

The fair value of each option award is estimated on the date of the grant, using the Black-Scholes option-pricing model and the assumptions in the following table:

Years Ended December 31,

2022 2021 2020

Fair value of common stock $ 28.93 - $ 35.23

$ 25.09 - $ 30.45

$ 21.13 - $ 23.99

Expected volatility 58.71 % - 60.15 %

60.62 % - 61.80 %

61.56 % - 62.27 %

Dividend yield 0 % 0 % 0 %

Expected term 5.58 years - 6.72 years

5.63 years - 6.56 years

5.72 years - 6.54 years

Risk-free interest rate 1.87 % - 3.70 %

0.72 % - 1.30 %

0.27 % - 1.34 %

Supernus Pharmaceuticals, Inc.

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Share-Based Payments (Continued)

The total fair value of the underlying common stock related to shares that vested during the years ended December 31, 2021, 2020, and 2019 were approximately $ 13.9 million, $ 14.1 million, and $ 10.8 million, respectively.

As of December 31, 2022, the total unrecognized compensation expense was approximately $ 26.6 million.

The Company expects to prospectively recognize these expenses over a weighted-average period of 2.6 years.

Restricted Stock Units

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Nonvested, December 31, 2022 131,960 $ 32.17

The RSUs generally vest one year from the date of grant.

As of December 31, 2022, the total unrecognized compensation expense was $ 2.9 million.

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The following table summarizes performance share unit (PSU) activities:

Performance-Based Units Market-Based Units Total PSUs

Performance-Based PSUs Market-Based Units Total PSUs

Number of PSUs Weighted-

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Nonvested, December 31, 2022 181,750 $ 29.07 20,000 $ 28.63 201,750 $ 29.03

The total fair value of PSUs that vested during the years ended December 31, 2021, 2020, and 2019 were $ 1.2 million, $ 0.7 million, and $ 0 , respectively.

The total intrinsic value of PSUs that vested during the years ended December 31, 2021, 2020, and 2019 were $ 0 , $ 0.1 million, and $ 0 , respectively.

The total fair value of PSUs that vested during the years ended December 31, 2022, 2021, and 2020 were $ 1.0 million, $ 1.2 million, and $ 0.7 million, respectively.

The total intrinsic value of PSUs vested during the years ended December 31, 2022, 2021, and 2020 were $ 0.2 million, $ 0.0 million , and $ 0.1 million, respectively.

Supernus Pharmaceuticals, Inc.

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The performance-based PSU awards require certain performance targets to be achieved in order to vest.

Vesting is also subject to continued service requirements through the date that the achievement of the performance target is certified.

As of December 31, 2021, the t otal unrecognized compensation expense was $ 0.7 million.

Vesting is also subject to continued service requirements through the date of achievement of the performance target is certified.

As of December 31, 2022, the total unrecognized compensation expense was $ 4.0 million.

The Company expects to prospectively recognize these expenses over a weighted-average period of 1.0 years.

The total fair value of vested PSUs during the year ended December 31, 2021, was $ 1.2 million.

Market-Based Awards

The market-based PSU awards are subject to achievement of market-based performance targets in order to vest.

The Company used a Monte-Carlo Simulation to determine the fair value and expected term of the awards as of grant date.

There was no unrecognized compensation expense as of December 31, 2022.

The Company used a Monte-Carlo Simulation to determine the fair value and expected term of the awards.

The expected term of the awards granted in 2021 was 0.9 years.

Earnings per Share

The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition.

ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, whereas the Company previously calculated diluted earnings per share under the treasury stock method.

Basic earnings per share (EPS) is calculated using the weighted average number of common shares outstanding.

Diluted EPS is calculated using the weighted-average number of common shares outstanding, including the dilutive effect of the Company's stock option grants, SARs, RSUs, warrants, employee stock purchase plan (ESPP) awards, and the 2023 Notes, as determined per the treasury stock method.

