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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-09 · 356 added, 448 removed, 1017 unchanged (44% 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, 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.

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, 2023, 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 February 27, 2024 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

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The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the accrued sales deductions process.

This included a control over the expected long-term return rate assumptions used in estimating the accrued product returns.

We assessed the Company's long-term return rate assumptions by evaluating the consistency of those assumptions with the trend of actual historical return rates.

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Baltimore, Maryland

March 9, 2023

February 27, 2024

Report of Independent Registered Public Accounting Firm

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and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, 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, 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 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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, 2023 and 2022, 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, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Baltimore, Maryland

March 9, 2023

February 27, 2024

Supernus Pharmaceuticals, Inc.

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Total current liabilities 290,196 687,958

Convertible notes, net — 379,252

Contingent consideration, long term 1,380 33,847

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Net product sales $ 573,933 $ 649,432 $ 567,504

Royalty revenues 17,806 12,271 11,047

Royalty and licensing revenues 33,588 17,806 12,271

Total revenues 607,521 667,238 579,775

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Amortization of intangible assets 82,385 82,630 29,989

Contingent consideration (gain) expense ( 510 ) ( 6,530 ) 1,900

Intangible asset impairment charges 20,189 — —

Contingent consideration gain ( 1,517 ) ( 510 ) ( 6,530 )

Total costs and expenses 612,790 621,114 493,746

Operating earnings 46,124 86,029 173,698

Operating earnings (loss) ( 5,269 ) 46,124 86,029

Other income (expense)

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Net earnings $ 1,316 $ 60,711 $ 53,424

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

Other comprehensive gain (loss):

Unrealized gain (loss) on marketable securities, net of tax 2,617 ( 4,749 ) ( 7,436 )

Other comprehensive gain (loss) 2,617 ( 4,749 ) ( 7,436 )

Comprehensive earnings $ 3,933 $ 55,962 $ 45,988

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Balance, December 31, 2020 52,868,482 $ 53 $ 409,332 $ 8,975 $ 326,498 $ 744,858

Share-based compensation — — 16,561 — — 16,561

Issuance of common stock in connection with the Company’s equity award plans 335,134 — 4,361 — — 4,361

Net earnings — — — — 126,950 126,950

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

Balance, December 31, 2020 52,868,482 53 409,332 8,975 326,498 744,858

Share-based compensation — — 17,910 — — 17,910

Issuance of common stock in connection with the Company’s equity award plans 387,612 — 7,095 — — 7,095

Share-based compensation expense related to employee stock purchase plan and share-based awards — — 17,910 — — 17,910

Issuance of common stock related to employee stock purchase plan and share-based awards 387,612 — 7,095 — — 7,095

Net earnings — — — — 53,424 53,424

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

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

Issuance of common stock in connection with the Company’s equity award plans 997,702 1 12,422 — — 12,423

Share-based compensation expense related to employee stock purchase plan and share-based awards — — 17,568 — — 17,568

Issuance of common stock related to employee stock purchase plan and share-based awards 997,702 1 12,422 — — 12,423

Net earnings — — — — 60,711 60,711

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Balance, December 31, 2022 54,253,796 54 408,115 ( 3,210 ) 481,245 886,204

Share-based compensation expense related to employee stock purchase plan and share-based awards — — 26,759 — — 26,759

Issuance of common stock related to employee stock purchase plan and share-based awards, net of taxes withheld 469,560 1 4,619 — — 4,620

Net earnings — — — — 1,316 1,316

Unrealized gain on marketable securities, net of tax — — — 2,617 — 2,617

Balance, December 31, 2023 54,723,356 $ 55 $ 439,493 $ ( 593 ) $ 482,561 $ 921,516

See accompanying notes.

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Other income from Navitor (see Note 4) — ( 12,888 ) —

Intangible asset impairment charges 20,189 — —

Amortization of deferred financing costs and debt discount 532 2,112 17,501

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Other noncash adjustments, net 13,920 11,638 ( 1,420 )

Deferred income tax (benefit) provision ( 26,324 ) ( 4,994 ) 568

Deferred income tax benefit ( 25,714 ) ( 26,324 ) ( 4,994 )

Changes in operating assets and liabilities:

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Acquisition of Adamas, net of cash acquired — — ( 310,742 )

Distribution from (investment in) Navitor — 12,888 ( 15,000 )

Distribution from Navitor — — 12,888

Purchase of property and equipment and deferred legal fees paid ( 551 ) ( 412 ) ( 2,045 )

Net cash used in investing activities ( 216,663 ) ( 81,913 ) ( 34,699 )

Net cash provided by (used in) investing activities 268,729 ( 216,663 ) ( 81,913 )

Cash flows from financing activities

Proceeds from issuance of common stock 6,610 12,423 7,095

Employee taxes paid related to net share settlement of equity awards ( 1,990 ) — —

Proceeds from Line of Credit 93,000 — —

Payments on Line of Credit ( 93,000 ) — —

Payment on convertible notes ( 402,500 ) — —

Proceeds from governmental loan and grant — — 800

Repayment of acquired Adamas loan — — ( 138,315 )

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

Net cash used in financing activities ( 397,880 ) ( 10,477 ) ( 130,420 )

Net change in cash and cash equivalents ( 18,066 ) ( 110,314 ) ( 85,206 )

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Supplemental cash flow information:

