SUPERNUS PHARMACEUTICALS, INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Supernus Pharmaceuticals, Inc. Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID 185 ) 89 Consolidated Balance Sheets 92 Consolidated Statements of Earnings 93 Consolidated Statements of Comprehensive Earnings 94 Consolidated Statements of Changes in Stockholders' Equity 95 Consolidated Statements of Cash Flows 96 Notes to Consolidated Financial Statements 97 88 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Supernus Pharmaceuticals, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Supernus Pharmaceuticals, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. 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, 2024, 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 25, 2025 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued sales deductions related to product returns As disclosed in Notes 2 and 14 to the consolidated financial statements, the Company recorded accrued product returns of $53,375 (dollars in thousands) as of December 31, 2024. The related provision for product returns is reflected as a reduction of gross product sales, and is recorded at the time of sale when the customer takes title to the product. Sale of the Company’s products are not subject to a general right of return; however, the Company will accept return of expired product six months prior to and up to 12 months subsequent to the product’s expiry date for certain products. The Company's products have a shelf life of up to 48 months from date of manufacture. We identified the evaluation of accrued sales deductions related to Trokendi XR, Oxtellar XR and Qelbree product returns, and specifically the assessment of the expected long-term return rates, as a critical audit matter. The assessment of the expected long-term return rates included a comparison to actual returns experience and involved a high degree of auditor judgment due to the significant passage of time between product sale and the time at which the Company issues credit for expired product. 89 Table of Contents 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. We compared prior period expected long-term return rate assumptions against actual return rates experience. /s/ KPMG LLP We have served as the Company's auditor since 2015. Baltimore, Maryland February 25, 2025 90 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Supernus Pharmaceuticals, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Supernus Pharmaceuticals, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, 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, 2024 and 2023, 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, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2025 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Baltimore, Maryland February 25, 2025 91 Table of Contents Supernus Pharmaceuticals, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 69,331 $ 75,054 Marketable securities 384,281 179,820 Accounts receivable, net 142,077 144,155 Inventories, net 54,293 77,408 Prepaid expenses and other current assets 36,088 16,676 Total current assets 686,070 493,113 Long-term marketable securities — 16,617 Property and equipment, net 11,545 13,530 Intangible assets, net 521,912 599,889 Goodwill 117,019 117,019 Other assets 31,527 37,505 Total assets $ 1,368,073 $ 1,277,673 Liabilities and stockholders’ equity Current liabilities Accounts payable and accrued liabilities $ 76,352 $ 79,569 Accrued product returns and rebates 168,705 154,274 Contingent consideration, current portion 47,340 52,070 Other current liabilities — 4,283 Total current liabilities 292,397 290,196 Contingent consideration, long-term — 1,380 Operating lease liabilities, long-term 27,382 33,196 Deferred income tax liabilities, net 4,961 24,963 Other liabilities 7,600 6,422 Total liabilities 332,340 356,157 Commitments and contingencies (Note 16) Stockholders’ equity Common stock, $ 0.001 par value; 130,000,000 shares authorized; 55,743,095 and 54,723,356 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 56 55 Additional paid-in capital 479,440 439,493 Accumulated other comprehensive loss, net of tax ( 189 ) ( 593 ) Retained earnings 556,426 482,561 Total stockholders’ equity 1,035,733 921,516 Total liabilities and stockholders’ equity $ 1,368,073 $ 1,277,673 See accompanying notes. 92 Table of Contents Supernus Pharmaceuticals, Inc. Consolidated Statements of Earnings (in thousands, except share and per share data) Year Ended December 31, 2024 2023 2022 Revenues Net product sales $ 637,696 $ 573,933 $ 649,432 Royalty, licensing and other revenues 24,121 33,588 17,806 Total revenues 661,817 607,521 667,238 Costs and expenses Cost of goods sold (a) 77,906 83,779 87,221 Research and development 108,796 91,593 74,552 Selling, general and administrative 321,582 336,361 377,221 Amortization of intangible assets 77,977 82,385 82,630 Intangible asset impairment charges — 20,189 — Contingent consideration gain ( 6,110 ) ( 1,517 ) ( 510 ) Total costs and expenses 580,151 612,790 621,114 Operating earnings (loss) 81,666 ( 5,269 ) 46,124 Other income (expense) Interest and other income, net 16,204 10,453 21,689 Interest expense — ( 2,415 ) ( 7,070 ) Total other income (expense), net 16,204 8,038 14,619 Earnings before income taxes 97,870 2,769 60,743 Income tax expense 24,005 1,453 32 Net earnings $ 73,865 $ 1,316 $ 60,711 Earnings per share Basic $ 1.34 $ 0.02 $ 1.13 Diluted $ 1.32 $ 0.02 $ 1.04 Weighted average shares outstanding Basic 55,100,063 54,536,281 53,665,143 Diluted 55,958,537 55,506,828 61,679,800 (a) Excludes amortization of intangible assets. See accompanying notes. 93 Table of Contents Supernus Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Earnings (in thousands) Year Ended December 31, 2024 2023 2022 Net earnings $ 73,865 $ 1,316 $ 60,711 Other comprehensive gain (loss) Unrealized gain (loss) on marketable securities, net of tax 404 2,617 ( 4,749 ) Other comprehensive gain (loss) 404 2,617 ( 4,749 ) Comprehensive earnings $ 74,269 $ 3,933 $ 55,962 See accompanying notes. 94 Table of Contents Supernus Pharmaceuticals, Inc. Consolidated Statements of Changes in Stockholders' Equity (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Earnings (Loss) Retained Earnings Total Stockholders' Equity Shares Amount Balance, December 31, 2021 53,256,094 $ 53 $ 434,337 $ 1,539 $ 379,922 $ 815,851 Cumulative effect of adoption of ASU 2020-06 — — ( 56,212 ) — 40,612 ( 15,600 ) Balance, January 1, 2022 53,256,094 53 378,125 1,539 420,534 800,251 Share-based compensation 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 Unrealized loss on marketable securities, net of tax — — — ( 4,749 ) — ( 4,749 ) 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 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 Share-based compensation expense related to employee stock purchase plan and share-based awards — — 27,755 — — 27,755 Issuance of common stock related to employee stock purchase plan and share-based awards, net of taxes withheld 1,019,739 1 12,192 — — 12,193 Net earnings — — — — 73,865 73,865 Unrealized gain on marketable securities, net of tax — — — 404 — 404 Balance, December 31, 2024 55,743,095 $ 56 $ 479,440 $ ( 189 ) $ 556,426 $ 1,035,733 See accompanying notes. 95 Table of Contents Supernus Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities Net earnings $ 73,865 $ 1,316 $ 60,711 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 80,414 84,859 85,543 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 Realized gains from sales of marketable securities ( 9 ) — ( 14 ) Amortization of premium/discount on marketable securities 1,823 ( 122 ) 3,233 Change in fair value of contingent consideration ( 6,110 ) ( 1,517 ) ( 510 ) Share-based compensation expense 27,755 26,759 17,568 Deferred income tax benefit ( 20,136 ) ( 25,714 ) ( 26,324 ) Inventory valuation write-down 8,876 8,023 10,442 Other noncash adjustments, net 7,525 5,897 1,196 Changes in operating assets and liabilities: Accounts receivable 2,078 18,765 ( 16,366 ) Inventories 15,806 6,110 ( 17,858 ) Prepaid expenses and other assets ( 19,352 ) ( 334 ) 12,303 Accrued product returns and rebates 14,431 2,609 18,941 Accounts payable and other liabilities ( 15,015 ) ( 36,287 ) ( 19,163 ) Payment of contingent consideration — — ( 2,100 ) Net cash provided by operating activities 171,951 111,085 116,826 Cash flows from investing activities Purchases of marketable securities ( 688,013 ) ( 101,621 ) ( 406,990 ) Maturities of marketable securities 498,871 370,901 190,739 Purchases of property and equipment ( 725 ) ( 551 ) ( 412 ) Net cash provided by (used in) investing activities ( 189,867 ) 268,729 ( 216,663 ) Cash flows from financing activities Proceeds from Credit Line — 93,000 — Payments on Credit Line — ( 93,000 ) — Payment on convertible notes — ( 402,500 ) — Proceeds from issuance of common stock 14,908 6,610 12,423 Employee taxes paid related to net share settlement of equity awards ( 2,715 ) ( 1,990 ) — Payment of contingent consideration — — ( 22,900 ) Net cash provided by (used in) financing activities 12,193 ( 397,880 ) ( 10,477 ) Net change in cash and cash equivalents ( 5,723 ) ( 18,066 ) ( 110,314 ) Cash and cash equivalents at beginning of year 75,054 93,120 203,434 Cash and cash equivalents at end of year $ 69,331 $ 75,054 $ 93,120 Supplemental cash flow information Cash paid for income taxes $ 53,254 $ 36,602 $ 16,200 Cash paid for interest on debt $ — $ 1,946 $ 2,516 Noncash investing and financing activities Property and equipment additions from utilization of tenant improvement allowance — — $ 580 See accompanying notes. 96 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements 1. Business Organization Supernus Pharmaceuticals, Inc. (the Company, see Consolidation in Note 2, Summary of Significant Accounting Policies ) was incorporated in Delaware and commenced operations in 2005. The Company is a biopharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. The Company's diverse neuroscience portfolio includes approved treatments for attention-deficit hyperactivity disorder (ADHD), dyskinesia in Parkinson's Disease (PD) patients receiving levodopa-based therapy, hypomobility in PD, epilepsy, migraine, cervical dystonia, and chronic sialorrhea. The Company is developing a broad range of novel CNS product candidates including new potential treatments for hypomobility in PD, epilepsy, depression, and other CNS disorders. The Company has eight commercial products: Qelbree ® , GOCOVRI ® , Oxtellar XR ® , APOKYN ® , Trokendi XR ® , XADAGO ® , MYOBLOC ® and ONAPGO TM (formerly known as SPN-830). In February 2025, the FDA approved ONAPGO (apomorphine hydrochloride) injection as the first and only subcutaneous apomorphine infusion device for the treatment of motor fluctuations in adults with advanced PD. ONAPGO will be launched in the second quarter of 2025. 2. Summary of Significant Accounting Policies Basis of Presentation The Company's consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The Company, which is primarily located in the United States (U.S.), operates in one operating segment. Reclassifications The prior year amounts related to the caption Inventory valuation write-down in the consolidated statements of cash flows has been reclassified to conform to current year presentation. The reclassification did not affect the other consolidated financial statements. Consolidation The Company's consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc. and its wholly-owned subsidiaries. These are collectively referred to herein as "Supernus" or "the Company." Supernus Pharmaceuticals, Inc. and each of its subsidiaries are distinct legal entities. 