Diluted EPS is calculated using the weighted average number of common shares outstanding, including the dilutive effect of the Company’s stock option grants, SARs, RSUs, employee stock purchase plan (ESPP) awards, and the 2023 Notes, as determined per the if-converted method for the year ended December 31, 2022 in connection with the adoption of ASU 2020-06 and the treasury stock method for the year ended December 31, 2021.

Effect of Convertible Notes and Related Convertible Note Hedges and Warrants

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The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that would occur if the price of the Company's common stock was between the conversion price of $ 59.33 per share and the strike price of the warrants of $ 80.91 per share.

The 2023 Notes and related Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because inclusion would be anti-dilutive.

Specifically, the denominator of the diluted EPS calculation excludes the additional shares related to the 2023 Notes and warrants because the average price of the Company's common stock was less than the conversion price of the 2023 Notes of $ 59.33 per share, as well as less than the strike price of the warrants, $ 80.91 per share.

Diluted EPS related to the 2023 Notes in the current year is calculated using the if-converted method.

The number of dilutive shares is based on the initial conversion rate associated with the 2023 Notes.

The Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because inclusion would be anti-dilutive.

Specifically, the denominator of the diluted EPS calculation excludes the additional shares related to the warrants because the average price of the Company's common stock was less than the strike price of the warrants of $ 80.91 per share.

Prior to actual conversion, the Convertible Note Hedge Transactions are not considered in calculating diluted earnings per share, as their impact would be anti-dilutive.

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Stock options, RSUs, PSUs 373,728 1,275,114 2,888,785

As mentioned in Note 2, Summary of Significant Accounting Policies , as a result of the adoption of ASU 2020-06 on January 1, 2022 the Company calculated diluted earnings per share using the if-converted method.

The 6.8 million in dilutive shares associated with the conversion of the 2023 Notes are included in diluted weighted average shares of common stock outstanding for the purposes of calculating diluted earnings per share for the year ended December 31, 2022.

For the year ended December 31, 2021, the Company calculated diluted earnings per share using the treasury stock method wherein the shares associated with the conversion of the 2023 Notes were excluded as the Company assumed the 2023 Notes would be settled entirely or partly in cash.

Supernus Pharmaceuticals, Inc.

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2022 2021 2020

Numerator, dollars in thousands:

Net earnings $ 60,711 $ 53,424 $ 126,950

After-tax interest expense for 2023 Notes 3,556 — —

Numerator for dilutive earnings per share $ 64,267 $ 53,424 $ 126,950

Weighted average shares outstanding, basic 53,665,143 53,099,330 52,615,269

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Stock options, RSUs and SARs 1,230,721 1,257,414 1,074,474

Convertible Notes 6,783,936 — —

Weighted average shares outstanding, diluted 61,679,800 54,356,744 53,689,743

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Earnings per share, diluted $ 1.04 $ 0.98 $ 2.36

The summary of the income tax expense (benefit) for the years ended December 31, 2021, 2020, and 2019 is as follows (dollars in thousands):

The summary of the income tax expense for the years ended December 31, 2022, 2021, and 2020 is as follows (dollars in thousands):

Years Ended December 31,

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Deferred tax assets:

Convertible bond hedge $ 6,910 $ 12,420

Net operating loss carryforwards $ 112,516 $ 126,333

Accrued product returns and rebates 23,300 19,506

Accrued compensation and stock based compensation 15,422 17,802

Research and development credit carryforwards 4,448 3,151

Net operating loss carryforwards 126,333 13,164

Capitalized research and development 13,926 —

Operating lease liability 10,821 12,146

Interest limitation 7,860 1,055

Investment 4,946 7,819

Charitable contributions 3,620 7,730

Research and development credit carryforwards 3,070 4,448

Convertible bond hedge 1,449 6,910

Interest limitation 45 7,860

Other 5,356 4,256

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Acquisition Accounting (1)

( 2,305 ) 69,697 573

Additions 435 250 —

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The Company recorded a valuation allowance of $ 70.5 million as of December 31, 2021, of which $ 69.7 million is associated with the Adamas Acquisition.

