10q10k10q10k.net

What changed in COLLEGIUM PHARMACEUTICAL, INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of COLLEGIUM PHARMACEUTICAL, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+322 added−367 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in COLLEGIUM PHARMACEUTICAL, INC's 2023 10-K

322 paragraphs added · 367 removed · 253 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

99 edited+24 added−36 removed125 unchanged
Biggest changeIn addition, government entities and private litigants have asserted claims under state consumer protection statutes against pharmaceutical and medical device companies for alleged false or misleading statements in connection with the marketing, promotion and/or sale of pharmaceutical and medical device products, including state investigations and litigation by certain government entities regarding our marketing of opioid products. ​ Third-Party Payor Coverage and Reimbursement ​ The commercial success of our products will depend, in part, upon the availability of coverage and adequate reimbursement from third-party payors at the federal, state and private levels.
Biggest changeIn addition, government entities and private litigants have asserted claims under state consumer protection statutes against pharmaceutical and medical device companies for alleged false or misleading statements in connection with the marketing, promotion and/or sale of pharmaceutical and medical device products, including state investigations and litigation by certain government entities regarding our marketing of opioid products. ​ The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.
As a result, our operations and business could be adversely affected by current and future third-party payor policies as well as healthcare legislative reforms. ​ While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, these requirements or any announcement or adoption of such proposals could have a material adverse effect on our ability to obtain adequate prices for our products and any other products we may seek to commercialize, and to operate profitably. ​ Healthcare Reform ​ In the United States, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations.
As a result, our operations and business could be adversely affected by current and future third-party payor policies as well as healthcare legislative reforms. ​ While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, these requirements or any announcement or adoption of such proposals could have a material adverse effect on our ability to obtain adequate prices for our products and any other products we may seek to commercialize, and to operate profitably. 16 ​ ​ Healthcare Reform ​ In the United States, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations.
Some states, however, have applicable fraud and abuse laws that apply more broadly to include products or services reimbursed by private payors. ​ The federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.
Some states, however, have applicable fraud and abuse laws that apply more broadly to include products or services reimbursed by private payors. ​ The federal Anti-Kickback Statute (“AKS”) (42 U.S.C. § 1320a-7b(b)) prohibits knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.
Exclusivity ​ Upon approval of an NDA for a new chemical entity (“NCE”), which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which time the FDA cannot receive any ANDA seeking approval of a generic version of that drug or any Section 505(b)(2) NDA, discussed in more detail below, that relies on the FDA’s findings of safety and effectiveness regarding the NCE drug.
Exclusivity ​ Upon approval of an NDA for a new chemical entity (“NCE”), which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which time the FDA cannot receive any ANDA seeking approval of a generic version of that drug or any Section 505(b)(2) NDA, 12 ​ discussed in more detail below, that relies on the FDA’s findings of safety and effectiveness regarding the NCE drug.
Among the provisions of the Affordable Care Act of importance to the pharmaceutical and biotechnology industry are the following: ​ ● an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs; ● an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively; ● a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (later amended to 70%) point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; ● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; ● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability; ● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ● a licensure framework for follow - on biologic products; ● a Patient - Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; ● a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and ● establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. ​ The Affordable Care Act has been subject to challenges in the courts.
Among the provisions of the Affordable Care Act of importance to the pharmaceutical and biotechnology industry are the following: ​ ● an annual, non-deductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs; ● an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively; ● a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (later amended to 70%) point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; ● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; ● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability; ● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ● a licensure framework for follow - on biologic products; ● a Patient - Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; ● a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and ● establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. ​ The Affordable Care Act has been subject to challenges in the courts.
Abuse, misuse, and diversion of Xtampza ER has remained low compared to commonly abused schedule II opioid analgesics for three years after introduction into the U.S. market. Methods to defeat the tamper resistant properties of Xtampza ER are reported but there is no indication of widespread or expanding abuse or misuse in the data streams evaluated.
Abuse, misuse, and diversion of Xtampza ER has remained low compared to commonly abused 3 ​ schedule II opioid analgesics for three years after introduction into the U.S. market. Methods to defeat the tamper resistant properties of Xtampza ER are reported but there is no indication of widespread or expanding abuse or misuse in the data streams evaluated.
Remuneration is not defined in the federal Anti-Kickback Statute and has been broadly interpreted to include anything of value, including for example, gifts, discounts, coupons, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value.
Remuneration is not defined in the federal Anti-Kickback Statute and has been broadly interpreted to include anything of value, including for example, gifts, discounts, 14 ​ coupons, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value.
In addition, we use a unique and proprietary process to manufacture our products that requires significant know how, which we currently protect as trade secrets. ​ Nucynta is protected by one issued patent in the United States (which covers both the drug substance and drug product) that is projected to expire in 2025.
In addition, we use a unique and proprietary process to manufacture our products that requires significant know how, which we currently protect as trade secrets. ​ Nucynta IR is protected by one issued patent in the United States (which covers both the drug substance and drug product) that is projected to expire in 2025.
The SEC also maintains a website, at www.sec.gov, that contains reports, proxy and information statements and other information regarding us and other issuers that file electronically. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Form 10-K. ​
The SEC also maintains a website, at www.sec.gov, that contains reports, proxy and information statements and other information regarding us and other issuers that file electronically. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Form 10-K. ​ ​ ​ 21 ​
Kuhlmann received a B.A. in Economics and Political Science from Columbia University and a J.D. from the Emory University School of Law. ​ Thomas Smith, M.D., Executive Vice President and Chief Medical Officer. Dr. Smith has served as our Chief Medical Officer since March 2022 following the acquisition of BDSI. Dr.
Kuhlmann received a B.A. in Economics and Political Science from Columbia University and a J.D. from the Emory University School of Law. 20 ​ ​ Thomas Smith, M.D., Executive Vice President and Chief Medical Officer. Dr. Smith has served as our Chief Medical Officer since March 2022 following the acquisition of BDSI. Dr.
The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol.
The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs. The results of preclinical testing are submitted to the FDA as part of an IND application along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol.
Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. ​ Clinical trials involve the administration of the investigational new drug to healthy volunteers or subjects under the supervision of a qualified investigator.
Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted. ​ Clinical trials involve the administration of the investigational new drug to healthy volunteers or subjects under the supervision of a qualified investigator.
Failure to meet FDA requirements for approval would also result in a medication not being approved for marketing. ​ The process of developing a pharmaceutical product and obtaining FDA approval to market the medication in the United States typically involves: ​ ● completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s good laboratory practices (“GLP”) and regulations; ● submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which becomes effective 30 days after submission and, if not placed on clinical hold, before human clinical trials may begin in the United States; ● approval by an independent institutional review board, at each clinical trial site before each trial may be initiated; ● performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices (“GCP”) and FDA regulations to establish the safety and effectiveness of the proposed drug product for each indication for which FDA approval is sought; ● satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s current good manufacturing practices (“cGMP”) and regulations; ● submission to the FDA of a NDA or, in the case of a generic drug, an abbreviated NDA (“ANDA”); 9 Table of Contents ● satisfactory completion of a review by an FDA advisory committee, if convened; and ● FDA review and approval of the NDA or ANDA. ​ Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the application type, complexity, and novelty of the product or disease. ​ Preclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product candidate.
Failure to meet FDA requirements for approval would also result in a medication not being approved for marketing. ​ The process of developing a pharmaceutical product and obtaining FDA approval to market the medication in the United States typically involves: ​ ● completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s good laboratory practices (“GLP”) and regulations; 8 ​ ● submission to the FDA of an Investigational New Drug (“IND”) application for human clinical testing, which becomes effective 30 days after submission and, if not placed on clinical hold, before human clinical trials may begin in the United States; ● approval by an independent institutional review board, at each clinical trial site before each trial may be initiated; ● performance of adequate and well - controlled human clinical trials in accordance with current good clinical practices (“GCP”) and FDA regulations to establish the safety and effectiveness of the proposed drug product for each indication for which FDA approval is sought; ● satisfactory completion of an FDA pre - approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s current good manufacturing practices (“cGMP”) and regulations; ● submission to the FDA of a NDA or, in the case of a generic drug, an abbreviated NDA (“ANDA”); ● satisfactory completion of a review by an FDA advisory committee, if convened; and ● FDA review and approval of the NDA or ANDA. ​ Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the application type, complexity, and novelty of the product or disease. ​ Preclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product candidate.
The FDA has encouraged the development of prescription opioids with abuse-deterrent formulations to help combat the opioid crisis, and expanding access to abuse deterrent formulations is part of the FDA’s comprehensive Opioids Action Plan. These technologies, however, do not eliminate the possibility of misuse and abuse.
The FDA has encouraged the development of prescription opioids with abuse-deterrent formulations to help combat the opioid crisis, and expanding access to abuse deterrent formulations is part of the FDA’s comprehensive Opioids Action Plan. These technologies, however, do not eliminate the possibility of 5 ​ misuse and abuse.
For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. ​ In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II.
For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. 13 ​ ​ In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II.
The final guidance also provides examples of product label claims that may be made based on the results of the corresponding studies and clinical trials. ​ After completion of the required clinical testing, an NDA is prepared and submitted to the FDA.
The final guidance also provides examples of product label claims that may be made based on the results of the corresponding studies and clinical trials. 9 ​ ​ After completion of the required clinical testing, an NDA is prepared and submitted to the FDA.
Indeed, prescription levels in 2020 returned to levels similar to those seen in the year 2000, when 143.8 million prescriptions for opioids were written in the United States, including 11.4 million prescriptions for extended-release opioids and 132.4 million prescriptions for immediate-release opioids. ​ Increasingly, practitioners and regulators are focusing on multidisciplinary, multimodal approaches to pain management, including exercise, physical therapy and psychotherapy, and opioid and non-opioid medications.
However, prescription levels in 2020 returned to levels similar to those seen in the year 2000, when 143.8 million prescriptions for opioids were written in the United States, including 11.4 million prescriptions for extended-release opioids and 132.4 million prescriptions for immediate-release opioids. ​ Increasingly, practitioners and regulators are focusing on multidisciplinary, multimodal approaches to pain management, including exercise, physical therapy and psychotherapy, and opioid and non-opioid medications.
After marked increases in opioid prescriptions from 2000 to 2015, prescriptions have decreased each year since 2015, correlating with rising awareness of the extent and impact of the opioid crisis.
After marked increases in opioid prescriptions from 2000 to 2015, prescriptions decreased each year since 2015, correlating with rising awareness of the extent and impact of the opioid crisis.
Our issued U.S. patents are projected to expire in 2023, 2025, 2030, and 2036 and our pending patent applications in the United States, if issued, would be projected to expire in 2023, 2030, and 2036.
Our issued U.S. patents are projected to expire in 2025, 2030, and 2036 and our pending patent applications in the United States, if issued, would be projected to expire in 2030 and 2036.
The information contained in our ESG report is not a part of, nor is it incorporated by reference in, this Form 10-K. ​ Collegium Culture, Employee Engagement and Management of Human Capital Resources Our employees are foundational to our current and future success, and we believe that their engagement and commitment are among our most valuable assets.
The information contained in our ESG report is not a part of, nor is it incorporated by reference into, this Form 10-K. ​ Human Capital Management ​ Collegium Culture and Employee Engagement ​ Our employees are foundational to our current and future success, and we believe that their engagement and commitment are among our most valuable assets.
Kuhlmann joined Collegium Pharmaceutical in March 2018 as Executive Vice President, General Counsel and Secretary and has also served as Chief Administrative Officer since March 2022. Prior to joining Collegium, Ms. Kuhlmann was an attorney in the Health Sciences Group of Pepper Hamilton LLP, a law firm headquartered in Philadelphia, PA. Ms.
Kuhlmann joined Collegium Pharmaceutical in March 2018 as Executive Vice President, General Counsel and Secretary and has also served as Chief Administrative Officer since March 2022. Prior to joining Collegium, Ms. Kuhlmann was an attorney in the Health Sciences Group of Pepper Hamilton LLP, a law firm headquartered in Philadelphia, Pennsylvania. Ms.
There are two broad categories of pain based on duration: acute pain, or pain that is self-limited and generally requires treatment for no more 3 Table of Contents than up to a few weeks, and chronic pain, or pain that lasts beyond the healing of an injury or that persists longer than 3-6 months.
There are two broad categories of pain based on duration: acute pain, or pain that is self-limited and generally requires treatment for no more than up to a few weeks, and chronic pain, or pain that lasts beyond the healing of an injury or that persists longer than 3 to 6 months.
On June 17, 2021, in an appeal from a lower court decision holding that the individual mandate under the Affordable Care Act is unconsistutional, the Supreme Court ruled that the plaintiffs lacked standing to challenge the law as they had not alleged personal injury traceable to the allegedly unlawful conduct.
On June 17, 2021, in an appeal from a lower court decision holding that the individual mandate under the Affordable Care Act is unconstitutional, the Supreme Court ruled that the plaintiffs lacked standing to challenge the law as they had not alleged personal injury traceable to the allegedly unlawful conduct.
Xtampza ER is protected by nineteen issued patents in the United States (which cover both the abuse-deterrent technology and methods of using it to treat patients), one granted and two pending applications in the European Patent Office, two issued patents in Canada, and one issued patent in each of Japan and Australia.
Xtampza ER is protected by twelve issued patents in the United States (which cover both the abuse-deterrent technology and methods of using it to treat patients), one granted and two pending applications in the European Patent Office, two issued patents in Canada, and one issued patent in each of Japan and Australia.
Regulatory authorities may withdraw product approvals, request product recalls, or take other punitive action if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. ​ The FDA may require post-approval studies and clinical trials if the FDA finds that scientific data, including information regarding related drugs, warrant them.
Regulatory authorities may withdraw product approvals, request product recalls, or take other punitive action if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. 11 ​ ​ The FDA may require post-approval studies, including post-marketing surveillance and observational studies and clinical trials, if the FDA finds that scientific data, including information regarding related drugs, warrant them.
Thus, approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired; until any non-patent exclusivity listed in the Orange Book for the referenced product has expired; and, in the case of a Paragraph IV 13 Table of Contents certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Thus, approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired; until any non-patent exclusivity listed in the Orange Book for the referenced product has expired; and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Regional Marketing Leader – Neuroscience, Executive Director Customer Marketing and Solutions, Sr. Director of Strategic Planning and Director of Cardiovascular Marketing. Mr. Dreyer received his B.S. in Biology from Messiah College. ​ Shirley Kuhlmann, Executive Vice President, General Counsel and Chief Administrative Officer . Ms.
Regional Marketing Leader – Neuroscience, Executive Director Customer Marketing and Solutions, Sr. Director of Strategic Planning and Director of Cardiovascular Marketing. Mr. Dreyer received a B.S. in Biology from Messiah College. ​ Shirley Kuhlmann, Executive Vice President, General Counsel and Chief Administrative Officer . Ms.
We face competition and potential competition from several sources, including pharmaceutical and biotechnology companies, generic and branded drug companies, drug delivery companies and academic and research institutions. However, our primary source of competition stems from the generic opioid market, including both extended-release and immediate-release opioid drugs.
We face competition and potential competition from several sources, including pharmaceutical and biotechnology companies, generic and branded drug companies, drug delivery companies and academic and research institutions. However, our primary source of competition stems from the generic opioid market, including both long-acting/extended-release and immediate-release opioid drugs.
This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. ​ Post-Approval Requirements ​ Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling and distribution, adverse event reporting and advertising, marketing and promotion restrictions. ​ Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA.
This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. ​ Post-Approval Requirements ​ Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling and distribution, adverse event reporting and advertising, marketing and promotion restrictions.
Moreover, no abuse deterrence technology, including DETERx, is able to deter the most common form of abuse—swallowing a number of intact capsules or tablets to achieve a feeling of euphoria. ​ Legislative and Regulatory Actions ​ In response to widespread prescription opioid abuse, the U.S. government and a number of state legislatures have in recent years enacted new legislation and regulations intended to fight the opioid epidemic.
Moreover, no abuse deterrence technology, including DETERx, is able to deter the most common form of abuse—swallowing a number of intact capsules or tablets to achieve a feeling of euphoria. ​ Legislative and Regulatory Actions ​ In response to widespread prescription opioid abuse, the U.S. government and a number of state legislatures enacted new legislation and regulations intended to fight the opioid epidemic.
The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. ​ 10 Table of Contents If the FDA’s evaluations of the NDA and of the sponsor’s manufacturing facilities are favorable, the FDA will issue an approval letter, and the sponsor may begin marketing the drug for the approved indications, subject to any post-approval requirements, described further below.
The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. ​ If the FDA’s evaluations of the NDA and of the sponsor’s manufacturing facilities are favorable, the FDA will issue an approval letter, and the sponsor may begin marketing the drug for the approved indications, subject to any post-approval requirements, described further below.
The limited aggregate amount of opioids that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications annually to the DEA for individual production and procurement quotas.
The limited aggregate amount of opioids that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications quarterly to the DEA for individual production and procurement quotas.
Prescription opioids are available in immediate-release formulations as well as in extended-release formulations, which incorporate a time-release mechanism designed to deliver steady amounts of opioid, typically over 12 to 24 hours.
Prescription opioids are available in immediate-release formulations as well as in long-acting/extended-release formulations, which incorporate a time-release mechanism designed to deliver steady amounts of opioid, typically over 12 to 24 hours.
Additionally, 7.4% of the U.S. adult population, approximately 19.6 million people, suffer from high-impact chronic pain that frequently limits life or work activities. ​ A 2011 report from the Institute of Medicine estimated that chronic pain costs the U.S. between $560.0 and $635.0 billion per year in direct medical costs and lost productivity, which does not include the cost of care for institutionalized individuals (e.g., nursing home residents, prisoners), military personnel, or children, or the costs associated with caregiving.
Additionally, 6.9% of the U.S. adult population, approximately 17.1 million people, suffer from high-impact chronic pain that frequently limits life or work activities. ​ A 2011 report from the Institute of Medicine estimated that chronic pain costs the U.S. between $560.0 and $635.0 billion per year in direct medical costs and lost productivity, which does not include the cost of care for institutionalized 4 ​ individuals (e.g., nursing home residents, prisoners), military personnel, or children, or the costs associated with caregiving.
The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers.
The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors.
At the federal level (in addition to the DEA and FDA efforts discussed elsewhere in this Annual Report on Form 10-K), in 2016 the CDC issued prescribing guidelines intended to reduce opioid-related harms by encouraging primary care physicians to limit the amount of morphine milligram equivalents (MMEs) that they prescribe for chronic pain patients.
At the federal level (in addition to the DEA and FDA efforts discussed elsewhere in this Annual Report on Form 10-K), in 2016 the CDC issued clinical practice prescribing guidelines intended to reduce opioid-related harms by encouraging primary care physicians to limit the amount of morphine milligram equivalents (“MMEs”) that they prescribe for chronic pain patients.
The REMS requires that training be made available to health care providers who 11 Table of Contents are involved in the management of patients with pain (including nurses and pharmacists) and requires that the education cover broad information about appropriate pain management, including alternatives to opioids for the treatment of pain.
The REMS requires that training be made available to health care providers who are involved in the management of patients with pain (including nurses and pharmacists) and requires that the education cover broad information about appropriate pain management, including alternatives to opioids for the treatment of pain.
Nucynta ER is protected by seven issued patents in the United States (which cover the drug substance, drug product, certain characteristics of the dosage form, and methods of treating patients) that are projected to expire in 2023, 2024, 2025, and 2028.
Nucynta ER is protected by four issued patents in the United States (which cover the drug substance, drug product, certain characteristics of the dosage form, and methods of treating patients) that are projected to expire in 2024, 2025, and 2028.