Cash paid for interest on convertible notes $ 2,516 $ 2,516 $ 2,516

Cash paid for interest on debt $ 1,946 $ 2,516 $ 2,516

Cash paid for operating leases $ 17,112 $ 12,883 $ 11,908

Income taxes paid $ 16,200 $ 25,190 $ 45,428

Cash paid for income taxes $ 36,602 $ 16,200 $ 25,190

Noncash investing and financing activity:

Contingent consideration liability related to acquisitions $ — $ — $ 10,307

Lease assets and tenant receivable obtained for new operating leases $ 1,867 $ 10,868 $ 2,478

Lease assets obtained for new finance lease $ — $ 22,747

Property and equipment additions from utilization of tenant improvement allowance $ — $ 580 $ 25

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Notes to Consolidated Financial Statements

Organization and Business

Business Organization

Supernus Pharmaceuticals, Inc.

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The Company has eight commercial products:

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

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

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 deferred income tax assets (liability) summary under Note 11, Income Tax Expense, have been reclassified to conform to the current year presentation.

The reclassifications did not affect the consolidated balance sheets, statements of earnings, or other consolidated financial statements for the years ended December 31, 2021, 2020, and 2019.

Consolidation

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and its wholly-owned subsidiaries.

These are collectively referred to herein as "Supernus" or "the Company." All significant intercompany transactions and balances have been eliminated in consolidation.

These are collectively referred to herein as "Supernus" or "the Company." All material intercompany transactions and balances have been eliminated in consolidation.

The consolidated financial statements reflect the consolidation of entities in which the Company has a controlling financial interest.

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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

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;

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;

representation in the entity's governance;

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information from other sources, including public and proprietary sources;

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

and other assumptions that the Company believes are

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

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.

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, 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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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.

Business Combinations and Contingent Considerations

Business Combinations and Contingent Consideration

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

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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

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

their respective fair values as of the acquisition date.

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.

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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.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

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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Subsequent to the acquisition date, at each reporting period prior to the resolution of the contingency, the contingent consideration liability is remeasured at current fair value, with changes recorded in earnings in the period of remeasurement.

The determination of the initial and subsequent fair value of the contingent consideration liability requires significant judgment by management.

The determination of the initial and subsequent fair value of the contingent consideration liability may require significant judgment by management.

Changes in any of the inputs not related to facts and circumstances existing as of the acquisition date may result in a significant fair value adjustment, which can impact the results of operations in the period in which the adjustment is made.

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, Acquisition and Note 7, Contingent Consideration.

Additional information regarding contingent consideration is included in Note 6, 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.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Concentration of Credit Risk

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Generally, these deposits may be redeemed upon demand, and therefore, these bear minimal default risk.

The following table shows the percentage of the Company's sales made to and percentage of accounts receivables from wholesalers and distributors representing more than 10% of the Company's total net product sales and more than 10% of the Company's accounts receivables, net:

Percentage of Net Product Sales Percentage of Accounts Receivable, net

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

The following table shows the percentage of the Company's sales made to customers representing more than 10% of the Company's total gross product sales, and the percentage of the Company's accounts receivables, net from each:

Percentage of Gross Product Sales Percentage of Accounts Receivable, net

2023 2022 2021 2023 2022

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12 % 10 % 1 % 7 % 6 %

88 % 90 % 87 % 91 % 92 %

Refer to Note 3, Disaggregated Revenues , for the concentration of net product sales.

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Intangible assets consist of definite-lived intangible assets:

acquired developed technology and product rights, and patent defense costs, and an indefinite-lived intangible asset:

acquired developed technology and product rights, patent defense costs, and an indefinite-lived intangible asset:

acquired IPR&D.

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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

Long-lived assets consist primarily of property and equipment, operating and finance lease assets, and definite-lived intangible assets.

Long-lived assets consist primarily of property and equipment, operating lease assets, and definite-lived intangible assets.

The Company assesses the recoverability of its long-lived assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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If impairment is determined, the Company writes down the asset to its estimated fair value and records an impairment loss equal to the excess of the carrying value of the long-lived asset over its estimated fair value in the period at which such a determination is made.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

Impairment of Indefinite-Lived Intangible Assets

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Goodwill and Goodwill Impairment Assessment

Goodwill is calculated as the excess of the consideration paid consequent to completing an acquisition compared to the net assets recognized in a business combination.

Goodwill is calculated as the excess of the consideration paid as part of an acquisition compared to the net assets recognized in a business combination.

Goodwill represents the future economic benefits from the other acquired assets that could not be individually identified and separately quantified.

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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 15, Interest Expense ).

Interest expense includes 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, Interest Expense ).

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

Interest expense also includes stated interest in connection with the Company's debt instruments.

Revenue Recognition

The Company determines revenue recognition for our contractual arrangements with customers based on the following five steps:

(1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to our performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfy the relevant performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

The Company recognizes revenue in an amount that reflects the consideration the Company expects to receive in

Supernus Pharmaceuticals, Inc.

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Summary of Significant Accounting Policies (Continued)

Revenue Recognition

The Company recognizes revenue in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

exchange for those goods or services.

The Company does not adjust revenue for any financing effects in transactions where the Company expects the period between the transfer of the goods or services and collection to be less than one year.

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Customers purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power.

The Company recognizes gross revenue when its products are shipped from a third party fulfillment center and physically received by its customers.

The Company's customers take control of its products, including title and ownership, upon the physical receipt of its products at their facilities.