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. In determining whether there is a controlling financial interest, the Company considers if it has a majority of the voting interests of the entity, or if the entity is a variable interest entity (VIE) and if the Company is the primary beneficiary. In determining the primary beneficiary of a VIE, the Company evaluates whether it has both: the power to direct the activities of the VIE that most significantly impact the VIE's economic performance; and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to that VIE. The Company's judgment with respect to its level of influence or control of an entity involves the consideration of various factors, including the form of an ownership interest; representation in the entity's governance; the size of the investment; estimates of future cash flows; the ability to participate in policymaking decisions; and the rights of the other investors to participate in the decision making process, including the right to liquidate the entity, if applicable. If the Company is not the primary beneficiary of the VIE, and an ownership interest is maintained in the entity, the interest is accounted for under the equity or cost methods of accounting, as appropriate. The Company continuously assesses whether it is the primary beneficiary of a VIE as changes to existing relationships or future transactions may affect its conclusions. 97 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) Use of Estimates The Company bases its estimates on: historical experience; forecasts; information received from its service providers; information from other sources, including public and proprietary sources; and other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from the Company’s estimates. The Company periodically evaluates the methodologies employed in making its estimates. Cash and Cash Equivalents The Company considers all investments in highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. Marketable Securities Marketable securities consist of investments in U.S. Treasury bills and notes; bank certificates of deposit; various U.S. government agency debt securities; corporate and municipal debt securities. The Company places all investments with governmental, industrial, or financial institutions whose debt is rated as investment grade. The Company's investments are classified as available-for-sale and are carried at fair value. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets. Any unrealized holding gains or losses on debt securities, including their tax effect, are reported as components of Other comprehensive gain (loss) in the consolidated statement of comprehensive earnings. Realized gains and losses, included in Interest and other income, net in the consolidated statement of earnings, are determined using the specific identification method for determining the cost of securities sold. Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses) are included in the consolidated statement of earnings, with a corresponding allowance established. If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings and adjust the allowance accordingly. Business Combinations and Contingent Consideration The Company determines whether an acquisition should be accounted for as a business combination or as an asset acquisition. If the acquired set of activities and assets does not meet the definition of a business, as defined by U.S. GAAP, the transaction is accounted for as an asset acquisition. In an asset acquisition, any acquired research and development that does not have an alternative future use is charged to expense as of the acquisition date, and no goodwill is recorded. If the acquired set of activities and assets meets the definition of a business, the Company applies the acquisition method of accounting and accounts for the transaction as a business combination. In a business combination, assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, if applicable, is recorded as goodwill. In a business combination, the operating results of the acquired business are included in the Company's consolidated statement of earnings, beginning on the effective acquisition date. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Significant judgment is involved in the determination of the fair value assigned to assets acquired and liabilities assumed in a business combination, as well as the estimated useful lives of assets. These estimates can materially affect our consolidated results of operations and financial position. The fair value of intangible assets are determined using information available as of the acquisition date and are based on estimates and assumptions that are deemed reasonable by management. Significant estimates and assumptions include but are not limited to: the probability of regulatory approval, revenue growth, and appropriate discount rate. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed as of the acquisition date, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, 98 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) 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. 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. Contingent Consideration Business combinations often include provisions for additional consideration to be transferred to former shareholders based upon the achievement of certain milestones, referred to as contingent consideration. Contingent consideration from product development milestones and sales-based milestone payments on future product sales are included in the purchase price for business combinations. The fair value of the contingent consideration liability is determined as of the acquisition date using estimated or forecasted inputs. These inputs include the estimated amount and timing of projected revenues, probability and timing of milestone achievement, probability of in-process research & development ("IPR&D") achieving regulatory approval, revenue volatility, and the estimated discount rates and risk-free rate used to present value the probability-weighted cash flows. 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 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 . Additional information regarding contingent consideration is included in Note 6, Contingent Consideration. Accounts Receivable, Net Accounts receivable are reported on the consolidated balance sheets at outstanding amounts due from customers, less an allowance for doubtful accounts and sales discounts. The Company extends credit without requiring collateral. The Company writes off uncollectible receivables when the customer has had a change in creditworthiness and the likelihood of collection is remote. Payment terms for receivables are based on customary commercial terms and are predominantly less than one year. Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk concentrations consist of cash, cash equivalents, marketable securities, and accounts receivable. The counterparties are various corporations, governmental institutions, and financial institutions of high credit standing. Substantially all of the Company's cash, cash equivalents, and marketable securities are maintained in U.S. Treasury bills and notes; bank certificates of deposit; various U.S. governmental agency debt securities; and corporate and municipal debt securities. The Company places all investments with governmental, industrial, or financial institutions whose debt is rated as investment grade. Deposits held with banks may exceed the amount of governmental insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and therefore, these bear minimal default risk. 99 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. 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 2024 2023 2022 2024 2023 Customer A 28 % 28 % 26 % 40 % 38 % Customer B 24 % 23 % 28 % 28 % 30 % Customer C 25 % 25 % 26 % 16 % 16 % Customer D 13 % 12 % 10 % 8 % 7 % 90 % 88 % 90 % 92 % 91 % Refer to Note 3, Disaggregated Revenues , for the concentration of net product sales. Inventories Inventories are recorded at the lower of cost or net realizable value, and include materials, labor, direct costs and indirect costs. These are valued using the first-in, first-out method. The Company periodically reviews inventory and records write-downs for any excess, expired and obsolete inventory, and for inventory that has a cost basis in excess of its expected net realizable value based on estimates of product demand, production requirements, market conditions, regulatory requirements and spoilage. The write-down to net realizable value is recorded in the period in which impairment is identified and is recorded as a component of Cost of goods sold in the consolidated statement of earnings. Property and Equipment Property and equipment are stated at cost. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the following useful lives: Computer equipment 3 years - 5 years Software 3 years - 5 years Lab equipment and furniture 5 years - 10 years Leasehold improvements Shorter of lease term or useful life Intangible Assets Intangible assets consist of definite-lived intangible assets: acquired developed technology and product rights, patent defense costs, and an indefinite-lived intangible asset: acquired IPR&D. Patent defense costs are legal fees that have been incurred in connection with legal proceedings related to the defense of patents. Patent defense costs are charged to expense in the event of an unsuccessful litigation outcome, or if they are deemed to not provide an increase in the value of the patent. Definite-lived intangible assets are carried at cost less accumulated amortization, with amortization calculated on a straight line basis over the estimated useful lives of the assets. The Company evaluates the estimated remaining useful life of its intangible assets annually, or when events or changes in circumstances warrant a revision to the remaining periods of amortization. Acquired IPR&D in a business combination is considered an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Upon successful completion of the project, the Company will determine the then-useful life of the intangible asset. This is generally determined as the period over which the substantial 100 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) majority of the cash flows are expected to be generated. The capitalized amount is then amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. 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. Impairment of Long-Lived 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. If indications of impairment exist, projected future undiscounted cash flows associated with the asset would be compared to the carrying value of the asset to determine whether the asset's value is recoverable. 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. Impairment of Indefinite-Lived Intangible Assets For indefinite-lived intangible assets, such as the acquired IPR&D asset, the Company evaluates impairment annually or more frequently if impairment indicators exist. The annual evaluation is generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount. The Company considers various factors including but not limited to, significant or adverse changes in the legal and regulatory environment, adverse clinical trial results, significant trial delays, inability to obtain governmental approval, inability to commercialize a product candidate, the introduction or advancement of competitive products, and product candidates, or other events that indicate it is more likely than not that fair value is less than its carrying value. If the Company is unable to conclude whether the indefinite-lived intangible asset is not impaired after considering the totality of events and circumstances during its qualitative assessment, the Company performs a quantitative assessment by estimating the fair value of the indefinite-lived intangible asset and comparing the fair value to the carrying amount. Evaluating for impairment requires judgment, including evaluating current economic and competitive circumstances, estimating future cash flows, future growth rates, future profitability, and the expected life over which projected cash flows would occur. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, the Company writes down the indefinite-lived intangible asset to its estimated fair value, and an impairment loss equal to the difference between the assets fair value and carrying value is recognized in the consolidated statement of earnings in the period at which such determination is made. Goodwill and Goodwill Impairment Assessment 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. The Company evaluates goodwill for possible impairment at least annually (during the fourth quarter of each fiscal year), or more often, if and when events and circumstances indicate that goodwill may be impaired. The annual evaluation is generally based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount. This includes but is not limited to, significant adverse changes in the business climate, market conditions, or other events that indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the Company is unable to conclude whether the goodwill is not impaired after considering the totality of events and circumstances during its qualitative assessment, the Company performs a quantitative assessment by estimating the fair value of the reporting unit and comparing the fair value to the carrying amount. Evaluating for impairment requires judgment, including identifying reporting units and estimating future cash flows. The Company estimates the fair values of its reporting unit using discounted cash flow models or other valuation models, such as comparative transactions or market multiples. If the carrying amount of the reporting unit exceeds its fair value, the Company writes down the goodwill to the estimated fair value, and an impairment loss equal to the difference is recognized in the consolidated statement of earnings in the period at which such determination is made. 101 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) 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 satisfies 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 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. No contract assets or liabilities were recorded as of December 31, 2024, or 2023. Revenue from Product Sales The Company's customers are primarily pharmaceutical wholesalers, specialty pharmacies, and pharmaceutical distributors. Customers purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power. The Company recognizes gross product sales 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. 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. Product sales are recorded net of various forms of variable consideration, including: provision for estimated rebates; provision for estimated future product returns; and an estimated provision for discounts. These are collectively considered "sales deductions." Sales deductions are based on estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of sale using the most likely value method. The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal will not occur. Variability in the net transaction price for the Company's products arises primarily from the aforementioned sales deductions. Significant judgment is required in estimating certain sales deductions. In making these estimates, the Company considers: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags for claims; inventory levels in the wholesale, specialty pharmacy, and retail distribution channel; and product life cycle. The Company adjusts its estimates of revenue either when the most likely amount of consideration it expects to receive changes, or when the consideration becomes fixed. If actual results in the future vary from our estimates, the Company adjusts its estimates in the period identified. These adjustments could materially affect net product sales and earnings in the period in which the adjustment(s) is recorded. Sales Deductions The Company records product sales net of rebates, returns and discounts. • Rebates - Rebates are discounts which the Company pays under either public sector or private sector health care programs. Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by the Company with managed care providers. Both types of rebates vary over time. Rebates are owed when our customer dispenses our product to a patient; i.e., filling a prescription. For each of its products, the Company bases its estimates of expected rebate claims on multiple factors, including: historical levels of deductions; contractual terms with managed care providers; actual and anticipated changes in product price; prospective changes in managed care fee for service contracts; prospective changes in co-payment assistance programs; and anticipated changes in program utilization rates; i.e., patient participation rates under each specific program. The Company records an estimated liability for rebates at the time the customer takes title to the product (i.e., at the time of sale to wholesalers/distributors). This liability is recorded as a reduction to gross product sales, and an increase in Accrued product returns and rebates. The liability is recorded as a component of current liabilities on the consolidated balance sheets. 102 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) • Returns - Sales of the Company's products are not subject to a general right of return. A product that has been used to fill patient prescriptions is no longer subject to any right of return. However, the Company will accept a return of product that is damaged or defective when shipped from its third party fulfillment centers. The Company will also accept a return of expired product six months prior to and up to twelve months subsequent to the product's expiry date for certain products. Expired or defective returned product cannot be re-sold and is therefore destroyed. The Company records an estimated liability for product returns at the time the customer takes title to the product (i.e., at time of sale). The liability is reflected as a reduction to gross product sales, and an increase in Accrued product returns and rebates. 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. Because the Company's products have a shelf life up to forty-eight months from the date of manufacture, and because the Company accepts return of product up to twelve 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. • Sales discounts - Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts, for distributing our products. Distributor and wholesaler allowances and service fees arise from contractual agreements and are estimated as a percentage of the price at which the Company sells product to them. In addition, distributors and wholesalers are offered a prompt pay discount for payment within a specified period. Prompt pay discounts are estimated as a percentage of the price at which the Company sells product. The Company accounts for these discounts at the time of sale as a reduction to gross product sales and accounts receivable, net. Royalty, Licensing, and Other 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. Historically, royalty revenues also included noncash royalty revenues for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics) and was based on estimated product sales of Orenitram by United Therapeutics. 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). There are no guaranteed amounts owed to the Company related to any of these royalty revenue agreements. License and Collaboration Arrangements At contract inception, the Company analyzes its collaboration arrangements to assess whether they are within the scope of Accounting Standards Codification 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. 103 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) 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 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. Cost of Goods Sold The cost of goods sold consists primarily of materials; third-party manufacturing costs; freight and distribution costs; direct labor; cost of royalties; cost to write down inventory to net realizable value and manufacturing overhead costs, including quality control and assurance. Research and Development Expenses Research and development expenditures are expensed as incurred. These expenses include: employee salaries, benefits, and share-based compensation; cost of contract research and development services provided by third parties; costs for preclinical and clinical studies; cost of acquiring or manufacturing clinical trial materials; regulatory costs; research facilities costs; depreciation expense and allocated occupancy expenses; and license fees and milestone payments related to in-licensed products and technologies. 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 104 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. 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. As appropriate, the Company accrues additional expense for services that have been delivered or defers nonrefundable advance payments until the related services are performed. If the actual timing of the performance of services or the level of effort varies from our estimate, the Company adjusts its accrued expenses, or its deferred advance payments, accordingly. If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such determination is made. Share-Based Compensation Stock Options The Company recognizes share-based compensation expense over the service period, using the straight-line method. Employee share-based compensation for stock options is determined using the Black-Scholes option-pricing model to compute the fair value of option grants as of their grant date. Forfeitures are accounted for as incurred. The Company uses the following assumptions for estimating the fair value of option grants: • Fair Value of Common Stock —The fair value of the common stock underlying the option grants is determined based on observable market prices of the Company's common stock. • Expected Volatility —Volatility is a measure of the amount by which the Company's share price has historically fluctuated or is expected to fluctuate on a daily basis and is expected to fluctuate (i.e., expected volatility) in the future. • Expected Dividend Yield —The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. The expected dividend yield is therefore zero . • Expected Term —This is the period of time during which options are expected to remain unexercised. The Company determines the expected term based on the historical exercise behavior of the stock option plan participants. Options have a maximum contractual term of ten years . • Risk-Free Interest Rate —This is the observed U.S. Treasury Note rate as of the week each option grant is issued, with a term that most closely resembles the expected term of the option. Restricted Stock Units (RSUs) Share-based compensation expense is recorded based on amortizing the fair market value of the RSU as of the date of the grant over the implied service period. RSUs granted to employees generally vest over four equivalent annual installments, starting on the first anniversary of the grant. RSUs granted to directors generally vest over a one year term. Forfeitures are accounted for as incurred. Performance Stock Units (PSUs) Performance-Based Awards Share-based compensation expense for performance-based awards is recognized based on amortizing the fair market value of the award as of the grant date over the periods during which the achievement of the performance target is probable . Performance-based awards require certain performance targets to be achieved in order for the award to vest . Vesting occurs on the date of achievement of the performance target. Forfeitures are accounted for as incurred. 