We 8 Table of Contents believe we have freedom to operate in the United States and other countries, but there can be no assurance that other companies, known and unknown, will not attempt to assert their intellectual property against us. ​ We also rely on trademarks and trade designs to develop and maintain our competitive position.
We believe we have freedom to operate in the United States and other countries, but there can be no assurance that other companies, known and unknown, will not attempt to assert their intellectual property against us. ​ We also rely on trademarks and trade designs to develop and maintain our competitive position.
In July 2014, we reincorporated in 21 Table of Contents the Commonwealth of Virginia pursuant to a merger whereby Collegium Pharmaceutical, Inc., a Delaware corporation, merged with and into Collegium Pharmaceutical, Inc., a Virginia corporation, with the Virginia corporation surviving the merger. ​ Available Information ​ We maintain a website at www.collegiumpharma.com.
In July 2014, we reincorporated in the Commonwealth of Virginia pursuant to a merger whereby Collegium Pharmaceutical, Inc., a Delaware corporation, merged with and into Collegium Pharmaceutical, Inc., a Virginia corporation, with the Virginia corporation surviving the merger. ​ Available Information ​ We maintain a website at www.collegiumpharma.com.
Xtampza ER and the Nucynta Products are classified by the DEA as Schedule II controlled substances, meaning these products have a high potential for abuse and dependence but are recognized as having an accepted medical use. Belbuca 7 Table of Contents is classified as a Schedule III controlled substance, meaning it has a moderate to low potential for abuse.
Xtampza ER and the Nucynta Products are classified by the DEA as Schedule II controlled substances, meaning these products have a high potential for abuse and dependence but are recognized as having an accepted medical use. Belbuca is classified as a Schedule III controlled substance, meaning it has a moderate to low potential for abuse.
Moreover, even if the applicant believes it has addressed the deficiencies, it is possible that approval may not ultimately be obtained. ​ Where a sponsor wishes to expand the originally approved prescribing information, such as by adding a new indication, it must submit and obtain approval of a supplemental NDA (“sNDA”).
Moreover, even if the applicant believes it has addressed the deficiencies, it is possible that approval may not ultimately be obtained. ​ Where a sponsor wishes to expand the originally approved prescribing information, such as by adding a new indication, it must submit and obtain approval of a sNDA.
Any reduction in payment that results from Medicare Part D may result in a similar reduction in payments from non-governmental payors. ​ 16 Table of Contents In March 2010, the Affordable Care Act was enacted, which significantly changed the way healthcare is financed by both governmental and private insurers.
Any reduction in payment that results from Medicare Part D may result in a similar reduction in payments from non-governmental payors. ​ In March 2010, the Affordable Care Act was enacted, which significantly changed the way healthcare is financed by both governmental and private insurers.
These ETASU include REMS-compliant accredited CE for Healthcare Providers (HCPs), which includes all healthcare providers who prescribe or are involved in the management of patients with pain; information provided to prescribers that they can use to educate patients in the safe use, storage, and disposal of opioids; and information provided to prescribers about the existence of the REMS and the strong recommendation that they complete the available training.
These ETASU include REMS-compliant accredited continuing education for healthcare providers, which includes all healthcare providers who prescribe or are involved in the management of patients with pain; information provided to prescribers that they can use 10 ​ to educate patients in the safe use, storage, and disposal of opioids; and information provided to prescribers about the existence of the REMS and the strong recommendation that they complete the available training.
Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the 12 Table of Contents Orange Book.
Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.
Our contract manufacturers must receive an annual quota from the DEA to produce or procure any Schedule I or Schedule II substance, including oxycodone base for use in manufacturing Xtampza ER and tapentadol for use in manufacturing the Nucynta Products.
Our contract manufacturers must receive a quarterly quota from the DEA to produce or procure any Schedule I or Schedule II substance, including oxycodone base for use in manufacturing Xtampza ER and tapentadol for use in manufacturing the Nucynta Products.
The Federal Physician Payments 15 Table of Contents Sunshine Act and similar state laws impose reporting requirements for various types of payments to physicians, other licensed healthcare practicioners and teaching hospitals. Failure to comply with required reporting requirements under these laws could subject manufacturers and others to substantial civil monetary penalties.
The Federal Physician Payments Sunshine Act and similar state laws impose reporting requirements for various types of payments to physicians, other licensed healthcare practitioners and teaching hospitals. Failure to comply with required reporting requirements under these laws could subject manufacturers and others to substantial civil monetary penalties.
The RADARS data represents a single snapshot in time and is subject to change. Therefore, we plan to continue monitoring real world data characterizing the rate of abuse, misuse, and diversion of Xtampza. ​ Nucynta Products ​ The Nucynta Products are oral formulations of tapentadol.
The RADARS data represents a single snapshot in time and is subject to change. Therefore, we plan to continue monitoring real world data characterizing the rate of abuse, misuse, and diversion of Xtampza. ​ Nucynta Products ​ The Nucynta Products are extended-release (“ER”) and immediate-release (“IR”) oral formulations of tapentadol.
The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (“SUPPORT Act”), which was signed into law in November 2018, includes a number of measures directed towards regulation and improvement of treatment for substance use-disorder and increased coverage by CMS of medically-assisted treatment options.
The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (“SUPPORT Act”), which was signed into law in November 2018, includes a number of measures directed towards regulation and improvement of treatment for substance use-disorder and increased coverage by the Centers for Medicare and Medicaid Services (“CMS”) of medically-assisted treatment options.
The purpose of such studies would be to assess a known serious risk or signals of serious risk related to the drug or to identify an unexpected serious risk when available data indicate the potential for such a risk.
The purpose of such studies would be to collect additional information to assess a known serious risk or signals of serious risk related to the drug or to monitor for or identify an unexpected serious risk when available data indicate the potential for such a risk.
This process is reproducible, scalable, and cost-efficient, and we believe that the microsphere formulation — and the related manufacturing process — is unique in the extended-release opioid market. To date, we have produced Xtampza ER through a contract manufacturing organization, Patheon, a subsidiary of Thermo Fisher Scientific, Inc.
This process is reproducible, scalable, and cost-efficient, and we believe that the microsphere formulation — and the related manufacturing process — is unique in the extended-release opioid market. To date, we have produced Xtampza ER through a contract manufacturing organization, Patheon, a subsidiary of Thermo Fisher Scientific, pursuant to a third-party supply agreement.
Potential limitations are based upon the fact that the Poison Center and Treatment Center Program cases involve self-reporting which may lead to: 1) differential misidentification among drug groups which may affect observed differences, and 2) case counts of drug groups comprised primarily of branded products (other ADF ER opioids) may be overestimated when based on self-reporting and drug groups comprised primarily of generic products (non-ADF ER opioids and IR oxycodone) may be underestimated.
Potential limitations are based upon the fact that the Poison Center and Treatment Center Program cases involve self-reporting which may lead to: (i) differential misidentification among drug groups which may affect observed differences, and (ii) case counts of drug groups comprised primarily of branded products (other abuse-deterrent formulations of ER opioids) may be overestimated when based on self-reporting and drug groups comprised primarily of generic products (non-abuse-deterrent formulations of ER opioids and IR oxycodone) may be underestimated.
The committee will discuss post-marketing requirements 3033-11, issued to holders of NDAs for extended-release and long-acting opioid analgesics to evaluate long-term efficacy of opioid analgesics and the risk of opioid-induced hyperalgesia. The discussion will focus on a clinical trial designed to address these objectives.
The committee discussed post-marketing requirements (“PMRs”) 3033-11, issued to holders of NDAs for extended-release and long-acting opioid analgesics to evaluate long-term efficacy of opioid analgesics and the risk of opioid-induced hyperalgesia. The discussion focused on a clinical trial designed to address these objectives.
The Inflation Reduction Act of 2022 could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.
The IRA could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.
Finally, we have six patent applications pending in the United States, one pending patent application in each of Canada and Japan, and one pending PCT application.
Finally, we have six patent applications pending in the United States, one pending patent application in each of Canada and Japan, and one pending Patent Cooperation Treaty (“PCT”) application.
The beginning of the opioid overdose epidemic in the late 1990s was marked by a rise in prescription opioid overdose deaths. For a variety of reasons, heroin use began increasing in the mid-2000s, and had surpassed prescription opioids as a cause of opioid-related overdose by 2016, reaching a rate of 4.9 per 100,000 persons in 2018.
The beginning of the opioid overdose epidemic in the late 1990s was marked by a rise in prescription opioid overdose deaths. For a variety of reasons, heroin use began increasing in the mid-2000s, and had surpassed prescription opioids as a cause of opioid-related overdose by 2016.
Department of Health and Human Services that would require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide discounts on Part D drugs.
Department of Health and Human Services that would require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance. Another component of the IRA includes the establishment of rebate payment requirements on Medicare Part D drugs which penalize price increases that outpace inflation.
Belbuca laminate is then sent to either LTS Therapy Systems (formerly Tapemark) in St. Paul, Minnesota or Sharp Packaging Solutions in Allentown, Pennsylvania where it is converted into individual dosage units and, ultimately, into finished goods. For the Belbuca product portfolio, we are currently qualifying alternate bulk and secondary packaging operations at our existing manufacturer’s sites.
Paul, Minnesota or Sharp Packaging Solutions in 6 ​ Allentown, Pennsylvania where it is converted into individual dosage units and, ultimately, into finished goods. For the Belbuca product portfolio, we are currently qualifying alternate bulk and secondary packaging operations at our existing manufacturer’s sites.
Item 1. Business ​ Overview ​ We are building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.
Item 1. Business ​ Overview ​ Our mission is to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.
The overall prevalence of chronic pain among adults in the United States is 20.4%, affecting approximately 50.0 million Americans.
The overall prevalence of chronic pain among adults in the United States is 20.9%, affecting approximately 51.6 million Americans.
As a reflection of this commitment, our annual Corporate Scorecard has included metrics relating to our performance relative to specific ESG initiatives. ​ In February 2023, we published our inaugural ESG report on our corporate website highlighting our ESG accomplishments to date and focus on advancing the oversight, evolution, and reporting of our ESG program.
As a reflection of this commitment, our annual Corporate Scorecard has included metrics relating to our performance relative to specific ESG initiatives. ​ In February 2024, we published our annual ESG report on our corporate website highlighting our ESG accomplishments to date.
Extended-release opioids are designed to offer more convenient dosing with a longer period of consistent blood levels of the active drug as compared to immediate-release formulations. ​ In 2022, there were approximately 145.1 million prescriptions for opioids written in the United States, representing a 5% decline from 2021 levels and including approximately 2.6 million prescriptions for branded extended-release opioids, approximately 11.6 million prescriptions for generic extended-release opioids, and approximately 130.9 million prescriptions for immediate-release opioids.
Extended-release opioids are designed to offer more convenient dosing with a longer period of consistent blood levels of the active drug as compared to immediate-release formulations. ​ In 2023, there were approximately 139.7 million prescriptions for opioids written in the United States, representing a 3.8% decline from 2022 levels and including approximately 13.6 million prescriptions for long-acting/extended-release opioids, and approximately 126.1 million prescriptions for immediate-release opioids.
Failure to maintain compliance with applicable requirements, particularly as manifested in loss or 14 Table of Contents diversion, can result in administrative, civil, or criminal enforcement action that could have a material adverse effect on our business, results of operations and financial condition.
Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in administrative, civil, or criminal enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations.
Additionally, we are implementing a multi-year DEI strategic plan that strives to integrate DEI with our 19 Table of Contents overall business goals by focusing on topics such as developing, retaining, and attracting talent; creating and sustaining a work environment where all employees feel valued and engaged; and developing a strong reputation and strategic alliance partnerships with the communities we serve. ​ As of December 2022, we had a total of 207 employees with representation with respect to gender and self-reported race and ethnicity as follows: ​ ​ ​ ​ ​ ​ ​ Ethnicity ​ # ​ % Asian (Not Hispanic or Latino) ​ 14 ​ 6.8 % Black or African American (Not Hispanic or Latino) ​ 12 ​ 5.8 % Hispanic or Latino ​ 5 ​ 2.4 % Prefer Not to Disclose ​ 4 ​ 1.9 % Two or More Races (Not Hispanic or Latino) ​ 3 ​ 1.4 % White (Not Hispanic or Latino) ​ 169 ​ 81.7 % ​ ​ ​ ​ ​ ​ Gender ​ # ​ % Female ​ 102 ​ 49.3 % Male ​ 105 ​ 50.7 % ​ As in everything we do, we are committed to continuous improvement in this area.
We are committed to employing people whose diverse backgrounds contribute to innovation and allow us to approach the complex issues that face our industry from many different perspectives. ​ We are executing our multi-year DEI strategic plan that strives to integrate DEI with our overall business goals by focusing on topics such as developing, retaining, and attracting talent; creating and sustaining a work environment where all employees feel valued and engaged; and developing a strong reputation and strategic alliance partnerships with the communities we serve. ​ As of December 2023, we had a total of 197 employees with representation with respect to gender and self-reported race and ethnicity as follows: ​ ​ ​ ​ ​ ​ Ethnicity ​ # ​ % Asian (Not Hispanic or Latino) ​ 15 ​ 7.6% Black or African American (Not Hispanic or Latino) ​ 12 ​ 6.1% Hispanic or Latino ​ 5 ​ 2.5% Prefer Not to Disclose ​ 3 ​ 1.5% Two or More Races (Not Hispanic or Latino) ​ 3 ​ 1.5% White (Not Hispanic or Latino) ​ 159 ​ 80.8% Total ​ 197 ​ 100% ​ ​ ​ ​ ​ Gender ​ # ​ % Female ​ 98 ​ 49.7% Male ​ 99 ​ 50.3% Total ​ 197 ​ 100% ​ As in everything we do, we are committed to continuous improvement in this area.
CARA expands the availability of naloxone for law enforcement and other first responders, forms an interagency task force to develop best practices for pain management with opioid medications and provides resources to improve state monitoring of opioids.
In 2016, the Comprehensive Addiction and Recovery Act (“CARA”), was enacted to address the national epidemics of prescription opioid abuse and heroin use. CARA expands the availability of naloxone for law enforcement and other first responders, forms an interagency task force to develop best practices for pain management with opioid medications and provides resources to improve state monitoring of opioids.
We have leveraged our research and development efforts as well as acquisitions and licensing relationships with third parties, to develop a portfolio of meaningfully differentiated products for use in the treatment of moderate to severe pain. ​ Xtampza ER ​ Our company was formed in 2002 to help address the opioid epidemic through the development of Xtampza ER, a pain treatment option designed with abuse deterrent properties.
We have leveraged our research and development efforts as well as acquisitions and licensing relationships with third parties, to develop a portfolio of meaningfully differentiated products for use in the treatment of moderate to severe pain.
Prior to discontinuation of our commercialization activities, Elyxyb was manufactured and packaged by Contract Pharmaceuticals Limited Canada in Mississauga, Ontario. ​ Drug Substances ​ The API used to formulate the products in our portfolio and DEA drug scheduling are as follows: ​ ​ ​ ​ ​ ​ Product ​ API ​ DEA Drug Schedule Xtampza ER ​ Oxycodone ​ Schedule II Nucynta IR ​ Tapentadol ​ Schedule II Nucynta ER ​ Tapentadol ​ Schedule II Belbuca ​ Buprenorphone ​ Schedule III Symproic ​ Naldemedine ​ Not a controlled substance Elyxyb ​ Celecoxib ​ Not a controlled substance ​ Oxycodone, tapentadol, and buprenorphine are classified as narcotic controlled substances under U.S. federal law.
Symproic is manufactured by UPM Pharmaceuticals in Bristol, Tennessee and packaged by Sharp Packaging Solutions in Allentown, Pennsylvania. ​ Drug Substances ​ The API used to formulate the products in our portfolio and DEA drug scheduling are as follows: ​ ​ ​ ​ ​ ​ Product ​ API ​ DEA Drug Schedule Xtampza ER ​ Oxycodone ​ Schedule II Nucynta IR ​ Tapentadol ​ Schedule II Nucynta ER ​ Tapentadol ​ Schedule II Belbuca ​ Buprenorphine ​ Schedule III Symproic ​ Naldemedine ​ Not a controlled substance ​ Oxycodone, tapentadol, and buprenorphine are classified as narcotic controlled substances under U.S. federal law.
We intend to participate in this meeting. ​ The Hatch-Waxman Amendments ​ Orange Book Listing ​ In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s product.
As part of the Opioid PMR Consortium, Collegium is working with the FDA to redesign study 3033-11. ​ The Hatch-Waxman Amendments ​ Orange Book Listing ​ In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s product.
Other jurisdictions may enact similar or novel measures intended to reduce or constrain the growth of pharmaceutical spending or otherwise impose policy measures (either opioid-specific or applicable to the pharmaceutical industry as a whole) that could increase our operating costs associated with compliance. ​ Our Portfolio ​ Our mission is to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.
Other jurisdictions may enact similar or novel measures intended to reduce or constrain the growth of pharmaceutical spending or otherwise impose policy measures (either opioid-specific or applicable to the pharmaceutical industry as a whole) that could increase our operating costs associated with compliance. ​ Manufacturing of Our Products ​ Overview ​ Xtampza ER is manufactured using a proprietary process.
The FDA may also require a labeling change if it becomes aware of new safety information that it believes should be included in the labeling of a drug. ​ The FDA recently announced a meeting of the Anesthetic and Analgesic Drug Products Advisory Committee to be held on April 19, 2023.
The FDA may also require a labeling change if it becomes aware of new safety information that it believes should be included in the labeling of a drug.
Nucynta ER was approved by the FDA in November 2008 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.
In November 2008, the FDA approved Nucynta ER and Nucynta IR. Nucynta ER is indicated for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options are inadequate.
We own all of the intellectual property, including know-how and specialized manufacturing equipment, necessary to be able to qualify the manufacturing equipment currently located at Patheon’s facility at an alternative location (and with an alternative vendor) if necessary. ​ Nucynta ER was historically produced at a Janssen facility in Puerto Rico pursuant to a supply agreement that we assumed from Assertio in connection with the Nucynta Acquisition.
We own all of the intellectual property, including know-how and specialized manufacturing equipment, necessary to be able to qualify the manufacturing equipment currently located at Patheon’s facility at an alternative location (and with an alternative vendor) if necessary. ​ The Nucynta Products are manufactured pursuant to supply agreements with third-party manufacturers.
Despite heightened awareness of the risks associated with opioid use, abuse of prescription opioids, including extended-release formulations, continues to be a public health issue. ​ 4 Table of Contents Extended-release opioids may be especially attractive to people who abuse opioids because, if the extended-release mechanism can be defeated through tampering, many extended-release products quickly deliver a relatively large amount of active pharmaceutical ingredient (“API”) (i.e., an effect known as “dose dumping”).
In 2021, the number of reported deaths involving prescription opioids totaled 16,706, worsening from 2019 levels. ​ Extended-release opioids may be especially attractive to people who abuse opioids because, if the extended-release mechanism can be defeated through tampering, many extended-release products quickly deliver a relatively large amount of active pharmaceutical ingredient (“API”) (i.e., an effect known as “dose dumping”).
We and our contract manufacturers are subject to state regulation on the distribution of these products. ​ Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use. In 2016, the Comprehensive Addiction and Recovery Act (“CARA”), was enacted to address the national epidemics of prescription opioid abuse and heroin use.
In certain circumstances, violations could result in criminal proceedings. ​ Individual states also independently regulate controlled substances. We and our contract manufacturers are subject to state regulation on the distribution of these products. ​ Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use.
As we seek to build and sustain a challenging, inspiring, and inclusive environment for our employees, we have focused on safety and wellness; talent acquisition and retention; employee engagement, development, and training; diversity and inclusion; and compensation and pay equity.
As we seek to build and sustain a challenging, inspiring, and inclusive environment for our employees, we have focused on talent acquisition and retention; employee training and development; diversity and inclusion; and employee health and safety. At Collegium, we recognize that we have a responsibility to hold ourselves to the highest standard of business and professional ethics.