The Company recognizes gross revenue when its customers take control of its products, including title and ownership.

Customer orders are generally fulfilled within a few days of order receipt, resulting in minimal order backlog.

There are no minimum product purchase requirements with our customers.

The Company recognizes revenue from product sales in an amount that reflects the consideration the Company expects to ultimately receive in exchange for those goods.

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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

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

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.

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.

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

The Company estimates the liability for returns primarily based on the actual returns experience for its commercial products.

The Company estimates the liability for

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

returns primarily based on the actual returns experience for its commercial products.

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.

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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.

Licensing Revenue

License and Collaboration Arrangements

At contract inception, the Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC Topic 606, Revenue from Contracts with Customers (ASC 606).

For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the five-step model under ASC 606 noted above.

The Company's agreements with third parties generally involve the right to use the Company's intellectual property as a functional license.

Certain agreements include an up-front license fee and ongoing milestone payments upon the achievement of specific events, and may also require minimum royalty payments based on in-country sales of products developed from the applicable intellectual property.

In determining when to recognize the revenue under a collaboration agreement, the Company assesses whether the license is distinct, which depends upon whether the customer can benefit from the license and whether the license is separate from other performance obligations in the agreement.

If the license is distinct, the Company must further assess whether the customer has a right to access or a right to use the license depending on whether the functionality of the license is expected to substantively change over time.

If the license is not expected to substantively change, the revenue is recognized at the point in time when the license is provided.

Generally, the Company recognizes revenues from non-refundable up-front fees allocated to the license at a point in time, when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

Revenue recognition from milestone payments is dependent upon the facts and circumstances surrounding the milestone payments.

Generally, milestone payments under the Company’s collaboration agreements with third parties are non-refundable.

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

This can involve management's judgment that includes assessing factors that are outside of the Company's influence, such as:

likelihood of regulatory success;

availability of third party information;

and expected duration of time until achievement of event.

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

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

Milestone payments based on a non-sales metric such as a development-based milestone (e.g.

obtaining regulatory approval) represent variable consideration and would be included in the transaction price subject to any constraints.

If the milestone payments relate to future development, the timing of recognition depends upon historical experience, the specific facts

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

and circumstances, and the significance a third-party has on the outcome.

Milestone payments 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 development activities of a third-party, are fully constrained and are not included in the transaction price until the period in which those regulatory approvals are obtained, or the specified event occurs due to the inherent uncertainty with the approval process.

For milestone payments to be received upon the achievement of a sales threshold, the revenue from the milestone payments is recognized at the later of when the actual sales are incurred or the performance obligation to which the sales relate has been satisfied as noted below.

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 ).

Royalty revenues include cash royalty amounts received from third parties pursuant to settlement agreements and agreements with collaboration partners for the right to use the Company's intellectual property as a functional license.

These agreements may include sales-based royalties on the licensed intellectual property to which the royalties relate and milestone payments based on the level of sales (collectively, "sales-based royalties").

For arrangements that include sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

If it is probable that a significant revenue reversal will not occur, the Company will estimate the royalty revenues using the most likely amount method.

Certain of the Company’s royalty revenues are recognized by the Company based on information supplied to the Company by its licensees and require estimates to be made.

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

Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, which is generally within the following quarter.

The difference between the Company’s actual and estimated royalty revenues has not been material to date.

Royalty revenues also includes noncash royalty revenues for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics) and is based on estimated product sales of Orenitram by United Therapeutics (see Note 3, Disaggregated Revenues ).

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

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(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.

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

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, Interest Expense ).

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

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.

Differences between actual results and estimated amounts are adjusted in the period in which they become known, which typically follows the quarterly period in which the estimate is made.

To date, actual royalties received have not differed materially from estimates.

There are no guaranteed minimum amounts owed to the Company related to any of these royalty revenue agreements.

During the second quarter of 2023, full ownership of the royalty rights has reverted back to the Company as the cumulative payment threshold has been reached (see Note 3, Disaggregated Revenues and Note 15, Commitments and Contingencies ).

There are no guaranteed amounts owed to the Company related to any of these royalty revenue agreements.

Cost of Goods Sold

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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

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Acquired IPR&D assets that are used for research and development and have no future alternative use are expensed as incurred in-process research and development.

The Company estimates preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs), and other service providers that perform services on the Company's behalf.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

services on the Company's behalf.

In recording service fees, the Company estimates the cost of those services performed on behalf of the Company during the current period and compares those costs with the cumulative expenses recorded and payments made for such services.

21 unchanged sentences

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)

8 unchanged sentences

Forfeitures are accounted for as incurred.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies (Continued)

The Company estimates the fair value of these awards as of the grant date using a Monte Carlo simulation that incorporates option-pricing inputs.

21 unchanged sentences

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.

4 unchanged sentences

The Company's policy is to recognize any interest and penalties related to income taxes as income tax expense in the relevant period.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted in 2022

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) :

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity - The new standard, issued in August 2020, simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments with cash conversion and beneficial conversion features.

ASU 2020-06 eliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the ability to use the treasury stock method for calculating diluted earnings per share for convertible instruments whose principal amount may be settled in whole or in part with equity.

Instead, ASU 2020-06 requires (i) the entire amount of the security to be presented as a liability on the balance sheet and (ii) application of the “if-converted” method for calculating diluted earnings per share.