105 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) Market-Based Awards Share-based compensation expense for market-based awards is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition has been satisfied. Market-based PSU awards vest upon the achievement of the performance target. Forfeitures are accounted for as incurred. The Company estimates the fair value of these awards as of the grant date using a Monte Carlo simulation that incorporates option-pricing inputs. This simulation covers the period from the grant date through the end of the derived requisite service period. Volatility as of the grant date is estimated based on historical daily volatility of the Company's common stock over a period of time, which is equivalent to the expected term of the award. The risk-free interest rate is based on the U.S. Treasury Note rate, as of the week, the award is issued, with a duration that most closely resembles the expected term of the award. Leases The Company determines if an arrangement is a lease considering whether there is an identified asset, and the contract conveys the right to control its use. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Right-of-use (ROU) assets and lease liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The Company calculates the present value of future payments by using an estimated incremental borrowing rate, which approximates the rate at which the Company would borrow, on a secured basis and over a similar term. This rate is estimated based on information available at the commencement date of the lease and may differ for individual leases or portfolios of leased assets. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and lease liabilities. Lease expense for operating leases is recognized on a straight-line basis over the expected lease term and recognized as an operating cost. Some of the Company's leases include options to terminate prior to the end of the lease term or to extend the lease for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company's lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes, or other costs. Variable lease costs are expensed as incurred on the consolidated statements of earnings. The Company's lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. Advertising Expense Advertising expense includes the cost of promotional materials and activities, such as print materials and digital marketing, marketing programs and speaker programs. The cost of the Company's advertising efforts are expensed as incurred. The Company incurred approximately $ 88.5 million, $ 99.7 million, and $ 131.7 million in advertising expense for the years ended December 31, 2024, 2023, and 2022, respectively. These expenses are recorded as a component of Selling, general and administrative expenses in the consolidated statements of earnings. Insurance Recoveries The Company has several policies with third-party insurers that provide for the recovery of certain costs incurred by the Company. The Company records our rights to insurance recoveries as a receivable when the respective costs are reimbursable under applicable insurance policies, it is probable that such costs will be reimbursed, and reimbursement can be reasonably estimated. As such, the Company estimates the percentage of costs that will be reimbursed by the insurance provider to determine the amount to record for the insurance recovery receivable. The Company recorded approximately $ 14.2 million of insurance recoveries during the year ended December 31, 2024. There were no insurance recoveries during the years ended December 31, 2023 and 2022, respectively. To date, there have not been any material adjustments to our prior estimates of the insurance recovery receivable. Insurance recoveries recognized in fiscal year 2024 were recorded as a reduction to Selling, general and administrative expenses . 106 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) Interest Expense Interest expense included 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 which were due and paid in 2023 (see Note 15, Interest Expense ). The Company amortized deferred financing costs and debt discounts 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. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and deferred tax liabilities are determined based on differences between their financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. When appropriate, valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertain tax positions in its consolidated financial statements when it is more-likely-than-not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently estimated as the largest amount of the tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities, assuming full knowledge of the position and relevant facts. 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 On January 1, 2024, the Company adopted Accounting Standards Update (ASU) 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). The new standard 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. See Note 13, Segment Reporting. Accounting Pronouncements Not Yet Adopted 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. ASU 2024-03, Disaggregation of Income Statement Expenses (Topic 220) - The new standard, issued in November 2024, requires additional disclosure in tabular format, about the nature of specific types of expense captions presented on the face of the income statement as well as disclosures about selling expenses. The new standard does not change the requirements for the presentation of expenses on the face of the income statement. The standard is effective with annual periods beginning after December 15, 2026. Early adoption and retrospective application are permitted. The Company plans to adopt the guidance for the fiscal year ending December 31, 2026. We expect ASU 2024-03 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. 107 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) SEC Final Climate Rule In March 2024, the U.S. Securities and Exchange Commission (SEC) adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (Final Rule). This rule will require registrants to disclose certain climate-related information in registration statements and annual reports with staggered compliance dates for large accelerated filers for the various aspects of the Final Rule. On April 4, 2024, the SEC issued an order staying the Final Rule. The SEC’s administrative stay is expected to remain in place until the completion of litigation filed in various federal courts challenging, among other things, the agency’s authority to adopt the Final Rule. The Company is evaluating the final rule to determine its impact on the Company's disclosures. 3. Disaggregated Revenues The following table provides information regarding total revenues (dollars in thousands): Year Ended December 31, 2024 2023 2022 Net product sales Qelbree $ 241,273 $ 140,192 $ 61,322 GOCOVRI 130,824 119,637 104,421 Oxtellar XR 99,464 113,404 115,345 APOKYN 73,926 75,083 75,305 Trokendi XR 63,201 94,336 261,221 Other (1) 29,008 31,281 31,818 Total net product sales 637,696 573,933 649,432 Royalty, licensing and other revenues 24,121 33,588 17,806 Total revenues $ 661,817 $ 607,521 $ 667,238 ______________________________ (1) Includes net product sales of MYOBLOC, XADAGO and Osmolex ER. In December 2023, the Company submitted to the FDA a notification of discontinuance to withdraw Osmolex ER from distribution. Distribution of Osmolex ER ceased on April 1, 2024. The Company recognized noncash royalty revenues of $ 4.0 million, and $ 9.8 million for the years ended December 31, 2023 and 2022, respectively. The Company no longer recognizes noncash royalty revenue as ownership of the royalty rights reverted back to the Company during the second quarter of 2023 (see Note 2, Summary of Significant Accounting Policies). Adjustments related to prior year sales in 2024 was less than 3 % of net product sales. The majority of the adjustment is attributable to Qelbree, reflecting favorable actual returns experienced in 2024. As a result, the Company changed its estimated provision for product returns based on the most recent experience. In 2023 and 2022, adjustments related to prior year sales have amounted to less than 1 % of net product sales for each of the respective periods. 108 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) The following table shows the percentage of net product sales to total net product sales: Percentage of Net Product Sales Year Ended December 31, 2024 2023 2022 Qelbree 38 % 24 % 9 % GOCOVRI 20 % 21 % 16 % Oxtellar XR 16 % 20 % 18 % APOKYN 12 % 13 % 12 % Trokendi XR 10 % 16 % 40 % Other (1) 4 % 6 % 5 % Total 100 % 100 % 100 % ______________________________ (1) Includes net product sales of MYOBLOC, XADAGO and Osmolex ER. 4. Investments Marketable Securities Unrestricted available-for-sale marketable securities held by the Company are as follows (dollars in thousands): December 31, 2024 December 31, 2023 Corporate, U.S. government agency and municipal debt securities Amortized cost $ 384,481 $ 197,153 Gross unrealized gains 89 5 Gross unrealized losses ( 289 ) ( 721 ) Total fair value $ 384,281 $ 196,437 As of December 31, 2024, all of our unrestricted available-for-sale marketable securities have contractual maturities of one year or less. There was no impairment on any available-for-sale marketable securities as of December 31, 2024 and December 31, 2023. Investment in Navitor In April 2020, the Company entered into a development agreement (the Development Agreement) with Navitor Pharmaceuticals, Inc. (Navitor Inc.). The Company can terminate the Development Agreement upon 30 days' notice. Under the terms of the Development Agreement, the Company and Navitor Inc. will jointly conduct a Phase 2 clinical program for NV-5138 (SPN-820) for treatment-resistant depression. The Company will bear all of the Phase 1 and Phase 2 development costs incurred by either party, up to a maximum of $ 50 million, which amount could be increased under the terms of the Development Agreement upon Navitor Inc.’s request and the Company’s consent. In 2020, the Company paid a one-time, nonrefundable, and non-creditable fee of $ 10 million for the option to acquire or license NV-5138 (SPN-820) and made a $ 15 million equity investment representing approximately 13 % ownership in Navitor Inc. There are also certain additional payments which could be incurred by the Company that are contingent upon Navitor Inc. achieving defined milestones. These payments include an additional license or acquisition fee depending on whether the Company ultimately licenses or acquires NV-5138 (SPN-820), and subsequent clinical, regulatory and sales milestone payments. The total payments, exclusive of the royalty payments on net sales of NV-5138 (SPN-820) and development costs paid by the Company under the agreement, have the potential to reach $ 410 million to $ 475 million, which includes an aggregate upfront payment of $ 25 million paid in 2020 for the option to acquire or license NV-5138 (SPN-820) and the equity investment, an additional license or acquisition fee depending on whether the 109 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Financial Statements (Continued) 4. Investments (Continued) Company ultimately licenses or acquires NV-5138 (SPN-820), and subsequent clinical, regulatory and sales based milestone payments. The Company also will have the first right of refusal for any compound with a similar mechanism of action to NV-5138 (SPN-820) on mTORC1 in the central nervous system. In addition to entering into the Development Agreement in April 2020, as mentioned above , the Company acquired Series D Preferred Shares of Navitor Inc. (the Navitor Shares), an equity investment representing an approximately 13 % ownership position in Navitor Inc. As part of a legal restructuring in March 2021, the Company's Navitor Inc. Shares were exchanged for membership interests in Navitor Pharmaceutics LLC (Navitor 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 LLC’s economic performance. In the second quarter of 2024, the Company consented to payment of additional Phase 2 development costs for NV-5138 (SPN-820) as they are incurred, but reserves the right to terminate payment of future development costs at its discretion. The maximum exposure to losses related to Navitor LLC includes the approximately $ 50.0 million for Phase 1 and Phase 2 development of NV-5138 (SPN-820) already paid by the Company, plus the cost of other development and formulation activities provided by the Company and additional Phase 2 development costs the Company agreed to pay pursuant to the Development Agreement. 