0001558370-23-008087 | 10-Q | XBRL Viewer | Collegium Pharmaceutical INC

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 269,480	$ 173,688
Accounts receivable, net	179,127	183,119
Inventory	32,895	46,501
Prepaid expenses and other current assets	16,798	16,681
Total current assets	498,300	419,989
Property and equipment, net	18,879	19,521
Operating lease assets	6,658	6,861
Intangible assets, net	530,002	567,468
Restricted cash	2,547	2,547
Deferred tax assets	23,969	23,950
Other noncurrent assets	87	100
Goodwill	133,857	133,695
Total assets	1,214,299	1,174,131
Current liabilities
Accounts payable	2,992	3,494
Accrued expenses	24,433	36,129
Accrued rebates, returns and discounts	200,902	230,491
Current portion of term notes payable	183,333	162,500
Current portion of operating lease liabilities	1,042	1,112
Total current liabilities	412,702	433,726
Term notes payable, net of current portion	353,769	397,578
Convertible Notes carrying value	261,222	140,873
Operating lease liabilities, net of current portion	6,873	7,112
Total liabilities	1,034,566	979,289
Commitments and contingencies (refer to Note 15)
Shareholders' equity:
Preferred stock, $0.001 par value; authorized shares - 5,000,000
Common stock, $0.001 par value; authorized shares - 100,000,000; 37,816,843 issued and 34,581,020 outstanding shares at March 31, 2023 and 37,084,759 issued and 33,848,936 outstanding shares at December 31, 2022	38	37
Additional paid-in capital	540,389	538,073
Treasury stock, at cost; 3,235,823 shares at March 31, 2023 and 3,235,823 shares at December 31, 2022	(61,924)	(61,924)
Accumulated deficit	(298,770)	(281,344)
Total shareholders' equity	179,733	194,842
Total liabilities and shareholders' equity	$ 1,214,299	$ 1,174,131

Inventory (Tables)

3 Months Ended

Mar. 31, 2023

Inventory

Schedule of Inventory


	March 31,		December 31,
	2023		2022
Raw materials	$	5,831	$	5,600
Work in process		13,347		24,672
Finished goods		13,717		16,229
Total inventory	$	32,895	$	46,501

Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Practical expedient incremental cost	true
Returns policy, threshold product return period	18 months
Returns policy, threshold product return period prior to expiration	6 months
Returns policy, threshold product return period after expiration	12 months
Product revenues, net	$ 144,767	$ 83,751
Minimum
Disaggregation of Revenue [Line Items]
Term of payment received	30 days
Maximum
Disaggregation of Revenue [Line Items]
Term of payment received	90 days

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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+ Details

Earnings Per Share - Computation of Net Earnings (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share
Net loss	$ (17,426)	$ (13,069)
Net loss - diluted	$ (17,426)	$ (13,069)
Weighted-average shares outstanding - basic	34,319,291	33,673,912
Weighted-average shares outstanding - diluted (in shares)	34,319,291	33,673,912
Loss per share - basic (in dollars per share)	$ (0.51)	$ (0.39)
Loss per share - diluted (in dollars per share)	$ (0.51)	$ (0.39)

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+ Details

License Agreements - License and supply agreement (Details) - Shionogi license and supply agreement	Apr. 04, 2019
License Agreements [Line Items]
Additional Percentage	1.00%
Minimum
License Agreements [Line Items]
Royalty Percentage	8.50%
Maximum
License Agreements [Line Items]
Royalty Percentage	17.50%

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2023	Apr. 30, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-37372
Entity Registrant Name	Collegium Pharmaceutical, Inc.
Entity Incorporation, State or Country Code	VA
Entity Tax Identification Number	03-0416362
Entity Address, Address Line One	100 Technology Center Drive
Entity Address, City or Town	Stoughton
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02072
City Area Code	781
Local Phone Number	713-3699
Title of 12(b) Security	Common Stock
Trading Symbol	COLL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		34,594,760
Entity Central Index Key	0001267565
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues
Product revenues, net	$ 144,767	$ 83,751
Revenue from Contract with Customer, Product and Service [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember
Cost of product revenues
Cost of product revenues (excluding intangible asset amortization)	$ 29,899	$ 16,332
Intangible asset amortization	$ 37,466	$ 18,923
Cost, Product and Service [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember
Total cost of products revenues	$ 67,365	$ 35,255
Gross profit	77,402	48,496
Operating expenses
Research and development		3,983
Selling, general and administrative	52,775	54,528
Total operating expenses	52,775	58,511
Income (loss) from operations	24,627	(10,015)
Interest expense	(21,427)	(5,831)
Interest income	2,747	4
Loss on extinguishment of debt	(23,504)
Loss before income taxes	(17,557)	(15,842)
Benefit from income taxes	(131)	(2,773)
Net loss	$ (17,426)	$ (13,069)
Loss per share - basic (in dollars per share)	$ (0.51)	$ (0.39)
Weighted-average shares - basic (in shares)	34,319,291	33,673,912
Loss per share - diluted (in dollars per share)	$ (0.51)	$ (0.39)
Weighted-average shares - diluted (in shares)	34,319,291	33,673,912

Term Notes Payable - 2022 Term Loan (Details) - 2022 Term Loan - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
	Mar. 22, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Debt
Aggregate principal amount	$ 650,000
Debt maturity	48 months
Interest rate, basis spread				12.30%
Principal repayments	$ 100,000
Remaining three years	550,000
Debt modification and transaction fee	173
Commitment and other fees	19,818
Note discounts	$ 2,049
Interest expense		$ 19,679	$ 1,823
Prepayment prior to the second-year anniversary
Debt
Prepayment premium percentage	2.00%
Prepayment on or after the second-year anniversary, but on or prior to the third-year anniversary
Debt
Prepayment premium percentage	1.00%
LIBOR
Debt
Floor rate	1.20%
Interest rate, basis spread	7.50%

Stock-based Compensation - Summary of Stock Option Activity (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Stock option activity
Outstanding	1,683,805
Granted	0	0
Exercised	(234,132)
Cancelled	(5,677)
Outstanding	1,443,996	1,683,805
Exercisable at end of period	1,358,588
Weighted average exercise price per share
Outstanding	$ 18.84
Exercised	16.36
Cancelled	20.01
Outstanding	19.24	$ 18.84
Exercisable at end of period	$ 19.20
Stock option activity, additional information
Outstanding Weighted-Average Remaining Contractual Term	5 years	5 years 6 months
Outstanding Aggregate Intrinsic Value	$ 7,074	$ 7,953
Exercisable at end of period, Weighted-Average Remaining Contractual Term	4 years 10 months 24 days
Exercisable at end of period, Aggregate Intrinsic Value	$ 6,730

Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets

Summary of changes in the carrying amount of goodwill


	Amount
Balance at December 31, 2022	$	133,695
Goodwill resulting from acquisitions		—
Measurement period adjustments from BDSI Acquisition		162
Balance at March 31, 2023	$	133,857

Schedule of gross carrying amount and accumulated amortization of the Intangible Asset


		March 31, 2023						December 31, 2022
	Amortization Period (Years)		Cost		Accumulated Amortization		Carrying Amount		Cost		Accumulated Amortization		Carrying Amount
Belbuca	4.8	$	360,000	$	(77,277)	$	282,723	$	360,000	$	(58,428)	$	301,572
Nucynta Products	8.0		521,170		(336,424)		184,746		521,170		(319,628)		201,542
Symproic	9.6		70,000		(7,467)		62,533		70,000		(5,646)		64,354
Elyxyb	—		—		—		—		5,000		(5,000)		—
Total intangibles		$	951,170	$	(421,168)	$	530,002	$	956,170	$	(388,702)	$	567,468

Summary of amortization expense


	Three Months Ended March 31,
		2023		2022
Belbuca	$	18,849	$	1,937
Nucynta Products		16,796		16,795
Symproic		1,821		182
Elyxyb		—		9
Total amortization expense	$	37,466	$	18,923

Schedule of future amortization expenses


Years ended December 31,	Belbuca		Nucynta Products		Symproic		Total
2023	$	56,544	$	50,385	$	5,464	$	112,393
2024		75,393		67,181		7,285		149,859
2025		75,393		67,180		7,285		149,858
2026		75,393		—		7,285		82,678
2027		—		—		7,285		7,285
Thereafter		—		—		27,929		27,929
Remaining amortization expense	$	282,723	$	184,746	$	62,533	$	530,002

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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-SubTopic 20
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-Subparagraph (h)
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Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
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+ Details

Goodwill and Intangible Assets - Future Amortization Expense (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
2023	$ 112,393
2024	149,859
2025	149,858
2026	82,678
2027	7,285
Thereafter	27,929
Intangible asset, net	530,002	$ 567,468
Nucynta Products
Finite-Lived Intangible Assets [Line Items]
2023	50,385
2024	67,181
2025	67,180
Intangible asset, net	184,746	201,542
Belbuca
Finite-Lived Intangible Assets [Line Items]
2023	56,544
2024	75,393
2025	75,393
2026	75,393
Intangible asset, net	282,723	301,572
Symproic
Finite-Lived Intangible Assets [Line Items]
2023	5,464
2024	7,285
2025	7,285
2026	7,285
2027	7,285
Thereafter	27,929
Intangible asset, net	$ 62,533	$ 64,354

Acquisitions (Details) $ in Thousands	Mar. 22, 2022 USD ($)
BioDelivery Sciences International, Inc
Business Acquisition [Line Items]
Consideration paid	$ 669,431

Stock-based Compensation - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based compensation
Proceeds from issuances of common stock from employee stock purchase plan	$ 169	$ 203
Unrecognized compensation cost related to outstanding options	$ 61,072
Period over which unrecognized compensation cost is expected to be recognized as expense	2 years 10 months 24 days
Restricted stock units
Stock-based compensation
Vesting period (in years)	4 years
Total fair value of shares vested	$ 14,779	8,001
Employee stock purchase plan.
Stock-based compensation
Employee Stock Purchase Plan, Purchase Price Percentage	85.00%
Issuance for employee stock purchase plan, shares	11,329
Proceeds from issuances of common stock from employee stock purchase plan	$ 169
Employee stock purchase plan compensation expenses	$ 46	$ 32

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets

Goodwill and Intangible Assets

9. Goodwill and Intangible Assets

The following tables summarizes the changes in the carrying amount of goodwill:


	Amount
Balance at December 31, 2022	$	133,695
Goodwill resulting from acquisitions		—
Measurement period adjustments from BDSI Acquisition		162
Balance at March 31, 2023	$	133,857

The Company’s goodwill resulted from the BDSI Acquisition. During the three months ended March 31, 2023, goodwill increased by $162 due to measurement period adjustments associated with the BDSI Acquisition. Refer to Note 4, Acquisitions.

The following table sets forth the cost, accumulated amortization, and carrying amount of intangible assets as of March 31, 2023 and December 31, 2022:


		March 31, 2023						December 31, 2022
	Amortization Period (Years)		Cost		Accumulated Amortization		Carrying Amount		Cost		Accumulated Amortization		Carrying Amount
Belbuca	4.8	$	360,000	$	(77,277)	$	282,723	$	360,000	$	(58,428)	$	301,572
Nucynta Products	8.0		521,170		(336,424)		184,746		521,170		(319,628)		201,542
Symproic	9.6		70,000		(7,467)		62,533		70,000		(5,646)		64,354
Elyxyb	—		—		—		—		5,000		(5,000)		—
Total intangibles		$	951,170	$	(421,168)	$	530,002	$	956,170	$	(388,702)	$	567,468

The following table presents amortization expense recognized in cost of product revenues for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022
Belbuca	$	18,849	$	1,937
Nucynta Products		16,796		16,795
Symproic		1,821		182
Elyxyb		—		9
Total amortization expense	$	37,466	$	18,923

As of March 31, 2023, the remaining amortization expense expected to be recognized is as follows:


Years ended December 31,	Belbuca		Nucynta Products		Symproic		Total
2023	$	56,544	$	50,385	$	5,464	$	112,393
2024		75,393		67,181		7,285		149,859
2025		75,393		67,180		7,285		149,858
2026		75,393		—		7,285		82,678
2027		—		—		7,285		7,285
Thereafter		—		—		27,929		27,929
Remaining amortization expense	$	282,723	$	184,746	$	62,533	$	530,002

Convertible Senior Notes - Interest Expenses (Details) - Convertible senior notes - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Debt
Contractual interest expense	$ 1,479	$ 943
Amortization of debt issuance costs	263	223
Total interest expense	$ 1,742	$ 1,166

Stock-based Compensation - Summary of Restricted Stock and Performance Share Activity (Details) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Performance share units
Number of shares
Balance	447,770
Granted	216,500
Vested	(223,170)
Performance adjustment	62,780
Balance	503,880
Weighted-average grant date fair value per share
Balance	$ 28.71
Granted	38.71	$ 24.12
Vested	27.99
Performance adjustment	27.14
Balance	$ 33.13
Restricted stock units
Number of shares
Balance	2,047,571
Granted	1,093,296
Vested	(552,734)
Forfeited	(132,214)
Balance	2,455,919
Weighted-average grant date fair value per share
Balance	$ 19.67
Granted	26.82	$ 17.68
Vested	20.42
Forfeited	21.66
Balance	$ 22.58

Revenue from Contracts with Customers (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contracts with Customers

Summary of product revenue provision and allowance


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2022	$	156,937	$	73,554	$	22,058
Provision related to current period sales		92,871		10,166		34,921
Changes in estimate related to prior period sales		36		571		92
Credits/payments made		(122,852)		(10,381)		(32,563)
Balance at March 31, 2023	$	126,992	$	73,910	$	24,508


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2021	$	142,379	$	54,617	$	13,226
Acquired from BDSI		34,158		18,187		7,575
Provision related to current period sales		95,413		7,072		22,612
Changes in estimate related to prior period sales		(514)		—		(37)
Credits/payments made		(118,937)		(4,899)		(22,001)
Balance at March 31, 2022	$	152,499	$	74,977	$	21,375

(1)

Provisions for rebates and incentives includes managed care rebates, government rebates and co-pay program incentives. Provisions for rebates and incentives are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s Consolidated Balance Sheets.