In September 2022, we completed the transfer of the Nucynta ER manufacturing process through a technology transfer program to enable manufacturing of Nucynta ER at Patheon in Cincinnati, Ohio. Thus, Nuncynta ER is currently manufactured at Patheon, pursuant to a supply agreement.
Nucynta ER was historically produced by Janssen at a facility in Puerto Rico pursuant to a supply agreement that we assumed from Assertio in connection with the Nucynta Acquisition. In September 2022, we completed the transfer of the Nucynta ER manufacturing process through a technology transfer program to enable manufacturing of Nucynta ER at Patheon in Cincinnati, Ohio.
As a result of a projected decrease in need for Schedule II opioids in 2023 and in an attempt to further reduce the risk of diversion, the DEA is lowering the supply of Schedule II opioids, which includes an average decrease in oxycodone and tapentadol, of approximately 6%. ​ Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. ​ The DEA also requires drug manufacturers to design and implement a system that identifies suspicious orders of controlled substances, such as those of unusual size, those that deviate substantially from a normal pattern and those of unusual frequency, prior to completion of the sale.
The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. ​ Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. ​ The DEA also requires drug manufacturers to design and implement a system that identifies suspicious orders of controlled substances, such as those of unusual size, those that deviate substantially from a normal pattern and those of unusual frequency, prior to completion of the sale.
These wax-based microspheres are designed to resist particle size reduction and dose dumping when subjected to physical and chemical manipulation. ​ 5 Table of Contents In April 2016, the FDA approved our New Drug Application (“NDA”) for Xtampza ER 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.
These wax-based microspheres are designed to resist particle size reduction and dose dumping when subjected to physical and chemical manipulation. ​ In April 2016, the United States Food and Drug Administration (“FDA”) approved our New Drug Application (“NDA”) for Xtampza ER.
Due to the controlled substances classification, the manufacturing, shipping, dispensing and storing of these products are subject to a high degree of regulation, as described in more detail under the caption “— Government Regulation — DEA and Opioid Regulation.” ​ We currently procure the API used in our products from a sole supplier or limited numbers of suppliers.
Due to the controlled substances classification, the manufacturing, shipping, dispensing and storing of these products are subject to a high degree of regulation, as described in more detail under the caption “— Government Regulation — DEA and Opioid Regulation.” ​ We currently procure the API used in our products from a sole supplier or limited number of suppliers. ​ Marketing and Commercialization ​ We commercialize our products in the United States with a dedicated field sales force, consisting of approximately 110 sales representatives and managers, to call on the approximately 10,000 health care professionals who write approximately 66% of the branded extended-release opioid prescriptions in the United States, with a primary focus on pain specialists.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel as they strive to increase stockholder value and contribute to the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel as they strive to increase stockholder value and contribute to the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. ​ Employee Training and Development ​ We believe career development begins with good conversations between employees and their managers that ensure regular feedback, and we have implemented tools and annual processes that allow all employees in conjunction with their managers to explore possibilities and drive development action.

… 79 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+19 added−22 removed103 unchanged
Biggest changeCurrently, it is not possible to predict the effect of any discontinuance, modification or other reforms to LIBOR, or the establishment of alternative reference rates such as SOFR, or any other reference rate, will have on us or our borrowing costs. ​ Risks Related to our Products ​ If we cannot continue successfully commercializing our products, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline. ​ Our business and future success are substantially dependent on our ability to continue successfully commercializing our products, including Xtampza ER, the Nucynta Products, Belbuca and Symproic. ​ Our ability to continue successfully commercializing our products will depend on many factors, including but not limited to: ​ ● our ability to manufacture commercial quantities of our products at reasonable cost and with sufficient speed to meet commercial demand; ● our ability to execute sales and marketing strategies successfully and continually; ● our success in educating physicians, patients and caregivers about the benefits, administration, use and coverage of our products; ● with respect to Xtampza ER, the perceived availability and advantages, relative cost, relative safety and relative efficacy of other abuse-deterrent products and treatments with similar indications; ● our ability to defend successfully any challenges to our intellectual property or suits asserting patent infringement relating to our products; ● the availability and quality of coverage and adequate reimbursement for our products; ● a continued acceptable safety profile of our products; and ● our ability to comply with applicable legal and regulatory requirements, including any additional manufacturing or packaging requirements that may become applicable to certain opioid products. ​ Many of these matters are beyond our control and are subject to other risks described elsewhere in this “Risk Factors” section.
Biggest changeAny decline in available funding or access to cash and liquidity resources could, among other risks, adversely impact our ability to meet our financial obligations, which could have material adverse impacts on our liquidity and our business, financial condition, or results of operations. ​ 25 ​ Risks Related to our Products ​ If we cannot continue successfully commercializing our products and any products that we may acquire in the future, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline. ​ Our business and future success are substantially dependent on our ability to continue successfully commercializing our products, including Xtampza ER, the Nucynta Products, Belbuca and Symproic, and any products that we may acquire in the future. ​ Our ability to continue successfully commercializing our products will depend on many factors, including but not limited to: ​ ● our ability to manufacture commercial quantities of our products at reasonable cost and with sufficient speed to meet commercial demand; ● our ability to execute sales and marketing strategies successfully and continually; ● our success in educating physicians, patients and caregivers about the benefits, administration, use and coverage of our products; ● with respect to Xtampza ER, the perceived availability and advantages, relative cost, relative safety and relative efficacy of other abuse-deterrent products and treatments with similar indications; ● our ability to defend successfully any challenges to our intellectual property or suits asserting patent infringement relating to our products; ● the availability and quality of coverage and adequate reimbursement for our products; ● a continued acceptable safety profile of our products; ● our ability to acquire new products, or develop new indications or line extensions for existing products, in the event that revenues from our existing products are impacted by price controls, loss of intellectual property exclusivity or competition; and ● our ability to comply with applicable legal and regulatory requirements, including any additional manufacturing or packaging requirements that may become applicable to certain opioid products. ​ Many of these matters are beyond our control and are subject to other risks described elsewhere in this “Risk Factors” section.
If we cannot do so, or are significantly delayed in doing so, our business will be materially harmed. ​ Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the product labeling of any of our products, including our abuse-deterrent claims with respect to Xtampza ER, and our ability to market our products successfully may be adversely affected. ​ Xtampza ER was approved with label language describing abuse-deterrent properties of the formulation with respect to the nasal and IV routes of abuse, consistent with Guidance for Industry, “Abuse-Deterrent Opioids- Evaluation and Labeling.” In November 2017, the FDA approved an sNDA for Xtampza ER to include comparative oral pharmacokinetic data from a clinical study evaluating the effect of physical manipulation by crushing Xtampza ER compared with OxyContin and a control (oxycodone hydrochloride immediate-release), results from an oral human abuse potential study and the addition of an oral abuse deterrent claim. ​ The FDA can require changes to the product labeling for any of our products at any time which can impact our ability to generate product sales.
If we cannot do so, or are significantly delayed in doing so, our business will be materially harmed. ​ Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the product labeling of any of our products, including our abuse-deterrent claims with respect to Xtampza ER, and our ability to market our products successfully may be adversely affected. ​ Xtampza ER was approved with label language describing abuse-deterrent properties of the formulation with respect to the nasal and IV routes of abuse, consistent with Guidance for Industry, “Abuse-Deterrent Opioids- Evaluation and Labeling.” In November 2017, the FDA approved a sNDA for Xtampza ER to include comparative oral pharmacokinetic data from a clinical study evaluating the effect of physical manipulation by crushing Xtampza ER compared with OxyContin and a control (oxycodone hydrochloride immediate-release), results from an oral human abuse potential study and the addition of an oral abuse deterrent claim. ​ The FDA can require changes to the product labeling for any of our products at any time which can impact our ability to generate product sales.
Acceptance and use of our products will depend on a number of factors including: ​ ● approved indications, warnings and precautions language that may be less desirable than competitive products; ● perceptions of physicians and other healthcare community members of the safety and efficacy of our products; ● perceptions by members of the healthcare community, including physicians, about the relevance and efficacy of our abuse deterrent technology; ● the availability of competitive products; ● the pricing and cost-effectiveness of our products relative to competing products; ● the potential and perceived advantages of our products over alternative treatments; ● the convenience and ease of administration to patients of our products; ● actual and perceived availability and quality of coverage and reimbursement for our products from government or other third-party payors; ● negative publicity related to our products or negative or positive publicity related to our competitors’ products; ● the prevalence and severity of adverse side effects; ● policy initiatives by FDA, HHS, DEA, or other federal or state agencies regarding opioids; ● our ability to comply with the Opioid Analgesic REMS; and ● the effectiveness of marketing and distribution efforts by us and any licensees and distributors. ​ If our products fail to have an adequate level of acceptance by the medical community, patients, or healthcare payors, we will not be able to generate sufficient revenue to remain profitable.
Acceptance and use of our products will depend on a number of factors including: ​ ● approved indications, warnings and precautions language that may be less desirable than competitive products; ● perceptions of physicians and other healthcare community members of the safety and efficacy of our products; ● perceptions by members of the healthcare community, including physicians, about the relevance and efficacy of our abuse deterrent technology; ● the availability of competitive products; ● the pricing and cost-effectiveness of our products relative to competing products; ● the potential and perceived advantages of our products over alternative treatments; ● the convenience and ease of administration to patients of our products; 29 ​ ● actual and perceived availability and quality of coverage and reimbursement for our products from government or other third-party payors; ● negative publicity related to our products or negative or positive publicity related to our competitors’ products; ● the prevalence and severity of adverse side effects; ● policy initiatives by FDA, HHS, DEA, or other federal or state agencies regarding opioids; ● our ability to comply with the Opioid Analgesic REMS; and ● the effectiveness of marketing and distribution efforts by us and any licensees and distributors. ​ If our products fail to have an adequate level of acceptance by the medical community, patients, or healthcare payors, we will not be able to generate sufficient revenue to remain profitable.
An economic downturn could result in business closures, higher levels of unemployment, or declines in consumer disposable income which could have an impact on the number of patients seeking and receiving treatment for conditions that might otherwise result in the prescription of our products, as patients may make efforts to avoid or postpone seeking non-essential medical care to allocate their resources to other priorities or essential items.
An economic downturn could result in business closures, higher levels of unemployment, or declines in consumer disposable income which 36 ​ could have an impact on the number of patients seeking and receiving treatment for conditions that might otherwise result in the prescription of our products, as patients may make efforts to avoid or postpone seeking non-essential medical care to allocate their resources to other priorities or essential items.
In particular, if the FDA determines that our post-marketing data for Xtampza ER does not demonstrate that the abuse-deterrent properties result in reduction of abuse, or demonstrates a shift to routes of abuse that present a greater risk, the FDA may find that product labeling revisions are needed, and potentially require the removal of our abuse-deterrence claims, which would have a material adverse effect on our ability to continue successfully commercializing Xtampza ER. ​ 26 Table of Contents Our opioid products are subject to mandatory REMS programs, which could increase the cost, burden and liability associated with the commercialization of these products. ​ The FDA has imposed a class-wide REMS on all IR, ER and long-acting opioid drug products (known as the Opioid Analgesic REMS).
In particular, if the FDA determines that our post-marketing data for Xtampza ER does not demonstrate that the abuse-deterrent properties result in reduction of abuse, or demonstrates a shift to routes of abuse that present a greater risk, the FDA may find that product labeling revisions are needed, and potentially require the removal of our abuse-deterrence claims, which would have a material adverse effect on our ability to continue successfully commercializing Xtampza ER. ​ 26 ​ Our opioid products are subject to mandatory REMS programs, which could increase the cost, burden and liability associated with the commercialization of these products. ​ The FDA has imposed a class-wide REMS on all IR, ER and long-acting opioid drug products (known as the Opioid Analgesic REMS).
Liabilities for taxes or assessments under any such laws could have an adverse impact on our results of operations. ​ California and several other states have enacted legislation related to prescription drug pricing transparency and it is unclear the effect this legislation will have on our business.
Liabilities for taxes or assessments under any such laws could have an adverse impact on our results of operations. ​ 30 ​ California and several other states have enacted legislation related to prescription drug pricing transparency and it is unclear the effect this legislation will have on our business.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor, or those with whom they communicate, from using that technology or information to compete with us.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor, or those with whom they communicate, from using 28 ​ that technology or information to compete with us.
The Federal Food, Drug, and Cosmetic Act, FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes.
The Federal Food, Drug, and Cosmetic Act, FDA regulations and other applicable regulations and policies provide incentives to manufacturers to 32 ​ create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes.
We are cooperating fully in the open investigations. Managing litigation and responding to governmental investigations is costly and may involve a significant diversion of management attention. Such proceedings are unpredictable and may develop over lengthy periods of time.
We are cooperating fully in the open investigations. Managing litigation and responding to governmental investigations is costly and may involve a significant diversion of management attention. Such proceedings are 37 ​ unpredictable and may develop over lengthy periods of time.
Our reliance on a limited number of vendors and, in particular, Patheon as our single manufacturer for Xtampza ER and Nucynta ER, exposes us to the following risks, any of which could impact commercialization of our products, result in higher costs, or deprive us of potential product revenues: ​ ● Our contract manufacturer, or other third parties we rely on, may encounter difficulties in achieving the volume of production needed to satisfy commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, may be affected by natural disasters that interrupt or prevent manufacturing of our products including the COVID-19 pandemic, may experience shortages of qualified personnel to adequately staff production operations, may experience shortages of raw materials and may have difficulties finding replacement parts or equipment; ● Our contract manufacturer could default on their agreement with us to meet our requirements for commercial supplies of our products and/or we could experience technical problems in the operation of our dedicated manufacturing suite; ● The use of alternate manufacturers may be difficult because the number of potential manufacturers that have the necessary governmental licenses to produce narcotic products is limited.
Our reliance on a limited number of vendors and, in particular, Patheon as our single manufacturer for Xtampza ER and Nucynta ER, exposes us to the following risks, any of which could impact commercialization of our products, result in higher costs, or deprive us of potential product revenues: ​ ● Our contract manufacturer, or other third parties we rely on, may encounter difficulties in achieving the volume of production needed to satisfy commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, may be affected by natural disasters that interrupt or prevent manufacturing of our products, may experience shortages of qualified personnel to adequately staff production operations, may experience shortages of raw materials and may have difficulties finding replacement parts or equipment; ● Our contract manufacturer could default on their agreement with us to meet our requirements for commercial supplies of our products and/or we could experience technical problems in the operation of our dedicated manufacturing suite; ● The use of alternate manufacturers may be difficult because the number of potential manufacturers that have the necessary governmental licenses to produce narcotic products is limited.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. ​ 38 Table of Contents We or the third parties upon whom we depend may be adversely affected by natural disasters and/or health epidemics, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster. ​ Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. ​ We or the third parties upon whom we depend may be adversely affected by natural disasters and/or health epidemics, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster. ​ Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.
We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry. ​ Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers.
We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry. ​ Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payors.
While we were successful in our regulatory approval and validation activities, we could encounter issues in obtaining commercial supply from Patheon's facility due to technical problems or challenges obtaining adequate and/or timely DEA procurement quota. ​ Although we have identified alternate sources for these services, it would be time-consuming, and require us to incur additional cost, to qualify these sources.
While we were successful in our regulatory approval and validation activities, we could encounter issues in obtaining commercial supply from Patheon's facility due to technical problems or challenges obtaining adequate and/or timely DEA procurement quota. ​ Although we have identified alternate sources for these services, it would be time-consuming, and require us to incur additional costs, to qualify these sources.
Physicians and others in the medical community, patients, and healthcare payors may not continue to accept and use our products, or accept and use any new products that we may develop or acquire.
Physicians and others in the medical community, patients, and healthcare payors may not continue to accept and use our products, or accept and use any new products that we may acquire.
The effect of the Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet known. ​ Our inability to expand and maintain coverage and profitable reimbursement rates from both government-funded and private payors for our products could have a material adverse effect on our operating results, our ability to raise capital needed to continue to commercialize our products and our overall financial condition. ​ The Affordable Care Act and any changes in healthcare law may increase the difficulty and cost for us to continue to commercialize our products and affect the prices we may obtain. ​ The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that may affect our ability to profitably sell our products, including implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. ​ The Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
The effect of the IRA on our business and the pharmaceutical industry in general is not yet known. ​ 31 ​ Our inability to expand and maintain coverage and profitable reimbursement rates from both government-funded and private payors for our products could have a material adverse effect on our operating results, our ability to raise capital needed to continue to commercialize our products and our overall financial condition. ​ The Affordable Care Act and any changes in healthcare law may increase the difficulty and cost for us to continue to commercialize our products and affect the prices we may obtain. ​ The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that may affect our ability to profitably sell our products, including implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. ​ The Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
We may not realize all the anticipated benefits from our future acquisitions, such as increased earnings, cost savings and revenue enhancements, for various reasons, including difficulties integrating operations and personnel, higher than expected acquisition and operating costs or other 36 Table of Contents difficulties, inexperience with operating in new geographic regions, unknown liabilities, inaccurate reserve estimates and fluctuations in market prices. ​ In addition, integrating acquired businesses and properties involves a number of special risks and unforeseen difficulties can arise in integrating operations and systems and in retaining and assimilating employees.
We may not realize all the anticipated benefits from our future acquisitions, such as increased earnings, cost savings and revenue enhancements, for various reasons, including difficulties integrating operations and personnel, higher than expected acquisition and operating costs or other difficulties, inexperience with operating in new geographic regions, unknown liabilities, inaccurate reserve estimates and fluctuations in market prices. ​ In addition, integrating acquired businesses and properties involves a number of special risks and unforeseen difficulties can arise in integrating operations and systems and in retaining and assimilating employees.
You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below: ● Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products and any products and future product candidates, if approved, that we may develop or acquire in the future; ● We have substantial outstanding indebtedness, which may adversely affect our business, financial condition and results of operations; ● If we cannot continue successfully commercializing our products, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline; ● Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the product labeling of any of our products, including our abuse-deterrent claims with respect to Xtampza ER, and our ability to market our products successfully may be adversely affected; ● Xtampza ER, the Nucynta Products, and Belbuca are subject to mandatory REMS programs, which could increase the cost, burden and liability associated with the commercialization of these products; ● Failure to comply with ongoing governmental regulations for marketing our products, and in particular any failure to promote Xtampza ER’s abuse deterrent labeling in compliance with FDA regulations, could delay or inhibit our ability to generate revenues from their sale and could also expose us to claims or other sanctions; ● Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize our products; ● If we are unable to obtain or maintain intellectual property rights for our technologies, products or any future product candidates which we may develop, we may lose valuable assets or be unable to compete effectively in our market; ● We have been, and may continue to be, forced to litigate to enforce or defend our intellectual property, which could be expensive, time consuming and unsuccessful, and result in the loss of valuable assets; 22 Table of Contents ● Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements; ● If we are unable to utilize our own sales and marketing capabilities successfully or enter into strategic alliances with marketing collaborators, we may not continue to be successful in commercializing our products and may be unable to generate sufficient product revenue; ● If the medical community, patients, and healthcare payors do not accept and use our products, we will not achieve sufficient product revenues and our business will suffer; ● Our products contain, and our future product candidates may contain, controlled substances, the manufacture, use, sale, importation, exportation and distribution of which are subject to regulation by state and federal law enforcement and other regulatory agencies; ● Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and may reduce the prices we are able to obtain for our products; ● Our products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could have a material adverse effect on our business.