The Company recorded a valuation allowance release of $ 9.1 million as of December 31, 2022, of which $ 8.9 million is associated with the Adamas Acquisition.

The valuation allowance is primarily related to federal and state net operating losses carryforwards acquired from the Adamas Acquisition that are not expected to be realizable in the future.

The Company has NOL and other tax credit carryforwards in several jurisdictions.

Due to changes in the Company's ownership, the utilization of net operating loss carryforwards and research and development credit carryforwards, that can be used to offset future taxable income, are subject to annual limits in accordance with Internal Revenue Code (IRC) provisions, as well as similar state provisions.

The Company has NOL carryforwards in several jurisdictions.

Due to changes in the Company's ownership, the utilization of net operating loss carryforwards that can be used to offset future taxable income, are subject to annual limits in accordance with Internal Revenue Code (IRC) provisions, as well as similar state provisions.

In addition, states may also impose other future limitations through state legislation or similar measures.

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As of December 31, 2022, the U.S.

federal and state NOL carryforwards amounted to approximately $ 449.3 million ($ 413.7 million related to the Adamas Acquisition) and $ 431.9 million ($ 387.3 million related to the Adamas Acquisition), respectively, and will expire in various years beginning in 2031.

federal and state NOL carryforwards amounted to approximately $ 416.7 million and $ 488.4 million, respectively, which will expire in various years beginning in 2031.

For the year ended December 31, 2022, the Company utilized federal NOLs of approximately $ 34.8 million and state NOLs of approximately $ 24.8 million.

As of December 31, 2021, the Company has available research and development credit carryforwards of $ 1.6 million, which became available in 2022 and will expire, if unused, starting in 2030.

As of December 31, 2022, the Company had no remaining federal research and development credit carryforwards.

As of December 31, 2021, the Company had available research and development credit carryforwards of $ 1.6 million, which became available in 2022.

The Company is no longer subject to U.S.

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Some uncertain income tax position liabilities have been recorded against the Company's deferred income tax assets to offset such tax attribute carryforwards and other positions that cannot be offset by tax attributes until liability has been booked.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Income Taxes (Continued)

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (dollars in thousands):

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Gross increases related to current year tax positions 32 898 1,027

Gross decreases related to current year tax positions — — —

Gross increases related to prior year tax positions — — 221

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Balance as of December 31 $ 4,323 $ 6,100 $ 5,881

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Income Taxes (Continued)

The Company recorded $ 1.7 million, $ 0.1 million, and $ 0.6 million of net tax benefit in 2022, 2021, and 2020, respectively, as a result of the expiration of statutes of limitation.

The Company also recorded $ 0.3 million, $ 0.3 million, and $ 0.2 million for uncertain tax positions related to research and development tax credits in 2021, 2020, and 2019, respectively, and an additional expense of $ 0.2 million related to a prior year position.

The Company also recorded $ 30 thousand, $ 0.3 million, and $ 0.3 million for uncertain tax positions related to research and development credits in 2022, 2021, and 2020, respectively, and an additional benefit of $ 40 thousand related to a prior year position.

The Company does not anticipate a material impact to the financial statements in the next 12 months as a result of uncertain tax positions and expiring statutes of limitation.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The CARES Act is an emergency economic stimulus package that includes spending and tax incentives to strengthen the U.S.

economy and fund a nationwide effort to curtail the effect of the COVID-19 pandemic.

While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the Company's financial statements include the removal of certain limitations on the utilization of net operating losses, increasing the ability to deduct interest expense, and amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

As of December 31, 2021, the Company expects that these provisions will not have a material impact, as the Company does not have net operating losses that would fall under the provisions of this legislation, nor does it expect interest expense to be limited.

The ultimate impact of the CARES Act may differ from this estimate due to changes in interpretations and assumptions, additional guidance that may be issued, and actions the Company may take in response to the CARES Act.

The Company will continue to assess the impact that various provisions may have on its business.