(2)

Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included in accrued rebates, returns and discounts in the Company’s Consolidated Balance Sheets.

(3)

Provisions for trade allowances and chargebacks include fees for distribution service fees, prompt pay discounts, and chargebacks. Trade allowances and chargebacks are deducted from gross revenue at the time revenues are recognized and are recorded as a reduction to accounts receivable in the Company’s Consolidated Balance Sheets.

Schedule of disaggregation of revenue


	Three Months Ended March 31,
	2023		2022
Xtampza ER	$	47,869	$	31,518
Belbuca		44,212		3,310
Nucynta IR		27,899		29,335
Nucynta ER		21,136		19,263
Symproic		3,651		300
Other		—		25
Total product revenues, net	$	144,767	$	83,751

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Mar. 31, 2023
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Collegium Pharmaceutical, Inc. (a Virginia corporation) and its subsidiaries. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of the Company’s management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to fairly present the financial position of the Company as of March 31, 2023, and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of products, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of intangible assets and tax valuation allowances. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions. The consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s most recently filed annual report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”).
Recent Accounting Pronouncements	Recently Adopted Accounting Pronouncements New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as required by the specified effective dates. Recently Issued Accounting Pronouncements Not Yet Adopted Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.

Acquisitions - Estimated Fair Value of Net Assets Acquired (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 22, 2022
Liabilities Assumed
Goodwill	$ 133,857	$ 133,695
BioDelivery Sciences International, Inc
Assets Acquired
Cash and cash equivalents			$ 97,362
Accounts receivable			55,495
Inventory			77,382
Prepaid expenses and other current assets			6,125
Property and equipment			1,242
Operating lease assets			481
Intangible assets			435,000
Total assets			673,087
Liabilities Assumed
Accounts payable			12
Accrued expenses			18,249
Accrued rebates, returns and discounts			56,261
Operating lease liabilities			481
Deferred tax liabilities			62,510
Total liabilities			137,513
Total identifiable net assets acquired			535,574
Goodwill			133,857
Total consideration transferred			669,431
Increase to inventory			$ 54,700

Convertible Senior Notes - 2026 Convertible Notes (Details)		3 Months Ended
	Feb. 13, 2020 USD ($) D $ / shares	Mar. 31, 2023 USD ($) D	Dec. 31, 2022 USD ($)	Mar. 31, 2022 USD ($)
Debt
Loss on extinguishment of debt		$ (23,504,000)
Convertible senior notes, net carrying value		$ 261,222,000	$ 140,873,000
2026 Convertible Notes
Debt
Interest rate (as a percent)	2.625%	2.625%
Aggregate principal amount	$ 143,750,000
Total debt issuance cost	$ 5,473,000
Initial conversion rate	34.2618
Initial conversion price \| $ / shares	$ 29.19
Conversion, threshold percentage of stock price trigger	130.00%
Conversion, threshold trading days \| D	20
Conversion, threshold consecutive trading days \| D	30
Consecutive business days \| D	5
Measurement period \| D	10
Threshold percentage to product of sale price of common stock and conversion rate	98.00%
Default period	30 days
Threshold amount of money borrowed	$ 20,000,000
Number of calendar days \| D	3
Term of notice to company	60 days
Provisions threshold amount of payment	$ 20,000
Aggregate principal amount of notes repurchased	117,400,000
Repurchased amount in cash	$ 140,100,000
Loss on extinguishment of debt		$ (23,504,000)
Recognition of deferred financing costs		2,264,000
Convertible senior notes, net carrying value		$ 25,866,000		$ 26,350,000
2026 Convertible Notes \| Conversion of convertible debt after the calendar quarter ending on March 31, 2020
Debt
Conversion, threshold percentage of stock price trigger		130.00%
Conversion, threshold trading days \| D		20
Conversion, threshold consecutive trading days \| D		30

Term Notes Payable

3 Months Ended

Mar. 31, 2023

Term Notes Payable

Term Notes Payable

11. Term Notes Payable

2022 Term Loan

On March 22, 2022, in connection with the closing of the BDSI Acquisition, the Company entered into an Amended and Restated Loan Agreement by and among the Company, and BioPharma Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender (collectively “Pharmakon”) (the “2022 Loan Agreement”). The 2022 Loan Agreement provided for a $650,000 secured term loan (the “2022 Term Loan”), the proceeds of which were used to repay the Company’s existing term notes and fund a portion of the consideration to be paid to complete the BDSI Acquisition. The 2022 Loan Agreement was accounted for as a debt modification and transaction fees of $173 were expensed. In connection with the 2022 Loan Agreement, the Company paid loan commitment and other fees to the lender of $19,818, which together with preexisting debt issuance costs and note discounts of $2,049 will be amortized over the term of the loan using the effective interest rate.

The 2022 Term Loan will mature on the 48-month anniversary of the closing of the BDSI Acquisition and is guaranteed by the Company’s material domestic subsidiaries. The 2022 Term Loan is also secured by substantially all of the assets of the Company and its material domestic subsidiaries. The 2022 Term Loan bears interest at a rate based upon the London Interbank Offered Rate (“LIBOR”) (subject to a LIBOR floor of 1.20%), plus a margin of 7.5% per annum. As of March 31, 2023, the interest rate was 12.3%. The Company paid $100,000 in principal payments under the 2022 Term Loan during the first year and the remaining $550,000 balance is required to be paid in equal quarterly installments over the remaining three years.

The 2022 Loan Agreement permits voluntary prepayment at any time, subject to a prepayment premium. The prepayment premium is equal to 2.00% of the principal amount being prepaid prior to the second-year anniversary of the closing date, or 1.00% of the principal amount being prepaid on or after the second-year anniversary of the closing date. The 2022 Loan Agreement also includes a make-whole premium in the event of a voluntary prepayment, a prepayment due to a change in control or acceleration following an Event of Default (as defined in the 2022 Loan Agreement) on or

prior to the second-year anniversary of the closing date, in each case in an amount equal to foregone interest from the date of prepayment through the second-year anniversary of the closing date. A change of control also triggers a mandatory prepayment of the 2022 Term Loan.

The 2022 Loan Agreement contains certain covenants and obligations of the parties, including, without limitation, covenants that limit the Company’s ability to incur additional indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of business. Failure to comply with these covenants would constitute an Event of Default under the 2022 Loan Agreement, notwithstanding the Company’s ability to meet its debt service obligations. The 2022 Loan Agreement also includes various customary remedies for the lenders following an Event of Default, including the acceleration of repayment of outstanding amounts under the 2022 Loan Agreement and execution upon the collateral securing obligations under the 2022 Loan Agreement.

During the three months ended March 31, 2023 and 2022, the Company recognized interest expense of $19,679 and $1,823, respectively, related to the 2022 Term Loan.

As of March 31, 2023, future required principal repayments under the 2022 Term Loan are as follows:


Years ended December 31,	Principal Payments
2023	$	137,500
2024		183,333
2025		183,333
2026		45,834
Total before unamortized discount and issuance costs	$	550,000
Less: unamortized discount and issuance costs		(12,898)
Term notes carrying value	$	537,102

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
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-Paragraph 1B
-Subparagraph (h)
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
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-Subparagraph (g)
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Accrued Expenses

3 Months Ended

Mar. 31, 2023

Accrued Expenses

Accrued Expenses

10. Accrued Expenses

Accrued expenses as of March 31, 2023 and December 31, 2022 consisted of the following:


	March 31,		December 31,
	2023		2022
Accrued royalties	$	7,726	$	13,770
Accrued product taxes and fees		4,821		4,352
Accrued audit and legal		2,283		1,957
Accrued incentive compensation		1,486		2,130
Accrued bonuses		1,333		1,507
Accrued sales and marketing		1,225		6,347
Accrued interest		1,051		1,410
Accrued payroll and related benefits		843		1,208
Accrued other operating costs		3,665		3,448
Total accrued expenses	$	24,433	$	36,129

Nature of Business

3 Months Ended

Mar. 31, 2023

Nature of Business

Nature of business

1. Nature of Business

Collegium Pharmaceutical, Inc. (the “Company” or “Collegium”) was incorporated in Delaware in April 2002 and then reincorporated in Virginia in July 2014. The Company has its principal operations in Stoughton, Massachusetts. The Company’s mission is to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. The Company’s portfolio includes Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), Belbuca, and Symproic.

Xtampza ER, an abuse-deterrent, oral formulation of oxycodone, was approved by the U.S. Food and Drug Administration (“FDA”) in April 2016 for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. The Company commercially launched Xtampza ER in June 2016.

The Nucynta Products are extended-release (“ER”) and immediate-release (“IR”) formulations of tapentadol. Nucynta ER is indicated for the management of pain severe enough to require daily, around the clock, long-term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options are inadequate. Nucynta IR is indicated for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate in adults. The Company began shipping and recognizing product sales on the Nucynta Products in January 2018 and began marketing the Nucynta Products in February 2018.

On March 22, 2022 (the “Acquisition Date”), the Company acquired BioDelivery Sciences International, Inc. (“BDSI”), a specialty pharmaceutical company working to deliver innovative therapies for individuals living with serious and debilitating chronic conditions, pursuant to an Agreement and Plan of Merger, dated as of February 14, 2022, by and among the Company, Bristol Acquisition Company Inc., the Company’s wholly owned subsidiary, and BDSI (the “BDSI Acquisition”). Upon closing, the Company acquired the Belbuca and Symproic products. Belbuca is a buccal film that contains buprenorphine, a Schedule III opioid, and was approved by the FDA in October 2015 for use in patients with pain severe enough to require daily, around-the-clock, long-term opioid treatment for which alternative options are inadequate. Symproic was approved by the FDA in March 2017 for the treatment of opioid-induced constipation (“OIC”) in adult patients with chronic non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent (e.g., weekly) opioid dosage escalation. The Company began shipping and recognizing product sales related to Belbuca and Symproic in March 2022.

The Company’s operations are subject to certain risks and uncertainties. The principal risks include inability to continue successfully commercializing products, changing market conditions for products and development of competing products, changing regulatory environment and reimbursement landscape, product-related litigation, manufacture of adequate commercial inventory, inability to secure adequate supplies of active pharmaceutical ingredients, key personnel retention, protection of intellectual property, and patent infringement litigation. As the COVID-19 pandemic unfolded, and governmental and societal reactions to it evolved, the Company’s business was impacted by several trends, including depressed pain patient office visits compared to pre-COVID periods. Notwithstanding the fact that the Department of Health and Human Services is planning for the federal public health emergency for COVID-19 to expire in May 2023, the Company expects the trends that emerged as a result of the pandemic to persist in the near to medium term.

The Company believes that its cash and cash equivalents at March 31, 2023, together with expected cash inflows from the commercialization of its products, will enable the Company to fund its operating expenses, debt service and capital expenditure requirements under its current business plan for at least one year from the date the consolidated financial statements were issued.

Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2023

Accrued Expenses

Schedule of components of accrued expenses


	March 31,		December 31,
	2023		2022
Accrued royalties	$	7,726	$	13,770
Accrued product taxes and fees		4,821		4,352
Accrued audit and legal		2,283		1,957
Accrued incentive compensation		1,486		2,130
Accrued bonuses		1,333		1,507
Accrued sales and marketing		1,225		6,347
Accrued interest		1,051		1,410
Accrued payroll and related benefits		843		1,208
Accrued other operating costs		3,665		3,448
Total accrued expenses	$	24,433	$	36,129

Convertible Senior Notes - Future Minimum Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Principal repayments
Convertible Notes carrying value	$ 261,222	$ 140,873
Convertible senior notes
Principal repayments
2023	3,914
2024	7,635
2025	7,635
2026	33,639
2027	6,943
Thereafter	251,915
Total minimum payments	311,681
Less: interest	(43,831)
Less: unamortized issuance costs	(6,628)
Convertible Notes carrying value	261,222
2026 Convertible Notes
Principal repayments
2023	346
2024	692
2025	692
2026	26,696
Total minimum payments	28,426
Less: interest	(2,076)
Less: unamortized issuance costs	(484)
Convertible Notes carrying value	25,866		$ 26,350
2029 Convertible Notes
Principal repayments
2023	3,568
2024	6,943
2025	6,943
2026	6,943
2027	6,943
Thereafter	251,915
Total minimum payments	283,255
Less: interest	(41,755)
Less: unamortized issuance costs	(6,144)
Convertible Notes carrying value	$ 235,356

Equity (Tables)

3 Months Ended

Mar. 31, 2023

Equity

Summary of changes in Shareholders' Equity

The changes in shareholders’ equity for the three months ended March 31, 2023 were as follows:


				Additional							Total
	Common Stock			Paid- In		Treasury Stock			Accumulated		Shareholders’
	Shares		Amount	Capital		Shares		Amount	Deficit		Equity
Balance, December 31, 2022	37,084,759	$	37	$	538,073	(3,235,823)	$	(61,924)	$	(281,344)	$	194,842
Exercise of common stock options	234,132		—		3,848	—		—		—		3,848
Issuance for employee stock purchase plan	11,329		—		169	—		—		—		169
Vesting of RSUs and PSUs	775,904		1		—	—		—		—		1
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(289,281)		—		(7,736)	—		—		—		(7,736)
Stock-based compensation	—		—		6,035	—		—		—		6,035
Net loss	—		—		—	—		—		(17,426)		(17,426)
Balance, March 31, 2023	37,816,843	$	38	$	540,389	(3,235,823)	$	(61,924)	$	(298,770)	$	179,733

The changes in shareholders’ equity for the three months ended March 31, 2022 were as follows:


				Additional							Total
	Common Stock			Paid- In		Treasury Stock			Accumulated		Shareholders’
	Shares		Amount	Capital		Shares		Amount	Deficit		Equity
Balance, December 31, 2021	35,806,119	$	36	$	502,095	(2,150,717)	$	(42,861)	$	(256,342)	$	202,928
Exercise of common stock options	190,074		—		3,261	—		—		—		3,261
Issuance for employee stock purchase plan	13,421		—		203	—		—		—		203
Vesting of RSUs and PSUs	563,050		—		—	—		—		—		—
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(191,667)		—		(3,382)	—		—		—		(3,382)
Share repurchases	—		—		5,000	(307,132)		(5,000)		—		—
Stock-based compensation	—		—		6,135	—		—		—		6,135
Net loss	—		—		—	—		—		(13,069)		(13,069)
Balance, March 31, 2022	36,380,997	$	36	$	513,312	(2,457,849)	$	(47,861)	$	(269,411)	$	196,076

Stock-based Compensation - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based compensation
Total stock-based compensation expense	$ 6,035	$ 6,135
Research and development
Stock-based compensation
Total stock-based compensation expense		1,591
Selling, general and administrative expenses
Stock-based compensation
Total stock-based compensation expense	$ 6,035	$ 4,544

Commitments and Contingencies (Details)													3 Months Ended	12 Months Ended	16 Months Ended
Commitments and Contingencies (Details)	Mar. 08, 2023 USD ($)	Apr. 19, 2022 case	Mar. 11, 2022 stockholder	Mar. 07, 2022 stockholder	Mar. 05, 2022 case	Feb. 28, 2022 case	Dec. 24, 2021 USD ($) case	Sep. 11, 2020	Oct. 02, 2019	Mar. 24, 2015 patent	Feb. 15, 2015	Feb. 11, 2015 patent	Mar. 31, 2023 lawsuit	Dec. 31, 2021 case	Sep. 30, 2017 patent
Commitments and Contingencies
Number of lawsuits dismissed														13
Claims settled							27
Xtampza ER Litigation
Commitments and Contingencies
Number of patents listed in FDA Orange Book \| patent												11
Stay period before FDA can issue a final approval unless it is terminated										30 months	30 months
Number of patents allegedly infringed \| patent										3		5			2
Number of lawsuits filed \| patent															2
PTAB duration for issuing decision									1 year
Statutory period of proceedings								18 months
Xtampza ER Litigation \| Maximum
Commitments and Contingencies
PTAB extended duration for issuing decision									6 months
Xtampza ER Litigation, District of Massachusetts
Commitments and Contingencies
Stay period before FDA can issue a final approval unless it is terminated										30 months
Number of patents allegedly infringed \| patent										3
Opioid Litigation
Commitments and Contingencies
Number of lawsuits filed \| lawsuit													6
Number of lawsuits dismissed		8
Litigation settlement, amount awarded to other party \| $							$ 2,750,000
Claims settled							27
Opioid Litigation, Massachusetts state court
Commitments and Contingencies
Number of lawsuits by municipalities \| lawsuit													13
Multi-District Litigation (MDL)
Commitments and Contingencies
Number of lawsuits filed														21
Number of lawsuits dismissed		3
Claims settled							8
State court
Commitments and Contingencies
Claims settled							19
BDSI Acquisition Litigation
Commitments and Contingencies
Number of additional cases filed					2	2
Number of demand letters received from purported stockholders \| stockholder			4	3
Aquestive Therapeutics, Inc Litigation
Commitments and Contingencies
Litigation settlement, amount awarded to other party \| $	$ 8,500

Income Taxes (Tables)

3 Months Ended

Mar. 31, 2023

Income Taxes

Schedule of income tax benefit recognized


	Three Months Ended March 31,
	2023		2022
Benefit from income taxes	$	(131)	$	(2,773)
Effective tax rate		0.7%		17.5%

Acquisitions

3 Months Ended

Mar. 31, 2023

Acquisitions

Acquisitions

4. Acquisitions

On March 22, 2022, the Company closed the BDSI Acquisition, with BDSI surviving as a wholly owned subsidiary of the Company. The BDSI Acquisition was completed to leverage the Company’s existing sales force and other operations to commercialize additional products that are typically marketed to similar physicians and to develop other synergies. The Company obtained control through the acquisition of shares in an all-cash transaction which closed on March 22, 2022.

The total consideration paid for the BDSI acquisition was approximately $669,431 consisting of the following (in thousands, except per share amounts):


Fair Value of Purchase Price Consideration	Amount
Fair value of purchase price consideration paid at closing:
Cash consideration for all outstanding shares of BDSI's common and preferred stock (103,235,298 shares acquired at $5.60 per share)	$	578,118
Cash consideration paid to settle RSUs and in-the-money options		28,309
Cash paid to settle BDSI debt		63,004
Total purchase consideration	$	669,431

The Company has accounted for the BDSI Acquisition as a business combination and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its financial statements following the Acquisition Date.

The final allocation of the consideration transferred to the assets acquired and liabilities assumed has been completed. During the three months ended March 31, 2023, the Company recorded measurement period adjustments to increase accrued expenses by $134 and deferred tax liabilities by $28, with a corresponding increase to goodwill of $162.

The following tables set forth the final allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:


	Amounts Recognized at the Acquisition Date
Assets Acquired
Cash and cash equivalents	$	97,362
Accounts receivable		55,495
Inventory		77,382
Prepaid expenses and other current assets		6,125
Property and equipment		1,242
Operating lease assets		481
Intangible assets		435,000
Total assets	$	673,087
Liabilities Assumed
Accounts payable	$	12
Accrued expenses		18,249
Accrued rebates, returns and discounts		56,261
Operating lease liabilities		481
Deferred tax liabilities		62,510
Total liabilities	$	137,513
Total identifiable net assets acquired		535,574
Goodwill		133,857
Total consideration transferred	$	669,431

The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the $435,000 of intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with risk. The Company amortizes the identifiable intangible assets on a straight-line basis over their respective useful lives (refer to Note 9, Goodwill and Intangible Assets). In addition, the acquired inventory was recognized at its acquisition-date fair value, which resulted in an increase of $54,700 compared to its preacquisition book value.

The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.

Goodwill and Intangible Assets - Narratives (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill and Intangible Assets
Measurement period adjustments from BDSI Acquisition	$ 162

Term Notes Payable - 2022 Term Loan - Future Minimum Payments (Details) - Pharmakon Term Notes $ in Thousands	Mar. 31, 2023 USD ($)
Principal repayments
2023	$ 137,500
2024	183,333
2025	183,333
2026	45,834
Total before unamortized discount and issuance costs	550,000
Less: unamortized discount and issuance costs	(12,898)
Term notes carrying value	$ 537,102

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Inventory (Details) - USD ($) $ in Thousands	3 Months Ended
Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory
Raw materials	$ 5,831	$ 5,600
Work in process	13,347	24,672
Finished goods	13,717	16,229
Total inventory	32,895	$ 46,501
Excess and obsolete inventory	$ 906

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Operating activities
Net loss	$ (17,426)	$ (13,069)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization expense	37,466	18,923
Depreciation expense	817	715
Deferred income taxes	(46)	(6,038)
Stock-based compensation expense	6,035	6,135
Non-cash lease expense	(105)	158
Non-cash interest expense for amortization of debt discount and issuance costs	2,287	913
Loss on extinguishment of debt	23,504
Changes in operating assets and liabilities:
Accounts receivable	3,993	(5,006)
Inventory	13,606	330
Prepaid expenses and other assets	(238)	677
Accounts payable	(502)	(350)
Accrued expenses	(12,131)	(6,838)
Accrued rebates, returns and discounts	(29,589)	(21,865)
Net cash provided by (used in) operating activities	27,671	(25,315)
Investing activities
Purchases of property and equipment	(176)	(108)
Acquisition of BDSI (net of cash acquired)		(572,069)
Net cash used in investing activities	(176)	(572,177)
Financing activities
Proceeds from issuances of common stock from employee stock purchase plan	169	203
Proceeds from the exercise of stock options	3,848	3,261
Payments made for employee stock tax withholdings	(7,736)	(3,382)
Repayment of term notes	(25,000)
Proceeds from term note modification		517,682
Proceeds from issuances of 2029 Convertible Notes, net of issuance costs of $5,846	235,654
Repurchase of 2026 Convertible Notes, including premium	(138,638)
Net cash provided by financing activities	68,297	517,764
Net increase (decrease) in cash, cash equivalents and restricted cash	95,792	(79,728)
Cash, cash equivalents and restricted cash at beginning of period	176,235	188,973	$ 188,973
Cash, cash equivalents and restricted cash at end of period	272,027	109,245	176,235
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:
Cash and cash equivalents	269,480	106,698	173,688
Restricted cash	2,547	2,547	2,547
Total cash, cash equivalents and restricted cash	272,027	109,245	$ 176,235
Supplemental disclosure of cash flow information
Cash paid for interest	19,499	5,833
Cash paid for income taxes	743	2,114
Supplemental disclosure of non-cash activities
Acquisition of property and equipment in accounts payable and accrued expenses		$ 148
Note issuance costs in accounts payable and accrued expenses	$ 434

Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may face legal claims or actions in the normal course of business. Except as disclosed below, the Company is not currently a party to any material litigation and, accordingly, does not have any other amounts recorded for any litigation related matters.

Xtampza ER Litigation

The Company filed the New Drug Application (“NDA”) for Xtampza ER as a 505(b)(2) application, which allows the Company to reference data from an approved drug listed in the FDA’s Orange Book, in this case OxyContin. The 505(b)(2) process requires that the Company certify to the FDA that the Company does not infringe any of the patents listed for OxyContin in the Orange Book, or that the patents are invalid. The process also requires that the Company notify Purdue Pharma, L.P (“Purdue”), as the holder of the NDA, and any other Orange Book-listed patent owners that it has made such a certification. On February 11, 2015, the Company made the required certification documenting why Xtampza ER does not infringe any of the 11 Orange Book-listed patents for OxyContin, five of which have been invalidated in court proceedings, and provided the required notice to Purdue. Under the Drug Price Competition and Patent Term Restoration Act of 1984, Purdue had the option to sue the Company for infringement and receive a stay of up to 30 months before the FDA could issue a final approval for Xtampza ER, unless the stay was earlier terminated.

In response to these actions, Purdue sued the Company for infringement in the District of Delaware on March 24, 2015 asserting infringement of three of Purdue’s Orange Book-listed patents (Patent Nos. 7,674,799, 7,674,800, and 7,683,072) and a non-Orange Book-listed patent (Patent No. 8,652,497), and accordingly, received a 30-month stay of FDA approval.

The Delaware court transferred the case to the District of Massachusetts. After the Company filed a partial motion for judgment on the pleadings relating to the Orange Book-listed patents, the District Court of Massachusetts ordered judgment in the Company’s favor on those three patents, and dismissed the claims asserting infringement of those patents with prejudice. Upon dismissal of those claims, the 30-month stay of FDA approval was lifted. As a result, the Company was able to obtain final approval for Xtampza ER and launch the product commercially.

Purdue subsequently filed two follow-on lawsuits asserting infringement of two patents that had been late-listed in the Orange Book and therefore, could not trigger any stay of FDA approval: Purdue filed suit asserting infringement of Patent No. 9,073,933 in November 2015, and asserted infringement of Patent No. 9,522,919 in April 2017. In addition, Purdue filed suit on two patents that had not been listed in the Orange Book, filing suit in June 2016 asserting infringement of Patent No. 9,155,717 and in September 2017, asserting infringement of Patent No. 9,693,961.

On March 13, 2018, the Company filed a Petition for Post-Grant Review (“PGR”) of the ʼ961 patent with the Patent Trial and Appeal Board (“PTAB”). The PGR argues that the ʼ961 patent is invalid for lack of a written description, for lack of enablement, for indefiniteness, and as being anticipated by prior art. The PTAB held oral argument on the proceedings on July 10, 2019 and was scheduled to issue a decision on the patentability of the ʼ961 patent by no later than October 4, 2019. On September 15, 2019, Purdue commenced a voluntary case under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. On September 24, 2019, Purdue gave the PTAB notice of its bankruptcy filing and sought the imposition of an automatic

stay of the PGR proceedings. On October 2, 2019, the PTAB extended the one-year period for issuing its decision by up to six months.

In October 2017, and in response to the filing of the Company’s supplemental New Drug Application (“sNDA”) seeking to update the drug abuse and dependence section of the Xtampza ER label, Purdue filed another suit asserting infringement of the ʼ933 and ʼ919 patent. The Company filed a motion to dismiss that action, and the Court granted its motion on January 16, 2018.