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

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.

1 unchanged sentence

Summary of Significant Accounting Policies (Continued)

New Accounting Pronouncements Not Yet Adopted

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

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers - The new standard, issued in October 2021, amended guidance on accounting for contract assets and contract liabilities from contracts with customers in a business combination.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606, Revenue from Contracts with Customers , as if the acquiree had initially applied recognition and measurement in their financial statements.

This guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis.

Early adoption is permitted.

Adamas Acquisition

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 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 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 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 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.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

As Initially Reported Measurement Period Adjustments (1)

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

Accounts receivable 11,156 — 11,156

Inventories (4)

20,200 ( 914 ) 19,286

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

Property and equipment 1,254 — 1,254

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

Accounts payable ( 4,592 ) — ( 4,592 )

Accrued expenses and other current liabilities ( 8,014 ) — ( 8,014 )

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

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 )

Total identifiable net assets 371,560 497 372,057

Goodwill 39,553 ( 497 ) 39,056

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

Cash consideration paid $ 400,806 $ — $ 400,806

Fair value of contingent consideration 10,307 — 10,307

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

(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

The estimated 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 dispose of the inventory, as well as a profit on the sale.

Acquired Intangible Assets

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 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.

The cash flows were discounted at a rate commensurate with the level of risk associated with its projected cash flows.

The Company believes the assumptions are representative of those a market participant would use in estimating fair value.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Acquisitions (Continued)

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 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)

Acquired developed technology and property rights $ 450,500 3.1 - 8.1

Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized.

Goodwill is primarily attributable to the anticipated cost synergies, additional growth platforms, and an expanded revenue base with the addition of the assets from the Adamas Acquisition.

The goodwill is not expected to be deductible for tax purposes.

Acquired Deferred Income Tax Liabilities, net

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 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 periods subsequent to the Closing Date.

Pro Forma Information

The following table presents the unaudited pro forma combined financial information for each of the periods presented, as if the Adamas Acquisition had occurred on January 1, 2020 (dollars in thousands):

Year Ended December 31,

Pro forma total revenues $ 663,729 $ 594,858

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 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 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.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) - The new standard, issued in November 2023, improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker.

ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing reporting requirements under Topic 280.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted.

The Company plans to adopt the guidance for the fiscal year ending December 31, 2024.

We expect ASU 2023-07 to require additional disclosures in the notes to our consolidated financial statements.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.

ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) - The new standard, issued in December 2023, requires entities to disclose additional information with respect to the effective tax rate reconciliation and to disclose the disaggregation by jurisdiction of income tax expense and income taxes paid.

The standard is effective with annual periods beginning after December 15, 2024, with early adoption permitted.

The standard is to be applied on a prospective basis, although optional retrospective application is permitted.

The Company plans to adopt the guidance for the fiscal year ending December 31, 2025.

We expect ASU 2023-09 to require additional disclosures in the notes to our consolidated financial statements.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.

Supernus Pharmaceuticals, Inc.

5 unchanged sentences

Net product sales

Trokendi XR $ 261,221 $ 304,817 $ 319,640

Oxtellar XR 115,345 110,708 98,725

Qelbree $ 140,192 $ 61,322 $ 9,879

GOCOVRI 119,637 104,421 9,778

Oxtellar XR 113,404 115,345 110,708

Trokendi XR 94,336 261,221 304,817

APOKYN 75,083 75,305 99,233

Qelbree 61,322 9,879 —

31,281 31,818 33,089

Total net product sales $ 573,933 $ 649,432 $ 567,504

Royalty revenues 17,806 12,271 11,047

Royalty and licensing revenues 33,588 17,806 12,271

Total revenues $ 607,521 $ 667,238 $ 579,775

1 unchanged sentence

(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 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 ).

The Company recognized noncash royalty revenues of $ 4.0 million, $ 9.8 million, and $ 9.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, pursuant to the Company's agreement with HC Royalty (see Note 2, Summary of Significant Accounting Policies ).

Adjustments related to prior year sales in 2023, 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.

The following table shows the percentage of net product sales to total net product sales:

Percentage of Net Product Sales

Years Ended December 31,

2023 2022 2021

Qelbree 24 % 9 % 2 %

GOCOVRI 21 % 16 % 2 %

Oxtellar XR 20 % 18 % 19 %

Trokendi XR 16 % 40 % 54 %

APOKYN 13 % 12 % 17 %

Total 100 % 100 % 100 %

______________________________

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

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Marketable Securities

Unrestricted available-for-sale marketable securities held by the Company are as follows (dollars in thousands):

2022 December 31, 2021

December 31, 2023 December 31, 2022

Corporate, U.S.

4 unchanged sentences

Total fair value $ 196,437 $ 462,110

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):

December 31, 2023

Less than 1 year $ 179,820

1 year to 2 years 16,617

2 years to 3 years 16,312

3 years to 4 years —

Greater than 4 years —

Total $ 196,437

1 unchanged sentence

Investment in Navitor

Development Agreement

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

4 unchanged sentences

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 Inc.

achieving defined development milestones.

There are certain additional payments which could be incurred by the Company that are contingent upon Navitor Inc.

achieving defined milestones.

These milestone payments include an additional license or acquisition fee depending on whether the Company ultimately licenses or acquires NV-5138, and subsequent clinical, regulatory and sales milestone payments.

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

Equity investment

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.

underwent a legal restructuring.