You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below: ● Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products and any products we may acquire in the future; ● We have substantial outstanding indebtedness, which may adversely affect our business, financial condition and results of operations; ● Adverse developments affecting the financial services industry could adversely affect our business, financial condition, or results of operations; ● If we cannot continue successfully commercializing our products and any products that we may acquire in the future, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline; ● Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the product labeling of any of our products, including our abuse-deterrent claims with respect to Xtampza ER, and our ability to market our products successfully may be adversely affected; ● Xtampza ER, the Nucynta Products, and Belbuca are subject to mandatory REMS programs, which could increase the cost, burden and liability associated with the commercialization of these products; ● Failure to comply with ongoing governmental regulations for marketing our products, and in particular any failure to promote Xtampza ER’s abuse deterrent labeling in compliance with FDA regulations, could delay or inhibit our ability to generate revenues from their sale and could also expose us to claims or other sanctions; ● Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize our products; ● If we are unable to obtain or maintain intellectual property rights for our technologies, products or any products we may acquire, we may lose valuable assets or be unable to compete effectively in our market; ● We have been, and may continue to be, forced to litigate to enforce or defend our intellectual property, which could be expensive, time consuming and unsuccessful, and result in the loss of valuable assets; ● Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements; ● If we are unable to utilize our own sales and marketing capabilities successfully or enter into strategic alliances with marketing collaborators, we may not continue to be successful in commercializing our products and may be unable to generate sufficient product revenue; ● If the medical community, patients, and healthcare payors do not accept and use our products, we will not achieve sufficient product revenues and our business will suffer; ● Our products contain controlled substances, the manufacture, use, sale, importation, exportation and distribution of which are subject to regulation by state and federal law enforcement and other regulatory agencies; ● Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and may reduce the prices we are able to obtain for our products; ● Our products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could have a material adverse effect on our business.
Such efforts may inhibit our ability to continue to commercialize our products. ​ Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs; the limitations of abuse-resistant formulations; the ability of people who abuse drugs to discover 32 Table of Contents previously unknown ways to abuse opioid drugs, including Xtampza ER, the Nucynta Products and Belbuca; public inquiries and investigations into prescription drug abuse; litigation; or regulatory activity regarding sales, marketing, distribution or storage of opioid drugs could have a material adverse effect on our reputation.
Such efforts may inhibit our ability to continue to commercialize our products. ​ Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs; the limitations of abuse-resistant formulations; the ability of people who abuse drugs to discover previously unknown ways to abuse opioid drugs, including Xtampza ER, the Nucynta Products and Belbuca; public inquiries and investigations into prescription drug abuse; litigation; or regulatory activity regarding sales, marketing, distribution or storage of opioid drugs could have a material adverse effect on our reputation.
Consequently, we are limited in our ability to maintain an appreciable safety stock of finished drug product. ​ Our reliance on third parties reduces our control over our development and commercialization activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards.
Consequently, we are limited in our ability to maintain an appreciable safety stock of finished drug product. ​ Our reliance on third parties reduces our control over our manufacturing and commercialization activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards.
Since we expect to rely on sales generated by Xtampza ER, the Nucynta Products, Belbuca, and Symproic for substantially all of our revenues for the foreseeable future, the failure of these products to maintain market acceptance would harm our business prospects. ​ Some of our products contain, and our future product candidates may contain, controlled substances, the manufacture, use, sale, importation, exportation and distribution of which are subject to regulation by state and federal law enforcement and other regulatory agencies. ​ Some of our products contain, and our future product candidates may contain, controlled substances that are subject to state and federal laws and regulations regarding their manufacture, use, sale, importation, exportation and distribution.
Since we expect to rely on sales generated by Xtampza ER, the Nucynta Products, Belbuca, and Symproic for substantially all of our revenues for the foreseeable future, the failure of these products to maintain market acceptance would harm our business prospects. ​ Some of our products contain controlled substances, and the manufacture, use, sale, importation, exportation and distribution of which are subject to regulation by state and federal law enforcement and other regulatory agencies. ​ Some of our products contain controlled substances that are subject to state and federal laws and regulations regarding their manufacture, use, sale, importation, exportation and distribution.
Such failure could also be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for products previously granted to us, or take other regulatory or legal action, including recall or seizure, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction, imposing civil penalties or pursuing criminal prosecution. ​ 34 Table of Contents Any stock out, or failure to obtain sufficient supplies of any of our products, or the necessary active pharmaceutical ingredients, excipients or components necessary to manufacture each of our products, could adversely affect our ability to commercialize such products, which could in turn adversely affect our results of operations and financial condition. ​ Because we currently rely on a sole supplier or limited number of suppliers to manufacture the active pharmaceutical ingredient of our products, any production problems with any of these suppliers could have a material adverse effect on us. ​ We currently rely on a sole supplier or limited number of suppliers to manufacture the active pharmaceutical ingredients of our products.
Such failure could also be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for products previously granted to us, or take other regulatory or legal action, including recall or seizure, total or partial suspension of production, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction, imposing civil penalties or pursuing criminal prosecution. ​ Any stock out, or failure to obtain sufficient supplies of any of our products, or the necessary active pharmaceutical ingredients, excipients or components necessary to manufacture each of our products, could adversely affect our ability to commercialize such products, which could in turn adversely affect our results of operations and financial condition. ​ 34 ​ Because we currently rely on a sole supplier or limited number of suppliers to manufacture the active pharmaceutical ingredient of our products, any production problems with any of these suppliers could have a material adverse effect on us. ​ We currently rely on a sole supplier or limited number of suppliers to manufacture the active pharmaceutical ingredients of our products.
These lawsuits, filed in multiple jurisdictions, are brought by various local governments as well as private claimants, against various manufacturers, distributors and retail pharmacies. These lawsuits generally alleged that we had engaged in improper marketing practices related to Xtampza ER and the Nucynta Products.
These lawsuits, filed in multiple jurisdictions, are brought by various local governments as well as private claimants, against various manufacturers, distributors and retail pharmacies. These lawsuits generally allege that we had engaged in improper marketing practices related to Xtampza ER and the Nucynta Products.
These regulations increase the personnel needs and the expense associated with development and commercialization of our products that include controlled substances.
These regulations increase the personnel needs and the expense associated with commercialization of our products that include controlled substances.
If a natural disaster, power outage, health epidemic (such as the COVID-19 pandemic) or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it might become difficult or, in certain cases, impossible for us to continue our business, and any disruption could last for a substantial period of time. ​ The disaster recovery and business continuity plans we have in place, and the technology that we may rely upon to implement such plans, may prove inadequate in the event of a serious disaster or similar event.
If a natural disaster, power outage, health epidemic or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it might 38 ​ become difficult or, in certain cases, impossible for us to continue our business, and any disruption could last for a substantial period of time. ​ The disaster recovery and business continuity plans we have in place, and the technology that we may rely upon to implement such plans, may prove inadequate in the event of a serious disaster or similar event.
Similarly, to the extent opioid abuse becomes less prevalent or less urgent of a public health issue, regulators and third party payers may not be willing to pay a premium for abuse-deterrent formulations of opioid. ​ Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use, including the Comprehensive Addiction and Recovery Act and the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act.
Similarly, to the extent opioid abuse becomes less prevalent or less urgent of a public health issue, regulators and third-party payors may not be willing to pay a premium for abuse-deterrent formulations of opioids. ​ Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use, including the Comprehensive Addiction and Recovery Act and the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act.
For more information, see the section in our Annual Report entitled “Business — Government Regulation — DEA and Opioid Regulation.” We may not be able to obtain sufficient quantities of these controlled substances in order to meet commercial demand.
For more information, refer to the section in our Annual Report entitled “Business — Government Regulation — DEA and Opioid Regulation.” We may not be able to obtain sufficient quantities of these controlled substances in order to meet commercial demand.
We cannot be sure that high-quality coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be and whether it will be satisfactory. ​ 31 Table of Contents Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.
We cannot be sure that high-quality coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be and whether it will be satisfactory. ​ Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.
Any of these consequences would harm the commercial success of our products, including Xtampza ER. ​ Further, after product approval, subsequent discovery of serious and unanticipated adverse events associated with the product; the emergence of other problems with the product, manufacturer or facility; or our failure to make required regulatory submissions may result in adverse regulatory actions, including withdrawal of the product from the market or the requirement to add or strengthen label warnings about the product.
Any of these consequences would harm the commercial success of our products, including Xtampza ER. ​ Further, discovery of serious and unanticipated adverse events associated with the product; the emergence of other problems with the product, manufacturer or facility; or our failure to make required regulatory submissions may result in adverse regulatory actions, including withdrawal of the product from the market or the requirement to add or strengthen label warnings about the product.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital markets. ​ 39 Table of Contents Sales of our common stock in the public market, either by us or by our current shareholders, or the perception that these sales could occur, could cause a decline in the market price of our securities.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital markets. ​ Sales of our common stock in the public market, either by us or by our current shareholders, or the perception that these sales could occur, could cause a decline in the market price of our securities.
The failure to obtain or maintain requisite governmental approvals or the imposition of additional or stronger warnings could delay or preclude us from further developing, marketing or realizing the full commercial potential of our products. ​ Risks Related to Intellectual Property ​ Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize our products. ​ Our commercial success depends upon our ability to commercialize products without infringing the intellectual property rights of others.
The failure to obtain or maintain requisite governmental approvals or the imposition of additional or stronger warnings could delay or preclude us from realizing the full commercial potential of our products. ​ Risks Related to Intellectual Property ​ Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize our products. ​ Our commercial success depends upon our ability to commercialize products without infringing the intellectual property rights of others.
The significance of each wholesale pharmaceutical distributor account to our business adversely impacts our ability to negotiate favorable commercial terms with each such distributor, and as a result, we may be forced to accept terms that adversely impact our results of operations. ​ 35 Table of Contents In addition, these wholesaler customers comprise a significant part of the distribution network for pharmaceutical products in the United States.
The significance of each wholesale pharmaceutical distributor account to our business adversely impacts our ability to negotiate favorable commercial terms with each such distributor, and as a result, we may be forced to accept terms that adversely impact our results of operations. ​ In addition, these wholesaler customers comprise a significant part of the distribution network for pharmaceutical products in the United States.
Our existing and future levels of indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, and among other things: ​ ● requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes; ● limiting our ability to obtain additional financing; ● limiting our flexibility to plan for, or react to, changes in our business; ● exposing us to the risk of increased interest rates as certain of our borrowings, including the 2022 Term Loan, are at variable rates of interest; ● diluting the interests of our existing shareholders as a result of issuing shares of our common stock upon conversion of the convertible notes; ● placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital; and ● increasing our vulnerability to downturns in our business, our industry or the economy in general, including any such downturn related to the impact of the COVID-19 pandemic. ​ Holders of our Convertible Notes, subject to a limited exception described in the notes, may require us to repurchase their notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any.
Our existing and future levels of indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, and among other things: ​ ● requiring the dedication of a substantial portion of our cash flows from operations to service our indebtedness, which will reduce the amount of cash available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes; ● limiting our ability to obtain additional financing; ● limiting our flexibility to plan for, or react to, changes in our business; ● exposing us to the risk of increased interest rates as certain of our borrowings, including the 2022 Term Loan, are at variable rates of interest; ● diluting the interests of our existing shareholders as a result of issuing shares of our common stock upon conversion of the Convertible Notes; ● placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital; and ● increasing our vulnerability to downturns in our business, our industry or the economy in general. ​ 24 ​ Holders of our Convertible Notes, subject to a limited exception described in the notes, may require us to repurchase their notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any.
Refer to Note 17, Income Taxes , to our consolidated financial statements included in Part IV of this Annual Report on Form 10-K for more information. ​ We have substantial outstanding indebtedness, which may adversely affect our business, financial condition and results of operations. ​ In March 2022, we entered into a $650.0 million secured term loan (the “2022 Term Loan”) pursuant to our Amended and Restated Loan Agreement with BioPharma Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender (as amended from time to time, the “2022 Loan Agreement”), of which $575.0 million in principal was outstanding as of December 31, 2022.
Refer to Note 18, Income Taxes , to our consolidated financial statements included in Part IV of this Annual Report on Form 10-K for more information. ​ We have substantial outstanding indebtedness, which may adversely affect our business, financial condition and results of operations. ​ In March 2022, we entered into a $650.0 million secured term loan (the “2022 Term Loan”) pursuant to our Amended and Restated Loan Agreement with BioPharma Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender (as amended from time to time, the “2022 Loan Agreement”), of which $412.5 million in principal was outstanding as of December 31, 2023.
Such pricing regulations may address the rebates that manufacturers offer to pharmaceutical benefit managers, or the discounts that manufacturers provide others within the pharmaceutical distribution chain; ● Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioids and regulatory and enforcement efforts to combat abuse, could decrease the potential market for our products and may adversely impact external investor perceptions of our business; ● If the FDA or other applicable regulatory authorities approve generic products with abuse deterrent claims that compete with our products, our sales could decline; ● If the third-party manufacturers of our products fail to devote sufficient time and resources to these products, or their performance is substandard, and/or we encounter challenges with our dedicated manufacturing suite at our third-party manufacturer’s site for the manufacturing of Xtampza ER, our costs may be higher than expected and could have a material adverse effect on our business; ● Because we currently rely on a sole supplier or limited numbers of suppliers to manufacture the active pharmaceutical ingredient of our products, any production problems with any of these suppliers could have a material adverse effect on us; ● We depend on wholesale pharmaceutical distributors for retail distribution of our products; if we lose any of our significant wholesale pharmaceutical distributors or their distribution network is disrupted, our financial condition and results of operations may be adversely affected; ● Our products could be subject to post-marketing requirements, which requirements may, in some cases, not be capable of timely or satisfactory completion without participation in consortia over which we have limited control; ● We may not realize all of the anticipated benefits from future acquisitions, and we may be unable to successfully integrate future acquisitions; ● Our business has been, and may continue to be, adversely affected by certain events or circumstances outside our control, including the effects of the COVID-19 pandemic and geopolitical turmoil; ● Litigation or regulatory action regarding opioid medications could negatively affect our business; ● We face substantial competition from other biotechnology and pharmaceutical companies, which may result in others discovering, developing or commercializing products more successfully than we do; ● Commercial sales of our products, and clinical trials of any future product candidates we may develop or acquire, may expose us to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at all; ● Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse, transparency, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished profits and future earnings; and ● The price of our common stock may be volatile and you may lose all or part of your investment. ​ 23 Table of Contents Risks Related to Our Financial Position and Capital Needs Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products and any products and future product candidates, if approved, that we may develop or acquire in the future.
Such pricing regulations may address the 22 ​ rebates that manufacturers offer to pharmaceutical benefit managers, or the discounts that manufacturers provide others within the pharmaceutical distribution chain; ● Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioids and regulatory and enforcement efforts to combat abuse, could decrease the potential market for our products and may adversely impact external investor perceptions of our business; ● If the FDA or other applicable regulatory authorities approve generic products with abuse deterrent claims that compete with our products, our sales could decline; ● If the third-party manufacturers of our products fail to devote sufficient time and resources to these products, or their performance is substandard, and/or we encounter challenges with our dedicated manufacturing suite at our third-party manufacturer’s site for the manufacturing of Xtampza ER, our costs may be higher than expected and could have a material adverse effect on our business; ● Because we currently rely on a sole supplier or limited number of suppliers to manufacture the active pharmaceutical ingredient of our products, any production problems with any of these suppliers could have a material adverse effect on us; ● We depend on wholesale pharmaceutical distributors for retail distribution of our products; if we lose any of our significant wholesale pharmaceutical distributors or their distribution network is disrupted, our financial condition and results of operations may be adversely affected; ● Our products could be subject to post-marketing requirements, which requirements may, in some cases, not be capable of timely or satisfactory completion without participation in consortia over which we have limited control; ● We may not realize all of the anticipated benefits from future acquisitions, and we may be unable to successfully integrate future acquisitions; ● Our business may be adversely affected by certain events or circumstances outside our control, including macroeconomic conditions and geopolitical turmoil; ● Litigation or regulatory action regarding opioid medications could negatively affect our business; ● We face substantial competition from other biotechnology and pharmaceutical companies, which may result in others discovering, developing or commercializing products more successfully than we do; ● Commercial sales of our products may expose us to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at all; ● Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse, transparency, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished profits and future earnings; and ● The price of our common stock may be volatile and you may lose all or part of your investment. ​ Risks Related to Our Financial Position and Capital Needs Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products and any products that we may acquire in the future.
Product liability claims may be brought against us by patients; clinical trial participants; healthcare providers; or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our products caused injuries, we could incur substantial liabilities.
Product liability claims may be brought against us by patients; healthcare providers; or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our products caused injuries, we could incur substantial liabilities.
This facility requires the maintenance of 33 Table of Contents regulatory approvals and other costs, all of which we absorb. We cannot guarantee that we will be able to continue to leverage the dedicated manufacturing suite in a profitable manner.
This facility requires the maintenance of regulatory approvals and other costs, all of which we absorb. We cannot guarantee that we will be able to continue to leverage the dedicated manufacturing suite in a profitable manner.
Three of our wholesale pharmaceutical distributors represented greater than 90% of our product shipments for the year ended December 31, 2022.
Three of our wholesale pharmaceutical distributors represented greater than 90% of our product shipments for the year ended December 31, 2023.
These treatments will compete with our products and the established use of these competitive products may limit the potential for our products to receive widespread acceptance. ​ Commercial sales of our products, and clinical trials of any future product candidates we develop or acquire, may expose us to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at all. ​ We currently carry product liability insurance.
These treatments will compete with our products and the established use of these competitive products may limit the potential for our products to receive widespread acceptance. ​ Commercial sales of our products and any products we acquire, may expose us to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at all. ​ We currently carry product liability insurance.
Ultimately, the outcome of such litigation, including our pending litigation with Purdue, could compromise the validity and scope of our patents or other proprietary rights or hinder our ability to manufacture and market our products. ​ If we are unable to obtain or maintain intellectual property rights for our technologies, products or any future product candidates which we may develop, we may lose valuable assets or be unable to compete effectively in our market. ​ We depend on our ability to protect our proprietary technology.
Ultimately, the outcome of such litigation, including our pending litigation with Purdue, could compromise the validity and scope of our patents or other proprietary rights or hinder our ability to manufacture and market our products. ​ If we are unable to obtain or maintain intellectual property rights for our technologies, products or any products we may acquire, we may lose valuable assets or be unable to compete effectively in our market. ​ We depend on our ability to protect our proprietary technology.
The U.S. federal and state NOL carryforwards expire at various dates through 2037. Federal NOLs and certain state NOLs incurred in 2018 and onward have an indefinite expiration under the Tax Cuts and Jobs Act of 2017 and applicable state statutes. We also had U.S. federal tax credits of approximately $4.2 million, and state tax credits of approximately $0.8 million.
The U.S. federal and state NOL carryforwards expire at various dates through 2037. Federal NOLs and certain state NOLs incurred in 2018 and onward have an indefinite expiration under the Tax Cuts and Jobs Act of 2017 and applicable state statutes. We also had U.S. federal tax credits of approximately $1.0 million, and state tax credits of approximately $0.7 million.
The DEA and some states conduct periodic inspections of registered establishments that handle controlled substances. ​ 30 Table of Contents Failure to obtain and maintain required registrations or to comply with any applicable regulations could delay or preclude us from developing and commercializing our products that contain controlled substances and subject us to enforcement action.
The DEA and some states conduct periodic inspections of registered establishments that handle controlled substances. ​ Failure to obtain and maintain required registrations or to comply with any applicable regulations could delay or preclude us from manufacturing and commercializing our products that contain controlled substances and subject us to enforcement action.
In addition, we have $26.4 million in 2.625% Convertible Senior Notes due in 2026 (the “2026 Convertible Notes”) and $241.5 million in 2.875% Convertible Senior Notes due 2029 (the “2029 Conertible Notes” and, together with the 2026 Convertible Notes, the “Convertible Notes”). We may 24 Table of Contents also incur additional indebtedness to meet future financing needs.