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. The Company records its share of the results of Navitor LLC, a private company, on a quarter lag as the financial information of Navitor LLC is not available on a sufficiently timely basis for the Company to apply the equity method of accounting. In December 2021, Navitor LLC sold one of its subsidiaries and distributed cash to its members in accordance with each member's share of the proceeds from the sale. The Company received $ 12.9 million in December 2021 from Navitor LLC in connection with this sale. As the Company's policy is to record its share of the results in its equity method investment on a quarter lag as previously indicated, the Company recorded the cash amount received in Other current liabilities in the consolidated balance sheets as of December 31, 2021. In the first quarter of 2022, the Company determined its estimated share of Navitor LLC's year-end 2021 earnings and recorded a gain of $ 12.9 million in Interest and other income, net in the consolidated statement of earnings. 5. Fair Value of Financial Instruments The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between unrelated market participants. The Company reports the fair value of assets and liabilities using a three level measurement hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy consists of the following three levels: • Level 1—Valuations based on unadjusted quoted prices in active markets that are accessible at measurement date for identical assets. • Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and model-based valuations in which all significant inputs are observable in the market, either directly or indirectly (e.g., interest rates; yield curves). • Level 3—Valuations using significant inputs that are unobservable in the market and inputs that reflect the Company’s own assumptions. These are based on the best information available, including the Company’s own data. The fair value of the restricted marketable securities which are classified as Level 2 financial assets are recorded in Other assets on the consolidated balance sheets. There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. 110 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 5. Fair Value of Financial Instruments (Continued) 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 Total Fair Value at December 31, 2024 Level 1 Level 2 Level 3 Assets: Cash and cash equivalents Cash $ 37,830 $ 37,830 $ — $ — Money market funds 31,501 31,501 — — Marketable securities Corporate debt securities 355,201 — 355,201 — U.S government agency securities 29,080 — 29,080 — Other noncurrent assets Marketable securities - restricted (SERP) 635 21 614 — Total assets at fair value $ 454,247 $ 69,352 $ 384,895 $ — Liabilities: Contingent consideration $ 47,340 $ — $ — $ 47,340 Total liabilities at fair value $ 47,340 $ — $ — $ 47,340 111 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 5. Fair Value of Financial Instruments (Continued) Fair Value Measurements Total Fair Value at December 31, 2023 Level 1 Level 2 Level 3 Assets: Cash and cash equivalents Cash $ 35,957 $ 35,957 $ — $ — Money market funds 39,097 39,097 — — Marketable securities Corporate debt securities 78,007 — 78,007 — Municipal debt securities 10,916 — 10,916 — U.S. government agency debt securities 90,897 — 90,897 — Long-term marketable securities Corporate debt securities 16,617 — 16,617 — Other noncurrent assets Marketable securities - restricted (SERP) 568 16 552 — Total assets at fair value $ 272,059 $ 75,070 $ 196,989 $ — Liabilities: Contingent consideration $ 53,450 $ — $ — $ 53,450 Total liabilities at fair value $ 53,450 $ — $ — $ 53,450 Other Financial Instruments The carrying amounts of other financial instruments, including accounts receivable, accounts payable, and accrued expenses, approximate fair value due to their short-term maturities. 6. Contingent Consideration The following table provides the current and long-term portions related to the contingent consideration for the USWM Acquisition and Adamas Acquisition (as defined below) (dollars in thousands): December 31, 2024 December 31, 2023 Reported under the following captions in the consolidated balance sheets: Contingent consideration, current portion $ 47,340 $ 52,070 Contingent consideration, long-term — 1,380 Total $ 47,340 $ 53,450 The Company's contingent consideration liabilities are related to the USWM Acquisition in 2020 and the Adamas Acquisition in 2021. The contingent consideration liabilities are measured at fair value on a recurring basis using either a Monte Carlo simulation or the income approach. The Company classifies its contingent consideration liabilities as Level 3 fair value measurements based on the significant unobservable inputs used to estimate fair value. These reflect the inputs and assumptions the Company believes would be made by market participants. Changes in any of those inputs together or in isolation may result in significantly lower or higher fair value measurement. The change in fair value is reported on the consolidated statement of earnings in Contingent consideration gain . 112 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 6. Contingent Consideration (Continued) USWM Contingent Consideration 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, 2024, the remaining potential contingent consideration payments are up to $ 55 million in regulatory and development milestones 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. In February 2025, the FDA approved ONAPGO (apomorphine hydrochloride) injection, formerly known as SPN-830, as the first and only subcutaneous apomorphine infusion device for the treatment of motor fluctuations in adults with advanced PD. ONAPGO will be launched in the second quarter of 2025. As such, the Company paid the $ 25 million milestone related to the FDA's approval of the SPN-830 NDA in February 2025, and expects the remaining $ 30 million milestones to be due and paid in 2025. 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, and the discount rate. Adamas Contingent Consideration 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 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, as further defined in the 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 twelve-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 twelve-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. As of December 31, 2024, the 2024 Milestone was not met and the possible outcomes for the remaining 2025 Milestone contingent consideration is $ 0 or $ 25.0 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. 113 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 6. 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): USWM Acquisition Adamas Acquisition Total Balance, December 31, 2021 $ 70,170 $ 10,307 $ 80,477 Milestone payments ( 25,000 ) — ( 25,000 ) Change in fair value recognized in earnings 1,100 ( 1,610 ) ( 510 ) Balance, December 31, 2022 46,270 8,697 54,967 Change in fair value recognized in earnings 130 ( 1,647 ) ( 1,517 ) Balance, December 31, 2023 46,400 7,050 53,450 Change in fair value recognized in earnings 940 ( 7,050 ) ( 6,110 ) Balance, December 31, 2024 $ 47,340 $ — $ 47,340 The Company recorded the following changes in fair value of the contingent consideration liability for the USWM milestones: • For the year ended December 31, 2024, the Company recorded a $ 0.9 million expense which was primarily driven by passage of time, as well as the change in timing of milestone achievement and estimated discount rate. • For the year ended December 31, 2023, the Company recorded a $ 0.1 million expense which was primarily driven by the passage of time and, as well as the change in timing of milestone achievement and estimated discount rate. • 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. The Company paid $ 25 million of the USWM contingent consideration in the first quarter of 2022 of which $ 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, 2024, the Company recorded a $ 7.1 million gain which was primarily driven by the non achievement of Milestone 2024. • For the year ended December 31, 2023, the Company recorded a $ 1.6 million gain primarily driven by the passage of time. • For the year ended December 31, 2022, the Company recorded $ 1.6 million gain which was primarily due to changes in market data and revenue projections. 7. Goodwill and Intangible Assets, Net Goodwill The following table sets forth the gross carrying amounts of goodwill (dollars in thousands): 114 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 7. Goodwill and Intangible Assets, Net (Continued) December 31, 2024 December 31, 2023 Goodwill $ 117,019 $ 117,019 There were no goodwill impairment charges recognized in 2024 or 2023. Intangible Assets, Net The following table sets forth the gross carrying amounts and related accumulated amortization of intangibles assets (dollars in thousands): December 31, 2024 December 31, 2023 Remaining Weighted Average Life (Years) Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Carrying Amount, Gross Accumulated Amortization Carrying Amount, Net Acquired in-process research and development $ 124,000 $ — $ 124,000 $ 124,000 $ — $ 124,000 Intangible assets subject to amortization: Acquired developed technology and product rights 5.92 661,311 ( 263,399 ) 397,912 661,311 ( 190,395 ) 470,916 Capitalized patent defense costs 0.00 43,820 ( 43,820 ) — 43,820 ( 38,847 ) 4,973 Total intangible assets 5.92 $ 829,131 $ ( 307,219 ) $ 521,912 $ 829,131 $ ( 229,242 ) $ 599,889 Amortization expense for intangible assets was $ 78.0 million, $ 82.4 million, and $ 82.6 million for the years ended December 31, 2024, 2023, and 2022, respectively. Patent defense costs are deferred legal fees incurred in conjunction with defending patents for Oxtellar XR and Trokendi XR. U.S. patents covering Trokendi XR and Oxtellar XR will expire no earlier than 2027. The Company entered into settlement agreements that allowed third parties to enter the Trokendi XR market on January 1, 2023. The Company entered into settlement and license agreements that allowed a third party to enter the Oxtellar XR market in September 2024. The Company entered into settlement and license agreements that allows third parties to enter the XADAGO market in December 2027, or sooner under certain conditions. In the fourth quarter of 2023, the Company recognized impairment charges of $ 20.2 million related to 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. The following table sets forth the anticipated annual amortization expense for definite-lived intangible assets. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and 115 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 7. Goodwill and Intangible Assets, Net (Continued) asset impairments, among other factors (dollars in thousands): Year: Estimated Amortization Expense 2025 $ 70,876 2026 70,876 2027 70,745 2028 69,301 2029 69,301 Thereafter 46,813 8 . Debt The 0.625 % Convertible Senior Notes Due 2023 (2023 Notes), which were issued in March 2018 with a total principal amount of $ 402.5 million and 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 matured on April 1, 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. No 2023 Notes were converted. 