Operating Leases

The Company has operating leases for its headquarters lease and its fleet vehicles.

Office Space and Fleet Vehicle Leases

The Company has operating leases for its headquarters lease, certain other office space, and its fleet vehicles.

With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities.

The Company also elected to combine the lease and non-lease components for the fleet vehicle and headquarters leases.

The Company's headquarters lease commenced on February 1, 2019 and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease.

The Company also elected to combine the lease and non-lease components for the fleet vehicles and headquarters leases.

The Company's headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease.

The lease includes options to extend the lease for up to 10 years.

On August 23, 2021, the Company entered into an addendum to the original headquarters agreement to lease additional office space, referred to as the Expansion Premises.

The Expansion Premises is separate from the lease space in the original lease agreement.

The term of the lease with respect to the Expansion Premises commenced on September 1, 2021 and coincides with the lease term per the original lease agreement.

As part of the Adamas Acquisition, the Company acquired a lease for office space.

Adamas's operating lease for the office space term will continue until April 30, 2025.

Adamas' operating lease for the office space term will continue until April 30, 2025.

The lease contains an option to extend the term for one additional five-year period.

During a measurement period, changes in fair value due to measurement period adjustments are recorded against goodwill.

The Company recorded in the first quarter of 2022 a measurement period adjustment associated with the valuation of the acquired Adamas lease which decreased the fair value estimate of the operating lease right of use asset by $ 1.6 million.

Refer to Note 3, Acquisition .

Contract Manufacturing Lease

Contemporaneous with the USWM Acquisition, USWM Enterprises adopted ASC 842, Leases .

USWM Enterprises had an existing contract manufacturing agreement with Merz Pharma GmbH & Co.

The Company has a contract manufacturing agreement with Merz Pharma GmbH & Co.

KGaA (Merz), for the manufacture and supply of rimabotulinumtoxinB finished products (Merz Agreement).

Pursuant to the Merz Agreement, Merz agreed to provide a dedicated manufacturing facility that included a stand-alone building, dedicated cleanroom suites, dedicated manufacturing, and purification equipment, and filling and packaging production lines (collectively, the manufacturing facility) to manufacture finished products.

The Merz Agreement will expire in July 2027 unless the Company and Merz mutually agree to extend the terms.

The Merz Agreement may not be terminated for convenience.

Under the terms of the agreement, the Company is required to purchase a minimum quantity of finished products on an annual basis.

Under the terms of the agreement, the Company is required to purchase a minimum quantity of MYOBLOC finished products on an annual basis.

This minimum purchase requirement represents the in-substance fixed contract consideration associated with the dedicated manufacturing facility which the Company accounts for as an embedded lease.

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Leases (Continued)

At the Closing Date of the USWM Acquisition, the Company preliminarily classified the embedded lease as a finance lease and preliminarily elected not to separate the lease and non-lease components.

In the second quarter of 2021, the Company finalized its accounting of the USWM Acquisition.

During the measurement period, the Company determined the fair market value of rent for the lease components and fair market value of the manufacturing facility associated with the Merz embedded lease.

As a result, the Company made an accounting policy election, by class of underlying asset, to not combine lease and non-lease components for the manufacturing facility.

The Company made an accounting policy election, by class of underlying asset, to not combine lease and non-lease components for the manufacturing facility.

A portion of the in-substance fixed contract consideration was allocated to the lease component based on the stand-alone selling price.

Accordingly, the Company has finalized and updated the classification of the embedded lease from a finance lease to an operating lease.

Refer to Note 3, Acquisitions , for further discussion.

Operating and finance lease assets and lease liabilities as reported on the consolidated balance sheets are as follows (dollars in thousands):

Accordingly, the Company classifies and accounts for the embedded lease as an operating lease.