A claim construction hearing was held on June 1, 2017. On November 21, 2017, the Court issued its claim construction ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717 patents. The Court issued an order on September 28, 2018 in which it granted in part a motion for summary judgment that the Company filed. Specifically, the Court ruled that the Xtampza ER formulation does not infringe the ʼ497 and ʼ717 patents. On September 18, 2019, Purdue gave the Court notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings. On September 20, 2019, the matter was stayed pending further order of the Court.

On September 1, 2020, the Bankruptcy Court entered an Order Granting Motions for Relief from the Automatic Stay, lifting the automatic stays in both the District of Massachusetts and PTAB proceedings. The Company appealed the Bankruptcy Court’s Order, in part, and that appeal is stayed, on consent by Purdue, pending the outcome of any appeal of the PTAB proceedings. On September 11, 2020, Purdue filed a motion to terminate the PTAB action on the basis that those proceedings had gone beyond the 18-month statutory period. The Company opposed Purdue’s motion. On November 19, 2021, the PTAB (i) denied Purdue’s motion to terminate the PGR and (ii) issued its Final Written Decision, finding that claims 1-17 of the ʼ961 patent were invalid for lack of written description and anticipation. On December 17, 2021, Purdue filed a Request for Director Review. That request was denied on February 7, 2022. On February 16, 2022, Purdue filed a Federal Circuit notice of appeal. On April 12, 2022, the Company filed a Motion to Dismiss the Appeal as Untimely. On May 20, 2022, the Federal Circuit denied the Motion to Dismiss and directed the parties to address jurisdiction during merits briefing.

On April 2, 2021, the Court granted Purdue’s Motion to Lift the Stay in the District of Massachusetts that was entered following Purdue’s Notice of Bankruptcy. On April 9, 2021, Purdue filed another follow-on lawsuit asserting infringement of U.S. Patent No. 10,407,434, which was late-listed in the Orange Book and therefore could not trigger any stay of FDA approval. The Company responded to Purdue’s complaint asserting the ’434 patent with a motion to dismiss. On May 21, 2021, and in response to the Company’s motion to dismiss, Purdue filed an amended complaint asserting the ’434 patent. The Company renewed its motion to dismiss on June 4, 2021, arguing: (i) Purdue cannot, as a matter of law, state a claim for infringement under § 271(e)(2)(A); (ii) Purdue cannot, as a matter of law, state a claim for product-by-process infringement under §271(g); and (iii) Purdue has not alleged facts sufficient to support any indirect infringement theory under §271(b) or (c). The Court held a hearing on the Company’s motion to dismiss on October 13, 2021, and the motion is pending before the Court.

Like the prior follow-on lawsuits, the ’434 patent litigation was consolidated into the lead case and a scheduling order was entered. On October 5, 2021, the Court held a claim construction hearing for the ʼ961 patent and the ʼ434 patent. On February 10, 2023, the Court set (i) the fact discovery deadline for August 2, 2023; and (ii) expert witness depositions to conclude by November 22, 2023. The Court has not set a deadline for dispositive motions or trial.

The remaining patents-in-suit in the lead consolidated action in the District of Massachusetts are the ʼ933, ʼ919, ʼ434, and ʼ961 patents. The parties agreed, however, that litigation concerning the ʼ961 patent is stayed pending resolution of Purdue’s Federal Circuit appeal of the PTAB decision invalidating the claims of the ʼ961 patent. Purdue has made a demand for monetary relief, and requested a judgment of infringement, an adjustment of the effective date of FDA approval, and an injunction on the sale of the Company’s products accused of infringement. The Company has denied all claims and has requested a judgment that the remaining asserted patents are invalid and/or not infringed; the Company is also seeking a judgment that the case is exceptional and has requested an award of the Company’s attorneys’ fees for defending the case.

The Company plans to defend this case vigorously. At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Nucynta Litigation

On February 7, 2018, Purdue filed a patent infringement suit against the Company in the District of Delaware. Specifically, Purdue argues that the Company’s sale of immediate-release and extended-release Nucynta infringes U.S. Patent Nos. 9,861,583, 9,867,784, and 9,872,836. Purdue has made a demand for monetary relief in its complaint but has not quantified its alleged damages.

On December 6, 2018, the Company filed an Amended Answer asserting an affirmative defense for patent exhaustion. On December 10, 2018, the Court granted the parties’ stipulation for resolution of the Company’s affirmative defense of patent exhaustion and stayed the action, with the exception of briefing on and resolution of the Company’s Motion for Judgment on the Pleadings related to patent exhaustion and any discovery related to that Motion. Also, on December 10, 2018, the Company filed a Rule 12(c) Motion for Judgment on the Pleadings, arguing that the Purdue’s claims were barred by the doctrine of patent exhaustion. On June 18, 2019, the Court heard oral argument on the Company’s Rule 12(c) Motion for Judgment on the Pleadings. On June 19, 2019, the Court issued an order stating that “judgment in Collegium’s favor is warranted under the doctrine of patent exhaustion to the extent Collegium’s alleged infringing activities resulted from sales that fall within the scope of that covenant.” The Court explained, however, that based on the current record, it was not possible “to determine whether title of the Nucynta Products was transferred to Collegium” from sales authorized by Purdue’s covenant not to sue. The Court ordered discovery on this issue and the case remained “stayed with the exception of discovery and briefing on and resolution of the Company’s anticipated motion for summary judgment based on patent exhaustion.”

On September 19, 2019, Purdue gave the Court notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings. The Nucynta litigation is subject to the automatic bankruptcy stay.

Pending resolution of the bankruptcy action, the Company plans to defend this case vigorously. At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Litigation Related to the BDSI Acquisition

On February 25, 2022, in connection with the BDSI Acquisition, a purported individual stockholder of BDSI filed a complaint in the United States District Court for the Southern District of New York, captioned Stein v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01600, naming as defendants BDSI and each member of its Board of Directors as of the date of the Merger Agreement (“Stein Action”). On February 28, 2022, two additional cases were filed by purported individual stockholders of BDSI in the same court, captioned Sanford v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01676 (“Sanford Action”), and Higley v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01658 (“Higley Action”). On March 2, 2022 and March 5, 2022, two additional cases were filed by purported individual stockholders of BDSI in the United States District Court for the Eastern District of New York, captioned Justice II v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01145 (“Justice Action”) and Zomber v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01220 (“Zomber Action”; together with the Stein, Sanford, Higley, and Justice Actions, the “Actions”). The Actions and any similar subsequently filed cases involving BDSI, its officers or Board of Directors, or any committee thereof, and/or any of the Company’s officers or directors relating directly or indirectly to the Merger Agreement, the BDSI Acquisition or any related transaction, are referred to as the “Merger Litigations.”

The Merger Litigations filed to date generally allege that the Schedule 14D-9 is materially incomplete and misleading by allegedly failing to disclose purportedly material information relating to the sale process leading to the Merger, BDSI’s financial projections, and the analyses performed by Moelis & Company LLC in connection with the Merger. The Merger Litigations assert violations of Section 14(e) of the Exchange Act and violations of Section 20(a) of the Exchange Act against BDSI’s Board of Directors. Additionally, the Stein, Higley, Justice, and Zomber complaints assert violations of Section 14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder. The Merger Litigations seek, among other things: an injunction enjoining consummation of the Merger, rescission of the Merger Agreement, a declaration that BDSI and its Board of Directors violated Sections 14(e) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, damages, costs of the action, including plaintiffs’ attorneys’ fees and experts’ fees and expenses, and any other relief the court may deem just and proper.

In addition, on February 24, 2022, February 28, 2022, and March 7, 2022, BDSI received demand letters from three purported stockholders of BDSI seeking to inspect certain books and records of BDSI related to the Merger (collectively, the “Inspection Letters”). On March 4, 2022, March 9, 2022, and March 11, 2022, BDSI received demand letters from four purported stockholders alleging that the Schedule 14D-9 omits purportedly material information relating to the Merger (collectively, the “Demand Letters”).

On April 14, 2022, plaintiff in the Higley Action filed a notice of voluntary dismissal of the complaint. On May 15, 2022, plaintiff in the Zomber Action filed a notice of voluntary dismissal of the complaint. And, on June 24, 2022, plaintiff in the Justice Action filed a notice of voluntary dismissal of the complaint. In the remaining Stein and Sanford Actions, on July 20, 2022, the respective Courts entered an Order for plaintiff to serve a summons and complaint by August 3, 2022. On July 28, 2022, plaintiff in the Sanford Action filed a partial voluntary dismissal of the individual named defendants but not BDSI from that action and filed a waiver of service as to BDSI. On October 26, 2022, plaintiff in the Sanford Action filed a notice of voluntary dismissal of the complaint as to Defendant BDSI as well. To date, the complaint in the Stein Action has not been served on, nor was service waived by, any of the named defendants in that action.

While the Company believes that the remaining Merger Litigations, Inspection Letters, and Demand Letters are without merit and that the disclosures in the Schedule 14D-9 comply fully with applicable law, solely in order to avoid the expense and distraction of litigation, BDSI previously determined to voluntarily supplement the Schedule 14D-9 with certain supplemental disclosures set forth in BDSI’s Schedule 14D-9 filed with the SEC on March 11, 2022 (the “Supplemental Disclosures”). The Company and BDSI believe that the Supplemental Disclosures mooted all allegations or concerns raised in the Merger Litigations, Inspection Letters, and Demand Letters.

As set forth in the Supplemental Disclosures, nothing therein shall be deemed an admission of the legal necessity or materiality under applicable law of the Supplemental Disclosures. To the contrary, the Company and BDSI specifically deny all allegations that any of the Supplemental Disclosures, or any other additional disclosures, were or are required. The Company plans to defend the Merger Litigations vigorously. At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Opioid Litigation

As a result of the opioid epidemic, numerous state and local governments, healthcare providers, and other entities brought suit against manufacturers, wholesale distributors, and pharmacies alleging a variety of claims related to opioid marketing and distribution practices. In late 2017, the U.S. Judicial Panel on Multidistrict Litigation ordered the consolidation of cases pending around the country in federal court against opioid manufacturers and distributors into a Multi-District Litigation (“MDL”) in the Northern District of Ohio. Of the 21 MDL cases that named the Company as a defendant, the allegations against it were previously dismissed or withdrawn in 13 cases as of December 31, 2021. The remaining eight MDL cases that named the Company were dismissed as of April 19, 2022. In addition, the Company had been previously dismissed from three non-MDL cases filed in Pennsylvania and Arkansas state courts.

Outside of the MDL, there were several cases filed against the Company in state courts in Pennsylvania and Massachusetts:

●

In Pennsylvania, six lawsuits naming the Company were consolidated for discovery purposes in the Delaware County Court of Common Pleas as part of a consolidated proceeding of similar lawsuits brought by numerous Pennsylvania counties against other pharmaceutical manufacturers and distributors. These included lawsuits filed between May 2018 and July 2019, alleging claims related to opioid marketing and distribution, including negligence, fraud, unjust enrichment, public nuisance, and violations of state consumer protections laws.

●

In Massachusetts, there were lawsuits by 13 municipalities, all of which were consolidated before the Business Litigation Session of the Superior Court. The actions alleged a variety of claims related to opioid marketing and distribution practices including public nuisance, common law fraud, negligent misrepresentation, negligence, violations of Mass Gen. Laws ch. 93A, Section 11, unjust enrichment and civil conspiracy.

On December 24, 2021, the Company entered into a settlement framework with Scott+Scott Attorneys at Law, LLP, the law firm representing plaintiffs in each of the 27 cases, including the 8 remaining MDL cases and 19 state court cases described above. Pursuant to the terms of the settlement framework, which were later memorialized in a final settlement

agreement, the Company agreed to pay $2,750 in exchange for the dismissal, with prejudice, of each plaintiff’s lawsuit against the Company and a release of claims related to such lawsuits. The settlement agreement was executed by the Company and all 27 plaintiffs, and the amounts subject to the settlement agreement were paid. As of April 19, 2022, the Company was dismissed, with prejudice, from each of the 27 cases.

The Company entered into this settlement to efficiently resolve this litigation and does not admit any liability or acknowledge any wrongdoing in connection with the settlement agreement.

Aquestive Litigation

On October 29, 2013, Reckitt Benckiser, Inc., Indivior PLC (formerly RB Pharmaceuticals Limited, “Indivior”), and Aquestive Therapeutics, Inc. (formerly MonoSol Rx, “Aquestive”) (collectively, the “RB Plaintiffs”) filed an action against BDSI relating to its Bunavail product in the United States District Court for the Eastern District of North Carolina (“EDNC”) for alleged patent infringement. Bunavail is a drug approved for the maintenance treatment of opioid dependence. This case was dismissed, but the RB Plaintiffs subsequently filed an action against BDSI, on September 22, 2014, relating to Bunavail product in the United States District Court for the District of New Jersey for alleged patent infringement. The RB Plaintiffs claimed that Bunavail, whose formulation and manufacturing processes have never been disclosed publicly, infringes its patent U.S. Patent No. 8,765,167 (the “‘167 Patent”).

On January 13, 2017, Aquestive filed a complaint in the United States District Court for the District of New Jersey alleging Belbuca infringes the ‘167 Patent.

On March 8, 2023, the parties filed a stipulation of dismissal. The RB Plaintiffs dismissed their claims with prejudice, and BDSI dismissed its counterclaims without prejudice. Under the terms of the settlement agreement, BDSI resolved both the Bunavail and Belbuca litigations in exchange for a one-time, lump-sum payment of $8,500 to Aquestive.