In addition, we have $26.4 million in 2.625% Convertible Senior Notes due in 2026 (the “2026 Convertible Notes”) and $241.5 million in 2.875% Convertible Senior Notes due 2029 (the “2029 Convertible Notes” and, together with the 2026 Convertible Notes, the “Convertible Notes”). We may also incur additional indebtedness to meet future financing needs.
If the demand for Xtampza ER and any future related products never meets our expectations and forecasts, or if we do not produce the output we plan, we may not be able to realize the return on investment we anticipated, which would have a negative impact on our financial condition and results of operations. ​ We have completed the activities required to transition commercial manufacturing for Nucynta ER from Janssen to Patheon.
If the demand for Xtampza ER and any future related products never meets our expectations and forecasts, or if we do not produce the output we plan, we may not be able to realize the return on investment we anticipated, which would have a negative impact on our financial condition and results of operations. 33 ​ ​ We have also transitioned commercial manufacturing for Nucynta ER from Janssen to Patheon.
The Inflation Reduction Act of 2022 could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.
The IRA could have the effect of reducing the prices we can charge and reimbursement we receive for our products, thereby reducing our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.
Our ability to maintain profitability depends upon our ability to realize the full commercial potential of our products and to commercialize successfully any other products and future product candidates, if approved, that we may develop, in-license or acquire in the future.
Our ability to maintain profitability depends upon our ability to realize the full commercial potential of our products and to commercialize successfully any other products that we may in-license or acquire in the future.
Our loss of any of these wholesale pharmaceutical distributors’ accounts, or a material reduction in their purchases or a significant disruption to transportation infrastructure or other means of distribution of our products, including as a result of the COVID-19 pandemic, could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our loss of any of these wholesale pharmaceutical distributors’ accounts, or a material reduction in their purchases or a significant disruption to transportation infrastructure or other means of distribution of our products, could have a material adverse effect on our business, results of operations, financial condition and prospects.
Such an interruption could have a material adverse impact on our business, including but not limited to, our ability to timely manufacture and distribute our products. ​ Manufacturing issues may arise that could increase product and regulatory approval costs, delay commercialization or limit commercial supply. ​ In our current commercial manufacturing operations, and as we scale up manufacturing of our products and conduct required stability testing, we may encounter product, packaging, equipment and process-related issues that may require refinement or resolution in order to proceed with our planned clinical trials, obtain regulatory approval for commercial marketing and build commercial supplies.
Such an interruption could have a material adverse impact on our business, including but not limited to, our ability to timely manufacture and distribute our products. ​ Manufacturing issues may arise that could increase product and regulatory approval costs, delay commercialization or limit commercial supply. ​ In our current commercial manufacturing operations, and as we scale up manufacturing of our products and conduct required stability testing, we may encounter product, packaging, equipment and process-related issues that may require refinement or resolution in order to successfully commercialize our products.
Any such delay could have a material adverse effect on our business. ​ Global supply chain disruptions and shortages may limit manufacturing and commercial supply of our products and have a material impact on our business. ​ There are currently global supply chain disruptions and shortages caused by a variety of factors, including the COVID-19 pandemic and geopolitical turmoil, such as the Ukrainian War.
Any such delay could have a material adverse effect on our business. ​ Global supply chain disruptions and shortages may limit manufacturing and commercial supply of our products and have a material impact on our business. ​ There are currently global supply chain disruptions and shortages caused by a variety of factors, including geopolitical turmoil, such as the Ukrainian War and current conflict in Israel and Gaza.
Further, our suppliers for Xtampza ER and the Nucynta Products active pharmaceutical ingredients also supply our primary competitor in the extended-release oxycodone space, Purdue. Identifying alternate sources of active pharmaceutical ingredients for our products is generally time-consuming and costly.
We contract with these suppliers for commercial supply to manufacture our products. Further, our suppliers for Xtampza ER and the Nucynta Products active pharmaceutical ingredients also supply our primary competitor in the extended-release oxycodone space, Purdue. Identifying alternate sources of active pharmaceutical ingredients for our products is generally time-consuming and costly.
Our arrangements with payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products and any product candidates for which we may obtain marketing approval.
Our arrangements with payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products.
Because of their restrictive nature, these regulations could limit commercialization of our products containing controlled substances. ​ Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and may reduce the prices we are able to obtain for our products. ​ In the United States, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system generally, and the manufacturing, distribution, and marketing of opioids in particular, that could prevent or delay marketing approval of future product candidates, restrict or regulate post-approval activities or affect our ability to profitably sell our products for which we obtain marketing approval.
Because of their restrictive nature, these regulations could limit commercialization of our products containing controlled substances. ​ Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and may reduce the prices we are able to obtain for our products. ​ In the United States, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system generally, and the manufacturing, distribution, and marketing of opioids in particular, that could affect our ability to commercialize our products.
In addition, some courts in the United States may be less willing 28 Table of Contents or unwilling to protect trade secrets.
In addition, some courts in the United States may be less willing or unwilling to protect trade secrets.
We intend to fulfill our PMRs by virtue of our participation in the Opioid PMR Consortium (“OPC”). Although we retain discretion in how to discharge such PMRs, the scale and scope of the studies required by the FDA make it cost prohibitive to discharge these requirements other than by joining the OPC that was formed to conduct them.
Although we retain discretion in how to discharge such PMRs, the scale and scope of the studies required by the FDA make it cost prohibitive to discharge these requirements other than by joining the OPC that was formed to conduct them.
Our ability to generate revenue from our current or future products depends on a number of factors, including our ability to: ​ ● realize a commercially viable price for our products; ● manufacture commercial quantities of our products at acceptable cost levels; ● sustain a commercial organization capable of sales, marketing and distribution for the products we sell; ● obtain coverage and adequate reimbursement from third parties, including government payors; and ● comply with existing and changing laws and regulations that apply to the pharmaceutical industry, including opioid manufacturers, and to our products specifically, including FDA post-marketing requirements. ​ If we fail to maintain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. ​ Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. ​ As of December 31, 2022, we had a U.S. federal net operating loss (“NOL”) carryforward of approximately $229.8 million and state NOL carryovers of approximately $252.6 million.
Our ability to generate revenue from our current or future products depends on a number of factors, including our ability to: ​ ● realize a commercially viable price for our products; ● manufacture commercial quantities of our products at acceptable cost levels; ● sustain a commercial organization capable of sales, marketing and distribution for the products we sell; ● obtain coverage and adequate reimbursement from third parties, including government payors; ● acquire new products, or develop new indications or line extensions for existing products, in the event that revenues from our existing products are impacted by price controls, loss of intellectual property exclusivity or competition; and ● comply with existing and changing laws and regulations that apply to the pharmaceutical industry, including opioid manufacturers, and to our products specifically, including FDA post-marketing requirements. ​ 23 ​ If we fail to maintain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. ​ Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. ​ As of December 31, 2023, we had a U.S. federal net operating loss (“NOL”) carryforward of approximately $137.5 million and state NOL carryovers of approximately $202.4 million.
Under the 2023 Repurchase Program, we will be permitted 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 2024-2025 Repurchase Program permits us 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.
However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.
However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product.
Although a substantial number of shares were repurchased pursuant to the Prior Repurchase Program, any future share repurchases under the 2023 Repurchase Program will depend upon, among other factors, our cash balances and potential future capital requirements, our results of operations and financial condition, the price of our common stock on the NASDAQ Global Select Market, and other factors that we may deem relevant.
Share repurchases under the 2024-2025 Repurchase Program will depend upon, among other factors, our cash balances and potential future capital requirements, our results of operations and financial condition, the price of our common stock on the NASDAQ Global Select Market, and other factors that we may deem relevant.
Factors that may inhibit our efforts to continue successfully commercializing our products in the United States include: ​ ● our inability to recruit and retain adequate numbers of effective sales and marketing personnel; ● the inability of sales personnel to reach adequate numbers of physicians who may prescribe our products; and ● unforeseen costs and expenses associated with creating and maintaining an independent sales and marketing organization. ​ If we are not successful in retaining sales and marketing personnel or in maintaining our sales and marketing infrastructure or if we do not preserve strategic alliances with marketing collaborators, agreements with contract sales organizations or collaboration arrangements, we will have difficulty in continuing to commercialize our products. ​ Additionally, our sales, marketing and distribution capabilities may continue to be hindered as a result of the COVID-19 outbreak.
Factors that may inhibit our efforts to continue successfully commercializing our products in the United States include: ​ ● our inability to recruit and retain adequate numbers of effective sales and marketing personnel; ● the inability of sales personnel to reach adequate numbers of physicians who may prescribe our products; and ● unforeseen costs and expenses associated with creating and maintaining an independent sales and marketing organization. ​ If we are not successful in retaining sales and marketing personnel or in maintaining our sales and marketing infrastructure or if we do not preserve strategic alliances with marketing collaborators, agreements with contract sales organizations or collaboration arrangements, we will have difficulty in continuing to commercialize our products. ​ If the medical community, patients, and healthcare payors do not accept and use our products, we will not achieve sufficient product revenues and our business will suffer.
We could be forced, 27 Table of Contents including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent.
In addition, in any such 27 ​ proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent.
In addition, because our assets are pledged as a security under the 2022 Loan Agreement, if we are not able to cure any default or repay outstanding borrowings, our assets would be subject to the risk of foreclosure by our lenders. ​ Further, amounts outstanding under our 2022 Loan Agreement bear interest at a rate based on LIBOR, subject to a LIBOR floor of 1.20%.
In addition, because our assets are pledged as a security under the 2022 Loan Agreement, if we are not able to cure any default or repay outstanding borrowings, our assets would be subject to the risk of foreclosure by our lenders. ​ Further, amounts outstanding under our 2022 Loan Agreement historically bore interest at a rate based on the London Interbank Offered Rate (“LIBOR”), and, effective July 1, 2023, bears interest at a rate based on the Secured Overnight Financing Rate (“SOFR”) subject to a SOFR floor of 1.2%.
Department of Health and Human Services that would require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide discounts on Part D drugs.
Department of Health and Human Services that would subject manufacturers of some brand-name medications without generic or biosimilar competition to a price negotiation program that results in a negotiated “maximum fair price” (or pay an excise tax for noncompliance), the establishment of rebate payment requirements on manufacturers of drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and revises the way manufacturers provide discounts on Part D drugs.
These IRC 382 annual limitations may limit our ability to use pre-ownership change federal NOL carryovers and pre-ownership change federal tax credit carryovers, which may potentially limit our ability to reduce our future federal income tax liability by using these losses.
These IRC 382 annual limitations may limit our ability to use pre-ownership change federal NOL carryovers and pre-ownership change federal tax credit carryovers, which may potentially limit our ability to reduce our future federal income tax liability by using these losses. As of December 31, 2023, remaining net operating losses of $124.3 million are subject to limitation.
It is unknown what form any such changes or any law proposed to replace the Affordable Care Act would take, and how or whether it may affect our business in the future.
Refer to the section in our Annual Report entitled “Business — Government Regulation — Healthcare Reform.” ​ Further changes to and under the Affordable Care Act remain possible. It is unknown what form any such changes or any law proposed to replace the Affordable Care Act would take, and how or whether it may affect our business in the future.
In March 2022, we entered into a Master Settlement Agreement resolving all 27 pending opioid-related lawsuits brought against us by cities, counties, and other subdivisions in the United States.
In March 2022, we entered into a Master Settlement Agreement resolving 27 pending opioid-related lawsuits brought against us by cities, counties, and other subdivisions in the United States. As part of the Master Settlement Agreement, we paid $2.75 million to the plaintiffs and the cases were dismissed, with prejudice.
As of December 31, 2022, there were outstanding options to purchase an aggregate of 1,683,805 shares of our common stock at a weighted average exercise price of $18.84 per share, of which options to purchase 1,545,610 shares of our common stock were then exercisable.
As of December 31, 2023, there were outstanding options to purchase an 39 ​ aggregate of 1,176,750 shares of our common stock at a weighted average exercise price of $19.48 per share, of which options to purchase 1,158,209 shares of our common stock were then exercisable.
If our management is not able to effectively manage the integration process, or if any business activities are interrupted as a result of the integration process, our business could suffer. ​ Our business has been, and we may in the future continue to be, adversely affected by certain events or circumstances outside our control, including the COVID-19 pandemic and geopolitical turmoil. ​ Our business has been, and we may in the future continue to be, adversely affected by certain events or circumstances outside our control.
If our management is not able to effectively manage the integration process, or if any business activities are interrupted as a result of the integration process, our business could suffer. ​ Our business may be adversely affected by certain events or circumstances outside our control, including macroeconomic conditions and geopolitical turmoil. ​ Events or circumstances outside of our control, including macroeconomic conditions such as recession or depression, inflation, and declines in consumer-spending could result in reduced demand for our products.
These generic equivalents would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product are typically lost to the generic product.
These generic equivalents would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices.
The FDA and other regulatory authorities require our products to be manufactured according to cGMP. Any failure by our third-party manufacturer to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of products in a timely manner, could lead to a shortage of commercial product.
Any failure by our third-party manufacturer to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of products in a timely manner, could lead to inspection deficiencies, a shortage of commercial product, or potential products liability exposure for any noncompliant distributed products.
Failure to comply with applicable regulations in the conduct of the clinical trials for our products would have an adverse impact on our commercial efforts. ​ Risks Related to Our Business and Strategy ​ We may not realize all the anticipated benefits from our future acquisitions, and we may be unable to successfully integrate future acquisitions.
Such withdrawal or restriction or labeling changes for our products would have an adverse impact on our business and financial condition. ​ Risks Related to Our Business and Strategy ​ We may not realize all the anticipated benefits from our future acquisitions, and we may be unable to successfully integrate future acquisitions.
There have been significant ongoing judicial, administrative, executive and legislative efforts to modify or eliminate the Affordable Care Act, and the Affordable Care Act has also been subject to challenges in the courts. See the section in our Annual Report entitled “Business — Government Regulation — Healthcare Reform.” ​ Further changes to and under the Affordable Care Act remain possible.
There have been significant ongoing judicial, administrative, executive and legislative efforts to modify or eliminate the Affordable Care Act, and the Affordable Care Act has also been subject to challenges in the courts.
On January 1, 2023, our Board of Directors authorized a new share repurchase program for the repurchase of up to $100 million of shares of our common stock at any time or times through December 31, 2023 (the “2023 Repurchase Program”).
We repurchased $61.9 million of shares pursuant to the Prior Repurchase Program prior to its expiration on December 31, 2022. In January 2023, our Board of Directors authorized a share repurchase program for the repurchase of up to $100.0 million of shares of our common stock through December 31, 2023 (the “2023 Repurchase Program”).
Accordingly, our interest expense for any period will fluctuate based on LIBOR and other variable interest rates, as applicable.
We have not hedged our interest rate exposure with respect to our floating rate debt. Accordingly, our interest expense for any period will fluctuate based on SOFR and other variable interest rates, as applicable.
As part of the Master Settlement Agreement, we paid $2.75 million to the plaintiffs and the cases will be dismissed, with prejudice. ​ Certain governmental and regulatory agencies are focused on the abuse of opioid medications, a concern we share, and we have received Civil Investigative Demands or subpoenas from four state attorneys general investigating our sales and 37 Table of Contents marketing of opioids and seeking documents relating to the manufacture, marketing and sale of opioid medications.
In late March 2023, three new cases were filed in three federal courts, naming us as one of numerous defendants, from which we have been dismissed. ​ Certain governmental and regulatory agencies are focused on the abuse of opioid medications, a concern we share, and we have received Civil Investigative Demands or subpoenas from four state attorneys general investigating our sales and marketing of opioids and seeking documents relating to the manufacture, marketing and sale of opioid medications.
We believe that we will continue to be subject to ANDA-related litigation, which can be costly and distracting and has the potential to impact the long-term value of our products. ​ In November 2017, the FDA issued a final guidance to assist industry in the development of generic versions of approved opioids with abuse-deterrent formulations, including recommendations about the types of studies that companies should conduct to demonstrate that the generic drug is no less abuse-deterrent than its brand-name counterpart.
However, there is no guarantee that FDA will agree that the Written Request has been satisfied and that we will receive this additional exclusivity, or that we will maintain such exclusivity, if granted. ​ In November 2017, the FDA issued a final guidance to assist industry in the development of generic versions of approved opioids with abuse-deterrent formulations, including recommendations about the types of studies that companies should conduct to demonstrate that the generic drug is no less abuse-deterrent than its brand-name counterpart.
The Inflation Reduction Act of 2022 also caps Medicare beneficiaries’ annual out-of-pocket drug expenses. Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the Inflation Reduction Act of 2022.
The IRA also caps Medicare beneficiaries’ annual out-of-pocket drug expenses at $2,000 per year, thereby eliminating the Medicare Part D coverage gap or “donut hole.” Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the IRA.
Accordingly, competition from generic equivalents to our products would substantially limit our ability to generate revenues and therefore, to obtain a return on the investments we have made in our products. In the past, we have initiated litigation with generic competitors that have filed Paragraph IV Certifications challenging certain of our patents.
Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product are typically lost to the generic product. Accordingly, competition from generic equivalents to our products would substantially limit our ability to generate revenues and therefore, to obtain a return on the investments we have made in our products.
There can be no assurance that similar disruptions in the wholesaler distribution network will not occur in the future or if they do, that we will be able to successfully manage such disruptions. ​ Our opioid products are subject to post-marketing requirements, which requirements may, in some cases, not be capable of timely or satisfactory completion without participation in consortia over which we have limited control. ​ Our opioid products are subject to a comprehensive regulatory scheme, including post-marketing requirements (“PMRs”) to conduct epidemiological studies and clinical trials.
We cannot guarantee that we can manage these pricing pressures or that wholesaler purchases will not fluctuate unexpectedly from period to period. ​ 35 ​ Certain of our opioid products are subject to post-marketing requirements or commitments, which may, in some cases, not be capable of timely or satisfactory completion without participation in consortia over which we have limited control. ​ For certain of our products, we are subject to post-marketing requirements to conduct epidemiological studies and clinical trials, or, in some cases, to conduct post-marketing surveillance or observational studies to gather additional information about our products.
These circumstances, in addition to the impact of geopolitical turmoil, social unrest, political instability, terrorism, cyberwarfare or other acts of war, may result in reduced demand for our products and negatively impact our sales, results of operations, and liquidity. ​ Litigation or regulatory action regarding opioid medications could negatively affect our business. ​ Beginning in 2018, lawsuits alleging damages related to opioids have been filed naming us as a defendant along with other manufacturers of prescription opioid medications.
Further, our insurance coverage may not be adequate or sufficient in type or amount to protect us from or to mitigate liabilities arising out of our privacy and security practices. ​ Litigation or regulatory action regarding opioid medications could negatively affect our business. ​ Beginning in 2018, lawsuits alleging damages related to opioids have been filed naming us as a defendant along with other manufacturers of prescription opioid medications.
While we have entered into settlement agreements with certain competitors, we are currently pursuing litigation to defend against Paragraph IV Certifications related to Belbuca. For more information, refer to Note 12, Commitments and Contingencies , to our consolidated financial statements included in Part IV of this Annual Report on Form 10-K.
Refer to Note 13, Commitments and Contingencies , to our consolidated financial statements included in Part IV of this Annual Report on Form 10-K.
To the extent the interest rates applicable to our floating rate debt increase, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected. ​ The Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), has announced the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month USD LIBOR tenor settings.