In the restructuring, 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 Units in Navitor LLC.

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

to a newly formed entity that became a separate, wholly-owned subsidiary of Navitor LLC.

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

As part of a legal restructuring in March 2021, the Company's Navitor Shares were exchanged for membership interests in Navitor Pharmaceutics LLC, which became the sole shareholder of Navitor Inc.

The Company has determined that although Navitor LLC is a VIE, the Company does not consolidate the results of this VIE into its financial results because the Company lacks the power to direct the activities that most significantly impact Navitor’s economic performance.

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.

3 unchanged sentences

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.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Investments (Continued)

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.

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

or Navitor LLC.

Fair Value of Financial Instruments

12 unchanged sentences

Fair Value of Financial Instruments (Continued)

Financial Assets Recorded at Fair Value on a Recurring Basis

Financial Assets and Liabilities 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,

Fair Value Measurements at December 31, 2023

Total Fair Value at December 31, 2023 Quoted Prices

17 unchanged sentences

Total liabilities at fair value $ 53,450 $ — $ — $ 53,450

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Fair Value Measurements as of December 31,

Fair Value Measurements at December 31, 2022

Total Fair Value at December 31, 2022 Quoted Prices

8 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

3 unchanged sentences

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

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Fair Value of Financial Instruments (Continued)

Other Financial Instruments

2 unchanged sentences

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)

December 31, 2022

Carrying Value Fair Value (Level 2)

Convertible notes, net $ 401,968 $ 395,959

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

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

Contingent Consideration

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):

2023 December 31,

Reported under the following captions in the consolidated balance sheets:

Contingent consideration, current portion $ 52,070 $ 21,120

Contingent consideration, long-term 1,380 33,847

Total $ 53,450 $ 54,967

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

5 unchanged sentences

USWM Contingent Consideration

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

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

The USWM Acquisition included potential additional contingent consideration payments for regulatory and development milestones and sales-based milestones.

As of December 31, 2023, the remaining potential contingent consideration payments include the following:

• Regulatory and developmental milestones:

• The potential $ 55 million in regulatory and development milestones is comprised of (1) $ 25 million related to the FDA's approval of the SPN-830 NDA and (2) $ 30 million related to the subsequent commercial product launch.

• The $ 30 million sales-based milestone that was due upon the achievement of certain U.S.

net product sales of APOKYN in 2023 was not achieved.

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, and the estimated amount and timing of projected revenues from the acquired USWM products.

Supernus Pharmaceuticals, Inc.

1 unchanged sentence

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 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 acquired USWM products.

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.

The Company assessed that these sales-based milestones will not be achieved based on the revised net sales projections.

The probability of achieving these milestones were significantly lower compared to prior estimates.

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.

On November 24, 2021 (the Adamas Closing Date), the Company completed its acquisition of all the outstanding equity of Adamas (Adamas 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.

Each Milestone may only be achieved once.

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

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)

Contingent Consideration (Continued)

Change in the Fair Value of Contingent Consideration

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):

1 unchanged sentence

Balance at December 31, 2020 $ 76,700 $ — $ 76,700

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

Change in fair value recognized in earnings ( 6,530 ) — ( 6,530 )

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

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

1 unchanged sentence

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

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

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

Change in fair value recognized in earnings 130 ( 1,647 ) ( 1,517 )

Balance at December 31, 2023 $ 46,400 $ 7,050 $ 53,450

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

Contingent consideration, long-term 33,847 35,637

Total $ 54,967 $ 80,477

The Company recorded the following changes in fair value of the contingent consideration liability for the USWM milestones:

• For the year ended December 31, 2023, the Company recorded $ 0.1 million expense which was primarily driven by the passage of time, as well as the change in timing of milestone achievement and estimated discount rate in the first quarter of 2023.

• For the year ended December 31, 2022, the Company recorded a $ 1.1 million expense which was primarily driven by the passage of time and the accretion to the payout amount related to the milestone achieved in the first quarter of 2022.

• For the year ended December 31, 2021, the Company recorded a $ 6.5 million gain which 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.

The Company paid $ 25 million of the USWM contingent consideration in the first quarter of 2022 of which

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Contingent Consideration (Continued)

$ 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.

The amount paid was for the milestone that was due upon the FDA acceptance of the SPN-830 NDA for review, which was achieved in the first quarter of 2022.

The Company recorded the following changes in fair value of the contingent consideration liabilities for the Adamas CVRs:

• For the year ended December 31, 2023, the Company recorded a $ 1.6 million gain which was primarily driven by the passage of time.

• For the year ended December 31, 2022, the Company recorded a $ 1.6 million gain primarily due to changes in market data and revenue projections.

Goodwill and Intangible Assets, Net

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

The following table sets forth the gross carrying amounts of goodwill (dollars in thousands):

2023 December 31,

Goodwill $ 117,019 $ 117,019

There were no goodwill impairment charges recognized in 2023 or 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):

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

December 31, 2023 December 31, 2022

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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.

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

In regards to Oxtellar XR, the Company entered into settlement and license agreements that allows third parties to enter the market in September 2024, or sooner under certain conditions.

In regards to XADAGO, the Company entered into settlement and license agreements that allows third parties to enter the market in December 2027, or sooner under certain conditions.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Goodwill and Intangible Assets, Net (Continued)

In the fourth quarter of 2023, the Company recognized impairment charges of $ 20.2 million mainly due to the partial write-off of the carrying value of some of its acquired intangible assets, primarily XADAGO.