Chemo Research, S.L

On March 1, 2019, BDSI filed a complaint for patent infringement in United States District Court for the District of Delaware against Chemo Research, S.L., Insud Pharma S.L., IntelGenx Corp., and IntelGenx Technologies Corp. (collectively, the “Chemo Defendants”), asserting that the Chemo Defendants infringe its Orange Book-listed patents for BELBUCA, including U.S. Patent Nos. 8,147,866 (“’866 patent”) and 9,655,843, (“’843 patent”) both expiring in July of 2027, and U.S. Patent No. 9,901,539 (“’539 patent”) expiring December of 2032 (collectively, “the BEMA patents”). This complaint follows a receipt by BDSI on January 31, 2019, of a Notice Letter from Chemo Research S.L. stating that it has filed with the FDA an abbreviated New Drug Application (“ANDA”) containing a Paragraph IV Patent Certification, for a generic version of BELBUCA Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, and 900 mcg. Because BDSI initiated a patent infringement suit asserting the patents identified in the Notice Letter within 45 days after receipt, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not infringed or invalid. On March 15, 2019, BDSI filed a complaint against the Chemo Defendants in the Federal District Court for the District of New Jersey asserting the same claims for patent infringement made in the Delaware lawsuit. On April 19, 2019, Defendants filed an answer to the Delaware complaint wherein they denied infringement of the ’866, ’843 and ’539 patents and asserted counterclaims seeking declaratory relief concerning the alleged invalidity and non-infringement of such patents.

On April 25, 2019, BDSI voluntarily dismissed the New Jersey lawsuit given Defendants’ consent to jurisdiction in Delaware.

The trial to adjudicate issues concerning the validity of the Orange Book-listed patents covering BELBUCA was held from March 1-3, 2021. Chemo did not participate in the bench trial. Instead, on February 26, 2021, Chemo agreed to be bound by the decision of the Court with respect to the validity of the BEMA patents from the March 1-3, 2021 trial with Alvogen. On December 20, 2021, the Court issued an opinion upholding the validity of certain claims in BDSI’s ʼ866 patent, which expires in 2027, and certain claims in the ’539 patent, which expires in 2032, to which Chemo is bound. This holding was affirmed on appeal by the Federal Circuit on December 21, 2022. The bench trial to adjudicate issues concerning the Chemo Defendants’ infringement of the Orange Book patents was set to commence on April 25, 2022. On March 30, 2022, the Court vacated the trial and has not yet set a new trial date.

On August 1, 2022, BDSI received a second Paragraph IV certification notice letter from Chemo indicating that Chemo has amended its ANDA to (i) withdraw its generic version of the 75 mcg and 150 mcg strengths of BELBUCA; and (ii) include its generic version of the 600 mcg and 750 mcg strengths of BELBUCA, in addition to the 300 mcg, 450 mcg, and 900 mcg strengths identified in the first Chemo Paragraph IV certification notice letter. In response, BDSI filed a complaint for patent infringement in Federal District Court for the District of Delaware. Chemo answered the complaint on December 1, 2022. The Court has not set a schedule for this litigation.

On August 24, 2022, the Court instructed the parties to update the Court at such time as the FDA addresses Chemo's July 29, 2022 response to the FDA. On February 8, 2023, the district court denied Chemo’s request for a trial date in the spring, and again instructed the parties to update the Court at such time as the FDA addresses Chemo’s July 29, 2022 response to the FDA. Chemo received a complete response letter with respect to its July 29, 2022 ANDA in April 2023.

The Company plans to litigate these cases vigorously. At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Alvogen

On September 7, 2018, BDSI filed a complaint for patent infringement in United States District Court for the District of Delaware against Alvogen Pb Research & Development LLC, Alvogen Malta Operations Ltd., Alvogen Pine Brook LLC, Alvogen, Incorporated, and Alvogen Group, Incorporated (collectively, “Alvogen”), asserting that Alvogen infringes BDSI’s Orange Book-listed patents for BELBUCA, including U.S. Patent Nos. 8,147,866 and 9,655,843, both expiring in July of 2027, and U.S. Patent No. 9,901,539, expiring in December of 2032 (collectively, “the BEMA patents”). This complaint followed receipt by BDSI on July 30, 2018 of a Paragraph IV Patent Certification from Alvogen stating that Alvogen had filed an ANDA with the FDA for a generic version of BELBUCA Buccal Film (75 mcg, 150 mcg, 300 mcg, 450 mcg, 600 mcg, 750 mcg and 900 mcg). Because BDSI initiated a patent infringement suit asserting the patents identified in the Paragraph IV notice within 45 days after receipt of the Paragraph IV Certification, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not infringed or invalid.

The Court scheduled a bench trial to adjudicate issues concerning the validity of the BEMA patents. A three-day bench trial against Alvogen was conducted commencing on March 1, 2021.

On December 20, 2021, the Court issued an opinion upholding the validity of certain claims in BDSI’s ʼ866 patent, which expires in 2027, and certain claims in the ’539 patent, which expires in 2032. Alvogen conceded infringement of those claims prior to the trial. The Court entered final judgment on January 21, 2022. The final judgment entered in this case upholding the validity of claims of the ’866 and ’539 Orange Book-listed patents extends the effective date of any final approval by the FDA of Alvogen’s ANDA until December 21, 2032, which is the expiration date of the ’539 patent, and enjoins Alvogen and those acting in concert with Alvogen from commercially manufacturing, using, selling, or offering for sale Alvogen’s ANDA products until December 21, 2032. Alvogen filed a motion to stay certain provisions of the final judgment in the Court. BDSI filed an opposition to Alvogen’s request for a stay. The Court retained jurisdiction to decide BDSI’s motion for contempt, which was filed on September 21, 2021.

Alvogen filed a notice of appeal to the Federal Circuit seeking to reverse the Court’s final judgment entered on January 21, 2022. Separately, BDSI filed a cross-appeal to the Federal Circuit seeking to reverse the Court’s opinion that claims 3 and 10 of the ʼ866 patent and claims 8, 9 and 20 of the ’843 patent are invalid and thus Alvogen is not liable for infringement of those claims, as well as any other ruling decided adversely to BDSI. On November 1, 2022, the Federal Circuit held oral argument on the parties’ appeal and issued its decision on December 21, 2022. In that decision, the Federal Circuit affirmed the district court judgment that certain claims of the ʼ866 and ʼ539 patent were not invalid as obvious. The Federal Circuit also vacated the district court’s judgment that certain claims of the ʼ866 and ʼ843 patent were invalid as obvious and remanded to the district court for further proceedings. The mandate issued on February 10, 2023.

As it has done in the past, the Company intends to vigorously defend its intellectual property against assertions of invalidity or non-infringement.

Opioid-Related Request and Subpoenas

The Company, like a number of other pharmaceutical companies, has received subpoenas or civil investigative demands related to opioid sales and marketing. The Company has received such subpoenas or civil investigative demands from the Offices of the Attorney General of each of Washington, New Hampshire, Maryland and Massachusetts.

On December 16, 2021, the Company entered into an Assurance of Discontinuance with the Massachusetts Attorney General (the “AoD”). The Company is currently cooperating with each of the remaining states in their respective investigations.

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

Fair Value of Financial Instruments

Fair Value of Financial Instruments

7. Fair Value of Financial Instruments

Disclosures of fair value information about financial instruments are required, whether or not recognized in the balance sheet, for financial instruments with respect to which it is practicable to estimate that value. Fair value measurements and disclosures describe the fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, as follows:


Level 1 inputs:	Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 inputs:	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 inputs:	Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability

Transfers are calculated on values as of the transfer date. There were no transfers between Levels 1, 2 and 3 during the three months ended March 31, 2023 and 2022.

The following table presents the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument at March 31, 2023 and December 31, 2022:


						Significant
				Quoted Prices		other		Significant
				in active		observable		unobservable
				markets		inputs		inputs
		Total		(Level 1)		(Level 2)		(Level 3)
March 31, 2023
Money market funds, included in cash equivalents	$	122,554	$	122,554	$	—	$	—

December 31, 2022
Money market funds, included in cash equivalents	$	172,590	$	172,590	$	—	$	—

The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis

using quoted market prices. Accordingly, these securities are categorized as Level 1.

Assets and Liabilities Not Carried at Fair Value

As of March 31, 2023, the fair value of the Company's 2.625% convertible senior notes due in 2026 was $28,656 and the fair value of the Company's 2.875% convertible senior notes due in 2029 was $216,505, which were estimated utilizing market quotations, and are considered Level 2.

The Company’s term notes fall into the Level 2 category within the fair value level hierarchy and the fair value was

determined using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals. As of March 31, 2023, the outstanding principal balance of the term notes of $550,000 reasonably approximated the estimated fair value.

As of March 31, 2023, and December 31, 2022, the carrying amounts of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued rebates, returns and discounts reasonably approximated their estimated fair values.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Acquisitions (Tables)

3 Months Ended

Mar. 31, 2023

Acquisitions

Schedule of consideration paid for acquisition

The total consideration paid for the BDSI acquisition was approximately $669,431 consisting of the following (in thousands, except per share amounts):


Fair Value of Purchase Price Consideration	Amount
Fair value of purchase price consideration paid at closing:
Cash consideration for all outstanding shares of BDSI's common and preferred stock (103,235,298 shares acquired at $5.60 per share)	$	578,118
Cash consideration paid to settle RSUs and in-the-money options		28,309
Cash paid to settle BDSI debt		63,004
Total purchase consideration	$	669,431

Schedule of preliminary allocation of acquisition purchase price

The following tables set forth the final allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:


	Amounts Recognized at the Acquisition Date
Assets Acquired
Cash and cash equivalents	$	97,362
Accounts receivable		55,495
Inventory		77,382
Prepaid expenses and other current assets		6,125
Property and equipment		1,242
Operating lease assets		481
Intangible assets		435,000
Total assets	$	673,087
Liabilities Assumed
Accounts payable	$	12
Accrued expenses		18,249
Accrued rebates, returns and discounts		56,261
Operating lease liabilities		481
Deferred tax liabilities		62,510
Total liabilities	$	137,513
Total identifiable net assets acquired		535,574
Goodwill		133,857
Total consideration transferred	$	669,431

Goodwill and Intangible Assets - Roll Forward (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Goodwill [Roll Forward]
Balance at December 31, 2021	$ 133,695
Measurement period adjustments from BDSI Acquisition	162
Balance at September 30, 2022	$ 133,857

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Issuance costs	$ 5,846

Goodwill and Intangible Assets - Cost, accumulated amortization, and carrying amount of intangible assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 133,857	$ 133,695
Cost	951,170	956,170
Accumulated Amortization	(421,168)	(388,702)
Carrying Amount	$ 530,002	567,468
Nucynta Products
Finite-Lived Intangible Assets [Line Items]
Amortization Period (Years)	8 years
Cost	$ 521,170	521,170
Accumulated Amortization	(336,424)	(319,628)
Carrying Amount	$ 184,746	201,542
Belbuca
Finite-Lived Intangible Assets [Line Items]
Amortization Period (Years)	4 years 9 months 18 days
Cost	$ 360,000	360,000
Accumulated Amortization	(77,277)	(58,428)
Carrying Amount	$ 282,723	301,572
Symproic
Finite-Lived Intangible Assets [Line Items]
Amortization Period (Years)	9 years 7 months 6 days
Cost	$ 70,000	70,000
Accumulated Amortization	(7,467)	(5,646)
Carrying Amount	$ 62,533	64,354
Elyxyb
Finite-Lived Intangible Assets [Line Items]
Cost		5,000
Accumulated Amortization		$ (5,000)

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Summary of significant accounting policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Collegium Pharmaceutical, Inc. (a Virginia corporation) and its subsidiaries. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

In the opinion of the Company’s management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to fairly present the financial position of the Company as of March 31, 2023, and the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year.

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of products, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of intangible assets and tax valuation allowances. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions. The consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s most recently filed annual report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”).

There were no changes in the Company’s significant accounting policies from those described in the Company’s Annual Report.

Recently Adopted Accounting Pronouncements

New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as required by the specified effective dates.

Recently Issued Accounting Pronouncements Not Yet Adopted

Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.

Inventory

3 Months Ended

Mar. 31, 2023

Inventory

Inventory

8. Inventory

Inventory as of March 31, 2023 and December 31, 2022 consisted of the following:


	March 31,		December 31,
	2023		2022
Raw materials	$	5,831	$	5,600
Work in process		13,347		24,672
Finished goods		13,717		16,229
Total inventory	$	32,895	$	46,501

The aggregate charges related to excess and obsolete inventory for the three months ended March 31, 2023 was $906. These expenses were recorded as a component of cost of product revenues. The aggregate charges related to excess and obsolete inventory for the three months ended March 31, 2022 were immaterial.

Equity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Jan. 31, 2023	Aug. 31, 2021	May 31, 2015
Equity
Share repurchase program authorized amount				$ 100,000
ASR
Equity
Shares repurchased during the period		3,235,823
Repurchases of common stock		$ 61,924
Shares repurchased, cost per share		$ 19.14
2014 Stock Incentive Plan
Equity
Shares of common stock authorized for issuance (in shares)					2,700,000
Increase in number of authorized shares on the first day of each fiscal year, as a percentage of outstanding common stock (as a percent)	4.00%
Shares of common stock remaining available for future grant (in shares)	1,983,955
Vesting period (in years)	4 years
Contractual life (in years)	10 years
Period following termination date vested options are exercisable (in months)	3 months
Maximum \| 2023 Share Repurchase Program
Equity
Share repurchase program authorized amount	$ 100,000		$ 100,000

Convertible Senior Notes

3 Months Ended

Mar. 31, 2023

Convertible Senior Notes.