To the extent the interest rates applicable to our floating rate debt increase, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected. ​ Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition, or results of operations. ​ Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

… 42 more changes not shown on this page.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings ​ Discussion of legal matters is incorporated by reference from Note 12, Commitments and Contingencies , to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. ​ Item 4. Mine Safety Disclosures ​ Not applicable. ​ 40 Table of Contents PART II ​
Biggest changeItem 3. Legal Proceedings ​ Discussion of legal matters is incorporated by reference from Note 13, Commitments and Contingencies , to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. ​ Item 4. Mine Safety Disclosures ​ Not applicable. ​ PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−2 removed1 unchanged
Biggest changeStock Performance Graph The following graph shows a comparison from May 7, 2015, the date on which our common stock first began trading on the NASDAQ Global Select Market, of the total cumulative shareholder return on an assumed investment of $100.00 in cash in our common stock as compared to the same investment in the NASDAQ Composite Index and the NASDAQ Biotechnology Index, all through December 31, 2022.
Biggest changeTotal cumulative shareholder return assumes an investment of $100.00 in cash in our common stock at the beginning of the 5-year period compared to the same investment in the NASDAQ Composite Index and the NASDAQ Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance.
(2) The difference, if any, between the total number of shares purchased and the total number of shares purchased as part of a publicly announced program relates to common stock withheld by us for employees to satisfy their tax withholding obligations arising upon the vesting of performance share units and restricted stock units granted under our Amended and Restated 2014 Stock Incentive Plan. ​ Item 6. [Reserved] ​ ​ 42 Table of Contents
(2) The difference, if any, between the total number of shares purchased and the total number of shares purchased as part of a publicly announced program relates to common stock withheld by us for employees to satisfy their tax withholding obligations arising upon the vesting of performance share units and restricted stock units granted under our Amended and Restated 2014 Stock Incentive Plan. ​ Item 6. [Reserved] ​ ​ 43 ​
Data for the NASDAQ Composite Index and NASDAQ Biotechnology Index assume reinvestment of dividends, however no dividends have been declared on our common stock to date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, $100 investment in stock or index ​ May 7, 2015 2022 Collegium Pharmaceutical, Inc.
Data for the NASDAQ Composite Index and NASDAQ Biotechnology Index assume reinvestment of dividends, however no dividends have been declared on our common stock to date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, $100 investment in stock or index ​ 2018 ​ 2023 Collegium Pharmaceutical, Inc.
The Prior Repurchase Program provided for the repurchase of up to $100 million of outstanding shares of our common stock at any time or times through December 31, 2022. The Prior Repurchase Program expired December 31, 2022 with approximately $38.1 million available for repurchase at the time of expiration.
The 2023 Repurchase Program provided for the repurchase of up to $100.0 million of outstanding shares of our common stock at any time or times through December 31, 2023. The 2023 Repurchase Program expired on December 31, 2023 with approximately $25.0 million available for repurchase at the time of expiration.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is publicly traded on the NASDAQ Global Select Market under the symbol “COLL” since May 7, 2015. Prior to May 7, 2015, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been publicly traded on the NASDAQ Global Select Market under the symbol “COLL” since May 7, 2015.
(COLL) ​ $ 100.00 $ 188.77 NASDAQ Composite Index (IXIC) ​ $ 100.00 $ 211.63 NASDAQ Biotechnology Index (NBI) ​ $ 100.00 $ 116.98 ​ 41 Table of Contents The performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
(COLL) ​ $ 100.00 ​ $ 179.27 NASDAQ Composite Index (IXIC) ​ $ 100.00 ​ $ 226.24 NASDAQ Biotechnology Index (NBI) ​ $ 100.00 ​ $ 143.60 ​ The performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
Holders As of January 31, 2023, there were 15 holders of record of our common stock. The number of holders of record does not include beneficial owners whose shares are held by nominees in street name.
Prior to May 7, 2015, there was no public trading market for our common stock. 41 ​ Holders As of January 31, 2024, there were 12 holders of record of our common stock. The number of holders of record does not include beneficial owners whose shares are held by nominees in street name.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers ​ The following table sets forth shares of Common Stock repurchased under our repurchase program authorized by our Board of Directors in August 2021 (the “Prior Repurchase Program”), as well as shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of performance share units and restricted stock units during the three months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total number of shares purchased ​ Average Price Paid per Share ​ Total number of shares purchased as part of publicly announced plans or programs (1) ​ Maximum approximate dollar value of Shares that may yet be purchased under the plans or programs October 1, 2022 through October 31, 2022 206,525 ​ $ 17.48 ​ 205,600 ​ $ 42,122 November 1, 2022 through November 30, 2022 206,668 ​ ​ 19.63 ​ 206,161 ​ ​ 38,076 December 1, 2022 through December 31, 2022 904 ​ ​ 21.85 ​ — ​ ​ 38,076 Total 414,097 (2) ​ $ 18.56 ​ 411,761 (2) ​ $ 38,076 ​ (1) The Prior Repurchase Program was announced on August 16, 2021.
Recent Sales of Unregistered Securities There were no unregistered sales of equity securities during the period covered by this Form 10-K. 42 ​ Purchases of Equity Securities by the Issuer and Affiliated Purchasers ​ The following table sets forth shares of common stock repurchased under our repurchase program authorized by our Board of Directors in January 2023 (the “2023 Repurchase Program”), as well as shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of performance share units and restricted stock units during the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total number of shares purchased ​ Average Price Paid per Share ​ Total number of shares purchased as part of publicly announced plans or programs (1) ​ Maximum approximate dollar value of Shares that may yet be purchased under the plans or programs (in thousands) October 1, 2023 through October 31, 2023 467,247 ​ $ 23.10 ​ 462,442 ​ $ 50,000 November 1, 2023 through November 30, 2023 867,532 ​ ​ 27.09 ​ 865,426 ​ ​ 30,000 December 1, 2023 through December 31, 2023 59,791 ​ ​ 27.12 ​ 57,349 ​ ​ 25,000 Total 1,394,570 (2) ​ $ 25.75 ​ 1,385,217 (2) ​ $ 25,000 ​ (1) The 2023 Repurchase Program was announced on January 4, 2023.
Removed
Such returns are based on historical results and are not intended to suggest future performance.
Added
Stock Performance Graph The following graph sets forth the Company’s total cumulative shareholder return as compared to the NASDAQ Composite Index and the NASDAQ Biotechnology Index for the 5-year period beginning on December 31, 2018 through December 31, 2023.
Removed
Recent Sales of Unregistered Securities There were no unregistered sales of equity securities during the period covered by this Form 10-K.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] ​ 42 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 43 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ 58 ​ Item 8. Consolidated Financial Statements and Supplementary Data ​ 58 ​
Biggest changeItem 6. [Reserved] ​ 43 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 44 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ 56 ​ Item 8. Consolidated Financial Statements and Supplementary Data ​ 57 ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+21 added−54 removed36 unchanged
Biggest changeThe $20.8 million increase was primarily driven by higher selling, general and administrative expenses, excluding stock-based compensation and acquisition related expenses, including: ​ ● an increase in sales, marketing, and consulting expenses of $10.7 million, primarily due to expenses incurred to support the commercialization of products acquired from BDSI in 2022, including Belbuca and Symproic, as well as for supporting the commercial launch of Elyxyb prior to its discontinuation in the fourth quarter of 2022; ● an increase in salaries, wages, and benefits (excluding stock-based compensation) of $3.5 million, primarily due to higher expense for corporate bonuses and incentive compensation due to improved company performance in 2022 compared to 2021; ● an increase in regulatory fees of $2.7 million primarily due to fees incurred for products acquired from BDSI in 2022 following the BDSI Acquisition; ● an increase in trainings, conferences, and meetings expenses of $1.9 million primarily due to certain annual internal meetings resuming in 2022 for the first time since the onset of the COVID-19 pandemic; 55 Table of Contents ● an increase in product taxes and fees of $1.7 million due to incurring product taxes and fees for products acquired from BDSI in 2022; and ● an increase in insurance expense of $1.4 million, primarily due to higher premiums. ​ The following is a summary of 2022 quarterly adjusted operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter GAAP operating expenses $ 58,511 ​ $ 41,254 ​ $ 38,372 ​ $ 38,032 Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ 6,135 ​ ​ 5,692 ​ ​ 5,377 ​ ​ 5,670 Acquisition related expenses ​ 27,167 ​ ​ 3,579 ​ ​ 463 ​ ​ 88 Total adjustments ​ 33,302 ​ ​ 9,271 ​ ​ 5,840 ​ ​ 5,758 Adjusted operating expenses $ 25,209 ​ $ 31,983 ​ $ 32,532 ​ $ 32,274 ​ Adjusted Net Income and Adjusted Earnings Per Share ​ Adjusted net income is a non-GAAP financial measure that represents GAAP net income adjusted to exclude significant income and expense items that are non-cash or not indicative of ongoing operations, including consideration of the tax effect of the adjustments.
Biggest changeThe $1.6 million increase was primarily driven by: ● an increase in salaries, wages, and benefits (excluding stock-based compensation) of $1.8 million, primarily due to increases in personnel costs for employees retained following the BDSI Acquisition; ● an increase in sales and marketing expenses of $3.1 million, primarily due to expenses incurred to support the ongoing commercialization of products acquired from BDSI; ● an increase in regulatory expenses of $0.8 million, primarily due to a full year of expenses related to products acquired from BDSI; partially offset by ● a decrease in audit and legal expenses (excluding litigation settlements) of $3.5 million. 54 ​ ​ The following is a summary of 2023 quarterly adjusted operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter ​ (in thousands) GAAP operating expenses $ 52,775 ​ $ 38,193 ​ $ 35,298 ​ $ 32,942 Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ 6,035 ​ ​ 7,072 ​ ​ 7,027 ​ ​ 7,002 Litigation settlements ​ 8,500 ​ ​ — ​ ​ — ​ ​ — Total adjustments ​ 14,535 ​ ​ 7,072 ​ ​ 7,027 ​ ​ 7,002 Adjusted operating expenses $ 38,240 ​ $ 31,121 ​ $ 28,271 ​ $ 25,940 ​ Adjusted Net Income and Adjusted Earnings Per Share ​ Adjusted net income is a non-GAAP financial measure that represents GAAP net income or loss adjusted to exclude significant income and expense items that are non-cash or not indicative of ongoing operations, including consideration of the tax effect of the adjustments.
Cost of Product Revenues Cost of product revenues include amortization and impairment expense for the intangible assets acquired in connection with business combinations and asset acquisitions, royalty expenses, the cost of active pharmaceutical ingredient, the cost of producing finished goods that correspond with revenue for the reporting period, as well as certain period costs related to freight, packaging, stability and quality testing.
Cost of Product Revenues Cost of product revenues include amortization and impairment expense for the intangible assets acquired in connection with business combinations and asset acquisitions, royalty expenses, the cost of active pharmaceutical ingredient, the cost of producing finished goods that correspond with revenue for the reporting period, as well as certain period costs 44 ​ related to freight, packaging, stability and quality testing.
While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this on Form 10-K, we believe the following accounting policies to be most critical to the significant judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this Form 10-K, we believe the following accounting policies to be most critical to the significant judgments and estimates used in the preparation of our consolidated financial statements.
Estimates include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of our products, estimates related to the fair value of assets acquired and liabilities assumed, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsaleable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, intangible assets and deferred tax valuation allowances.
Estimates include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of our products, estimates related to the fair value of assets acquired and liabilities assumed, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsalable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, intangible assets and deferred tax valuation allowances.
The determination of the fair value of the acquired assets and liabilities assumed is a critical accounting estimate because the estimation of fair values requires significant management judgement and requires various assumptions based on non-observable inputs that are included in valuation models.
The determination of the fair value of the acquired assets and liabilities assumed is a critical accounting estimate because the estimation of fair values requires significant management judgment and requires various assumptions based on non-observable inputs that are included in valuation models.
Adjusted EBITDA, as used by us, may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. ​ 53 Table of Contents There are several limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent, such as: ​ ● adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; ● we exclude stock-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position; ● adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; ● adjusted EBITDA does not reflect the benefit from or provision for income taxes or the cash requirements to pay taxes; ● adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; ● we exclude impairment expenses from adjusted EBITDA and, although these are non-cash expenses, the asset being impaired may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; ● we exclude restructuring expenses from adjusted EBITDA.
Adjusted EBITDA, as used by us, may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. ​ There are several limitations related to the use of adjusted EBITDA rather than net income or loss, which is the nearest GAAP equivalent, such as: ​ ● adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; ● we exclude stock-based compensation expense from adjusted EBITDA although: (i) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; and (ii) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position; ● adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; 52 ​ ● adjusted EBITDA does not reflect the benefit from or provision for income taxes or the cash requirements to pay taxes; ● adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; ● we exclude impairment expenses from adjusted EBITDA and, although these are non-cash expenses, the asset(s) being impaired may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; ● we exclude restructuring expenses from adjusted EBITDA.
Refer to Note 5, License Agreements , and Note 10, Goodwill and Intangible Assets, for further detail around the intangible assets acquired from the BDSI Acquisition, the Nucynta Intangible Asset and royalty expenses.
Refer to Note 5, License Agreements , and Note 11, Goodwill and Intangible Assets, for further detail around the intangible assets acquired from the BDSI Acquisition, the Nucynta Intangible Asset and royalty expenses.
The provision for income taxes in 2022 primarily consistent of state income tax for states for which our state-level NOLs did not fully offset state-level taxable income.
The provision for income taxes in 2022 primarily consisted of state income tax for states for which our state-level NOLs did not fully offset state-level taxable income.
We base our estimates and assumptions on historical experience when available and on various factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis.
We base our estimates and assumptions on 45 ​ historical experience when available and on various factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
To determine whether the acquisition should be accounted for as a business combination or as an asset acquisition, we made 46 Table of Contents certain judgments regarding whether the acquired set of activities and assets met the definition of a business.
To determine whether the acquisition should be accounted for as a business combination or as an asset acquisition, we made certain judgments regarding whether the acquired set of activities and assets met the definition of a business.
In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (“ASC 606”) product sales are recorded upon delivery of products to customers, net of a provision for estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.
In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (“ASC 606”) product sales are recorded upon delivery of products to customers (upon the transfer of control of the product to the customer), net of a provision for estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.
We have maintained a valuation allowance on the portion of our deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions of $5.3 million as of December 31, 2022.
We have maintained a valuation allowance on the portion of our deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions of $5.8 million as of December 31, 2023.
Therefore, product sales are recorded upon delivery to our customers net of estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, as well as estimated product returns. ​ Sales Deductions ​ Sales deductions consist primarily of provisions for (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 for our products; and (3) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks.
Therefore, product sales are recorded upon delivery to our customers net of estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, as well as estimated product returns. ​ Sales Deductions ​ Sales deductions consist primarily of provisions for: (i) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances; (ii) product returns, including return estimates for our products; and (iii) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks.
The $5.5 million decrease was due to redirection of resources from research and development activities during 2022 as we shifted our focus to supporting our commercial products rather than research and development. ​ Selling, general and administrative expenses were $172.2 million for 2022, compared to $119.0 million for 2021.
The $4.0 million decrease was due to redirection of resources from research and development activities during 2022 as we shifted our focus to supporting our commercial products rather than research and development. ​ Selling, general and administrative expenses were $159.2 million for 2023, compared to $172.2 million for 2022.
During the year ended December 31, 2021, we removed the valuation allowance on the substantial majority of our deferred tax assets, resulting in a tax benefit in 2021 partially offset by state tax expense. ​ Critical Accounting Policies and Significant Judgments and Estimates Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
During the year ended December 31, 2021, we removed the valuation allowance on the substantial majority of our deferred tax assets, resulting in the recognition of a discrete deferred tax benefit of $78.0 million in 2021. ​ Critical Accounting Policies and Significant Judgments and Estimates Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Actual results may differ from these estimates under different assumptions or conditions. We believe that several accounting policies are important to understanding our historical and future performance.
We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. We believe that several accounting policies are important to understanding our historical and future performance.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
We are required to pay $100.0 million in principal payments during the first year of the 2022 Term Loan and the remaining $550.0 million balance is required to be paid in equal quarterly installments over the remaining three years of the term note.
We paid $100.0 million in principal payments during the first year of the 2022 Term Loan and the remaining $550.0 million balance will be paid in equal quarterly installments over the remaining three years of the term note.
Estimates are based on historical experience, current conditions and various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amounts of revenues and expenses.
Estimates are based on historical experience, current conditions and various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amounts of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021. ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 Net cash provided by operating activities $ 124,230 $ 103,557 Net cash used in investing activities (573,691) ​ (1,944) Net cash provided by (used in) financing activities 436,723 ​ (89,303) Net (decrease) increase in cash, cash equivalents and restricted cash $ (12,738) ​ $ 12,310 ​ Operating activities.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ (in thousands) Net cash provided by operating activities $ 274,749 $ 124,230 Net cash used in investing activities (70,812) ​ (573,691) Net cash (used in) provided by financing activities (140,178) ​ 436,723 Net increase (decrease) in cash, cash equivalents and restricted cash $ 63,759 ​ $ (12,738) ​ Operating activities.
In March 2022, our debt balance increased significantly as we modified the 2020 Term Loan with Pharmakon to an increased principal balance of $650.0 million to fund a portion of the consideration paid to complete the BDSI Acquisition.
We are primarily dependent on the commercial success of Belbuca, Xtampza, and the Nucynta Products. In March 2022, our debt balance increased significantly as we modified the 2020 Term Loan with Pharmakon to an increased principal balance of $650.0 million to fund a portion of the consideration paid to complete the BDSI Acquisition.
For further detail regarding our operating lease obligations, refer to Note 14, Leases . Our purchase obligations represent the minimum purchase obligations of up to $3.0 million per year with our contract manufacturer which are in effect as of December 31, 2022 and will remain in effect each year until the termination of our manufacturing agreement.
Our purchase obligations represent the minimum purchase obligations of up to $3.0 million per year with our contract manufacturer which are in effect as of December 31, 2023 and will remain in effect each year until the termination of our manufacturing agreement.
We provide 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, we evaluate all available evidence including projections of future taxable income, carryback opportunities, reversal of certain deferred tax liabilities, and other tax planning strategies.
In determining the extent to which a valuation allowance for deferred tax assets is required, we evaluate all available evidence including projections of future taxable income, carryback opportunities, reversal of certain deferred tax liabilities, and other tax planning strategies, all of which are subject to uncertainty.
Cash provided by financing activities was $436.7 million in 2022, compared to cash used in financing activities of $89.3 million in 2021.
Cash used in financing activities was $140.2 million in 2023, compared to cash provided by financing activities of $436.7 million in 2022.
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 in the period. Business Combination Accounting and Valuation of Acquired Assets We completed the BDSI Acquisition on March 22, 2022, which was accounted for as a business combination.
Accruals and related reserves are adjusted as new information becomes available, which generally consists of actual trade allowances and chargebacks processed. Actual results may differ from these estimates under different assumptions or conditions. Business Combination Accounting and Valuation of Acquired Assets We completed the BDSI Acquisition on March 22, 2022, which was accounted for as a business combination.
We commercialize our pain portfolio, consisting of Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), Belbuca, and Symproic, in the United States. ​ Xtampza ER, an abuse-deterrent, oral formulation of oxycodone, was approved by the 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.
We commercialize our pain portfolio, consisting of Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), Belbuca, and Symproic, in the United States. ​ Xtampza ER, an abuse-deterrent, oral formulation of oxycodone, was approved by the United States Food and Drug Administration (“FDA”) in April 2016 for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative treatment options are inadequate.
These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. ​ In our quarterly and annual reports, earnings press releases and conference calls, we may discuss the following financial measures that are not calculated in accordance with GAAP, to supplement our consolidated financial statements presented on a GAAP basis. ​ Adjusted EBITDA ​ Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income (loss) adjusted to exclude interest expense, interest income, the benefit from or provision for income taxes, depreciation, amortization, stock-based compensation, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations.