The primary factors that led to the impairment determinations were the following:

(1) the performance of the commercial products;

(2) forthcoming loss of exclusivity of XADAGO;

and (3) the change in the Company's future outlook of the brands.

The Company recognized as impairment loss the difference between the estimated fair values and carrying values of these intangible assets.

The Company used the discounted cash flow income approach to estimate the fair values of each of these intangible assets.

The primary inputs and assumptions used in the model included timing and projections of estimated future revenues and cash flows, loss of exclusivity, and discount rate.

The fair value measurement is classified as Level 3 within the fair value hierarchy as defined in ASC 820, Fair Value Measurement , due to the unobservable inputs used.

The impairment loss is reported as Intangible asset impairment charges in the consolidated statements of earnings.

Amortization expense for intangible assets was approximately $ 82.4 million, $ 82.6 million, and $ 30.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

4 unchanged sentences

Thereafter 116,114

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Convertible Senior Notes Due 2023

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 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.

The Indenture includes customary terms and covenants, including certain events of default upon which the 2023 Notes may be due and payable immediately.

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

Noteholders may convert their 2023 Notes at their option only in the following circumstances:

(1) during any calendar quarter, if the last reported sale price per share of the Company's common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including the last trading day of the immediately preceding calendar quarter, exceeds 130 % of the conversion price, or a price of approximately $ 77.13 per share on such trading day;

(2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company's common stock, as specified in the Indenture;

and (4) at any time from and including October 1, 2022, until the close of business on the second scheduled trading day immediately before the maturity date.

At its election, the Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, based on the applicable conversion rate.

The initial conversion rate is 16.8545 shares per $1,000 principal amount of the 2023 Notes, which represents an initial conversion price of approximately $ 59.33 per share and is subject to adjustment as specified in the Indenture.

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

If a “make-whole fundamental change,” as defined in the Indenture occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.

If a “fundamental change,” as defined in the Indenture occurs, then noteholders may require the Company to repurchase their 2023 Notes at a cash repurchase price equal to the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest, if any.

The 2023 Notes matured on April 1, 2023.

On March 30, 2023, the Company transferred funds totaling $ 403.8 million to the Trustee (Wilmington Trust) related to the repayment of the 2023 Notes which was reported as restricted cash in the first quarter of 2023.

On April 1, 2023, the Company paid the total principal amount due of $ 402.5 million under the 2023 Notes and the remaining outstanding interest due of $ 1.3 million with the restricted cash.

Contemporaneous with the issuance of the 2023 Notes, the Company also entered into separate privately negotiated convertible note hedge transactions (collectively, the Convertible Note Hedge Transactions) with each of the call spread counterparties.

The Company issued 402,500 convertible note hedge options.

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.

The Convertible Note Hedge Transactions were 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.

As of March 31, 2023, the Convertible Note Hedges have expired.

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 strike price of the Warrant Transactions will initially be $ 80.91 per share of the Company’s common stock, and is subject to adjustment.

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.

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

however, the Warrant Transactions could have had a dilutive effect with respect to the Company’s common

Supernus Pharmaceuticals, Inc.

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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;

however, the Warrant Transactions could have a dilutive effect with respect to the Company’s common stock, to the extent that the market price per share of the Company’s common stock, as measured under the terms of the Warrant Transactions, exceeds the strike price of the warrants.

The liability component of the 2023 Notes consists of the following (dollars in thousands):

2022 December 31,

stock, to the extent that the market price per share of the Company’s common stock, as measured under the terms of the Warrant Transactions, exceeded the strike price of the warrants.

The warrants expired unexercised on November 22, 2023.

As of December 31, 2022 , the liability component of the 2023 Notes consists of the following (dollars in thousands):

2023 Notes $ 402,500

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Total carrying value $ 401,968

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.

The Company 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):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, 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.

No 2023 Notes were ever converted.

Uncommitted Demand Secured Line of Credit

On February 8, 2023, the Company entered into a credit line agreement with UBS.

The Credit Line provides for a revolving line of credit of up to $ 150 million, which can be drawn at any time.

Any fixed rate borrowing will bear interest at a fixed interest rate, equal to the sum of (i) the UBS Fixed Funding Rate (as defined in the Credit Line) plus (ii) the applicable Percentage Spread established in the Credit Line.

Any variable rate borrowing will bear interest at a variable interest rate, equal to the sum of (i) the UBS Variable Rate (as defined in the Credit Line) plus (ii) the applicable Percentage Spread established in the Credit Line.

The Credit Line is secured by a first priority lien and security interest in certain of the Company’s assets, including each account of the Company at UBS Financial Services Inc.

(the “Collateral Account”), and other such collateral (collectively, the "Collateral"), as further defined in the Credit Line.

The Company may be required to post additional collateral if the value of the Collateral declines below the required collateral maintenance requirements.

Upon certain customary events of default, all amounts due under the Credit Line will become immediately due and payable without demand, and UBS has the right, in its discretion, to liquidate, transfer, withdraw or sell all or any part of the Collateral and apply the proceeds to repay any borrowings pursuant to the Credit Line.

The Company has the right to repay any variable rate advance under the Credit Line at any time, in whole or in part, without penalty.

The Company may repay any fixed rate advance in whole, but may not repay any fixed rate advance in part.