Convertible Senior Notes

12. Convertible Senior Notes

2026 Convertible Notes

On February 13, 2020, the Company issued 2.625% convertible senior notes due in 2026 (the “2026 Convertible Notes”) in the aggregate principal amount of $143,750, in a public offering registered under the Securities Act of 1933, as amended. The 2026 Convertible Notes were issued in connection with funding the acquisition of the Nucynta Products. Some of the Company’s existing investors participated in the 2026 Convertible Notes offering. In connection with the issuance of the 2026 Convertible Notes, the Company incurred approximately $5,473 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

The 2026 Convertible Notes are senior, unsecured obligations and bear interest at a rate of 2.625% per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. Before August 15, 2025, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after August 15, 2025, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The 2026 Convertible Notes will mature on February 15, 2026, unless earlier repurchased, redeemed or converted. The initial conversion rate is 34.2618 shares of common stock per $1 principal amount of 2026 Convertible Notes, which represents an initial conversion price of approximately $29.19 per share of common stock. The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events.

Holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes, in multiples of $1 principal amount, at their option only under the following circumstances:

(1)

during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2)

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal amount of the 2026 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

(3)

upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(4)

if the Company calls the 2026 Convertible Notes for redemption; or

(5)

at any time from, and including, August 15, 2025 until the close of business on the scheduled trading day immediately before the maturity date.

As of March 31, 2023, none of the above circumstances had occurred and as such, the 2026 Convertible Notes could not have been converted.

The Company did not have the right to redeem the 2026 Convertible Notes prior to February 15, 2023. On or after February 15, 2023, the Company may redeem the 2026 Convertible Notes, in whole and not in part, at a cash redemption price equal to the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on:

(1)

each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and

(2)

the trading day immediately before the date the Company sends such notice.

Calling any 2026 Convertible Notes for redemption will constitute a make-whole fundamental change, in which case the conversion rate applicable to the conversion of any 2026 Convertible Notes, if converted in connection with the redemption, will be increased in certain circumstances for a specified period of time.

The 2026 Convertible Notes have customary default provisions, including (i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture, if such default is not cured within 3 calendar days after its occurrence; (iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales; (v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company; (vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $20,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness; (vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company’s significant subsidiaries for the payment of at least $20,000; and (viii) certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries.

Repurchase of a Portion of the 2026 Convertible Notes

Contemporaneously with the offering of the 2029 Convertible Notes (as defined below), the Company entered into separate privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $117,400 aggregate principal amount of the 2026 Convertible Notes for an aggregate of $140,100 of cash, which includes accrued and unpaid interest on the 2026 Convertible Notes to be repurchased. This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2026 Convertible Notes participating in the issuance of the 2029 Convertible Notes. Accordingly, the Company evaluated the transaction for modification or extinguishment accounting in accordance with Accounting Standards Codification (“ASC”) 470-50, Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange was determined to have substantially different terms. The repurchase of the 2026 Convertible Notes and issuance of the 2029 Convertible Notes were deemed to have substantially different terms based on the present value of the cash flows immediately prior to and after the exchange. Therefore, the repurchase of the 2026 Convertible Notes was accounted for as a debt extinguishment. The Company recorded a $23,504 loss on early extinguishment of debt on the Condensed Consolidated Statements of Operations for the three months ending March 31, 2023, which includes the recognition of previously deferred financing

costs of $2,264. After giving effect to the repurchase, the total remaining principal amount outstanding under the 2026 Convertible Notes as of March 31, 2023 was $26,350.

2029 Convertible Notes

On February 10, 2023, the Company issued 2.875% convertible senior notes due in 2029 (the “2029 Convertible Notes”) in the aggregate principal amount of $241,500, in a private offering to qualified institutional buyers pursuant to Section 4(a)(2) and Rule 144A under the Securities Act of 1933, as amended. The 2029 Convertible Notes were issued to finance the concurrent repurchase of a portion of the 2026 Convertible Notes, and the remainder of the net proceeds may be used for general corporate purposes. In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $6,280 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

The 2029 Convertible Notes are senior, unsecured obligations and bear interest at a rate of 2.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023. The 2029 Convertible Notes will mature on February 15, 2029, unless earlier repurchased, redeemed or converted. Before November 15, 2028, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after November 15, 2028, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The initial conversion rate is 27.3553 shares of common stock per $1 principal amount of 2029 Convertible Notes, which represents an initial conversion price of approximately $36.56 per share of common stock. The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events.

Holders of the 2029 Convertible Notes may convert all or any portion of their 2029 Convertible Notes, in multiples of $1 principal amount, at their option only under the following circumstances:

(1)

during any calendar quarter commencing after the calendar quarter ending on June 30, 2023, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2)

during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

(3)

upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(4)

if the Company calls any or all of the 2029 Convertible Notes for redemption, but only with respect to the 2029 Convertible Notes called for redemption; or

(5)

at any time from, and including, November 15, 2028 until the close of business on the scheduled trading day immediately before the maturity date.

As of March 31, 2023, none of the above circumstances had occurred and as such, the 2029 Convertible Notes could not have been converted.

The Company may not redeem the 2029 Convertible Notes prior to February 17, 2026. On or after February 17, 2026 and on or before the 40^th scheduled trading day before the maturity date, the Company may redeem the 2029 Convertible Notes, in whole or in part, at a cash redemption price equal to the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on:

(1)

(2)

the trading day immediately before the date the Company sends such notice.

However, the Company may not redeem less than all of the outstanding 2029 Convertible Notes unless at least $75,000 aggregate principal amount of the 2029 Convertible Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

Calling any 2029 Convertible Note for redemption will constitute a make-whole fundamental change with respect to that 2029 Convertible Note, in which case the conversion rate applicable to the conversion of that 2029 Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances for a specified period of time.

The 2029 Convertible Notes have customary default provisions, including (i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture, if such default is not cured within 3 business days after its occurrence; (iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales; (v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company; (vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $30,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness; (vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company’s significant subsidiaries for the payment of at least $30,000; and (xiii) upon the occurrence of certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries.

The 2026 Convertible Notes and 2029 Convertible Notes (together, the “Convertible Notes”) are classified on the Condensed Consolidated Balance Sheets as of March 31, 2023, as convertible senior notes.

As of March 31, 2023, the outstanding balance of the Convertible Notes consisted of the following:


	2026 Convertible Notes		2029 Convertible Notes		Total Convertible Notes
Principal	$	26,350	$	241,500	$	267,850
Less: unamortized issuance costs		(484)		(6,144)		(6,628)
Net carrying amount	$	25,866	$	235,356	$	261,222

The Company determined the expected life of the 2026 Convertible Notes and 2029 Convertible Notes was equal to the six-year term of each. The effective interest rate on the 2026 Convertible Notes and 2029 Convertible Notes is 3.34% and 3.28%, respectively. As of March 31, 2023, the if-converted value did not exceed the remaining principal amount of the Convertible Notes.

The following table presents the total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2023, and 2022:


	Three Months Ended March 31,
	2023		2022
Contractual interest expense	$	1,479	$	943
Amortization of debt issuance costs		263		223
Total interest expense	$	1,742	$	1,166

As of March 31, 2023, the future minimum payments on the Convertible Notes were as follows:


Years ended December 31,	2026 Convertible Notes		2029 Convertible Notes		Total Convertible Notes
2023	$	346	$	3,568	$	3,914
2024		692		6,943		7,635
2025		692		6,943		7,635
2026		26,696		6,943		33,639
2027		—		6,943		6,943
Thereafter		—		251,915		251,915
Total minimum payments	$	28,426	$	283,255	$	311,681
Less: interest		(2,076)		(41,755)		(43,831)
Less: unamortized issuance costs		(484)		(6,144)		(6,628)
Convertible Notes carrying value	$	25,866	$	235,356	$	261,222

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized shares	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	100,000,000	100,000,000
Common stock, issued shares	37,816,843	37,084,759
Common stock, outstanding shares	34,581,020	33,848,936
Treasury stock, shares	3,235,823	3,235,823

Convertible Senior Notes (Tables) - Convertible senior notes

3 Months Ended

Mar. 31, 2023

Debt Instrument [Line Items]

Schedule of convertible notes outstanding


	2026 Convertible Notes		2029 Convertible Notes		Total Convertible Notes
Principal	$	26,350	$	241,500	$	267,850
Less: unamortized issuance costs		(484)		(6,144)		(6,628)
Net carrying amount	$	25,866	$	235,356	$	261,222

Schedule of total interest expense recognized related to the convertible notes


	Three Months Ended March 31,
	2023		2022
Contractual interest expense	$	1,479	$	943
Amortization of debt issuance costs		263		223
Total interest expense	$	1,742	$	1,166

Schedule of future minimum payments


Years ended December 31,	2026 Convertible Notes		2029 Convertible Notes		Total Convertible Notes
2023	$	346	$	3,568	$	3,914
2024		692		6,943		7,635
2025		692		6,943		7,635
2026		26,696		6,943		33,639
2027		—		6,943		6,943
Thereafter		—		251,915		251,915
Total minimum payments	$	28,426	$	283,255	$	311,681
Less: interest		(2,076)		(41,755)		(43,831)
Less: unamortized issuance costs		(484)		(6,144)		(6,628)
Convertible Notes carrying value	$	25,866	$	235,356	$	261,222

Acquisitions - Fair Value of Purchase Consideration and Measurement Period Adjustments (Details) - BioDelivery Sciences International, Inc - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Mar. 22, 2022	Mar. 31, 2023
Business Acquisition [Line Items]
Cash consideration for all outstanding shares of BDSI's common and preferred stock (103,235,298 shares acquired at $5.60 per share)	$ 578,118
Cash consideration paid to settle RSUs and in-the-money options	28,309
Cash paid to settle BDSI debt	63,004
Total purchase consideration	$ 669,431
Shares of stock acquired	103,235,298
Share price (in dollars per share)	$ 5.60
Accrued expenses		$ 134
Deferred tax liabilities		28
Goodwill		$ 162

Earnings Per Share - Anti-dilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock options
Anti-dilutive securities
Dilutive securities excluded from the calculation of diluted earnings per share (in shares)	1,443,996	2,401,110
Restricted stock units
Anti-dilutive securities
Dilutive securities excluded from the calculation of diluted earnings per share (in shares)	2,455,919	2,039,179
Performance share units
Anti-dilutive securities
Dilutive securities excluded from the calculation of diluted earnings per share (in shares)	503,880	484,292
Warrants
Anti-dilutive securities
Dilutive securities excluded from the calculation of diluted earnings per share (in shares)		1,041,667
Convertible senior notes
Anti-dilutive securities
Dilutive securities excluded from the calculation of diluted earnings per share (in shares)	7,509,104	4,925,134

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share

Schedule of computations of basic and diluted net (loss) per share


	Three Months Ended March 31,
	2023		2022
Numerator:
Net loss	$	(17,426)	$	(13,069)
Adjustment for interest expense recognized on convertible senior notes:		—		—
Net loss - diluted	$	(17,426)	$	(13,069)
Denominator:
Weighted-average shares outstanding — basic		34,319,291		33,673,912
Effect of dilutive securities:
Stock options		—		—
Restricted stock units		—		—
Performance share units		—		—
Employee stock purchase plan		—		—
Warrants		—		—
Convertible senior notes		—		—

Weighted average shares outstanding — diluted		34,319,291		33,673,912

Loss per share — basic	$	(0.51)	$	(0.39)
Loss per share — diluted	$	(0.51)	$	(0.39)

Schedule of dilutive securities excluded from the calculation of diluted earnings per share


	Three Months Ended March 31,
	2023	2022
Stock options	1,443,996	2,401,110
Restricted stock units	2,455,919	2,039,179
Performance share units	503,880	484,292
Warrants	—	1,041,667
Convertible senior notes	7,509,104	4,925,134

Convertible Senior Notes - Outstanding (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Debt
Net carrying amount	$ 261,222	$ 140,873
Convertible senior notes
Debt
Principal	267,850
Less: unamortized issuance costs	(6,628)
Net carrying amount	$ 261,222
Debt instrument term	6 years
2026 Convertible Notes
Debt
Principal	$ 26,350
Less: unamortized issuance costs	(484)
Net carrying amount	$ 25,866		$ 26,350
Effective interest rate	3.34%
2029 Convertible Notes
Debt
Principal	$ 241,500
Less: unamortized issuance costs	(6,144)
Net carrying amount	$ 235,356
Effective interest rate	3.28%

Equity

3 Months Ended

Mar. 31, 2023

Equity

Equity

13. Equity

The changes in shareholders’ equity for the three months ended March 31, 2023 were as follows:


				Additional							Total
	Common Stock			Paid- In		Treasury Stock			Accumulated		Shareholders’
	Shares		Amount	Capital		Shares		Amount	Deficit		Equity
Balance, December 31, 2022	37,084,759	$	37	$	538,073	(3,235,823)	$	(61,924)	$	(281,344)	$	194,842
Exercise of common stock options	234,132		—		3,848	—		—		—		3,848
Issuance for employee stock purchase plan	11,329		—		169	—		—		—		169
Vesting of RSUs and PSUs	775,904		1		—	—		—		—		1
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(289,281)		—		(7,736)	—		—		—		(7,736)
Stock-based compensation	—		—		6,035	—		—		—		6,035
Net loss	—		—		—	—		—		(17,426)		(17,426)
Balance, March 31, 2023	37,816,843	$	38	$	540,389	(3,235,823)	$	(61,924)	$	(298,770)	$	179,733

The changes in shareholders’ equity for the three months ended March 31, 2022 were as follows:


				Additional							Total
	Common Stock			Paid- In		Treasury Stock			Accumulated		Shareholders’
	Shares		Amount	Capital		Shares		Amount	Deficit		Equity
Balance, December 31, 2021	35,806,119	$	36	$	502,095	(2,150,717)	$	(42,861)	$	(256,342)	$	202,928
Exercise of common stock options	190,074		—		3,261	—		—		—		3,261
Issuance for employee stock purchase plan	13,421		—		203	—		—		—		203
Vesting of RSUs and PSUs	563,050		—		—	—		—		—		—
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(191,667)		—		(3,382)	—		—		—		(3,382)
Share repurchases	—		—		5,000	(307,132)		(5,000)		—		—
Stock-based compensation	—		—		6,135	—		—		—		6,135
Net loss	—		—		—	—		—		(13,069)		(13,069)
Balance, March 31, 2022	36,380,997	$	36	$	513,312	(2,457,849)	$	(47,861)	$	(269,411)	$	196,076

Common Stock

In May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which an aggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultants and advisors of the Company, plus an annual increase on the first day of each fiscal year until the expiration of the Plan equal to 4% of the total number of outstanding shares of common stock on December 31^st of the immediately preceding calendar year (or a lower amount as otherwise determined by the Company’s board of directors (“Board of Directors”) prior to January 1^st). As of March 31, 2023, there were 1,983,955 shares of common stock available for issuance pursuant to the Plan. The Plan provides for granting of both Internal Revenue Service qualified incentive stock

options and non-qualified options, restricted stock awards, restricted stock units and performance stock units. The Company’s qualified incentive stock options, non-qualified options and restricted stock units generally vest ratably over a four-year period of service. The stock options generally have a ten-year contractual life and, upon termination, vested options are generally exercisable for three months following the termination date, while unvested options are forfeited immediately upon termination. Refer to Note 14, Stock-based Compensation, for more information.