In addition, certain non-GAAP financial measures, primarily Adjusted EBITDA, are used to measure performance when determining components of annual compensation for substantially all non-sales force employees, including senior management. ​ We may discuss the following financial measures that are not calculated in accordance with GAAP in our quarterly and annual reports, earnings press releases and conference calls. ​ Adjusted EBITDA ​ Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income or loss adjusted to exclude interest expense, interest income, the benefit from or provision for income taxes, depreciation, amortization, stock-based compensation, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations.
Intangible assets are then amortized over their estimated useful lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. We test intangible assets for potential impairment whenever triggering events or circumstances present an indication of impairment.
Intangible assets are then amortized over their estimated useful lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized, which is generally based on our cash flow projections.
Acquisition related expenses include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, and miscellaneous other acquisition related expenses incurred; and ● we exclude recognition of the step-up basis in inventory from acquisitions (i.e., the adjustment to record inventory from historic cost to fair value at acquisition) as the adjustment does not reflect the ongoing expense associated with sale of our products as part of our underlying business. ​ Adjusted EBITDA for the years ended December 31, 2022 and 2021 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 GAAP net (loss) income $ (25,002) ​ $ 71,517 Adjustments: ​ ​ ​ ​ ​ Interest expense ​ 63,213 ​ ​ 21,014 Interest income ​ (1,047) ​ ​ (12) Benefit from income taxes ​ (3,845) ​ ​ (74,891) Depreciation ​ 2,684 ​ ​ 1,736 Amortization ​ 131,469 ​ ​ 67,181 Impairment expense ​ 4,786 ​ ​ — Stock-based compensation expense ​ 22,874 ​ ​ 24,255 Restructuring ​ — ​ ​ 4,578 Litigation settlements ​ — ​ ​ 2,935 Acquisition related expenses ​ 31,297 ​ ​ — Recognition of step-up basis in inventory ​ 39,584 ​ ​ — Total adjustments $ 291,015 ​ $ 46,796 Adjusted EBITDA $ 266,013 ​ $ 118,313 ​ 54 Table of Contents Adjusted EBITDA was $266.0 million for 2022 compared to $118.3 million for 2021.
Acquisition related expenses include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, and miscellaneous other acquisition related expenses incurred; ● we exclude recognition of the step-up basis in inventory from acquisitions (i.e., the adjustment to record inventory from historic cost to fair value at acquisition) as the adjustment does not reflect the ongoing expense associated with sale of our products as part of our underlying business; and ● we exclude losses on extinguishments of debt as these expenses are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis. ​ Adjusted EBITDA for the years ended December 31, 2023 and 2022 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ (in thousands) GAAP net income (loss) $ 48,155 ​ $ (25,002) Adjustments: ​ ​ ​ ​ ​ Interest expense ​ 83,339 ​ ​ 63,213 Interest income ​ (15,615) ​ ​ (1,047) Loss on extinguishment of debt ​ 23,504 ​ ​ — Provision for (benefit from) income taxes ​ 27,578 ​ ​ (3,845) Depreciation ​ 3,496 ​ ​ 2,684 Amortization ​ 145,760 ​ ​ 131,469 Impairment expense ​ — ​ ​ 4,786 Stock-based compensation ​ 27,136 ​ ​ 22,874 Litigation settlements ​ 8,500 ​ ​ — Acquisition related expenses ​ — ​ ​ 31,297 Recognition of step-up basis in inventory ​ 15,116 ​ ​ 39,584 Total adjustments $ 318,814 ​ $ 291,015 Adjusted EBITDA $ 366,969 ​ $ 266,013 ​ Adjusted EBITDA was $367.0 million for 2023 compared to $266.0 million for 2022.
Adjusted weighted-average shares - diluted is calculated in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security. ​ Adjusted net income and adjusted earnings per share for the years ended December 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 GAAP net (loss) income $ (25,002) ​ $ 71,517 Adjustments: ​ ​ ​ ​ ​ Non-cash interest expense ​ 8,285 ​ ​ 3,406 Amortization ​ 131,469 ​ ​ 67,181 Impairment expense ​ 4,786 ​ ​ — Stock-based compensation expense ​ 22,874 ​ ​ 24,255 Restructuring ​ — ​ ​ 4,578 Litigation settlements ​ — ​ ​ 2,935 Acquisition related expenses ​ 31,297 ​ ​ — Recognition of step-up basis in inventory ​ 39,584 ​ ​ — Discrete deferred tax benefit from valuation allowance release ​ — ​ ​ (62,649) Income tax effect of above adjustments (1) ​ (60,553) ​ ​ (9,071) Total adjustments $ 177,742 ​ $ 30,635 Non-GAAP adjusted net income $ 152,740 ​ $ 102,152 ​ ​ ​ ​ ​ ​ Adjusted weighted-average shares — diluted (2) ​ 39,531,814 ​ ​ 41,045,805 Adjusted earnings per share (2) $ 3.96 ​ $ 2.58 ​ (1) The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate of 26% to the adjustments that have a tax effect.
Adjusted weighted-average shares - diluted is calculated in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security. ​ Adjusted net income and adjusted earnings per share for the years ended December 31, 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ (in thousands, except share and per share data) GAAP net income (loss) $ 48,155 ​ $ (25,002) Adjustments: ​ ​ ​ ​ ​ Non-cash interest expense ​ 8,635 ​ ​ 8,285 Loss on extinguishment of debt ​ 23,504 ​ ​ — Amortization ​ 145,760 ​ ​ 131,469 Impairment expense ​ — ​ ​ 4,786 Stock-based compensation ​ 27,136 ​ ​ 22,874 Litigation settlements ​ 8,500 ​ ​ — Acquisition related expenses ​ — ​ ​ 31,297 Recognition of step-up basis in inventory ​ 15,116 ​ ​ 39,584 Income tax effect of above adjustments (1) ​ (53,526) ​ ​ (60,553) Total adjustments $ 175,125 ​ $ 177,742 Non-GAAP adjusted net income $ 223,280 ​ $ 152,740 ​ ​ ​ ​ ​ ​ Adjusted weighted-average shares — diluted (2) ​ 41,788,125 ​ ​ 39,531,814 Adjusted earnings per share (2) $ 5.47 ​ $ 3.96 ​ (1) The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate to the adjustments that have a tax effect.
Estimates of the future product returns are made at the time of revenue recognition to determine the amount of consideration to which we expect to be entitled (that is, excluding the products expected to be returned).
Estimates of the future product returns are made at the time of revenue recognition to determine the amount of consideration to which we expect to be entitled (that is, excluding the products expected to be returned). 46 ​ At the end of each reporting period, we analyze trends in returns rates and update our assessment of variable consideration for returns.
Actual results may differ from these estimates under different assumptions or conditions. 45 Table of Contents Product Revenue ​ Our only source of revenue to date has been generated by sales of our products, which are primarily sold to distributors (“customers”), which in turn sell the product to pharmacies and others for the treatment of patients (“end users”).
Product Revenue ​ Our only source of revenue to date has been generated by sales of our products, which are primarily sold to distributors (“customers”), which in turn sell the product to pharmacies and others for the treatment of patients.
As of December 31, 2022, our intangible assets included those acquired in connection with the BDSI Acquisition and the Nucynta Intangible Asset.
As of December 31, 2023, our intangible assets included those acquired in connection with the BDSI Acquisition and the Nucynta Intangible Asset. 47 ​ Income Taxes We utilize the asset and liability method of accounting for income taxes.
Refer to Note 20, Subsequent Events, for more information. ​ 51 Table of Contents Cash flows ​ In this section, we discuss cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Refer to Note 14, Debt , for more information. ​ 50 ​ Cash flows ​ In this section, we discuss cash flows for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cash used in investing activities was $573.7 million in 2022, compared to $1.9 million in 2021. The $571.8 million increase in cash used in investing activities was primarily due to the use of $572.1 million for the BDSI Acquisition, net of cash acquired, which closed in 2022. Financing activities.
Cash used in investing activities was $70.8 million in 2023, compared to $573.7 million in 2022. The $502.9 million decrease in cash used in investing activities was primarily due to the use of $572.1 million for the BDSI Acquisition in 2022, net of cash acquired, partially offset by purchases and maturities of marketable securities in 2023. Financing activities.
As of December 31, 2022, the outstanding principal balance of the 2022 Term Loan was $575.0 million, of which $162.5 million in principal payments are due within the next 12 months. As of December 31, 2022, the outstanding principal balance of the convertible notes was $143.8 million which is not due until 2026.
As of December 31, 2023, the outstanding principal balance of the 2022 Term Loan was $412.5 million, of which $183.3 million in principal payments are due within the next 12 months.
Other selling, general and administrative expenses include facility-related costs and professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining patents.
Other selling, general and administrative expenses include facility-related costs and professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining patents. As we continue to invest in the commercialization of our products, we expect our selling, general and administrative expenses to continue to be substantial for the foreseeable future.
Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes the results of our operations for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 ​ (in thousands) Product revenues, net $ 463,933 $ 276,868 Cost of product revenues ​ ​ ​ ​ ​ Cost of product revenues (excluding intangible asset amortization) ​ 118,190 ​ ​ 59,070 Intangible asset amortization and impairment ​ 136,255 ​ ​ 67,181 Total cost of products revenues ​ 254,445 ​ ​ 126,251 Gross profit ​ 209,488 ​ ​ 150,617 Operating expenses ​ ​ ​ ​ ​ Research and development ​ 3,983 ​ ​ 9,451 Selling, general and administrative 172,186 ​ 118,960 Restructuring ​ — ​ ​ 4,578 Total operating expenses 176,169 ​ 132,989 Income from operations 33,319 ​ 17,628 Interest expense (63,213) ​ (21,014) Interest income ​ 1,047 ​ ​ 12 Loss before income taxes ​ (28,847) ​ ​ (3,374) Benefit from income taxes ​ (3,845) ​ ​ (74,891) Net (loss) income $ (25,002) ​ $ 71,517 ​ Product revenues, net ​ Product revenues, net were $463.9 million for the year ended December 31, 2022 (“2022”), compared to $276.9 million for the year ended December 31, 2021 (“2021”), representing a $187.0 million increase.
Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes the results of our operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ (in thousands) Product revenues, net $ 566,767 $ 463,933 Cost of product revenues ​ ​ ​ ​ ​ Cost of product revenues (excluding intangible asset amortization) ​ 94,838 ​ ​ 118,190 Intangible asset amortization and impairment ​ 145,760 ​ ​ 136,255 Total cost of products revenues ​ 240,598 ​ ​ 254,445 Gross profit ​ 326,169 ​ ​ 209,488 Operating expenses ​ ​ ​ ​ ​ Research and development ​ — ​ ​ 3,983 Selling, general and administrative 159,208 ​ 172,186 Total operating expenses 159,208 ​ 176,169 Income from operations 166,961 ​ 33,319 Interest expense (83,339) ​ (63,213) Interest income ​ 15,615 ​ ​ 1,047 Loss on extinguishment of debt ​ (23,504) ​ ​ — Income (loss) before income taxes ​ 75,733 ​ ​ (28,847) Provision for (benefit from) income taxes ​ 27,578 ​ ​ (3,845) Net income (loss) $ 48,155 ​ $ (25,002) ​ 48 ​ Product revenues, net ​ Product revenues, net were $566.8 million for the year ended December 31, 2023 (“2023”), compared to $463.9 million for the year ended December 31, 2022 (“2022”), representing a $102.9 million increase.
As of December 31, 2022, and December 31, 2021, we had $173.7 million and $186.4 million in cash and cash equivalents, respectively. ​ We believe that our cash and cash equivalents at December 31, 2022, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future. ​ Borrowing Arrangements and Equity Offerings ​ The following transactions represent the material borrowing arrangements and equity offerings. ​ 2020 Term Loan ​ On February 6, 2020, in connection with the execution of the Nucynta Purchase Agreement, we, together with our subsidiary, Collegium Securities Corporation, entered into a loan agreement (the “2020 Loan Agreement”) with BioPharma Credit PLC, as collateral agent and lender; and BioPharma Credit Investments V (Master) LP, as lender (collectively “Pharmakon”).
As of December 31, 2023, and December 31, 2022, we had $238.9 million and $173.7 million in cash and cash equivalents, respectively. ​ We believe that our cash, cash equivalents, and marketable securities as of December 31, 2023, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future. ​ Borrowing Arrangements and Equity Offerings ​ The following transactions represent our material borrowing arrangements and equity offerings: the 2022 Term Loan, the 2026 Convertible Notes, and the 2029 Convertible Notes.
The $187.0 million increase is primarily due to increases in revenue for products acquired from BDSI of $140.6 million, including $126.5 million for Belbuca, as well as increases in revenue for Xtampza ER and the Nucynta Products of $35.1 million and $11.3 million, respectively. ​ The increase in revenue for products acquired from BDSI was due to the acquisition of these products in March 2022. ​ The increase in revenue for Xtampza ER of $35.1 million is primarily due to an increase in gross price and lower gross-to-net adjustments primarily related to rebates and provisions for returns, including revisions in the estimate of variable consideration associated with unprocessed returns claims, resulting in a $8.1 million increase in comparative revenue, partially offset by decreased sales volume. ​ The increase in revenue for the Nucynta Products of $11.3 million is primarily due to an increase in gross price and lower provisions for returns, including revisions in the estimate of variable consideration associated with unprocessed returns claims, resulting in a $3.4 million comparative decrease in revenue, partially offset by decreased sales volume and higher rebates. ​ Cost of product revenues ​ Cost of product revenues (excluding intangible asset amortization) was $118.2 million for 2022, compared to $59.1 million for 2021.
The $102.9 million increase is primarily due to increases in revenue for Belbuca of $55.6 million, Xtampza ER of $38.6 million, the Nucynta Products of $6.3 million, and Symproic of $4.2 million, partially offset by decreases in other revenue of $1.8 million. ​ The increase in revenue for Belbuca of $55.6 million and Symproic of $4.2 million is primarily due to a full year of revenue in 2023, compared to a partial year of revenue in 2022 due to the timing of the BDSI Acquisition. ​ The increase in revenue for Xtampza ER of $38.6 million is primarily due to lower gross-to-net adjustments primarily related to provisions for rebates and higher gross price, partially offset by lower sales volume and higher gross-to-net adjustments related to provisions for returns. ​ The increase in revenue for the Nucynta Products of $6.3 million is primarily due to lower gross-to-net adjustments primarily related to provisions for rebates and returns and higher gross price, partially offset by decreased sales volume. ​ Cost of product revenues ​ Cost of product revenues (excluding intangible asset amortization) was $94.8 million for 2023, compared to $118.2 million for 2022.
The $42.2 million increase was primarily due to the 2022 Loan Agreement that we entered into in connection with the BDSI Acquisition, which substantially increased our indebtedness, along with higher interest rates impacting our variable rate term loan debt. ​ Interest income was $1.0 million for 2022, compared to $12,000 for 2021.
The $20.1 million increase was primarily due to the 2022 Term Loan that we entered into in connection with the BDSI Acquisition, higher interest rates impacting our variable rate term loan debt, and higher interest expense due to the issuance of the 2029 Convertible Notes (offset by the partial repurchase of the 2026 Convertible Notes). ​ 49 ​ Interest income was $15.6 million for 2023, compared to $1.0 million for 2022.
We began shipping and recognizing product sales related to Belbuca, Symproic, and Elyxyb in March 2022. ​ 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.
Upon closing of the BDSI Acquisition, we acquired Belbuca and Symproic. ​ Belbuca is a buccal film that contains buprenorphine, a Schedule III opioid, and was approved by the FDA in October 2015 for severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative options are inadequate.
We 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 ER is indicated for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options are inadequate.
As such, the non-GAAP effective tax rates for the years ended December 31, 2022 and 2021 were 25.4% and 22.8%, respectively. (2) Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share .
(2) Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share . As such, adjusted weighted-average shares – diluted includes shares related to the assumed conversion of our convertible notes and the associated cash interest expense added-back to non-GAAP adjusted net income.
This increase was partially offset by lower cost of product revenues associated with the Nucynta Products and Xtampza ER, which was primarily related to a decrease in sales volume. ​ Intangible asset amortization and impairment was $136.3 million for 2022, compared to $67.2 million for 2021.
The $23.4 million decrease was primarily related to 2022 including higher cost of product revenues related to the step-up basis in inventory acquired from BDSI as well as lower sales volume in 2023 for Xtampza and the Nucynta Products. ​ Intangible asset amortization was $145.8 million for 2023, compared to $136.3 million for 2022.
As we continue to invest in the commercialization of our products, we expect our selling, general and administrative expenses to continue to be substantial for the foreseeable future. 44 Table of Contents Interest Expense ​ Interest expense consists primarily of cash and non-cash interest costs related to our debt, including the term loan issued in March 2022 in connection with the BDSI Acquisition (the “2022 Term Loan”), and the term notes (the “2020 Term Loan”) and convertible notes (the “2026 Convertible Notes”) issued in February 2020 in connection with the Nucynta Acquisition.
Interest Expense ​ Interest expense consists primarily of cash and non-cash interest costs related to our debt, including the term loan issued in March 2022 in connection with the BDSI Acquisition (the “2022 Term Loan”), the term notes (the “2020 Term Loan”) and convertible notes (the “2026 Convertible Notes”) issued in February 2020 in connection with the Nucynta Acquisition, and convertible notes issued in February 2023 (the “2029 Convertible Notes”). ​ On March 22, 2022 the outstanding balance related to the 2020 Term Loan was fully paid in connection with the closing of the BDSI Acquisition and establishment of the 2022 Term Loan. ​ Interest Income ​ Interest income consists of interest earned on our cash, cash equivalents, and marketable securities. ​ Provision for Income Taxes ​ The provision for income taxes reflects expense or tax benefit for federal and state income taxes, as well as the impact of non-deductible expenses.
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, we expect the trends that emerged as a result of the pandemic to persist in the near to medium term. ​ Financial Operations Overview Product Revenues Product revenues through the year ended December 31, 2022 were primarily generated from sales of Xtampza ER, the Nucynta Products, Belbuca, and Symproic.
We began shipping and recognizing product sales related to Belbuca and Symproic in March 2022. ​ Financial Operations Overview Product Revenues Product revenues through the year ended December 31, 2023 were primarily generated from sales of Xtampza ER, the Nucynta Products, Belbuca, and Symproic.
As such, the non-GAAP effective tax rates for the three months ended March 31, June 30, September 30, and December 31, 2022 were 25.4%, 25.4%, 25.3%, and 25.4%, respectively. (2) Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share .
(2) Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share . As such, adjusted weighted-average shares – diluted includes shares related to the assumed conversion of our convertible notes and the associated cash interest expense added-back to non-GAAP adjusted net income.
In addition, we believe that the presentation of these non-GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliations, provide supplementary information that may be useful to analysts, investors, lenders, and other third parties in assessing our performance and results from period to period.
We believe the presentation of these non-GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliations, provide analysts, investors, lenders, and other third parties with insights into how we evaluate normal operational activities, including our ability to generate cash from operations, on a comparable year-over-year basis and manage our budgeting and forecasting.