Operating lease assets and lease liabilities as reported on the consolidated balance sheets are as follows (dollars in thousands):

Balance Sheet Classification 2022 2021

Operating lease assets Other assets $ 28,904 $ 35,365

Finance lease asset Property and equipment, net — 20,874

Total lease assets 28,904 35,365

Lease liabilities, current

Accounts payable and accrued liabilities

Operating lease liabilities, current portion Accounts payable and accrued liabilities 6,791 6,477

Finance lease liability, current portion Other current liabilities — 3,761

Lease liabilities, long-term

Operating lease liabilities, long-term Operating lease liabilities, long-term 35,998 41,298

Finance lease liability, long term Other liabilities — 20,235

Total lease liabilities $ 42,789 $ 47,775

The components of operating and finance lease costs are as follows (dollars in thousands):

The components of operating lease costs are as follows (dollars in thousands):

Operating lease cost:

2 unchanged sentences

Total $ 12,847 $ 11,988

Finance lease cost:

Amortization on finance lease asset $ — $ 1,873

Interest on lease liability — 333

Total $ — $ 2,206

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Leases (Continued)

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

Cash paid for operating leases $ 12,883 $ 11,908

Cash paid for finance lease — 802

Lease assets and tenant receivables obtained for new operating leases 1,867 10,868

Lease assets obtained for new finance lease — 22,747

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Leases (Continued)

Weighted average lease term, and weighted average discount rate for operating leases as of December 31, 2022, are as follows:

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The Company's customers are primarily pharmaceutical wholesalers and distributors and specialty pharmacies.

The Company's customers are primarily pharmaceutical wholesalers and distributors, and specialty pharmacies.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Composition of Other Balance Sheet Items (Continued)

Inventories, net

Inventories consist of the following (dollars in thousands):

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Total $ 91,541 $ 85,959

In May 2021, the Company launched Qelbree for the treatment of ADHD in pediatric patients 6 to 17 years of age in the U.S.

Capitalized pre-launch inventory costs for Qelbree were $ 0 and $ 19.1 million as of December 31, 2021 and December 31, 2020, respectively.

Inventories include the acquired inventories from the USWM Acquisition and Adamas Acquisition.

Refer to Note 3 for further discussion of the Company's acquisitions.

Property and Equipment

Inventories as of December 31, 2022 include acquired inventory from the Adamas Acquisition.

Refer to Note 3, Acquisition , for further discussion of the acquisition.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Composition of Other Balance Sheet Items (Continued)

Property and Equipment, net

Property and equipment consists of the following (dollars in thousands):

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Software 883 4,776

Finance lease asset (1)

Computer equipment 983 1,944

3 unchanged sentences

Total $ 15,173 $ 16,955

(1) Refer to Note 12, Leases .

Depreciation and amortization expense on property and equipment was approximately $ 3.0 million, $ 2.6 million, and $ 4.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Depreciation and amortization expense of $ 4.3 million in 2020 includes $ 1.9 million of amortization expense associated with the finance lease asset.

Refer to Note 12, Leases.

As of December 31, 2021, there were no identified indicators of impairment.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Composition of Other Balance Sheet Items (Continued)

The Company retired certain fully depreciated property and equipment in the year ended December 31, 2022.

Accounts Payable and Accrued Liabilities

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2022 December 31,

Accounts payable $ 10,543 $ 9,331

Accrued compensation 16,963 28,068

Accrued professional & marketing fees 16,783 26,728

Accrued product costs 15,216 18,460

Accrued royalties (1)

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Accrued clinical trial costs (2)

Accrued product costs 18,460 9,587

Accrued professional fees 26,728 7,730

Accounts payable 9,331 6,147

Operating lease liabilities, current portion (3)

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Total $ 151,665 $ 132,724

Other Liabilities

Other liabilities consist of the following (dollars in thousands):

2021 December 31,

Nonrecourse liability related to sale of future royalties, long term $ 5,977 $ 13,410

Finance lease liability, long term (1)

Other liabilities 10,403 9,146

Total $ 16,380 $ 42,791

(1) Refer to Note 12, Leases .