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. 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 would have been required to make in excess of the principal amount of converted 2023 Notes, as the case may be. The Convertible Note Hedges expired on March 30, 2023. 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. The Company issued a total of 6,783,939 warrants. The warrants entitle the holder to one share per warrant. 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 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 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. 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. 116 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 8. Debt (Continued) 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, 2024, there was no outstanding debt under the Credit Line. 9. Share-Based Payments Common Stock The holders of the Company's common stock are entitled to one vote for each share of common stock held. Equity Incentive Plan The Company has adopted the Supernus Pharmaceuticals, Inc. 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 administered by the Company's Board of Directors and the Company's Compensation Committee of the Board. The 2021 Plan provides for the grant of stock options and certain other equity awards, including: stock appreciation rights (SARs); restricted and unrestricted stock; stock units; performance awards; cash awards; and other awards that are convertible into or otherwise based on the Company's common stock, to the Company's key employees, directors, consultants, and advisors. On June 14, 2024, the Company's shareholders approved, and the Company has adopted, the Amended and Restated 2021 Equity Incentive Plan (the Amended 2021 Plan) to increase the number of shares of the Company's common stock available for issuance under the 2021 Plan by 4,000,000 shares. The maximum number of shares that can be issued under the Amended 2021 Plan is 15,012,893 shares of the Company's common stock which includes the (i) 4,000,000 shares added pursuant to the adoption of the Amended 2021 Plan, (ii) the number of shares that remain available to be issued or transferred pursuant to awards under the 2021 Equity Incentive Plan as of the adoption date of the Amended 2021 Plan, and (iii) the number of shares that have already been issued or transferred pursuant to awards under the 2021 Plan prior to the approval by the Company’s stockholders of the Amended 2021 Plan. Option awards are granted with an exercise price equal to the closing price of the Company's common stock as of the grant date. Options and awards granted have a ten year contractual term. Options and awards granted to employees, consultants and advisors generally vest in four equivalent annual installments, starting on the first anniversary of the grant's date. Options and awards granted to the directors generally vest over a one year term. Employee Stock Purchase Plan The Company has adopted the Supernus Pharmaceuticals, Inc. 2012 Employee Stock Purchase Plan (as amended to date, the ESPP). The ESPP allows eligible employees the opportunity to acquire shares of the Company's common stock at periodic intervals through accumulated payroll deductions. These deductions are applied at the semi-annual purchase dates of June 30 and December 31 to purchase shares of common stock from the Company at a discount. Eligible employees may purchase shares at the lower of 85 % of the fair market value at either the first day of the purchase period or the fair market value at the end of the purchase period. The ESPP provides for the issuance of up to 1,700,000 shares of the Company's common stock. The Company records compensation expense related to its ESPP. Share-based compensation expense 117 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 9. Share-Based Payments (Continued) Share-based compensation expense is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Research and development $ 5,148 $ 4,743 $ 2,922 Selling, general and administrative 22,607 22,016 14,646 Total $ 27,755 $ 26,759 $ 17,568 Stock Option The following table summarizes stock option activities: Number of Options Weighted Average Exercise Price (per share) Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2022 5,797,569 $ 26.99 6.1 $ 53,650 Granted 1,204,643 $ 37.78 Exercised ( 258,154 ) $ 16.70 Forfeited ( 160,236 ) $ 33.48 Outstanding, December 31, 2023 6,583,822 $ 29.20 5.9 $ 23,668 Granted 1,206,812 $ 28.29 Exercised ( 781,441 ) $ 16.12 Forfeited ( 290,120 ) $ 31.96 Outstanding, December 31, 2024 6,719,073 $ 30.44 5.9 $ 43,198 As of December 31, 2024 Vested and expected to vest 6,719,073 $ 30.44 5.9 $ 43,198 Exercisable 4,137,283 $ 29.54 4.4 $ 30,396 The weighted average grant date fair value of options granted for the years ended December 31, 2024, 2023, and 2022 were $ 16.57 , $ 21.30 , and $ 18.10 per share, respectively. The aggregate intrinsic value of shares exercised for the years ended December 31, 2024, 2023, and 2022 were $ 14.4 million, $ 5.1 million, and $ 16.3 million, respectively. Proceeds from the options exercised for the years ended December 31, 2024, 2023, and 2022 were $ 6.8 million, $ 4.3 million, and $ 10.4 million, respectively. The total fair value of the underlying common stock related to options that vested during the years ended December 31, 2024, 2023, and 2022 were approximately $ 16.7 million, $ 14.8 million, and $ 13.9 million, respectively. Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 9. Share-Based Payments (Continued) The fair value of each option award is estimated on the date of the grant, using the Black-Scholes option-pricing model and the assumptions in the following table: Year Ended December 31, 2024 2023 2022 Fair value of common stock $ 27.94 - $ 36.16 $ 27.66 - $ 38.60 $ 28.93 - $ 35.23 Expected volatility 55.56 % - 56.55 % 56.87 % - 58.22 % 58.71 % - 60.15 % Expected dividend yield 0 % 0 % 0 % Expected term 5.77 years - 7.91 years 5.60 years - 7.03 years 5.58 years - 6.72 years Risk-free interest rate 3.82 % - 4.57 % 3.27 % - 4.33 % 1.87 % - 3.70 % As of December 31, 2024, the total unrecognized compensation expense was approximately $ 37.4 million. The Company expects to prospectively recognize these expenses over a weighted-average period of 2.5 years. Restricted Stock Units The following table summarizes restricted stock unit (RSU) activities: Number of RSUs Weighted- Average Grant Date Fair Value per Share Nonvested, December 31, 2022 131,960 $ 32.17 Granted 227,980 $ 38.60 Vested ( 47,049 ) $ 32.18 Forfeited ( 12,750 ) $ 35.68 Nonvested, December 31, 2023 300,141 $ 36.90 Granted 198,414 $ 28.06 Vested ( 100,891 ) $ 36.51 Forfeited ( 19,499 ) $ 34.71 Nonvested, December 31, 2024 378,165 $ 32.48 The total aggregate grant date fair value of RSUs that vested during the years ended December 31, 2024, 2023, and 2022 were $ 3.7 million, $ 1.5 million, and $ 0.6 million, respectively. As of December 31, 2024, the total unrecognized compensation expense was $ 8.4 million. The Company expects to prospectively recognize these expenses over a weighted-average period of 2.4 years. Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 9. Share-Based Payments (Continued) Performance Stock Units The following table summarizes performance share unit (PSU) activities: Performance-Based PSUs Market-Based Units Total PSUs Number of PSUs Weighted- Average Grant Date Fair Value per Share Number of PSUs Weighted- Average Grant Date Fair Value per Share Number of PSUs Weighted- Average Grant Date Fair Value per Share Nonvested, December 31, 2022 181,750 $ 29.07 20,000 $ 28.63 201,750 $ 29.03 Granted 205,000 $ 34.00 — $ — 205,000 $ 34.00 Vested ( 132,120 ) $ 30.72 — $ — ( 132,120 ) $ 30.72 Forfeited ( 3,000 ) $ 28.93 — $ — ( 3,000 ) $ 28.93 Nonvested, December 31, 2023 251,630 $ 32.22 20,000 $ 28.63 271,630 $ 31.96 Granted 252,700 $ 26.91 — $ — 252,700 $ 26.91 Vested ( 121,595 ) $ 31.68 — $ — ( 121,595 ) $ 31.68 Forfeited ( 58,050 ) $ 29.37 — $ — ( 58,050 ) $ 29.37 Nonvested, December 31, 2024 324,685 $ 28.80 20,000 $ 28.63 344,685 $ 28.79 The total aggregate grant date fair value of PSUs that vested during the years ended December 31, 2024, 2023, and 2022 were $ 3.9 million, $ 4.1 million, and $ 1.0 million, respectively. Performance-Based Awards The performance-based PSU awards require certain performance targets to be achieved in order to vest. Vesting is also subject to continued service requirements through the date the achievement of the performance target is certified. As of December 31, 2024, the total unrecognized compensation expense was $ 6.1 million. The Company expects to prospectively recognize these expenses over a weighted-average period of 0.8 years. Market-Based Awards The market-based PSU awards are subject to achievement of market-based performance targets in order to vest. The Company used a Monte-Carlo Simulation to determine the fair value and expected term of the awards as of grant date. There was no unrecognized compensation expense as of December 31, 2024. The expected term of the awards granted in 2021 was 0.9 years. 10. Earnings per Share 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 options, stock awards, and employee stock purchase plan (ESPP) awards using the treasury-stock method, and the 2023 Notes using the if-converted method. Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 10. Earnings per Share (Continued) The following table sets forth the computation of basic and diluted EPS for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands, except share and per share amounts): Year Ended December 31, 2024 2023 2022 Numerator: Net earnings $ 73,865 $ 1,316 $ 60,711 After-tax interest expense for 2023 Notes — — 3,556 Numerator for dilutive earnings per share $ 73,865 $ 1,316 $ 64,267 Denominator: Weighted average shares outstanding, basic 55,100,063 54,536,281 53,665,143 Effect of dilutive securities: Stock options and stock awards 858,474 970,547 1,230,721 Convertible notes — — 6,783,936 Weighted average shares outstanding, diluted 55,958,537 55,506,828 61,679,800 Earnings per share, basic $ 1.34 $ 0.02 $ 1.13 Earnings per share, diluted $ 1.32 $ 0.02 $ 1.04 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 8, Debt . The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that would occur if the price of the Company's common stock was between the conversion price of $ 59.33 per share and the strike price of the warrants of $ 80.91 per share. The 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 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: Year Ended December 31, 2024 2023 2022 Stock options and stock awards 601,684 543,140 373,728 2023 Notes — 1,691,337 — Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 11. Income Tax Expense The summary of the income tax expense for the years ended December 31, 2024, 2023, and 2022 is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Current Federal $ 31,217 $ 20,772 $ 17,515 State 12,925 6,395 8,846 Deferred Federal ( 18,920 ) ( 21,351 ) ( 6,802 ) State ( 1,217 ) ( 4,363 ) ( 19,527 ) Total income tax expense $ 24,005 $ 1,453 $ 32 A reconciliation of income tax expense at the U.S. federal statutory income tax rate to annual income tax expense at the Company's effective tax rate is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Income tax expense computed at U.S. federal statutory income tax rate $ 20,553 $ 581 $ 12,756 State income taxes 5,114 ( 330 ) ( 3,198 ) Permanent items 131 3,028 399 Research and development credits ( 8,628 ) ( 1,117 ) 237 Loss on investment ( 2,147 ) — — Uncertain income tax position 2,620 ( 2,529 ) ( 1,992 ) Change in valuation allowance 5,859 1,267 ( 8,626 ) Other 503 553 456 Income tax expense $ 24,005 $ 1,453 $ 32 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Financial Statements (Continued) 11. Income Taxes (Continued) The significant components of the Company's deferred income tax assets (liabilities) are as follows (dollars in thousands): As of December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 93,109 $ 101,325 Accrued product returns and rebates 20,627 22,150 Accrued compensation and stock based compensation 15,912 15,613 Operating lease liability 8,608 10,374 Capitalized research and development 47,103 29,953 Other 14,100 12,755 Total deferred tax assets 199,459 192,170 Less: valuation allowance ( 66,725 ) ( 60,866 ) Total deferred tax asset, net of valuation allowance 132,734 131,304 Deferred tax liabilities: Intangibles ( 128,188 ) ( 144,327 ) Operating lease assets ( 6,159 ) ( 7,251 ) Other ( 3,348 ) ( 4,689 ) Total deferred tax liabilities ( 137,695 ) ( 156,267 ) Net deferred tax liabilities $ ( 4,961 ) $ ( 24,963 ) In assessing the realizability of deferred income tax assets, the Company considers whether it is more-likely-than-not that some or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (NOL) is available. The Company considers projected future taxable income, the scheduled reversal of deferred income tax liabilities, and available tax planning strategies that can be implemented by the Company in making this assessment. 