The $147.7 million increase was primarily due to higher revenue and gross profit before excluded costs, partially offset by higher adjusted operating expenses, as discussed below. ​ The following is a summary of 2022 quarterly Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter GAAP net (loss) income ​ $ (13,069) ​ $ (5,191) ​ $ 457 ​ $ (7,199) Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ 5,831 ​ ​ 17,761 ​ ​ 19,046 ​ ​ 20,575 Interest income ​ ​ (4) ​ ​ (5) ​ ​ (11) ​ ​ (1,027) (Benefit from) provision for income taxes ​ ​ (2,773) ​ ​ (1,455) ​ ​ 975 ​ ​ (592) Depreciation ​ ​ 715 ​ ​ 656 ​ ​ 488 ​ ​ 825 Amortization ​ ​ 18,923 ​ ​ 37,501 ​ ​ 37,552 ​ ​ 37,493 Impairment expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,786 Stock-based compensation expense ​ ​ 6,135 ​ ​ 5,692 ​ ​ 5,377 ​ ​ 5,670 Acquisition related expenses ​ ​ 27,167 ​ ​ 3,579 ​ ​ 463 ​ ​ 88 Recognition of step-up basis in inventory ​ ​ 603 ​ ​ 12,638 ​ ​ 10,519 ​ ​ 15,824 Total adjustments ​ $ 56,597 ​ $ 76,367 ​ $ 74,409 ​ $ 83,642 Adjusted EBITDA ​ $ 43,528 ​ $ 71,176 ​ $ 74,866 ​ $ 76,443 ​ Adjusted Operating Expenses ​ Adjusted operating expenses is a non-GAAP financial measure that represents GAAP operating expenses adjusted to exclude stock-based compensation expense, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations. ​ Adjusted operating expenses for the years ended December 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 GAAP operating expenses $ 176,169 ​ $ 132,989 Adjustments: ​ ​ ​ ​ ​ Stock-based compensation ​ 22,874 ​ ​ 24,255 Restructuring ​ — ​ ​ 4,578 Litigation settlements ​ — ​ ​ 2,935 Acquisition related expenses ​ 31,297 ​ ​ — Total adjustments $ 54,171 ​ $ 31,768 Adjusted operating expenses $ 121,998 ​ $ 101,221 ​ Adjusted operating expenses were $122.0 million for 2022 compared to $101.2 million for 2021.
The $101.0 million increase was primarily due to higher revenues and gross profit before excluded costs, partially offset by higher adjusted operating expenses. ​ 53 ​ The following is a summary of 2023 quarterly Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter ​ (in thousands) GAAP net (loss) income ​ $ (17,426) ​ $ 13,007 ​ $ 20,634 ​ $ 31,940 Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ 21,427 ​ ​ 21,863 ​ ​ 20,768 ​ ​ 19,281 Interest income ​ ​ (2,747) ​ ​ (4,027) ​ ​ (4,538) ​ ​ (4,303) Loss on extinguishment of debt ​ ​ 23,504 ​ ​ — ​ ​ — ​ ​ — (Benefit from) provision for income taxes ​ ​ (131) ​ ​ 4,790 ​ ​ 8,149 ​ ​ 14,770 Depreciation ​ ​ 817 ​ ​ 895 ​ ​ 835 ​ ​ 949 Amortization ​ ​ 37,466 ​ ​ 37,463 ​ ​ 36,317 ​ ​ 34,514 Stock-based compensation ​ ​ 6,035 ​ ​ 7,072 ​ ​ 7,027 ​ ​ 7,002 Litigation settlements ​ ​ 8,500 ​ ​ — ​ ​ — ​ ​ — Recognition of step-up basis in inventory ​ ​ 10,170 ​ ​ 4,748 ​ ​ 198 ​ ​ — Total adjustments ​ $ 105,041 ​ $ 72,804 ​ $ 68,756 ​ $ 72,213 Adjusted EBITDA ​ $ 87,615 ​ $ 85,811 ​ $ 89,390 ​ $ 104,153 ​ Adjusted Operating Expenses ​ Adjusted operating expenses is a non-GAAP financial measure that represents GAAP operating expenses adjusted to exclude stock-based compensation expense, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations. ​ Adjusted operating expenses for the years ended December 31, 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ (in thousands) GAAP operating expenses $ 159,208 ​ $ 176,169 Adjustments: ​ ​ ​ ​ ​ Stock-based compensation ​ 27,136 ​ ​ 22,874 Litigation settlements ​ 8,500 ​ ​ — Acquisition related expenses ​ — ​ ​ 31,297 Total adjustments $ 35,636 ​ $ 54,171 Adjusted operating expenses $ 123,572 ​ $ 121,998 ​ Adjusted operating expenses were $123.6 million for 2023 compared to $122.0 million for 2022.
Contractual Obligations Our contractual obligations as of December 31, 2022 that will affect our future liquidity include our term loan, including interest, convertible senior notes, including interest, operating lease obligations, and purchase obligations. For further detail regarding our term notes and convertible senior notes, refer to Note 13, Debt.
For further detail regarding our term notes and convertible senior notes, refer to Note 14, Debt. For further detail regarding our operating lease obligations, refer to Note 15, Leases .
Significant judgment is required in making these assessments to maintain or reverse our valuation allowances, and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time. 47 Table of Contents Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Significant judgment is required in making these evaluations, including comparing future annual income projections to the expiration dates and annual limitations of such assets. To the extent our future expectations change, we would have to assess the recoverability of these deferred tax assets at that time.
The remainder of the increase in financing activities was primarily due to $33.8 million less in repurchases of common stock in 2022. ​ Funding requirements We believe that our cash and cash equivalents as of December 31, 2022, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future.
The $576.9 million decrease was primarily due to: ● the repayment of the outstanding balance of the 2020 Term Loan and establishment of the 2022 Term Loan in connection with the BDSI Acquisition, which was accounted for as a debt modification and resulted in $517.7 million in proceeds from the term note modification in 2022; ● an increase in repayments of term notes of $87.5 million; and ● an increase in repurchases of common stock of $60.9 million, which includes $75.0 million related to accelerated share repurchases executed in 2023; partially offset by ● the repurchase of a portion of our 2026 Convertibles Notes and issuance of our 2029 Convertible Notes which resulted in net proceeds of $96.6 million in 2023. ​ Funding requirements We believe that our cash, cash equivalents, and marketable securities as of December 31, 2023, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future.
Historically, we have funded such losses through private placements and/or public offerings of our preferred stock, common stock, and convertible notes, and commercial bank debt. We are primarily dependent on the commercial success of Belbuca, Xtampza, and the Nucynta Products.
The effective tax rate was 36.4% and 13.3% for 2023 and 2022, respectively. ​ Liquidity and Capital Resources ​ Sources of Liquidity ​ Historically, we have funded our operations primarily through the private placements and/or public offerings of our preferred stock, common stock, and convertible notes; commercial bank debt; and cash inflows from sales of our products.
As such, the non-GAAP effective tax rates for the three months ended March 31, June 30, September 30, and December 31, 2021 were 24.4%, 26.7%, 25.0%, and 24.8%, respectively. (2) Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share .
The blended federal and state statutory rate for the three months ended March 31, June 30, September 30, and December 31, 2023 were 26.8%, 24.0%, 25.6%, and 25.9%, respectively. As such, the non-GAAP effective tax rates for the three months ended March 31, June 30, September 30, and December 31, 2023 were 21.5%, 23.5%, 24.7%, and 25.9%, respectively.
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. We 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, we acquired BioDelivery Sciences International, Inc.
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 and pediatric patients aged 6 years and older with a body weight of at least 40 kg.
The $69.1 million increase in amortization expense was due to the BDSI Acquisition, in which $435.0 million of consideration was allocated to our acquired intangible assets, Belbuca, Symproic, and Elyxyb. The intangible assets are amortized on a straight-line basis over the respective estimated useful lives.
The $9.5 million increase in intangible asset amortization was due to a full year of amortization expense recognized in 2023 related to the intangible assets acquired from BDSI of which $435.0 million of consideration was allocated to our acquired intangible assets, compared to a partial year of amortization expense in 2022.
Cash provided by operating activities was $124.2 million in 2022, compared to $103.6 million in 2021. The $20.6 million increase in cash provided by operating activities was primarily due to the impact of higher non-cash items included in net loss, including higher intangible asset amortization as a result of the BDSI Acquisition, and the effect of deferred taxes.
The $150.5 million increase in cash provided by operating activities was primarily due to the increase in cash flow from operating results, which reflects operating earnings, after adjustment for non-cash items that are included in net income, including higher intangible asset amortization as a result of the BDSI Acquisition and recognition of a loss on extinguishment of debt in connection with the repurchase of a portion of our 2026 Convertible Notes, as well as changes in working capital. ​ Investing activities.
(“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 us, Bristol Acquisition Company Inc., our wholly owned subsidiary, and BDSI (the “BDSI Acquisition”). Upon closing, we acquired the Belbuca, Symproic, and Elyxyb products.
This grant extended the period of U.S. exclusivity for Nucynta IR from June 27, 2025 to July 3, 2026. ​ On March 22, 2022, we acquired BioDelivery Sciences International, Inc. (“BDSI”), a specialty pharmaceutical company working to deliver innovative therapies for individuals living with serious and debilitating chronic conditions (the “BDSI Acquisition”).
As such, for periods where non-GAAP adjusted income (loss) was in an income position, adjusted earnings per share includes 4,925,134 shares related to the assumed conversion of the convertible notes and the associated cash interest expense added-back to non-GAAP adjusted net income, as well as other potentially dilutive securities to the extent that they are not antidilutive. ​ 56 Table of Contents The following is a summary of 2022 quarterly adjusted net income and adjusted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter GAAP net (loss) income $ (13,069) ​ $ (5,191) ​ $ 457 ​ $ (7,199) Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash interest expense ​ 913 ​ ​ 2,522 ​ ​ 2,467 ​ ​ 2,383 Amortization ​ 18,923 ​ ​ 37,501 ​ ​ 37,552 ​ ​ 37,493 Impairment expense ​ — ​ ​ — ​ ​ — ​ ​ 4,786 Stock-based compensation expense ​ 6,135 ​ ​ 5,692 ​ ​ 5,377 ​ ​ 5,670 Acquisition related expenses ​ 27,167 ​ ​ 3,579 ​ ​ 463 ​ ​ 88 Recognition of step-up basis in inventory ​ 603 ​ ​ 12,638 ​ ​ 10,519 ​ ​ 15,824 Discrete deferred tax benefit from valuation allowance release ​ — ​ ​ — ​ ​ — ​ ​ — Income tax effect of above adjustments (1) ​ (13,671) ​ ​ (15,737) ​ ​ (14,290) ​ ​ (16,855) Total adjustments $ 40,070 ​ $ 46,195 ​ $ 42,088 ​ $ 49,389 Non-GAAP adjusted net income $ 27,001 ​ $ 41,004 ​ $ 42,545 ​ $ 42,190 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted weighted-average shares — diluted (2) ​ 39,241,622 ​ ​ 39,256,685 ​ ​ 39,495,453 ​ ​ 39,644,115 Adjusted earnings per share (2) $ 0.71 ​ $ 1.07 ​ $ 1.10 ​ $ 1.09 ​ (1) The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate of 26% to the adjustments that have a tax effect.
In addition, adjusted earnings per share includes other potentially dilutive securities to the extent that they are not antidilutive. ​ 55 ​ The following is a summary of 2023 quarterly adjusted net income and adjusted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Quarter ​ Second Quarter ​ Third Quarter ​ Fourth Quarter ​ (in thousands, except share and per share data) GAAP net (loss) income $ (17,426) ​ $ 13,007 ​ $ 20,634 ​ $ 31,940 Adjustments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash interest expense ​ 2,287 ​ ​ 2,261 ​ ​ 2,124 ​ ​ 1,963 Loss on extinguishment of debt ​ 23,504 ​ ​ — ​ ​ — ​ ​ — Amortization ​ 37,466 ​ ​ 37,463 ​ ​ 36,317 ​ ​ 34,514 Stock-based compensation ​ 6,035 ​ ​ 7,072 ​ ​ 7,027 ​ ​ 7,002 Litigation settlements ​ 8,500 ​ ​ — ​ ​ — ​ ​ — Recognition of step-up basis in inventory ​ 10,170 ​ ​ 4,748 ​ ​ 198 ​ ​ — Income tax effect of above adjustments (1) ​ (18,874) ​ ​ (12,100) ​ ​ (11,300) ​ ​ (11,252) Total adjustments $ 69,088 ​ $ 39,444 ​ $ 34,366 ​ $ 32,227 Non-GAAP adjusted net income $ 51,662 ​ $ 52,451 ​ $ 55,000 ​ $ 64,167 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted weighted-average shares — diluted (2) ​ 40,196,015 ​ ​ 42,849,952 ​ ​ 42,058,820 ​ ​ 41,279,982 Adjusted earnings per share (2) $ 1.32 ​ $ 1.26 ​ $ 1.34 ​ $ 1.58 ​ (1) The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate to the adjustments that have a tax effect.
Removed
Elyxyb was approved by the FDA in May 2020 for the acute treatment of migraine with or without aura in adults.
Added
We commercially launched Xtampza ER in June 2016. ​ The Nucynta Products are extended-release (“ER”) and immediate-release (“IR”) formulations of tapentadol.
Removed
We discontinued commercialization of Elyxyb in the fourth quarter of 2022 and transferred that product, together with related assets and liabilities, to a third party in the first quarter of 2023. ​ We believe the addition of Belbuca and Symproic to our portfolio strategically aligns with our mission to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people suffering from serious medical conditions. ​ Outlook We incurred net losses in each year since inception until 2020.
Added
We began shipping and recognizing product sales on the Nucynta Products in January 2018 and began marketing the Nucynta Products in February 2018. In August 2023, the FDA granted New Patient Population exclusivity in pediatrics for Nucynta IR.
Removed
In the year ended December 31, 2022, we also incurred a net loss.
Added
Future events, such as competition, technological advances, or other changes, are subject to uncertainty and could cause subsequent evaluations to cash flow projections. We test intangible assets for potential impairment whenever triggering events or circumstances present an indication of impairment.
Removed
Substantially all our net losses resulted from costs incurred in connection with selling, general and administrative costs associated with our operations and research and development programs, and we expect to continue to incur significant commercialization expenses related to marketing, manufacturing, distribution, selling and reimbursement activities. ​ The BDSI Acquisition diversified and expanded our business by adding Belbuca and Symproic to our highly differentiated pain portfolio.
Added
We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized.
Removed
We expect the addition of these products to continue to strengthen our financial position 43 Table of Contents through increased revenue scale and accelerated cash flow generation.
Added
Certain deferred tax assets, such as net operating losses and tax credits, expire at varying dates and are generally subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC 382”).
Removed
While we incurred significant transaction costs and other acquisition related expenses during the year ended December 31, 2022 to complete the BDSI Acquisition and to integrate BDSI’s operations, we do not expect to incur additional acquisition related expenses related to the BDSI Acquisition moving forward.
Added
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Removed
In addition, we expect the step-up basis in inventory to impact our results of operations until all acquired inventory is sold, which we expect to occur within 12 to 18 months following the Acquisition Date. ​ We believe that our cash and cash equivalents at December 31, 2022, together with expected cash inflows from the commercialization of our products, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future. ​ As the COVID-19 pandemic unfolded, and governmental and societal reactions to it evolved, our business was impacted by several trends, including depressed pain patient office visits compared to pre-COVID periods, which in turn may account for fewer patients beginning therapy with our products, and labor disruptions that impacted pain offices, which in turn impacted our access to, and quality of interactions with, such offices.
Added
This increase was partially offset by a decrease in amortization expense as a result of the FDA granting New Patient Population exclusivity in pediatrics for Nucynta IR to July 3, 2026, resulting in an extension of the estimated useful life of the underlying intangible asset.
Removed
On March 22, 2022 the outstanding balance related to the 2020 Term Loan was fully paid in connection with the closing of the BDSI Acquisition and establishment of the 2022 Term Loan. Historically, interest expense also related to a term loan facility with Silicon Valley Bank (“SVB”) in connection with the Nucynta Commercialization Agreement.
Added
The intangible assets are amortized on a straight-line basis over the respective estimated useful lives. ​ Operating expenses ​ We did not recognize research and development expenses in 2023, compared to $4.0 million recognized in 2022.
Removed
However, in January 2020, we prepaid the outstanding principal, accrued interest, and required prepayment fees on the SVB term loan and recognized an immaterial loss on extinguishment as a component of interest expense. ​ Interest Income ​ Interest income consists of interest earned on our cash and cash equivalents. ​ Provision for Income Taxes ​ The provision for income taxes reflects expense or tax benefit for federal and state income taxes.
Added
The $13.0 million decrease was primarily related to: ● a decrease in acquisition related expenses classified as selling, general and administrative of $30.6 million; partially offset by ● an increase in salaries, wages, and benefits of $8.7 million, primarily due to increases in personnel costs for employees retained following the BDSI Acquisition and higher stock-based compensation expenses; ● an overall increase in audit and legal expenses of $5.0 million, primarily due to an $8.5 million litigation settlement; ● an increase in sales and marketing expenses of $3.1 million, primarily due to expenses incurred to support the ongoing commercialization of products acquired from BDSI; and ● an increase in regulatory expenses of $0.8 million, primarily due to a full year of expenses related to products acquired from BDSI. ​ Interest expense and Interest income ​ Interest expense was $83.3 million for 2023, compared to $63.2 million for 2022.
Removed
During the year ended December 31, 2022, we recognized a tax benefit, partially offset by state income tax expense. The provision for 2022 income taxes primarily consisted of state income tax for states for which our state-level NOLs did not fully offset state-level taxable income.
Added
The $14.6 million increase was primarily due to a higher overall balance invested in 2023 compared to 2022 and higher interest rates earned on cash equivalents and marketable securities. ​ Loss on extinguishment of debt ​ We recognized a $23.5 million loss on extinguishment of debt in 2023 in connection with the repurchase of a portion of our 2026 Convertible Notes.

… 55 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+4 added−0 removed0 unchanged
Biggest changeOur money market funds are short-term highly liquid investments, however, due to the short-term duration and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. ​ The 2022 Term Loan has an underlying rate that is indexed to the 3-month LIBOR rate (subject to a floor of 1.20%), plus a margin of 7.5% per annum.
Biggest changeDue to the nature of our investments, we do not believe that the fair value of our investments has a material exposure to interest rate risk. ​ 56 ​ 2022 Term Loan ​ The 2022 Term Loan bears interest at a rate based upon the Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment of 0.26% (subject to a floor of 1.20%), plus a margin of 7.5% per annum.
Based on the outstanding principal amount of the 2022 Term Loan as of December 31, 2022 of $575.0 million and the applicable interest rate, a hypothetical 1% increase or decrease in interest rates would increase or decrease future interest expense by approximately $5.8 million. ​
Based on the outstanding principal amount of the 2022 Term Loan as of December 31, 2023 of $412.5 million and the applicable interest rate, a hypothetical 1% increase or decrease in interest rates would increase or decrease future interest expense by approximately $4.1 million. ​
Item 7A. Quantitative and Qualitative Disclosures about Market Risks ​ Our primary exposure to market risk is interest rate sensitivity in connection with our money market funds and the 2022 Term Loan. ​ As of December 31, 2022, our cash and cash equivalents included money market funds of $172.6 million.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks ​ Our primary exposure to market risk is interest rate sensitivity in connection with our investment portfolio and the 2022 Term Loan. None of these market risk sensitive instruments are held for trading purposes. ​ Investment Portfolio ​ Our investment portfolio includes financial instruments that are sensitive to interest rate risks.
Added
Our investment portfolio is used to preserve capital, maintain liquidity sufficient to meet cash flow requirements, and maximize returns commensurate with our risk appetite.
Added
We invest in instruments that meet the credit quality, diversification, liquidity, and maturity standards outlined in our investment policy. ​ As of December 31, 2023, our investment portfolio includes $82.0 million of cash equivalents and $71.6 million of marketable securities, which are primarily comprised of money market funds, U.S. Treasury securities, corporate debt, and government-sponsored securities.
Added
Our money market funds are short-term highly liquid investments, and our marketable securities have active secondary or resale markets to help ensure liquidity.
Added
We account for marketable securities as available-for-sale, thus, no gains or losses are realized due to changes in the fair value of our marketable securities unless we sell our investments prior to maturity or incur a credit loss. Furthermore, our investment policy includes guidelines limiting the term-to-maturity of our investments.

Other COLL 10-K year-over-year comparisons