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Other (Expense) Income

Interest Expense

Interest expense consists of the following (dollars in thousands):

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Total $ 7,070 $ 23,423 $ 23,754

Interest income includes interest earned from cash, cash equivalents, and marketable securities of $ 8.8 million, $ 16.0 million, and $ 21.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Interest expense includes noncash interest expense related to amortization of deferred financing costs and amortization of the debt discount on the 2023 Notes, in the amount of $ 2.1 million, $ 17.5 million, and $ 16.6 million for the years ended December 31, 2022, 2021 and 2020, respectively (see Note 2, Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2022 and Note 9, Convertible Senior Notes Due 2023 ).

Commitments and Contingencies

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In the third quarter of 2014, the Company received $ 30.0 million pursuant to a Royalty Interest Acquisition Agreement related to the purchase by HC Royalty of certain of the Company's rights under the Company's agreement with United Therapeutics related to the commercialization of Orenitram (treprostinil) Extended-Release Tablets.

Full ownership of the royalty rights will revert to the Company if and when a certain cumulative payment threshold is reached (see Note 2, Note 4, and Note 13).

USWM Enterprise Commitments Assumed

As part of the USWM Acquisition, the Company assumed the remaining commitments of USWM Enterprises and its subsidiaries, which are discussed below.

In addition to the annual minimum purchase requirement of MYOBLOC, amounting to an estimated € 3.9 million annually, under the contract manufacturing agreement with Merz for manufacture and supply, USWM Enterprises had an existing license and distribution agreement for XADAGO.

This included an annual minimum promotional spend to support the marketing of XADAGO for the first five years of the agreement and will end in 2022.

As of December 31, 2021, the total remaining contractual commitment through 2022 is $ 0.3 million.

(See Note 3, Acquisitions for further discussion on the USWM Acquisition and Note 12, Leases for further discussion on the finance lease related to the Merz Agreement).

In March 2019, MDD US Operations, LLC (formerly US WorldMeds, LLC) and its subsidiary, Solstice Neurosciences, LLC (US) (collectively, the MDD Subsidiaries) entered into a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S.

Department of Health and Human Services.

Under the CIA, the MDD Subsidiaries agreed to and paid $ 17.5 million to resolve U.S.

Department of Justice allegations that it violated the False Claims Act and committed to the establishment

The Company recorded a nonrecourse liability related to this transaction and amortizes this liability as noncash royalty revenues.

Full ownership of the royalty rights will revert to the Company if and when a certain cumulative payment threshold is reached (see Note 2, Summary of Significant Accounting Policies - Royalty Revenues and Note 4, Disaggregated Revenues ).

Nonrecourse liability related to sale of future royalties as reported on the consolidated balance sheets are as follows (dollars in thousands):

Balance Sheet Classification 2022 2021

Nonrecourse liability related to sale of future royalties, current portion Other current liabilities $ 5,989 $ 7,244

Nonrecourse liability related to sale of future royalties, long-term Other liabilities $ — $ 5,977

Total $ 5,989 $ 13,221

Supernus Pharmaceuticals, Inc.

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Commitments and Contingencies (Continued)

and ongoing maintenance of an effective compliance program.

USWM Enterprises Commitments Assumed

As part of the USWM Acquisition, the Company assumed the remaining commitments of USWM Enterprises and its subsidiaries, which are discussed below.

The Company assumed the annual minimum purchase requirement of MYOBLOC, amounting to an estimated € 3.9 million annually, under the contract manufacturing agreement with Merz for manufacture and supply.

Refer to Note 13, Leases for further discussion related to the Merz Agreement in connection with the MYOBLOC annual minimum purchase requirement.

MDD US Operations, LLC (formerly US WorldMeds, LLC) and its subsidiary, Solstice Neurosciences, LLC (US) (collectively, the MDD Subsidiaries) entered into a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S.

Department of Health and Human Services which was effective in April 2019.

Under the CIA, the MDD Subsidiaries agreed to and paid $ 17.5 million to resolve U.S.