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. A reconciliation of the deferred tax asset valuation allowance is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Beginning balance $ 60,866 $ 59,598 $ 70,529 Acquisition Accounting (1) — — ( 2,305 ) Additions 6,785 1,268 435 Deductions ( 926 ) — ( 9,061 ) Ending balance $ 66,725 $ 60,866 $ 59,598 (1) Amount comprised principally of acquisitions and purchase accounting adjustments in connect with acquisitions The Company recorded a net valuation allowance addition of $ 5.9 million for the year ended December 31, 2024. The valuation allowance is primarily related to federal and state net operating losses carryforwards acquired from the Adamas Acquisition that are not expected to be realizable in the future. The Company has NOL carryforwards in several jurisdictions. Due to changes in the Company's ownership, the utilization of net operating loss carryforwards that can be used to offset future taxable income are subject to annual limits in Table of Contents Supernus Pharmaceuticals, Inc. Notes to Financial Statements (Continued) 11. Income Taxes (Continued) accordance with Internal Revenue Code (IRC) provisions, as well as similar state provisions. In addition, states may also impose other future limitations through state legislation or similar measures. Despite the NOL carryforwards, the Company may incur higher state income tax expense in the future. As of December 31, 2024, the U.S. federal and state NOL carryforwards amounted to approximately $ 340.6 million and $ 467.0 million, respectively, which will expire in various years beginning in 2031. For the year ended December 31, 2024, the Company utilized federal NOLs of approximately $ 33.5 million and state NOLs of approximately $ 17.1 million. The Company is no longer subject to U.S. Federal income tax examinations for years prior to 2021 with the exception that operating loss or tax credit carryforwards generated prior to 2021 may be subject to tax audit adjustment. The Company accounts for uncertain income tax positions pursuant to the guidance in ASC Topic 740, Income Taxes . The Company recognizes interest and penalties related to uncertain tax positions, if any, in Income Tax Expense . 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. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Balance as of January 1 $ 2,149 $ 4,323 $ 6,100 Gross increases related to current year tax positions 517 112 32 Gross increases related to prior year tax positions 3,829 9 — Gross decreases related to prior year tax positions — — ( 39 ) Lapse of statute of limitations ( 655 ) $ ( 2,295 ) ( 1,770 ) Balance as of December 31 $ 5,840 $ 2,149 $ 4,323 The Company does not anticipate a material impact to the financial statements in the next twelve months as a result of a change in liabilities for uncertain tax positions. As of December 31, 2024, $ 3.5 million of the balance of unrecognized tax benefits was classified as Accounts payable and accrued liabilities . At December 31, 2023 and 2022, respectively the balance of unrecognized tax benefits was classified as other long term liabilities. All of our liabilities for unrecognized tax benefits would impact the effective tax rate, if recognized. 12 . Leases Office Space and Fleet Vehicle Leases The Company has operating leases for its headquarters lease, certain office space, certain office equipment and its fleet vehicles. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities. The Company made an accounting policy election, by class of underlying asset, to combine the lease and non-lease components for the headquarters, office space, office equipment and fleet vehicle leases. The Company's headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to ten years . As part of the Adamas Acquisition, the Company acquired a lease for office space. Adamas' operating lease for the office space term will continue until April 30, 2025. The lease contains an option to extend the term for one additional five-year period. Table of Contents Supernus Pharmaceuticals, Inc. Notes to Financial Statements (Continued) 12. Leases (Continued) Contract Manufacturing Lease The Company has a contract manufacturing agreement with Merz Pharma GmbH & Co. KGaA (Merz), for the manufacture and supply of rimabotulinumtoxinB finished products (Merz Agreement). The Merz Agreement will expire in July 2027 unless the Company and Merz mutually agree to extend the terms. The Merz Agreement may not be terminated for convenience. Under the terms of the agreement, the Company is required to purchase a minimum quantity of MYOBLOC finished products on an annual basis. This minimum purchase requirement represents the in-substance fixed contract consideration associated with the dedicated manufacturing facility which the Company accounts for as an embedded lease. In October 2021, we entered into an amendment to the Merz Agreement which increased the price of the annual purchase commitment of MYOBLOC from € 3.0 million to approximately € 3.9 million. The Company made an accounting policy election, by class of underlying asset, to not combine lease and non-lease components for the manufacturing facility. A portion of the in-substance fixed contract consideration was allocated to the lease component based on the stand-alone selling price. Accordingly, the Company classifies and accounts for the embedded lease as an operating lease. Operating lease assets and lease liabilities as reported on the consolidated balance sheets are as follows (dollars in thousands): December 31, Balance Sheet Classification 2024 2023 Assets Operating lease assets Other assets $ 24,477 $ 28,994 Total lease assets $ 24,477 $ 28,994 Liabilities Lease liabilities, current Operating lease liabilities, current portion Accounts payable and accrued liabilities 6,889 8,331 Lease liabilities, long-term Operating lease liabilities, long-term Operating lease liabilities, long-term 27,382 33,196 Total lease liabilities $ 34,271 $ 41,527 The components of operating lease costs are as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Operating lease cost: Fixed lease cost $ 8,945 $ 8,258 $ 8,239 Variable lease cost 5,475 5,998 4,608 Total $ 14,420 $ 14,256 $ 12,847 Supplemental cash flow information related to leases is as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Cash paid for operating leases $ 17,283 $ 17,112 $ 12,883 Lease assets obtained for new operating leases 3,662 7,170 1,867 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Financial Statements (Continued) 12. Leases (Continued) The weighted average lease term and weighted average discount rate for operating leases are as follows: Year Ended December 31, 2024 2023 Weighted-average remaining lease term (years) 7.0 7.3 Weighted-average discount rate 4.9 % 4.5 % Future minimum lease payments under noncancellable operating leases as of December 31, 2024, are as follows (dollars in thousands): Operating Leases Year ending December 31: 2025 $ 8,234 2026 6,957 2027 4,735 2028 3,004 2029 3,064 Thereafter 14,003 Total future minimum lease payments 39,997 Less: Imputed interest (1) ( 5,726 ) Present value of lease liabilities $ 34,271 (1) Calculated using the interest rate for each lease. 13 . Segment Reporting The Company operates in one operating segment and therefore has only one reportable segment. The Company derives revenue primarily from sales of its commercial products in the U.S. The Company's chief operating decision maker (CODM) is the chief executive officer. The Company manages the business activities on a consolidated basis. The CODM assesses performance of the Company, and decides how to allocate resources based on net income, which is reported in the consolidated statement of earnings as net earnings and allocates resources on a consolidated basis. The CODM uses net earnings to decide whether to reinvest profits into the Company's current products or into other research and development initiatives for the Company's product candidates. Net earnings is also used to monitor budget versus actual results. The measure of the reportable segment assets is reported on the balance sheet as total assets. The accounting policies of the reportable segment are the same as those described in Note 2, Summary of Significant Accounting Policies . Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 13. Segment Reporting (Continued) The following table shows the segment revenue, significant segment expenses and net earnings (dollars in thousands): Year Ended December 31, 2024 2023 2022 Total revenues $ 661,817 $ 607,521 $ 667,238 Less: Significant Segment Expenses: Cost of goods sold 77,906 83,779 87,221 Selling 153,105 149,955 147,289 Marketing 74,188 79,231 120,499 General and administrative 94,289 107,175 109,433 Research and development expenses External development program expenses: ONAPGO 1,641 3,825 1,942 SPN-820 27,042 12,311 8,139 SPN-817 9,837 9,397 7,341 Qelbree 15,819 11,101 8,641 Early-stage programs and other expenses 16,352 20,467 16,929 Total external development program expenses 70,691 57,101 42,992 Internal employee-related expenses 38,105 34,492 31,560 Total research and development expenses 108,796 91,593 74,552 Other segment items (a) 79,668 94,472 67,533 Net earnings $ 73,865 $ 1,316 $ 60,711 (a) Other segment items include amortization of intangible assets, intangible asset impairment charges, contingent consideration gain, net interest and other income, interest expense, and income tax expense, whose amounts are disclosed in the consolidated statement of earnings. 