In its discretion and without cause, UBS has the right at any time to demand full or partial payment of amounts borrowed pursuant to the Credit Line and terminate the Credit Line.

On March 30, 2023, the Company borrowed $ 93.0 million under the Credit Line, which bore a variable interest rate.

The funds from this borrowing were used to repay outstanding indebtedness under the 2023 Notes as discussed above under the Convertible Senior Notes Due 2023.

As of June 30, 2023, the Company repaid the total principal balance of $ 93.0 million under the Credit Line and the interest incurred on the Credit Line of $ 0.7 million.

As of December 31, 2023, there was no outstanding debt under the Credit Line.

Share-Based Payments

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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 to, 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

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

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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The Company records compensation expense related to its ESPP.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

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

24 unchanged sentences

Exercisable 4,110,537 $ 26.58 4.43 $ 22,305

The weighted-average grant date fair value of options granted for the years ended December 31, 2022, 2021, and 2020 were $ 18.11 , $ 16.25 , and $ 13.44 per share, respectively.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

The weighted-average grant date fair value of options granted for the years ended December 31, 2023, 2022, and 2021 were $ 21.3 million, $ 18.1 million, and $ 16.3 million per share, respectively.

The aggregate intrinsic value of shares exercised for the years ended December 31, 2023, 2022, and 2021 were $ 5.1 million, $ 16.3 million, and $ 2.8 million, respectively.

17 unchanged sentences

0.72 % - 1.3 %

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

As of December 31, 2023, the total unrecognized compensation expense was approximately $ 34.1 million.

17 unchanged sentences

The Company expects to prospectively recognize these expenses over a weighted-average period of 2.9 years.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

Performance Stock Units

16 unchanged sentences

The total intrinsic value of PSUs vested during the years ended December 31, 2023, 2022, and 2021 were $ 0.5 million, $ 0.2 million, and $ 0.0 million , respectively.

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Share-Based Payments (Continued)

Performance-Based Awards

9 unchanged sentences

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, 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

In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 9, Convertible Senior Notes Due 2023 .

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.

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.

In addition to the above described effect of the 2023 Notes and the related Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards in the calculation of diluted EPS, because their inclusion would be anti-dilutive:

Years Ended December 31,

2022 2021 2020

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.

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 years ended December 31, 2023 and December 31, 2022 in connection with the adoption of ASU 2020-06, and the treasury stock method for the year ended December 31, 2021.

Supernus Pharmaceuticals, Inc.

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Earnings per Share (Continued)

The following table sets forth the computation of basic and diluted net earnings per share for the years ended December 31, 2022, 2021, and 2020 (dollars in thousands, except share and per share amounts):

The following table sets forth the computation of basic and diluted EPS for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands, except share and per share amounts):

Years Ended December 31,

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Earnings per share, diluted $ 0.02 $ 1.04 $ 0.98

Effect of Convertible Notes and Related Convertible Note Hedges and Warrants

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 EPS, whereas the Company previously calculated diluted EPS under the treasury stock method.

As a result of the adoption of ASU 2020-06, the 6.8 million in dilutive shares associated with the conversion of the 2023 Notes were included in the calculation of diluted EPS for the year ended December 31, 2022 because their inclusion would be dilutive.

In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 8, Debt .

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

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

In addition to the above described effect of the Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards and shares associated with the conversion of the 2023 Notes in the calculation of diluted EPS, because their inclusion would be anti-dilutive:

Years Ended December 31,

2023 2022 2021

Stock options, RSUs, PSUs 543,140 373,728 1,275,114

2023 Notes 1,691,337 — —

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Income Tax Expense

The summary of the income tax expense for the years ended December 31, 2023, 2022, and 2021 is as follows (dollars in thousands):

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Notes to Financial Statements (Continued)

Income Taxes (Continued)

Income Tax Expense (Continued)

The significant components of the Company's deferred income tax assets (liabilities) are as follows (dollars in thousands):

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Operating lease liability 10,374 10,821

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 12,755 18,486

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Deferred tax liabilities:

Amortization of intangibles ( 162,654 ) ( 199,240 )

Debt discount on 2023 Notes ( 133 ) ( 5,671 )

Patent infringement legal costs ( 10,968 ) ( 10,689 )

Intangibles ( 144,327 ) ( 171,113 )

Operating lease assets ( 7,251 ) ( 7,338 )

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Based upon the level of historical taxable income and projections for future taxable income over the periods in which the NOL and credit carryforwards are available to reduce income taxes payable, management had determined it is not more-likely-than-not to realize all such net deferred tax assets.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Income Taxes (Continued)

A reconciliation of the deferred asset valuation allowance is as follows (dollars in thousands):

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(1) Amount comprised principally of acquisitions and purchase accounting adjustments in connect with acquisitions

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 Company recorded a valuation allowance addition of $ 1.3 million for the year ended December 31, 2023.

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.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Income Tax Expense (Continued)

The Company has NOL carryforwards in several jurisdictions.

5 unchanged sentences

For the year ended December 31, 2023, the Company utilized federal NOLs of approximately $ 42.6 million and state NOLs of approximately $ 25.7 million.

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 112 32 898

Gross decreases related to current year tax positions — — —

Gross increases related to prior year tax positions 9 — —

2 unchanged sentences

Balance as of December 31 $ 2,149 $ 4,323 $ 6,100

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 $ 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.

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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 .