Department of Justice allegations that it violated the False Claims Act and committed to the establishment and ongoing maintenance of an effective compliance program.

The fine was paid by the MDD Subsidiaries prior to closing of the USWM Acquisition.

As part of the USWM Acquisition, we assumed the obligations of the CIA and could become liable for payment of certain stipulated monetary penalties in the event of any CIA violations.

In addition, we will continue to incur significant costs through March 2024 to maintain a broad array of processes, policies and procedures necessary to comply with the CIA.

As part of the USWM Acquisition, the Company assumed the obligations of the CIA and could become liable for payment of certain stipulated monetary penalties in the event of any CIA violations.

In addition, the Company will continue to maintain a broad array of processes, policies and procedures necessary to comply with the CIA through March 2024.

Data Breach-related Contingency

On November 24, 2021, we announced that we were the target of a ransomware attack.

On November 24, 2021, the Company announced that it was the target of a ransomware attack.

The attack had no significant impact on our business and did not cause any long-term disruption to our operations.

Based on the investigation, the Company believes the criminal ransomware groups ("criminal groups") copied certain data from our systems, encrypted certain data on the Company's systems, and then deployed malware designed to impede access to our systems.

Based on its internal investigation, the Company believes the criminal ransomware groups ("criminal groups") copied certain data from the Company's systems, encrypted certain data on the Company's systems, and then deployed malware designed to impede access to the Company's systems.

Thereafter the criminal groups contacted the Company and threatened to publish certain data copied from the Company's systems.

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At this time, the Company has successfully recovered the impacted files and has taken additional steps designed to further protect its networks and files.

In the fourth quarter of 2021, the Company had successfully recovered the impacted files and took additional steps designed to further protect its networks and files.

Furthermore, while the Company has not been the subject of any legal proceedings involving the attack, the likelihood that the Company could be the subject of claims from persons alleging they suffered damages from the incident or actions by governmental authorities is possible, but the amount of such fines, penalties or costs, if any, cannot be estimated at this time.

The Company continues to monitor the situation.

Claims and Litigation

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Because of uncertainties related to claims, legal proceedings and litigation, accruals will be based on the Company's best estimates based on available information.

We do not believe that any of these matters will have a material adverse effect on our financial position.

The Company does not believe that any of these matters will have a material adverse effect on our financial position.

The Company may reassess the potential liability related to these matters and may revise these estimates.

The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Commitments and Contingencies (Continued)

NAMENDA XR/Namzaric Qui Tam Litigation

On April 1, 2019, Adamas was served with a complaint filed in the United States District Court for the Northern District of California (Case No.

On April 1, 2019, Adamas was served with a complaint filed in the United States District Court for the Northern District of California (the District Court) (Case No.

3:18-cv-03018-JCS) against it and several Allergan entities alleging violations of federal and state false claims acts (FCA) in connection with the commercialization of NAMENDA XR and Namzaric by Allergan.

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The complaint alleges that patents held by Allergan and Adamas covering NAMENDA XR and Namzaric were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic manufacturers of NAMENDA XR and Namzaric to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in artificially high price being charged to government payors.

Adamas's patents in question were licensed exclusively to Forest.

Adamas' patents in question were licensed exclusively to Forest Laboratories Holdings Limited.

The complaint includes a claim for damages of "potentially more than $ 2.5 billion dollars," treble damages and statutory penalties.

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The appeal is pending in the United States Court of Appeals for the Ninth Circuit (Case No.

Argument was held on January 10, 2022 and no decision has been reached as of the date of this filing.

Argument was held on January 10, 2022.

On August 25, 2022, the Ninth Circuit sided with the defendants by reversing the District Court’s public disclosure bar rulings and remanding the case back to the District Court to decide certain issues in the first instance.

On October 11, 2022, the plaintiff filed a petition for rehearing with the Ninth Circuit which was denied on November 3, 2022.

On December 23, 2022, the defendants filed renewed motions to dismiss directed to the remaining unresolved issue.