14. Composition of Other Balance Sheet Items The following details the composition of other balance sheet items (dollars in thousands for amounts in tables): Accounts Receivable, Net As of December 31, 2024, and December 31, 2023, the Company recorded allowances of approximately $ 12.3 million and $ 10.7 million, respectively, for prompt pay discount and contractual service fees paid to the Company's customers. The Company's customers are primarily pharmaceutical wholesalers and distributors and specialty pharmacies. The Company accounts for these prompt pay discount and contractual service fees as reduction to gross product sales at the time of sale. See Note 2, Summary of Accounting Policies - Revenue from Product Sales. Inventories, net Inventories consist of the following (dollars in thousands): December 31, 2024 December 31, 2023 Raw materials $ 11,127 $ 16,274 Work in process 26,725 31,212 Finished goods 16,441 29,922 Total $ 54,293 $ 77,408 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 14. Composition of Other Balance Sheet Items (Continued) The Company recorded inventory write-offs of $ 8.9 million and $ 8.0 million for the years ended December 31, 2024 and 2023, respectively. The inventory write-offs are reported on the consolidated statement of earnings in Cost of goods sold . Property and Equipment, net Property and equipment consist of the following (dollars in thousands): December 31, 2024 December 31, 2023 Lab equipment and furniture $ 13,370 $ 13,069 Leasehold improvements 14,023 14,023 Software 883 883 Computer equipment 1,112 960 29,388 28,935 Less accumulated depreciation and amortization ( 17,843 ) ( 15,405 ) Total $ 11,545 $ 13,530 Depreciation and amortization expense on property and equipment was approximately $ 2.4 million, $ 2.5 million, and $ 3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following (dollars in thousands): December 31, 2024 December 31, 2023 Accounts payable $ 4,587 $ 1,964 Accrued compensation, benefits, & related accruals 21,225 20,722 Accrued sales & marketing 11,007 11,666 Accrued manufacturing expenses 11,652 11,652 Accrued R&D expenses 5,898 10,530 Operating lease liabilities, current portion (1) 6,889 8,331 Accrued royalties (2) 8,105 7,918 Other accrued expenses 6,989 6,786 Total $ 76,352 $ 79,569 (1) Refer to Note 12 , Leases . (2) Refer to Note 16 , Commitments and Contingencies . Accrued Product Returns and Rebates Accrued product returns and rebates consist of the following (dollars in thousands): December 31, 2024 December 31, 2023 Accrued product rebates $ 115,330 $ 96,984 Accrued product returns 53,375 57,290 Total $ 168,705 $ 154,274 Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 15. Interest Expense Interest expense consists of the following (dollars in thousands): Year Ended December 31, 2024 2023 2022 Interest expense $ — $ ( 1,321 ) $ ( 2,542 ) Interest expense on nonrecourse liability related to sale of future royalties — ( 562 ) ( 2,416 ) Noncash interest expense on debt — ( 532 ) ( 2,112 ) Total $ — $ ( 2,415 ) $ ( 7,070 ) 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 ). 16. Commitments and Contingencies Product Licenses The Company has obtained exclusive licenses from third parties for proprietary rights to support the product candidates in the Company's CNS portfolio. Under these license agreements, the Company may be required to pay certain amounts upon the achievement of defined milestones. If these products are ultimately commercialized, the Company is also obligated to pay royalties to third parties, computed as a percentage of net product sales, for each respective product under a license agreement. Through the USWM Acquisition, the Company acquired licensing agreements with other pharmaceutical companies for APOKYN, ONAPGO, XADAGO, and MYOBLOC. The Company is obligated to pay royalties to third parties, computed as a percentage of net product sales, for each of the products under the respective license agreements. The royalty expense incurred for these acquired products is recognized as Cost of goods sold in the consolidated statements of earnings. USWM Enterprises Commitments Assumed As part of the USWM Acquisition, the Company assumed the remaining commitments of USWM Enterprises and its subsidiaries, which are discussed below. The Company assumed the annual minimum purchase requirement of MYOBLOC, amounting to an estimated € 3.9 million annually, under the contract manufacturing agreement with Merz for manufacture and supply. Refer to Note 12, Leases for further discussion related to the Merz Agreement in connection with the MYOBLOC annual minimum purchase requirement. MDD US Operations, LLC (formerly US WorldMeds, LLC) and its subsidiary, Solstice Neurosciences, LLC (US) (collectively, the MDD Subsidiaries) entered into a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services which was effective in April 2019. Under the CIA, the MDD Subsidiaries agreed to and paid $ 17.5 million to resolve U.S. Department of Justice allegations that it violated the False Claims Act and committed to the establishment and ongoing maintenance of an effective compliance program. The fine was paid by the MDD Subsidiaries prior to closing of the USWM Acquisition. As part of the USWM Acquisition, the Company assumed the obligations of the CIA and could become liable for payment of certain stipulated monetary penalties in the event of any CIA violations. In addition, the Company will continue to maintain a broad array of processes, policies and procedures necessary to comply with the CIA and submitted its final report during the second quarter of 2024. The Company remains subject to its obligations under the CIA until it receives official notification of release from the Office of the Inspector General. Claims and Litigation From time to time, the Company may be involved in various claims, litigation and legal proceedings. These matters may involve patent litigation, product liability and other product-related litigation, commercial and other matters, and government Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 16. Commitments and Contingencies (Continued) investigations, among others. On a quarterly basis, the Company reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated, the Company will accrue a liability for the estimated loss. Because of uncertainties related to claims, legal proceedings and litigation, accruals will be based on the Company's best estimates based on available information. The Company does not believe that any of these matters will have a material adverse effect on our financial position. The Company may reassess the potential liability related to these matters and may revise these estimates. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows. NAMENDA XR/Namzaric Qui Tam Litigation On April 1, 2019, Adamas was served with a complaint filed in the United States District Court for the Northern District of California (the District Court) (Case No. 3:18-cv-03018-JCS) against it and several Allergan entities alleging violations of federal and state false claims acts (FCA) in connection with the commercialization of NAMENDA XR and Namzaric by Allergan. The lawsuit is a qui tam complaint brought by an individual, asserting rights of the federal government and various state governments. The lawsuit was originally filed in May 2018 under seal, and Adamas became aware of the lawsuit when it was served. The complaint alleges that patents held by Allergan and Adamas covering NAMENDA XR and Namzaric were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic manufacturers of NAMENDA XR and Namzaric to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in artificially high price being charged to government payors. Adamas' patents in question were licensed exclusively to Forest Laboratories Holdings Limited. The complaint includes a claim for damages of "potentially more than $ 2.5 billion dollars," treble damages and statutory penalties. To date the federal and state governments have declined to intervene in this action. This case is currently stayed pending Adamas's and Allergan's interlocutory appeal of the District Court's December 11, 2020 order denying Adamas's and Allergan's motion to dismiss the complaint. The appeal is pending in the United States Court of Appeals for the Ninth Circuit (Case No. 21-80005). Argument was held on January 10, 2022. On August 25, 2022, the Ninth Circuit sided with the defendants by reversing the District Court’s public disclosure bar rulings and remanding the case back to the District Court to decide certain issues in the first instance. On October 11, 2022, the plaintiff filed a petition for rehearing with the Ninth Circuit which was denied on November 3, 2022. On December 23, 2022, the defendants filed renewed motions to dismiss directed to the remaining unresolved issue. 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. On February 20, 2024, the plaintiff filed a motion for an indicative ruling and to set aside the judgment in the District Court, based on the same arguments raised in his appeal. That motion was fully briefed and the District Court determined that the motion for an indicative ruling was suitable for determination without a hearing. On May 7, 2024, the District Court denied the plaintiff’s motion for an indicative ruling. The appeal is fully briefed, and the Ninth Circuit heard oral argument on November 21, 2024. On January 29, 2025, the Ninth Circuit affirmed the District Court’s order dismissing the litigation. The plaintiff intends to file a Petition for Panel and En Banc Rehearing and has asked the Ninth Circuit to extend his filing deadline until March 31, 2025. The Company intends to defend itself vigorously. However, the Company can offer no assurances that it will be successful in a litigation. APOKYN Litigation On October 3, 2022, Sage Chemical, Inc. and TruPharma, LLC filed a lawsuit in the United States District Court for the District of Delaware (Case No.22-cv-1302) alleging that Supernus Pharmaceuticals, Inc., Britannia Pharmaceuticals Limited, and US WorldMeds Partners, LLC violated state and federal antitrust law in connection with APOKYN. On January 10, 2023, the Company filed motions to dismiss all claims and the lawsuit in its entirety. Between May 9, 2024 and June 4, 2024, the Court ruled on all motions to dismiss, declining to dismiss any claims against the Company, its subsidiaries, or Britannia Pharmaceuticals Limited and dismissing US WorldMeds Partners, LLC, USWM, LLC, and all of the individual defendants (former US WorldMeds executives) out of the case completely. The Court then lifted the stay on fact depositions, which are now well underway and are expected to be completed by first half of February 2025. Plaintiffs moved to revive the claims against US WorldMeds Partners, LLC and USWM, LLC, but not the former individual defendants. Briefing was complete on August 21, 2024 and the Court heard argument on the motion on August 29, 2024. The Court entered an Order that revived the claims against US WorldMeds Partners, LLC and USWM, LLC on December 5, 2024. The operative scheduling order sets the following Table of Contents Supernus Pharmaceuticals, Inc. Notes to Consolidated Financial Statements (Continued) 16. Commitments and Contingencies (Continued) key deadlines: end of fact discovery January 31, 2025 (however, certain fact depositions will likely occur in the first half of February by agreement of the parties); expert discovery to conclude May 12, 2025; case dispositive motions to be filed June 2, 2025; hearing on case dispositive and Daubert motions on September 11, 2025; pretrial conference December 10, 2025; a ten-day jury trial to begin on January 5, 2026. On January 3, 2025, the Court issued an Oral Order requiring the parties to “engage in in-person mediation in good faith” and jointly select an agreed-upon mediator. The parties are working to schedule the mediation to occur in late April 2025 in compliance with Court’s Oral Order that the mediation conference “occur no later than May 2, 2025 (unless the parties stipulate to a later date and such date is approved by the Court)." 17. Subsequent Events In February 2025, the FDA approved ONAPGO (apomorphine hydrochloride) injection, formerly known as SPN-830, as the first and only subcutaneous apomorphine infusion device for the treatment of motor fluctuations in adults with advanced PD. ONAPGO will be launched in the second quarter of 2025. The Company paid the $ 25 million milestone related to the FDA's approval of the SPN-830 NDA in February 2025, and expects the remaining $ 30 million milestone to be due and paid in 2025. Refer to Note 6, Contingent Consideration , for further information. Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.