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Leases (Continued)

Contract Manufacturing Lease

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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.

Supernus Pharmaceuticals, Inc.

Notes to Financial Statements (Continued)

Leases (Continued)

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

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

2023 2022 2021

Cash paid for operating leases $ 17,112 $ 12,883 $ 11,908

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

Lease assets and tenant receivable obtained for new operating leases 7,170 1,867 10,868

Supernus Pharmaceuticals, Inc.

16 unchanged sentences

Accounts Receivable

As of December 31, 2022, and December 31, 2021, the Company has reduced gross accounts receivable by approximately $ 13.0 million and $ 13.5 million, respectively.

As of December 31, 2023, and December 31, 2022, the Company has reduced accounts receivable by approximately $ 10.7 million and $ 13.0 million, respectively.

Prompt pay discount and contractual service fees, which were originally recorded as reduction to revenues, represents estimated amounts not expected to be paid by our customers.

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Total $ 77,408 $ 91,541

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

Refer to Note 3, Acquisition , for further discussion of the acquisition.

The Company recorded inventory write-offs of $ 8.0 million and $ 10.4 million for the years ended December 31, 2023 and 2022, respectively.

Supernus Pharmaceuticals, Inc.

2 unchanged sentences

Property and Equipment, net

Property and equipment consists of the following (dollars in thousands):

Property and equipment consist of the following (dollars in thousands):

2023 December 31,

8 unchanged sentences

Depreciation and amortization expense on property and equipment was approximately $ 2.5 million, $ 3.0 million, and $ 2.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company retired certain fully depreciated property and equipment in the year ended December 31, 2022.

Accounts Payable and Accrued Liabilities

2 unchanged sentences

Accounts payable $ 1,964 $ 10,543

Accrued compensation 16,963 28,068

Accrued professional & marketing fees 16,783 26,728

Accrued product costs 15,216 18,460

Accrued royalties (1)

12,022 13,821

Accrued clinical trial costs (2)

Accrued compensation, benefits, & related accruals 20,722 16,963

Accrued manufacturing expenses 11,652 15,216

Accrued sales & marketing 11,666 16,783

Accrued R&D expenses 10,530 7,490

Operating lease liabilities, current portion (1)

Accrued royalties (2)

Other accrued expenses 6,786 10,534

Total $ 79,569 $ 96,342

(1) Refer to Note 16, Commitments and Contingencies .

(2) Includes preclinical and all clinical trial-related costs.

(1) Refer to Note 12, Leases .

(2) Refer to Note 15, Commitments and Contingencies .

Accrued Product Returns and Rebates

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Interest expense $ ( 1,321 ) $ ( 2,542 ) $ ( 2,195 )

Interest expense on nonrecourse liability related to sale of future royalties 2,416 3,727 4,319

Noncash interest expense on nonrecourse liability related to sale of future royalties ( 562 ) ( 2,416 ) ( 3,727 )

Noncash interest expense on debt ( 532 ) ( 2,112 ) ( 17,501 )

Total $ ( 2,415 ) $ ( 7,070 ) $ ( 23,423 )

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 ).

Noncash interest expense on debt is related to amortization of deferred financing costs on the 2023 Notes.

The Company fully amortized the deferred financing costs on the 2023 Notes in the first quarter of 2023.

(see Note 8, Debt ).

Commitments and Contingencies

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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.

Notes to Consolidated Financial Statements (Continued)

Commitments and Contingencies (Continued)

Full ownership of the royalty rights has reverted back to the Company as the cumulative payment threshold has been reached as of June 30, 2023 (see Note 2, Summary of Significant Accounting Policies - Royalty Revenues and Note 3, Disaggregated Revenues ).

As of December 31, 2022, the n onrecourse liability related to sale of future royalties was $ 6.0 million and was included in Other current liabilities as reported on the consolidated balance sheet.

USWM Enterprises Commitments Assumed

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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.

Department of Justice allegations that it violated the False Claims Act and

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Commitments and Contingencies (Continued)

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.

20 unchanged sentences

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

10 unchanged sentences

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 August 25, 2022, the Ninth Circuit sided with the defendants by reversing the District Court’s public disclosure bar

Supernus Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

Commitments and Contingencies (Continued)

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.

On March 20, 2023, the District Court entered an order and final judgement dismissing with prejudice the FCA claim while declining to exercise supplemental jurisdiction over the state false claims act claims which were dismissed without prejudice.

On April 19, 2023, the plaintiff appealed the District Court's dismissal of the Federal False Claims Act claim.

The appeal remains pending in the United States Court of Appeals for the Ninth Circuit.

APOKYN Litigation

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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.

On January 10, 2023, the Company filed motions to dismiss all claims and the lawsuit in its entirety.

As of April 12, 2023, briefing on those motions is now complete.

Those motions remain pending.

On April 10, 2023, the Court issued a scheduling order that provides for a Pretrial Conference on March 7, 2025, and a jury trial beginning on March 24, 2025.

Pretrial discovery is ongoing.

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

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.

Apotex Settlement and License Agreement

The Company entered into settlement and license agreements dated June 21, 2023 with Apotex Inc.

The agreements settled ongoing patent litigation regarding Apotex ANDA filings seeking approval to market a generic version of the Company's 150mg, 300mg, and 600mg strength Oxtellar XR (extended-release oxcarbazepine) tablets in September 2024, or sooner under certain conditions.

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