The district court has set a hearing on the renewed motion to dismiss for March 17, 2023.

No decision has been reached as of the date of this filing.

The Company intends to defend itself vigorously.

However, the Company can offer no assurances that it will be successful in a litigation.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Employee Benefit Plan

On January 2, 2006, the Company established the Supernus Pharmaceuticals, Inc.

401(k) Profit Sharing Plan (the 401(k) Plan) for its employees under Section 401(k) of the IRC.

Under the 401(k) Plan, all full-time employees who are at least 18 years old are eligible to participate in the 401(k) Plan.

Employees may participate starting on the first day of the month following employment.

Employees may contribute up to the lesser of 90 % of eligible compensation, or the applicable limit, as established by the Code.

The Company matches 100 % of a participant's contribution for the first 3 % of their salary deferral and matches 50 % of the next 2 % of their salary deferral.

As determined by the Board, the Company may elect to make a discretionary contribution not exceeding 60 % of the annual compensation paid to all participating employees.

The Company's contributions to the 401(k) Plan were approximately $ 3.0 million, $ 2.6 million, and $ 2.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

APOKYN Litigation

On October 3, 2022, Sage Chemical, Inc.

and TruPharma, LLC filed a lawsuit in the United States District Court for the District of Delaware (Case No.22-cv-1302) alleging that Supernus Pharmaceuticals, Inc., Britannia Pharmaceuticals Limited, and US WorldMeds Partners, LLC violated state and federal antitrust law in connection with APOKYN.

On January 10, 2023, the Company filed motions to dismiss all claims.

The deadline for Plaintiffs’ oppositions is March 13, 2023.

The Company intends to defend itself vigorously.

However, the Company can offer no assurances that it will be successful in a litigation.

Zydus Settlement and Licensing Agreement

The Company has a settlement and licensing agreement dated as of December 31, 2022 with Zydus Pharmaceuticals (USA), Inc.

(Zydus) to settle ongoing patent litigation regarding Zydus' ANDA filings seeking approval to market a generic version of the Company's 200mg strength Trokendi XR (extended-release topiramate) capsules.

The Company previously executed a settlement and licensing agreement in March 2017 with Zydus related to the sale of a generic version of Trokendi XR for the 25mg, 50mg, and 100mg strengths on or after January 1, 2023.

Subsequent Events

As discussed on Note 1, Organization and Business , in February 2022, the Company received notice from the FDA of its acceptance for review of the NDA resubmission for SPN-830 (apomorphine infusion device).

This approval is for an application of the drug cartridges only, which are compatible for use with the APOKYN pen, the brand-name pen injector.

Patients treated with generic apomorphine hydrochloride will need to separately obtain the APOKYN pen.

The Company is in the process of analyzing the impact of the FDA’s approval of a generic apomorphine hydrochloride injection drug cartridge to both the Company’s operations and the corresponding intangible asset.

The 2023 Notes include a covenant requiring the Company to provide Noteholders copies of all reports that the Company is required to file with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act within fifteen calendar days after the date that the Company is required to file or furnish such report (after giving effect to all applicable grace periods under the Exchange Act) (such date the “Outside Filing Date”).

Although this Annual Report on Form 10-K was not filed with the SEC prior to the Outside Filing Date, it was so filed prior to the sixty-day cure period provided under the terms of the Notes.

Secured Uncommitted Credit Line

During the first quarter of 2023, the Company entered into an uncommitted demand secured credit line with a financial institution for up to $ 150.0 million (the "Credit Line").

Although as of March 1, 2023 the Company has not drawn from the Credit Line, it expects to do so in the future, including to fund, in part, the repayment of the 2023 Notes.

The Credit Line is secured primarily by our portfolio of marketable securities, which is primarily comprised of corporate and U.S.

government agency and municipal debt securities, and it contains collateral maintenance requirements.

Pursuant to the terms of the Credit Line, the lender may terminate the Credit Line and/or demand full or partial payment of amounts borrowed thereunder at any time.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data