Share Repurchases

In August 2021, the Board of Directors authorized a share repurchase program to repurchase up to $100,000 of outstanding shares of the Company’s common stock at any time or times through December 31, 2022 (the “Prior Repurchase Program”). The Prior Repurchase Program permitted the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act. Shares repurchased under the Prior Repurchase Program were returned to the Company’s pool of authorized but unissued shares available for reissuance. The timing and amount of any such repurchases were determined based on share price, market conditions, legal requirements, and other relevant factors.

Through December 31, 2022, the Company repurchased 3,235,823 shares at a weighted-average price of $19.14 per share for a total of $61,924 under the Prior Repurchase Program and the cost of repurchased shares were recorded as treasury stock in the Consolidated Balance Sheet. The Prior Repurchase Program expired on December 31, 2022.

In January 2023, the Board of Directors authorized a share repurchase program to repurchase up to $100,000 of the Company’s common stock through December 31, 2023 (the “2023 Repurchase Program”). The 2023 Repurchase Program permits the Company to effect repurchases through a variety of methods, including open-market purchases (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act. The timing and amount of any shares purchased on the open market will be determined based on the Company’s evaluation of the market conditions, share price and other factors. The Company plans to utilize existing cash on hand to fund the 2023 Repurchase Program.

As of March 31, 2023, the Company has not yet repurchased shares under the 2023 Repurchase Program. Thus, $100,000 remained available for share repurchases under the 2023 Repurchase Program as of March 31, 2023.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Paragraph 13
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+ Details

License Agreements

3 Months Ended

Mar. 31, 2023

License Agreements

License Agreements

5. License Agreements

Shionogi license and supply agreement

Prior to the BDSI Acquisition, BDSI and Shionogi Inc. (“Shionogi”) entered into an exclusive license agreement (the “Shionogi License Agreement”) for the commercialization of Symproic in the United States including Puerto Rico (the “Shionogi Territory”) for opioid-induced constipation in adult patients with chronic non-cancer pain (the “Shionogi Field”).

Pursuant to the terms of the Shionogi License Agreement, tiered royalty payments on net sales of Symproic in the Shionogi Territory are payable quarterly based on a royalty rate that ranges from 8.5% to 17.5% (plus an additional 1% of net sales on a pass-through basis to a third-party licensor of Shionogi) based on volume of net sales and whether Symproic is being sold as an authorized generic. Unless earlier terminated, the Shionogi License Agreement will continue in effect until the expiration of the royalty obligations, as defined therein. Upon expiration of the Shionogi License Agreement, all licenses granted for Symproic in the Shionogi Field and in the Shionogi Territory survive and become fully-paid, royalty-free, perpetual and irrevocable.

BDSI and Shionogi also had entered into a supply agreement under which Shionogi will supply Symproic at cost plus an agreed upon markup. In the event that Symproic is sourced from a third-party supplier, Shionogi would continue to supply naldemedine tosylate for use in Symproic manufacturing at cost plus such agreed upon markup for the duration of the Shionogi License Agreement.

Convertible Senior Notes - 2029 Convertible Notes (Details)			3 Months Ended
	Feb. 10, 2023 USD ($) D $ / shares	Feb. 13, 2020 USD ($) D $ / shares	Jun. 30, 2023 D	Mar. 31, 2023 USD ($) D
2026 Convertible Notes
Debt
Interest rate (as a percent)		2.625%		2.625%
Original principal amount		$ 143,750,000
Total debt issuance cost		$ 5,473,000
Conversion, threshold percentage of stock price trigger		130.00%
Conversion, threshold trading days \| D		20
Principal				$ 26,350,000
Conversion, threshold consecutive trading days \| D		30
Consecutive business days \| D		5
Measurement period \| D		10
Threshold percentage to product of sale price of common stock and conversion rate		98.00%
Number of calendar days \| D		3
Term of notice to company		60 days
Provisions threshold amount of payment		$ 20,000
Effective interest rate				3.34%
Initial conversion rate		34.2618
Initial conversion price (in dollars per share) \| $ / shares		$ 29.19
Threshold amount of money borrowed		$ 20,000,000
Default period		30 days
2029 Convertible Notes
Debt
Interest rate (as a percent)	2.875%			2.875%
Original principal amount	$ 241,500,000
Total debt issuance cost	$ 6,280,000
Conversion, threshold percentage of stock price trigger			130.00%	130.00%
Conversion, threshold trading days \| D			20	20
Principal				$ 241,500,000
Conversion, threshold consecutive trading days \| D			30	30
Consecutive business days \| D			5
Measurement period \| D			10
Threshold percentage to product of sale price of common stock and conversion rate			98.00%
Number of calendar days \| D	3
Term of notice to company	60 days
Provisions threshold amount of payment	$ 30,000
Effective interest rate				3.28%
Threshold amount of money borrowed	$ 30,000,000
Default period	30 days
2029 Convertible Notes \| Minimum
Debt
Principal				$ 75,000
Convertible senior notes
Debt
Interest rate (as a percent)	2.875%
Principal				$ 267,850,000
Initial conversion rate	27.3553
Initial conversion price (in dollars per share) \| $ / shares	$ 36.56

Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

16. Income Taxes

The Company is subject to U.S. federal and state income taxes. The income tax provision for interim periods reflects the Company’s estimate of the annual effective tax rate expected to be applicable for the full fiscal year, adjusted for any discrete events which are recorded in the period in which they occur.

The following table presents information regarding the Company’s income tax benefit recognized for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Benefit from income taxes	$	(131)	$	(2,773)
Effective tax rate		0.7%		17.5%

The benefit from income taxes in the three months ended March 31, 2023 reflects the tax benefit of the current year loss. The tax benefit for the three months ended March 31, 2023 was impacted by discrete nondeductible costs associated with the debt extinguishment, partially offset by excess tax benefits related to stock compensation. The tax benefit for the three months ended March 31, 2022 was significantly impacted by discrete nondeductible transaction costs and partially offset by excess tax benefits related to stock compensation.

The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluates all available evidence including projections of future taxable income, carry back opportunities, reversal of certain deferred tax liabilities, and other tax planning strategies. The Company has maintained a valuation allowance on the portion of its deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions as of March 31, 2023.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Term Notes Payable (Tables)

3 Months Ended

Mar. 31, 2023

2022 Term Loan

Debt Instrument [Line Items]

Schedule of future payments under debt agreements


Years ended December 31,	Principal Payments
2023	$	137,500
2024		183,333
2025		183,333
2026		45,834
Total before unamortized discount and issuance costs	$	550,000
Less: unamortized discount and issuance costs		(12,898)
Term notes carrying value	$	537,102

Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Stock-based Compensation

Summary of performance share units activity


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2022	447,770	$	28.71
Granted	216,500		38.71
Vested	(223,170)		27.99
Forfeited	—		—
Performance adjustment	62,780		27.14
Outstanding at March 31, 2023	503,880	$	33.13

Summary of restricted stock units activity


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2022	2,047,571	$	19.67
Granted	1,093,296		26.82
Vested	(552,734)		20.42
Forfeited	(132,214)		21.66
Outstanding at March 31, 2023	2,455,919	$	22.58

Summary of stock option activity


				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise Price	Contractual		Intrinsic
	Shares		per Share	Term (in years)		Value
Outstanding at December 31, 2022	1,683,805	$	18.84	5.5	$	7,953
Exercised	(234,132)		16.36
Cancelled	(5,677)		20.01
Outstanding at March 31, 2023	1,443,996	$	19.24	5.0	$	7,074
Exercisable at March 31, 2023	1,358,588	$	19.20	4.9	$	6,730

Summary of stock-based compensation


	Three Months Ended March 31,
	2023		2022
Research and development	$	—	$	1,591
Selling, general and administrative		6,035		4,544
Total stock-based compensation expense	$	6,035	$	6,135

Goodwill and Intangible Assets - Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 37,466	$ 18,923
Nucynta Products
Finite-Lived Intangible Assets [Line Items]
Amortization expense	16,796	16,795
Belbuca
Finite-Lived Intangible Assets [Line Items]
Amortization expense	18,849	1,937
Symproic
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 1,821	182
Elyxyb
Finite-Lived Intangible Assets [Line Items]
Amortization expense		$ 9

Revenue from Contracts with Customers - Product Revenue Provision and Allowance Categories (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Rebates and Incentives
Allowance categories
Balance at beginning of the period	$ 156,937	$ 142,379
Acquired from BDSI		34,158
Provision related to current period sales	92,871	95,413
Changes in estimate related to prior period sales	36	(514)
Credits/payments made	(122,852)	(118,937)
Balance at end of the period	126,992	152,499
Product Returns
Allowance categories
Balance at beginning of the period	73,554	54,617
Acquired from BDSI		18,187
Provision related to current period sales	10,166	7,072
Changes in estimate related to prior period sales	571
Credits/payments made	(10,381)	(4,899)
Balance at end of the period	73,910	74,977
Trade Allowances and Chargebacks
Allowance categories
Balance at beginning of the period	22,058	13,226
Acquired from BDSI		7,575
Provision related to current period sales	34,921	22,612
Changes in estimate related to prior period sales	92	(37)
Credits/payments made	(32,563)	(22,001)
Balance at end of the period	$ 24,508	$ 21,375

Earnings Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share

Earnings Per Share

6. Earnings Per Share

Basic earnings per share is calculated by dividing the net income or loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted earnings per share is computed by dividing the net income or loss by the weighted-average number of shares of common stock, plus potentially dilutive securities outstanding for the period, as determined in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security. For purposes of the diluted earnings per share calculation, stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), and shares potentially issuable in connection with the Company’s employee stock purchase plan and convertible senior notes are considered potentially dilutive securities and included to the extent that their addition is not anti-dilutive.

The following table presents the computations of basic and dilutive earnings per common share:


	Three Months Ended March 31,
	2023		2022
Numerator:
Net loss	$	(17,426)	$	(13,069)
Adjustment for interest expense recognized on convertible senior notes:		—		—
Net loss - diluted	$	(17,426)	$	(13,069)
Denominator:
Weighted-average shares outstanding — basic		34,319,291		33,673,912
Effect of dilutive securities:
Stock options		—		—
Restricted stock units		—		—
Performance share units		—		—
Employee stock purchase plan		—		—
Warrants		—		—
Convertible senior notes		—		—

Weighted average shares outstanding — diluted		34,319,291		33,673,912

Loss per share — basic	$	(0.51)	$	(0.39)
Loss per share — diluted	$	(0.51)	$	(0.39)

The Company has the option to settle the conversion obligation for its convertible senior notes due in 2026 and 2029 in cash, shares or a combination of the two. The Company uses the if-converted method for the convertible senior notes.

The following table presents dilutive securities excluded from the calculation of diluted earnings per share:


	Three Months Ended March 31,
	2023	2022
Stock options	1,443,996	2,401,110
Restricted stock units	2,455,919	2,039,179
Performance share units	503,880	484,292
Warrants	—	1,041,667
Convertible senior notes	7,509,104	4,925,134

For PSUs, these securities were excluded from the calculation of diluted earnings per share as the performance-based or market-based vesting conditions were not met as of the end of the reporting period. All other securities presented in the table above were excluded from the calculation of diluted earnings per share as their inclusion would have had an antidilutive effect.

Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue
Product revenues, net	$ 144,767	$ 83,751
Xtampza ER
Disaggregation of Revenue
Product revenues, net	47,869	31,518
Belbuca
Disaggregation of Revenue
Product revenues, net	44,212	3,310
Nucynta IR
Disaggregation of Revenue
Product revenues, net	27,899	29,335
Nucynta ER
Disaggregation of Revenue
Product revenues, net	21,136	19,263
Symproic
Disaggregation of Revenue
Product revenues, net	$ 3,651	300
Other
Disaggregation of Revenue
Product revenues, net		$ 25

- Definition

+ References

+ Details

Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2023

Revenue from Contracts with Customers

Revenue from Contracts with Customers

3. Revenue from Contracts with Customers

The Company’s revenue to date is from sales of the Company’s products, which are primarily sold to wholesalers (“customers”), which in turn sell the product to pharmacies for the treatment of patients.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements with a customer, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to

the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the assets is one year or less.

Performance Obligations

The Company determined that performance obligations are satisfied, and revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This generally occurs upon delivery of the products to customers, at which point the Company recognizes revenue and records accounts receivable. Payment is typically received 30 to 90 days after satisfaction of the Company’s performance obligations.

Transaction Price and Variable Consideration

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”). The transaction price for product sales includes variable consideration related to sales deductions, including (1) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances; (2) product returns, including return estimates; and, (3) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks. The Company will estimate the amount of variable consideration that should be included in the transaction price under the expected value method for all sales deductions other than trade allowances, which are estimated under the most likely amount method. These provisions reflect the expected amount of consideration to which the Company is entitled based on the terms of the contract. In addition, the Company made a policy election to exclude from the measurement of the transaction price all taxes that are assessed by a governmental authority that are imposed on revenue-producing transactions.

The Company bases its estimates of variable consideration, which could include estimates of future rebates, returns, and other adjustments, on historical data and other information. Estimates include: (i) timing of the rebates and returns incurred, (ii) pricing adjustments related to rebates and returns, and (iii) the quantity of product that will be rebated or returned in the future. Significant judgment is used in determining the appropriateness of these assumptions at each reporting period.

Provisions for rebates and incentives are based on the estimated amount of rebates and incentives to be claimed on the related sales. As the Company’s rebates and incentives are based on products dispensed to patients, the Company is required to estimate the expected value of claims at the time of product delivery to wholesalers. Given that wholesalers sell the product to pharmacies, which in turn dispense the product to patients, claims can be submitted significantly after the related sales are recognized. The Company’s estimates of these claims are based on the historical experience of existing or similar programs, including current contractual and statutory requirements, specific known market events and trends, industry data, and estimated distribution channel inventory levels. Accruals and related reserves required for rebates and incentives are adjusted as new information becomes available, including actual claims. If actual results vary, the Company may need to adjust future estimates, which could have an effect on earnings in the period of the adjustment.

Provisions for trade allowances and chargebacks are primarily based on customer-level contractual terms. Accruals and related reserves are adjusted as new information becomes available, which generally consists of actual trade allowances and chargebacks processed relating to sales recognized.

Provisions for product returns, including returns for Xtampza, the Nucynta Products, Belbuca and Symproic, are based on product-level returns rates, including processed as well as unprocessed return claims, in addition to relevant market events and other factors. Estimates of the future product returns are made at the time of revenue recognition to determine the amount of consideration to which the Company expects to be entitled (that is, excluding the products expected to be returned). At the end of each reporting period, the Company analyzes trends in returns rates and updates its assessment of variable consideration for returns to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period. To the extent the Company receives amounts in excess of

what it expects to be entitled to receive due to a product return, the Company does not recognize revenue when it transfers products to customers but instead recognizes those excess amounts received as a refund liability. The Company updates the measurement of the refund liability at the end of each reporting period for changes in expectations about the amount of refunds with the corresponding adjustments recognized as revenue (or reductions of revenue).

The Company provides the right of return to its customers for an 18-month window beginning six months prior to expiration and up until twelve months after expiration. The Company’s customers short-pay an existing invoice upon notice of a product return claim. Adjustments to the preliminary short-paid claims are processed when the return claim is validated and finalized. The Company’s return policy requires that product is returned and that the return is claimed within the 18-month window.

At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period. Variable consideration, including the risk of customer concessions, is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. In particular, resolution of the unprocessed return claims includes the risk of concession for those that are outside of the Company’s return policy.

Significant judgment is required to determine the variable consideration included in the transaction price as described above. Adjustments to the estimated variable consideration included in the transaction price occurs when new information indicates that the estimate should be revised. If the value of accepted and processed claims is different than the amount estimated and included in variable consideration, then adjustments would impact product revenues, net and earnings in the period such revisions become known. The amount of variable consideration ultimately received and included in the transaction price may materially differ from the Company’s estimates, resulting in additional adjustments recorded to increase or decrease product revenues, net.

The following tables summarize activity in each of the Company’s product revenue provision and allowance categories for the three months ended March 31, 2023 and 2022:


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2022	$	156,937	$	73,554	$	22,058
Provision related to current period sales		92,871		10,166		34,921
Changes in estimate related to prior period sales		36		571		92
Credits/payments made		(122,852)		(10,381)		(32,563)
Balance at March 31, 2023	$	126,992	$	73,910	$	24,508


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2021	$	142,379	$	54,617	$	13,226
Acquired from BDSI		34,158		18,187		7,575
Provision related to current period sales		95,413		7,072		22,612
Changes in estimate related to prior period sales		(514)		—		(37)
Credits/payments made		(118,937)		(4,899)		(22,001)
Balance at March 31, 2022	$	152,499	$	74,977	$	21,375

(1)

(2)

(3)

As of March 31, 2023, the Company did not have any transaction price allocated to remaining performance obligations and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial.

Disaggregation of Revenue

The Company discloses disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. When selecting the type of category to use to disaggregate revenue, the Company considers how information about the Company’s revenue has been presented for other purposes as well as what information is regularly reviewed and used for evaluating financial performance. As such, the Company disaggregates its product revenues, net from contracts with customers by product, as disclosed in the table below.


	Three Months Ended March 31,
	2023		2022
Xtampza ER	$	47,869	$	31,518
Belbuca		44,212		3,310
Nucynta IR		27,899		29,335
Nucynta ER		21,136		19,263
Symproic		3,651		300
Other		—		25
Total product revenues, net	$	144,767	$	83,751

The Company began recognizing revenue from net product sales of Belbuca and Symproic following the Acquisition Date (refer to Note 4, Acquisitions).

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value of Financial Instruments

Schedule of financial instruments measured at fair value by level within fair value hierarchy


						Significant
				Quoted Prices		other		Significant
				in active		observable		unobservable
				markets		inputs		inputs
		Total		(Level 1)		(Level 2)		(Level 3)
March 31, 2023
Money market funds, included in cash equivalents	$	122,554	$	122,554	$	—	$	—

December 31, 2022
Money market funds, included in cash equivalents	$	172,590	$	172,590	$	—	$	—

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Feb. 10, 2023	Dec. 31, 2022	Feb. 13, 2020
Transfer of Assets From Level 1 to Level 2	$ 0	$ 0
Transfer of Assets From Level 2 to Level 1	0	0
Transfer of Liabilities From Level 1 to Level 2	0	0
Transfer of Liabilities From Level 2 to Level 1	0	0
Transfer of Assets Into Level 3	0	0
Transfer of Assets Out of Level 3	0	0
Transfer of Liabilities Into Level 3	0	0
Transfer of Liabilities Out of Level 3	0	$ 0
Term notes outstanding principal balance	550,000
Money market funds
Cash equivalents	122,554			$ 172,590
Level 1 \| Money market funds
Cash equivalents	122,554			$ 172,590
2026 Convertible Notes
Convertible senior notes, fair value	$ 28,656
Interest rate (as a percent)	2.625%				2.625%
2029 Convertible Notes
Convertible senior notes, fair value	$ 216,505
Interest rate (as a percent)	2.875%		2.875%

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022
Income Taxes
Benefit from income taxes	$ (131)	$ (2,773)
Effective tax rate	0.70%	17.50%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Stock-based Compensation

Stock-based Compensation

14. Stock-based Compensation

Performance Share Units

The Company periodically grants PSUs to certain members of the Company's senior management team. PSUs vest subject to the satisfaction of annual and cumulative performance and/or market conditions established by the Company’s Compensation Committee.

A summary of the Company’s PSU activity for the three months ended March 31, 2023 and related information is as follows:


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2022	447,770	$	28.71
Granted	216,500		38.71
Vested	(223,170)		27.99
Forfeited	—		—
Performance adjustment	62,780		27.14
Outstanding at March 31, 2023	503,880	$	33.13

The number of PSUs granted represents the target number of shares of common stock that may be earned. However, the actual number of shares earned may vary based on the satisfaction of performance criteria. The weighted-average grant date fair value of PSUs granted for the three months ended March 31, 2023, and 2022 was $38.71 and $24.12, respectively.

Restricted Stock Units

The Company granted RSUs to employees during the three months ended March 31, 2023. The Company’s RSUs generally vest ratably over a four-year period of service. A summary of the Company’s RSU activity for the three months ended March 31, 2023 and related information is as follows:


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2022	2,047,571	$	19.67
Granted	1,093,296		26.82
Vested	(552,734)		20.42
Forfeited	(132,214)		21.66
Outstanding at March 31, 2023	2,455,919	$	22.58

The weighted-average grant date fair value per share of RSUs granted for the three months ended March 31, 2023 and 2022 was $26.82 and $17.68, respectively. The total fair value of RSUs vested (measured on the date of vesting) for the three months ended March 31, 2023, and 2022 was $14,779 and $8,001, respectively.

Stock Options

A summary of the Company’s stock option activity for the three months ended March 31, 2023 and related information is as follows:


				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise Price	Contractual		Intrinsic
	Shares		per Share	Term (in years)		Value
Outstanding at December 31, 2022	1,683,805	$	18.84	5.5	$	7,953
Exercised	(234,132)		16.36
Cancelled	(5,677)		20.01
Outstanding at March 31, 2023	1,443,996	$	19.24	5.0	$	7,074
Exercisable at March 31, 2023	1,358,588	$	19.20	4.9	$	6,730

There were no stock options granted during the three months ended March 31, 2023 and 2022.

Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan allows employees to purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the closing price of the Company’s common stock on (1) the first day of the purchase period or (2) the last day of the purchase period. During the three months ended March 31, 2023, 11,329 shares of common stock were purchased for total proceeds of $169. The expense for the three months ended March 31, 2023 and 2022 was $46 and $32, respectively.

Stock-based Compensation Expense

A summary of the allocation of the Company’s stock-based compensation expense for the three months ended March 31, 2023 and 2022 is as follows:


	Three Months Ended March 31,
	2023		2022
Research and development	$	—	$	1,591
Selling, general and administrative		6,035		4,544
Total stock-based compensation expense	$	6,035	$	6,135

At March 31, 2023, there was approximately $61,072 of unrecognized compensation expense related to unvested options, restricted stock units and performance stock units, which is expected to be recognized as expense over a weighted average period of approximately 2.9 years.

Equity - Changes in Shareholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Balance at beginning of period	$ 194,842	$ 202,928	$ 202,928
Balance at beginning of period, shares	37,084,759
Balance at beginning of period, shares	3,235,823
Exercise of common stock options	$ 3,848	3,261
Issuance for employee stock purchase plan	169	203
Vesting of RSUs and PSUs	1
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(7,736)	(3,382)
Stock-based compensation	6,035	6,135
Net loss	(17,426)	(13,069)
Balance at end of period	$ 179,733	196,076	$ 194,842
Balance at end of period, shares	37,816,843		37,084,759
Balance at end of period, shares	3,235,823		3,235,823
Common stock
Balance at beginning of period	$ 37	$ 36	$ 36
Balance at beginning of period, shares	37,084,759	35,806,119	35,806,119
Exercise of common stock options, shares	234,132	190,074
Issuance for employee stock purchase plan, shares	11,329	13,421
Vesting of RSUs and PSUs	$ 1
Vesting of RSUs and PSUs, shares	775,904	563,050
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(289,281)	(191,667)
Balance at end of period	$ 38	$ 36	$ 37
Balance at end of period, shares	37,816,843	36,380,997	37,084,759
Additional Paid-In Capital
Balance at beginning of period	$ 538,073	$ 502,095	$ 502,095
Exercise of common stock options	3,848	3,261
Issuance for employee stock purchase plan	169	203
Shares withheld for employee taxes upon vesting of RSUs and PSUs	(7,736)	(3,382)
Stock-based compensation	6,035	6,135
Share repurchases		(5,000)
Balance at end of period	540,389	513,312	538,073
Treasury Stock
Balance at beginning of period	$ (61,924)	$ (42,861)	$ (42,861)
Balance at beginning of period, shares	(3,235,823)	2,150,717	2,150,717
Share repurchases		$ (5,000)
Share repurchases (in shares)		(307,132)
Balance at end of period	$ (61,924)	$ (47,861)	$ (61,924)
Balance at end of period, shares	(3,235,823)	2,457,849	(3,235,823)
Accumulated Deficit
Balance at beginning of period	$ (281,344)	$ (256,342)	$ (256,342)
Net loss	(17,426)	(13,069)
Balance at end of period	$ (298,770)	$ (269,411)	$ (281,344)

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accrued Expenses
Accrued royalties	$ 7,726	$ 13,770
Accrued product taxes and fees	4,821	4,352
Accrued audit and legal	2,283	1,957
Accrued incentive compensation	1,486	2,130
Accrued bonuses	1,333	1,507
Accrued sales and marketing	1,225	6,347
Accrued interest	1,051	1,410
Accrued payroll and related benefits	843	1,208
Accrued other operating costs	3,665	3,448
Total accrued expenses	$ 24,433	$ 36,129